A good book for beginners
I believe it should work well if implemented, and I’d recommend this book for people new to thinking about personal finance.
If you already have a handle on things, however, there is not much here for you apart from affirmation: Bach’s simple rules will probably mirror what you do already.
Bach’s system revolves around the following five concepts:
1. Make sure you pay yourself first by putting money aside as soon as you get paid. Automatize the process to make sure it happens without you having to think about it or take action.
2. Save on taxes by using tax-advantaged accounts. This is perhaps less useful to readers in Japan, although the J401k and NISA can fulfill this role to some extent.
3. Buy a house and pay it off early. I am not sure this works as well in Japan as Bach claims it does in the US, but it’s not the worst thing you could do.
4. Put aside money for an emergency. He recommends 3-12 months.
5. Give to charity to contribute to society and feel good.
Nothing we haven’t covered here on the blog, but it can be good to reinforce things from time to time and Bach writes well.
The strengths of this book include simplicity, effective advice, and readability. The book is full of memorable anecdotes that reinforce the lessons.
I was unhappy with a few things.
1. The focus on the US is inevitable, but it means that perhaps 10-20% of the book does not apply to an international audience.
2. The author uses a 10% annual growth rate in his examples, which is a bit too generous in my opinion. The numbers get quite a bit smaller if you change the growth to 8% or even 5%.
3. The reasoning behind buying a house is simplistic and lacks nuance. It’s not always the best option.
Having said all that though, this is a perfectly pleasant book that could completely turn someone’s finances around. I recommend it for beginners and more experienced readers who enjoy brushing up on the basics.