| The Color of Money Book Club Debut! |
with Michelle Singletary
Post Business Columnist
Wednesday, Oct. 23, 2002; 1 p.m. ET
This month's book selection is "The Richest Man in Babylon" by George S. Clason. Saving money can be as easy as seven simple steps. This book is full of time-tested advice that everyone can follow to start developing the habit of saving early on and adhering to certain rules for a financially secure future.
Join Michelle Singletary on Wednesday, Oct. 23 at 1 p.m. ET to talk about key financial tips from the book.
For a chance to win a free copy of next month's selection, "Take on the Street: What Wall Street and Corporate America Don't Want You to Know," by Arthur Levitt, send in your name, address, and daytime and evening phone numbers on a postcard or index card (to save money, turn the blank side of an old greeting card into a postcard). Please don't put your card in an envelope. No e-mailed entries will be accepted. Send the card in care of the Color of Money Book Club, 1150 15th St. NW, Washington, D.C. 20071. Include the name of the current book selection. Entries must be postmarked by Nov. 10.
The transcript follows.
Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
washingtonpost.com: Many of you have been waiting and here it is! Below is the list of winners for this month's Color of Money Book Club selection:
Mary Coward, Seattle, WA
Marcia Crowley, Webster Grove, MO
Ann Darnel, Blair, Nebraska
Warren Delane, Hercules, CA
Diba L. Harmon, Middletown, DE
Judy Lefaivre, Coconut Creek, FL
Kelvin Murray Jr., Norfolk, VA
Alberta Potter, Saint Charles, MO
Mrs. Ambrose K. Ramsey, Baton Rouge, LA
Mrs. M. M. Sergeant, Rochester, NY
Nicole Vickery, Huntsville, AL
Wanda Beland, Bowie, MD.
Gwendolyn Coleman, Fort Washington, MD
Joseph Gray, Capitol Hts, MD
William F. Heavey, Jr., Bethesda, MD
Leonora Heys, Columbia, MD
Ms. Eva M. Mc Leod, Washington, DC
Wendy Mitter, Leesburg, VA
Betty J. Morton, Temple Hills, MD
George L. Shepard, Cockeysville, MD
Katie Tichacek, Washington DC 20009
Louisville, Ky.: This is an excellent book for everyone. Should be required reading for every senior before he/she can graduate from high school.
The lessons in this book will help to reduce poverty.
Michelle Singletary: Welcome to the first discussion of the "Color of Money Book Club." As many of you know our first selection is "The Richest Man in Babylon." I truly think this is an awesome book. It reminds me of everything my grandmother, Big Mama, taught me.
And I agree with the person from Louisville that this should be required reading for every senior and college student in the country. Sadly, so many college students graduate with a ton of debt, debt that could have been avoided. At any rate I can't wait to get to your questions.
Tampa, Fla.: Clason's formula for spending 70%, saving 10%, and paying toward debt 20% is all well and good. But what if your debts are excessive and you're trying to get 'out of the hole?' If you're saving at 3% and paying out interest at 8 or 9%, should you really be 'saving' at all or at that rate?
Michelle Singletary: I know that it seems crazy to be saving when you have massive debts. But think about it. Life is always full of financial rainy days. If you don't begin to build up even a little everytime something happens (car braking down, washing machine going up, toilet overflowing) you have to go into debt to get out of the hole. So, if you are extremely overloaded with debt perhaps you should just save 5 percent and put the rest to paying off your debt. Clason's formula is the ideal (actually I think we should all be saving 20 percent but that's me). So don't beat yourself up if you can't at first start at the 10 percent. But start saving something!
Washington, D.C.: Before you get too far into today's chat, can you please explain how the book club works, and how I can learn more about it? Thanks.
Michelle Singletary: I would love to explain the book club. It is easy to join. You just get the book and read it. You don't have to e-mail or write me if you don't want to. We won't be holding monthly meetings. Nobody has to bring chips and dip. I just wanted to get people reading about personal finance. I wanted to help people figure out which of the many personal finance books out there were worth buying (or borrowing). So every month or with every selection I will hold an online discussion, like this one. I hope to be able to invite the author to come on as my guest to discuss their book. I would have invited Clason but he passed away.
In addition to the chat I invite all of you to write or e-mail me a 100-word essay on what the book meant to you. That's it. I hope to have thousands of members because knowledge is power!
Ashburn, Va.: This is one of the most important books on my bookshelf! I try to read it through at least once a year. Recently, I read it at bedtime to my 9 and 11 year old children, and we discussed the principles. I've also given it as a gift to young people in my office who are just beginning their financial and retirement planning efforts. By paying yourself first, and letting your gold have children and grandchildren, you begin the journey towards financial security and independence. The joy of this book is that the analogies in the lessons really make you think about how the principles apply to your own life and financial situation. Such a short and easily read book, packed with wisdom.
Michelle Singletary: I love the idea of reading this book to your kids. It's a great way to open up the conversation about the importance of saving. There are also wonderful parables about the importance of having a good work ethic.
Jacksonville, Fla.: This book is very revealing on points of wisdom in regard to money management. Those points of wisdom were not only good in Babylon times, but apply today as well. Glad to hear about the book club forming and am looking forward to future readings.
Michelle Singletary: Thank you so much. The response to the book club has been outstanding. More than 1,000 people sent in entries to win a free book. And, don't forget I'm giving out free books for the next selection. That's a $24.95 savings if you win.
Eustis, Fla.: We have our Accounting Operations Class here for the live chat. All different ages, all different life circumstances. I am recommending this book to everyone. But how do I convince people to save money instead of spending it especially people in their 40's.
Michelle Singletary: Hey Eustis, glad to have you aboard. It's hard to break old habits. I've found it hard to convince people of all ages the wisdom of saving for their future. But you know you do what you can and often people just watch what you do. I preach but I also practice what I preach. You will be surprised how that will help people change their life. For example, my nephew wasn't the best with his money but by watching (and living) with me and my husband he picked up some great money habits. So keep preaching but don't get discouraged. If you manage to help just one person you should be proud.
Oakton, Va.: Hi, Michelle -
Not a question but a comment --
You are providing such a valuable service in your column and with these chats. You give sound advice and deserve many kudos (as does Big Mama) for giving people the tools to live a more financially secure life. I always look forward to what you have to say. Keep up the great work!
Michelle Singletary: Aw, thank you so much. So sweet of you to say. It's called service journalism. It's why I became a journalist.
Camp Spring, Md.:
I really did enjoy the book. Is the money saved considered a nest egg and not to be touched or can it be used for emergencies?
Michelle Singletary: Great question. Please read my column from Sunday because in it I explained that if you can I suggest you try to save at least 20 percent of your income. Put 10 percent toward retirement and use the other 10 percent for both short term and long term goals. Short term would be paying cash for a new washing machine and dryer. Short term would be trying to pay cash (or at least a huge downpayment) on your next USED car. Long term would be downpayment on your home or college fund for your kids. I know 20 percent is a lot but if we really examine our needs and our wants I bet many of us (including me) could eliminate a lot of expenses.
Omaha, Neb.: I've come to a book club without having read the book - no one ever does that, do they?
Can you tell me the two most important things you learned from this book?
I think it's even more important to give 10% to God and then start paying yourself.
Michelle Singletary: It's okay you haven't read the book. I'm sure a many of book club members go to their monthly meeting not having finished the book. I think the two most important things I learned from this book is
1. pay yourself first. If you believe in tithing then that means 10 percent to God and another 10 percent for you. That also means you have to really think about your expenses. And, if you take it a little further you might have to save 30 percent of your income--10 percent to God, 10 percent for retirement, 10 percent for short and long term goals I've already mentioned. That's going to be tough for a lot of folks but it can be done.
The second most important point is control thy expenditures. How are you going to find the money to save? By learning the difference between a need and a want.
So if you get nothing else out of this book selection or never pick up the book practice those two principles and you will become financially secure.
Potomac, Md.: In addition to today's book, are there other books you would recommend to a novice just learning about financial matters?
Michelle Singletary: I would recommend you read the "Millionaire Next Door." Also, I love "Your Money or Your Life," by Joe Dominguez and Vicki Robin. For some background on Wall Street read "A Random Walk down Wall Street" by Burton G. Malkiel
Silver Spring, Md.: I am so thrilled to be participating by simply reading and applying common sense to my money fears. Since I began reading your column and applying principles from the first reading, I have fatten my purse to the tune of $1100.00. Thanks!!!!
Michelle Singletary: Wow. That's wonderful. And just by reading your little note I can tell if has changed your life. I love saving. I love the choices it gives you.
Beltsville, Md.: How come consumer find it very difficult to save money? But when you ask if they have a high speed internet connection (DSL or Cable Modem), high end Nextel cell phones, digital cable, all the high end features on their house phone they say yes. But they claim they don't have any money to invest.
Michelle Singletary: To be fair it's hard not to be a consumer in a all consuming society. Every where we turn there are messages that we have to buy this or have that. I even find it hard to tune out these marketing ploys. So I understand that for some people it's hard to imagine not having cable or leasing a car they can't afford to buy. So that's why in my column and through this book club I hope to get people to examine their expenses and make the right choices for them. It's okay if you have cable but it's not okay if you aren't saving money from your paycheck every time you get paid. As One woman who asked me how she could find money to save for a home told me after I asked that she paid $70 for cable every month. When I challenged her to get rid of it she hesitated. I finally said do you want to watch TV or have a home? Sometimes it's hard to see how your choices feed into your lack of saving.
Somewhere, USA: The principles you set forth in your column have also help me to vanish $5,000 worth of credit card debt (in less than a year)! Thanks.
Michelle Singletary: You are welcome. Isn't it nice to be debt-free??
Washington, D.C.: I love the idea of a book club, and I think it's great that you're giving away books. But I was disappointed that you wrote that it's a $24.95 savings for those who win. I try not to spend money on books. We have a great library system here in Washington. You don't have to spend money to get a great book. Going to the library is a real moneysaver for anyone who loves to read or wants to learn about a new topic. If the book is something you will read over and over, you can always buy it later. Libraries should be on everyone's list of penny-pinching ideas!
Michelle Singletary: I totally agree with you and I am trying to help some folks by giving away free books (actually thanks should go to the publishers!!!--Signet for Richest Man and Pantheon for Arthur Levitt's new book). I borrowed "Richest Man in Babylon" from my local library and I encourage you do the same. But I also believe that buying books is a good investment. I often highlight passages and refer back to them often. I believe the pursuit of knowledge is one of the best investments you can make so I don't think it's too much to spend $25 for a book that can change your life or help you understand something about your money. However, if you are going to spend that much money try to cut out something else from your budget. For example, skip going out once a month or take your lunch to work.
Land O Lakes, Fla.: I look forward to your column every week, Michelle and the book club is great! This book was a perfect way to begin...My question has to do with the 4th Law of Gold...that people shouldn't invest in businesses in which they are not familiar or not approved by others. We get so many mixed messages from the 'experts' we hire about stocks and other investments and many of us may learn about the company and don't fully understand the industry. How can we best avoid breaking the 4th law?
Michelle Singletary: By not breaking the 4th law. Listen, I believe in investing but don't invest in something you can't understand. I work with a financial planner and she recommended something that just didn't sit well with me. I really couldn't understand the expense structure. So I took a pass. Maybe this was a good investment for me but I just didn't feel comfortable. That's how I invest. That's why I invest in low-cost mutual funds. If you are investing in individual stocks you should be able to explain to a 6-year how the company makes money. If you can't do put your money in that stock. simple.
New York, N.Y.: I don't understand how you save 10 percent of your salary if literally your entire salary goes to rent, utilities, health insurance and groceries.
Michelle Singletary: I understand. It's tough. But you can't go through life and not save so that's why you have to take the 10 percent off the top first. So that might mean cutting your rent by getting a roommate or living with a relative. That might mean cutting cable or not having long distance on your telephone. That might mean discount grocery shopping. It won't be easy but my role model is my grandmother. She maid just minimum wage. She raised five grandchildren and yet she saved money from every paycheck. That meant we didn't go to fast food chains, we didn't go to the movies, we didn't go bowling, we didn't have a lot of clothes. But Big Mama managed because she knew what would happen if she didn't save her 10 percent.
Brookeville, Md.: Please remind everyone that they do not have to pay full retail for a book. Even with shipping charges, buying on-line can save money (especially if you save up and buy several books at a time). My favorite book web sites are half.com (mainly for used books)and alldirect.com (for new ones).
Michelle Singletary: Good advice. I saw on amazon.com and barnes and noble's web site that you could buy the latest selection used for about $2.
Mount Airy, N.C.: We all have maximum earning potential. Granted we can change this to a certain degree, i.e. furthering our education. But for the most part with the exception of cost of living increases, our income is predetermined. And although we know how much income we will have, we don't plan properly for our expenses. We are reactive rather than proactive. "Paying" yourself first is preparing for the unexpected and tomorrow.
I'll share this book with my daughters and with my friends. It says what we all know - but rarely do.
Michelle Singletary: Amen!
Eustis, Fla.: Accounting Class
"The Richest Man in Babylon" in definitely a book to have in your home. But I keep giving mine away. Like to my grown children. I will suggest to our class that we start our own lending library.
Michelle Singletary: I love that idea! But try to encourage every student to get their own copy. I plan to try and read my copy every year just so I stay on the straight and narrow road! My husband's reading the book now and I encourage every couple to read it and talk about it.
Huntsville, Ala.: Most of the questions I've seen don't really have to do with the book. I just wanted to comment that the most important message in the book was in the first chapter, where Bansir the chariot builder was wondering why he was so poor. He had learned his trade very well, but never learned the skill of accumulating a surplus of cash, and how to invest it.
I find this is very true...people will work their tails off to get a little bit of extra money, but if it comes to investing, they "tune out" and refuse to think about it. There seems to be a mental block to thinking of things in a different way, or perhaps they feel it is just to difficult.
Michelle Singletary: I disagree and agree with you. I think every question has been directly tied to the book. This book club and selection was intended to open up conversations about money.
Now I agree that the first chapter was so important. It reminded me of how so many people sit around and wonder why so and so has this or that and they don't. It's the "keeping up with the Joneses" syndrome. But the fact is the Joneses probably are in debt too. Saving is just the first step. Learning to make your money work for you is how the rich get rich!
Washington, D.C.: I saved money for several years to buy a house. I chatted with you in one of these live sessions about three years ago. I explained that I wanted to use my 401K to buy a house and you told me that this wasn't a wise decision. I just purchased my home and I ate breakfast at home and brought my lunch to work everyday, and ate dinner at home (I still do). There were days that I splurged, but no large purchases though. By the way, I am just getting cable installed today for the first time in years.
Thanks for the advice!
Michelle Singletary: So, did you use your 401 k money?
Washington, D.C.: Michelle, I think your column is great. I work with low-income people who have proven that even the poorest of the poor can save money and build high-return assets. The people I work with are a part of a matched savings program called Individual Development Accounts (IDAs), where individuals save, attend financial education training, and have their savings matched so long as they purchase one of three high-return assets--a home, business, or post-secondary education. Do you have any advice for particularly low-income individuals who are struggling to save?
Michelle Singletary: I get this question often and it is a hard thing to tell people just getting by that they have to save. But I always tell them of the time I received an e-mail from a guy making $100,000 and he was living paycheck to paycheck and had not savings. I tell them it's not what you make but how you make do with what you have. They have to try and look for ways to trim their expenses. That might mean moving in with another family to split the rent. It might mean their kids don't get a lot for Christmas. It might mean not eating out hardly at all. It certainly means they may need to find ways to continue their education and increase their ability to earn. It won't be easy but it can be done.
Washington, D.C.: It's difficult to save, but I have a 12 year-old car because I don't want to pay a high car note. I pretend that I have a $350 car note and save the money in a special account every month.
Michelle Singletary: Alright. That's the way to do it. And if you do have to buy a car, buy a used one. You can get a great used car because of all the knuckleheads that are leasing!
Washington, D.C.: No, I didn't use the 401K money to buy my house. I saved enough money without having to use it.
Michelle Singletary: I'm so pleased and happy my advice made a difference. Now you have your home and you still have your retirement money. Doesn't that feel good?
Elyria, Ohio: Are we talking 20% of after tax income?
Michelle Singletary: I used my take home pay to determine my 20 percent. But you could use gross if you like--just means tightening the belt more but it will also mean more money in thy purse!
Silver Spring, Md.: This book was an excellent read and should be required for everyone. It is so difficult to get people to understand when they have free time they should not spend recreational time at the mall - being at the mall prompts you to spend, spend, spend. I find that if I don't go to the mall/store unless I need something and am specific in buying what I "need" then I spend a lot less. Took me a while to figure out to stay out of the stores and stay out of the catalogs unless there is something specific I need - not want. People tell me "but I just spent $3/$4 dollars on this little knick knack, etc." but what they don't realize is that the $3/$4 add up quickly. Start charting what you spend in a week and you will be amazed - Keep up the good work with this financial book club! P.S. The web makes it so much easier to spend large amounts of money on that debit/credit card without even getting up - keep a credit card ledger and see how these bills add up!
Michelle Singletary: That's one of the biggest ways I began to save money. I stopped shopping. in fact, I hate going to the mall.
Omaha, Neb.: What corollary exists in our society today for the "wise men" mentioned in the book from which to seek advice?
Michelle Singletary: Me!
Winter Park, Fla.: Just a comment on your review of "Babylon"...this book had an incredible impact on the way I saved and invested. I read it about 10-12 years ago. As a self-employed Graphic Artist, I couldn't relate to the 'normal' way of saving/investing suggested by financial planners....putting a certain AMOUNT away each week. Some weeks I'd make $30, some weeks $300, some weeks -0-. When I read that book and it said to save 10% of everything earned...it just clicked for me! I began to save 10%, then 20%, and now have a tidy pile for investment and a tidy pile for savings goals. It was so simple...yet when i recommended the book to a friend, she found it 'too simple', 'too redundant' and really missed the point. Needless to say she's still struggling with her finances. I think this book should be required reading starting in the 7th grade, every year until graduation. Maybe it would help curtail the crazed spending habits of most : D
Michelle Singletary: Sometimes it's hard to get people to see that simple doesn't mean dumb. I followed the simple money advice of my grandmother and it has made an amazing difference in my life.
Chambersburg, Pa,: My husband I are semi-retired and retired respectively. We are both over 60. Do you think "The Richest Man in Babylon" still has something to say to us. Or is it too late?
Michelle Singletary: I never think it's too late to read such wisdom. If nothing else it will enforce what you already know. You can read it and recommend it to others in your life.
Arlington, Va.: I think this book is particularly useful at this time. The message I got was "go back to simple", the simple straightforward advice that my parents and grandparents used to give me.
And for those who need formulas, the book also provides advice on what portions to save, spend, and use to pay back debt.
Michelle Singletary: Simple is good!
Bowie, Md.: I did not finish the book but I am almost done. The basic principles are discussed early in the book and seem to be very simple to do if you have the discipline to adopt the 7 concept to building wealth. I never learned to pay myself but I did make good judgement early on in my career. As my salary increased, I found my quality of life increase and I began to live above my means. In addition, I was working partly on commission in which I had good years and bad. When I have a bad year that's when things get tough. I want to know what would you recommend as the first step to applying these principles since the debt I have accumulated is overwhelming and paying myself 20% of my income is not really possible. I also have to deal with emergencies that come up that make it even harder to reduce debt and start to save.
Michelle Singletary: Save, save, save, save, FIRST. You can't get around that first all-important step. So maybe you can't do the 20 percent. Start with 10 percent. It also sounds like you have plenty to cut in your expenses. You will never dig yourself out of your debt hole if you don't do as Arkad suggested and pay yourself first. Then cut your expenses and apply that savings to help pay off your debt.
Jacksonville, Fla.: Michelle,
What is your personal opinion on tithing? There was no mention in the book, but just wondering your feelings.
Michelle Singletary: I think this is a very personal choice. If you choose to tithe understand that you have a lot more challenges and that means really watching your expenses. But if you tithe that doesn't get you out of saving that 10 percent for yourself.
Tallahassee, Fla.: I think young people should read a book like this because it explains the concept of acquiring wealth and the management of money. Do you think this book would influence the the opinions of minority students relating to money management if it were required reading.
Michelle Singletary: I think this book applies to everyone, black, green, orange or whatever.
Omaha, Neb.: I agree with Huntsville in that I really don't want to think about money. I get overwhelmed with the choices and then tune out and don't deal with it.
Michelle Singletary: I can relate. It's easy to run away rather than face some tough choices. But run away from your money worries and they only get worse. I think about money everyday--how I can save more, how I can reduce my spending, how I can make better use of what I got. IF you are feeling overwhelmed just slow down. Take it step by step. Start saving first. Then cut your expenses. Then begin to research how you can make your money grow. You could start by just putting your money in a CD or money market. Whatever you do, don't hide. Don't run. Deal with it because life has a way of forcing the issue and you will want to be prepared.
Well I have to go. Thank you so much for joining me today. I'm so happy so many people have found this book useful. Please be sure to pick up the next book club selection, "Take Back The Street" by Arthur Levitt. The online discussion of this book is scheduled for Nov. 20 at 1 p.m. Mr. Levitt will be joining me as a guest. I promise you it will be an interesting discussion. Mr. Levitt has much to say about the current state of investing for regular folks like you and me. Again, thanks and don't forget to send in entries for a chance to win a copy of his book. Also, e-mail me with your thoughts about the last book club selection on the newest one.
That wraps up today's show. Thanks to everyone who joined the discussion.
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