In my mailbag recently was a question that helped me choose the August selection for the Color of Money Book Club.
A reader asked: "Is there any book you can recommend that will just give a plain-English description of mutual funds and other types of funds and bonds for someone like me? I have tried reading a couple of magazines but they immediately jump into jargon I don't understand. Even if I hire a financial planner, I still want to be able to understand what they're doing with my investments."
Good question. I would recommend "Dictionary of Financial Terms" by husband and wife authors Virginia B. Morris and Kenneth M. Morris (Lightbulb Press, $14.95).
The couple produces a series of financial guides through Lightbulb Press. He is the chairman and chief executive of the company, and she is its editorial director.
What I like best about "Dictionary of Financial Terms" and the reason I made it this month's pick is the use of plain language and colorful illustrations to make dry material interesting.
This is a dictionary for the average man or woman. It can also serve as a refresher for people who think they know it all (and they often don't).
Really, folks, if you have money to save or invest, you've got to have at least a basic understanding of the words and phrases that have become germane as to how we conduct our consumer business.
For example, I recently conducted a budgeting workshop for some women at my church. We were talking about how much to invest and how important it was to build that into your budget. At that point, I decided to ask the women if they knew what an IRA was.
Well, almost everyone nodded. Not quite convinced, I decided to test them a little further.
"So, ladies, what does IRA stand for?" I asked.
"Individual Retirement Account," most responded.
"Good. Now who can explain exactly what an IRA is?"
"It's for retirement investing," someone said.
"True, but explain to me how it works."
Upon pressing them, I found that most only vaguely knew that an IRA is just the account you set up and that you have to select investments to go into it.
Here's what else "Dictionary of Financial Terms" says about an IRA (for those who don't know): "These tax-deferred retirement accounts are designed to encourage working people to invest for the long term. If you earn income from work, or are married to someone who does, you can put up to $3,000 per year in an IRA and postpone paying tax on any earnings. If you're 50 or over, you can invest an additional $500 each year."
"In this day and age, we are so dependent on all this fairly complicated financial stuff," Virginia Morris said in an interview. "But we aren't always sure of some things, such as the difference between tax-exempt and tax-deferred."
Do you know?
If you read "Dictionary of Financial Terms," you would find out that some investments are tax-exempt, which means you don't have to pay income tax on their earnings. Tax-deferred means you are allowed to postpone paying income tax until you begin withdrawing from the account in which the investment is held.
The best part of this book is that you can get updates posted on the company's Web site at www.lightbulbpress.com/onlinedictionary/onlinedictionary.html. Click on the link that says "Try the dictionary."
The online version of the dictionary is updated at least four times a year, Virginia Morris said. Thank goodness, because there is always something new about personal finance.
And before you grouse about why you should buy the book when the definitions are online for free, let me say that I think it's worth it to have a hard copy. Wouldn't it be useful, during a meeting with your financial adviser or some other financial professional, to have this dictionary handy to look up terms you don't understand?
I certainly wouldn't hesitate to do that (and have). Besides, you may not always have convenient access to a computer.
"I think we all need reference guides," Virginia Morris said. "The financial language used today is so technical, and the people who know it don't always take the time to explain it to their clients. Or they don't always realize that their client doesn't understand what they are talking about."
I agree with the reader who corresponded with me. Even if you have a professional working with you, you've got to know the playbook he or she is using. The best investment you can make is to buy a dictionary that will help you build your financial vocabulary.
If you want to join the Color of Money Book Club, subscribe to my new electronic newsletter at www.washingtonpost.com/newsletters. Scroll down the page and click on the box for Personal Finance. As a benefit, each month, randomly selected subscribers will get a free copy of the book club selection. Also join me at 1 p.m. Aug. 18 at www.washingtonpost.com for an online discussion with Virginia Morris.
Michelle Singletary discusses personal finance every Tuesday on NPR's "Day to Day" program and online at www.npr.org. Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or send e-mail to firstname.lastname@example.org. Comments and questions are welcome, but please note that they may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.