I finished Chris Farrell’s “The New Frugality” a few days ago, and there are things I liked about the book and things I definitely did not like.
I like that there’s an emphasis on frugality, living simply, and examining choices vs. common wisdom. I like that he advocates comparing the cost of renting vs. owning a home and says that it’s not throwing away money to rent–something I’ve felt for a long time but didn’t know how to put into financial terms. I really like that he emphasizes a margin of safety in all money decisions.
I’m leery of his advice to only invest in index funds that track the major indices like the S&P 500. Looking at the return rate of funds like these over the last 10 or more years is not comforting. If I were to be invested in a fund like this, I’d be barely keeping ahead of inflation, if that. I don’t think his comments on actively managed funds are true; there are mutual funds with returns greater than 8% over 10+ years, many with returns around 12%. I think if you understand what you’re investing in, you don’t need to be as basic as Farrell advises.
I’m also critical of anyone who writes a financial advice book but isn’t wealthy. I know that sounds a bit crass, but I am reminded of Dave Ramsey’s saying about not taking advice from broke people. If you aren’t at least doing fairly well financially, why should I listen to you?
I think the perspective on the Great Recession was helpful. The lingering message is that this too shall pass, and to avoid losing your shirt by keeping a portion of money safe in proportion to your age and need.