Book Review: You're Broke Because You Want to Be

People are the way they are because that is the way they choose to be. Money doesn’t change the kind of person you are. You are who you are because of the choices you make, not because of how much money you have.

~ Larry Winget

Update: This review is included in the Carnival of Personal Finance #148 – Tour of Ireland Edition at Being Frugal. Thanks!

This book doesn’t make a lot of “best in personal finance” lists and it’s certainly not going to win any literary prizes anytime soon. I read it anyway, and I would recommend that you read it too. It’s a fast, somewhat funny read and it is (at times, brutally) honest. If you feel like you might need a kick in the hindquarters to get you moving on controlling your finances and eliminating your debt, Larry’s got the boots you need.

3 Things I Loved About This Book

Even if you’re not in a serious debt hole, I’ve got 3 reasons you should still give it a chance:

1. It provides tons of practical tips for anyone who needs to get control of their money. That pretty much includes everyone. The tone is such that the toughest messages are directed at those who have spent frivolously, dug themselves a huge debt hole, and are now looking to place the blame on something or someone other than the person in the mirror. That said, the information Larry provides is a mix of well-engrained personal finance commandments and specific tips and ideas that might be new to you.

2. Two of the main themes are Balance Junkie favourites. One of the founding principles of this blog is that getting your financial balance sheet in order can and will lead to a better balance in other areas of your life. It’s not about the money.

Secondly, Larry is a proponent of the idea that change happens when we become uncomfortable enough to act. I’ve beaten this topic pretty hard too, and I think that committing to change is really hard, but opens a lot of doors if you can just take that first step.

3. It’s simple and honest. It seems to me that these two qualities are in very short supply these days, so I place a huge premium on them. Complexity and an infinite drive for more have steered us astray and distorted truths that used to be considered incontrovertible.

Larry’s Heapin’ Helpin’ o’ Truth

Right from the beginning of the book, Larry makes a distinction between poor and broke. The poor people are those in the third world who truly lack the opportunity to live well. Broke people are either underearning, overspending, or both. Yes, some people are lucky enough to be born into great wealth. So your last name isn’t Trump or Hilton. That doesn’t mean you can’t succeed.

Larry takes a light-hearted swipe at the bestselling book The Secretwhich teaches you to think about, visualize, and and talk about your goals in order to achieve them. According to Mr. Winget, the real secret is: “What you think about, talk about, and get off your a*$ and do something about comes about”.

According to Larry, you don’t have a money problem. If you lack money, that is the result of other problems. In order to get ahead, you need to align your spending with your values. If you want to know what you value, look at your spending. If you say that you value your family and friends but spend a lot of money on things like cigarettes, alcohol, and entertainment, either your spending is out of whack with your values or your values are different than you say they are.

Top 10 Tips for Getting It Together Financially

I don’t really like Top 10 lists because they’re pretty subjective and they inevitably exclude some really great ideas. I’m hypocritically including one here because listing all of the great ideas from this book would make the review prohibitively long, not to mention representing a gigantic copyright infringement. Anyhow, this is just a sampling of some of the ideas Mr. Winget offers:

1. Open a no-fee chequing account. To my knowledge, PC Financial is the only bank that offers this at the moment, and I don’t think it’s available in all parts of Canada. Canadian Capitalist recently wrote that chequing accounts from ING Direct may be coming soon, so keep watching.

2. Shop with a list and a budget. Buy only what you need and only what you can afford.

3. Build a cushion. Yep, this is the much-discussed emergency fund. It’s a must-have. Many people advocate a 6 month cushion, but that can be hard to do at first. Larry recommends saving at least one month’s expenses and building from there.

4. Forget coupons. Coupons can actually cost you more money if they lead you to buy things you don’t really need. If you find a coupon for something you need, great. But don’t change what you need based on a coupon and don’t spend hours searching for coupons, especially if you find you are basing your purchasing patterns on coupons rather than genuine needs.

5. Lose weight and clean up your house. This goes along with good habits in one part of your life spreading to others. Cutting back on food intake is healthier for you and for your balance sheet. Cleaning up your home gives you a sense of pride and taking care of your possessions makes them last longer.

6. Take a look at your friends. If you hang out with with an unhealthy, overspending, highly indebted crowd that likes to play the victim, you can find yourself falling into those habits yourself. Find a group of friends that closely mirrors your values.

7. Give away some of your money. For whatever reason, what we give eventually comes back to us, sometimes with “interest”. This works, and it feels great.

8. Teach kids about money. Allow your kids to earn money by doing chores outside of the basics. Teach them about credit and interest rates. But above all, set an example. Let them see that you have a budget. Involve them to the extent that they are old enough to understand.

9. Know what you are willing to give up to get what you want. If you really want to help your kids pay for post-secondary education and/or have a comfortable retirement, you need to make sure that you minimize and eventually eliminate debt so that you can concentrate on positive compounding. That will probably mean forgoing some things that you would like to have now.

10. “The Hole Principle”: This might be my favourite personal finance cliché. When you find yourself in a hole, stop digging.

Overall, this book advocates a sense of personal responsibility that seems to be wanting these days, but it also demonstrates the sense of empowerment that goes with it. In this era of bailing out over-leveraged banks and consumers, it’s a refreshingly genuine call to grow the heck up and take responsibility for your life. You’ll feel great about it – honest. This book is really cheap to buy, but you can probably find it at the library for free!

Do you find Larry Winget’s style too harsh, or do you think it’s just what we need right now?