Have you ever read “Smart Couples Finish Rich” by David Bach? This book is one of the first personal finance books I can remember reading back in my early 20’s. The book is copyrighted in 2001/2002, right after 9/11 and the tech crash of the early 2000’s, so it’s an interesting trip back through time.
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This book and the original, Smart Women Finish Rich, both helped to inspire the speech I gave in my Public Speaking undergraduate course on saving and investing. Given that the book is a bit over 15 years old, and the fact that it had such a big impact on me in my early investing life, I thought it appropriate to revisit some of the lessons it teaches.
First, A Bit About Bach
David Bach, the author of this book, was previously a senior VP of a major New York brokerage firm and founded The Bach Group. He started seminars that covered the same topics as his books – Smart Women Finish Rich and Smart Couples Finish Rich. He’s been featured as an expert in multiple notable publications, and is still publishing books to this day.
Interestingly, he started out by saving just 1% of his income, but over time ramped that up to 20%. What does “over time” mean? This article from Business Insider says that he got to that percentage over the course of 15 years. Although this isn’t enough for the FIRE (Financially Independent, Retire Early) crowd, it’s certainly more than the 5.7 percent that the average American puts aside. Apparently, he only started saving and investing in his mid-20’s at one percent of his income, and then brought up his savings rate from there.
A Bit About The Books
On his books – I actually own the first two books that he wrote (Smart Women and Smart Couples Finish Rich), but no others. I’ve taken several of his other books out of the library. They have very familiar content – if you’ve read one, you probably don’t need to read the others.
But if you’ve never read a Bach book and you happen to find this one at the library or a used book sale, I’d recommend picking it up if you’re just starting your personal finance and investing journey. His books are very readable – he sprinkles stories liberally among various basic financial lessons. They’re great books for people who are just starting to get interested in personal finance, who haven’t yet been introduced to the miracle that is compound interest, or if you just want a fun and quick money read. If you’re deep into personal finance or have spent years reading finance books like I have, there’s not going to be anything new here.
If you’re going to actually buy a first book by Bach, I’d probably recommend you grab The Automatic Millionaire. I took the original out of the library a while back, and although it just repeated the same lessons as Smart It was recently updated and likely has more up to date information than some of his older books.
UPDATE – I found a copy of his new book at the library, so I’ll be reviewing it shortly!
Lessons From Smart Couples Finish Rich
As I mentioned above, I read this book in the very early 2000’s. My husband and I were married in September of 2001, so this book was a perfect way to financially start off our married life. Bach gives nine lessons to help smart couples finish rich (TM):
- Facts and myths about couples and money. Bach reviews five separate myths and facts about money. This includes the myths that if you love one another you won’t fight about money; it takes money to make money, you don’t make enough to invest, taxes and inflation are under control (ha ha ha), and that everything will work out OK even if you don’t talk about money. He also provides a money quiz that you can take as a couple to see how money savvy you are.
- Figuring out the true purpose of money in your life. In this chapter he talks about how to get down to what money really means to you. What are your values – separately and as a couple? Is it security? Freedom? Family? Making a difference? This is separate from setting goals, which really are what allow you to live your values. This exercise helps to align your goals with your ultimate values, and make sure that your decisions are getting you closer to where you want to be.
- Plan together – win together. “Failure to plan is planning to fail,” is essentially the motto of this chapter. Here Bach shares a strategy for getting financially organized through a hanging folder system. Nowadays this would probably be a set of instructions on how to use Dropbox or something similar. He then shares seven rules for creating a purpose driven financial plan, where you align your values with your overall financial plan
- Make sure your goals are based on values
- Make them specific, detailed, and with a finish line (also called SMART goals)
- Put your top five goals in writing
- Start taking action within 48 hours
- Enlist help – share your goals with others
- Get a rough idea on how much each goal will cost
- Make sure your goals match your values as a couple (seems repetitive with #1)
- The couples’ latte factor. This is where Bach talks about his famous (and much maligned) Latte Factor (TM). It’s a concept I covered when talking about snowballing your way to wealth, where the small amounts you spend every day can add up to huge amounts over time. Although some people criticize this (I don’t buy lattes!), the idea is powerful. Certainly, there are some people who don’t spend frivolously. But I, and probably you, know plenty of people who “never have any money” but have constant lunches out/vacations/new cars/new clothes/etc.
- Build your retirement basket. Save and invest for retirement – pay yourself first. Here Bach talks about how pre-tax contributions will “cost” you less than you contribute. He also encourages you to research your investment options, like I did when I did my in-depth analysis of my 401k. He covers all the usual retirement plans: 401k, IRA, ROTH, SEP IRA’s, Simple IRA’s, and so on.
- Build your security basket. This is usually called an “emergency fund” by ordinary folks. He recommends somewhere between three and 24 months of expenses be set aside. Reading back on this it’s funny to see what interest rates used to be. Four percent on a money market checking account? Elsewhere in the book he talks about getting 7% interest on a CD. I wish! He also covers wills, health insurance, life insurance, disability insurance, and long-term care here.
- Build your dream basket. You shouldn’t just invest for retirement and security, according to Bach. You should also set aside some of your income to fund your dreams. Here he covers some of the basics of mutual fund and index fund investing.
- Learn to avoid the ten biggest financial mistakes couples make. What are those mistakes?
- Getting a 30 year mortgage (if you’re a reader of the side, you’ll know I agree with that one)
- Not taking credit card debt seriously
- Trying to “get rich quick” by day trading (do people do this anymore?)
- Buying stocks on margin (I can’t believe this is common enough that it’s a top mistake)
- Not starting a college-savings plan soon enough (totally agree with this one – you need a college compact)
- Not teaching your kids about money
- Not signing a prenup (I, Vigilante wrote about this before)
- Not having a greater purpose in life
- Not figuring out who’s responsible for what
- Not getting a financial advisor (he then goes into eight rules for hiring an advisor. I don’t care for this advice, personally, but then again I’m a DIY gal through and through).
- Increase your income by 10 percent in nine weeks. I hate this chapter, and I hated it back when I read it. Will your company give you a 10% raise within two months because you clean your desk? Likely no. I’ve only ever worked for large companies. Asking for an off-cycle raise would get you no where. If you want a big jump in income off-cycle, you need to go to a different company (and then you’ll probably be losing bonus/stock).
Does Smart Couples Actually Make You Rich?
Like any book, it won’t make you rich unless you take the lessons to heart and actually execute on them. Will the advice work? Yes. If you follow the lessons Bach teaches, you will be better off than most of your peers. Will you be able to retire at 30? No, for that you need to go seek out different sources of information.
Overall it’s a very readable book – a good one for newly married couples who aren’t that interested in money yet. Back when I first read it (and Smart Women Finish Rich), a lot of the information was new to me. Nowadays, though, it’s all the basics I’ve known for years. So if you’re already very knowledgeable about personal finance, this is a book to skip. Also, I don’t know how updated the version currently available is. My version talks about 7% CD’s, a red-hot job market, and the “new!” ROTH IRA’s and 529 plans. So it’s somewhat outdated.
Have you read this book, or any of the other “finish rich” books? If so, what did you think? Or do you have some thoughts on the lessons Bach teaches? Let me know in the comments.
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