Review of The 1-2-3 Money Plan
By Eric Hammer
The 1-2-3 Money Plan: The Three Most Important Steps
to Saving and Spending Smart, by Gregory Karp - FT Press
2009
"A Great Book for Those Who Just Want to Know What to
Do About Money"
Love him or hate him, most New Yorkers feel a great deal of
respect for former mayor Rudolph W. Giuliani. That’s because
he was the sort of person who would lead and offer clear opinions
about what he believed in; and even if you didn’t necessarily
agree with him, you had to respect him for doing that. I was
reminded of this fact when I began reading The 1-2-3 Money Plan
by Gregory Karp. Mr. Karp doesn’t purport to offer you all
the possible options when making a choice about financial decisions.
He also doesn’t mince words and says openly that some people
may disagree with his opinions and recommendations, but I did
find much to respect and like in what he wrote given that he
tries to take the mystery out of financial planning and just
give you his best advice, as well as he know how to do so.
Mr. Karp takes a rather interesting approach to financial
planning, one which seems at first to be unorthodox, but which
actually works quite well. Rather than suggesting that one create
a saving plan, he suggests that one create a spending plan. Yes,
that’s right – a financial wizard is actually telling
you that you need to plan how to spend all of the money you earn.
He even goes on to say that money is good for just one thing
– spending it.
However, before you walk away scratching your head in wonder,
consider this: Mr. Karp defines spending in three ways. He defines
it as spending in the past, spending in the present and spending
in the future. Spending in the past means paying off debts, since
it is money you have already spent; spending in the present means
exactly what it sounds like – paying your current bills.
The most innovative concept however is his concept of spending
in the future. After all, he argues, you are ultimately saving
money up with the intention of it eventually being spent, either
in retirement or by your heirs, but eventually, that money will
be spent, though hopefully not before it has worked a bit and
earned you more money that can be spent still further in the
future.
With that kind of concept in mind, Mr. Karp goes on to suggest
that we examine our spending and figure out what we really get
the most benefit from when we pay for something. He suggests
for example that rather than spend money on things, you spend
money on experiences because memories last for a lifetime while
things eventually wear out. I found much to admire in this concept
and I enjoyed reading the book tremendously.
The book is full of practical tips, all organized in groups
of three (because it is a number that for some reason seems to
resonate with the human consciousness – Winston Churchill’s
famous statement for example, "I have nothing to offer you
but blood sweat and tears" is remembered that way because
it’s a group of three, though the actual term, which is
much more forgettable is "I have nothing to offer you but
blood, toil tears and sweat.") to make them easier to remember.
Probably my favorite comment in the book comes very early
on, when Mr. Karp points out something that I often mention in
my own writing on financial blogs – you have to treat "future
spending" (aka saving) like paying a monthly bill and ideally
like a payroll deduction. The less you have to think about it
and the more automatic it becomes for you, the more likely you
are to actually do it.
Over-all, the book is not a perfect guide; it doesn’t
tell you everything you could possibly want to know or cover
every possible situation you may face. However, as Mr. Karp says,
it is "good enough" and that’s a heck of a lot
better than most financial books can claim these days.
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