Your Money Milestones

Unlike many authors who write self help books, Milevsky is a university professor, not an advisor. As a result, this book, heavily influenced by the behaviorist school of economic thought, takes a very different tact when it comes to approaching important financial issues (milestones) in your life. Milevsky’s most important contribution is to insist that one add “human” capital to any balance sheet of assets and liabilities. Such balance sheets are a common tool among advisors, but people often fail to include their most valuable asset: themselves. Doing so radically changes one’s approach to financial issues.

Consider for example the issue of debt. Americans are heavily in debt, though less so in the wake of the recent financial crisis (savings rate are actually up from negative numbers to around 6%). Is this debt healthy? Most people who offer financial advice, including myself, would say no. Mortgages are a conspicuous exception. But Milevsky modifies these assumptions with two important points. The first is, when you assume the debt is at least as important as how you assume it, and second, the sources of the debt are equally important. Even consumer debt, the big no no of financial advisors is Ok, provided you take it in moderation and early in life. What you are effectively doing, the author suggests, is moderating your consumption over your life. Your future earnings are likely to be higher and you are trading some of those earnings for a slightly higher standard of living today.
On the other hand, debt when you are older is quite dangerous.

Your Money Milestones: A Guide to Making the 9 Most Important Financial Decisions of Your Life