America's Cheapest Family Gets Your Right on the Money
by Steve and Annette Economides (and yes, that's their real last name)
I can't believe I forgot to review this book because I LOVE it. This book is extremely helpful. Often, books on personal finance or frugality are theoretical and focus on the need to save now, preserve our resources, etc., etc., etc. The subheading to this book claims to be your guide to living better, spending less, and cashing in on your dreams.
This book does just that. This family of 5 children starts with practical ways to implement frugality, giving concrete examples and step-by-step instructions and ends with the theory. They give solid ways to budget for all expenses, pay off your home, set up a merit-based allowance system, save money on everyday expenses (they spend $350/month on groceries for a family of 7), saving money on medical, vacations, clothing, etc.
I especially like their section on emergency funds. We are counseled by the church and by the personal finance sector to have 3-6 months liquid savings stashed away in an emergency fund. The Economides family does more than that—they have specific amounts in each section of their emergency fund.
Emergency Fund Categories.
Medical Emergencies (not insurance or regular): save up to your maximum out-of-pocket expenses
Home Repair: 1% of the value of your home (hey, that’s the deductible)
Emergency Travel: Enough for everyone in the family to buy plane tickets for illness or death
Unemployment: 6 months of actual expenses
Car Replacement: depends on what car you want
I also liked the section on what to do when "extra" money comes in like bonuses, tax refunds, gifts, etc. I find that it is so easy to just let those opportunities get absorbed in the daily budget. If it doesn't get absorbed, it gets spent on a bunch of indulgences I didn't really want in the first place.
Making the Most of Windfalls
If you have debt other than your mortgage
60% debt liquidation
10% charitable giving
If you are trying to pay off the house and don’t have additional debt
30% additional principal
20% home improvement projects
10% charitable giving
This is a must-read. I loved it and while I won't apply every single aspect, I loved reading about a real family (with 5 kids and a stay-at-home mom) that makes it work. They don't seem to deprive themselves of fun. They just make the most of what they have and I really enjoyed the small glimpse into their family life.