Book Review: All The Money in the World

All the Money in the World is a hidden gem of a personal finance book. It’s a lesser known book by a lesser known author who is usually known for writing about another topic.

I usually associate Laura Vanderkam with productivity advice. Books like 168 Hours or What Most Successful People Do Before Breakfast are the ones that usually get mentioned when she’s being introduced.

In fact, one of the biggest lessons I’ve learned comes from one of her time management books, Off the Clock.

In that book, she talks about the concept of “memory sinkholes,” which are the dark side of routines. Routines can be great because they allow us to execute without conscious effort. But stack up too much “sameness” and the days all blur together in our mind.

Experience too much monotony, and years of your life can be lost in a memory sinkhole.

So how can you keep this from happening? One way is to facilitate a spirit of micro-adventure. Here’s how Vanderkam beautifully puts it:

It is the effortful fun that makes today different, and makes today land in memory. You don’t say “Where did the time go?” when you remember where the time went.

You can also cement the memories by having people share their stories or by writing them down in a journal. One of my most commonly used writing prompts is “what made today different than any other day?”

But today we aren’t (just) talking time management, we’re talking personal finance. So let’s dive in to my favorite lessons from All the Money in the World.

My Favorite Lessons

The Three Premises of Wealth Held By Happy People

1. I have enough. Some have more. Plenty have less.
2. If I want more than I have to achieve big goals, I can figure out a way to get it.
3. Every dollar is a choice. How I earn it and how I spend it is up to me.

I love these three premises.

The first is about contentment: A virtue that is wildly underrated and in far too short supply. Yes, contentment is hard when you’re feeling the financial pinch, but contentment and gratitude are always worth it.

The second is about the importance of income generation. Something we talk about a lot on this site. But it also hits on the psychology of money. There’s a certain rational optimism that’s needed to do the hard work necessary for making more money.

Many people scoff at the psychological aspects of money, but we’re all human and these factors can be far more important than the pure arithmetic that I love to trot out. In this particular instance, there’s great dignity in developing confidence in yourself and your abilities.

The third premise impacts both income generation and frugality. It reminds me a lot of the notion of money being something you trade your life energy for from Your Money Or Your Life.

Status Symbols: Conscious vs. Unconscious Brain

Vanderkam points out that our conscious self knows that status symbols are worthless, but our unconscious brain never got the memo.

This is part of the reason why money will always involve a discussion of human nature and we can’t just talk about the numbers.

You need little tips and tricks to get your unconscious brain to go along with what your conscious brain already knows to be best.

One trick that I like is called “the man in the car paradox.” Next time you find yourself desiring a shiny sports car, just remember: No one would admire or respect you if you owned the car. Just like you don’t admire or respect the man in the car; you’re just imagining yourself with his stuff.

Remember the “Man in the Car Paradox” When You’re About to Make an Expensive Mistake

Most Comparisons Are Biased

Comparison is a dangerous game, especially when you consider that it’s rigged from the beginning.

We tend to sabotage our own contentment by comparing ourselves to people who have more than we do, but as Vanderkam points out, many more people have less.

That’s not to say we should switch to looking down on others, but that we should remind ourselves that we’re being biased in our assessments.

When it comes to wealth, there’s always someone richer. If you live in an apartment, it’s the people who live the the nice apartments that are rich. But those people think that homeowners are rich. And homeowners think that people who live in mansions are rich. But the people who live in mansions think the silicon valley tech bros are rich. The silicon valley tech bros think that Oprah is rich.

And Oprah…well, I really hope that Oprah knows she’s rich.

The Best Way to Save Money

In personal finance, there’s a huge debate about how important it is to cut back on little expenses. Is your morning latte preventing you from becoming a millionaire, or are there other things you should be focusing on?

I’m somewhat in the middle, although I lean closer to the side that says don’t sweat the small stuff. When you run the numbers, it’s clear that investing small savings over time can add up to an impressive (though likely not life changing amount).

That said, cutting back on little indulgences every day is hard and takes a lot of willpower. More importantly, there are other options.

Laura Vanderkam says she buys more lattes and flowers…but she moved from New York to Pennsylvania for a lower cost of living. She says that most people think too much about discretionary expenses and forget about their fixed costs, which tend to be must higher.

I completely agree.

That’s why on this site, I trot out this glorious four-fold framework of frugality:

If something doesn’t save a lot of money, it better be easy. If it isn’t easy, it better save a lot of money.

That’s why I advocate focusing on the quick wins and the big wins in frugality.

Quick wins are the idea that you take a weekend to tackle all your smaller recurring expenses like your internet, phone, and car insurance, and try to find some way to save. This requires a little work up front, but you can lock the savings in for months or even years at a time.

Quick Wins the Simple Way: The Fast Path to Frugality

Big wins come from the recognition that some categories of your budget represent a bigger proportion of your spending than others. Most people spend roughly half their money on housing, transportation, and food. If you can save in these areas, you can be more liberal in others.

Big Wins the Simple Way: The 80/20 Approach to Saving Money

A Smarter Approach to Marriage Spending

There’s no way around it: Weddings are expensive.

Luara Vanderkam knows this. She also knows that one-time events often impact our happiness (and our marriage) less than recurring ones.

Instead of spending big money on a wedding, what if you put it into a savings account dedicated to date nights, cleaning services, and “thinking of you” gifts?

She points out that many people spend more on flowers on their wedding than they do on “just because” flowers their entire marriage.

She shares the story of one guy who bucked the trend of expensive diamond engagement rings, opting instead for sapphire. The ring that he picked out for his future bride has a blue sapphire bookended by two smaller white sapphires. He paid $267 for a huge, beautiful, intricate ring that his wife gets regular compliments on.

You don’t have to pay huge money on weddings and engagement rings just because everyone else does.

You’ll notice that I was so impressed by Laura Vanderkam’s advice on wedding spending, that much of it made it into my post about weddings:

Why Are Weddings So Expensive?

Could You Come Up With an Extra $2,000 in 30 Days?

This is a question that doesn’t get enough attention in personal finance. Many of us earn enough to cover our regular expenses, but if something unexpected comes up, we had better hope we saved for it, because our prospects of quickly earning more to pay for it are slim.

It’s hard to earn an extra $2,000 when your primary income is an annual salary.

Laura recommends freelancing. It’s hard work to turn freelancing into a profitable gig, but once you do the hard work of building up a client base, you have many potential sources of income waiting to be pitched.

Having a group of clients also lets you run the numbers on whether it’s more efficient to cut your spending or to try to earn more. The problem for most people when it comes to figuring out what their time is worth is that most of their time is worthless; only the hours between 8am and 5pm are profitable.

How to Start Freelancing With No Experience

The Importance Of Work

Vanderkam says that work isn’t a means to happiness later, it’s a source of happiness now.

This is a great and refreshing perspective. Don’t get me wrong, I’m all about financial independence and freeing myself from the need to work or to be dependent on an employer.

But I’m sold on the value of work.

I plan on working for as long as possible, my goal is just to switch to more of what I like (like writing this blog) and less of what I don’t. I’m a teacher at heart, and the work that makes me excited is to learn interesting things and teach everything I know.

Don’t “Stretch” For Housing

Probably the biggest status symbol out there is the idea of a nice house.

But we’ve already looked at the fact that housing is the biggest expense for most people, so it’s the one that’s most important to get under control.

Here’s what I’ve found: You get used to wherever you live. I’ve lived in a modern two-story enormous house and I got used to it. I’ve lived in a tiny two bedroom apartment and I got used to it. In college, I lived with five other guys in a rickety house built in 1908 and I got used to it.

But when it comes time to buying a house, everyone is tempted (and encouraged by their real estate agent) to “stretch” what they can afford.

Don’t do it.

Vanderkam points out that the difference between spending 33% of your income on housing and 25% is $4,000 a year on a $50,000 salary. On a $100,000 salary it’s $8,000 a year. The best way to say within a reasonable budget is to control your housing costs.

She also points out that the best way to get your housing expenses as low as possible is to own your home entirely.

Final Thoughts

This is a great book and I highly recommend it. I also recommend basically any other book by Laura Vanderkam that you can get your hands on. I haven’t read them all, but the ones I have read are outstanding.

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