A month ago, I was contacted about doing a book review for an oddly-titled book, Killing Sacred Cows.
The biggest problem I had with the book – and the same problem many of you will have – is that the author focuses on tearing down some of the strongest myths we’ve used to prop up our personal finance ideals. While I have prided myself lately on smart saving, frugal living, and minimizing expenses, this book tries to show that these aren’t ways to wealth. Instead, smart spending, living to your true purpose, and maximizing cash flow are the prescribed means to finding wealth.
I winced a bit as I read the first few chapters. It’s hard to hear that you may be doing things wrong… But as I delved deeper, the economist inside of me started seeing the truth in the author’s suggestions. Now, the application of that truth will be harder to manage for some, but the truth is there.
Each chapter sets about to examine then refute one of the firmly-entrenched myths in our financial society:
- The Finite Pie – The myth that the supply of money is finite and that you’re only “winning” if you collect and hold as much as you can.
- You’re in It for the Long Haul – The myth that the best way to plan for the future is to sock away every penny you can now and let compound interest fund your retirement.
- It’s All About the Numbers – The myth that the numbers on your balance sheet describe your true wealth.
- Financial Security – The myth that financial security comes from staying safe and collecting a salary.
- Money is Power – The myth that more money brings you more power.
- High Risks = High Returns – The myth that you can only expect a chance for high returns if you accept high risk.
- Self-Insurance – The myth that insurance is an expense you should minimize and try to not ever use.
- Avoid Debt Like the Plague – The myth that all debt is bad and should be avoided at all costs.
- A Penny Saved is a Penny Earned – The myth that minimizing expense and buying the cheapest possible is the best way to save.
While the book is a great resource and I always encourage people to challenge their beliefs, I do not agree with all the advice the author provides in his book. For instance, instead of focusing on saving for the long term by building your 401(k) and watching your net worth, the author claims that building a positive cash flow now and focusing on what the author calls your “Soul Purpose” is the best way to deal with the future. I agree that cash flow is important and a positive cash flow is the best way to wealth, I disagree with the concept that one should avoid 401(k)s and savings accounts. Just like an emergency fund, these resources can help provide temporary cash flow when the usual streams dry up. I think it’s irresponsible to neglect saving, even if it means you’re “losing” money to inflation and under-utilized resources. I suppose I’m just more of a moderate than the author in that regard.
Overall, I enjoyed the book and it’s definitely worth the read. Like I said before, I think it’s a good idea to read and entertain ideas that challenge your beliefs – as long as you don’t go overboard and accept everything you read as the best truth for you to follow. I will certainly keep the ideas and recommendations proposed in this book in mind as I make financial decisions in the future.
If this book sounds like something you’d be interested in, visit the book’s companion site, http://www.killingsacredcows.com, and download the first two chapters for free.
Want a Copy?
I was able to secure a second copy of the book to give away to my loyal readers. I figured if I was intrigued by the book, you probably would be, too. So, if you would like a copy of Killing Sacred Cows.
- Leave a comment below about one of the myths listed above. You can say which one you might have the hardest time letting go of, if you don’t think a listed myth is actually myth, or something else as long as it pertains to one of the above myths.
- One entry per person. Feel free to comment all you want, but only one entry will be accepted per valid e-mail and IP address.
- Contest open to US residents only. Sorry, I know that I have many international readers, but various laws and such make it much to frustrating to open this worldwide.
- Contest will end Sunday, December 7, 2008, at 11:59pm Central Standard Time. On Monday, December 8, 2008, I will announce the winner who will then need to contact me to claim their prize. Good luck!
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Does sound like an interesting book. The self-insurance myth is a particularly tough one. On the one hand, some things can easily be insured by saving up enough money. Unless you’ve got a very high income, however, you should always have liability insurance (since who knows what kind of damage you may cause and who may try to sue!) and health insurance.
Need for the latter can be demonstrated by my mom’s health situation. Her cancer is so rare that the drugs that keep her alive cost well more than my father’s annual salary. And my father is highly-paid compared to the average American. Even if they’d tried, I doubt my parents could have saved anything near the amount that they’d need. They could have kept her alive for a couple years by looting their retirement, but her treatments in the last four years have topped a million dollars. So all those years that we barely used our insurance are paying off now.
Sometimes you have to empty the cup to fill it again. Tearing down ideals is a way of doing that. However, the “myths” are no myths to earning becoming financially wealthy. Based on what you wrote, it seems like his new commandments are just modified versions of things we learned. Spending wisely is being frugal or investing. Maximizing cash flow is earning more money and reducing expenses. Living your true purpose is being in it for the long haul and actually enjoying it. The ideas in “Killing the Sacred Cow” seems to be a good addition to the current ‘myths’ of being financially savy.
There are two ideas that I’m not in total agreement with. The first is Financially security comes from a steady salary. I was laid off twice last year and burned through my emergency fund. Jobs are never secure. I decided to move back to my parents home to retool in school and find multiple ways to bring in income in addition to a job with a salary or wage. With the current state of the economy, my current job cut my hours from 30 a week to only 8.
I also think that not all debt is bad debt. The consumer debt I’m carrying is bad. The student loan I have are not.
Right now I’m trying to increase my income, go back to school, and pay off the bad debt I have right now.
#6. I used to work in financial planning, and the MPT risk-return fallacy is too ingrained there. “There’s no such thing as a free lunch,” right? But since markets approach efficiency but are never perfectly efficient, they should have known that good deals and bad deals were out there…
Now that the financial markets are crashing around our ears, I hope people realize that others have enjoyed returns as good as theirs without the risk.
“The myth that financial security comes from staying safe and collecting a salary.”
That would by far be the hardest for me to change, for a number of reasons: 1) that is what my family believes and is a rule by which I was raised, 2) I’ve actually built my life around this rule – choosing a career that I knew would be safe and give me that regular paycheck, and 3) not only have I made my career in a safe field, I work at a safe company.
I am in the process of going back to school for something I love, rather than the practical logical thing – yet, I still can’t help but pursue it as fiscally responsibly as I can!
Great review. I’m currently reading this book. The premise looked great. I’m excited to dig into it a bit more and get to the meat of it. Thumbed.
I would really like to read this book. It sounds quite interesting. Myth #7 would be my hardest to let go. I’m all for self insurance (depending on what is trying to be self insured). Thanks for the giveaway!
Great review, I think we all hold, or have held, some of these myths to be true. The insurance one was one that i had flirted with – until earlier this year when we had 250k in hospital bills. That bust ed that myth really quick for us.
Another one that i had probably held in the past was the “money is a finite resource” one. After reading another book – i realized how silly that myth is. Wealth/money is created, and as long as you hold initiative and drive, you can create more! Your success isn’t dependent on someone else having less or vice versa!
Sounds like an interesting book! I would have a hard time letting go of #2 and #8. I am all about socking it away and avoiding debt :)
I’d have to say #8 is my hang-up. I realize that not all debt is bad, but for someone like me who just doesn’t ever seem to make enough money to pay all of the bills on time, the more debt that I find, the worse off I am.
The kicker? I’ve only had about 3000 in debt for the last 7 years. That’s it. But my credit is bad, we keep owing money to people who aren’t technically ‘creditors’ (i.e., family), and nothing is getting any better. Well, not yet anyway. And now, someone has taken out a big loan using my social, so I’m kind of screwed. Heh.
Ack. I’m ranting…lol.
The comments on debt seem to be no more than a form of mental accounting. Consider an example: One person is all about “bad debt” and buys $100,000 of consumer goods on credit and invests her savings of $100,000 in rental real estate. The other is all about “good debt” and pays cash for $100,000 of consumer goods and borrows $100,000 to invest in rental real estate. They both have exactly the same consumer possessions, the same investment properties and the same levels of debt and net worth. What’s the difference? Mental accounting can be useful, but this time it seems like no more than an empty trick.
Also, I really have a hard time with the author’s take on tax advantaged retirement savings accounts. If he had stressed that these transmute (lower taxed) dividends and capital gains into (higher taxed) ordinary income I could understand, but the author’s website at
http://www.401khoax.com/
rejects the very idea of retirement savings in the ordinary sense. Yes, some people can pull off a better retirement strategy, but for the vast majority of us IRAs and 401(k)s seem the most viable options available.
In the wake of the disappearance of defined benefit pension plans and every politician seeming ever so eager to carve away at Social Security and Medicare, those of us unwilling to follow the “Rich Dad” path *need* those options.
#3 would be the most difficult. I am an engineer and everything is about the numbers.
I disagree with #8. While I do realize that debt can be “useful” for lack of a better word, it’s almost always the worst method to use. Zero debt allows anyone the most financial freedom in life. If you don’t have debt, you are free to use your money as you see fit, whether that be investment, savings, helping out relatives/charities, or whatever. If you have no debt, you also have more time to find new employment if your job disappears or if you simply want a change of career or employer. Your emergency fund will last much longer if it need only be used for necesseties (food, shelter, utilities) rather than Mastercard, Visa, etc. Debt means that the money you work for is never really yours–it’s already gone before you ever see the cash. Yes, you agreed to that, but it’s rather like volunteering for indentured servanthood. Who in the world has happier life doing that? Life isn’t all about money. Debt-free living enriches your quality of life immeasurably, because you not only have financial freedom with money that is yours, but your stress level is greatly reduced. Worry robs joy from life. There are many reasons we can worry, but (other than debt from a catastrophic event) you can eliminate the worry of debt, if you choose to do so.
I’m quite curious to see what alternative the author proposes to socking away money for retirement. If I’m not in it for the long haul at 22, what exactly should I be doing?
As a Christian I find #8 the toughest ‘myth’ to let go of. Proverbs 22:7 tells us when we are in debt, we are slaves to the one we owe. Not having any payments except for my mortgage, allows me to do a lot of things for others without any guilt.