Elizabeth Warren in All Your Worth, by Elizabeth Warren
On Budget & Economy:
Can't count on good old-fashioned hard work like our parents
The rules of the game have changed. Somewhere in your bones you already know this. Hard work and good intentions are no longer enough. Security, comfort, lasting prosperity--you want it, you work hard for it, and yet the worry remains.
Real financial peace seems so hard to achieve. You can't count on good old-fashioned hard work the way your parents did. Go to school, get a job, do your work, don't go too crazy with spending, and everything will work out right? Not anymore.
All Your Worth>/i> is for anyone who ever worries about money. For anyone who works hard and plays by the rules, but discovers that the rules have changed. For anyone who wants to build wealth, but isn't sure how to get started.
"No one knows how much I worry about money. What should I do?" Of course, we gave the best answer we could.
Source: All Your Worth, by Elizabeth Warren, p. 1-3&7
Jan 17, 2006
On Principles & Values:
From a long line of hardscrabble Okies
We are women who come from a long line of hardscrabble Okies. Shortly before I (Elizabeth) was born, my father lost the family's life savings to a crooked business partner.
During my growing-up years, Daddy sold carpeting at a department store and worked as a maintenance man for an apartment complex. I got my first job at 9, rocking a neighbor's colicky baby in the afternoons so his mama could get a few hours of sleep.
By age 11, I was taking in sewing, and at 16 I worked the mail desk at an insurance office. My college financial aid applications classified my family as "poor," although
I never thought we were any worse off than our neighbors.
Source: All Your Worth, by Elizabeth Warren, p. 5
Jan 17, 2006
On Welfare & Poverty:
Make a balanced, sustainable lifetime financial plan
Have you ever wondered why one person can manage just fine on $40,000 a year, while another person is in big trouble on $140,000?The difference comes down to one simple, but very powerful, idea: Get your money in balance. What is balance?
You've heard of a balanced diet, with enough of each of the basic food groups. Balancing your money follows the same general idea. The right amount of this, the right amount of that, and not too much of any one thing--and you have the formula for a
sustainable, lifetime plan. When your money is in balance, you spend just the right amount on each of your major expense categories.
All Your Worth balances your money into three categories:- Your Must-Haves (the things you need)
-
Your Savings (the money you save)
- Your Wants (the stuff that's just for fun)
This is just like a diet where you look at carbs, your protein, and your fat intake.
Source: All Your Worth, by Elizabeth Warren, p. 13-4
Jan 17, 2006
On Budget & Economy:
Non-wealthy people need financial books too
[After we wrote] "The Two-Income Trap", which told the story of how the new rules of money had trapped millions of hardworking families into a financial struggle, the phone started ringing. The book did more than raise some public policy issues; it
touched a raw nerve. People would pause and say quietly, "You're not just talking about money, you know. You're describing my whole life."[We tried to] find a couple of good books we could recommend. Everywhere we went, we found plenty of books on
the difference between bull and bear markets, and lots of tips on how to find a great deal in potato futures. In other words, we found oodles of advice for people who are financially secure and just want to make a little more money.
But what about
the people who AREN'T so secure? What about the people who stopped us in the grocery store, the mothers at the preschool, and the guys at Home Depot? Where was the advice for them? It didn't exist. Se we developed "All Your Worth."
Source: All Your Worth, by Elizabeth Warren, p. 6-7
Jan 17, 2006
On Education:
Promote student loan discounts without prolonging payments
Still paying off that degree in medieval history/ Many student loan issuers will give you a discount if you are careful to pay on time, or if you authorize monthly transfers from your bank account.
For example, Sallie Mae (the nation's largest issuer of student loans) will slice 2 percentage points off the interest rate on certain loans if you have made your payments on time for the past two years.
Ask your student loan issuer if you can qualify for any discounts; it is worth a phone call. But watch out for private banks that offer to consolidate your student loans; they may lower your monthly payment, but usually at the
cost of keeping you in debt longer than necessary. The goal is to get a cheaper interest rate without prolonging your payments.
Source: All Your Worth, by Elizabeth Warren, p. 80
Jan 17, 2006
On Welfare & Poverty:
Refinancing mortgages shouldn't require more debt
There are lots of people (including a number of so-called financial experts) who will tell you that it's smart to "cash out" your home equity and take on a bigger mortgage.
Well, we're here to tell you it isn't smart. In fact, it is just plain dangerous. You are just borrowing money that you will have to pay back someday--and you are doing it in the most dangerous way possible.
If something goes wrong and you can't pay, the mortgage company gets to take away your house. Just remember this simple rule:
When you refinance your mortgage, don't let the bank talk you into taking on a single dollar of new debt.
Source: All Your Worth, by Elizabeth Warren, p. 83
Jan 17, 2006
On Budget & Economy:
Minorities are targeted for high-priced mortgages
African Americans, Latinos, and older Americans are specifically targeted for high-priced mortgages. Take it straight from the mortgage lender's mouth; when a loan officer at a major bank was asked how she decided which customers to hit with extra fees,
here's what she said: "If someone appeared uneducated, inarticulate, was a minority, or was particularly old or young, I would try to include all the [additional cost] CitiFinancial offered."
In other words, this company's lending agents routinely
steered families to higher-cost loans whenever they thought there was a chance they could get away with it, and they thought they could get away with targeting certain groups. This wasn't an isolated incident; one study showed that on average, people
who live in high income African-American neighborhoods get neighborhoods get charged MORE for their loans than people who live in low-income white neighborhoods. Most of the time, it isn't even legal.
Source: All Your Worth, by Elizabeth Warren, p. 86
Jan 17, 2006
On Budget & Economy:
Congress took reins off credit industry in 1970s
For millions and millions of Americans, debt has become a way of life. In fact, more than 80 million Americans now owe money on a credit card. And not just a little bit of money: The average family that carries a balance now owes more than two month's
income on their credit cards. When your parents were young, interest rates were regulated by law, which meant that credit card companies could make money only if everyone paid them back. But all that changed during the last twenty-five years.
Congress and the Supreme Court quietly took the reins off the credit industry in the late 1970s, freeing the way for credit card companies to jack up their interest rates (and their fees).
And the card companies learned something new: They could
make higher profits from lending to ordinary, middle-class people.
Why are the card companies so eager to sign everyone up? Credit card debt has become the single most profitable line of business for big banks.
Source: All Your Worth, by Elizabeth Warren, p.132-4
Jan 17, 2006
On Welfare & Poverty:
Home equity is a trap: can't borrow your way out of debt
"Tap into your home equity!" "Consolidate your debt!" "Lower your interest payments sand save money on taxes!" The drive toward second mortgages and home equity lines of credit is practically a national fever. And if you are facing a mountain of debt,
it can certainly sound tempting. Well, it isn't smart. In fact, it's dangerous. Really, really dangerous. Borrowing against your home to pay off other debt violates the first principle of debt-free living: You can't borrow your way out of debt.
Ever.
- Home equity loans put your home at risk. If you make all your payments, the lender can take away your home.
- You probably won't save very much. The money you save on interest is very small, often less than the fees you
paid to set up the loan.
- The only way to tap your home equity is to sell your home. You should rest easy that you are putting your home equity to work exactly as you should be: You're keeping a roof over your head.
Source: All Your Worth, by Elizabeth Warren, p.149-52
Jan 17, 2006
On Budget & Economy:
Rules were different when banks were regulated
Your parents lived in a time when the government strictly regulated the banking industry. The amount of interest a lender could charge was tightly limited, so banks had to be very careful to lend money only to people who could comfortably pay them back.
As a result, in your parents' generation there were no "zero-down" mortgages. Almost no one was "house poor," spending too much on a home or apartment. There were no offers on TV to "cash out" your home on equity.
No one had a car payment the size of Texas, and car leases hadn't even been invented. The rules were different in other ways. Tuition at State U was less than $1 a day, so no one started out life with a six-figure student loan.
Once someone found a job, if they worked hard, they could pretty much count on keeping that job until it was time to collect a gold watch at retirement.
Source: All Your Worth, by Elizabeth Warren, p.16-7
Jan 17, 2006
On Social Security:
One in eight older Americans lives in poverty
It's time to start saving for your golden years. You just need to DO it. One in eight older Americans lives in poverty. The average Social Security payment is about
$10,000 a year--not even enough to live in safety in many places, let alone comfort. The elderly are now the fastest-growing group in bankruptcy. Myth:
You can count on social security to see you through old age.
Fact: Social Security benefits are not enough to live on.
Myth:
You don't need to save for retirement if you plan to keep working.
Fact: You need to be prepared in case you're not able to keep working.
Source: All Your Worth, by Elizabeth Warren, p.174-6
Jan 17, 2006
On Families & Children:
Every couple disagrees over money; solution is compromise
The truth is, every couple disagrees over money. You CAN improve your money partnership. Because getting straight about money in your relationship isn't about waiting for that perfect moment when you and your partner miraculously
think alike about everything. It is about working together, every single day, reaching compromises that work for both of you--just like you do for the rest of your relationship. -
Change What You Can Don't wait for your mate to be perfect; fix the things you can, right here, right now.
- No Nagging
- Stick to the Subject
Don't have one of those giant It's-Time-to-Talk-About-Money conversations. Try something a little more modest. Present a simple, straight-forward suggestion, preferably one that has a relatively easy answer.
Source: All Your Worth, by Elizabeth Warren, p.198-203
Jan 17, 2006
On Corporations:
Differentiate between Chapter 7 and Chapter 13 bankruptcy
| CHAPTER 7 & CHAPTER 13 IN A NUTSHELL |
|---|
| | Chapter 7 | Chapter 13 |
|---|
| What it does for you | Erases most consumer debts | Gives you extra time to repay
your debts |
|---|
| Which debts are erased | Most consumer debts, such as: Credit cards, Medical Bills, Payday loans, utilities | After your 3-5 year repayment plan, any unpaid consumer debts are erased. |
|---|
| Which debts
are never erased | Child support/Alimony; Taxes; Student loans; Mortgage (unless you give up your home); Car payment (unless you give up your car) | Same |
|---|
| Biggest advantage | Fresh start in just a few weeks |
Gives you time to catch up on mortgage payments |
|---|
| Biggest drawback | No time to catch up on the mortgage, so you could lose your home | Most people don't make it through the repayment plan, so the debt piles back on |
|---|
Source: All Your Worth, by Elizabeth Warren, p.257-8
Jan 17, 2006
On Welfare & Poverty:
Balanced Money Formula: must-haves vs. wants vs. savings
There is always enough for each of the 3 categories. Must-Haves, Wants, and Savings each follow a preset formula, so that they are always balanced against each other. So, what's the formula? Here it is:- Must-Haves: 50%
- Wants: 30%
- Savings:
20%
Why 50%? There are 3 simple reasons.- It is sustainable.It's not about getting straight with your money for a month; it's about getting straight for life.
- It is safe.When everything is going well, you should
have the money for what you Must-Have and for what you Want. Suppose you get laid off? With Must-Haves at 50%, your unemployment check could cover your needs for several months.
- It has been tested over time.That number worked for
Americans for a long time. A generation or so ago, most families spent half (or less) of their incomes on the Must-Haves. Getting rich, little by little, was commonplace; people did it every day. People also WORRIED less--a whole lot less.
Source: All Your Worth, by Elizabeth Warren, p.26-9
Jan 17, 2006
On Welfare & Poverty:
For non-wealthy, financial house is built on sand
You have only so much time and energy to focus on money. You need to work, to fix the car, to take care of your kids (or your cat or your girlfriend), and do a zillion other things besides getting straight with your money. There just isn't TIME to chase
down every possible financial detail to perfection. We once counseled a man who watched every penny--to the exclusion of watching his dollars. Roberto was a fanatic sale chaser. He also kept the most meticulous financial records we have ever seen.
And you know what? Roberto owed thousands of dollars to the IRS because he hadn't gotten around to filing his tax returns in the last three years. He didn't have car insurance or health insurance. And he hadn't saved a nickel for retirement. Every week
Roberto spent hours saving pennies and updating his financial records. But when it came to what really mattered, his financial house was built on sand.
So, what's the alternative to counting the pennies? Follow the steps in All Your Worth.
Source: All Your Worth, by Elizabeth Warren, p.63-4
Jan 17, 2006
Page last updated: Jan 03, 2020