“Each and every day wasted on not investing will cost you dearly. Not only will it cost you in terms of the lost impact of compounding, but you’ll also lose the most important thing of all: the opportunity to learn from experience…The sooner you start gaining your 10,000 hours of investor experience, the sooner you’ll have this investing business figured out.”
Financial literacy is hugely important in the modern world, but unless you grew up in a family that talked about money, it can feel overwhelming. I frequently speak to friends who are interested in money and want to get out of debt/invest/save, but simply have no idea where to start. It’s an interesting challenge.
Ann Wilson introduces money through an extended conceit: cooking. There are four wealth flavours (assets, liabilities, income, expenditures) which you need to develop your palate to distinguish, two spices (time and interest rates), and a number of useful kitchen implements (your motivation as a a wealth obsession magnet, income statement as scales). Yeast, of course, is compound interest. The goal is to be a Wealth Chef, not just a cook!
Some first steps: use your last 3 months of bank statements to estimate your expenses, then write up a balance sheet listing all your income generating assets (sadly, your home would not count, and if you’re hoping to retire your job might not either). You are financially free when your generated income is enough to cover all your expenses.
It’s a fun way of introducing financial concepts, and judging by her own successful wealth-counselling business, an effective one. Her markets particularly to housewives and other women, which is reasonable – as she points out, at least historically men were frequently the one who managed the money, but in a world of increased equality and divorce, this is nonsense.
I have a few complaints at the margin: Wealth Chef uses 8-10% as a conservative interest rate on savings, for example, which is reflective of the historical return on the stock market but not of most people’s portfolios, which are a balance between equity and bonds. Italso emphasizes the credit score more than I would, though I agree that for people working their way out of debt, it is a useful way of tracking progress. For my tastes, the book also has a few too many exclamation marks, but it adds to the non-confrontational style.
Overall, definitely recommended if you’re intimidated by money and like cooking. If you’re an investment banker, probably not: consider reading guides on how baking cupcakes is like investing instead.
Disclosure: I read it as an advance reader copy. You can read more reviews of The Wealth Chef on Amazon.