Get a Financial Life

Updated through four editions since its original publication about 20 years earlier, this personal finance guide targets readers in their 20s and 30s who want to take control of their money. The author, Beth Kobliner, argues that managing one's finances is achievable with a modest amount of knowledge and effort, despite stagnant salaries, record-high student debt, and rising housing costs. Having helped more than half a million readers across its editions, this fully revised fourth edition addresses contemporary financial challenges. Its guiding principle remains the same: Focus exclusively on what readers need to know and leave out everything else.

The book opens with a cheat sheet of eight financial priorities, roughly ranked by importance. Kobliner designates health insurance as the single most important priority, noting that a serious illness can bankrupt an uninsured person. Second is paying off high-rate debt, because eliminating a credit card balance charging 15% interest is equivalent to earning a guaranteed 15% return. Third, she urges contributing to a 401(k), a tax-favored employer-sponsored retirement savings plan, especially when employers match contributions. She then recommends building an emergency cushion of three to six months' expenses, investing in low-cost index funds (funds that track a market index rather than relying on active stock picking), monitoring one's credit score, evaluating homeownership carefully, and learning basic tax strategies.

Kobliner turns next to budgeting and goal-setting, encouraging readers to put specific dollar values on financial goals and keep a detailed spending diary for one month. Three rules of thumb anchor this chapter: Non-mortgage debt payments should stay below 20% of monthly take-home pay, housing costs should not exceed 30%, and savings should reach at least 15%. She emphasizes automating savings through payroll deduction or recurring bank transfers, citing research showing that once people establish automatic savings, they tend to maintain the habit.

The book's most detailed chapter addresses debt. Kobliner explains that carrying a credit card balance is never beneficial and warns about teaser rates, temporary promotional interest rates that expire after several months and may apply only to transferred balances. She illustrates the cost of minimum payments: A 30-year-old paying only the minimum on $5,000 at 15% interest would not finish until age 52, having spent $5,729 in interest alone.

On student loans, Kobliner distinguishes between federal loans (lower fixed rates, flexible repayment) and private loans (potentially much higher variable rates, fewer protections). She describes federal repayment options including Standard (10 years of equal payments), Graduated (payments rising every two years), Extended (up to 25 years), and income-driven plans that cap payments based on income and forgive remaining debt after 20 to 25 years. She details Public Service Loan Forgiveness, which eliminates remaining federal debt after 10 years of qualifying payments for public servants. For car loans, she advises putting at least 20% down and choosing terms of four years or fewer.

The chapter also explains credit scores. The FICO score, the credit scoring model most commonly used by lenders, ranges from 300 to 850 and is determined by payment history (35%), amounts owed (30%), length of credit history (15%), types of credit (10%), and new applications (10%). Kobliner shows that on a $200,000 thirty-year mortgage, the difference between the highest and lowest credit score tiers can exceed $68,000 in total costs. She recommends keeping credit utilization (the percentage of available credit being used) low, automating payments, and avoiding excessive hard inquiries (lender credit checks that can temporarily lower a score). She also covers identity theft tools including fraud alerts (notices requiring extra verification before new credit is issued), credit freezes (blocks preventing new accounts from being opened), and disputes with credit bureaus.

The banking chapter advises finding a bank with free checking and strong mobile features, warns against debit card overdraft protection, and recommends Internet-only banks for higher savings rates. Kobliner emphasizes automatic transfers as the most effective savings mechanism.

The investing chapter introduces funds as the primary vehicle for young investors. Historical data presented in the book shows that from 1926 to 2015, large-company stocks returned an average of 10% annually (6.9% after inflation), far outpacing safer alternatives. Kobliner strongly recommends index funds over actively managed funds, citing research showing active managers do not outperform indexes on average yet charge far higher fees, with expense ratios (annual fees charged as a percentage of invested assets) averaging about 1% for active funds versus 0.11% for index funds. She recommends low-cost options from Vanguard and Charles Schwab and discusses behavioral pitfalls including recency bias (the tendency to assume recent trends will continue) and overconfidence (overestimating one's ability and trading too aggressively), recommending automated investing to counteract these tendencies.

The retirement chapter opens with a compelling comparison: Saving $1,000 per year from age 25 to 65 at 7% yields $213,610, while starting at 35 yields only $101,073. Kobliner notes that Social Security may not pay full benefits after 2034 without congressional action and that employer pensions are largely extinct, making personal retirement savings essential. She explains that 401(k)s and IRAs (individual retirement accounts) allow money to grow without annual taxation. She distinguishes between traditional plans (pretax contributions, taxes paid on withdrawal) and Roth plans (after-tax contributions, tax-free withdrawals), arguing that Roth options often suit young people in lower tax brackets. She establishes a savings hierarchy: First maximize employer-matched 401(k) contributions, then open a Roth IRA (funded with after-tax dollars for tax-free growth), then consider nondeductible IRAs (traditional IRAs funded with after-tax contributions, convertible to Roth IRAs through a tax code loophole), then contribute beyond the match. For self-employed readers, she covers SIMPLE IRAs (small-business retirement plans), SEP-IRAs (simplified employee pensions), and solo 401(k)s.

The housing chapter challenges the assumption that renting is wasteful, arguing that buying makes sense only when one plans to stay several years. Kobliner details what lenders evaluate, describes programs including Federal Housing Administration (FHA) loans (as little as 3.5% down) and Veterans Affairs (VA) loans (no down payment for qualifying veterans), and explains the differences between fixed-rate and adjustable-rate mortgages, warning that adjustable rates can rise dramatically.

The insurance chapter argues that health insurance is non-negotiable and that disability insurance matters more than life insurance for most young people, since they are more likely to become disabled before retirement than to die. For those who need life insurance, term coverage (insurance that lasts for a fixed time period) is far cheaper than cash value policies, which are permanent policies with a built-in savings component. Kobliner lists unnecessary coverage to avoid, including rental car protection, flight insurance, extended warranties, and smartphone insurance.

The tax chapter explains the graduated federal income tax system and the choice between the standard deduction (a fixed amount subtracted from income) and itemizing (listing specific deductible expenses). Itemized deductions include state and local taxes, property taxes, charitable contributions, and mortgage interest. Student loan interest, up to $2,500 annually, is deductible even without itemizing. Kobliner identifies valuable tax credits including the saver's credit for retirement contributions, the American Opportunity Tax Credit for college expenses, and the child tax credit.

The final chapter surveys benefits for military service members and veterans, including education assistance through the Post-9/11 G.I. Bill, no-down-payment VA home loans, low-cost health care through Tricare (the military's health insurance program), interest rate caps on pre-service debt during active duty, tax-free combat zone pay, and pension eligibility after 20 years of service.