Invest Your Way to Financial Freedom (Book Review)
Great books on money management and financial freedom investing are hard to find, especially ones with no ulterior motive. That’s why Invest Your Way to Financial Freedom by Ben Carlson and Robin Powell is an exciting addition to the European personal finance space.
The authors, both professionals in the field with decades of investing experience, explain the concepts of good financial habits clearly and concisely, so that even complete beginners can follow. Let’s have a closer look at the book and whom it might benefit the most.
KEY TAKEAWAYS
- While a portion of the advice is targeted at UK readers, people from other European countries can benefit from learning the concepts described.
- Consistently save 10-20% of your income throughout your career and increase this percentage when you receive a raise. Start now, even if you can’t hit 10% yet. The earlier you begin, the larger your chance of success.
- To help you get into a savings habit, automate your pension and tax wrapped account (e.g. ISA in UK) contributions. That way, they are like another bill you pay as soon as you receive your pay check.
- First save up an emergency fund of 3-6 months’ expenses, then invest in target date funds or low-cost index trackers.
- Try to avoid funds with an expense ratio of over 0.30%.
Here is the full analysis
SNAPSHOT
Financial Freedom Investing: A Complete Guide
When it comes to practical life skills and investing, most teenagers and young adults aren’t taught very much by schools or their parents. As a result, different sources of information have cropped up, many of them suboptimal or even dangerous.
Carlson and Powell’s book aims to fill the gap in knowledge that many people have when it comes to managing their money.
As highly qualified professionals, they have set out to debunk some myths. The book shows people earning an average income how they can invest for the long term and slowly gain more freedom from their employers and the constraints of needing to earn money.
While a portion of the advice is targeted at UK readers, people from other European countries can benefit from learning the concepts described.
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WHAT I LIKED
The Authors
When considering the merits of a work, it’s always important to look at the background of the authors.
Are they well qualified, and do they have first-hand experience of the concepts they are describing?
In this case, the answer is a resounding yes. Ben Carlson runs the popular personal finance blog, A Wealth of Common Sense, and he has written three books on the topic in the past. What’s more, he works in asset management, so he has spent his life helping others to manage their finances.
Robin Powell also has many years of experience, both as the editor of the blog The Evidence-Based Investor and through his work as Head of Client Education at the financial planning network RockWealth.
The two authors are passionate about helping people to navigate the wealth of information currently available in the personal finance space and find ethical, actionable advice.
Basic concepts that will make a difference in your life
Invest Your Way to Financial Freedom is designed for beginners, particularly young people who are just starting out in their careers.
The authors spend a lot of time focusing on the merits of saving a part of your income and starting small. With several easy-to-understand tables, they explain how saving and investing even a modest part of your income can eventually lead to a large retirement pot.
They also demonstrate that the process can be simple by emphasizing automation and investing in one simple product, namely target date funds.
Because of the straightforward nature of the advice and the modest length of the book, it will appeal to people who are not naturally drawn to personal finance and are simply looking for an easy way to secure their retirement.
Although much of the book illustrates that starting young is best, the authors are optimistic about savers in their 40s and 50s reaching their goals.
They dedicate an entire chapter to explaining how those who have neglected investing in the earlier years can catch up and how they should allocate their money.
The tone of the book is continuously positive and, although many of the examples seem most relevant to middle-class people with an average or above income, they do touch on what you can do if your income is lower.
That it applies to Europeans
All the examples in the book focus on UK investors, so people in other countries will have to adapt some of the advice to their own situation.
There is mention of ISAs, LISAs and SIPPs, tax-sheltered accounts and pension related taxes that are exclusively available in the UK, but the description of the funds people should invest in is more universal.
Almost all the advice will benefit readers in other European countries, so you should still consider this book if you live in the EU and there isn’t a financial freedom investing book specifically for your country.
Since the majority of personal finance literature is produced by Americans, US investors can likely find information that is more targeted towards their unique situation.
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WHAT YOU WON'T FIND IN THIS BOOK
A Manual for Aspiring Investors
So, is this a comprehensive manual for investors?
The answer depends on who you are. The book works well for employed people with an average income looking to retire at a normal age. It helps beginners to learn how to spend sensibly, invest in productive assets, and secure their future.
However, this isn’t enough for many people interested in personal finance.
To pursue e.g. FIRE, or, Financial Independence, Retire Early, you’ll need to delve deeper.
Similarly, the book focuses heavily on employed people, so those in non-traditional work situations might need different advice.
How to Retire Early
For people who have never immersed themselves in the personal finance space, Invest Your Way to Financial Freedom is an excellent starting point.
If you follow all the advice in the book, you will have more financial success than the average person, and you’ll be able to enjoy your retirement at age 65 or 70.
However, those looking to either retire early or secure their financial freedom at an earlier age will need to do more research.
The book’s advice is to save 10-20% of your income for the length of your career, which can be enough for retirement but isn’t enough for financial independence at a young age.
Many people interested in FIRE save 40-70% of their income for 10-20 years.
After that, they are considered financially independent, which means that their assets cover all their expenses. As a result, they can choose to keep working, retire, or pursue alternative forms of income such as self-employment or starting a business.
Invest Your Way to Financial Freedom doesn’t delve too deeply into this concept, so readers ready to supercharge their investments might need to look further.
Ways to invest if you're self-employed
In the European Union alone, over 192 million people were self-employed in 2020. For them, many of the examples in the book don’t apply, since their income fluctuates throughout the year.
Automating their investments and saving a set percentage will be difficult. What’s more, they don’t have a workplace pension, so they will have to take a more active role in their future planning.
Arguably, this fact makes it even more important to support these people and provide them with accurate financial information.
Unfortunately, the book focuses exclusively on employed people.
While this has helped it to remain concise, it means that a significant chunk of the population still does not have access to accurate information tailored to their situation.
SHOULD YOU BUY THIS BOOK?
Our overall rating comprises five key considerations, including suitability for beginners and European and UK readers.
1. Beginner-Friendly
2. Investing Concepts
3. Investing How-to (Europe)
4. Financial Freedom Principles
5. Personal Finance Know-how
1. Beginner-Friendly
2. Investing Concepts
3.Investing How-to (Europe)
4. Financial Freedom Principles
5. Personal Finance Know-how
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Rating justification
Invest Your Way to Financial Freedom by Ben Carlson and Robin Powell is a great resource for people who are new to saving and investing.
It makes for a great gift for young family members or friends who are starting their first job or older people struggling with their financial situation.
It has somewhat less focus on reaching Financial Independance as other books we have reviewed and that you may want to grab to complement this reading.
Instead, the authors’ intent is on helping you maximize your finances.
The investing concepts are explained clearly and based on evidence.
Targeted at a UK readership, it is most relevant for young people hoping to set up their lives and careers in this part of the world.
Our overall Personal Finance Know-how related rating would be higher if we only considered the UK.
That said, most concepts and some know-how are also applicable to other EU countries, and it provides everyone with accessible, accurate information that is easy to understand and digest.
Finally, you won’t find specific investment how-to advice in this book. This is something that needs to be researched independently.
Bankeronwheels.com resources for beginners can be a great starting point to complement the book.
Good Luck and Keep’em* Rolling!
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