Wednesday, May 5, 2010

Book Review: Personal Capital

I was asked to write a review of the book "Personal Capital: Foundational Concepts of Capitalism" by J.L. Eaton. The book is approximately 200 pages, and was self-published by the author through The text serves as a good introduction to personal finance. In the introduction, Mr. Eaton spells this out, saying "This book is written for those who have recently joined the professional workforce after finishing college and who are just starting out in the respective careers."

The book contains five main sections covering these topics: Basic Economics, Debt, Taxes, Real Estate, and Investments. Drawing upon such works as The Millionaire Next Door by Thomas Stanley and William Danko, the author builds a case for accumulating investment assets and reducing debts. The author covers some of the most basic of economic ideas, such as The Rule of 72.

The author defines the term "Personal Capital" to represent the value of your investment assets minus all debts owed. This roughly corresponds to what most of us would refer to as Net Worth. However, he specifically excludes non-financial assets such as televisions, DVD players, laptops, desktop computers, and the like. Also excluded from Personal Capital is one’s primary residence. In addition to an extensive discussion of real estate, the author devotes a major section to the treatment of taxes. There is a lot of good information here, but one caveat that I can give is that some of the information is dated. The book was recently published (at the end of 2009), but the author often references tax rates and rules for 2008. As we all know, tax regulations are moving targets that change almost every year, so his numbers may not be current.

There is a section about securities that mostly cover bonds, and leaves only a short discussion of stocks. As the writer of a stock investing blog, I had hoped that the author would give a more detailed treatment of stocks. However, I understand that he has a broad topic to cover, and cannot get into every detail. The book is written in the style of a research paper where the author highlights the main points of each topic by drawing upon other writings. He makes generous use of footnotes throughout the book that refer to such texts as The Automatic Millionaire by David Bach, and Warren Buffet’s Letters to Berkshire Hathaway shareholders.

The general financial advice given is solid and straightforward. It should not surprise anybody with a basic understanding of personal finance. Thankfully, there are no get rich quick scams presented in this book. The author does a good job of covering a lot of material within 200 pages. Unlike popular finance authors like Robert Kiyosaki, and David Bach, Mr. Eaton hasn’t trademarked any buzzwords like "The Cashflow Quadrant". So, I don’t get the feeling that he is trying to sell me something else (like another book or audio program) when I’m reading this book.

Overall, I think that the author’s target audience may benefit from this well-written book. You are not likely to find Personal Capital at your local bookstore, but it is available through for $14.99. It can also be purchased as a PDF file download (ebook) from for only $6.

J.L. Eaton lives in Northern Virginia (near Washington DC) with his wife Marci. He maintains the Capitalism Curriculum website.

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