Right out of the gate, author David Trahair says Canadians are going about their financial future all wrong: “Our quest to build wealth and secure a comfortable retirement often ends up making us poor and others rich.” What is your reaction when you read that?
A few years ago, I would have questioned Trahair’s statement. Now, I’m with him all the way. In Cash Cows, Pigs and Jackpots, Chartered Accountant David Trahair tells us to run, fast, from traditional wisdom and get off our modern treadmill of excessive borrowing for the homes we live in, stop buying and investing in things that cost us more than we realize and taking too many chances on long-shots because they rarely, if ever, pay off. Thanks to David and his great team at Wiley, I’m giving you an opportunity to win a FREE copy of Cash Cows, Pigs and Jackpots, David Trahair’s latest book. Before I do that, here’s an overview of what you’ll read in David’s latest offering.
“From now on, before you spend any more money on anything, before you jump into an investment opportunity, before you sign a deal for a new car or a new house or condo, before you put another cent on your credit card, before you borrow another dime, stop for a moment and consider the cash flow implications of this thing.” If you do this, Trahair writes, you’ll have a good idea whether you’re making a financial commitment in a cash cow, a cash pig or gambling on a cash jackpot.
Want to know what your biggest cash cow is? Read chapter 2 and follow David’s advice once you find out.
In chapter 3, David suggests net worth while a viable metric is a poor measure of wealth. He also suggests (and maybe rightly so) many “wealthy” people are living a mirage.
“It seems to me that many people who became millionaires (at least on paper) got rich by borrowing to do it. It sounds easy: take a loan from a bank, invest in something and hope the thing you buy grows in faster value than the interest you have to pay on the debt. In other words, their wealth is debt-dependent.” Money is not needed for happiness only an enabler to do certain things writes Trahair.
Next, David writes about “the mutual fund fee monster” everyone should be wary about and how borrowing, while it can work for some people is far from a sure bet to secure financial independence.
Probably David’s most blunt perspective on debt is expressed in chapter 5 entitled The Dream of Home Ownership. While he says we often hear the phrase “the rich don’t rent”, for many people this is absolutely the right thing to do, especially when you factor in the closing costs, land transfer tax, GST/HST and then the ongoing costs of home ownership. David takes the reader into great detail (and math) about the opportunity costs of investing in a tax-free savings account (TFSA) or a Registered Retirement Savings Plan (RRSP) instead of purchasing a home. Trahair continues sharing his take on debt when writing about The Condominium Conundrum in chapter 6, making reference to an excellent resource for potential condo buyers, the Condominium Buyer’s Guide produced by the Canadian Mortgage and Housing Corporation (CMHC).
In chapter 7, David demystifies inflation providing definitions for the Consumer Price Index (CPI), deflation and stagflation, the latter a “two-headed beast” that could occur in Canada due to slow economic growth and rising prices.
Even with recent government rule changes to the Canada Pension Plan (CPP), Trahair weighs the pros and cons of taking CCP early, at age 60, how to apply for it and challenges some myths that the plan is underfunded. In Cash Cows, Pigs and Jackpots, there are also details about Old Age Security (OAS) and the Guaranteed Income Supplement (GIS), including eligibility criteria for each program and a breakdown for folks about annuities – information that would serve any investor nearing retirement well.
Cash Cows, Pigs and Jackpots is another solid publication from Trahair, national best-selling author of Enough Bull who reinforced what sophisticated investors have always known and what novice investors need to know now: cash flow is the key to financial freedom. David is passionate about helping you take control of your finances, which is clear when he writes: ”give yourself a chance of contentment during your retirement years. If you are already retired, the best time to start taking control of your cash inflows and outflows was in the past. The second best time is today.”
Dedicated readers and new followers, because the month of November is Financial Literacy month in Canada, I want to do my part to contribute. I want you to win a FREE copy of David Trahair’s new book Cash Cows, Pigs and Jackpots. Enter below! The contest closes in about two weeks from today. Good luck everyone!