Straight Talk on Your Money
Many financial mistakes people make are a result of conventional wisdom. That means, the generally accepted money advice some people follow – is wrong. This includes some of the advice you’ve accepted by your parents, your friends and even from your “expert” financial professionals. Don’t assume what any of them tell you is always correct and don’t assume it must apply to you and your family.
That’s the premise of Straight Talk on Your Money by Doug Hoyes, who skewers 22 of the biggest financial myths in Canada today. Doug knows how to bust myths and help Canadians. He is a Chartered Professional Accountant and Licensed Insolvency Trustee. Over the course of his career, Doug has advised over 10,000 people in financial difficulty.Doug was very kind to send me a copy of his book this fall and I checked it out while travelling last month. (FYI – Good plane-reading-material Doug.) Here are some of the selected myths Doug is going to help you bust when you pick up a copy of his book.
Myth-busting in Canada (or anywhere else for that matter)
Myth #1 – Humans are Rational
Heck no. Here is Doug on this myth when it comes to housing: “…the first step in making that decision is to acknowledge that you are not rational; that you, and I, make decisions on emotion and are often influenced by social norms. If we realize this, we can briefly and intentionally set our emotions aside so that we can consider the facts and make an informed decision.”
This certainly easier written than done but I agree with the point. Our judgments in life (and in money) are often clouded by the forces around us. If we can work a bit harder to strengthen our cognitive muscles we’ll be financially wealthy for it.
Myth #3 – Experts are experts
Refreshing to see a financial professional admit he is biased. Heck, I am too. News flash, so are you.
So be mindful of experts Doug warns who claim they are not, because “the problem with some experts is they don’t encourage debate; they stifle it.”
The reality is, nobody cares about you (or your family) more than you. If you want to include the words “your money” into that sentence then by all means do so. I have and will always continue to believe in this mantra.
Myth #8 – Pay your small debts first
Conventional wisdom argues you’ll feel better about your debt issues if you tackle your small debts first, before the major ones. I disagree (and so does Doug). Math should trump psychology but it hardly ever works.
Myth #11 – There is good debt and bad debt
One of these reasons is you focus on good debt – such as borrowing money for a house that should appreciate in value over time. While this could be a form of “good debt” Doug provides a checklist of questions to consider if you’re going to be using someone else’s money:
- Can I afford the payments?
- Will I profit from using the debt?
- What is the risk?
Consider debt as a practical tool for your financial life but only if it fits the task.
Myth #13 – A house is a great investment
Don’t think I didn’t notice why this is myth #13 in the book, as in unlucky #13. A house is not always a great investment. Our own case study is evidence of that.
After upgrades and some repairs, we’ll be lucky to break even if we move from this house after 7-8 years here. You can read more about our housing dilemma here.
Doug reminds us that houses do not generate income (like my portfolio does here) and there are opportunity costs to consider – choosing any housing investment over any other form of investing. No doubt my wife and I would be far ahead of where we are today (financially) if we rented over buying this house. At the end of the day however, living here has been great to date and it was a lifestyle choice we were more than happy to commit to at the time. Simply acknowledge with any housing decision that emotion will probably guide your house-buying decision much more than math.
Myth #17 – Budgeting is essential for financial success
Yes and no on this Doug. While Doug believes budgeting “is a waste of time” for most people, I tend to believe in it. I believe there are better ways to budget but to his point, you have to find some system that works for you.
Myth #22 – Life is like a box of chocolates
Doug cites potential loss of employment and medical issues as the key reasons to have plans and contingencies in place when things aren’t as rosy. “The point is that stuff happens, so think about it now, and make a plan.”
Like most personal finance books that come my way, and find their way to a plane or anywhere else I’m reading material, I found this book both enjoyable and full of practical advice. The purpose of Doug’s book entitled Straight Talk on Your Money was not to tell you how to live your financial life. It was to share the perspectives of Doug and some of his lessons learned from thousands of client’s experiences with money. With that objective in mind, I thought he did a good job.
Have you read Straight Talk on Your Money yet? What financial myths would you like to see get busted?