The One-Page Financial Plan

August 29th, 2016 by Potato

Carl Richards’ book The One-Page Financial Plan has been out for a little over a year so this isn’t exactly a fresh review. It’s a very quick and easy read, punctuated with Carl’s simple but illuminating sketches.

I want to both sing the praises of this book and damn it, sometimes for the same parts.

The part I loved is the philosophy towards planning, which is to seek a balance between mapping the future out in great detail (impossible as the future is inherently uncertain) and just living for today and playing it by ear. Carl tells us to just make a guess about where we’d like to go in the future. “Don’t be committed to the guess, be committed to the process of guessing.” […] “Once we’ve accepted that a lot can happen between now and the future, financial planning boils down to making the best guess we can about what goals will help us live the life we want. Don’t worry about getting it ‘right.’ You can — and should — simply course-correct your guess when you notice yourself going off track.”

The part that causes me the most dichotomous feelings is the title: a one-page financial plan. I was really excited to see what his one-page plan was, because I really tried to simplify my example plan and it was still over two pages. Here is his “plan”:

Time with family doing things we love!

  1. Fully fund all retirement accounts each year
  2. Fund kids’ education account each year
  3. Save for house

Those are a list of priorities, and this fits so well with the kind of planning that Sandi describes in her library talks, about goals and direction. This is a fantastic exercise to do and I think it’s great that the book covers it so well — this is an easy thing to overlook when trying to plan.

And then I get angry because it’s not a plan, or at least not what you expected a plan to be going in, so the title feels like a cheat. Then there’s a great analogy about putting together a children’s toy, and the picture on the box vs. the detailed step-by-step instructions, which makes me love it again. But that still doesn’t make the picture on the box a plan. Grr!

Anyway, if you were expecting to walk out with a step-by-step guide for creating a detailed financial plan that mapped out how much you had to save in which baskets, you’ll be disappointed. However, it’s a short read, and thinking about your goals and priorities is an important part of the planning process, so it’s still worth your time.

The Long Earth and Foraging

June 7th, 2016 by Potato

I’m partway into the last book of the The Long Earth Series and I just had to take a break to rant about part of it.

Don’t get me wrong, it’s an interesting premise and there’s a good story in there — after all, I have stuck with it through three and a half books now. The idea is that there are multiple parallel worlds, each differing a tiny bit from the last. But humans only developed on “datum Earth”, so when people “step” to a parallel world they find the world as it would have been, without the effects of millennia of humanity. Forests where cities stand, mammoths roaming North America. So people spread out to colonize the new parallel worlds, with full knowledge of where the gold and oil is hidden.

However, the point the authors then try to ram home multiple times and that just doesn’t catch with me — that’s immersion-breaking for me — is that beyond that, a great many people decide to drift further and further into the parallel worlds and become hunter-gatherers, living off the untouched land. They try to make it sound like an idyllic life, that the plants will provide, and all the squirrel you can eat. So many people are drawn by this new/old way of living that civilization is being hollowed out and at risk of collapse.

Sure, there would be more big game without over-hunting, many of which would have no fear of humans, but people would be giving up all our infrastructure: clean water, shelter, the internet, medicine. I just can’t see it.

I mean, yes, part of why this is immersion-breaking for me is just how much I am not that foraging type, so every time they try to sell that point about half of humanity just walking away from everything civilization offers I go “hells no!” There are some people even in the city who are all about foraging, with jealously guarded secret spots in the Don Valley where edible mushrooms and wild chives grow. That’s not me — I can barely deal with you-pick-em apples/strawberries at an orchard/farm where they are ripe and ready and thick upon the plants. And I’m still like “This is too much work just to eat, someone give me something to edit and I’ll hit the grocery store later.”

If you’re really, really into hunting (and all the nasty business of skinning and butchering that comes with it) then maybe, but I can’t swallow the notion that wandering into the forest and living on the fruits and berries you find is in any way appealing. Without humans spreading the plants we like, there wouldn’t be that many of them to make foraging all that easy. Moreover, plants and berries just don’t work the way they say — most of what we eat has been shaped by human cultivation. If I could barely be buggered to pick delicious Royal Gala or Empire apples from a tree in full ripeness, ancestral corn (pitiful and tiny), wild bullrushes (technically edible), black spruce (who doesn’t love a good black spruce porridge?), stinging nettle (nope), dandelion (they grow wild in my lawn and I pick them anyway and I still can’t be bothered to eat them), or wild grapes (you thought the seeds were a problem when you accidentally bought the non-seedless cultivated grapes) would just be giant fuck yous.

Sure, if you had no other choice, many of those things are technically food. If you pathologically loved the open, empty world, you may run off to a parallel universe and live off the land. But I absolutely cannot see something like half of earth’s population abandoning industrialized farming to go forage in the long earth. There are many other interesting potential calamities the authors could have explored based on the discoveries. For example, what would happen to climate change if we could tap three or four Ghawar and Permian Basin oil fields from neighbouring earths, and put all the CO2 into our atmosphere? What economic shocks would happen if precious metals were no longer quite so rare? What tensions would there be between establishing suburbs in the “parallel footprint” of existing cities, versus using those areas for farming (as many of our cities were founded on prime farmland)? Some of these issues are touched on lightly in the books, but nothing is hammered as hard and as often as the hollowing-out of humanity for the call of foraging.

To give you an idea of how hard they try to sell the idea, here’s a blockquote to leave you with:

“Valhalla is a city supported by combers. Hunter-gatherers. The logic is elementary. Intensive farming can support orders of magnitude more people per acre than hunting and gathering. On a single world a comber community, even if natural resources are rich, would necessarily spread out, diffuse; the concentration of population needed to sustain a city would be impossible. Here, it is sufficient for the combers to be spread out, not geographically, but over many stepwise Earths — over a hundred parallel Valhallas, left wild for hunting. […] The city is a product of a layer of worlds, each lightly harvested, rather than the product of a single intensively farmed world. This is intensive gathering: a uniquely post-stepping urban solution.”

Air Miles Suck (and Have Effectively Expired Already)

May 3rd, 2016 by Potato

I was one of the first to sign up for an Air Miles card when they were offered at my local Dominion over 20 years ago. All I had to do was carry around a little piece of plastic and shop like I normally did (with maybe a few extra rounds of stocking up when bonus offers came around) and I’d get free movie tickets? Sweet deal.

And of course, over the years the points got devalued, and the bonus offers weren’t as good so they didn’t accumulate as fast. Then the deathknell: air miles cash points. I should have read the tea leaves and switched over right away, but I didn’t, because for a short time movie passes were still an option. Quite rapidly over the last two years, air miles have stripped away virtually all of the things you could use your points on. And they don’t allow you to convert your stranded dream points to cash points, so they’ve effectively become worthless.

There are some news stories out this week making a splash about how air miles points will start expiring soon if they’re old, but really, it’s already happened. If you have a big stockpile of “dream” points, go ahead and see what you can get, but it will be a frustrating experience on many levels. Not only because all the stuff you may have got or been saving up for before (gift cards, movie passes, zoo passes, electronics, magazine subscriptions) is gone, but also because of how slow the air miles site is. Plus it’s all cluttered up with stuff to buy with cash rather than redeem your miles for, which is highly frustrating. I don’t know if that’s just a bait-n-switch (I clearly clicked on the section for redeeming my points, air miles, so why are you pitching me on ways to spend cash and get more stupid points?), or if it’s to have something in those categories because otherwise the possible redemptions are really sad looking, or if they just don’t even know what they’re doing over there any more.

How sad? Under house & home there are zero items you can redeem your points for unless you are a Gold member or want to use one of their terrible, scammy “cash + points” deals. Under electronics there is one item. Kitchen and dining has two, one of which is a hideous woodgrain grain mill, something I know is at the top of everyone’s kitchen wishlist </sarc>. Personal care & lifestyle has a few items left… but only two are under 2000 points and again, weird, underwhelming items no one would want.

So whether they officially take them away in the coming weeks or not is just semantics — if you weren’t paying attention (and I wasn’t), your air miles have already expired.

I think this devaluation of points and the effective elimination of the “dream” option was a huge mis-step for air miles. There’s no longer a reason to bank points, which means people don’t feel good about getting their statements and seeing ridiculous amounts on there. Instead they’ll save a few bucks here or there, $10 at a time, and the program will lose its ability to act as a loyalty/incentive/draw. Making points only usable for cash makes the value completely transparent, and that doesn’t work in their favour (the return is poor relative to other points plans).

The program is so bad now that it’s working in reverse: instead of a store offering air miles being a perk and a reason to shop there over competitors, a store offering air miles is just a sad reason to keep air miles alive. I don’t shop at Pharma Plus because they offer air miles — I haven’t cut up my air miles card because I still shop at Pharma Plus. When MoneySense offered me bonus air miles to renew my subscription (a subscription I got in the first place by redeeming miles which is no longer an option), I wanted to write in and ask if they could just stuff the air miles and give me a few bucks off instead. In part because they burned us, air miles are a bit of an annoyance, and in some cases I’d rather avoid stores that offer them.

And as a final note: don’t transfer your points to someone else. They “offer” the ability to transfer your points to another person, but it is a scam. They charge 15 cents per point to do it, when the points are only worth about 10 cents each in the first place! If you have points expiring, trying to combine with someone else will not work out for you unless you just need a few more points to reach some threshold for redemption (not that there’s much left to redeem for).

Word on the Street After-Action Report

September 27th, 2015 by Potato

Word on the Street was super depressing.

It was the first time at Harbourfront, and there were road closures and a Jays game (who are actually popular at the moment) working against it, but on the other hand the weather could not have been more perfect for an outdoor festival.

I have a lot to complain about, and that’s pretty much all this post is, so feel free to skip from here if you like. One note before you go: the lack of attendance means I have a lot of inventory on hand at the moment, so I have extended my free shipping offer if you buy the Value of Simple from my direct site.

First is how confusing the new Queens Quay is as a roadway. I was just commenting to Wayfare about how weird it was and how all the reports I’d heard of collisions and streetcar problems were making sense after seeing it for myself. We saw an SUV make a left turn against the left-turn light (but there were four other green lights on at the time and no one coming the other way, so kind of understandable), and I said someone’s going to not expect the streetcar to be coming up on their left, not see the red light for the turn, and hit it one day. Well sure enough the next light cycle that’s exactly what happened. The guys manning the gate at Word on the Street said it was the second such collision they’d seen that weekend, which sounds crazy to me.

Harbourfront is not a great location for an event like this because it’s so isolated down by the water: it’s not on the subway, it’s hard to drive to, and people can only approach it from one direction, which leads to a lot of congestion as people move in and out at peak times.

Then parking is such a rip-off at Harbourfront. It’s not just that it’s expensive, it’s expensive in a really aggravating way. WotS officially ran 11am-6pm. Parking was flat rate, pay-in-advance until 6pm, and then a second flat rate pay-in-advance if you stayed after 6pm. Well, I had a booth that was supposed to be open until 6, so I figured I wouldn’t be leaving until 6:30 or so with teardown and stragglers and packing up, and had to make that call in advance. But as it turned out other people started packing it in early, which led to the attendees filtering out early, and then the organizers started tearing down the signs early and telling people to be ready to move out because getting cars on site to unload everything was going to be a nightmare. So we were packed up and out of the parking spot by 6:05pm — that 5 minutes of parking cost $14 because of the flat rate system with the really stupid break point. For a 6pm event, stretching the parking flat rate to 7pm or so would have made sense, but no, they had to try to gouge the exhibitors those last few bucks. That also likely had an effect on the attendees disappearing by 5:30 — those who drove were probably aiming to make sure they were long gone by the 6pm cut-off on the first rate. And one more parking/Queens Quay annoyance is that there isn’t a right-turn lane or right-on-red allowed to get out of Harbourfront, so at each light cycle all the pedestrians would block the cars from turning right, who would then block the cars from going straight, and it took forever for people to just get off the site and on to the road, two cars per light cycle at a time. They could have really used a cop or two directing traffic to get a few more in a row getting out and going.

As for the festival itself, it was very weirdly laid out — and from my vantage point — a practical ghost town. To be clear, there were a fair number of people in attendance overall, but it was very unevenly distributed.

On the layout, it was spread around Harbourfront, with buildings separating it roughly into thirds. There were many people who had no idea very large sections of WotS existed because they didn’t go through one or both of the buildings to explore the other parts. There were many, many lost people, and not many maps or signs saying things like “more WotS this way!” I think they needed to define a traffic flow pattern and put some arrows down to help people hit all of it, or even just put up more signs saying “independent authors this way! More kidstreet this way!” I think we spent more time at the booth helping people find other booths than we did selling books and talking about investing. I heard from other people that were touring more of it that other parts were much, much busier than where I was, but even then there were a lot of dead pockets: a tent might have been divided into four booths, one facing each direction, and two sides of it would get no traffic, with people not even knowing they could go around the other side of the tent. Or booths set up in weird, dead corners — the kids area had a healthy crowd, but most of it was set up outside and the stuff inside was so dead that Wayfare took a break to sit down in a corner in there and do some work on her laptop.

My location was terrible. They put booths facing both directions down a little alley between the buildings. That alley did not get much foot traffic in the first place, and splitting it to either side further cut it down. Unfortunately it wasn’t evenly bisected, so ~3/4 of what traffic there was went down the side opposite me. In the sales material for authors they highlight that (in the past) 225,000 people attend Word on the Street. I had maybe 2,000 people walk by my booth all day. Not stop to chat or even let their eyes focus on the signage, just walking by in total. I didn’t have a great view of the main entrance, but I know what 50,000 people at a Jays game looks like and I don’t think there were even that many at the whole event.

To talk business for a sec, I had brought just under 100 books, hoping to sell nearly all of them, plus 200 bookmarks to give away and 100 postcards with some quick facts about RESPs for all the parents with little ones that would be going for the kids stuff. But because of the segregation there were hardly any parents coming by — the kids’ stuff was on the other side of the Harbourfront building and they had no reason to come down my little alley (those who did to go the long way around to the TVO stage did so on the other side of our tent where the alleyway was wider). I only managed to give away (for free) maybe ~40 RESP cards and ~60 bookmarks. I sold 14 books (I needed to sell ~55 to break even on the day).

I know it was hard in advance to figure out if this would be worth it for me — I couldn’t find other authors blogging about this or similar events. So I went through a bit of a Fermi calculation, figuring that of the wildly inflated 225k attendance figure, maybe 20k would make it within sight of my booth (which would average just about a person walking by per second over the 7 hours — basically some decent milling crowds, which fit well with my memory of past events and didn’t seem too extremely optimistic). Then of that, maybe 5% would be interested in the topic and slow to have a look, and maybe 10% of those interested would buy a copy after talking for a bit — which would have worked out to selling a book every 5-10 minutes, and a healthy margin of error above the break-even level. The big kicker for me is that I actually wasn’t too far off on those estimates that should have been harder to guess at — about 4% of those who did pass by did pause to pick up a card or bookmark, and possibly chat for a bit; about 17% of those did make a purchase — it was that first traffic number that was off by an order of magnitude that spoiled the predicted success. (Though I did vastly underestimate how much time people would need to talk about investing before making a decision on whether to buy the book).

Now I made some marketing mistakes that could have helped get people who did walk by to stop and check it out in more detail, the biggest one I think was to prominently feature the cover of the book in a large, eye-catching poster when instead I could have used that space for a large, eye-catching poster that somehow got people to stop and check out the book — whether that was summaries of reviews, a few bullet points about how the book helps, or leading questions to get people to come in. But the fact is whether my “conversion rate” was a factor of two or three times better just wouldn’t have mattered given how little traffic there was there in the first place. But either way, from a business perspective, WotS was totally not worth it for selling books (or even just exposure — only 10 people visited the site today).

Of course, all this whining about the space and layout and lack of traffic is from the point of view of an exhibitor. As I was writing this I saw on Twitter someone praise this year’s layout, because it clumped together all the booths on that person’s hit list so they didn’t have to walk around the whole event: just a surgical strike to one corner and they were out. Wayfare rather liked the extra stage space that Harbourfront offered because it made it more of an “event” versus the book sale frenzy it started off as. Which highlights part of the problem for people like me: it does no good to bring in tens of thousands (if not the hundreds of thousands in past years) of people to see big-name authors or local magazine offerings or kids’ musicians or whatever if those are all clustered together and then hardly anyone explores the rest of the event.

I recall in past years that everything was laid out fairly logically, so you knew where to go to hit everything (up and down Queen St., or around the loop in Queen’s Park, with IIRC a bit of a grid of tents in the middle). Most trade shows are similar: nice, neat rows so you can come up with some kind of logical search path and hit most of the things to explore. And then the vendors are somewhat randomized in there, so you get a reward for exploring further — ah, another SciFi (or whatever you’re into) booth down this row, let’s go (and also stumble on something nearby). Here it was confusing, and the clustering meant if you were primarily looking for one thing, there was no reward for exploring further (and because it was confusing, if you did want something else you had a hard time finding it).

Harbourfront offered more large stages/auditoriums for particular events like the performances from TVO shows for kids, or authors doing readings, but it also brought those people away from the rest of the festival, again segregating more. But, it was more of a “cultural event” — which is fine for attendees, but vendors should be wary.

So in short, from the perspective of a local author, in one of the dead spots in the layout, I think the new Harbourfront location for WotS was a complete bust. Possibly the old ones were too and I was just mistaken in my attendance assumptions or got swept up in their fancy marketing (though if you do a google image search you’ll find more people with umbrellas in the rain at Queen’s Park than on an absolutely gorgeous day at Harbourfront). Either way, for those following along here for self-publishing anecdotes, it looks like a booth at a generalist literacy event is not a great choice for spending your precious marketing dollars (unfortunately not much else is).

The other reason it was depressing was the reasons people were giving me for not buying the book. There’s the usual catch-22 I’ve faced with the book all along, too: those who are interested enough in investing to stop and have a look at the book generally don’t feel they need an introductory, practical guide because they’re already doing it. Those who could really be helped by a book like this just walk on by without making eye contact. That sort of thing is helped a lot by audience selection at other events like Money 201 talks at the library. But while I haven’t come up with a good solution to the problem yet, I’m used to facing that one. What was really depressing was seeing so many people with debt problems to tackle before they could even think of investing. So many who didn’t even want to try to learn, because “simple investing” was an oxymoron. A few who at one point I thought must have read my blog and were out to troll me because they didn’t need to invest because they had real estate. I didn’t give anyone the RE bear hard-sell, but when I mentioned that this offered an easy way to diversify, one guy actually said he didn’t need to “because it’s different here” — he said the literal words and I was like “Am I on camera here? Is this really happening?” A few were a little older than me, and didn’t like the sounds of moderate, long-term growth that focused on costs — they needed to beat the market and get rich quick because they didn’t have enough time left to save for retirement the slow way.

Fortunately, 100% of parents at WotS already know about and use an RESP for their kids.

Wealthing Like Rabbits: A PF Cheerleader

June 29th, 2015 by Potato

I have to admit, I was really afraid to read Wealthing Like Rabbits based on the previews and excerpts I had seen. I was also afraid because the title was explained with this blurb: “Let’s take the word wealth, which is a noun, and start using it as a verb. The new word wealthing will replace saving when discussing any saving that increases your net wealth,” and I was scared that it was going to be wall-to-wall neologisms. I was pleasantly surprised: It’s actually a really good cheerleader for personal finance.

The book kicks off with an alternate reality comparison: what life looks life if you stretch to the max for a house and lifestyle, and what it can look like if you pare it back to something that’s still well within the comfortable range. It’s one of the best uses of this technique I’ve seen, and strongly makes the case that living within your means is not all about sacrifice, but can provide the stability and security you need to actually be happy. “Comfortable is about more than money. Much more. It’s about sleeping comfortably at night and not being afraid to check your mailbox or your inbox in the morning. It is about being comfortable driving to work in a Corolla rather than a Lexus when you are thirty-three so that you won’t have to drive to work at all when you are sixty-three.”

It’s full of highly relatable anecdotes advising readers to set up good savings habits, control their spending, and build their lives on a solid financial foundation. The irreverent examples using zombies and hockey are not taken too far (with the exception of the debt = smoking one), and each chapter has its own unique pop culture reference to help prevent them from being over-stretched.

WLR has the subtitle of An Original Introduction to Personal Finance and the key word there is introduction. It is not a guide or user’s manual, and Robert Brown is no Michael James on Money — the book has a few technical mistakes and misunderstandings… But it’s not a book on details anyway. The sins are of detail and not of message, and the message is just fantastic. It’s not detail-oriented, but like a good cheerleader it’s just to get you riled up and rooting for the home team, not to deliver a detailed game plan for the next play. And WLR is great in that role: it is so easy to read and does such a great job at those alternate life comparisons that I think it’s well worth reading for a newbie, and would make a good first introduction to personal finance — the details (that geeks like me love to nitpick) can be ironed out in their second or third PF book.

I was also relieved to find the bit on the wealthing neologism at the end of the book, and not a new phrase the author tried to wedge into the entire thing.

It is full of quotable bits, which I will end on: “It’s startling to see how a series of seemingly reasonable decisions can result in such an unreasonable amount of money going out the door.”

——

Nitpicking:

I’ve noted some points as I was reading it (and Michael James on Money already covered many in his review), so here is a breakdown of some things to watch for.

RRSPs: The most noticeable errors (in terms of affecting the message) come from discussions of RRSPs. TL;DR: just accept the take-home message that you should save and invest for your future in some combination of an RRSP and TFSA, and pick up the details elsewhere.

Early on in the book, WLR calls the refund from an RRSP contribution a windfall, and suggests that younger readers use RRSPs over TFSAs because they would rather get this windfall when young than when old. Yet later, when discussing the home buyer’s plan, he suggests the opposite: that using the tax savings for a downpayment is “…stealing from a future version of yourself.” [emphasis in the original] Describing the home buyer’s plan is a touch challenging, but to break it down simply I’ll put it this way: it’s a way to use “the government’s portion” of your RRSP as a downpayment now, or to use pre-tax money for your downpayment. For example, if you’re in the 30% tax bracket and were able to save $17.5k in your TFSA as a downpayment for a house, you could instead have put the $25k you made (and were taxed on before putting the funds in your TFSA) in an RRSP pre-tax, and then used the full $25k for your downpayment. In many cases, this difference (~$7.5k depending on your tax bracket — double for a couple) is not enough to worry about getting into a commitment to repay and the psychology of tapping into sacred retirement funds and all that. However, if that amount can make the difference between having 19% down and getting stuck paying CMHC fees or having 20% and avoiding them, it can be well worth it (though you could just save a up for a few more months too). The HBP is often described as a loan to yourself from your RRSP, which is right because you have to pay it back, but doesn’t really get to the main benefit. Of course, the main drawback is that you do have to pay it back and a shocking number of people don’t, which is why WLR comes in against it.

However, it’s also a good safety valve on the RRSP — as a young person you can start saving for “the future” with your RRSP if you want without needing a detailed plan on saving for a house versus saving for retirement, the HBP (and the flexibility of the TFSA) will let you focus on saving and sorting the details out later. WLR makes takes the opposite point of view on this opinion: “It’s important to understand that long-term (retirement) savings and saving for a house are two entirely different things and they need to be treated as such.”

What’s weird is that the book then recommends paying CMHC fees over using the HBP. The HBP has the risk of not getting repaid and costing you some RRSP room and a premature tax bill, but paying for mortgage insurance is guaranteed money out the door.

As for the windfall issue, I tackled that in an earlier post. In short, it’s not — the refund is a total red herring that confuses a lot of people with the RRSP.

When describing the benefits of enrolling in an automatic RRSP payroll deposit plan, the book says that “If you contribute $50 a week to your RRSP, you can reduce your taxes by $50 a week.” Not quite: a $50 automatic contribution will reduce your taxable income by $50; your reduced tax withheld will be more like $15, depending on your tax bracket. Again, it’s still a good idea, but the details are off.

Paying off debt vs investing: There is one bit of flawed reasoning that crops up in a few places. When discussing whether to pay of debt first or to start investing, the book says “Yes, the debt’s interest is likely higher, however, I really, truly hope that the interest on your savings will be compounding for a much longer period of time than the interest on your debt will be, which makes the math favour the savings plan.” No. There is a big benefit to starting to save early, but that applies equally to reducing debt early — investing does not get special treatment in this regard, and your savings from the future will not hitch a ride on the TARDIS to come back and thank you for birthing them earlier. If the interest on your debt is higher than your expected returns from investing, then paying the debt off aggressively is the right move. Your retirement savings may have 40 years ahead of them to compound when you’re in debt, but for the first year of building them up your debt and retirement savings both compound for a year; the year after that adds exactly one year to each: your debt (negative wealth) growing every bit as fast (or faster if the interest rate is higher) as your investments. Where it makes sense to invest before paying off your debt is when your expected return is higher than the interest on your debt — or to pay the penalty for behavioural reasons.

He does have a side point that starting to save and invest early will get you into the good habit of building up your RRSP and avoid procrastinating, and I think this has merit. I’ve seen some people get caught unsure of where to go after finally paying off their debt — starting to invest a bit before the big zero day can make the transition smoother, even if it’s not mathematically optimal. But these behavioural factors are not what the math says you should do. In the margin I starred this paragraph: “…all habits are forming. The sooner you embrace and establish the habit of saving, the easier it will be for you to maintain that habit throughout your life. If instead you develop a habit of postponing saving until a better, more perfect time, you will (with the best of intentions) establish a habit of procrastination. And you know what? There is no perfect time!” That was great and could have stood on its own.

This issue of compounding times rears its bizarre head again when discussing saving for a house. “So, while I’m saying that you need to be saving for your retirement even if you are carrying some debt, in the same sentence I’ll say that you shouldn’t be saving for a house until you are debt-free. That sounds hypocritical but it’s not. Any money you save for a house down payment will not be compounding for nearly as long as your retirement savings will be. Without the advantage of the longer time frame, the cost of servicing the debt is bound to exceed the return on your savings.”

Mortgage math: A big part of the alternate reality possibilities centre around buying a larger house or a smaller one. The most math-heavy part of the book is comparing the housing choices of two brothers, one of whom stretches to the max while the other starts with a more realistic budget. There are many tables of figures there, and even I was starting to tune out at the number over-load.

There is an exceptionally common error about mortgage payment frequency out there that also appears in WLR, “The more frequent your mortgage payments, the less total interest you will pay over the length of your mortgage.” So far so good — this is true. However, the effect of paying more frequently is quite small and often over-stated by confusing more frequent payments with accelerated payment schemes. I highly recommend aligning your mortgage payment frequency with your paycheque frequency: if you get paid biweekly, make your mortgage biweekly. But if you get paid monthly, there is no point in making your mortgage payment weekly — the savings on interest are minimal, and anyway you end up having to push a payment back just so you can keep a balance in your chequing account to spread a monthly paycheque over several weekly periods. WLR falls into the common mistake of confounding accelerated payments with more frequent payments: “The difference is substantial. A $350,000 mortgage at 5% paid monthly would …[numbers]… The same mortgage would cost only …[numbers]… a savings of $30,187 just for paying more often.” [emphasis mine] No, the savings are from paying more, not more often.

Accelerated weekly/biweekly plans are a good behavioural way to arrange paying more on your mortgage, but they are not magic. If your budget is constraining you from paying your mortgage down aggressively, signing up for an accelerated weekly or biweekly mortgage can lead to nasty surprise when you hit your first month with an extra billing period in it.

Again, these are nitpicks for geeks like me. The book is good for its anecdotal value, the relatable stories that will help people learn and remember the basics.