Blessed by the Potato

Worry-Free Money by Shannon Lee Simmons describes how you can set up your finances to make sure your major goals are met and your money is working to help make you happy. Once the big things are taken care of, the method she describes lets you spend the rest worry-free. It’s a fantastic message, lots of people (including me, despite nitpicks) love the book for this, and it’s easy to recommend.

The chapter on dinner out with friends was great. To steal a quick summary: everyone felt pressured to attend an $80/plate dinner and didn’t want to miss out, but the price tag didn’t really fit anyone’s budget. By talking openly about it, the group was able to figure out the trap they were in and find a way to still hang out and have fun without breaking the collective bank.

“Is it safe, is it happy?” This isn’t a quote from Gandalf, but a framework for deciding when spending is good spending. And it’s a framework that I think is driving a lot of the positive reviews — it’s a good, simple way to frame your spending problems.

The “F*ck it moment” was a good way of framing that moment of weakness when we overspend, but I hated the orthography. Yes, the asterisk is in the book. The book for grown-ups that she wrote herself. I know it’s nitpicky, even for me, but for fuck’s sake if you want to swear then just swear — the asterisk isn’t fooling anyone. Those who are prickly about such things will still be prickly (I can tell you from experience — three obscured letters appears to be the prudish sweet spot), and it’s not like you had a network or regulator censoring your book. And if you don’t want to swear, then just call it something else in the first place: a screw-it moment, whatever moment, cowabunga moment, a Scarborough subway moment — there are lots of euphemisms.

Nitpicks

I got an advanced review copy, so I’m not sure how many of the errors were caught before final publication, but there were some funny ones, such as including costs in multiple categories in the highly detailed budget examples (am I the only one not spending hundreds of dollars a month at the gym as both a fixed and variable cost?). One appeared to be an issue of incomplete adjusting of a real case to an anonymized example, where a family with a 5-year-old has been struggling with daycare payments for 8 years (that or it’s a case of an unspeakable — and unspoken — tragedy).

One that I’m pretty sure is not an error is the description of how to figure out how much to save for an emergency fund. While I agree with a lot about the need for emergency funds and how she describes it in general, I have a hard disagree with this:

“The only way to set a savings target for an emergency account is to work out an average based on your spending history.”

Not only are there other ways, that’s a pretty bad one — if I had used that method, I would have $0 in my car repair emergency fund, and been left completely unprepared for the $1700 in damage a mouse did last winter. Similarly, she suggests reducing your emergency fund by anticipated EI payments. I can say from multiple experiences that EI is not a replacement for an emergency fund: it will eventually come through to help backfill your emergency fund, but delays in getting your EI are fairly common and you can’t rely on it in lieu of emergency savings.

That last point may be because she puts a lot of focus on accepting that people are people and to not stress people out with unrealistic goals, that it’s better to aim for something small and achievable than for where you really want them to be — though in that case I would have helped provide a method to better estimate emergency fund needs, and then tell readers to start with a month and work up to 3-6 months’ of expenses saved later.

The Problem with Dylan

I loved the “opting out of life’s checklist” part. You can’t compare yourself to other people, you don’t know how they maintain the tiny sliver of their lifestyle that you can see, and sometimes your life’s checklist (buy a detached house at age X, for example) don’t work for your life as it is and you have to change those plans.

We can’t all be robots (yet… the assimilation technologies are advancing though), so I suppose it’s good that she tackles head-on the difference between what you can do and what you will do. That mixing and balancing between the emotional/irrational part of personal finance with the finance part is always a bit difficult for my spreadsheet-based operating system. I mean brain. That organ above my neck that is totally made of wet gooey gross stuff just like yours. Anyway, it’s great that so much of this book goes right into that terrain and a big reason for all the love it’s getting.

But I didn’t get a good sense of when financial exigencies led to a “lemonade” awakening, where someone should adjust their life checklist, or when the rules of thumb could go out the window in the name of mental health. The story of Dylan was the biggest thing that stuck out here, and I think there were many problems with the case study.

To recap: Dylan’s just barely out of the lowest tax bracket, trying to live in one of the most expensive cities in the world. He was living with a SO who made more than twice as much as him, so it’s not a surprise that he’s in for a big lifestyle adjustment when the relationship falls apart and he’s out on his own.

But he wants a 1-bedroom above-ground apartment in a good location — no basements, no commuting — which will be something north of 70% of his income on housing and fixed costs. That violates the earlier rule to not commit more than 55% of after-tax income to fixed expenses. Oh, and he has a bunch of credit card debt. Shannon does a good job talking about how to make it work temporarily, the value of saving even $100/mo in fixed costs, and finding even a small amount of extra income… but this is a major violation of “the rules”.

Usually, you break the rules in an example to prove a point, and I do not see why Dylan breaks all the rules here — because he doesn’t want to live in a basement apartment or leave a city he can’t afford where his higher-earning ex just threw him out? The only justification was that it was “Not good for my emotional well-being.” So do none of the rules apply if it’s for emotional well-being? Or, given a similar thing happens in Burn Your Mortgage, is the general principle simply that financial rules of thumb don’t apply to Toronto and Vancouver?

“No matter which way we sliced it, the breakup meant that Dylan would be forced to live beyond his means for the next five years. Welcome to real life.”

That “welcome to real life” could just as well have been said to Dylan and his preference for a 1-bedroom apartment in an expensive area — instead of being forced to live beyond his means, he could just as easily been forced to live in a smaller space or (gasp!) with roommates. Now, he’s young (though that point is not reinforced), so letting his goals slip for a few years was something he could (and did) recover from, but I think there’s a danger the average reader takes another message entirely away from the case.

There’s another big problem with Dylan: that credit card debt. While he’s paying interest at 19% for nearly 4 years, Dylan is sitting on more than enough assets in his RRSP to wipe it out in a stroke. Shannon says not to tap them for a completely screwy reason — as Michael James puts it:

“…Taking money from his retirement account didn’t make sense because much of it would be taxed at a higher rate than the interest he was paying on his credit card.” There are good reasons not to touch retirement savings, but comparing a tax percentage to a credit card interest percentage makes no sense at all. You might as well decide to buy a car instead of a house because the car has more tires than the house has bedrooms.

This could likely be a blog post in its own right. But briefly, she’s comparing an annual rate of interest to a one-time tax, and furthermore, that tax is something that will apply at some point no matter what — indeed, he’ll likely never get that money out at a lower rate than he could right now (and then he should prioritize his TFSA once he starts saving again). While there are behavioural issues associated with tapping retirement savings to pay off a credit card (which she does get around to later, such as “putting him into scarcity mode by emptying all his accounts” and making long-term savings short-term ones), that only comes later, and is in reference to his emergency fund rather than his retirement savings. In terms of money sense he absolutely should have pulled the money out of his RRSP to attack the credit card debt. Moreover, that would have freed up $300/mo in his budget (when the rest of the story was about a song & dance to eek out $200/mo).

The Dylan story has a happy ending, but only because he ended up getting more income than the plan called for, and didn’t face a big increase (indeed, any increase) in his rent and other fixed costs. It could have just as easily ended as the next story does, where he builds his plan around being tight for a few years, but banking on raises/more income in the future to offset it… which never come or get eaten up by increases in lifestyle spending. Then instead of facing a big lifestyle adjustment once, he’d be in for two rounds.

Conclusion

Worry-Free Money is a great book, particularly for beginners. It goes into a lot of detail on managing cashflow, with a spend-the-rest/hard limit method that may work better than traditional budgeting for many people who are made of meat and feelings. It acknowledges that emotions exist, and those emotions may compete with financial goals, and takes a holistic view where finances are part of that.

I loved the encouragement to talk honestly about finances, and how many people may be feeling the same financial pressures as you. There are nitpicks (and again, if you’re new here, that’s just how I read and likely why I work as an editor), and it’s left kind of fuzzy when preferences have to give way to the harsh truths of the real world, but I liked it enough that it’s in the reading guide in the back of the 2nd edition of the Value of Simple, and whenever I get around to updating my graphical reading guide I’ll probably include it there, too.

In today’s Globe, Andre Picard points out that technologies to help prevent/reduce deaths of small children and animals in cars already exist.

He doesn’t mention technologies to cool cars though, which I think are also important, perhaps moreso than alarms.

The first, and most important to bring up, is heat-rejecting ceramic tint. It’s inexpensive, can be applied to any car after-market — even your existing car, right now — and helps with just the general summertime comfort in addition to slowing the rate at which your car turns from comfortable to uncomfortable to deadly oven. I got mine done 8 years ago, it cost $284 at the time, and can’t recommend it highly enough — there is such a huge difference in the amount of heat coming through the side/back windows vs. the untinted front window, and the car is so much cooler than other peoples’ cars (esp. untinted rental cars that we have for a week here or there on vacation). If you’re in Toronto and need a recommendation, I had FormulaOne Pinnacle tint installed by Auto-Links in Scarborough, but there should be a tint place in pretty much every city that will install a heat-rejecting ceramic film for you (note that most tint, like the one you may have had installed at the factory or by a dealer on your new car, is a metallic or dyed film that helps a bit in the sun, but is not as good at reducing heat).

I should mention that while I love it, it’s not a panacea: the car will still get hot, just not as hot as fast. You’ll still need to not leave a living thing in the car, so you’ll need good practices/habits and maybe even an alarm or reminder to help with that. Still, the difference between having an hour and several hours before something horrible happens could make all the difference.

The second is more built-in to the car, and not an option I went for myself, but I’m surprised it hasn’t become as popular as keyless entry and backup cameras did: a solar roof to provide the power to keep the fans running when it’s hot and sunny.

Day 7. The wild calories continue to call at me. Their taunts and siren songs pick up at sunset. So far I have not been tempted out to the wilderness to investigate…

It’s been a week of actually doing the stuff I’ve known all along I should have been doing, and things are going well. I’ve run a calorie deficit every day. I’ve lost over a pound in a week — an amount that took 3 months in my “let’s just fart about with trying to eat a bit more sensibly and be a bit more active.” None of this should be much of a surprise (except the surprise that I’ve actually been good for a whole week).

I’m not physically hungry at all, so far it’s a fairly achievable calorie deficit. I’m taking a bit of a cue from the intermittent fasting ideas, with late breakfasts (~10-11am) and no snacking after 10pm, which I think helps, as I’m used to the idea of missing breakfast in a crazy morning rush. Psychologically I’m craving all the things. Like, I just want to transmute my stress into nothingness via the catalysis of chocoloate, even though that is a reversible reaction, with some nasty by-products. I’ve been whining, and likely will continue until I get to the point where eating healthy is more natural, and where I don’t want to eat a box of cookies just to prove that I can complete some kind of task.

The deeper question is how did I get here, and how would I get here on purpose faster in the future? Whether it’s losing weight, starting to budget, or starting some uncomfortable project, how can you get to the point where you actually just buckle down and do it? I don’t recall a particular epiphany — hitting my never weight should have taken me right to this point, but instead it took another year and a half to actually take it seriously and use all the tools at my disposal. My dad getting sick did re-surface the idea of mortality, but then why July 1st and not June 1st?

It’s an important question, because while I expect I’ll be good next week, and hope I’ll be good the week after, and the week after that, ad nauseum, I know there will come a time where I will slack off or fail. And when that happens, how will I dust myself off and get myself back here again? How, when I’m not sure how I finally stumbled in in the first place? For that matter, I’m not even quite sure what it is that I stumbled upon: willpower? Wisdom? The incubation time for a good idea to finally take root?

Anyway, had a decent week health-wise. There have been other decent weeks, but this one felt a little more on purpose, what with the tracking and not eating all the timbits when work got busy. Not quite sure how I managed it or how to do it again.

The last update featured some ups and downs and a near miss. This quarter was more of the same: a few good weeks, a few weeks of kummerspeck. Lots of walking: I hit my step goal ~5 days out of 7 on average, and there were only 3 weeks in the quarter where I didn’t hit it at least 4 days. But, curling season is over and I didn’t do much other exercise (other than the brief period of teaching Blueberry to ride her bike). At one point I was down over 2 lbs from the previous weigh-in, at another I was up over 3. But the see-saw did end down on the quarter end, by just a hair over a pound.

Taking three months to lose a pound doesn’t seem right to celebrate, because that’s almost down in the noise, and way slower than my target. But I did cross down through a threshold, which is good! The directionality is correct! And it felt hard, even if the results aren’t impressive. So it means the price of the course is going to go up! The next stop on the way back up to $299 (as my weight comes down to my target) is $229.

To really challenge myself I should probably make the thresholds a moving target, but right now I’m going to take the small victory and think about insanity mode for 2019.

I know that tracking what I eat will help, and I haven’t been doing it. So I started today. Right now I’m trying the function built into the fitbit app, but might just use a small paper journal in the end. Either way, I know that how I do it will be less important than that I do it at all.

The quarter also marks the start of the 20th anniversary year of BbtP. The day the site went live way, way back then is an ill-defined day near the end of the year, lost to the sands of time, so we’ll arbitrarily align with the winter solstice. Of course, celebrations are premature. I’ve wanted to update the design, etc. (maybe enable https?), and thought this would be the natural time for an update (maybe even a complete “rebranding”) but just don’t have the time/energy for it. And given that my posting frequency is way down, with more meta/health update posts, to an outside observer all signs must be indicating that the blog is in terminal decline, so perhaps we should open up the ideas for anniversary celebrations to a long-overdue euthanasia.