Category Archives: Book Reviews

Book helps map out a happy retirement

Retirement is a strange thing, in that you can’t really imagine what it is like until it happens – and when it does, you find it hard to believe you spent so long working.

But for many of us, leaving work and our colleagues behind might limit our social connections. What to do when work is in the rearview mirror? A great book, 101 Fun Things To Do in Retirement, has the answers.

Author Stella Rheingold begins by defining retirement as “entering a new, self-determined phase of life, leaving the employer or oversight of others to exercise greater choice and freedom in the use of one’s time.” In her view, that freedom is akin to “a lottery win.”

The book’s chapters then look in detail at various retirement pursuits, ranging from arts and crafts, the outdoors, sports, charitable work, and many more.  Some interesting hobbies in the “Head to Your Shed” chapter include blacksmithing and glassblowing, which “could be your passport to making some truly stunning artistic creations.” In “The Great Outdoors” chapter, she suggests picnicking – “if you are on a budget, but still want million-dollar views with your lunch, there is no better way than packing a picnic lunch.”

Under “Social,” a suggestion is to start or join a film club, ideal for “genre nuts” or those who love “films of a particular era.” Often such events can be hosted at a fun venue, such as a local pub, she writes.

The “Musical” category suggests learning to play an instrument, joining a choir, and later, checking out an “open mike” night. The “Educational” chapter talks of going back to school to further your education, or sitting in on university lectures, or joining a debating club.

Ideas for you to think about in the “Sporty” pages include lawn bowling, 10-pin or duckpin bowling, croquet and archery.

What’s great about this book is that Rheingold not only describes the various activities that are out there, but she gives you suggestions on how to reach out and join up. Trying out new things can be a bit daunting, but the warm, witty and wisdom-packed writing here makes it seem like getting going on all these great things will be worth the effort. As well, the activities are mainly, for the most part, quite affordable and thus, doable on most budgets.

Among her concluding thoughts is this gem – “life is short and may not have any meaning beyond the meaning we give it. The one thing we can do to truly honour life is to live it to the fullest for as many days as we are able.”

This is a great addition to any library.

Whatever you decide to do with your freedom after work, having a little income security will never be a bad thing. Consider opening a Saskatchewan Pension Plan account. Your contributions will be professionally invested over time, and at retirement, you’ll be able to choose from a wide variety of options that turn those savings into a lifetime income.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Retirement in Canada: Author Klassen likes concept of phased retirement

If you’re looking for a thoughtful, fact-filled and interesting guide to planning for your golden years, then Retirement in Canada by Thomas R. Klassen is a wise addition to your retirement reading collection.

Retirement, writes Klassen, is a complex issue both financially and demographically. He notes that the huge wave of retiring baby boomers is unprecedented. “Two-thirds of those 65 and over who have ever lived are alive today,” he writes.

For this huge group, he asks, will traditional definitions of retirement still work? “Retirement typically involves a substantial and sustained reduction in the amount of time spent in paid employment,” he explains. “Yet such a definition fails to include the many Canadians who spend decades in unpaid labour, such as working at home to care for children or other relatives.” What, he asks, does retirement look like for that group, “those who have not worked for money for an extended period of time?”

The old idea of retirement was ending employment at age 65 and never working again. However, Klassen notes, “it is relatively rare for retirement to mean the complete and irrevocable stoppage of work.” There is, he continues, “nothing magical about 65,” and Canada’s very first old-age pension program started at 70. Women, he writes, can still give birth after age 65 through in vitro, a 100-year-old completed a marathon in 2011, students graduate university in their 80s and 90s, and “workers in a range of occupations remain employed years, and in a few cases, decades past age 65.”

Canadians are now living longer. In the 1920s, life expectancy for Canadian men was 59 and for women, 61. These days, most Canadians will live to at least 85.

Will the burden of paying for all these retirees fall upon younger Canadians?

Klassen takes issue with the old-age dependency argument, the “impression of a future world in which a relatively few younger workers will have to support a multitude of retired people.” First, the retirees depend “on savings, such as pensions, accumulated during decades of employment,” rather than on younger workers. Second, such thinking assumes that everyone 15-64 “is employed – that is, they are workers – and that everyone 65 and over is retired and not employed. This is clearly not the case.”

In fact, he writes, older Canadians work past age 65 in ever-larger numbers, either because “they have no choice but to continue earning employment income,” or because “they live to work, rather than work to live.”

The idea behind mandatory retirement at 65 was “to press for adequate pensions from employers and for state programs for older citizens,” he writes. A related idea was to clear the decks for younger people to take the jobs vacated by retirees. When mandatory retirement was ended, Klassen notes, this thinking was revealed as “a fallacy,” based incorrectly on the assumption that the number of jobs in the economy is finite.

While government retirement income programs generally work well, the other main savings vehicles – RRSPs and workplace pensions – aren’t running at maximum efficiency. Klassen notes that only 39 per cent of workers had access to a workplace pension plan in 2010, and that only 25 per cent of those eligible for a private pension joined.

An issue, he suggests, might be affordability. Families in their 30s have significantly less wealth than those in their 60s, who are living in mortgage-free homes and are experiencing their highest levels of income.

So, given all this, will retirement be a good thing for most of us?

Klassen concludes by noting that “most Canadians can expect satisfaction with, and in, retirement after an initial period of adjustment.” He adds that “there is no magic transformation that occurs upon retirement,” so “those with higher levels of satisfaction with life before retirement will likely continue to be fortunate and fulfilled in retirement.”

If you are someone who has not joined a workplace pension plan, or don’t have access to one, the Saskatchewan Pension is well worth checking out. You can start small, and make contributions when you can, and then ramp it up as your income improves over time. It’s a flexible plan that is a sensible retirement savings ally.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

A new way of adding joy by tidying up – Marie Kondo

If you’ve ever looked around your home and noticed it is a debris field of clutter, then The Life-Changing Manga of Tidying Up by Marie Kondo is THE book for you.

The book provides a unique, step-by-step roadmap to making your home into the place of joy it should be, furnished only by the things that give you joy and fully de-cluttered.

Once you commit to her system, Kondo writes, “there’s no rebound… that’s the life-changing magic of tidying up.” The book, which is mainly a Manga cartoon, shows Kondo helping a young woman declutter her apartment.

The book recommends that you should start by “visualizing your ideal lifestyle,” even drawing a picture of how you want your home to look. Start, the book recommends, by discarding, which “really means choosing what to keep… keep only what sparks joy.”

A key tip is to never tidy up by place, but by category. Don’t go through your clothes in a closet, remove ALL your clothes from all closets, take them to a central spot, and sort them out into piles of keep (clothes you love and that spark joy) and to get rid of (those that don’t spark joy). Then, put them away in the empty closets and drawers.

There’s a chapter on how to save space by carefully folding your clothes – everything doesn’t need to be on a hanger, the book advises.   Books are treated in a similar way, although Kondo advises that once you have taken all books to a central sorting spot, you should clap your hands to wake the “dormant” books, so that when you sort them, you will be able to feel the joy sparked by the ones you want to keep.

With paper and miscellaneous (komono), you recycle things like newspapers and magazines first, and then use three categories for all paperwork – “needs attention, save (contractual), and save (other).” As Kondo says, “the rule of thumb for papers is to discard them all. Keep only those you will be certain you need in the future.”

Once all the tidying is done, the chapter on storage basically instructs the reader to “put things where they belong,” and to store everything by the same categories you used to tidy – clothing, books, paper and miscellaneous, and sentimental items.

Once you have succeeded, your home “is your joyful space,” and is “linked to your body.”

This book is a great read and a totally different way to look at how we deal with all of our possessions. We tend to keep things that don’t work, don’t fit, or that we think might be of value; the book urges liberation from this retentive state of mind and liberating the open space that’s in our homes.

From a saver’s perspective, there is always cash for getting rid of things with value that no longer give you joy, and money to be saved by staying where you are rather than moving to a bigger place with all your clutter. It’s a great read, a sort of spiritual view of aligning your environment with your inner happiness.

And if you are able to save a bit on housing or cash in some unwanted collectibles, a wonderful extra thing you can do is make a contribution to your Saskatchewan Pension Plan account. Tidying away some money today will bring joy in a future tomorrow!

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Moderate saving and debt avoidance are keys to a good retirement: Vettese

In The Essential Retirement Guide, noted actuary and financial writer Frederick Vettese offers a different, and decidedly non-alarmist approach to funding one’s golden years.

The book challenges some of the accepted “truths” about retirement planning, such as the possibility we will all live past 100 and that we should save (via all sources) enough money to replace 70 per cent of our pre-retirement income.

On longevity, Vettese notes that “the average person has little better than a 50-50 chance of making it from age 50 to 70 without dying or incurring a critical illness.” The book provides some interesting advice on how to determine your own, more realistic life expectancy target.

As for the 70 per cent target, Vettese produces ample evidence showing many of us can have a well-funded retirement with a much lower target. The income replacement target, he writes, can be “as low as 35 per cent for a couple that spent a considerable amount on housing and child-raising through their working years. The target can nudge above 50 per cent for a middle-income couple who paid off their mortgage earlier and then started to spend much more on themselves during their last few years of employment.”

Why does he feel you need less? He cites research showing that spending drops more than 50 per cent on many items – airline fares, admission fees, alcohol, cigarettes, clothing – once we reach age 80. And while many of us assume we will at some point face expensive long-term care costs, Vettese writes that “the probability of requiring long-term care is about 50 per cent for women and 40 per cent for men,” and it is unlikely that such care will be required for more than five years.

Other advice from Vettese includes paying attention to investment management fees. “Unless the firm that is managing your monies (if you have one) can demonstrate that they consistently achieve higher returns than the benchmark indices, you should expect your own returns will just match the benchmarks, less whatever fees you are paying.” Exchange-traded-funds have very low fees of 0.25 per cent, versus fees of up to three per cent for “some high-cost equity mutual funds,” he warns.

Vettese likes annuities as part of a retirement plan. “Buying an annuity is usually a better bet than managing your own investment portfolio after retirement and drawing an income from it,” he writes. “You lose a little upside potential but you also eliminate some major risks.” He suggests that people with a portfolio of fixed income and equity assets consider converting the fixed income portion to an annuity, which provides them with a set amount of income monthly for as long as they live.

Access to a workplace pension is a plus for those that have it, he notes. “Participating in almost any workplace pension plan is a good thing,” he writes. Nearly every kind of workplace savings arrangement is a group product, which gives individuals access to low-fee investments, Vettese notes. That leaves more money for retirement income, he writes.

Vettese provides a nice six-point retirement strategy, as follows:

  • “Save 10 per cent of your pay each year.
  • Invest it in low-cost pooled funds, weighted towards equities.
  • Keep the asset mix the same, through good times and bad.
  • Apart from the mortgage on your home, avoid going into debt.
  • Pay off your mortgage by the time you retire.
  • Buy a life annuity at retirement.”

This is a good reference book for anyone wanting to fine-tune (or develop) a retirement plan and it has been written to work with both Canadian and American audiences, a somewhat rare feat.

The Saskatchewan Pension Plan provides some of the tools you may need for your retirement plan, such as low-cost, professional investing in a pooled fund, and the ability to convert some or all of your savings to an annuity at retirement. Check it out today.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Retirement wit and wisdom featured in How to Survive Retirement

How to Survive Retirement, written by Clive Whichelow and Mike Haskins, packs a lot of retirement wit and wisdom into a tiny, pocket-sized package.  The book, published by Summersdale, uses quick pithy one-liners and cute illustrations to deliver some key messages about what retirement is like, and how to get through it.

As a retiree, the book suggests, “you are now free to confess that you didn’t have a clue what you were doing at work the past 40 years.” And now that you are retired, the book notes, you can choose between being “a perky, all-action windsurfing, golf-playing globetrotting gadabout who puts youngsters to shame” or “a thin-lipped, beige-wearing old crone who sees retirement as an excuse to take up moaning as a full-time job.”

The choice, the authors advise, is yours.

Other advice includes the idea that retirement “is a sign from above that you are destined for better things.” You can take pleasure, the authors point out, by noting that “when you left (work), they needed three people to replace you.”

There are some dos and don’ts for retirees, the authors suggest.

“Do attempt to keep in touch with the modern world,” they write. “Do try some exciting new experiences,” and “do keep an active interest in what’s going on in your neighbourhood.”

Don’t, they suggest, “wear a mobile phone attachment on your ear all the time – everyone will assume it’s a hearing aid.”

Retirement, the authors remark, should not be considered “the end of your working life… it’s the start of your non-working life, enjoy!”

After all, they write, “you’ve done your bit for retirement, now it’s someone else’s turn.”

Other advice – “the more you keep yourself fit and healthy, the more you will get your money’s worth from your retirement.”

This book is a quick read, a lot of fun, and delivers some good messaging in a humorous way. For example, retirees are urged to “pretend all the things you have to do during the day are part of a job you’ve been given.” And as well, “retirement is a miracle cure – you will never again have a mystery ‘illness’ that requires that you have a day off work.”

Finally, the book notes that “whoever set the amount for the pension never tried to live off it.” That’s true, given that more is always better when it comes to retirement income. An idea that occurs after reading How to Survive Retirement is to consider doing a little extra saving on your own for that golden era down the road. And of course, the Saskatchewan Pension Plan has all the tools you need to begin saving today for retirement income tomorrow.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Putting kids in the know about managing cash

Wouldn’t it be great, we fifty-somethings like to ask each other, if they taught the kids about money in school?

Translation – we wish someone would warn our children about the pitfalls of easy credit, which leads to crippling debt and a dearth of savings. And we are aware that the “someone” should probably not be us, since most of us are already there.

In the UK, a charitable group called Young Money is taking steps to right that wrong and get some financial literacy knowledge out to the younger set. They’ve released a textbook called Your Money Matters, and it’s free for anyone to download. Intended for use in education, it also contains a teacher’s guide.

The clearly written, concise book walks the reader through the basics of saving. Interest, the book explains, is “a reward for saving,” but is less rewarding when you want a loan or line of credit. “It is better to save than borrow, because in effect you get paid to save, whereas you have to pay to borrow,” the book notes.

After looking at the various savings options via banks, including bonds, the book then focuses on how to save. Basically, savings can come from earnings, gifts, the sale of things you own and – importantly – “reviewing your spending,” the book advises. “Reviewing your spending and making informed spending choices can have a serious impact on the money you have left to save,” notes the book.

Ways to be an “informed spender” include price checking between stores, using coupons and discount codes, joining online cashback sites, following favourite stores on social media to be alerted to sales and “decluttering” by reducing unneeded fees, the book states.

The spending chapter defines “needs versus wants.” Needs, the book explains, are “the absolute necessities… the things you can’t do without” such as food, water, shelter; wants are “the items, services, or experiences you would buy if you have the money to do so.”

As individuals, the book warns, we have peer pressure that influences our spending – family, peers, our culture, the season, ads, and the temptation to spend “disposable” income left over after bills are paid. The better you know these often negative influences, the easier it is to manage them, the book advises.

While much of the book is focused on UK examples, the basic stuff on saving and spending is pretty universal in theme. And while the intended audience is younger people, all of us could benefit from being informed spenders, rather than uniformed splurgers.

The book talks about the UK retirement system which is different than ours here in Canada. It does point out that joining a pension plan at work is a great idea because “your employer will also contribute to it.”

If you don’t have the option of a pension in your workplace, the Saskatchewan Pension Plan offers a “do it yourself,” end-to-end pension system you can join on your own. Your savings are invested professionally with very low fees, and at retirement time, SPP can convert your savings into a lifetime annuity, meaning you’ll get a cheque every month for as long as you live. It’s a wise step to take for any informed spender.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Book reveals path to “the vacation of a lifetime”

Retirement, the financial part at least, is a two-phase process. First, there’s savings – personal, workplace pension, government pensions, and so on. Second, there’s the art of turning those savings into an income stream that will pay for your retired life, which could continue for three decades.

A nice overview to this process, albeit from a U.S. point of view, can be found in The Retirement Survival Guide, written by Julie Jason and published by Sterling. Jason, a money manager, takes complex concepts and presents them in a clear, logical way, using charts, examples, and memorable textual sound bites.”

“Creating retirement income is all about making sure you can be financially secure for as long as you live,” she writes. Whether you want to sustain or expand your lifestyle in retirement, Jason notes, you need to take into account all your income sources and savings to make sure you have enough “to cover the gap,” and so that you “won’t outlive your nest egg.”

A good first step, she notes, is to know where you stand. “What you need to know first is how much you spend on `musts’ and how much you spend on `wants,’” Jason explains. A must refers to basics – rent or mortgage, utilities, food, taxes, the “essential expenses.” Everything else is a want. Essential expenses must be paid in full and on time, she advises.

Another important consideration is whether your money “will last as long as you do,” she writes. If you are trying to live off savings, how much should you take out each year without running out? Jason says most financial institutions feel a withdrawal rate of four to five per cent of “your initial assets, adjusted each year for inflation,” is a safe amount. Experts disagree, so Jason offers a nice worksheet to help you come up with a withdrawal rate tailored to your specific situation.

Now is always a good time to start saving, she writes, adding that “time is money.”

“Would you rather have a penny that doubles daily for 30 days, or $1 million? Believe it or not, you’re better off taking the doubling penny… a penny earning 100 per cent daily interest would grow to $10.7 million in 30 days,” Jason explains.

While 100 per cent interest isn’t a realistic possibility, the example shows the power of compound interest over time, she explains. She provides a table showing that if a 30-year-old saved $100 a month, or $42,000 over 35 years, he or she would have $215,600 by age 65, $465,500 by age 75 and $2.1 million by age 95. So, she says, “you’ve never too young, or too old, to start saving.”

A later chapter deals with the problem of the vanishing workplace pension plan. She suggests the use of annuities to ensure you have monthly income for life, and never outlive your savings.

The “Finish Line” chapter gives a nice overview of post-retirement portfolio design for do-it-yourself savers, and finishes with this compelling thought. “Take small steps,” Jason writes. “Don’t rush. After all, you’re getting ready for the vacation of a lifetime.” This is an interesting, well-written and helpful book that would make a fine addition to your retirement planning shelf.

The Saskatchewan Pension Plan  offers many of the levers mentioned in the book. The professionally managed fund has an enviable rate of return since its inception, and you can convert your savings into an annuity payout that ensures you’ll get a monthly pension for life. Perhaps it too deserves consideration when you are planning for retirement.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Book reveals a way to build wealth – conscious spending

We Canucks keep breaking the wrong kind of record – levels of debt. In fact, one would not be surprised if the phrase “becoming debt free” is starting to appear on people’s bucket lists.

An eye-opening booked called I Will Teach You to Be Rich by Ramit Sethi is a nice addition to your self-help library.  Among the many excellent ideas in this book is the notion of “conscious spending.” Sethi writes that becoming wealthy does not mean you must become super-frugal, living as cheaply as you can and buying the lowest cost items possible. Instead, he says it is important to think hard about what you ARE spending money on – conscious spending.

“Frugality alone doesn’t get you to your goals. It’s a helpful but not sufficient condition. So I take another approach of trying to write about money holistically, while urging you to make your own decisions about what’s important enough to spend a lot on, and what’s not,” he writes.

Most of us don’t think before we spend – unconscious spending – he writes. We just put it on the credit card and then hope for the best. A far better approach is to have a “prescriptive budget,” or a spending plan, for the month ahead. Many of us don’t know, he writes, what’s going out in any category – such as subscriptions and membership fees.

“We not only lack a prescriptive budget (“I want to spend 20% on my retirement account, 10% on savings, 20% on going out…”), we even lack a descriptive budget (“where is my money going?”),” he notes.

But the exercise of knowing where you WANT to spend your money in advance of spending it is empowering, he says. You may want to buy lots of shoes, go out a lot, or some other passion. What you want to spend your money on is up to you, there is no standard approach to take, the book notes.

The book is written in a very friendly, informal style – it’s like listening to sound advice on money from a close and trusted friend. It’s a good read with some fresh thinking on a subject that is of growing importance.

Once you’ve moved to a prescriptive budget and are conscious about your spending, don’t forget to make SPP part of your retirement savings plan. Your future you will thank your present you.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

BOOK REVIEW: Wealthing Like Rabbits

By Sheryl Smolkin

I don’t often review personal finance books because it seems to take an inordinate amount of time to wade through yet another statement of the obvious just to glean enough cogent information to give readers a taste of what the book is all about.

But when I read accolades from the likes of Gail Vaz-Oxlade, Preet Bannerjee, Roma Luciw, Dan Bortolotti plus a whole bunch of my other favourite personal finance bloggers in the introductory pages of the book, I thought I’d better keep on going to find out what all of the fuss is about.

Author Robert R. Brown says Wealthing Like Rabbits is written to be a fun and unique introduction to personal finance and suggests that any book that includes sex, zombies and a reference to Captain Picard is “an absolute must read,” regardless of genre.

Brown starts out by asking how many rabbits there would be after 60 years if 24 rabbits were released on a farm on a great big island. Before providing an answer to this question, he introduces the need to save for retirement, although he doesn’t begin to predict how much you or I will need. His only conclusion is that “more is better” because it is better to be 65 years old with $750,000 saved than 65 years old with $75,000 saved.

Then he reveals that there would be 10 billion rabbits after 60 years and launches into a discussion of the history and key features of registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs). Subsequently he riffs about how many zombies there would be in England if France sent 100/week for 40 years.

If you are still with me, you may wonder — what is the point of all this?

Not surprisingly of course, it’s to illustrate the power of compounding, whether in relation to rabbits, or money or zombies. We learn that just $100/wk deposited in an RRSP earning 6% for 40 years will add up to a nest egg of $624,627.

But the positive and the negative impact of compounding interest are also very cleverly brought home in later chapters. I particularly liked the comparison of brothers Mario and Luigi who both had similar incomes and $100,000 for a down payment on a house. They went to the bank to find how big a mortgage they were eligible for.

Mario’s banker told him “he could afford” to buy a house for $525,000. Luigi told the mortgage specialist he needed $10,000 for closing costs and the $90,000 balance had to cover at least 20% of the purchase price of the house so the most he would be willing to spend is $450,000.

The story continues with Mario buying a 3,000 square foot home for $525,000. Luigi sticks to his budget and buys a 1,600 square home nearby for $350,000. Over 20 years, compound interest on the mortgage means that Mario ends up paying $807,538 for his house while Luigi only has to fork out $538,359.

Similarly, when it comes to debt, Brown illustrates that high interest credit card debt can quickly escalate if balances are not paid off every month. Even I did not realize until recently that if you miss your payment due date by even as little as one day, the interest-free grace period completely disappears. In fact you have to pay interest on the amount of each transaction from the date each and every purchase was made.

Brown also reviews the characteristics of a line of credit; a home owner’s line of credit; bank loans and consolidation loans. While generally he believes all of these can cause severe damage to your financial health, he recognizes that when handled properly, they each have their place.

But he draws a line in the sand when it comes to payday loans. Never, ever get a payday loan, Brown says.

He gives the example of Buddy who borrows $400 from a payday loan place because his furnace broke down. He is charged $21 for every $100 he borrows for just two weeks. Two weeks later he pays the payday lender $484. That’s 21% for only 14 days, which works out to 546% annually. And that’s only the beginning.

If Buddy can’t pay in two weeks the payday loan company will charge him an NSF penalty and continue to accumulate stratospheric interest rates on the whole amount. Further defaults mean he will likely be hounded both by telephone at home and at work day and night. The file may be handed over to an even more aggressive collection agency.

In the second last chapter, Brown offers a brain dump of financial tips (which he doesn’t call “Fifty Shades of Brown”):

    • Spousal RRSPs are cool.
    • MoneySense magazine is a great source of personal finance information.
    • Eat dinner at home. Then go out for a fancy coffee and desert to Starbucks.
    • Buy life insurance, not mortgage insurance from your bank.
    • Read Preet Banerjee’s book Stop Overthinking Your Money for the skinny on life insurance.
    • Use the noun“wealth” as a verb. So instead of saving $150/week in your RRSP you will be wealthing your money.

And finally, Brown’s parting words at the end of the book are “you’ve got to show up.” Put some money away for your future. Live in a house that makes sense. Be smart about how you spend your money. Spend less than you earn. Be comfortable living within your means. He says it really is that simple.

Wealthing Like Rabbits is funny and engaging and it hits all the personal finance bases. Regardless of whether you are a Millennial, a Gen Xer or a Boomer, you will find lots of tips on how to save more, spend less and still have a lot of fun along the way. 

The book can be purchased in hardcover for $16.95 and the epub and kindle versions are available for $7.99.