Category Archives: Book Reviews

BOOK REVIEW: THE REAL RETIREMENT Why you could be better off than you think

By Sheryl Smolkin

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The Real Retirement by Morneau Shepell Chief Actuary Fred Vettese and Bill Morneau, Executive Chairman of Morneau Shepell was released and extensively reviewed by the media in 2013.

However, I decided to circle back to this book over a year later because it is much more optimistic than many of the personal finance books I have reviewed since January.

Most financial writers seem to be trying to guilt readers into forgoing consumption during their working lives in order to accumulate sufficient RRSP savings to generate 70% of pre-retirement income.

In contrast, Vettese and Morneau present well-reasoned arguments to illustrate that income replacement of 50% or even less post-retirement will result in a “neutral retirement income” (NRIT), i.e. similar patterns of consumption for retirees.

Initially, they note that there are three phases of retirement:

Phase 1: From retirement age to the mid or late 70s or even later if you are healthy you are most likely to travel to exotic locations and pursue expensive hobbies. Therefore your income requirements will be highest in this phase.

Phase 2: In the second phase of retirement you may have diminished physical or mental capabilities. If so, you will travel less and cut back on strenuous activities. Therefore you will spend less money.

Phase 3: In the last years of your life you may be more physically or mentally impaired. You may need to be in a nursing home, or if you are wealthy enough, in an upscale retirement home with nursing care.

As a result, planning to spend more in the first decade of retirement will not necessarily mean that you will run out of money before you run out of time.

I thought it was particularly interesting that when considering available resources that can generate retirement income for Canadians, unlike many other personal financial writers, the authors also factor in the value of “Pillar 4 assets” including real estate, business equity and non-registered savings.

They use the following population breakdown in their calculations:

Income Quartile Average total income (couple)
Quartile 1 $29,000
Quartile 2 $53,000
Quartile 3 $78,000
Quartile 4 $110,000
Quartile 5 $204,000

The bottom quartile is dropped out because it is assumed that government benefits such as CPP, OAS and the GIS will provide better than average income replacement.

For the most part, Quartile 5 is also excluded since a couple with an income of over $200,000 has typically saved in RRSPs and has other Pillar 4 assets that can augment retirement ravings.

Vettese presents an example of a couple in Quartile 3 with $78,000 in annual income at age 65 and assumes they saved 6.5% annually in an RRSP from age 30 until retirement, Once their RRSP balance is converted to a RRIF at age 65, including government benefits they will have an income after retirement of $48,600/year.

Although retirement income for this couple is just 62% of their pre-retirement income, they no longer make RRSP and CPP contributions; have EI deductions and other employment costs; and pay a mortgage or child-raising costs. Their income taxes are also much lower.

The net result is that they have $14,000 more in disposable income to spend post-retirement! Although each family’s financial situation differs, the authors conclude that an NRIT which equalizes consumption before and after retirement generally only requires about 50% of pre-retirement income.

A calculations using a couple in Quartile 4 ($116,000 before retirement) reveals that the NRIT is just 44%. Furthermore, they can achieve their NRIT with 35 years of RRSP contributions equal to 3.5% of household income. And in general the higher the income level, the lower the NRIT.

This book is an interesting read because it presents a different perspective on the perennial questions, “How much will I need in retirement?” and “How much do I have to save to accumulate the amount I will require?”

While Vettese and Morneau suggest the answers to these questions may be “less than you think,” it doesn’t mean you don’t have to save at all. And all of the scenarios assume you retire free of mortgage and other debt. They also presume a drop in employment expenses and taxes payable that may not apply in your situation.

But if you thought the only thing you have to look forward to is Freedom 75, reading this book will cheer you up. Retiring at age 65 may in fact be a perfectly reasonable objective and you might even be able to afford a nice annual vacation or two while you are still well enough to travel.

The Real Retirement can be purchased online from Chapters for $15.64.

Fred Vettese
Fred Vettese
Bill Morneau
Bill Morneau

BOOK REVIEW: HOW NOT TO MOVE BACK IN WITH YOUR PARENTS

By Sheryl Smolkin

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The same day I was planning to review “How not to move back in with your parents: The young person’s guide to financial empowerment,” the author and Globe and Mail personal finance columnist Rob Carrick wrote a column revealing how difficult it is for students to get summer jobs to pay for their education and quantifying the cost of post-secondary study.

He cited the Yconic/Abacus Data Survey of Canadian Millennials, conducted for The Globe and Mail earlier this year of 1,538 young people aged 15 to 33. The study found that just over one-third of young people worked more than 30 hours per week at their last summer job. Another 23 per cent worked less than 30 hours at the same job, while the rest were either working multiple part-time jobs, looking for work or taking summer classes.

According to the survey, earnings from summer jobs and other savings totalled less than $2,500 for 46 per cent of students prior to starting college or university, while another 23 per cent had $2,500 to $5,000. However, a year of undergraduate education away at school including tuition, books and living expenses can easily cost $20,000 or more.

That’s why the information in Carrick’s latest book is so valuable. Every new parent should get a copy when they leave the hospital with their precious bundle of joy and beginning at a young age children should be taught the basic principles of financial literacy outlined in the book.

The first chapter discusses sources of funding for college or university and the basics of Registered Educational Savings Plans (RESPs). It is important that new parents understand that the combination of government grants and compounding mean that by opening an account in their child’s first year, saving for a college education becomes almost painless.

He also zeroes in on avoiding the debt trap and the perennial student dilemma: go to school at home or go away to school? He suggests that if the out-of-town program is going to make the student more successful or give him/her the edge in building a career, the additional cost can more easily be justified.

Successive chapters deal with banking, saving, budgeting and the pros and cons of buying a car. Later in the book he looks to the future and covers off the financial implications of buying a home; weddings and kids; and, insurance and wills.

Every chapter has a useful hot list. Examples are:

  • Tips for saving money in your student years
  • Expert tips on building a solid credit rating
  • Five rookie financial mistakes to avoid
  • Ten things you need to know about your company pension plan
  • Top mortgage tips for first-time buyers
  • Top reasons not to buy mortgage life insurance from your bank

Regardless of how well parents and their offspring plan and save, Carrick recognizes that kids may need to move home for some period of time when they are out of work or looking for a job. In fact he did so himself after he finished university.

In those circumstances, parents will have to make “boomerang decisions” like:

  • Whether they should charge room and board
  • Whether to provide some day-to-day spending cash
  • Whether to push their child to take any job you can get.

But kids also need their part by acting like adults, making non-financial contributions and keeping parents updated on their job search. Recognizing that parents may have useful contacts and advice can also help to avoid friction.

The principles of good money management for students and parents Carrick discusses are not new. However, they are introduced and packaged in a way that makes sense for both cohorts.

It’s well worth the couple of hours it will take you to read the book and a good reference you can dip into from time to time in the future when your family is at an age and stage where specific information will apply.

The book can be purchased for $16.57 online at Chapters.

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Book Review: THE SMART DEBT COACH

By Sheryl Smolkin

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Talbot Stevens is so confident that his book “The Smart Debt Coach” can save you money, that he is offering a free refund to anyone who doesn’t think they can save at least $1,000 by applying the basic principles he discusses.

The book is written in the style of a “self-help novel” like David Chilton’s The Wealthy Barber and Jon Chevreau’s Findependence Day. The main characters are Joe, Michelle, their friend Kim (physician and single mom) and financial advisor Bruce.

When Joe’s sister Lisa asks his family to join them on a Caribbean holiday, they are reluctant to do so because it will mean further maxing out their credit cards. Then Joe realizes Lisa saved the money in advance for the trip and he wants to learn more about how she accomplished this on a lower family income.

She explains that on the advice of their parents (which Joe ignored at the time) for over 10 years she and her husband have been working with Brian, a financial advisor. Since his death they continue to get similar advice from his nephew Bruce.

It turns out that Bruce (a widower) is the parent of one of the kids on the hockey team that John and Michelle’s son plays on. Kim (divorced) is also a hockey mom. While watching the games week after week, they quiz Bruce on basic financial concepts and eventually John and Michelle retain him privately.

And so their journey to a better financial future begins.

Bruce goes through a goal setting exercise to help them establish priorities and negotiates a contract which clearly sets out the responsibilities of both the financial coach (Bruce) and the clients (Joe and Michelle).

One of the first strategies Joe and Michelle learn about is “Debt Swapping.” Essentially this means if you have high interest credit card debt plus unregistered investments, you can cash in your investments, pay off the debt and then borrow at a lower rate to re-populate your investment account.

This is a win-win because they will pay less interest on the investment loan and they can write off the interest expense against any investment income.

But based on the maxim that “a penny saved is a penny earned,” Bruce also illustrates how avoiding credit card debt and other unnecessary expenses represents real money in their pockets. Furthermore, their advisor demonstrates they are not getting the full benefit of their RRSP contributions if they spend their tax return instead of topping up RRSP accounts.

Like the wealthy barber, Bruce encourages John and Michelle to “pay themselves first” by setting up automatic withdrawal of monthly RRSP contributions and increasing contributions every year by a specified percentage. He says that in most cases saving 8% of income and inflating deposits yearly by 3% produces a larger retirement fund than saving 10% without ever ramping up savings.

He also motivates them to be more frugal in other areas and buy a slightly used truck instead of a new one to reduce monthly car payments. Some more complicated strategies recommended later in the book include taking out short-term loans to top up RRSP contributions and using a second tax refund from RRSP top ups to fund registered educational savings plans for their children.

In addition there are chapters on other smart debt strategies, a common sense way to beat the market and how being a landlord can pay dividends.

However, by the time I read about 80 pages I found myself skimming to try and pick out the relevant financial information without having to wade through the somewhat contrived story. I was also disappointed that there was not a point form checklist of the basic ideas I could use for future reference.

The book is extremely readable and the advice is good. While it is far from a romance novel I was not surprised that after all those hockey games (spoiler alert), Bruce and Kim are a couple by the end of the book.

Unless you are already doing everything Stevens suggest (and few of us are) it is unlikely that you will be able to honestly collect on his money back guarantee for the book. Even if you don’t read it cover to cover, you will discover some new strategies you can use to map your own road to a healthy financial future.

You can purchase The Smart Debt Coach for $15.67 on the Chapters Indigo website.

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Book Review: FAMILY, KIDS, MONEY

By Sheryl Smolkin

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Kevin O’Leary is one of North America’s most successful entrepreneurs, as well as a star of CBC’s Dragon’s Den and ABC’s Shark Tank (where he will appear exclusively next season). He has co-founded, funded and sold numerous companies in a wide range of industries. Kevin is currently the Chairman of O’Leary Funds, a billion dollar mutual fund and O’Leary Mortgages. He also co-hosts CBC’s The Lang and O’Leary exchange.

In his most recent book “Cold Hard Truth on Family, Kids and Money,” O’Leary takes a life cycle approach to decisions creating a financial family dynasty. Unlike most of the books we have reviewed in this space, the focus is less on the precise details of budgeting or saving money and more how to choose a mate, build a long-lasting marriage and pass on good financial skills to your children.

He starts by describing his mother’s second marriage which lasted 46 years because it was based not just on love, but on shared personal and financial values. He says, “Marriage is like a pizza pie, where love is only one slice.” Therefore, he firmly believes couples should date for at least three years to really get to know each other before marriage.

He also recommends that couples complete individual “financial due diligence” work sheets before sealing the deal. This comprehensive questionnaire covers educational background, employment history, personal debt and any criminal history.

O’Leary acknowledges that this may not seem very romantic. However he says there is nothing that will kill the romance faster than finding out after the wedding when you apply for a mortgage that your partner is deeply in debt and has a terrible credit history.

Not surprisingly, he also believes the reason many arranged marriages work out is because before setting up a first date a good matchmaker will consider the couple’s temperament, education, personal values and attitudes towards money.

When it comes to the kids, O’Leary says the most important thing you can give them is your time. But an early MBA (money and banking awareness) comes a close second. Every financial interaction with your child is an opportunity to teach by example whether you are buying groceries or visiting your investment advisor.

Because financially illiterate children turn into financially illiterate adults, he encourages parents to teach them the basics at home from a very early age. “There’s no need to make lessons too complex for kids. Don’t spend too much. Mostly save. Always invest. These are the building blocks,” he says.

Always an entrepreneur, O’Leary is a big fan of the wealth that family businesses can create. But he uses anecdotal examples to illustrate the money mistakes you can make in a family business and the fixes. For example, he says don’t be in a rush. It’s better to do your research first and produce a quality product. And if the business doesn’t make money in three years, he advises you to cut your losses and move on. It’s a hobby not a business.

Finally, he confronts head on some tough issues like the financial implications of a divorce and the high cost of retirement homes and long-term care. He is an unabashed advocate for the purchase of long-term care insurance.

The book covers a lot of territory and in some sections it feels like a series of individual essays rather than a cohesive whole. Even if you do not fully agree with every aspect of O’Leary’s business-like approach to love and money, you are bound to find some good ideas to apply to your own family and finances in this 262-page book.

You can buy Cold Hard Truth on Family, Kids and Money online from Indigo. The paperback costs $11.47 and the Kobo version sells for $12.99.

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Book Review: MANAGING ALONE

By Sheryl Smolkin

Making a will and getting our financial affairs in order is something we all know is important, but many of us never get around to it. Younger people in particular often feel they are invincible and that it is too soon to think about death and dying.

But people die as a result of illness or accidents at all ages. And where they have not done the necessary planning, spouses left behind may not have the money or information they need to pay the mortgage, support their children and move on with their lives.

“Managing Alone” is a self-published book by Manulife Certified Financial Planners Jennifer Black and Janet Baccarani (co-owners of Dedicated Financial Solutions). The authors use 10 fact scenarios to help both young and old widows and widowers in different situations coping on their own without the help and support of their partners.

The book is short (119 pages) and easy to read. The stories are based on actual situations encountered by Black and Baccarini while advising clients. Each chapter focuses on two or three critical financial issues for the widow or widower profiled. Only a few of the many topics covered are how to:

  • Locate and access your deceased spouse’s assets.
  • Claim government benefits available to widows/widowers and their children.
  • Deal with final expenses and your spouse’s final tax return.
  • Establish your own credit and financial identity and why this is important.
  • Obtain the right insurance coverage at the lowest possible cost.
  • Manage if your spouse did not leave a will.
  • Get family affaris affairs in order when death of one spouse is imminent.

A story that should resonate with younger readers is about Kayla and Jacob, a couple in their 20s with three young children. When Jacob drowned on a fishing trip without a will, Kayla had no idea how to manage the family finances. To compound matters, all of Jacob’s bank accounts were frozen. The bank also refused to pay on the mortgage insurance policy because he had traces of alcohol in his blood at the time of death and was engaged in “a dangerous activity.”

This chapter discussed in detail how Kayla met with a financial planner who advised her to use the proceeds of Jacob’s small insurance policy to cover expenses until she could get a job. He also helped her to develop cash flow projections and cut back on expenses so she could get by without selling the house.

Several years later she remarried and her new husband adopted the children. As part of their financial planning, the couple opened joint bank accounts; switched the ownershp of Kayla’s house to joint ownership; made beneficiary designations on company pension and insurance plans; purchased life and disability insurance with named beneficiaries; and drafted wills and powers of attorney.

Another interesting scenario features Walter and Anna, a financially well-off couple in their 60s. Anna died suddenly of bacterial meningitis. Eventually Walter felt ready to meet a new companion again, but his family was concerned that unscrupulous potential partners may try to take advantage of a grieving spouse. Working with his lawyer, accountant and financial planner in consultation with his children, Walter set up a trust to protect the estate. This section clearly explains the different kinds of trusts and how to set them up. He also updated his will and powers of attorney.

At the end of every chapter, there is a work sheet where you can fill in points to think about that may apply to you and questions to ask your advisor.

In addition to the book, the authors have established the website widowed.ca, a free online resource for widows, widowers and their loved ones, providing an easy way to locate a wide variety of information and services needed after the loss of a cherished companion.

You can find articles, event notices, Q&As, discussion forums and links to government websites on this frequently updated and valuable resource.

I highly recommend this book for couples, the recently widowed and their family members. The website covers an added continuum of valuable information and networking opportunies. Information on purchasing a print or electronic copy of the book can be found here. The ebook for Kobo can also be purchased from Chapters/Indigo for $10.99.

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Jennifer Black
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Janet Baccarani

Book Review: STOP OVER-THINKING YOUR MONEY

By Sheryl Smolkin

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In his new book “Stop Over-thinking Your Money,” Globe and Mail personal finance columnist and television personality Preet Banerjee says personal finance is a lot like physical fitness. In order to be in better shape, everyone knows they have to work out and eat well. A personal trainer delivers results, not by showing clients a new way to perform sit-ups, but rather by simply making sure the sit-ups get done.

Similarly, in this book Banerjee discusses in five simple rules how to think about money and focus on the 20% of what you really need to know in order to be in top financial shape.

Rule 1: Disaster- proof your life 
Investing is only one of many factors that affect your personal finances. If you are going to retire well at age 65 you have to put away money for a long time. But if you die, lose your job or become disabled before then, your long-term plans could go up in smoke. That’s why he says disability insurance, life insurance and an emergency fund should be the foundation of your financial plan. Wills and powers of attorney must also be taken care of early on. 

Rule 2: Spend less than you earn 
Spending less than you earn is the cornerstone of financial stability. It allows you to eliminate money stress and begin creating wealth. Here’s where you learn how to budget. Banerjee highly recommends Kerry K. Taylor’s electronic spreadsheets on Squawkfox.com. By starting with your old or current budget, the many undesirable things you spend money on like take-out coffee, fast food breakfasts and debt repayments will jump out at you. Then you can create a new budget and start tracking your spending more diligently. Surplus can be allocated to savings. 

Rule 3: Aggressively pay down high interest debt 
Thou shalt not carry credit card balances! When you have high interest debt, the amount of cash flow it ties up on a monthly basis is painful to calculate. Banerjee shows how you can transfer high-interest balances to low interest balances using a line of credit. Then he recommends developing a plan of attack for paying down your debt. While he acknowledges that changing spending patterns to alleviate debt is easier said than done, he says the only way to keep your finances on an even keel is to save more before you spend. 

Rule 4: Read the fine print 
From today forward, he instructs readers to read every word on any document they put their signature on. Gym memberships, cellphone contracts, loan documents. You name it. He gives the example of a friend whose wife could not collect on his mortgage insurance because the policy was underwritten at the time of death. The policy said it was invalid if he had any alcohol in his bloodstream while operating a motorized vehicle (a snowmobile in this case) when he died. In contrast, a life insurance policy underwritten at the time of purchase paid out within two weeks. 

Rule 5: Delay consumption
The fifth rule is simply an extension of the first. Stop worrying about keeping up with the Joneses. As you earn more money or get a bonus don’t get caught up in lifestyle inflation. And avoid the monthly payment trap. Think seriously about whether house renovation is actually an investment and if the personal gain from expensive hobbies is really worth the cost.

Throughout the book Banerjee keeps returning to the message that if you wait to make a perfect plan you may never start. And in the beginning, building up lots of money depends more on putting money away than making money grow because of smart investment decisions. You can control how much you save but you have almost no control over market performance, he says.

This book is an accessible, quick read but like any guide, it is up to you to buy into Banerjee’s five financial rules and implement them. He calls them the roadmap to an easy “A” in personal finance.

But when you are ready for a more sophisticated “A+” strategy he would be happy to provide additional guidance along the way. Who knows? That could be his next book, But until then, you can find him on twitter @preetbanerjee. He is looking forward to hearing from you!

You can buy a hard copy of Stop Over-thinking Your Money online at Chapters/Indigo for $13.68. An ebook from Kobo can also be purchased and downloaded.

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Book Review: RRSPS THE ULTIMATE WEALTH BUILDER

By Sheryl Smolkin

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If an alien parachuted into Canada in the first two months of the year and needed to quickly understand the what, when, why and how of registered retirement savings plans (RRSPs), there is no better source of information than Gordon Pape’s new book RRSPs The Ultimate Wealth Builder.

The prolific writer has authored and co-authored over 20 books with down-to-earth investment advice, many of which have become best sellers. And this one is definitely another winner.

RRSPs were created by Louis St. Laurent’s Liberal government and have been around since 1959. Of course as Pape explains, there have been many important tweaks along the way.

  • Contribution levels have jumped from 10% of earned income (maximum of $2,500) to 18% of the previous year’s earned income (maximum of $24,270 in 2014.)*
  • Since 1996, unlimited carry-forwards of unused contribution room have been permitted.
  • Contributions can be made until age 71. The maximum age was reduced to age 69 as part of the government’s austerity program in 1997, but raised back to 71 in the 2007 budget. Now there is growing demand to bump it up further to age 73.
  • Registered retirement income funds (RRIFs) were added to the program in the 1970s, allowing taxpayers to further tax-shelter funds after retirement subject to mandatory minimum withdrawals.

Early chapters of the book set the scene with an extensive RRSP vocabulary (Chapter 2) and the rules relating to contribution levels, deadlines, carry-forwards and spousal plans (Chapter 3).

In Chapter 4 Pape says the most common mistake people make is to walk into their bank and say, “I want to buy an RRSP.” “You invest in an RRSP so the type of RRSP you select will have a huge impact on how your money will grow over the year,” he says.

If you are a regular RRSP contributor, you may think you have little to learn about the subject. But here are a few interesting tidbits I picked up that you may not be aware of:

  • You can contribute in one year and defer your tax deduction to a later year when your earnings are higher and the deduction is worth more.
  • If you don’t have sufficient cash but you have a self-directed RRSP, you can make a contribution “in kind” of another qualified investment at its fair market value. For example you can contribute a $5,000 GIC maturing in three years.
  • If you receive a retiring allowance or severance pay it can be transferred directly to your RRSP without withholding tax even if you do not have contribution room. You can transfer in $2,000 times the number of years or part years you were with the employer up to and including 1995 without withholding tax. You can also make an additional tax-free contribution of $1,500 for each year or part year prior to 1989 in which no money was vested for you in a pension plan or deferred profit sharing plan.

Pape also shares important details about making RRSP withdrawals for buying a home or returning to school and the complex RRSP mortgage and repayment rules.

For example, did you know that if your RRSP funds are used to invest in a mortgage for you or your children, interest payments have to be made at market rates?

In addition, non-arm’s length RRSP mortgages must be administered by an approved lender under the National Housing Act and insured either through Canada Mortgage and Housing or a private company like Genworth MI Canada.

Chapters 12, 13 and 14 thoughtfully address the perennial questions: RRSP or mortgage pay down? RRSP or debt pay down? RRSPs or Tax-free savings accounts.

The one area where I disagree with Pape is on the merits of an employer-sponsored Group RRSP. He says they are often not a great deal because employers can’t contribute to them directly; Group RRSP contributions reduce your total contribution level for the year; and Group RRSPs frequently offer a limited number of investment options.

In my experience working as Canadian Director of Research for a global actuarial consulting firm, smart employers view their Group RRSP as an important attraction and retention tool. They generally incent employee participation by grossing up salary to match or partially match employee contribution levels.

In addition, fees are often lower than individual RRSPs opened with retail financial institutions and there is a large (but not too large) selection of diversified investment funds for employees to choose from. Interactive websites plus in person and online education are also frequent valuable group RRSP add-ons.

What I do not disagree with is that RRSPs can be a powerful machine for creating wealth that you ignore at your peril! RRSPs The Ultimate Wealth Builder can be purchased online from Indigo books for $13. An e-reader version is also available for $13.99 from the Kobo bookstore.

*Contributions to the Saskatchewan Pension Plan of up to $2500/year form part of your RRSP contribution limits. You can also transfer $10,000 from your RRSP to SPP each year until you are 71 without tax consequences. In 2013 the SPP balanced fund earned 15.77%.

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Book Review: How to Eat an Elephant

By Sheryl Smolkin

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If one of your New Year’s resolutions is to finally get serious about your family finances, How to Eat an Elephant by financial planner Frank Wiginton is a book you may want to take a look at.

For many years when Wiginton’s clients have approached him to make a financial plan he has asked them to bring in a series of documents. Clients often said that the amount of work they had to do and the quantity of information they needed to pull together was overwhelming.

To help them overcome this fear and stress, he began breaking down the required information into smaller, much more manageable bite-sized pieces – i.e., “small bites of the elephant.”

This was the genesis of the “twelve step program” in his book covering topics ranging from goal setting, debt management, and insurance to retirement savings, estate and tax planning. Wiginton suggests that by using this guide and doing about four hours a month of “homework” readers can develop a realistic financial roadmap.

Each chapter includes a breezy discussion of the topic, “Frank thoughts” from the author and anecdotes about how using these techniques have benefitted certain individuals. At the end of each brief chapter summary you are directed to easy-to-use web tools that help you to collect the information and use the strategies described in the previous section.

I particularly like that Chapter 1 asks readers to “blue sky,” prioritize and price a list of 50 things they want to do right now. Then by identifying the major things that must happen to accomplish each goal, reviewing the list regularly and sharing goals with others they have a better chance of making their goals a reality.

Chapter 2 teaches you how to create a net worth statement and by Chapter Three, Wiginton finally  deals with the dreaded “b” word – budgeting. That’s where he gets into “needs vs. wants” and ways to break “the spending habit.” Ideas like using cash only, saving 10% and re-negotiating mortgages and telecommunications bills are not new, but seeing them in one comprehensive list is helpful.

When it comes to retirement planning, Wiginton says the first step is to determine what you want to do in retirement and what it will cost. Then he presents various retirement savings options and the tax implications of each one.

Wiginton notes that you may actually need less money than you think to retire because:

  1. You will pay lower taxes when you no longer are employed.
  2. For many people, expenses are lower once the mortgage is paid off and the kids have left home.
  3. People tend to spend less with age.

For example, when people are 60 to 70 years old they tend to be a lot more active than when they are 70 to 80 and the trend grows more pronounced with age.

As a result, in calculating what clients need, he usually reduces the amount of spending required by 15 or 20% around age 75 and by another 15 to 20% at age 85. However, he says that increasing costs of long-term care for seniors do have to be factored into the equation.

This is an engaging and clearly written book that runs to 274 pages of smallish print. There are no quick fixes but if you are prepared to work through it “one bite at a time,” by the end you will have a much better understanding of your finances and a plan that will help you achieve your personal financial goals.

The book is available in paperback or for Kobo and can be ordered for about $16.00 from the Chapters/Indigo website.

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