Straight Talk on Your Money
The Biggest Financial Myths and Mistakes... and How to Avoid Them
J. Douglas Hoyes
BA, CA, CPA, CIRP, CBV, LIT
Licensed Insolvency Trustee
Doug Hoyes, BA, CA, CPA, CBV, CIRP, LIT, is the co-founder of Hoyes, Michalos & Associates Inc., one of Canada’s largest personal insolvency firms. In his thirty-year career as a chartered accountant and Licensed Insolvency Trustee, he has personally helped over 10,000 individuals solve their debt problems and rebuild their financial future.
He has appeared before the Senate Banking, Trade and Commerce Committee in Ottawa to give testimony on the impact of bankruptcy legislation on the individual, and serves as an OSB (Office of the Superintendent of Bankruptcy) Oral Board Examiner.
Doug is a passionate advocate for ensuring that people find the right solutions for their debt problems. Frequently interviewed in the media, he has shared his knowledge and expertise on the most common financial myths and mistakes on CBC, Global News, The Globe and Mail, the Toronto Star, Business News Network, The Financial Post, and CTV News. He posts regularly to the Hoyes, Michalos blog, to Twitter (@doughoyes), and on Huffington Post Canada.
What do all of those initials mean?
- BA (Commerce and Economics Specialist, University of Toronto)
- CA (Chartered Accountant)
- CPA (Chartered Professional Accountant)
- CBV (Chartered Business Valuator)
- CIRP (Chartered Insolvency and Restructuring Professional)
- LIT (Licensed Insolvency Trustee)
About the Book
In his 30 year career, Licensed Insolvency Trustee Doug Hoyes has watched as intelligent, well meaning people let their emotions get the better of them as they follow the conventional financial wisdom and get into serious money trouble, often leading to bankruptcy. The inescapable conclusion is that, in many areas, everything you know about money is wrong.
Doug Hoyes shatters the conventional wisdom, explaining why a good credit score may be detrimental to your financial well being, why a house is not an investment, why you should never pay a collection agent, and why you should never loan friends or family money, and that’s just four of the 23 chapters.
Most financial professionals will disagree with most of the advice in this book. Experts believe budgeting is important; this book will explain why budgeting is a waste of time. Experts will tell you to pay yourself first, and that everyone should take full advantage of tax free investments. This book will tell you the exact opposite.
But Straight Talk on Your Money is not simply a book that casts stones at financial glass houses. This is a book that dismantles conventional wisdom, but then replaces it with practical advice to show you how to prevent financial problems before they happen.
Table of Contents
Preface
Introduction: Following the Crowd Causes Bad Decisions
Part 1: Conventional Wisdom’s Fatal Flaw
Myth #1: Humans are Rational
- Humans Are Entirely Irrational
- Rationalizing Is Not the Same as Being Rational
- Cognitive Reflection and Decision-Making
- With Just the Facts, We Can Be Rational
- We Follow Our Emotions to Fit In
- Practical Advice: Recognize that You Are an Irrational, Emotional Being
Myth #2: It’s Your Fault
- Life Happens
- The Stunning Realization
- Using a Stacked Example to Prove the Point
- The Folly of the Financial Gurus’ Advice
- Reasons Why Your Financial Woes May Not Be Your Fault
- So Whose Fault Is It?
- Practical Advice: Focus on the Positive
Myth #3: Experts are Experts
- All Experts Are Biased
- Follow the Money
- The Myth of the Unbiased Banker
- The Tyranny of the Experts
- Practical Advice: Nobody Cares About Your Money as Much as You Do
Part 2: Debt
Myth #4: Give Credit Where Credit Is Due
- Credit Is Debt
- I Am a Good Person Because I Have a High Credit Score
- The Rule of 72
- The Credit Score Scam
- But What About Free Credit Scores?
- Worrying About Your Credit Score Is Missing the Point
- Practical Advice: Focus on Your Goals, Not Your Credit Score
Myth #5: The Most Important Number is the Monthly Payment
- The Monthly Payment Is Almost Irrelevant
- Isn’t This Obvious?
- Practical Advice: Crunch the Numbers
Myth #6: Bank at Only One Bank
- There Are Two Problems with Having Just One Bank
- Dark Side #1: Fees
- Dark Side #2: You Lose Control
- Practical Advice: Spread Your Wealth
Myth #7: When a Collection Agent Calls, Always Pay Up
- What You Don’t Know about Collection Agents
- Collection Agencies Earn a Commission
- How the Statute of Limitations Works against Collection Agencies
- Why Do Collection Agents Want a Small Payment?
- Practical Advice: How to Deal with Collection Agents
Myth #8: Pay Your Small Debts First
- Math or Psychology?
- A Repayment Strategy
- Callable and Secured Debts
- Practical Advice: Set Your Priorities
Myth #9: Cash In Your RRSP to Pay Off Debt
- Retirement Accounts Are for Retirement
- Seizable Assets
- A Debt-Reduction Strategy When You Have Assets
- Practical Advice: Bankruptcy May Be Preferable to Cashing in Retirement Accounts
Myth #10: Payday Loans Are a Short-Term Fix for a Temporary Problem
- The Real (Very High) Cost of Payday Loans
- Payday Loans Are a Symptom, Not the Problem
- Practical Advice: Be Creative, Find Other Options
Myth #11: There Is Good Debt and Bad Debt
- Is It That Simple?
- Who Cares? I Just Want to Buy That House
- If How We Feel About Debt Shouldn't Govern Our Decisions, What Should?
- Practical Advice: Debt Is a Tool — Use It Only if It Fits the Task
Myth #12: Bankruptcy is the Easy Way Out
- Bankruptcy Is Sometimes the Best Strategy
- Why Some Say Bankruptcy Is Morally Wrong
- Debt: The Real Numbers
- Some People Can’t Pay Their Debts
- Practical Advice: Pay Down Debt or Go Bankrupt?
Part 3: Real Estate
Myth #13: A House Is a Great Investment
- What Is an Investment?
- Your House Does Not Generate Income
- Opportunity Cost
- Houses Don’t Always Go Up in Value
- So Should I Buy a House or Not?
- Keeping Up with the Joneses
- Practical Advice: Take Emotion Out of the Equation
Myth #14: Owning A House Gives You Stability
- A House Is an Anchor
- Practical Advice: Look Ahead
Myth #15: The Bigger the Mortgage, the Better
- The Chapter That Writes Itself
- The Appropriate Level of Leverage
- It's Not Just About the Numbers
- How to Avoid Being House Poor
- Practical Advice: Buy or Rent?
Part 4: Budgeting and Planning
Myth #16: Investment Expertise Is The Key to Good Money Management
- Investing Is Not the Key Component of a Successful Financial Plan
- The 80/20 Rule of Money Management
- When Should You Start Investing?
- Practical Advice: Focus on the Basics
Myth #17: Budgeting Is Essential for Financial Success
- Budgeting Is a Waste of Time
- Why Is Budgeting a Bad Idea?
- How to Not Budget
- What About Saving Money?
- What Day Is Christmas This Year?
- The Secret Benefit of Not Budgeting
- But I Like to Budget
- The One Example Where a Budget Is Not a Waste of Time
- Practical Advice: The Perfect Budgeting System
Myth #18: I Am Immortal
- There Is More to Death than Life Insurance
- The Death Checklist
- The “In the Loop” Checklist
- Practical Advice: Information Is Power ... and Insurance for Your Family
Myth #19: Pay Yourself First
- Saving Isn't Always the Best Strategy
- But I Want to Establish a Savings Habit
- Practical Advice: Adopt Good Financial Habits
Myth #20: Joint Bank Accounts Are Essential for Couples
- Should You (or Shouldn’t You) Have a Joint Bank Account?
- When It Makes Sense to Have a Non-Joint Account
- Why Is This an Issue?
- Practical Advice: Look Out for Yourself
Myth #21: You Should Always Help Your Family and Friends
- Never Loan Money to Family or Friends
- How to Say No (or Yes)
- House Loans
- What About a Second Mortgage?
- The Bailout
- Practical Advice: The “Helping Family” Checklist
Myth #22: Life Is Like A Box of Chocolates
- Life Isn’t Always Sweet ... But It Is Predictable
- The Money Plan
- The “Everything Else” Plan
- Practical Advice: Prepare for the Inevitable
Postcript
- Just Because It’s in a Book Doesn’t Make It True
Read More
More Resources
In addition to Straight Talk on Your Money, the following are great resources to help you make informed decisions about your personal finances and live a debt-free, stress free life:
- Hoyes, Michalos and Associates Inc.
- Debt Free in 30: The Podcast – weekly podcast with host Doug Hoyes and industry experts talking about debt, money and personal finance, with an emphasis on practical advice
- Debt Solutions Blog – answers to common bankruptcy, consumer proposal and debt management questions.
- Free Credit Repair Course
- The No-Budget Budget – this is a explanation on why Doug thinks budgeting is bad and how to manage your money when you don’t like spreadsheets.