Straight Talk on Your Money

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