Monday, March 26, 2012

Debt Free for Life (Canadian Edition) by David Bach

Sometimes a good financial planner is also a cheeseball. In this best-selling book, David Bach provides some very good advice on how to become debt free. Unfortunately, this common sense approach is often undermined by a writing style that is (how can I put it) akin to a 16-year-old girl writing in her diary about the cute boys in class. Other parts of the book, meanwhile, sound like an informercial, as various sections contain "testimonials" from readers about how great Bach's lessons are. This reader feedback is then interspersed with semi-regular sales pitches on how you can buy some of his other books, such as his highly popular work The Automatic Millionaire.

To give you an example, Bach REALLY likes to write the occasional word in CAPITAL letters in order to make it clear that his point is really IMPORTANT. This "cute" technique -- it would be a bit cruel to call it "childish" -- often gets in the way of an otherwise sensible book. While not ground breaking, Bach provides a lot of useful tips on how to lower and eventually eliminate your debt, including: how to fix your credit score; how to negotiate with credit card companies about lowering your interest rate; how to pay off your mortgage quicker; and how to find a good debt counsellor that can help with any serious debt repayment problems. True, a lot of this advice is common knowledge and can be found elsewhere, but by putting all of these tips in a single book the reader can use it as a workbook to help them reduce their debt.

It is clear from reading this book that Bach has transformed himself into a product and that he can't help but market himself.  Make no mistake, this book is the literary equivalent of an infomercial that is selling debt-counselling advice. In fact, at certain points, one almost expects to see a 1-800 number at the bottom of the page accompanied by a two-for-one special that will give the reader a special gift (but only if the readers acts now by buying another of Bach's books). That being said, it is also true that this book contains a lot of common sense, and that it can be quite useful for anyone who is having problems getting their financial house in order. So before we make too much fun of this REALLY IMPORTANT book that will help you become DEBT FREE FOR LIFE we should also recognize that it does contain a lot of good advice.

3 out of 5 stars

The RESP Book by Mike Holman

Mike Holman has produced a very useful handbook that explains the intricacies of Registered Education Savings Plans (RESPs). From how much money can be invested into an RESP, to how much grant money an account can receive from the Government of Canada, to excellent tax advice on how to withdraw money once the RESP beneficiary enrols in a post-secondary institution. What happens if the beneficiary decides not to have a post-secondary education? This book clearly explains the consequences of this scenario, while offering good advice on how to minimize your tax bill and any penalties.

This easy-to-read book should be studied by anyone who wants to open up a RESP for a child, young relative or family friend. Its practical advice (which can easily be digested in an afternoon) provides great tips that can be used for the entire life of an RESP account.

4 out of 5 stars

Saturday, March 24, 2012

Financial First Aid for Canadian Investors by Michael Graham, Bryan Snelson and Cindy David

Imagine that you are at a dinner party and a guest starts talking in a slightly annoying voice. Given that you are interested in the subject matter -- i.e. how to improve your investment portfolio -- you ignore the awkward speech and concentrate on what is being said. After about 10 minutes, you must admit that the speaker knows what he is talking about, and that some of his advice is quite useful. As the evening progresses, however, you can't overlook the occasional cliché, nor hide the fact that your fellow guest sometimes sounds like a professor reading a dictionary. At the conclusion of the evening, while driving home, you recall some of the insights that you heard, and agree that the speaker made several excellent points. But then you remember the annoying voice, his sometimes rambling babble, and those weird moments when he would refer to himself in the third person.

Reading this book is a little like listening to such a dinner guest. On the plus side, Financial First Aid offers many great tips on how to improve as an investor. From what questions to ask when picking a financial advisor, to a good summary of the different strategies that an investor should engage in when buying stocks, bonds, insurance and other financial products, there are many useful parts to this book. I also appreciated the chapters that outline the common errors that investors make, the strong tips on how to research a company, and the practical summary on what fees investors have to pay when investing, and how to minimize these fees.

This good advice, however, is undermined by an occasionally annoying writing style. In too many parts, the text reads like a newsletter rather than a book, which is made worse by a weird tendency of the authors to refer to themselves in the third person. I understand that the use of the third person is sometimes necessary when a book is written by multiple authors, but when overdone (as in this case), the result is a tone that comes across as part-cocky and part-schizoid.

If you want to read a useful book that contains practical advice for the Canadian investor then this is a good choice. But if you do read this book, be prepared to be annoyed by the occasional boilerplate statement, some chapters that read more like a power point presentation than a book, and the overuse of the third person.

3 out of 5 stars

Thursday, March 22, 2012

Stop Working, Here's How You Can by Derek Foster

Want to retire at 34? Investor Derek Foster found a way to do so by investing in solid, dividend-paying stocks. The story of how he managed to quit working at an age when some people are only starting their careers is a fun read. It also helps that the book is written in an informal, easy to read style that contains several good investment tips.

Among the book's many attributes are the following: good advice on how to research companies before investing in them; strong suggestions for which companies to invest in; a clear explanation of why it is so important to have dividend paying stocks in your portfolio; and interesting insights into how taxes work. (In a nutshell, the book explains how income from dividends or capital gains attracts a much lower tax rate than employment or tax income. The book therefore argues that one should rely as much as possible on investment income in order to pay less tax).

After reading this book I was left with a high opinion of this author. Some further research, however, led me to discover some things that were quite ironic. For instance, this book, which was published in 2005, strongly argues for the buy-and-hold approach to stock investing, i.e. one should NEVER sell their stocks once purchased. Nevertheless, in February 2009, Derek Foster broke his own rule by selling all of his stocks in order to move to cash. As well, his original philosophy of buying dividend stocks and then holding them forever was a little misleading, as he also owned Income Trusts which are a different beast than large-cap companies that pay dividends.

As the warning at the beginning of this book makes clear, one should not take the advice in this book literally. On further reflection, one can find problems with the investing advice that is being espoused. That being said, as a purveyor of strong general concepts of how to invest, this is a good book that provides a lot of valuable suggestions, and for that reason it is worth the read.

4 out of 5 stars

Monday, March 19, 2012

What Color is your Parachute? (For Retirement) by Richard N. Bolles and John E. Nelson

Saving for retirement is often presented as a strictly financial question. In this interesting book, the authors make the point that a happy retirement contains multiple elements, (e.g. where you plan to live; how to have strong friendships; what hobbies / activities will you continue to do once you retire) that should also be taken into account along with financial concerns.

Notwithstanding the strong thesis of the authors, as I am only 36 and nowhere near retirement, I skimmed through the more "holistic" parts of the book and concentrated on the sections that deal with financial advice, in particular the first six chapters. In a very convincing discussion, the book begins by pointing out that the traditional pillars of retirement -- i.e. social security, employer pension plans and personal savings -- are becoming increasingly wobbly. The metaphor that is used is of a formerly solid three-legged stool whose legs are consistently being cut-out from underneath. Though this book is from the United States, this analysis will ring true for many Canadians.

This book offers good advice on how to better prepare for retirement in the future. This includes suggestions on how to become a more efficient saver, to tips on how to avoid many of the marketing tricks that are used in the retirement "industry".

4 out of 5 stars

Smoke and Mirrors by David Trahair

This is an excellent book that should be read by all Canadians who are interested in saving for retirement. Offering practical and straightforward advice, David Trahair tackles several myths that are put forward by the financial industry. Among the most important is the ubiquitous mantra that you should: a) start making RRSP contributions as young as possible; and b) maximize your contributions throughout your life. However, as convincingly argued out in the book, this strategy has important financial consequences that could actually cost you money by the time you retire. That is why instead of maximizing your RRSPs, the author advocates a strategy of optimization, i.e. calculate the right amount of money that you should put away in RRSPs, and then use the rest to pay down such things as consumer debt.

Another good section of the book explains why tax shelters can often cause more harm than good, and why trying to escape the tax man can sometimes be counter-productive. Then there is the discussion on why you may not need as much money as you think to retire, as well as an excellent chapter on why paying down your mortgage quicker is something that all homeowners should do. Some people, the author notes, think that by cutting down on restaurants, lattes or indulgences they can add to their bottom line. In reality, paying down your mortgage faster is not only a better move economically, but it could also allow you to continue enjoying the little things in life.

With practical exercises and honest advice this book is a must read. I throuroughly enjoyed it and highly recommend it.

5 out of 5 stars

Squirrel Seeks Chipmunk by David Sedaris

This book could have been brilliant. Similar to the classic Aesop's Fables, this collection of short stories contains a series of tales involving animals. Written with wonderful humour and at times brilliant insight, this book -- like the famous stories of Aesop -- is a study of human nature told through the form of animals. One story that particularly stands out is "Squirrel seeks chipmunk," which not only serves as the title of the book, but also offers a delightful analysis on relationships, and how the reality of past romances can turn into myth in our own heads with the passage of time.

Unfortunately, the brilliance contained in this book starts to fade by the end. For instance, in "The Grieving Owl," the second last story in the book, the narration devolves into sheer stupidity. Instead of insight, we are left with juvenile scatological humour -- and not even funny scatological jokes at that -- that undermine the first few wonderful stories. This lamentable progression soured me on this collection and left me shaking my head in disappointment. This could have been a delightful book, which is why the final portion was so upsetting.

3 out of 5 stars