When Life Bites You in the Wallet, published earlier this year, is an excellent personal finance primer on banking, credit, debt and insolvency, written by a former banker and a bankruptcy trustee.
The bankruptcy trustee, based in British Columbia, is Blair Mantin. The other coauthor is Lee Anne Davies, who I got to know a bit when she worked in Toronto at the senior levels of a major Canadian bank. Lee Anne now lives in British Columbia.
However, in her new career as a health, aging and financial guru, Lee Anne pulls no punches about the wily ways of the industry that once employed her. (I can’t resist noting that the “bite” image on the wallet in the cover image to the right could also symbolize biting the hand that once fed this co-author.)
Before I cite specific examples of “bites” I should point out that I first read the manuscript before publication, so it contains a couple of “blurbs” from me. I see that one of them confessed that the book differed from the usual personal finance books in that I learned several things I hadn’t known before — especially about banking and insolvency. I also suggested that baby boomer parents need to read this book and give a copy to their kids the day they graduate from college. But seeing as Christmas is fast approaching, perhaps the book deserves to be under the tree.
The bank is not your friend
As I re-read the physical edition for this review, I was again struck by how many passages I had underlined.
Such as? Well, for starters this sentence from the chapter Debt is a Big Business: “The bank is a business. The bank is not your friend.” That sentence is followed with a reminder that “bank employees are financially incented to offer you more products and larger loans.”
Or how about this statistic from TransUnion: “As many as 70% of bankruptcy filings are made by people with strong credit scores.”
Debt is not equity
The authors view debt the way I do: it’s something that increases stress levels and is to be avoided, particularly for those near or in retirement. They counsel students being pitched credit cards via campus visits from the major financial institutions to “simply walk on by” and resist the temptation. One chapter, “Debt is not Equity,” sensibly points out that “You cannot be ‘worth’ what you ‘owe.’ You can only be ‘worth’ what you ‘own.’ ”
Even the chapter on real estate, dubbed “The Sacred Cow of Debt,” tells would-be homeowners that the size of the mortgage offered to you by a financial institution “Is not the mortgage you should accept.” This is followed by another statistical passage I underlined: “In fact, 26% of debtors who file a personal bankruptcy or consumer proposal are homeowners.”
Some should rent, not own
They even attack this sacred cow by citing various articles by the Globe & Mail’s Rob Carrick that it might be better to rent than own a home. Some of the highest-profile personal finance gurus or media figures in Canada are mentioned either in the book or the numerous footnotes: everyone from Carrick to David Chilton to Garry Marr.
Overdrafts worse than payday loans?
Here’s another passage that got my attention in the chapter entitled Debt by Another Name: Overdraft. Despite the warm, fuzzy” feeling of the term “Protection,” Overdrafts are unsecured loans. They have been compared to payday loans (which obviously and rightly, the authors condemn) but get this sentence: “…overdraft protection is inferior even to payday loans.” If you find yourself actually using this “protection” to stay liquid, it’s a sign you’re in financial trouble.
An even more dire sign of impending financial doom is credit-card users that pay only the minimum monthly amount. Do that and it will take 50 years to pay your outstanding balance, the authors write. (I’m guessing neither ever intends to be employed by a bank in the future).
Don’t be blinded by credit scores
A chapter tantalizingly entitled “Paying bills on time is not good enough” challenges the idea that young people should strive to get the highest credit score by taking out multiple credit products and paying off the minimum required payments on time. The problem is those who are less close to the edge of the financial precipice — i.e. relatively solvent and in little need of such credit — may actually have lower credit scores. But those who play it the banks’ way may quickly find themselves hurtling down the debt precipice in the event of unexpected job loss or other negative life events.
There’s much more although the book is relatively short: just over 150 pages, and most of the chapters are just three or four pages long. In keeping with the likely target audience of young people with limited financial resources, it’s priced at just $14.99 for the physical edition and less than that for the e-book edition (Kindle, Kobo among them).