The bulk of the book is a set of financial lessons mainly aimed at Canadians between 20 and 45.  The early chapters introduce the characters, make it clear that the lessons require no prior expertise, and that the lessons really will help with seemingly impossible problems like the high cost of housing.  These early chapters do a good job of convincing readers that they really can improve their financial lives.

Between the jokes and identifying with the characters, readers will find themselves enjoying lessons that would normally be boring.  Chilton uses dialogue to emphasize important points, to voice objections to his advice, and to clarify common misunderstandings.

I often find things I disagree with in books, but that really isn’t the case here.  Chilton had to make some tough decisions about which details to include and which to leave out, and most readers could come up with a topic or nuance they wish was covered.  One topic I think could have made the cut is that some investors think they don’t pay investment fees.  I’ve heard people recommend their advisor because he doesn’t charge any fees.  All advisors get paid out of their clients’ money in one way or another, no matter what anyone says to the contrary.

I won’t try to summarize the lessons because the result wouldn’t be useful.  Without Chilton’s explanations of the whys behind his advice, too much would be lost.  Instead, I’ll comment on several areas.

Artificial Intelligence (AI)

Chilton didn’t really discuss AI except to make a good joke that I won’t spoil.  He was asked the question “What happens if AI takes away most of our jobs and the economic system collapses?”  There are some bad things AI could do such as cyber war, monitoring all of our actions, preventing us from doing “unapproved” things, and limiting our movements.  However, I don’t see negatives in AI doing jobs for us.  If AI together with machines will eventually grow our food, make clothes and other goods, and build houses, why will we need money?  Until we get to that point, we’ll still need money and people to do jobs.

Pay yourself first

One of the book’s characters says “Save first, spend the rest, good.  Spend first, save the rest, bad.”  This core piece of advice survived from the original book, but there are some caveats now.  For example, some diligent savers “offset the growing value of their assets on their net-worth statements with matching, or near matching, debts on the liability side.  From excessive car loans to large credit-card balances to massive lines of credit, many [live] beyond their means to a scary level.”

Watching other people, I’m convinced that it’s important to set aside savings from your pay first and then spend later, but my wife and I are weirdos who never needed to do this.  Our natural tendency to spend little usually left plenty of savings at the end of each pay period.  We’re the type who had to learn to spend more as our income and savings grew.

Index investing

I thought the passage explaining why we should just buy all stocks instead of trying to pick the best ones was well done.  It included “No, we can’t just buy the winners.  No, there is no way for us to consistently pick them ahead of time.  No, the people we hire to do it for us aren’t any good at it either.”

Like most experts who are trying to help their audiences, Chilton is a fan of all-in-one asset allocation ETFs.  “Not only does the fund buy the individual stocks for you, it does so across the world,” and “These funds also do all the rebalancing for you.”  These funds handle everything so there is no need to monitor your progress.  In fact, to avoid making emotional decisions, you’re best to “pay almost no attention” to the daily or weekly changes in the value of your savings.

“One of the most important factors, if not the most important, as you choose what type of investments to make, is the associated time frame.  How long are you able to set the money aside?  How long until you need it?”  Stocks in the form of all-in-one ETFs are for the long term.  For something like a house down payment, “unless I thought my purchase was at least five to seven years away,” I wouldn’t invest it aggressively.

Starting early

I’m a fan of advising people to start the saving habit early.  Chilton gives an example to motivate this advice where saving $1000 per month for 8 years is more valuable than saving $1000 per month for the subsequent 24 years.  Continue Reading…