I argued in a recent column that the pandemic wealth boom is over and a new period of financial adjustment is at hand. Here’s an ideal book in case things get ugly: Financial First Aid: Your Tool Kit for Life’s Emergencies, by Alyssa Davies. Ms. Davies blogs at Mixed Up Money and she’s the content manager for an independent real estate marketplace Zolo. Here’s a Q&A we did by e-mail about her new book and how it addresses what might be ahead for our personal finances:
Q: I really like the intro to your new book, which reads “For the one who feels like they don’t have a best friend to talk about their financial fears with – you’ve found a safe place here.” Why did you start the book that way?
A: In finance, so many of us are always looking for the right ‘expert’ that can help us learn. But, in reality, it’s often much easier to learn about something that can be intimidating, like money, from someone we resonate with. I want to make people feel that sense of security with me.
Q: Your book does something unusual for the personal finance genre, which is to acknowledge money shaming. Can you tell us what this is, and why it’s harmful?
A: Our finances and how we spend and save are heavily dictated by emotion. Whether we’re looking for a dopamine hit or can’t sleep at night because we are so worried about our debt load, money and emotions are very much connected. And that’s why a lot of financial advice that was shame-and fear-based was so popular for so long. We felt we had to do things a certain way to get ahead. You can open the door for more meaningful conversations by shifting the narrative to say that a) sometimes we don’t have the same choices as others, and b) you’re not the only person struggling. Not everyone is doing poorly with their money because they’re spending lavishly. Many people are just doing what they need to do to get by. We have to acknowledge all experiences.
Q: Your book talks a lot about emergency funds, ie money safely parked in savings for unexpected setbacks. Emergency funds have been foundational in personal finance since forever. Why do we still need to make people understand how important this is?
A: Many people experience something called financial denial. We avoid opening our bills, filing our taxes, and discussing a raise because it feels uncomfortable. The same thing goes for emergencies. No one wants to walk around shouting: ‘The sky is falling!’ and constantly face worry. But most emergencies are actually planned expenses — or they should be. You’d be hard-pressed to find someone who hasn’t met a flat tire, lay off, or a roof that needs replacing every once in a while. Creating a comfortable space to encourage this type of conversation is vital.
Q: In the pandemic wealth boom, keeping money in a savings account was almost seen as stupid or negligent, given how much stocks and crypto were rising. Given the talk about the potential for a recession ahead, how urgent is it now to have an emergency fund?
A: I understand this feeling entirely. You never want to let anxiety or a sense of scarcity have you leaving too much money on the sidelines, and I think a lot of people assume that having an emergency fund would put you in this situation. But, an emergency fund is money you plan to spend in the near or immediate future. When a recession hits, the economy isn’t going to be as lucrative. Jobs will be lost, and companies will see lower sales volume. Putting yourself in a position to keep some control when it comes to your money is a great way to take back the power to feel at ease.
Q: High levels of personal debt have been a story for years, but low interest rates kept things manageable. Now that rates are rising, what do you advise someone who is sweating about their debt?
A: Negotiate! I think many people hear about negotiating lower phone bills and negotiating for a higher salary. Still, they don’t know that there is plenty of opportunities to negotiate your debt. Calling and asking to reduce your interest rate or see if any payment plans could work with the lender is always an option. The worst they can do is say no.
Q: I’m giving you a platform to speak directly to people who feel they have messed up their finances. What encouragement can you offer them?
A: We make hundreds of choices every single day. Sometimes, they’re the best choice, and other times, they’re the opposite. The last thing you should be doing when you make a hard decision that can impact your financial stability is to shame yourself. Instead, give yourself compassion for getting through a tough month – or year. No one (not even Warren Buffet) will go through their life without making a money mistake.
Looking for retirement-minded millennials
Are you a millennial who’s thinking about retirement and how it will look different than it does for your parents? What are your financial plans for that phase of life? How are you saving for them now, if at all? We’d like to chat with you for Stress Test, our personal finance podcast. If you’re interested in sharing your story, please email our producer emilyjackson24@gmail.com
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Rob’s personal finance reading list
Pandemic puppies, the sequel
Predictable: Dogs bought during the pandemic are being surrendered to shelters by people who can’t handle them. I wonder how much these people spent on their dogs and care before bailing.
No thanks, I’m full
A recent survey finds that Canadians have cut back on their use of meal-kit services. The turn-offs: Price and packaging. Meal-kits were a thing during the pandemic – all the ingredients for full meals delivered to your door.
The dark side of index investing
This New York Times article isn’t a critique of indexing, which means owning exchange-traded funds or mutual funds that deliver the returns of various stock and bond indexes. Rather, it’s a critical look at the economic power of three global investing giants that dominate indexing through their lineups of exchange-traded funds.
The ultimate travel reward card portfolio
Three top travel reward credit cards – a Visa, a MasterCard and an Amex – for people who want maximum flexibility in how they redeem their points.
Today’s financial tool
A guide on building credit for immigrants to Canada.
The Money-Free Zone
Two laugh-out-loud food gross-outs: The 70s Dinner Party Twitter feed and Reddit’s SupidFood thread, featuring the likes of chocolate ramen, watermelon popcorn and hot Cheetos sushi rolls.
Tweet of the week
U.S. personal finance guy Ramit Sethi created this Spotify playlist for the “crypto dudes” who are feeling down about the recent price decline in cryptocurrency.
In case you missed these Globe and Mail personal finance-related stories
- The new pay equity act means many women are entitled to pay raises. Here’s how to hold employers accountable
- HELOCs have us complacent and greedy about debt. They’re now a defining Canadian characteristic
- Online investors say forum culture is misunderstood
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing ... and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
