On today’s episode, Chrissy, Money Mechanic and Ryan discuss their favourite personal finance and FIRE books. These top picks are sure to grow your knowledge and speed your path to FI!
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Thanks to EQ Bank for sponsoring this episode of Explore FI Canada. The EQ Bank Savings Plus Account reimagines banking by offering an everyday 2.00% interest rate, plus the flexibility of a checking account, along with unlimited transactions, no everyday banking fees, no minimum balances and fast, cheap and fully transparent international money transfers and more—all from one account. Visit exploreficanada.ca/eqbank to learn more.
Hello and welcome to Explore FI Canada podcast. Join us as we sit with other Canadians at the round table… to discuss and sometimes argue about financial independence in Canada!
Money Mechanic 0:48
Hello, everybody welcome to Explore FI Canada. Thanks for listening. We are here today to discuss some of the books that we really enjoy that are part of the journeys to financial independence and perhaps your retire early type person. So, without further ado, the usual suspects are here, Money Mechanic from Victoria and from Ontario, our good friend Ryan.
Money Mechanic 1:13
Good to have you here and from just across the water in Vancouver, my other good friend Chrissy.
Hello, how’s everyone doing today?
Money Mechanic 1:23
Alright, so we decided we’ve we’ve all been voracious readers of content in this space. And let’s not kid ourselves. There is a ridiculous amount of literature out there and you can bury yourself in a million personal finance books, but the thing is, some of them speak to us more than others.
Money Mechanic 1:41
And I think really today we’re just going to talk about a couple of books each that we’ve read recently that maybe spoke to us and helped us on our FI journey. So one of the books I really wanted to start with was The Value of Simple, but I’m not going to.
Oh! Why not?
The plot thickens.
Money Mechanic 2:01
John Robertson wrote that book and I think it’s super valuable for people that are just starting off in personal finance and getting their accounts set up and things like that. But I chose not to go with that book because I just read a couple books that spoke to me in my path to FI that are a bit different.
Money Mechanic 2:23
They are a little bit of the beginning. They’re a little bit of the psychology there. There’s a lot wrapped up in this and I think with the literature that’s out there, you need to find beyond just the pure numbers. So the first book I’m going to talk about is an old one. It’s from 1997. It’s Rich Dad, Poor Dad by Robert Kiyosaki.
Money Mechanic 2:43
It took me till two months ago to read this book. And I really wish 20 year old Money Mechanic had read this book. And it’s not because I would have been able to understand reply that back then it just would have made giving me the inspiration to, to work towards FI a lot sooner than I did.
Money Mechanic 3:07
The thing I liked about this book the most, is that he really doesn’t go into a lot of numbers. I think a lot of us in this space are too focused on the numbers. He talks about having assets and liabilities. The book’s more about understanding what business is about. Yeah, one of the main themes is financial intelligence.
Money Mechanic 3:29
And if you’re asking yourself what financial intelligence is, it’s the all encompassing part of what our journey to FI or financial independence is. Your intelligence, about money, about your spending, about your assets, about your liabilities, all these things are really important.
Money Mechanic 3:47
And it’s been said so many times to track our spending. And there’s quite a few blogs that talk about running your personal finances, as a business and these are some very basic steps that we should all probably learn early on in the journey to enhance our financial intelligence as we move forward.
Money Mechanic 4:08
What I found about this book was he talks about the psychology of success, more than just the numbers about it. Sure, he goes into how he got rich in real estate, and stocks and this and that. And really, that’s not important. I don’t think that’s none of us are in the FI space for that reason. We want our freedom.
Money Mechanic 4:36
But freedom has a cost. And the cost is learning how to understand how money works, and use it as a tool to our advantage. What really resonated with me the most was probably because I relate my own experiences to the educated yet poor dad who has a fantastic work ethic, and has a great job, but does everything according to quote unquote, societal norms.
Money Mechanic 5:12
He goes through life following the status quo, hoping to retire at 65. And then the business dad has a totally different outlook on life and financial freedom and independence. And if you’ve never heard of having multiple income streams, this is what it’s really all about.
Money Mechanic 5:34
You need to find other ways to earn money than being a technician at your own job. And it spoke to me a lot because I’ve been a technician at my own job for a long time. And I realized that’s not sustainable for true financial independence in the long run.
I agree with everything you say about the book. It’s it does feature all these topics that are really important each of us to learn and now you make me want to reread the book to get more out of it because I I found it didn’t speak to me the same way as it spoke to you. So it’s great to hear someone else’s point of view.
Money Mechanic 6:15
You know, I don’t think it would have spoke to me 20 years ago, and it is it you know, it’s interesting that all this literature is out there. It there’s it comes at a certain time and an important point where it does speak to you.
Money Mechanic 6:31
And I felt the reason why I really liked this book right now is because he talks a lot about entrepreneurship and business and as I’m working through my journey to FI and realizing that I don’t want to go to a nine to five job, but I also don’t want to be RE–retired early with nothing to do so.
Money Mechanic 6:54
For example, this podcast and other online businesses and things that are are starting and growing. It’s really nice to have that kind of motivation behind you. And you go, Oh, yeah, this is actually how people generate wealth is not just going to work at 8 am and coming home at 6pm. There’s other ways to do it. And it just helps you envision different ways.
Yeah. And I think those are great lessons. And I’m not sure why that I just didn’t. I don’t know I didn’t find his message that compelling for me whereas all the things that you’re saying they speak to me in and I understand them and I gravitate towards those messages and I got a lot of that out of The Four Hour Workweek by Tim Ferriss, for some reason.
They’re quite different books, but I got very similar messages from that book and that spoke to me but I, I find it interesting that Rich Dad Poor Dad is so well loved by so many people, but there’s certain members of the audience, including me and and others that… I don’t know. It just doesn’t speak to us the same way. And I wish it did because it’s such a classic book that a lot of people just love.
Money Mechanic 8:14
Yeah, I totally agree with you, Chrissy, and I read The Wealthy Barber for the first time last year as well. Like these are books that are written so long ago that have a classic message and you’re absolutely right. If you’re new in the space and you pick up this book, it may or may not speak to you. There’s definitely other literature out there.
Money Mechanic 8:34
For me it was like The Accountant read it actually. And he goes, you need to read this because him and I talk a lot about business opportunities and things like that and we want to be away from our nine to five jobs. And and I think that’s one thing this book helps focus on is that there’s a lot of opportunity out there being a business owner and entrepreneur trying going out on your own
Money Mechanic 8:59
And one thing that I really liked that I wanted to bring up that he talks a lot about in this book, and I think you guys will agree with me as you get a little more involved in your FI journey, the psychology of happiness and money becomes more important than the actual, where do I put money into index funds, right?
Money Mechanic 9:18
And he talks a lot about winners and losers. And winners are not afraid of losing. And this is a quote, “Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure, also avoid success.”
Money Mechanic 9:36
It’s a pretty simple quote. But he examples in this book where he’s been successful, and he’s been not afraid to fail. Again, like I said, I won’t go into those specific examples because that’s not applicable to my life. But the psychological message is, hey, it’s okay. If I fail at something, learn from it, move on.
I find there are a lot of people in this space and maybe just as a general consensus across Canada that they need permission to take action or that they need permission to do something that is abnormal. I think to the FIRE crowd that speaks to us directly, because we’re doing something that is very abnormal, right?
We’re saving a high amount of our income to buy an independence and perhaps quit our jobs with our middle fingers up in the air. That’s very abnormal. And you don’t need permission from anybody to do it. Just do it. I have never read Robert’s book but I’m assuming that’s what he’s speaking to. And I like that. It’s a good pick. Chrissy you mentioned The Four Hour Workweek by Tim Ferriss. Is that one of your picks?
No, it’s not, but it is one of my favorite books. I read it probably in 2005. I don’t remember but soon after it came out and I like I said I got a lot of the same messages out of it like that. You don’t have to work a nine to five and you can create passive income and that was just mindblowing for me.
At the time, I had no idea of the potential of online businesses. And I still don’t really know how to capitalize on that. But it was inspiring. And it got me thinking about ways that all of us could generate income outside of a nine to five job. And it was it was a great read, and I think it’s still a great read.
Money Mechanic 11:23
So, what is your book?
Well, I picked two books. And like you, I actually had an original book that I decided not to discuss on this episode and the book I’ve mentioned many times before, it’s The Wealthy Barber . It had been years since I last read it so I reread it and I still love it. I still love the core concepts in it, but there is a lot in it that is now outdated and may not be the most applicable to people on the FIRE journey.
So I’ve decided to to shelve that one for now and revisit it another time. So I picked two books, both by women just by coincidence, but they just, they’re awesome books. So I picked them. The first one I picked is The Sassy Investor. And that is written by Michelle Hung. And I love this book just because it’s so different. It’s very female oriented. It’s pink and it’s very pretty.
But it’s not just the way it looks that attracted me it’s the content in it is just amazing. I find Michelle to be a very conversational writer and she’s writing about what what you referred to earlier as very dry, a very dry topic. It’s investing and personal finance and that tends to be something that turns people off.
But she’s Michelle has found a way to write and illustrate her points that is very easy to understand. Very easy to digest. And what’s also unique about this book is it’s not just a book with a lot of text and chapters is actually a workbook where there are pages that you can actually fill in and color.
And I argue that they’re actually pretty enough that you could tear them out of the book, I think they’re the book is actually made that you can tear the pages out, you could post them around your house just to give yourself inspiration as you’re moving along the journey in this workbook where she takes you from basic personal finance.
I’m trying to remember all the topics she covers, but I know she covers budgeting and sort of giving yourself a wish list of goals that you would like to hit. Those kinds of things which I think would be really helpful to just have visually represented and, you know, put them up in your space and you can look at them every day and and make sure you’re heading in the right direction with all your daily choices.
But she does actually go more in depth. She doesn’t just skim the surface she goes into investing and actually even draws out… she has an illustrator that worked with her and the illustrations are fantastic. So it’s worth checking out the book just for that.
But she actually drew out the screen for placing an order for a stock or an ETF and it’s it’s it’s funny to see it drawn out in a cartoon kind of format but it explains it perfectly. And I don’t think I’ve ever understood how to place a trade as clearly as that just the way that they’ve set it up.
So yeah, there’s this book is just jam packed with lots of really great useful info info, but it’s also really fun, really nice looking and just I think it would be really appealing to younger women in particular, but I think anybody whether you’re female or male, there’s there’s lots of really great info in this book.
Chrissy on a scale of one to 10 how sassy are the Money Mechanic and I and should we be picking this book?
Money Mechanic 15:00
Sassy? You win the trophy for that, Ryan.
Money Mechanic 15:07
Money Mechanic 15:12
You be sassy!
Honestly as as pink and pretty as it is, honestly, the info is useful to everybody it. So if pink doesn’t appeal to you, it’s fine. Just look past that and read what Michelle has written and you’ll still get a lot from this book.
Money Mechanic 15:31
Yeah, sounds like a great book Chrissy. Ryan, do you want to introduce your book?
I’m going to introduce a book that I think everybody listening has heard before, but in case you haven’t, it is The Simple Path to Wealth by JL Collins. Probably the most foundational book maybe it’s definitely in the top three.
You know, I don’t know if it’s ahead or behind Your Money or Your Life by Vicki Robbins but I’ve yet to read that one for whatever reason. You can all… I know I know. I know. For whatever reason I haven’t read like the grandmother of FIRE. But anyways
Money Mechanic 16:08
You’re banned from podcasting until you’ve read that book.
Be right back. Okay, guys, we are back recording and wow, what a great read.
Money Mechanic 16:19
No, The Simple Path to Wealth is awesome. Tell us more about it.
Yeah, it’s really for anybody that’s interested in learning about financial independence, which is a lifestyle choice and investing in the stock market, which is a financial choice, but really, you just need to make it a lifestyle choice, like leave the finance part out of it.
And that’s really who JL Collins is attempting to write to. He says in his book, and on his blog, that you that he is trying to cater to his daughter who doesn’t really want anything to do with finances. She wants to know what she’s doing but she doesn’t really care. And so he’s kind of giving her the too long didn’t read gist of it, you know, like, just do this, you’ll be fine.
That really speaks to the simplicity of the FIRE movement and what we’re all chasing with this lifestyle. Right. So when it comes to investing it is. Let me see, I want to term this. I think Canadians have been searching for our version of this advice, you know, at least the way it applies in practical terms, because he writes to Americans.
He wants you to invest in your 401k and Roths and blah, blah, blah, blah, blah, and he wants you to buy VTSAX from Vanguard. None of that is applicable to us. Unfortunately, we just can’t do any of those things. We can’t even buy the VTSAX mutual fund we can we have our options and unfortunately, that’s outside of the scope of of what I’m going to be talking about and today’s episode.
But in my opinion, the exact reason you should pick up this book is for this exact quote: “Toughen up, cupcake and cure your bad behavior.” I really like it because yeah, as anyone would know JL Collins is that he really likes to slice through all the fat, and he trims it all off, he points out to probably 99% of the dinner table as he likes to say.
And he says you can just push that all off the table because it just doesn’t work for you. It doesn’t actually do you anything. It’ll just confuse you. It’ll take a lot of time, and you’ll be worse off for it. So I’d like to read just a few headlines for what I think I have his book right in front of me and what I think that people would really enjoy to hear.
And if you’ve never read The Simple Path to Wealth, you’ll find this very enlightening. And if you have heard it, you’ll know that I’ve probably picked the most JL Collins-esque advice that he’s given in the book.
So: number one, market crashes are expected. Number two, market always recovers. Number three, the market always goes up. Number four, the market is the single best performing investment class over time, bar none. Number five, the next 10, 20, 30, 40 years will have many, many collapses and recessions and disasters for the market.
Number six, if you toughen up and learn to ignore the noise and ride out the storm, adding still more and more over your money to the investments is a good thing. Number seven, be strong enough to stay the course. And you will know that these bad things are coming not only intellectually but on an emotional level as well. Number eight, there is a market crash coming to you. And there’ll be another one after that. What wonderful opportunities of buying they will be.
That is why I love JL Collins because he really just puts it out there very vanilla to you. Like if you look at a graph, you could probably discern this yourself but to understand it on an emotional level that he describes to you and that he described to his daughter is the reason why everybody should be picking up this book. In my opinion it is one of the top three books that you should be reading. What do you guys think of that?
Money Mechanic 19:52
Yeah, I don’t have much to disagree with that. I mean, as a society where the only people are the Western society we we run to Best Buy when there’s a sale on, but we run away from the stock market when there’s a recession or a quote unquote, sale on.
Money Mechanic 20:06
And I think this book does a great job of that I love that book as well. And I think you can really read through the US side of that book. Because it’s pretty easy. Chrissy has done a great job on her blog. And there’s other ways out there to learn what a 401k means to us as Canadians and and the underlying message is fantastic in that book.
I love that book. I loved his Stock Series and I was so excited when he transferred it into book format, because it just puts it all together in a logical order. And it’s so easy to read. And I recommend it to everyone who’s starting to learn about investing even though it’s a US writer written for a US audience. Like you said, there is so much that is still applicable to Canadians and it’s not hard to translate the US accounts and US terms into Canadian.
My second book is going to do pretty much just that. But I’m going to wait to describe that later on in the episode. If people want to hear more about JL Collins, I just have a few resources that they can check out in the show notes. He does a great Google Talk. You can just Google or YouTube JL Collins Google talk, and you can hear him talk about it.
Yeah, he’s interviewed by someone who went to Chautauqua, which is a financial seminar or not seminar. It’s just like a vacation slash meeting that you can go to. He also has his blog at JLCollinsNH.com, and you can just click on The Stock Series. That’s what Chrissy was mentioning before you can basically read the book in blog format, but it’s not at all well edited compared to the book. And otherwise, just yeah, grab it from the library.
That’s what I did. I requested that my library buy it. And what always surprises me is every time I put a request in to purchase a an FI book, there’s always three or four requests that come right after I place my request. So there’s clear a community out there that is interested in FI they’re just they’re just hidden.
Money Mechanic 22:05
This is probably a good time to take a quick break and come back with the second half of our books.
Money Mechanic 22:11
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Money Mechanic 22:32
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Money Mechanic 22:56
Alright, so I had to go deep down into the Money Mechanic bookshelf. I really thought hard about my second book because there’s just so much good stuff out there. But I did choose a new one. And I am going to shout this out and support one of my hometown guys, Robinson Smith—Master Your Mortgage for Financial Freedom.
Money Mechanic 23:18
And if you don’t recognize that title it’s because the book just came out in late 2019. And it is the Smith Manoeuvre. We all want to learn more about this. Go pick up this book. It’s brand new, and I’m shamefully promoting it and I’m not getting any kickbacks, but I sure hope he brings some beer over when I interview him.
Money Mechanic 23:37
So he rewrote his father’s original book, which is Fraser Smith, right? The Smith Manoeuvre that came out a long time ago. And I think I’m not going to go into the super details of what this is because most of us in this space know what it is but I am going to read this:
Money Mechanic 23:56
“The Smith Manoeuvre is a creative, legal financial strategy designed for Canadian homeowners to convert the non-deductible debt of a house mortgage to the deductible debt of an investment loan. This simultaneously ensures the elimination of your non-deductible mortgage in record time while building a free and clear, non-registered, “personal pension plan” and enjoying substantial tax refunds each year for years to come. your mortgage will melt away as fast as your investment portfolio grows.” Now doesn’t that sound awesome?
Love it. I’m salivating.
Money Mechanic 24:39
I think this book the reason I chose it is because I think everybody’s been waiting for a little bit of updated content on this strategy. And let’s be very clear, it’s a strategy and it’s not for everyone. And you really need to understand what you’re doing with this and it it’s like anything in personal finance or FI.
Money Mechanic 24:57
It’s about having the dedication, the perseverance and the mindset to continue with it over a long period of time, that makes the difference. And he does go into some new ideas that weren’t in the original book about having some accelerators. And I’m not going to tell you what they are because you need to go pick up the book and read it.
Money Mechanic 25:22
But there’s ways that you can really instead of for those that don’t understand what the Smith Manoeuvre is taking principle paydown your mortgage and applying it to a investment. And it can just be an index fund. I know there’s always a lot of discussion about well should be a dividend stock? Should it be this or that? It doesn’t matter.
Money Mechanic 25:40
The point is your portfolio over a long period of time will outgrow the cost of your mortgage that is not tax deductible. And I know that sounds very simplistic and I know that we’re making assumptions but so is JL Collins in his book saying the market always goes up. So, you know, it is what it is.
Money Mechanic 26:04
But I know there’s a lot of interest out there and there is a book so go out and read it and I enjoyed reading it. And I’m actually lucky to have it in front of me because there’s been a few requests to borrow it from me and Kevin, who talked about real estate loans with these on my other show. He takes a picture of everybody he lends a book to. And this is a great idea because I am definitely missing a few books.
That is a great idea. I I need to do that too. I have also lost some books along the way. I am so excited to read this book because I read the original written by Fraser, who is Robinson’s dad and it was a short tiny little book but it was so packed with a lot of very detailed info and I got a little lost along the way. It’s quite technical, even though it’s written in a very easy to understand language it got a little too into the weeds with some of the, is it boosters that is that what he calls them?
Money Mechanic 27:04
He does in the original. Yeah. And and you’re absolutely right. And I think Robinson did a great job in the second book making it much more readable. And he gives a lot more examples that we can, most of us can probably relate to. They’re not FI-specific by any means. But you’re right. The original book was fantastic. But yeah, it was technical.
Mm hmm. Yeah. So I’m excited to see what Robinson’s done and, you know, it’s been a long time since his dad wrote the book. So he, I’m sure Robinson’s had a lot of time to think about it and consider based on audience feedback, what changes would be would make it more reader friendly. So yeah, that’s definitely going on my list.
Okay. Chrissy, I think you have a very familiar book to us.
Mm hmm. I just want to say before I go into it that I picked this book because I genuinely do love it. It’s not because these are former guests of ours. And the book I picked…
It’s Quit Like a Millionaire. I I genuinely loved the book. And the reason why it came to mind for this episode is because I recently was asked by my sister, she’s part of a book club. And she wanted to recommend some books to her group that would would touch on FIRE but wouldn’t turn people off.
So a couple of the books I put forward which were Playing With FIRE and Quit Like a Millionaire, we we discussed and she, my sister actually skimmed through the book and I think she watched the documentary and she decided that that may have been too far out there, based on on the Reikens’ story.
That it might turn people off so she shied away from that even though she she and I both agree the book was excellent and we both love the documentary we we felt like that might be a bit too far and jumping into the deep end for people who have never heard of FIRE and have just no concept of it, it might do the opposite and make them run away.
So I said, what about Quit Like a Millionaire? And because I have not come across a single negative review of that book other than people saying that it’s not Canadian enough and I kind of agree with that. But I haven’t heard anyone say this is crazy. This is ridiculous doesn’t make sense it. I’ve only heard good things about it and that people have said it’s changed their life. It’s changed their financial journey.
So I think it’s a great book. I read it myself before I read any reviews and I loved it and I would happily read it again. There aren’t many books that I would read more than once, but this was definitely a good read. It’s packed full of info but it’s also such a great story. I love that Kristy wove her story about growing up in China into the book.
And that’s what makes it really approachable to me because she came from poverty and she came from a family that was were immigrants to Canada and they started with basically nothing. And that also resonates with me because that’s similar to what I grew up with. My parents weren’t in poverty. And I was born in Canada, but I had immigrant parents and they started from nothing and worked their way up.
So I can see how it’s possible to reach FI even if you come from humble up an humble upbringing, so that really appeal to me. But more than that, it’s just a great book. There’s a lot of technical info that’s conveyed in a very easy to understand and conversational way. So that’s, that’s my second pick. It’s a great book.
You know, I really love that book as well. I listened to it twice on Audible. And I think my favourite part about it was where they’re responding to criticism of them not having children and being able to save up a bunch of money and travel the world and see their investments grow rather than shrink.
And as much as I love to learn about the world schooling, as they call it, which is for anyone who hasn’t heard of it, it’s basically homeschooling except the world is your home, pretty much how they term it anyways. And you just travel around with your kids and just teach them homeschool style, but just in different countries at a time.
Anyways, they decided that it wasn’t fair for them to write about parenting and financial independence, because they hadn’t had any kids. So they brought on three experts to really just trounce the numbers. And that was by far one of my favorite parts about it just because raising a kid is deemed to be so expensive, and I’ve never felt that.
Not with my 20 month old daughter, and I see what people spend their money on. And it’s like, well, No wonder your kids so expensive, right? Dropping $1,000 in toys every month. That’s why they’re so expensive, right? But I’ve never felt that and I love that, that they decided to just step away and let the other experts and gurus in our, in our movement be able to address that.
Yeah, and I’m really glad that we got to interview them and that they wrote this book because, to be honest, I wasn’t a follower of their blog, not consistently prior to this, I think because they’re millennials and I’m not a millennial, I just figured their message wouldn’t be applicable to me.
But I’ve since become quite a fan of theirs, and especially actually, I really appreciate their recent post. I think it was a look back on 2019. And they spoke about and I, I hadn’t heard them mention this before, but they actually break their portfolio into two.
Whereas there’s one portfolio that they live off of is that is their pre-FI portfolio and then they have a second portfolio that they use for, I think donations and just kind of the, maybe the blog expenses, things like that. And that is their post-FI earnings, you know, anything they earned from their book or their blog that came after they retired.
That is just sort of side earning and then they don’t count that in the calculations they share with their readers and I thought that was extremely transparent. And it really helps to lay to rest the argument that people say, Oh, you know, they’re retired just because they started a blog or they wrote a book and they hit it big. So I appreciate that. There’s a lot of transparency in what they put out there. And I thank them for doing that. And it’s inspiring for us Canadians to see that it’s possible in in Canada.
So my second recommendation is Beat the Bank, which is by Larry Bates, and I’m going to say right off the bat that I absolutely hate the title of this book. I think it sounds so click-baity, and make matters worse, there’s a freaking pig piggy bank cartoon winking at you on the front of the book. It sounds like a get rich quick scheme, doesn’t it?
In reality, this book is fantastic and in my opinion, it’s a superb follow up to The Simple Path to Wealth because it goes where JL Collins doesn’t go, which is the practical Canadianness, of what to do in Canada to buy index ETF. So he repeats a lot of the same indexing advice as JL Collins.
But as somebody who worked for the big banks all his life, this is Larry Bates I’m talking about I have to give a massive street cred because I imagine he lost a lot of friends or colleagues or a lot of dinner party invites by exposing the plain vanilla mutual fund industry that is closet indexing, because really, that’s what they do, right? They just copy a lot of what everybody’s doing over and over again, and then they slap on these huge mutual fund fees.
And Larry Bates goes right into detail about how that’s so insidious to your future gains. So I do have a few stats for you guys if you’d like to bear with me because I think it just goes to show exactly what this book can do for you. So if you haven’t read it already, hopefully this will convince you. You guys ready?
Money Mechanic 34:57
Okay, so throughout the book he makes often he often compares to real life examples of mutual funds and anything like that, right? So I chose one by random. And I chose the RBC Select Conservative Portfolio, which I think is one of the biggest ones in Canada. So this has an MER of 1.84%. But a true fee of 32%.
So how can this be right? That doesn’t make any sense the fee is 1.84 isn’t it? And this is what the book is going to walk you through. And that’s what I’m going to take you through right now. That’s because the MER is compounding along with your returns regardless of whether or not you make any money from the stock market.
So whether or not it goes up or down, that 1.84% keeps compounding, right? So these are the astronomical fees of Old Bay Street, which refers to super high MER fees out there. You cannot afford these fees because if you want to retire earlier rather than later, your portfolio gains need to improve in value much more so than the 30% drag you’re experiencing.
So I went to Larry’s website at LarryBates.ca. And I plugged in the specs of that RBC mutual fund he mentioned before I started out with 200K, and I average market returns at 7%, plugged in the posted MER of 1.84% and I didn’t touch it for 10 years and what happened?
I had a gain of $193,000, but I paid $62,000 for the mutual fund manager to simply match the market. Remember, I’m just choosing an average of 7% right? So my actual return was only $130,000 because I paid someone else to sit in an office tower pretend to be smarter than the market. Isn’t that crazy?
Wow, that’s painful, painful to hear
It gets worse, or it gets better. Because I did the exact same scenario except I took Vanguard’s equivalent of the RBC Select Conservative mutual fund. So this would be their all in one Asset Allocation Fund, which is VCNS which is their Vanguard Conservative Asset Allocation Fund.
And it has the exact same stock to bond ratio which is 40% stocks and 60% bonds. Exact same thing as the RBC mutual fund except, you know, I’m sure they’re different and underlying holdings, but for the most part, I think it’s a fair comparison because they’re both addressing the broader stock and bond markets at the same ratio.
So using the exact same inputs as what I just mentioned before, except for the MER, which I reduced to 0.25%, which is what Vanguard is charging, your index fund still gains $193,000 because you have the exact same return. But instead of paying $63,000 in fees, you not only paid $9,000 in fees.
So whereas you only kept 68% of the gains with RBC, that resulted in $130,000 of a gain, you now get to keep 95% of your of your gains with Vanguard, which is a gain of $184,000. Isn’t that incredible?
Money Mechanic 37:48
And I think that you’re portraying a great example there and going to his website, he does it in a graph where you can see it and he calls it the T-Rex Score and you can visually plug in those various simple numbers and go, wow!
Now remember, you’re not losing money for what you’ve initially invested like that 200k doesn’t just suddenly disappear. But it’s your gains. It’s the point that you’re investing in the first place. That’s why you’re taking the risk. That’s why you’ll never see that 200 grand because you have it invested to make you more money.
And that’s where the banks come in and say, well, I’m going to take 32% even though they only advertise it, they’re going to take 1.84%. And they’ve gone to great lengths through lobbyists and what have you to make sure that you never truly understand the fee. And that’s what Larry through his 30 plus years of insider knowledge in the banking system is pointing out to you in his book, Beat the Bank.
That’s why I love it so much. So he does go into a lot more detail. He described some DIY and assemble it yourself portfolios, like the Vanguard, iShares, BMO asset allocation funds. Again, that’s beyond the scope of today’s episode, so unfortunately, going to leave it there.
But I do really recommend the book and I think that if you read it in sequence my recommendations in sequence, so you start with The Simple Path to Wealth by JL Collins, and then you go into Larry Bates’ Beat the Bank, you’re going to quench the thirst for Canadian knowledge because once you read JL Collins, you’re like, okay, what’s for Canada? Like? What can I do here, right?
And then Beat the Bank is going to completely walk that through for you. And the fact that you get to read the same content, but in a different way, in terms of the passive indexing twice, I think is also just it’s just good for your psychology because it’s really just ingrained in you that you are not better than the market, your best chance of outperforming is to be average.
That’s kind of an oxymoron, but it’s very, very relevant. And if anyone wants to hear more about Larry Bates, you can definitely head to his website. Money Mechanic just mentioned the T-Rex Scoring calculator on LarryBates.ca where you can see all of it for yourself, or you can go to the Canadian Couch Potato podcast because he has Episode 19: The Big Trade-off with Larry Bates and I highly recommend you check that out. You can hear him talk to Dan Bortolotti himself.
Money Mechanic 40:02
Yeah, I absolutely love this book. I read it early 2019 when it came out and everything you said holds, holds true Ryan. And one of the things I really liked that he brings up in the book is that there’s, there’s wealth builders and wealth killers.
Money Mechanic 40:17
And he talks about this a few times in the book and your wealth builders are the amount you save, the time it has to compound and the rate of return. And your wealth killers are fees, taxes and inflation. And we need to be conscious of those things and think about them. And this is what all of us on this path to FI are about is optimizing the builders and minimizing the killers, right? So it is a great book and yeah, I second your endorsement of it.
So I have not read this book. And I have to tell you why. I agree with Ryan that the title put me off. Because I assumed based on the title that this was a basic personal finance book about banking and just how to manage your money, not that it went into investing and fees and that it was as Canadian as it was.
So, yeah, for different reasons. I agree that the title didn’t do it justice. And the fact that the cover is piggy bank also makes me think it’s just about basic money, you know, money management. So, I am very encouraged to hear what you’ve said about the book, and I’m definitely going to read it sometime soon.
I recommend it wholeheartedly. And I also like to just read just a little quote that he hasn’t in the book because he has all these cheeky little quotes everywhere. So he has this under the subtitle, brilliant stock pickers: “The only function of economic forecasting is to make astrology look more respectable.”
If you want to know what kind of book this is, that should pretty much sum it up for you, right? That’s by John Kenneth, by the way, that wasn’t his quote. He wrote that in there.
Money Mechanic 42:03
There’s just so much out there. And for anybody that’s interested, there’s there’s still a bunch of books we could probably say that are better beginner books or more advanced books or better investing books or, you know, there’s just so much out there. This is just scratching the surface of stuff that we that we found interesting.
I mean, I think there’s a lot of honorable mentions that we can just list out right? I mean, Playing With FIRE Chrissy mentioned, The Wealthy Barber again was mentioned, but there’s also ChooseFI. There’s The Value of Simple right? There’s you talked about, you talked about Wealthing Like Rabbits, right? No, no, you didn’t you didn’t.
Money Mechanic 42:40
No, just quickly, but I mean, Wealthing Like Rabbits is a very Canadian content book too. And it’s a great starting place for a lot of people.
Millionaire Teacher—another Canadian.
Oh, Andrew Hallam, right? That was probably a good one.
Money Mechanic 42:54
I’m reading Preet Banerjee right now. Stop Overthinking Your Money. There’s so much content out there. It’s really fantastic. And for anybody who’s listening to this, just pick up a book. I mean, do yourself a favor and pick up something and expand your financial intelligence as Robert Kiyosaki says.
Yeah, you know what I did when I was starting my FIRE journey, I would just go to whichever library I happened to be at, find the personal finance section, and just look on the shelf and just grab three or four books that looked interesting and took them home.
And some of them I loved and some of them I didn’t like so much, but it helped me to branch out from the books that everyone was talking about, because there are some books that aren’t as well known that really, really resonated with me. So I suggest everyone try to do that. And if you like buying books, then go to the bookstore and do the same thing. Find the personal finance section and just grab a few books off the shelf and try them out.
I love it. I love it. We’re also going to have our books on our website in the show notes that you can click on and order through the Amazon store, but we really hope that we get zero commissions from that because we want to see you all get it from the library or check out the blogs that have it for free.
Money Mechanic 44:09
I’m a big fan of secondhand bookstores and both books that are in front of me while not Robinsons, I bought that brand new but I am big fan of second hand books and I’m actually really enjoying making my own FI bookshelf, which I love having because I love being able to lend these books out to people that are interested. So definitely reuse, go to the library.
Well, if anybody else has any other suggestions for us, feel free to contact us or comment on our show notes. Right? We’d love to hear from you. We’ve kept it strictly personal finance, but I think there’s other books in this space that could really help people. I think Atomic Habits come to mind or Digital Minimalism is another big one.
Money Mechanic 44:47
Yeah, that’s James Clear’s book is also very high on my list. I seem to always have like a five book backlog that I’m trying to get to.
More they’re coming out faster than you can read them.
Well, thank you all for listening. I hope you’ve discovered some new books through this episode that we’ve shared. And I hope that you can join in the conversation in our show notes and share some books that you found helpful.
We love hearing from you. So please message us, leave us a comment, share the show. Whatever you can do to, to communicate with us. We We love hearing from you. So go and do that and hopefully we will discover some new books from you too.
Transcribed by Otter.ai
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- FI Garage
- Chrissy’s review of The Sassy Investor
- The US/Canadian FI Glossary at Eat Sleep Breathe FI
- The Stock Series from JL Collins
- JL Collins Google talk
- The Smith Manoeuvre
- FI Garage Interview #6 – How to get +10% returns in your RRSP
- 005: Achieving FI in Toronto | Kristy and Bryce from Millennial Revolution
- Review of the Playing With FIRE documentary on Explore FI Canada
- Our 2019 Finances from Millennial Revolution
- T-Rex Score
- VCNS Vanguard Conservative Asset Allocation Fund
- Episode 19: The Big Trade-off from Canadian Couch Potato
- The Value of Simple by John A Robertson
- Rich Dad, Poor Dad by Robert Kiyosaki
- The Four Hour Workweek by Tim Ferriss
- The Wealthy Barber by David Chilton
- The Sassy Investor by Michelle Hung
- The Simple Path to Wealth by JL Collins
- Your Money or Your Life by Vicki Robin and Joe Dominguez
- Master Your Mortgage for Financial Freedom by Robinson Smith
- The Smith Manoeuvre by Fraser Smith
- Quit Like a Millionaire by Kristy Shen and Bryce Leung
- Playing With FIRE by Scott Reikens
- Beat the Bank by Larry Bates
- ChooseFI by Chris Mamula, Brad Barrett and Jonathan Mendonsa
- Wealthing Like Rabbits by Robert R Brown
- Millionaire Teacher by Andrew Hallam
- Stop Overthinking Your Money by Preet Banerjee
- Atomic Habits by James Clear
- Digital Minimalism by Cal Newport
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