Personal finance can be an intimidating topic, but it doesn’t have to be. With the hundreds of books out there, where is a reader to start? Some people would rather get a root canal than assess their financial situation. And while improving personal finances is one of the most common New Year’s Resolutions, by mid-January many have already given up on their holiday credit card statement. It’s these excuses author and Globe and Mail personal finance columnist Preet Banerjee skewers in his new book, Stop Over-Thinking Your Money.
Banerjee provides five simple rules to follow towards financial success. You’ll note investing isn’t one of them – why should you worry about investing, when you don’t have any money to invest? With household debt at record levels and personal savings rates at paltry levels, Canadians clearly aren’t getting the message. Banerjee’s rules are easy to grasp and actionable – you’ll achieve an “easy a” in personal finance in no time.
Rule 1 – Disaster-Proof Your Life
What if you were run over by a bus tomorrow; would your loved ones be left in financial ruin? Banerjee helps break down the cornerstones of protecting the ones you care about most through disability insurance, life insurance and emergency funds. Insurance can be a dry subject, but Banerjee brings it to life through his engaging conversational style.
Rule 2 – Spend Less Than You Earn
There’s a reason why Millennials have been nicknamed the “entitled generation”. The art of savings seems to have been lost over the generations. Stop trying to keep up with the Joneses – they’re broke! Banerjee walks us through how to create a simple, yet effective budget to watch our spending and get it under control. Once you’re running a surplus, then you can start worrying about ETFs, mutual funds and the slew of investments out there.
Rule 3 – Aggressively Pay Down High-Interest Debt
There’s good debt and bad debt. Good debt, such as mortgages and student loans increase your net worth, while bad debt, such as credit cards, payday loans and car loans, can push you to the brink of financial ruin. Not only does Banerjee provide examples of how much debt will cost you in interest over your lifetime, he provides effective and easy to follow plans of attack, such as the “debt snowball” that will motivate you to become debt-free sooner.
Rule 4 – Read The Fine Print
Life is busier than ever today, so it should come as no surprise our eyes tend to glaze over when it comes to reading the fine print. Even though the font may be miniscule, it doesn’t mean we should ignore it. Everything we sign, from gym memberships to mortgage insurance, has fine print we should carefully review before signing on the dotted line. Often the most important details are found there that can come back to bite us later on. Don’t be afraid to take a contract home and review it in the comfort of your own home: it’s to your benefit.
Rule 5 – Delay Consumption
Why save up for a fancy car for years when you can have it today through the magic of credit? The reason is because you’re robbing from your future self. Banerjee explains how you can still enjoy the finer things in life like luxury cars without sacrificing your finances. Instead of leasing a Porsche for $800 per month, why not rent one on the weekend for $200 and save a bundle on car loans and auto insurance? Lifestyle inflation is another trap we often find ourselves in – even if we receive a $5,000 raise at work, we manage to find something to spend it on. By paying yourself first, you can avoid growing your expenses along with your income.
A Step-By-Step Guide
Stop Over-Thinking Your Money is my favourite personal finance book since The Wealthy Barber Returns by David Chilton. It’s free of complex graphs, charts and jargon that tend to scare the average person away from personal finance books. Banerjee manages to capture readers of all ages through his relaxed and often humorous tone.
If you’re looking for a book to help turn your finances around, Banerjee’s is a must-read – it will help you improve your finances one simple step at a time.