If you’re looking for a personal finance book to give a young adult this holiday season, my top suggestion is Money Like You Mean It: Personal Finance Tactics for the Real World, by Erica Alini. Ms. Alini, national online money reporter at Global News, has written a book that feels connected to what’s going on right now in the economy. For example, she offers some good ideas on how to exploit a job market that has given workers an unusual amount of leverage in negotiating pay and benefits. Naturally, she also covers expensive housing costs. Here’s an exchange I had with Ms. Alini recently by e-mail:
Q: The subtitle of your new book jumped out at me – personal finance tactics for the real world. Would it be accurate to say you’ve found that some traditional personal finance isn’t working in today’s world, at least for young adults?
A: Yes, that’s exactly what I was getting at. Personal finance is becoming more and more complex. I’ll give you a few examples. So much financial innovation is geared toward making us buy or borrow more: we now have not only credit cards, but mobile payments and BNPL (buy now, pay later) apps, which can be a psychological slippery slope into overspending. You can buy stocks with an app, but that also means you can make really costly investing mistakes with a few thumb strikes. Even buying home insurance isn’t straightforward any more. If your house is at risk of flooding (and more and more of us face that risk), you’ll need to buy optional, additional coverage, and it’s up to you to know this. Everywhere you turn, there are more choices, more financial products and more things you need to know to be able to make good decisions. We all need to level up. But the challenge is greatest for millennials and Gen. Z who also face mind-bending housing costs and are often bogged down by student debt just when they should be taking off in life.
Q: One of your chapters is titled, Everything Starts With Housing. What do you mean by that?
A: How much you’re going to spend to keep a roof over your head is one of those critical decisions that can set your long-term financial trajectory. If you spend too much on housing – whether you have a mortgage or a landlord – then you’re going to have a hard time paying for the rest of your life. And reconciling the cost of shelter with the cost of everything else has become the biggest financial challenge for my generation.
Q: How do we get millennials and Gen Z thinking strategically about retirement when housing is so expensive and many people in these groups are skeptical they’ll ever be able to retire?
A: The earlier you start to save and invest for retirement, the more time there is for compound interest to work its magic. Even if you can only save a tiny sliver of your paycheque for retirement, it’s important to set up those automatic transfers. Then, as your income increases, or your debt payments shrink, give yourself a raise and boost your contribution. That said, don’t panic if you haven’t started yet: you haven’t missed the boat. You’ll have to save more aggressively but hopefully if you’re older you also have a higher and more stable income.
Q: One of the things I like about your book is how you’ve integrated the job market into personal finance. What advice do you have for young adults who want to take advantage of a job market that, thanks to the pandemic, offers real opportunity to find better pay, benefits and work-life balance?
A: This is your chance to job-hop your way to higher pay, but make sure you know your worth. To gather on-the-ground intelligence, talk to colleagues and people in your industry. Career coach Allison Venditti suggests playing the “over-under game.” People often won’t tell you how much they make, but are more open to saying whether they make more or less than a certain amount. That information is a good way to make sure you don’t lowball yourself during pay negotiations. Also remember: there’s so much more to discuss than your salary. For example, you can negotiate work arrangements (like working from home), flexible hours, vacation, professional title and waiving the waiting period for health and retirement benefits. You can even ask for a retirement payout if the pension benefits at your new job are less generous than what you were getting in your old gig.
Q: Millennials and Gen Z have had some real success as investors in the pandemic as almost everything went up in price. How do you suggest they achieve long-term investing success?
A: A lot of people developed a taste for buying and selling single stocks in the gravity-defying bull market we’ve had since the spring of 2020. I think there’s a sense that investing (whether it’s stocks or crypto) is the only way to get ahead and accumulate wealth if you can’t get into the real estate market. I completely understand that sentiment, and it’s great to see so many people investing. But the evidence is clear: it’s extremely difficult to beat market returns over many decades. If you want to grow your savings over the long term, then index investing – buying and holding investments that track the movements of broad financial indexes – is a great way to do so. Robo-advisers, all-in-one ETFs and index mutual funds are three low-cost, low-effort index investing options I discuss in the book.
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Rob’s personal finance reading list
A Toronto house was listed for sale at $1
Guess how much it sold for. Lots.
Who caused inflation?
Watch for a politicization of inflation as living costs keep rising. Is it the federal government’s fault for overstimulating the economy during pandemic lockdowns? No, says former Bank of Canada governor Stephen Poloz.
Year-end tax tips
Written for financial advisers, this very readable summary of year-end tax tips is worth a look if you’ve done well in the stock market lately.
A solution to high-cost housing
High housing costs are starting to drag rents higher after declines in some cities that were caused by economic lockdowns. Here’s an interesting solution to unaffordable house prices and rent: dorms where people have their own bedrooms and share everything else, including bathrooms in some cases. Like student dorms, but more upscale.
Today’s financial tool
CardFinder will help you find credit cards that best meet your needs and spending habits. All available cards are in the mix.
The Money-Free Zone
One from the vault – the Lafayette Afro Rock Band’s 1972 song Darkest Light. A funk masterpiece that has been widely sampled by other musicians.
Who I’m following on Twitter
Rewards Canada is my go-to source for news on credit card rewards programs.
In case you missed these Globe and Mail personal finance-related stories
- How to reboot your portfolio with Canada’s ETF guru
- Food inflation changing how Canadians shop, eat, grocers say
- Seniors have a lot of stuff: Here’s how to downsize instead of dumping it all on heirs
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
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.
Rob Carrick