We have a cliché problem in personal finance. Too many empty phrases that are repeated endlessly because they suggest expertise and mastery of money. You’ll find some prime examples of stale personal finance clichés in a recent blog post by money coach Anita Bruinsma. under the heading “Personal finance nonsenseMs. Bruinsma takes on real estate investing, passive income, side hustles and more. I liked his post so much that I invited him to expand on it in the Q&A. Here is our exchange via email:
Q: Anita, tell us a little about your background in investing and the type of work you do.
A: I spent 15 years as a stock market analyst, researching companies and making stock recommendations for the investment funds my group manages. I’m now a financial coach, and one of my services is teaching people how to be a do-it-yourself investor. Personally, I have been a DIY investor since I was 23 years old.
Question: What led you to choose these five statements as nonsense? I mean, a lot of people really believe some of these things.
A: I think personal finance and investing has become a hobby for some people, which has led to a lot of information being made available online by people who are far from experts in the field. There are statements and ideas that are repeated over and over again as if they were indisputably true. Rhetoric can make it seem like people are getting rich by doing these extraordinary things while everyone else is missing out. This can feel daunting and cause people to throw up their hands and give up on doing anything with their finances because it is too difficult or complicated. Of course, it doesn’t have to be this way.
Q: I can’t believe how often I’ve heard the phrase “investment property” over the past few years, both professionally and in conversations with friends and family. You took aim at the idea that real estate investing is the best way to get rich. From where?
A: There is a feeling of FOMO if someone does not own real estate in this country. The truth is, owning real estate as an investment takes work and can be stressful. It’s easy to say, ‘My tenant’s rent pays my mortgage,’ but what about that new refrigerator or broken air conditioner they need in their apartment? What about taxes, insurance and maintenance? There’s also the hassle factor: difficult tenants, record keeping, and that call you get from a tenant about a plumbing emergency while you’re on vacation. When all costs are taken into account, it is not uncommon for people to incur losses on their rental properties on an annual basis. This means their cash flow decreases, leaving less money for their daily living.
Q: How about trading stocks or crypto? What is your opinion on how possible it is to trade your way to wealth creation? God knows the world of personal finance is full of people who say so.
A: If you want to see me get excited at a dinner party, invite someone who loves talking about crypto and stock trading. People who brag about how much money they’ve made trading stocks and crypto often aren’t telling the whole story. Winning consistently in trading is rare; It’s so rare that even the most experienced Bay Street money manager can’t do it. Why would someone who has no experience or training in stock market analysis and who does not receive support from a team think that he can do better? The thought of trading stocks makes many people think that investing isn’t possible for them because they don’t have the time or inclination. The truth is that anyone can invest in the stock market with a buy-and-hold strategy using exchange-traded funds or mutual funds.
Q: You also targeted side hustles, a phrase that has always bothered me because it suggests that the reason you’re not getting ahead financially is because you’re not working hard enough. But in today’s economy, I wonder if some people need an extra side hustle to get by. What are your thoughts?
A: There is no doubt that the high inflation we have been experiencing lately has made it difficult to make ends meet. But we must be careful when looking at aggregate data and averages to determine how well people are getting along. Every person’s situation is unique. Some people are definitely struggling to pay their bills, and in some cases, they need to earn more. While there are other ways for most people to get by, sometimes it’s a question of the choices they make, especially how they spend their money. If someone wants to take on a side hustle, that’s great. But for many people, this is simply not possible. What would the ‘hustle’ be? Will they experience any outages? Will they spend time with their families? I want people to not feel guilty for not taking a side hustle disguised as a side hustle.
Q: The nonsense you choose all has a common theme; There are shortcuts or proven formulas to getting rich. In your experience, what does it take to build wealth and how long of a timeline should you have?
A: Building wealth is based on the simplest concepts: Spend less than you earn, save and invest. Yes, it is boring, boring and time consuming. But for average people, this is how wealth is built. By “wealth” I don’t mean saving money to hoard it. My point is to first save enough money for your retirement so you don’t have to stress about it.
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Rob’s personal finance reading list
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Reader comment
In a recent newsletter, I answered a question about how to choose which profitable stocks to sell. One newsletter subscriber had an additional suggestion: donate some or all of the shares to charity. “There will be no capital gains and no donation tax credit. Your reader will be doubly rewarded.
Do you have a comment or question for me? Send it my way. Sorry, I can’t answer everyone individually. Questions and answers have been edited for length and clarity.
Tools, explainers, guides and charts
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Free Zone
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For Feelies at their best, check out this live version of the song high ground. And in recognition of Velvet singer Lou Reed, here is a review a new Reed organic product. I loved this line: “You know things are bad when Lou Reed is healthier than you.”
Call: We want to hear from you
The Globe explores how retirement affects a parent’s ability to help their children with housing costs. We hope to hear from retired parents who support their children with a down payment or co-signing on a mortgage, from children who receive support from retired parents, or from those who do not because their retirement presents particular challenges. If you would like to share your personal story, please contact Globe and Mail reporter Irene Galea at igalea@globeandmail.com.
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