Kicking Financial Ass: A Practical Money Guide That Doesn't Suck
()
About this ebook
The award winning and bestselling book that helped millennials punch debt in the face, invest for the future, and retire early! Now in a 2nd edition
Why wait until 65 to retire when you can start doing what you really want when you are in the prime of your life? Whether your dream is to start your own business,
Paul Christopher Dumont
Chris Dumont is the founder of MoneySensei.com, a personal finance hub that helps people become debt-free. For nearly a decade, he has worked in finance learning both inside and outside the classroom the fundamentals of personal finance. Chris holds an MBA from the Schulich School of Business in Toronto, Ontario and a Bachelor of Commerce from the Alberta School of Business with a major in Finance. He completed his CFA designation in 2016.
Related to Kicking Financial Ass
Related ebooks
Simple Path to Wealth: Your Guide to Financial Freedom Rating: 0 out of 5 stars0 ratingsI Will Teach You To Be Rich by Ramit Sethi: Summary by Fireside Reads Rating: 3 out of 5 stars3/5Kicking Financial Ass: Punch Debt in the Face, Invest for the Future, and Retire Early! Rating: 0 out of 5 stars0 ratingsYou Can Retire Early!: Everything You Need to Achieve Financial Independence When You Want It Rating: 3 out of 5 stars3/5Don't Hire a Financial Coach! (Until You Read This Book): Financial Freedom for Smart People Rating: 5 out of 5 stars5/5How to Retire Debt-Free and Wealthy: A Finance Coach Reveals the Secrets, Tips, and Techniques of How Clients Become Millionaires Rating: 0 out of 5 stars0 ratingsThe Personal Finance Handbook Rating: 0 out of 5 stars0 ratingsPassive Income Monthly Plan: Create 60 Paychecks in 90 Days Rating: 0 out of 5 stars0 ratingsLet Your Money Work Harder for You: A Roadmap to Financial Security Rating: 0 out of 5 stars0 ratingsSummary of Scott Trench's Set for Life Rating: 0 out of 5 stars0 ratingsNewlywed Financial Bliss E-Book: A Financial Guide for Newlyweds and Couples Rating: 0 out of 5 stars0 ratingsHow to Be Good With Money Rating: 0 out of 5 stars0 ratingsInvesting for 20 Good Summers: Making your money work so you don't have to Rating: 0 out of 5 stars0 ratingsDon’t Save for Retirement: A Millennial’s Guide to Financial Freedom Rating: 4 out of 5 stars4/5Buying a Franchise: Great Investment or Big Mistake Rating: 0 out of 5 stars0 ratingsChris Guillebeau's Born For This: How to Find the Work You Were Meant to Do | Summary Rating: 4 out of 5 stars4/5Live the Life You Want with the Money You Have: The money handbook for a new generation Rating: 0 out of 5 stars0 ratingsStress Free Money: Overcome These Seven Obstacles to Find Financial Freedom Rating: 5 out of 5 stars5/5The Short-Term Rental Playbook Rating: 0 out of 5 stars0 ratingsHow To Retire Early: The Shockingly Simple Facts Rating: 0 out of 5 stars0 ratingsPlaying with FIRE (Financial Independence Retire Early): How Far Would You Go for Financial Freedom? Rating: 4 out of 5 stars4/5End Financial Stress Now: Immediate Steps You Can Take to Improve Your Financial Outlook Rating: 5 out of 5 stars5/5Zero Down Your Debt: Reclaim Your Income and Build a Life You'll Love Rating: 0 out of 5 stars0 ratingsWorry-Free Money: The guilt-free approach to managing your money and your life Rating: 4 out of 5 stars4/5Money Like You Mean It: Personal Finance Tactics for the Real World Rating: 0 out of 5 stars0 ratingsMoney-Smart Kids: Teach Your Children Financial Confidence and Control Rating: 4 out of 5 stars4/5Millennial Money Makeover: Escape Debt, Save for Your Future, and Live the Rich Life Now Rating: 0 out of 5 stars0 ratingsThe One-Number Budget: Why Traditional Budgets Fail and What to Do About It Rating: 0 out of 5 stars0 ratingsRetire Before Mom and Dad: The Simple Numbers Behind A Lifetime of Financial Freedom Rating: 4 out of 5 stars4/5
Personal Finance For You
The Psychology of Money: Timeless lessons on wealth, greed, and happiness Rating: 5 out of 5 stars5/5Summary of The 48 Laws of Power by Robert Greene Rating: 4 out of 5 stars4/5The Millionaire Next Door Rating: 4 out of 5 stars4/5Investing For Dummies Rating: 3 out of 5 stars3/5Set for Life: An All-Out Approach to Early Financial Freedom Rating: 4 out of 5 stars4/5Same as Ever: Timeless Lessons on Risk, Opportunity and Living a Good Life Rating: 5 out of 5 stars5/5Rich Dad Poor Dad Rating: 5 out of 5 stars5/5Principles: Life and Work Rating: 4 out of 5 stars4/5The Intelligent Investor, Rev. Ed: The Definitive Book on Value Investing Rating: 4 out of 5 stars4/5The Black Girl's Guide to Financial Freedom: Build Wealth, Retire Early, and Live the Life of Your Dreams Rating: 5 out of 5 stars5/5We Should All Be Millionaires: A Woman’s Guide to Earning More, Building Wealth, and Gaining Economic Power Rating: 4 out of 5 stars4/5Summary of R. Nelson Nash's Becoming Your Own Banker Rating: 0 out of 5 stars0 ratingsFinancial Feminist: Overcome the Patriarchy's Bullsh*t to Master Your Money and Build a Life You Love Rating: 5 out of 5 stars5/5Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Property Investment Strategy Made Simple Rating: 5 out of 5 stars5/5Get the Hell Out of Debt: The Proven 3-Phase Method That Will Radically Shift Your Relationship to Money Rating: 5 out of 5 stars5/5Die With Zero: Getting All You Can from Your Money and Your Life Rating: 4 out of 5 stars4/5The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns Rating: 4 out of 5 stars4/5Get What's Yours: The Secrets to Maxing Out Your Social Security Rating: 4 out of 5 stars4/5Lower Your Taxes - BIG TIME! 2023-2024: Small Business Wealth Building and Tax Reduction Secrets from an IRS Insider Rating: 0 out of 5 stars0 ratingsMoney Hacks: 275+ Ways to Decrease Spending, Increase Savings, and Make Your Money Work for You! Rating: 4 out of 5 stars4/5Legal Loopholes: Credit Repair Tactics Exposed Rating: 4 out of 5 stars4/5Win In Court Every Time Rating: 5 out of 5 stars5/5
Reviews for Kicking Financial Ass
0 ratings0 reviews
Book preview
Kicking Financial Ass - Paul Christopher Dumont
Kicking Financial Ass
Copyright © 2019, 2021 Paul Christopher Dumont. All rights reserved.
No part of this book may be used or reproduced in any manner whatsoever without written permission, except in the case of brief quotations embodied in critical articles and reviews.
ISBN 978-1-9991326-3-7 (Paperback)
ISBN 978-1-9991326-4-4 (eBook)
LEGAL DISCLAIMER
The views expressed by Mr. Dumont in Kicking Financial Ass are solely his and not intended as investment advice nor a guarantee of any financial return. Mr. Dumont is not an investment or tax professional, so the information contained in this book is not a substitute for professional advice. The contents of this book are accurate to the best of his knowledge at the time of printing, but rules and laws are ever-changing. Please do your research to confirm that you have the current information.
To anyone who has ever struggled with debt.
Contents
Note from the Author
Introduction
Part One: Foundations
Chapter One: Be More with Less
The Story of the Mexican Fisherman
What Makes Us Happy?
The Happiness Equation
Focus Your Spending
Learn from the Best
Summary
Chapter Two: Know Where Your Money Is Going
Find Out Your Net Worth
Budgeting Techniques
Savings Tips
Be Frugal but Not Cheap
Summary
Chapter Three: Save 25x Your Annual Spending Rate
How Much Do I Need to Retire?
When Can I Retire?
The Power of Saving vs. Spending
Summary
Chapter Four: Build A Small Emergency Fund
Why You Need an Emergency Fund
Building an Emergency Fund
Summary
Chapter Five: Take Back Control of Your Debt
Focus on Your Credit Card Debt First
Know Your Credit Score
4 Steps to Managing Your Debts
Keep Yourself Accountable
Student Loan Relief
Avoid Payday Loans
Summary
Chapter Six: Minimize Your Car Expense
The True Cost of Commuting
Reality Check on New Cars
Buy Used and Use the 10% Rule
Avoid Leasing
What if You Paid Too Much for a Vehicle?
Ride Sharing Advice
Money-Saving Tips
Save on Car Insurance
Summary
Chapter Seven: Have Insurance Just in Case
Recommended Criteria
Renter’s and Homeowner’s Insurance
Car Insurance
Life Insurance
Long-Term Disability
Health Insurance
Dental Insurance
Long-Term Care Insurance
Travel Insurance
Summary
Part Two: Growth
Chapter Eight: Negotiate Salaries & Raises
Salaries
Raises
Summary
Chapter Nine: Have a Side Hustle
Anyone Can Make Extra Income
Create a List Of Ideas
Making Money with Products
Making Money with Services
How to Rank and Select Your Idea
Validate Your Top 3 Ideas
Side Hustle Checklist
Summary
Part Three: Investing
Chapter Ten: Invest in the Index
Stocks
Investing 101
Index Funds
Advice on Financial Advisors
How Do I Buy?
Alternative Investments
What About Robo-Advisors?
What About Bonds?
Summary
Chapter Eleven: Use Your Tax-Advantaged Accounts
Why Tax-Advantaged Accounts are Important
Canadian Accounts
Rrsps
Tfsas
Tfsas Vs. Rrsps
Resps
The Money Allocation Order
Avoid Withdrawing
Summary
Chapter Twelve: The Perils & Benefits of Real Estate
Home Ownership
Renting vs. Buying
Real Estate Can Be a Poor Investment
Investment Alternative to Owning a Home
10 Factors to Consider When Buying a Home
Other Mortgage Considerations
Home Equity Line of Credit (Heloc)
Summary
Part Four: Living Your Life
Chapter Thirteen: Find a Purpose in Retirement
Filling the Void
Finding a Purpose
Get Over Your Fears
Summary
Chapter Fourteen: Happiness
Appendix
American Accounts
401(k)s
IRAs
Summary
Recommended Reading
Acknowledgements
About The Author
Endnotes
Note from the Author
I published Kicking Financial Ass in 2019 because I, like many Millennials, struggled with the challenges that our generation faces including enormous student debt, lack of economic opportunities, and competitiveness in the job market. This was a direct result of the 2009 financial crisis and now we are living through the COVID-19 pandemic. When can we catch a break?
The advice in this book is sound and is applicable even now during COVID-19. After receiving feedback on the first edition I made the following changes to make it even more robust and useful. In this edition I have:
Included how to get F-You money by getting your financial S.H.I.T. together;
Included my recommended reward credit cards to get more cash back and travel more often for less;
Included 10 different index funds to choose from depending on your risk tolerance;
Answered what to do if you want to retire early and lack health insurance (for Americans);
Included advice on RESPs (Registered Education Savings Plans) and how you can best save for post-secondary education for your child;
Expanded on the tax-advantaged retirement accounts chapter adding further clarity on the different accounts available and how to maximize their usefulness;
Clarified examples I previously used to make them more clear;
Included more side hustle ideas to help you increase your income;
Included a recommended reading section for books and blogs I found useful on my journey;
And more!
As it was true in 2019 and still is true today, most books fail to address how our values toward money influence our buying decisions. We chase happiness by trying to buy our way there. Furthermore, most books do not definitively answer the key questions: How much money do you need to retire? Why use tax-advantaged retirement accounts? Should you buy or lease a car? Is real estate a good investment? This book tackles those questions by condensing a wide breadth of material into simple concepts you can apply in your daily life.
This work rests heavily on the shoulders of countless other books, blogs, studies, and articles written about financial affairs and the contributions of individuals acknowledged at the end of the book. Moreover, I have been interested in personal finance for over 15 years, investing in the stock market since I was 18, and have applied all I learned from my finance undergraduate degree, M.B.A., and CFA charter. From this research and experience, I consolidated the best financial advice into an easy-to-read how to
guide on retiring earlier and living your life to the fullest. As a side note, I work 9 to 5 like most of my readers, but I am on track to retire in less than 10 years even though I had $50,000 of debt seven years ago.
Why Should You Read This Book?
This book is not a boring lecture on money but rather a roadmap and tool you can use for your situation. It does not need to be read in order, so start at the beginning and continue to the end or flip to the chapter you feel will be most beneficial. Each chapter has actionable advice you can apply immediately to improve your finances.
You will come away with strategies to help you save, even if you are barely scraping by today. You will receive clear advice on paying down your debts—credit cards, student loans, or mortgages. I provide transportation advice on whether you should buy a new or used car, lease, or use ride sharing. You will discover the differences between RRSPs and TFSAs for Canadians and 401(k) and IRA accounts for Americans. I also discuss tricky situations such as negotiating salaries and raises. You will learn what to invest in and whether it is better to rent or buy a home. You will also learn the most crucial lesson of investing: Start early and why that matters. But most importantly, you will learn how to retire in as few as 10 years if you so choose.
Take your time when reading this book and reread sections when necessary. For example, focus on Chapter 8: Negotiate Salaries & Raises when you start looking for a new job to maximize your income. I discuss financial concepts and stats throughout the book but in a way that anyone can understand. After reading this book, you will be much more confident with your finances instead of being overwhelmed when trying to balance a budget.
While some of the examples are extreme, they illustrate how saving even $10 a day allows you to retire years earlier. This book is not about being a hermit, saving every dollar you possibly can, and eating Kraft Dinner every night in hopes of a better future. It is about maximizing life’s fun at minimal expense by using a simple, effective investment strategy of investing in index funds.
So, whether you choose the sections that most apply to your life or read the entire book, I hope you take away a few ideas that you can use to improve your personal finances and are prepared to retire in as few as 10 years.
Now, it’s time for you to start Kicking Financial Ass!
— Paul Christopher Dumont
Introduction
Saving money is hard. We want to budget, but we spend more than we realize—or admit to ourselves. For most, money seems to come and go, and we are left wondering why we are in debt. Life gets in the way, and unexpected expenses pop up. At the same time, costs for education, housing, and healthcare tend to increase every year, outpacing the raises we receive. The media does not help either. We turn on the TV and are overwhelmed by the flood of information. We ask ourselves where to even start. Between investment accounts, budgeting, and what to invest in, there is a lot to take in. Not only that, but the media portrays happiness as being for sale, and modern life pressures us into overspending with new cars, new watches, and new iPhones. It is no wonder that it is hard to save. We keep postponing saving money until later, thinking once we get that promotion or raise then we can start.
I used to think this way, especially when I was younger. I remember buying a new MacBook Pro for school and spared no expense getting the 15-inch version with bumped-up specs when I only needed the 13-inch base model. I upgraded my iPhone every year when my current iPhone still worked fine. I bought the latest and greatest TVs to keep up with technology. And, I spent countless hours looking at new cars when I could afford them the least. Fortunately, common sense and the thought of having a seven year car payment reeled my car fantasies back in. This behavior did not mean that I was a bad person. Most people live life this way.
Growing Up Without
As a child, my brother and I grew up with a single mom. Our dad left when I was nine, so we did not have a lot. During the day, my mom worked multiple jobs to try and make ends meet. I remember on more than one occasion seeing my mom walk in the door with a box of food, knowing she had gone to the food bank. In school, I was picked on for having odd clothes and glasses because we could not afford what the other kids were wearing. Through it all, I thought that if only I had what the other kids had, then I would be popular, happy, and normal. My urge to impress others came from this. I thought if I worked hard and bought everything my mom could not afford, then I could impress others in school, be liked, and have more friends.
Why am I sharing such a personal story right off the bat? Because coming from nothing, I know how hard it is to get your life on track and how it is easy to feel frustrated, exhausted, scared, resentful, or guilty over your financial situation. My experience growing up also taught me that happiness is a state of mind and how the insecure boy wanting to keep up with everyone else to be happy was wrong. I only became happier when I was satisfied with what I had.
Growing up without money meant I had an odd fixation on it. I did not have money to manage, and, therefore, I wanted it. For years, I dreamed of what it would be like to have money and believed that once obtained then I would finally be secure in myself and have something to offer others. This became a problem because my self-identity revolved around money and how insecure I felt not having it. Little did I realize that money should be the process of obtaining more but not the end goal.
My life changing-moment came after graduating high school when I decided to live with my dad for a year in the Philippines. While I was there, I saw little children with literally nothing, whose parents made less than $100 a month, running around in the streets laughing. I thought to myself, How can they be happy? Here I am working hard at my job at McDonald’s spending money on videogames and electronics, and these kids are happier than I am.
I needed to change my focus, so I studied how those children could be happier than most people I knew back in Canada, including myself. No longer was I trying to impress others. Relationships, volunteering, and making a difference in the world became my focus. The good news is that you can make those fundamental changes right now like I did.
Who Is This Book For?
I wrote this book to make a positive impact on others concerning financial security. It is written to teach a new way of thinking about money—to help readers learn the fundamental skills they need to become debt-free and retire comfortably. This book is for anyone, of any age and income, who wants to learn how to better save their money and change their mentality regarding their finances. The ideas in this book are not taught in the classroom, although they should be, and come from real-world experience. I have an undergrad in finance and an MBA and still had to learn everything from scratch.
I specifically wrote this book as a guide for my peers, Millennials. We tend to focus on experiences instead of financial security, mostly because we believe having both is not feasible. We may wonder why even try when faced with seemingly insurmountable odds. The principles of this book, however, teach everyone the monetary fundamentals and demonstrate how financial security is achievable no matter where you come from.
Tackling Debt
Household debt was at record levels and that was before the COVID-19 pandemic. According to the OECD¹ the average household debt in Canada is at 186% of net disposable income, the eighth highest in the world and higher than the United States which is 19th in the world.
Given so much debt it’s no surprise that savings rates have been low with the one-off exception of the savings rate hitting a historical high of 28% in the second quarter of 2020 as widespread fear paralyzed consumers due to COVID-19. However, the savings rate is dropping back to historical lows as the economy recovers from the pandemic. The United States has almost the identical trend.
If you are one of the 99% of the people out there, you fall somewhere on this financial spectrum:
Retired comfortably with no money issues.
Working, saving the maximum in tax-advantaged retirement accounts, and have no debt other than a mortgage.
Same as above, but add car loans and/or student loans.
Same as above, but not able to max out your tax-advantaged retirement accounts due to expenses.
Same as above, but have credit card debt.
Living paycheck to paycheck, cannot always make payments on time, and have a troubled credit history.
Near bankruptcy, likely to lose the house and personal possessions, cannot find work, and debt is higher than your ability to pay back.
Your goal is to move up this spectrum, one rung at a time. My goal is to help you get climbing!
For full disclosure: I am in the #2 category with my goal of obtaining #1, which is a far cry from where I was growing up. What qualifies me to write a book about personal finance when I am not myself retired? Good question. First off, I started from the bottom with literally nothing. I was not born into a rich family. I had to work and claw my way up out of poverty.
Second, I am now debt-free other than my mortgages, and believe me, it felt like a long road from being over $50,000 in debt and making mistakes along the way to now having a sizable six-figure retirement fund and owning multiple properties. It is all about saving, budgeting, investing in the market, using compound interest, and the time it takes for your money to work for you.
The truth is that for most people it is not one single event that puts them into debt but rather hundreds of small financial decisions every day—one transaction at a time, each swipe of the credit card, nothing that sets off alarm bells on its own. These small purchases add up over time, though. While my debt primarily came from a single life decision, I show you how changing my daily spending habits allowed me to pay back my debt and save a sizable amount in a short period of time.
The 14 chapters in Kicking Financial Ass, which are divided into four parts—Foundations, Growth, Investing, and Living Your Life—will transform your relationship with money, help you achieve your goals, and enable you to become financially independent. This is not a book about money as much as it is about changing your perspective on life.
By the end of this book, you will:
Spend less money and be happier.
Save more money.
Lower your debt.
Focus your time on what matters.
Overcome your past money mistakes and start investing for the future.
Save for retirement and retire earlier.
Discover what values you hold dear.
After reading this book, you will feel empowered to change your habits and routines, focus on debt reduction, and ultimately retire. You will feel free to travel the world, take multiple vacations a year, and live life how you want to and feel secure in your financial future. Many of us never received financial training in school. Most, if not all of us, had to learn it on our own. This book is a short-cut to teach you everything you need to know.
PART ONE
FOUNDATIONS
Now that you are motivated to make changes, which ones should you make to take control of your finances to keep them on track?
This section of the book focuses on the foundations of money management that will teach you the essentials to take control of your finances, walk you step by step on how to rethink your money habits, build your confidence, eliminate your debt, and start saving, allowing you to live your life to its fullest potential. Do this by:
Being satisfied with what you have and spending money on the things that make you the happiest,
Knowing how much you need to retire and determining how much you can afford to spend,
Learning how to budget and be frugal and not cheap,
Learning strategies on how to tackle your debt in the most efficient way,
Building a small emergency fund in the shortest time,
Minimizing your car expense so that you can focus on growing your money,
Having insurance to protect you from unexpected life events, and
Learning how to say no to overspending.
These essentials allow you to propel your finances to the next level so get ready to level-up!
Chapter One
Be More With Less
THE STORY OF THE MEXICAN FISHERMAN
A businessman was sitting at the pier of a tiny coastal Mexican village when a fisherman docks a small boat. The businessman compliments the fisherman on the size of his fish and asks him how much time it took to catch them.
Not very long,
replies the fisherman.
The businessman then asks why the fisherman did not stay out longer and catch more fish?
The fisherman says he has enough to support his family and does not need more fish.
What do you do with the rest of your time if you’re not catching more fish?
the banker asks.
I sleep late, fish a little, play with my children, take siestas with my wife, and, in the evenings, I go into the village where I drink wine and play guitar with my friends. I have a fulfilling life.
The businessman is not impressed.
I have an MBA from the top business school in the world and can help you,
he says.
You should catch more fish, and with the profits, buy a bigger boat. With the profits from the bigger boat catching more fish, you could buy more boats and eventually have an entire fleet of boats other fishermen can use to fish for you. Instead of being the middleman, you could sell directly to the fish processor, eventually opening your own processor. You could own and control the entire supply chain, everything from owning the product to the processing and distribution of the fish. Complete vertical integration,
he says. You could then move from this little village to New York City where you would run your growing business.
The fisherman, intrigued, asks, Seems like a lot of work. How long would that take?
If everything goes well, at most 25 years,
replies the businessman.
Then what?
asks the fisherman.
The businessman laughing says, That’s the best part, when the time is right, you sell your business to the public by doing an IPO and make millions!
Wow. Millions, I can’t even imagine. Then what’s after that?
After that, you’ll be able to retire, live in a tiny village, sleep late, play with your children, catch a few fish, take a siesta with your wife, and spend your evenings drinking and playing guitar with your friends.
The moral of the story is that you can become more with less. The Greek philosopher Epictetus said, Wealth consists not in having great possessions, but in having few wants.
The fisherman already achieved his end goal, so pursuing wealth for the sake of money was futile and frankly a waste of time. If you are going to pursue money, pursue it for a reason. Money should only be a process in obtaining your goals, not the means in itself. The first thing you should do then is to determine what your reasons are when wanting to make money.
Too often, people get wrapped up in wanting more, more, more, thinking, If only I had more money, I’d be happy...,
believing, consciously or unconsciously, that the next purchase will be the cure-all to their problems. In the 1943 influential paper, A Theory of Human Motivation,
American psychologist Abraham Maslow proposed that healthy human beings have a certain number of needs, and that these needs are arranged in a hierarchy, with some, such as physiological and safety needs, being more fundamental than others, like social and esteem