Kicking Financial Ass Read online

  Copyright © 2019 by Paul Christopher Dumont.

  All rights reserved. No part of this book may be reproduced or used in any manner without the written consent of the author.

  Paperback ISBN: 978-1-9991326-0-6

  E-book ISBN: 978-1-9991326-1-3

  To anyone who has ever struggled with debt.

  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.

  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 RETIREMENT ACCOUNTS

  Why Retirement Accounts Are Important

  CHAPTER 11A: AMERICAN ACCOUNTS

  401(k)s

  IRAs

  CHAPTER 11B: CANADIAN ACCOUNTS

  RRSPs

  TFSAs

  TFSAS vs. RRSPS

  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

  Acknowledgements

  About the Author

  Notes

  NOTE FROM THE AUTHOR

  I wrote Kicking Financial Ass because I, like many Millennials, struggled with the challenges that our generation faces, including enormous student debt, lack of economic opportunity, and competitiveness in the job market. While searching for answers to questions like, “Why do we spend money?” and “What do I need to know to be financially secure?” I determined that there was a not a single book on the market addressing my concerns. Years after my debt was paid off and had bought my first property, friends and family started asking me for financial advice. After seeing success after success, I decided to share my experience with others.

  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 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 10 years even though I had $50,000 of debt only four 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 401(k) and IRA accounts for Americans and RRSPs and TFSAs for Canadians. 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 yea
rs.

  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, MBA, CFA

  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 information that is available. 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 reeled my car fantasies back in. This behavior did not mean that I was a bad person. In fact, 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 we were young, 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 that 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 attaining 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 McDonalds 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

  The number one financial issue that faces society is debt. In December 2017, U.S. consumer debt hit $3.82 trillion. That is a lot of debt. Of this, $1.75 trillion are student loans, $1.25 trillion are auto loans, and $500 billion are credit cards. And, this does not include mortgages. Think about that for a second. This debt is about $11,660 per person1 including children. For a household of four, that is about $46,640. What is even more astonishing is the average U.S. household has a savings rate of 3.2%, which is near a 10-year low. As seen in the figure below, the country is headed in the wrong direction. Canadian consumers are doing a bit better but not by much.

  If you are one of the 99% of the people out there, you fall somewhere on this financial spectrum:

  1.Retired comfortably with no money issues.

  2.Working, saving the maximum in tax-advantaged retirement accounts, and have no debt other than a mortgage.

  3.Same as above, but add car loans and/or student loans.

  4.Same as above, but not able to max out your tax-advantaged retirement accounts due to expenses.

  5.Same as above, but have credit card debt.

  6.Living paycheck to paycheck, cannot always make payments on time, and have a troubled credit history.

  7.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, 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.

&n
bsp; 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 and question every purchase.

  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.

  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,