Chapter One
Introduction
Everyone loves a good finance book. But, what I have found is that most finance books focus on the optimal way of running someone’s finances. Unfortunately, what I have noticed is that the optimal way requires a certain kind of person, and to be frank, they are simply the minority. Can anyone learn and develop the skills to adjust their finances to an ‘optimal’ situation? Of course. Is it easy in theory? Of course!
Is it easy in real life? Of course not.
And this is the main problem. Financial concepts are easy to understand but very difficult to implement with the necessary consistency that is required to succeed. We all know we should pay as little interest as possible, only borrow what we can afford (if at all!), buy a house within our means, not eat out, etc. ... I could go on and on. The simple truth is that a lot of these items pose great difficulties for many people.
What we will explore in Behaviour Before Math is that by not aiming for perfection but instead aiming to be slightly above-average the majority of people will achieve much better results in their financial lives.
But before we begin, it is important to acknowledge that the first step to improving your situation is to take action. Taking action is a fundamental principle that we will be discussing throughout this book. We will spend more time discussing this later. Just note, that if you simply read this book and do not participate in the practical exercises that we will be discussing, you will fall short in your learning.
Personal finance is a skill and just like throwing a ball or riding a bike, it takes practice. So please, do not hesitate to write in the book, take notes, and follow-through with the practical exercises. The exercises may sound simple. They may be basic. You may ‘know’ the answers to the questions already; but take the time, run through them and you will find that you will have a much better experience. And thankfully, not every chapter will have exercises.
I know I said not to hesitate to write in the book. You are reading this on a screen. Do not destroy your phone, tablet, or monitor screen. That wouldn't be financially prudent, after all.
A quick note: I am a Canadian, however, this book is just as relevant to our neighbour’s to the south, except for Chapter 13.
Who is this book for, and why do you need it?
This book is designed for those who:
- find finances scary
- do not understand them
- get lost whenever someone talks about finances
- are not able to save
- are not able to budget
- simply are not able to get ahead
- do not understand how interest rates work, how credit works, or how mortgages work,
- question why they have no money at the end of the month
If any of these apply to you, then you should keep reading. I hope this book changes your life.
If you already know how to implement a budget and follow it, have healthy on-going savings, are ‘financially literate’, and do not get deer-eyed when people talk about finances, you will probably get little out of this book. However, you may be able to impart some of the wisdom it contains to your friends and family who you may have not been able to get through to in the past.
You will not find many technical terms in this book, and when you do, feel free to ignore them. They are irrelevant. What is important are the principles being taught, not the words being used.
Who am I, and why should you listen to me?
My name is David Moffatt and I have been professionally involved in the financial services industry since 2015, and as a hobby (read obsession) since approximately 2011. At the initial launch of Behaviour Before Math, I operated and owned a debt restructuring firm that serviced the Atlantic provinces. My life has progressed and I am now the Vice President of Powell Associates Ltd., a Licensed Insolvency Trustee Firm that assists consumers and businesses find practical solutions to deal with their debt. But before any of this I spent nearly 7 years in the military.
In the military, I worked with ammunition and explosives. Obviously, a stark contrast to the insolvency industry but both provide an incredibly unique insight into how people manage their money.
The military in Canada pays very well, and the average serving member (without necessarily even completing high school) makes around $50,000-$60,000 a year. Considering the median household income in Canada in 2015 was $70,336 most military families made substantially more than the median income if they have a spouse that works as well and/or as they progress up the ranks.
The debt industry has provided me insight into the much broader market. I have assisted everyone from single mothers only making $1500 per month all the way to individuals making $250,000+ per year. The insolvency experience has provided me with the opportunity to dive deep into situations and really learn what financial mishaps occur in people’s lives, which has allowed me to better assist them.
I grew up in a middle-class family. My father was in the military and my mother worked retail. I was an only child. I did not ask for many things as a child, but my parents never said no. I did not have fancy new phones, or fancy new computers when they came out. The most expensive item my parents ever bought me was a car; they bought it used for about $7,000. I grew up comfortably. I worked a few jobs while in high school, but I did not save much money.
Once I completed high school, as was the norm in my family, I joined the military. The military was great! I got to experience things that I would have never got to experience otherwise. But the other side to the story is that I joined at 18, and left home. I was on my own. Making my own decisions. Good and bad. If you were to fast-forward to the age of 21, I was approximately $30,000-35,000 in debt. I was living paycheck to paycheck. The interesting thing ... money did not stress me out. My thought process was ‘I have a pension... who cares if I am in debt right now’. I also had this mentality of buying whatever I wanted. By the time I was 21, I had 2 cars, I was eating out nearly every evening, and I was going out for drinks with friends every weekend. I had a ‘live in the now’ mentality vs. a live for the future mentality.
To make a long story short, I managed to get myself out of debt, started helping my colleagues with their finances and ultimately convinced the military to pay for continuing education. I went through a mindset shift during this period and ultimately decided that I was going to leave the military and help consumers with their finances. Since that time, I have now spoken to thousands of individuals regarding their financial situation, and have learned what makes people successful and unsuccessful with their money.
Focus on the principles, not the examples
So, the question remains. Why should you listen to me? The reality is, I hope you do not. I hope you take the principles from this book and its chapters, rather than focusing on the examples. Improve your financial knowledge; think about what you really want out of life, and use this book as a base to achieve your goals. This book is not meant to replace professional financial advice, nor should it.
We will spend the first few chapters exploring theory and concepts prior to getting into the nitty gritty.
Also, I want to add that if you disagree with me let me know using my Contact Me form! What I have discovered is that finances are fluid and there is truly no one-size-fits-all solution. Is there a cookie-cutter mould that, in theory, should fit 99% of consumers? Yes. But it will never work. The reason is that consumer behaviour will never allow for an optimized approach to be successful.