Tuesday, June 26, 2018

Worry-Free Money: the Guilt-Free Approach to Managing Your Money and Your Life

I can't honestly remember why I took Shannon Lee Simmons' Worry-Free Money: the Guilt-Free Approach to Managing Your Money and Your Life out from the library (it wasn't on that list of top financial books for Canadians, nor was it recommended in Preet Banerjee's book).  Oh well.  Whatever the reason, I finished it today (I started it a little while ago, read a few other books, then went back and started it two days ago, making this a really fast two day read).

Simmons is the founder of the New School of Finance, which I admit to never having heard of prior to reading this book (and which for some reason I thought was in Vancouver; it's not, it's in Toronto). Simmons quit her job on Bay Street to start her own business; here she shares her tips for getting regular people back on track with their finances (and helps shed light on whether or not you can actually afford certain expenses).

Worry-Free Money is split into three parts.  Part 1, Stop Feeling Broke, asks you to look at your life checklist (which you usually mentally compile to keep up with your friends and family - the people you identify with, who Simmons refers to as your Joneses).  It also explains how social media can easily exasperate this because you scroll through curated pictures that highlight your Joneses lifes (and which can make you feel envious in a "oh if they can afford that, why can't I?" kind of way).  Finally, she makes the case of why you shouldn't compare yourself to anyone - you don't know what their financial situation is like.  To go on the trips, get the home renos, etc, your Joneses may be in debt to their eyeballs, or came into an inheritance; you just don't know.

I'm not going to lie: I had a bit of a hard time relating to the first section.  I feel like I'm in a point in my life that I'm not quite sure where I'm going, so I don't necessarily have a life checklist.  Nor do I feel like I compare myself to other people on social media.  It was an enlightening part of the book, but yeah, just not very relevant to me.

But that's okay; part 2, Stop Budgeting, Start Living, and Get Control, is where the fun of the book begins!  Simmons advocates getting rid of a budget because budgets set you up to fail, and make you feel bad about every one of your purchases (especially if you come close to or surpass the arbitrary limit you put on each area of your spending).  In Simmons' view, life is unexpected and we don't know that we'll spend the same amount on everything each month; some months will have higher expenses in one area than the other.  So instead of a budget, Simmons advocates splitting your expenses up into Fixed Expenses (these are your mortgage, utilities, gym memberships, minimum debt payments, etc; basically all of your recurring fees.  This should not be more than 55% of your after-tax income), Meaningful Savings (this is where you put more money towards debts, or save for retirement, etc), Short-Term Savings (these are for short term goals like a vacation fund, and buffers for things like car repairs and home renos), and finally your Spending Money/Hard Limit (which includes groceries, gas, entertainment, and all the rest of your expenses).  Simmons says you can spend your spending money on whatever you want/however you want to, but do not go above your Hard Limit.

To make things easier, she says it's best to have two accounts: one where you put your Spending Money into, and the other to deal with everything else.  Then you can spend your Spending Money down to zero and not be worried about dipping into your other expenses. 

Part 2 has tons of examples of how all of this breaks down (using true stories, with permission, from Simmons' clients), talks about how to figure out whether you can afford a Lifestyle Upgrade (this is something bigger that will change your Fixed Expenses permanently, like a bigger house). Part 2 also explains Happy Spending (which is spending that you feel good about both now and in the future) and how your purchases need to both feel good and be affordable.  Then she goes into detail about saying no to overspending, and not feeling guilty about saying no to things (and to help you not feel guilty, she advocates about being honest about your finances with other people when you say no; according to Simmons, money is a taboo subject and she thinks that if we change that and start talking about it without judging, the world will be a better place for all).

Part 3, The Future is Financially Friendly (I Promise), has a few chapters about making and adapting to changes in your life (basically you can either spend less or earn more), making the best of a situation when life hands you lemons (when you're dealing with lemons, you may need to look at your life checklist and see if you can make a change so you will be financially safe and so in the long term happier), being realistic about how uncertain life can be (spoiler: have an emergency savings fund that is easy, but not too easy, to access), dealing with financial regrets (you made the best decision at the time that you could with all the information at the time; if you compare yourself to other people, often you forget to factor in their luck), and finally talking about money with your people (without judgement!)

While I wasn't sure about it in the beginning, I honestly really liked reading Worry-Free Money.  I liked how Simmons was able to illustrate her points with so many different case studies.  Her method is relatively simple.  And while I wasn't super fond of her fancy terms at the beginning (Fixed Spending vs Meaningful Savings, that kind of thing), by the end of the book I was fine with it.  Oh, and I was really, really thankful that she didn't throw acronyms out all over the place; the only one I can think of was EROI, or Emotional Return on Investment.  Simmons' tone is very conversational, which I think worked in a book about financial planning (I don't think Worry-Free Money would work nearly as well if it was written in a formal academic tone, for example - that would be very off-putting to people, myself included). 

And by the time I finished reading Worry-Free Money, I had actually busted out some spreadsheets to figure out where I was at financially.  Was I spending more than 55% of my income on Fixed Expenses?  How much spending money do I really have per month?  Can I cut back anywhere to get some short term savings going?  (I think that last question is going to require me tracking my spending for a few months).  So needless to say, Worry-Free Money is a very inspiring book; I recommend it for everyone who has worried about their spending habits (which I'm sure is most people), or for people trying to figure out if they can REALLY afford something.

1 comment:

Shauna said...

One caveat to my endorsement: Worry-Free Money is written for people who are NOT struggling to make ends meet. It was written for people who do have enough to pay for basic necessities. Simmons says that situation takes a different set of financial planning solutions which she does not discuss in this book.

Also, Worry-Free Money is Canadian! I should have made that more clear when I said she was from Toronto.