David Trahair - Cash Cows, Pigs and Jackpots: The Simplest Personal Finance Strategy Ever

Copyright 2012 by David Trahair

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The material in this publication is provided for information purposes only. Laws, regulations, and procedures are constantly changing, and the examples given are intended to be general guidelines only. This book is sold with the understanding that neither the author nor the publisher is engaged in rendering professional advice. It is strongly recommended that legal, accounting, tax, financial, insurance, and other advice or assistance be obtained before acting on any information contained in this book. If such advice or other assistance is required, the personal services of a competent professional should be sought.

Library and Archives Canada Cataloguing in Publication Data

Trahair, David

Cash cows, pigs and jackpots : the simplest personal finance strategy ever/ David Trahair.

Includes index.

Issued also in electronic formats.

ISBN 978-1-118-08351-2

1. Finance, Personal. I. Title.

HG179.T71 2012 332.024 C2012-902739-1

ISBN 978-1-118-08352-9 (eBk); 978-1-118-08353-6 (eBk); 978-1-118-08354-3 (eBk)

Production Credits

Cover design: Adrian So

Interior text design: Thomson Digital

Typesetter: Thomson Digital

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To Emily Yeskoo and her family.

Emily Yeskoo has a rare neurodegenerative disease that is terminal. At the age of 10 she was given three years to live. She is now 19, thanks to her fighting spirit and the loving support of her family: her mom Lindsey, dad Paul, brother Chris and sister Madeleine.

Emily is the inspiration for Toronto's first pediatric palliative care hospice called Emily's House. It will provide 24-hour care to terminally ill children so they don't have to face spending the rest of their lives in a hospital ward. It will be a place where they can learn, play, develop and grow... to be just kids, in a comfortable, child-friendly setting, with personalized family-centred programs.

It will also offer a welcome break to parents faced with the ultimate stress each and every day.

A portion of the proceeds from the sale of this book will go to Emily's House.

For more information please visit http://www.philipazizcentre.ca/childrens-hospice .

Acknowledgements

I could not have written this book if I had not been trained as a chartered accountant. In fact, finding the CA profession when I was a lost 23-year-old fresh out of university kind of saved me.

The CA profession has also recently given me the opportunity to teach and learn from other CAs. I give courses based on my books to CAs and other accountants in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Through these courses I have met many incredible minds, some of whom have been instrumental in developing the content of this book.

First of all I have to thank Kurt Rosentreter, CA, CFP, CLU, TEP, FMA, CIMA, FCSI, CIM (no, I'm not kidding!). I first met Kurt taking one of the courses that he offers to CAs. I have never met anyone with his knowledge, qualifications and ability to explain complex financial issues in plain language. My conversations with him over the issues in this book and the examples he relayed were instrumental in making the book something that I hope you will find easy to understand and helpful in your own quest for solid financial footing. Kurt's website is www.kurtismycfo.com .

There are also many other CAs who have provided valuable advice, feedback and encouragement, including Ron Graham, Phil Goldband, Jeff Goldberg, Peter Poulimenakos, Peter Shennett and Brian Quinlan.

I also have the privilege of hearing from other people who aren't CAs but nonetheless teach me invaluable lessons. One such person is Debbie Spence, one of the best accountants I know. The other is Michel Boutin, who describes himself as a self-taught investor, but he is much more than that. He is also a wiz at Microsoft Excel, the complexities of Canadian income taxes, as well as fully bilingual. Thanks for all your feedback and contributions, Michel!

I would also like to thank all the great people at my publisher, John Wiley & Sons, for their hard work on this book, including Karen Milner, Lucas Wilk, Elizabeth McCurdy and Nicole Langlois. And thanks, of course, are due to my literary agent, Hilary McMahon, of Westwood Creative Artists.

Thanks also to two of my greatest backers, Gloria Krajacic and Michael Boyd, for their never ending support.

I would also like to thank my dad, Peter, for always being there when I needed him and for providing such a great example of how to live a happy, healthy, fulfilling life.

And of course to my kids. My buddy for life, my son, Kyle, and my angel, my daughter, Cassidy. You make life worth living!

Last but not least, the love of my life, my amazing wife, Elaine. Love forever.

Introduction

I have been researching and writing about personal financial issues for more than a decade now and have taught my theories to thousands of CAs over the last few years.

I have had lots of feedback and it has now become crystal clear to me:

Our quest to build wealth and secure a comfortable retirement often ends up making us poor and others rich.

Simply put, the accepted method of building wealth doesn't work anymore.

Think about it for a moment.

We are persuaded that the way to get wealthy is to build our assets and net worth, since that is the true measure of wealth. It's the measure of the value of what we own less the amounts that we owe. So we end up trying to build our assetswe load up on real estate, for instance, buying big houses and rental properties. Or we put money into the stock market, many of us using expensive mutual funds to do so.

And many of us use debt to do the building.

But you know what? The strategy is wrong. It's faulty logic that is sending many Canadians, and people around the world, on a journey to the poorhouse.

Why?

Because it ignores the one thing that overrides any strategy designed to build wealth.

It ignores the basic principle that has always existed.

It ignores the base logic that anyone who is truly rich knows.

It is this:

What we should really be focused on is not getting rich but plain old cash flow .

Simple, isn't it? Yes, it is. It always has been and it always will be.

If you want to secure your financial future, forget all the fancy strategies like leveraging (borrowing to build wealth). Forget the fantasy that the stock market is going to make your financial dreams come true. Discard the notion that real estate is going to be the ride to wealth like it has been for past generations.

Forget those things because believing those concepts is likely to set you up for failure in the tough years that are coming.