The book Findependence Day is a work of fiction that teaches financial lessons in the style of The Wealthy Barber. The author, Jonathan Chevreau, is a personal finance columnist for the Financial Post and National Post.
Trying to marry compelling fiction with financial lessons isn’t easy. I was curious to see how Chevreau would try to do this. It was obvious from the beginning of the story that the finance parts were going to be central. The first page contains financial lessons. You might think that this means the fiction part took a back seat, but this didn’t turn out to be the case.
By the time I got about a third of the way through the book, I was hooked on the story. It’s not exactly a Stephen King thriller, but I was hooked enough read the latter two-thirds of the book in a single sitting on a lazy Sunday morning.
I won’t give away the story other than to say that it is about a couple who make plenty of typical financial mistakes, but manage to succeed with the help of some expert advice.
There was one point where the marriage of fiction and finance was a little strained. While an expectant father waits to see his wife who is in labour, he coolly discusses financial matter with an expert advisor. In the hours before my first son was born I could barely string words together.
For the rest of this review I’ll focus on a few of the financial lessons.
Qualifying for a Mortgage
In a discussion of whether the young couple would qualify for a mortgage, the expert says “You qualify if you can fog a mirror.” That line cracked me up. Some home buyers seem to think that banks are doing them a favour by granting them a mortgage, but in reality, the banks are hungry for this business.
One part I couldn’t make much sense of was “If mutual fund Management Expense Ratios or MERs are running between 2% and 3% a year, they’ll cut your investment returns by 20% or 30% over three or four decades.” A 2% MER for 30 years takes away 45% of a portfolio. A 3% MER for 40 years takes away 70% of a portfolio.
Hacking Online Brokerage Accounts
According to one of the book’s characters, online brokerages guarantee the full amount in an account in the event that some cyber-criminal breaks in and transfers all the assets out. It makes sense to me that brokerages should cover losses in this case, but I was never too sure how it would play out. I’d like to see actual documentation of some sort to confirm that customers have this protection.
One of the main themes of the book is that becoming financially independent is best done slowly by making good financial choices through your life rather than going for the big score. Amen to that.