Tuesday, April 22, 2014

Taking the Gail Vaz-Oxlade Test

I’ve learned a lot from watching Gail Vaz-Oxlade work with people who manage their money poorly. She understands what they’re doing wrong and knows when they need a hug and when they need to be called morons. However, I find her prescriptions don’t apply well to people like me. To illustrate, I’ll take a recent test she posted on her blog.

Like 10% of Canadians in a study Gail quotes, I give myself an A in financial literacy. However, Gail correctly observes that “many Canadians may have a false sense of confidence.” Here are a few facts about my finances before I leap into taking Gail’s tests:

– I save more than half of my take-home pay.
– This savings level is not really part of any plan. I just look back at my credit card, bank account, and trading account records and see that I’ve saved more than I’ve spent.
– I check my account statements closely for errors, but I maintain high enough balances that I don’t have to check often to see if I have enough money for a particular purchase.

Here’s the first test (edited for length):
1. If you track your spending daily, take an A. If you do a weekly check, you score a B. If you’re over-confident enough to believe that you only have to check in once a month, you’re passing, but just. Never look at your account because you’ve got overdraft protection so nothing too bad can happen? You FAIL.
Given how often I check my accounts, I deserve roughly a C on Gail’s scale.
2. Do you live on a budget and stick pretty close to the plan? Take an A. If you have a budget but sometimes are surprised by expenses, you score a B. If you have a budget in your head, and never go over on your spending, you’re passing, for now. If you don’t have a budget at all because you think they’re stupid or you can’t be bothered to manage your money with this level of detail, epic FAIL.
I’m partly a D and partly an “epic FAIL” on this one. I don’t have a budget, but I never go over on my spending. I just look into the past to see how much I spend and use this to predict my future.
3. Do you have a specific amount that you set aside every month automatically for both retirement and emergencies? Take an A. If you save “pretty regularly” but not automatically, you score a B. If you’re using a round-up program for savings, all you get is a pass. Less than that, you FAIL. You also FAIL if you claim you can’t find even a dollar a day to save.
I probably deserve a C on this one. Whenever cash has built up to a certain threshold in one of my accounts, I invest it. I usually just make one RRSP contribution in a year. I fill up my TFSA whenever there’s enough cash around. Any other cash gets invested in my taxable trading account.

Overall, my performance doesn’t look good on Gail’s scale, but my personal financial results are likely in the top few percent. I have friends who handle money similarly to the way I do. Gail’s methods are very successful for helping most people, but there seems to be a subset of us who don’t need Gail’s approach. However, I’d bet that most of the people who think they don’t need Gail’s approach are wrong.


  1. Michael, this is just unfair and possibly counter-productive. You are only able to live like you do because time ago I have (likely) done all the steps Gail demands from her audience. You live now based on experience you have earned. It's not that you do not control you cash flow, it's that you do it automatically, almost subconsciously. Like you do not use multiplication table to do you calculations. Give people a chance to learn.

    1. @AnatoliN: I have nothing against the people who need Gail's methods. Some of them are members of my extended family. I've actually learned from Gail how to help some of my friends and family.

      There has never been a time when I would have rated higher than a C on any of Gail's questions. I know a few other people like this as well. I guess what I do is automatic, but it isn't really budgeting or close tracking; I just don't spend much day-to-day. I've always been this way.

      If my article came off as critical of Gail or the people she helps, that certainly wasn't my intention.

  2. Also Gail's rules would be more important the closer that your income was to your outgo. Obviously your income more than meets your needs so you have more flexibility. I have been on both sides of the street financially. I still budget but not as tightly.

    1. @Jambo411: In my experience, how close your outgo is to your income is a matter of personality (to a point). I've know couples with quarter-million dollar incomes who couldn't make ends meet, and I recall one couple who kept things together at well below the so-called poverty line. Even when I had almost nothing I managed to spend less than my means without budgeting or tracking my spending. Of course, things were simple back then. My money went to food, shelter, tuition, books, and nothing else. (I counted on gifts for clothes.)

  3. Interesting self-test. I will have to take that. I suspect I have a mixed bag of ratings.

  4. Hi Michael,

    I'm with you on this one. I like to listen to talk radio I find peoples totally opposite viewpoints on subjects fascinating. I know some people would say it's boring... Gail is on late night talk locally here, I'm usually driving just at that hour. Like you I find the value of her advice to be "mixed".

    I think people that are in dire financial situations are helped by her. I'll give her that. I don't think her advice transitions well into a group like myself seeking "second level" financial knowledge. Like optimizing your investment choices and paying attention to fees, etc. I found myself shaking my head a few times. I have never heard her discuss issues like you would find here. More "taming your debt snowball" stuff and she has guests with non financial related stories on. ("The View" Canada style comes to mind)

    I like listening to a wide variety of investing pod-casts + shows. I really wind up turning hers off. In my honest opinion I feel she does not always give the best advice so I find some of her ideas frustrating to listen too.

    1. @Paul: If that's been your experience, then you should listen to the things that work for you. Even though Gail's advice doesn't often apply to me personally, I've used her methods to help others.

      I'm glad you enjoy my blog. Gail's advice probably applies to more people than my blog does, but I value my readers and their feedback.

  5. Gail's used to working with the personal finance equivalent of alcoholics. So if a non-alcoholic has a glass of wine with dinner, she's going to see that as a big problem, because alcoholics think they can have one glass of wine and then stop, but they can't. As you say, there are probably more people who think they're fine than people who actually are fine...

    1. @Anonymous: Interesting analogy. One of my grandfathers once told me that he'd had coffee every day for more than 50 years but never got the habit.