Step aside conventional wisdom. Author David Trahair is cutting a swath through the crowd with his book, Cash Cows, Pigs and Jackpots. In this interesting volume, our friend and former board member at Credit Canada Debt Solutions offers non-traditional wisdom about personal finance, with observations and advice that could shake up your worldview in relation to credit, debt, how to budget, and how to invest.
We’ve all heard the expression cash cows, a metaphor based on the four-legged bovine in the barn that produces milk over the years and requires little maintenance. Substitute milk for money - and the bovine for an investment vehicle - and we arrive at the conventional view of the cash cow as, say, stocks and investment funds that promise to bring steady gains and security as we leisurely sit back and let the investments grow.
But times are changing, with the likelihood of tough years ahead. Indeed, how many of us still wince when we think back to investment losses in recent years while looking for tips to save money.
From Trahair’s alternative viewpoint, today’s real cash cow isn’t found on Bay Street or Wall Street; it’s found in front of the mirror of your bathroom. As he sees it, the most reliable cash cow in your life is you and your ability to keep the cash flowing as a result of all your hard work. Make sure, the author exhorts, that this cash cow is protected.
So it is that Cash Cows, Pigs and Jackpots devotes much discussion to ensuring you are doing all you can to take care of yourself, to live life well and fully. You are your own chief asset, so you ought to be eating in healthy ways, exercising regularly, getting a good night’s sleep, pursuing activities that bring pleasure, and surrounding yourself with loved ones and those whose company you enjoy.
But, of course, the book is far from being a “self-help” manual involving lifestyles. In practical terms of finance, Trahair has lots to say, and in the process of doing so he challenges the advice of many financial institutions, brokers, and investment companies. He notes that too many of us follow the traditional financial thinking. We get on a treadmill to build assets, even borrowing to invest - and pinning all our hopes on growing our net worth - only to find that tradition has lead us astray.
Do as the financial institutions themselves do, Trahair says. Put your focus on maintaining a positive cash flow day to day, month to month, and put less emphasis on the customary aim of building net worth and acquiring assets. You’ll find you may reduce a lot of stress and anxiety in the process.
He offers contrarian views about other matters. Paying rent, for instance, as opposed to paying on a mortgage. Renting is not a four-letter word; for some, it can make a lot of sense. He also promotes the fundamentals of personal budgeting, offering practical advice about living within one’s means, wiping out personal debt, and saving for retirement.
And what of cash pigs and jackpots?
Well, Trahair tells us a cash pig "is the opposite of a cash cow. It is something that constantly drains cash from your pocket." A car is a good example here. We should be very cautious about cash pigs, he advises.
Jackpots, meanwhile, are financial gambits involving long odds. Think the lottery or an investment that sounds too good to be true. As Trahair says, "The key point to realize is that cash jackpots are rarely guaranteed. They are usually just potential jackpots … (which) come with a big risk.” This being that the jackpot frequently is nothing but a financial black hole. The author urges us never to confuse cash cows with cash pigs. Nor should we even begin to rank jackpots with cash cows.
Actually, from a personal perspective, I can see Trahair’s point in an instance where a fellow I know confused all three. This fellow, after selling his house, walked away with about $200,000. Then, hoping to double or even triple his money in a couple of years, he took the advice of a good friend (now a former good friend no doubt) and put the full sum toward the purchase of penny stocks in mining.
Fast-forward a few years to today. The stock now holds a mere 10 per cent of the buy-in value, with scant prospects for growth in sight. So the fellow’s $200,000 investment has now dwindled in value to just $20K. Such is the outcome when cash cows, pigs, and jackpots get all caught up in a muddle.
Anyway, we can thank David Trahair for an interesting read that unmuddles financial matters in so many ways. He knows whereof he speaks. In addition to authoring several other books about finance – including Enough Bull and Crushing Debt - he is a successful chartered accountant offering a range of accounting and tax services to many businesses and individuals. As well, he is a frequent speaker, and appears regularly in the media.
Above all, I salute him for what is to me the heart of his latest book. In essence, he’s saying that life is not all about the gold at the end of the rainbow; it’s about the journey, and about doing our best to enjoy it as we go.