The Snowman’s Guide to Personal Finance – Interview with Steven Arnott

If you are a Canadian, trying to make sense of your money situation, The Snowman’s Guide to Personal Finance is the book you’re looking for. The easy-to-understand chapters are concise and to the point. It starts right from the basics, including income, savings, and managing unexpected expenses. Then it goes on to second level topics like budgeting, credit scores, debt, insurance, and more. Naturally, investing in Canadian government programs such as RRSPs, TFSAs and RESPs are covered too. Once you’ve got the basics, come back again to this book and learn how to set up your investing accounts, how your subconscious mind works against your savings goals, and calculate how much you need to save for retirement.

Steve recently contacted me to ask me to review his new book on my blog. He sent me an ebook copy, but I don’t own a tablet and and I don’t love reading long-form content on my phone. So he kindly send me a paperback copy of his book, which I quickly devoured. Even though I’m not the target audience for this book, I found it very informative and I will definitely share it with the young adults in my life.

Steve is an up-and-coming force in the Canadian personal finance sphere, and I thought the best way to share more about him and his book was to do an interview. I’m so happy Steve agreed! This interview was conducted over email, and is lightly edited.

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An interview with Steven Arnott, author of The Snowman’s Guide to Personal Finance

1. Get to know Steve

Hi Steve, why don’t we start with letting my readers know a little bit about you? How did you get interested in personal finance, and where did you go to post-secondary and what industry do you work in?

Growing up I always loved math. The idea of breaking a complex problem into smaller pieces was enjoyable. And the opportunity to use previous solutions in new and creative ways was exciting. That interest in math brought me to the University of Waterloo to complete a degree in actuarial science, a field that combines statistics and finance.

My interest in personal finance started in the final year of my degree when I realized it merged many of the topics I enjoyed most. The combination of math, psychology, philosophy and uncertainty provided a structured environment to learn while ensuring no two days would be alike. Since graduating I’ve spent five years in the financial services industry focused on helping Canadians invest their money.

2. Inspiration for the book

You mention in the introduction of your book that the inspiration came from a conversation with your younger brother and his friend. Can you tell us a bit more about that?

I was finishing my final year of undergrad and was learning as much as I could about personal finance. I was frequenting forums, reading books and participating in investment competitions. One evening at dinner my younger brother mentioned an encounter he had recently had at his bank. The teller had noticed a sizable amount of money in his chequing account and asked if he had considered investing it. He hadn’t.

My brother had put in all the work and discipline to save but hadn’t been exposed to the options available to help grow his money. He had a brother with a growing interest in personal finance, a mother who was an accountant and both parents who were actively involved in managing the family’s finances. Our household was arguably an excellent environment to be exposed to investing and yet even there it hadn’t happened. My goal for the book is to minimize how often this type of scenario plays out and to help Canadians understand their options.

3. Who is the book for?

When I read your book, my impression was that it is a great source of information for young people who are starting to dip into financial issues on their own for the first time. Can you describe the image you had in mind of who you were writing this book for?

I wrote the book to share what I had learned with my brother and close friends, all in their late teens or early 20s at the time. It’s targeted for younger Canadians who are starting to face decisions that involve financial trade-offs. This could include whether and what type of degree to get, how quickly to pay off a student loan, how to save for a vacation, or why and how to save for retirement. The book doesn’t require any background with personal finance terms or ideas. The fundamentals are explained through early examples and analogies before they’re built on in later chapters.

In addition to visualizing these young Canadians being introduced to personal finance topics for the first time, I also imagined them revisiting the book 2, 5 or 10 years down the line as their lives progress. One challenge with financial literacy is that many of the specific details are forgotten if they’re not used within about a year of learning them. Therefore, the goal of the book is to serve as an introduction to young adults as well as to provide next steps for older readers.

4. What do readers need?

What kinds of important personal finance information do you think young adults are missing?

The most critical piece from what I’ve seen is having an initial ‘why’. Once people understand the opportunity personal finance topics provide there’s no stopping them from learning more. Whether it’s the peace of mind they’ll have before bed and first thing in the morning, or the tens of thousands in growth they could earn on their savings, it’s important to start with ‘why’ you’re doing it.

Our days are bombarded with advertisements that use a deep understanding of psychology to get your attention and your money. Think ‘act now’, ‘50% off’ or ‘be more…’. There’s no billboard out there saying ‘spend less’, ‘pause before you buy’, ‘what do you want out of life and how can money help you achieve it’.

Personal finance can be very simple if you have the motivation to and self-awareness to create and stick to a plan. Spend less than you earn, invest your money for growth and protect yourself and family from unmanageable risks. The more you can automate this the simpler it becomes.

5. Is talking about money taboo?

Talking about money issues with friends and extended family has always seemed to be sort of a taboo subject. I’ve noticed since starting Money In Your Tea that I’m having more of these conversations. Are you finding the same, now that you’re an author of The Snowman’s Guide to Personal Finance? And what are the top 3 issues that you find people struggle with?

I’ve noticed the same. While I’ve had conversations with friends and family over the years due to my role in the financial services industry and interest in personal finance, it’s picked up quite a bit since I started sharing about the book.

The most common issues I’ve seen people struggle with are:

1. Market timing – People are regularly worried that the next market decline is just around the corner. Sometimes it’s based on research and financial ratios and other times it’s due to a news headline. My response is that rather than looking at the market on a monthly or annual basis, identify when you need the money you’re investing. If over that time period you believe you’ll earn a return on your money that you’re comfortable with (e.g., 3%, 4%, 6%), then invest your money. [Kari: I wrote on this recently in Will the Stock Market Crash in 2020?]
2. Fear of missing out – This has been very common over the last few years with bitcoin, marijuana and real estate across most of Canada. People see prices going up and feel silly for missing out, believing each passing day leaves them further behind their peers. My response is that buying something with little or no value to you is dangerous. You may be able to get through one or two rounds of hot potato safely, but it’s a dangerous game to play. Instead, focus on investing where you see real value so that you’re not dependent on someone else deciding how much you’ll have in the future.
3. Insurance – This may be unique to me as my undergrad covered insurance in-depth. It’s common to see people with families who don’t have disability or life insurance. I believe it’s a combination of not wanting to think about the possibility, not believing it will happen, not knowing where to turn, a negative view of the insurance industry and not wanting to pay for something they’ll likely never receive a payout from. My response is to discuss whether the premium is something they’d be able to afford and to compare that to the peace of mind offered knowing their family will be taken care of if something horrible were to happen.

6. A look at a typical financial struggle young adults face

Let’s say a 25-year-old asks you for financial advice. She has graduated school and has been working for a few years, earning $60,000/year. She’s saved up $15,000 in a bank account, but she’s not sure what to do with it. She wants to do some travelling, but also buy a condo in a few years. There’s also $8,000 remaining on her student loans. Retirement feels like a long time away, but she knows she should be saving for that too. She feels overwhelmed and maybe not smart enough about all this. What advice would you give her?

I’d start by stepping just outside traditional personal finance topics and ask, ‘what she enjoys most?’ and ‘how can money help her do more of that?’. If she loves travelling, then it’s important to look at her financial decisions through the lens of travel. She could use some of her $15,000 to travel this year, providing excitement for the months leading up to the trip and memories for years after. That said, anything she spends on travel today will impact her ability to travel later. If she set aside $5,000 for ‘retirement’, that money could grow to provide the equivalent of a $2,000 trip today every year for the first 15 years of her retirement.

I’d also ask if the condo purchase is something she feels obligated to do or whether she’s confident she’s found a place she wants to settle down for the foreseeable future. If travel is a priority, she may wish to move for work in a few years or take half a year off entirely and travel around the world. In either of these cases she’d likely be better off renting until her priorities shift.

Depending on the interest she’s paying on her student loan, she could either set up an automatic payment and tackle the debt over the next few years or use some of the $15,000 to pay it down more aggressively. Again, it comes down to her unique preferences. If having student debt creates anxiety, then it’s likely worth paying down faster.

With respect to feeling overwhelmed, it’s only natural. We don’t do a very good job of preparing people to manage their money. It’s a taboo topic in most social circles and there’s little exposure through school or from employers. In addition, our minds are wired to be bad at money. What worked for humankind as we evolved on the savanna doesn’t work today to help you make financial decisions.

In closing I’d say, ‘you can afford anything, just not everything’ – (I’m not sure where this quote originated). Ask yourself what brings you the most happiness, fulfillment, satisfaction and how can your money help you do more of it.

7. Bad money advice

What are some of the big misconceptions, or bad advice that you hear about in personal finance and investing in Canada?

People often over-complicate their finances when they’re first starting out. The 80/20 rule is a commonly observed phenomenon that suggests you can get 80% of the benefit from 20% of the effort. This rule applies for personal finance. Many people get hung up on questions like whether to invest using a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP). The difference may provide 5% additional savings one way or the other. If this question is delaying you from getting started, you’re giving up 100% of the benefits until you begin.

Another misconception is that cutting back on spending will lower your life satisfaction. Everyone I’ve talked to who has gone from spending all or more than all their income, to cutting back their spending has been happier for it. By spending thoughtfully on what you enjoy and having the financial confidence that comes with saving, you should see your quality of life increase.

Finally, I often hear that investing is too risky. I understand where this view comes from and I can appreciate the unease that occasional market crashes and frequent news headlines can cause. That said, I find that looking at risk in a different way often does the trick. When it comes to saving for your retirement, it’s almost impossible to build a sizable nest egg without investing. If you earn 2% a year on your savings, you’ll only be keeping up with inflation. This means every dollar you want to spend in retirement you’ll need to set aside yourself. It’s possible you’ll fall short of your target savings goal if you invest, but it’s almost certain that you’ll fall short if you don’t invest.

8. Writing this book

How long did it take you to write the book? And do you have plans for writing a follow-up?

From the start of the project to publication was just over 7 years. This was intentional as the first draft was based on the theory and math, but I wanted experience in the industry to overlay the book with practical findings. I was also able to significantly improve my writing over the years. After all, I had just graduated with a math degree. Over those years I’d estimate a total of 800 to 1,200 hours of explicit research, writing and editing. That said, with over a thousand hours of study for exams and over 10,000 conversations with investors, I was able to fast-track much of the research.

I’ve joked with people that have read the book that I believe each chapter could be its own book. While I don’t have immediate plans for a follow-up, I’d love to continue simplifying personal finance for Canadians and will write on my blog for the time being.

9. Final thoughts

Is there anything else you’d like to share with my readers?

Firstly, thank you for sticking with me this far into the Q&A, it was a pleasure sharing a bit of my background. I’ve mentioned above the importance of finding your ‘why’ or ‘what you enjoy most’. I’ve found this is easiest through self-reflection and understanding what has and hasn’t worked for you in your past. It’s also about where you’re headed in the future and what you believe is most likely to work for you.

Once you have a direction, I find it’s important to be intentional about the steps you take to get there. Ask yourself critically if your actions (e.g., career choice, spending habits) are for you or for someone else. By reminding yourself of the ‘why’ you’ll find a better path for you and be more likely to stay on track.

And finally, it’s important to revisit your ‘why’ from time to time. You’ll learn what is and isn’t working and be able to incorporate new ideas or options into your plan.

Best of luck on your financial journey. I encourage you to explore the blog, there are a lot of great articles here to help you take the next step in whichever direction you decide.

10. How to buy The Snowman’s Guide to Personal Finance

And lastly, where can people find you, and where can they pick up a copy of your book?

I’m actively writing over at www.snowmansguide.com where I share new ideas that either didn’t fit cleanly into the book or have come to mind since I published. I have an email sign up on the website which I use to share new posts and will use for local events in the future. Please head over and sign up if you’re interested. You can also follow me on Twitter @snowmans_guide.

The book is available in print from Amazon. It’s also available as an eBook from Amazon or Kobo.

If you pick up a copy and enjoy the read, please share your feedback on Amazon or Goodreads to help us reach as many Canadians as we can.

If you have questions or topics you’d like answered in a simple way, please send me a note at steven@snowmansguide.com.

Thank you again for stopping by and thanks Kari for having me.

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The Snowman’s Guide to Personal Finance – Free Book Giveaway!

March 1, 2020 update: The contest closed Feb. 29th, and the winners have been notified! Thank you for your interest in this amazing Canadian personal finance book. I would recommend picking up a copy of The Snowman’s Guide to Personal Finance at Amazon.ca!

Steve has generously offered to give away 5 paperback copies of his book to my readers! Here are the rules:

1. Live in Canada. While some of the advice in The Snowman’s Guide is relevant to anyone, it would be most helpful to people in Canada for things like the discussions of RRSPs, TFSAs, RESPs, and more.
2. Complete the entry form.
3. Comment below, so I know you’re interested in getting a FREE copy of the book! Include your ‘why’ – one (or more) personal finance topics that you’re struggling with or you’d like to learn more about.
4. Optional, but for each share on Twitter or Facebook where you tag me @moneyinyourtea, you will get an additional entry into the contest.

Contest ends Saturday, February 29th at 23:59pm ET. Yes, on the “leap day”! The five winners will be chosen at random. I will announce the winners, and contact you privately for your mailing address to send you the book.

Good luck!

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Other Book Reviews at Money In Your Tea

• The Most-Wished-for Personal Finance Books, great for gift giving to parents, grads, anyone into frugal living, financial independence, and more
• The Latte Factor and Smart Women Finish Rich, both by David Bach
• STANDUP to the Financial Services Industry, authored by John de Goey
• Broke Millennial, by Erin Lowry
• Read Your Way to Wealth in 2019, a summary of the best books of the year