Pretty much everything to say in personal finance has already been said in a book. The narrow space for originality has been exploited by Sam Dogen, a San Francisco-based personal finance blogger who has written a book called write Buy This, Not That.

Mr. Dogen’s aim is to help people make smarter spending decisions on the way to financial independence. To hear more, I invited him to do an e-mail Q&A. Here’s an edited transcript of an exchange that includes Mr. Dogen’s take on Canadian housing:

Q: Financial freedom is an appealling idea, and we know this because multiple books, blogs and more focus on it. What’s your definition of financial freedom?

A: When I helped kickstart the modern-day Financial Independence Retire Early (FIRE) movement in 2009, I defined financial independence as when your passive income can cover at least all of your basic living expenses. Passive income can come from slot bonus 100 rental income, dividend income, bond income, and royalties. Basically, any type of income that doesn’t require much if any active energy to generate is considered passive income. However, I’ve noticed there’s been an evolution of different FIRE types to fit the various stages people are at on their financial independence journey. The most practical one is Barista FIRE, where one usually takes on a low-paying job to help bridge the gap between their living expenses and passive income and also to get healthcare insurance. For example, my family of four pays US$2,200 a month in unsubsidized healthcare insurance! Every time I pay the bill, I wish I was Canadian!

Q: You say in your introduction that you want to help people improve their financial decision-making. What’s wrong with the spending decisions people are making?

A: A lot of people are spending without great intention. Instead of spending frivolously on things you don’t really need or want, make it a point to spend intentionally on the things that will give you the most joy and the greatest returns. Treat your investments as an important expense to take care of your future. Otherwise, you’ll wake up one day years from now and wonder where all your money went.

Q: What do you make of the splurge purchases in the pandemic – puppies, Pelotons, food, travel, home renos?

A: They are completely rational. During trying times, we rationally spend money to make ourselves feel better. Ironically, it’s during good times when we don’t have to spend as much money because life is so good. A lonely person would love an adorable puppy or cat. A person who is afraid of working out at the gym would love a stationary bike to reduce stress and help them stay fit. Given we’re all at home more, spending money on home renovations and larger homes is also a logical move. Personally, my hot tub, which I installed years ago, has been my greatest investment yet.

Q: What’s wrong with the traditional approach of money management — paying yourself first, ie saving, and then spending what’s left?

A: The traditional approach of paying yourself first and spending what’s left is just fine. However, you can only save so much. Saving and budgeting is a defensive strategy that everyone should adopt as a basic standard. If the amount of money you’re saving each month doesn’t hurt, you’re not saving enough. However, to build great wealth, or at least more wealth than the average person, the focus must firmly be on generating more income through work, entrepreneurship and your investments. This offensive part of the equation to wealth creation has way more upside. Working 35 to 45 hours a week is an artificial construct. If we desire to achieve financial freedom sooner, we must spend these precious hours outside of work to earn and learn.

Q: Any ‘buy this, not that’ advice for people who are shopping for a first home (ie, fixer-upper or fully renovated, prime neighbourhood or less desirable but cheaper)?

A: The problem with the Canadian housing market is that valuations are overly stretched. With rising rates and a slowing global economy, I would be patient and look for better deals in six to 12 months. Real estate cycles can take one to two years to turn. My second piece of advice is to buy a fixer-upper if you are in your 20s or 30s. One financial benefit is that you can usually get a discount to market value, even after your expected costs of fixing up the property. Further, you gain the experience of learning how to renovate for future fixer-upper purchases. You may also pick up some handyman skills as well, which will prove valuable for your own house and for future rental properties.

More here:

I will be on holidays for the next two weeks. Globe personal finance reporter Erica Alini will be writing this newsletter in my absence. Enjoy!

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Rob’s personal finance reading list

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Today’s financial tool

How to use Ontario’s Staycation Tax Credit, designed to encourage residents of the province to travel locally. You can get back up to $200 of vacation expenses as an individual or $400 as a family.

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Love this – a history of “nobody wants to work anymore.” It’s not a new thing.

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