Financial Facelifts, Eric and Ilsa, Soundbites, and Showing Your Work

As much as I love recording Because Money with my good friends Jackson Middleton and Robb Engen, and getting to shoot the breeze with our knock-out roster of guests, I come away from each episode regretting that I didn't get to say just this one more thing. (And that I waved my hands around too much. Again.)

In our latest episode, we welcomed Alexandra Macqueen to talk generally about the thousand-word financial makeovers that run in nearly every Canadian newspaper, and specifically about the Eric and Ilsa debacle that ran in the Globe and Mail last weekend. The video, transcript. and links to the relevant sites and articles are up on becausemoney.ca for your viewing pleasure.

Here's a point that I wanted to make and didn't quite get to: most of the value in a financial plan (or facelift, or makeover, or what-have-you) is in showing your work, not in the answers themselves. That is, the fact that recommendations are made for you is equally - if not more - important than the fact that recommendations are made at all.

All of the information you'd get in a plan to build your retirement income, pay off your debts, control your spending, decide between renting and buying, take a lifetime pension or the commuted value, or anything else is out there already: online, in a book, or in a research journal. But because it's not specific to you, it is therefore is not as clear or motivating as a plan that addresses your situation directly and in detail.

Let me give you an example: Doug Runchey is a Canada Pension Plan expert who writes very detailed and informative posts over at Retire Happy.

The relevant information to calculate your own pension amount, or the breakeven point to apply for benefits depending on your life-expectancy, or how the Child Rearing Drop Out provision works is all right there in the post, and yet after each one is published there quickly appears 93 comments that are all variations on the question "but what about me and my particular situation?"

Every financial facelift says essentially the same thing: smooth your lifetime consumption and taxes by saving enough in the right kind of registered account, spend less than you earn, think about which goals are the most important and which ones you can move around, make sure you've got appropriate insurance, etc.Is it the right advice? Sure. Is it worth repeating? Absolutely. But unless it's advice for you, addressing your bank balance, your income, your behavioural blind spots, and the values that make you get out of bed every morning, it's the financial health equivalent of  "eat more vegetables, fewer processed foods, and exercise more" repeated over and over again in slightly different words.