Urgen Kuyee: Hi Gord, why don’t you let my readers know a little bit about yourself? Which school did you go to? Maybe you can also share your experience working for companies such as IBM and Apple. And how did you get into personal finance?
Gordon Stein: For my education background, I went to Western University for Mechanical Engineering degree and really enjoyed it. Then, few years later, I got an MBA from the Rotman School of Business at Toronto. From there, I moved into roles in high tech sales operations and marketing.
The interest in personal finance, I had always had a natural interest in money. I read The Wealthy Barber like everyone else. I have always had a team of young people reporting to me and found that they often struggle with their personal finance and would turn to me for some advice. You know how do you generate wealth and all this massive marketing machine that’s getting them to spend their money. Instead, what they should be doing is building for their future and building some wealth and financial freedom. So, that was the general interest and how I got into personal finance.
UK: Let’s talk about your book, Cashflow Cookbook. What led you to write this book?
GS: The genesis for the book was I was in my car one day, with a friend of mine. He found a car wash receipt in my console and asked why would I spend money on car washes. It was a $13 receipt and at the time, I thought, what, am I going to wash my car in my driveway everyday? He said no. You want to get an Esso points card, save the points, fill in a form and you get a free wash. I thought I am not going to go through all that to get a free car wash. Then, someone else was talking about the Esso Speedpass. I got one of those. It’s so much easier to pay for my gas and saves me about $25 a month on my car wash. I thought that’s kind of interesting. Then, a couple of weeks later I heard one of those home alarm monitoring ads. I called them up and they said what are you paying? I said I am paying 35. They said well, we will monitor for $10 a month. Again, I thought okay that was easy. I signed up and saved another $25 a month. I got a speed pass for my wife and that was $75 a month. And none of these was any kind of effort or sacrifice. It got me curious and I said what else is there? So, for the next two years, I gathered the best personal finance ideas, ideas that are saving you money with minimal sacrifices, minimal effort. Things like the car wash and the alarm monitoring, how do you save a lot of money without any effort and sacrifice? So, I pulled all of the ideas together in a spreadsheet and it eventually became Cashflow Cookbook.
UK: I haven’t read the book yet.
GS: I have a copy for you here. When I worked out the value of the savings in the book, invested at 7 percent for ten years, it came to an incredible $2.3 million dollars. Here was an easy way for Canadians to add an extra $ 2 million to their net worth over 10 years. I thought, “This is a book, that Canadians need.” So, that was Cashflow Cookbook.
UK: What are one to three books that have greatly influenced your life?
GS: Good question. Wow, so many good ones. Covey’s habits of successful people I think is a great one. The Wealthy Barber way back one is fantastic. And, I would say in the blog world, Mr. Money Mustache and I am sure you have read as well.
GS: His blog is really good in terms of shifting people’s perception and thinking differently about money and wealth and savings. It’s not about being cheap, it’s not about being frugal, and it’s about being smart and then, building financial freedom.
UK: He’s an engineer too.
GS: Yes, that’s right. Canadian engineer. (Laughs)
UK: As I told you when I emailed you, I found about your book through Rob Carrick’s newsletter. Rob said, “If you’re going to write a book about personal finance, Job One is to say something different than the hundreds of books already covering the topic.” How is your book different from other personal finance books?
GS: Yes, I think it is very different and that was really the point Rob was making. If you read all the personal finance books, if you go back to the classics, The Richest Man in Babylon, you know save your 10 percent, get the money working for you and all these things. And, if you travel that whole thing from The Richest Man in Babylon to The Wealthy Barber, it’s very similar, a lot of repetition and very similar kinds of ideas. There are some that are pretty unique like Wealthing Like Rabbits by Robert Brown. A lot of those are about setting you up, up front. So, “Hey. Here is what you do up front so that you don’t get into trouble. Don’t borrow too much money, etc.” When I talk to people, what I find is they have no room, whatever income level whether they are making too less or too much. I know people who are making 50K, 100K, 500K and they all tend to spend right up to the limit and the question is how do you get out of that situation? How do you free up the cash so you can pay down the debt and start to build some wealth? I believe that Cashflow Cookbook is very unique and that it gives you specific recipes on how to reduce cost without sacrificing and with minimal effort.
The whole point of the book is you immediately take those savings and apply them to pay down debt if you are in a negative net worth or apply them to building wealth into your TFSAs and RRSPs depending on your situation. So, I think, as Rob said, it is a very unique book. I don’t know any other personal finance book that does this.
UK: This is not a money question but what advice would you give to a young recent college grad who is just starting his or her career in sales? What makes an individual a good salesperson?
GS: Yes, I have managed thousands of salespeople over the years. I would say the most important thing in sales is I would suggest read one book a month on selling, minimum and just keep learning. The Challenger Sale is great, To Sell Is Human by Daniel Pink is another great book. Keep reading them and reading them, that’s the one big one. The other big one is shift from talking, shift from product and really take the time to understand your customers. What business challenges are they facing? Not only how do you solve those business challenges but as The Challenger Sale would say, how do you go over the top and take your customer to a completely different place that they never would have thought of to add dramatic value to their business. And, I think if you build this great interest in your customer, not the cliché way but if you really understand their business, really understand not just their pain points but what it would take for them to leapfrog their competitors and how do you add something to that. I think that’s the key.
UK: I saw a recent tweet of yours where you stated, “I’ve gone mostly vegan, low sodium and low sugar, so to me, the dividends are the best thing on their menu.” You were talking about A & W’s increase in their dividends. For me, the best thing on their menu is the chubby chicken burger. I love it. Anyhow, has the change in your diet going mostly vegan, low sodium and low sugar have an effect on your body? Has it led to you having more energy and as a result, being more productive?
GS: Chubby Chicken Burger. (Laughs) Yes, it is a great question. I love kind of hacking things. How do you do better in personal finance? How do you do better in fitness? How do you do better in health? If you think about food, I think people often think about food, “Oh, what do I feel like? Or, you know what would be tasty?” And there’s a whole industry that’s trying to drive more sugar, fat and salt through our diet which becomes very addictive. So, when you start to shift that and start to think about, “Hey, what does my body need?” You hit a very different kind of relationship with food.
I see a lot of parallels if you think about the average Canadian and the stats would say they are 20-30 pounds overweight. They don’t exercise anywhere near enough, they are horrible with their financial fitness. Whether it is eating, fitness or financial fitness, there is a lot of work to be done. But, I think the rewards are fabulous you know in terms of to your point of having the energy, having great outlook on life and avoiding all of these diseases and heartening of the arteries, obesity, cholesterol and all of these things. My daughter got me thinking a lot about veganism. I am not a vegan but she is, all three of our children are actually vegan now. Certainly I am moving in that direction and from an animal rights’ perspective, from environmental perspective and from a personal health perspective and also, from a finance perspective, it’s a great move for people. You only get one body so it’s very important to take care of it.
(Urgen here: Bye Bye Chubby Chicken Burger T_T this is the Internet slang for crying. K, I was kidding. I love Gord and he is absolutely right about going mostly low sodium and low sugar but I don’t see me being a vegan or vegetarian anytime soon.)
UK: Now, we shall get back to money. Let’s say a 27-year-old nurse, she makes about 65K/year and wants to save about 10 percent yearly for her retirement. Would you tell her to go with a TFSA or an RRSP?
GS: I think by far the more important thing is they put some money away. So, I would say, let’s side step the question a little bit. I think the first thing is I think 10 percent is low. I believe it is good to set a more aggressive strategy and I would use some of the recipes from Cashflow Cookbook to drive that cost base down. But, I think once it’s done you know different schools on it. The pure math would say TFSA. From a tax perspective if you are putting a lot of money in a RRSP in those early days, it could actually work in reverse because your are going to be saving in a lower rate and taxed at a higher rate when you pull it out. I would say the key thing is step one is the debt. I would get rid of any kind of debt, consumer debt or any sort. Then, step two is the TFSA and once you start to get in the higher income bracket, I would start doing the RRSP.
UK: Gord, how do you invest your money? Do you mind sharing what’s in your portfolio today?
GS: Sure. I have always been in high tech. So, what I do is I like the idea of standing on the back of giants. The first thing that I see is when I look at a lot of research out there is they will take a company like Staples and say, oh it’s got good cash flow and low debt, this and that. I am saying they are selling paper and file folders, it’s 2018 and the world is going paperless. Everyone is buying on Amazon and some analysts are recommending that you invest in a company solely because it has a strong balance sheet? It’s critical to look at the technology trends that will affect every company. So, I will apply one filter and the first big filter is “Hey, how is this thing going to look given all the tremendous transformation that’s happening in technology?” So, how is that company going to do in that context? Then, I don’t do the cash flow analysis, the balance sheet analysis or the changes in the company’s tax rates. There are way too many smart people who can do that for me. I will then filter it through the research on my brokerage account. I will look at some third party research and let them do all the cash flow and all the rest of the debt structure work.
So, I have got quite a bit of amazon because I like their incredible transformation. I have Facebook as well, I mean if you want to do targeting in terms of digital advertising, they are the ones with the data. They will sort out the privacy thing but they have got it. Another one is Google, incredibly powerful. They own search. Apple from a device perspective and all their eco system sales have started to rise up and grow like iCloud and iTunes. They really have the privacy piece nailed as well. So, I like those kinds of stocks. I like companies that are moving in the right direction as we go down this road.
Another example is companies that can really benefit from technology. So, take the organizations that have huge call centres. It’s my belief that 90 percent of those call centre agents are going to be gone. They are going to be replaced by Siri or Alexa. It is not a great story from a human perspective. However, from a company’s perspective, it is a huge opportunity there. Zero wait time queue, you are talking to an AI machine that starts to rival humans. And, that’s already started to happen now. It is starting to happen globally so “Hey, who are the companies who are going to see this terrific shift?” There is another whole story at what it means for us as a society with a job perspective that’s frightening. But, this exists and it is just the reality.
UK: When did you start investing your money in the stock market? How long have you been investing for?
GS: I started pretty much as soon as I started work. And, set aside probably 10 percent or something like that to start. Then, as I got incremental raises and made more over the years, always making a point of not even looking at it, not spending more, instead increasing that savings rate and getting that money working for me. And, very consistent investing over an embarrassing number of years but then you get to a point of financial independence where your money is working for you. Those dividends keep re-investing and when the stock market goes down, fantastic because now you are re-investing at a lower cost base. If the stock market goes back up, fantastic, because the wealth has grown.
UK: Lastly, what are bad recommendations you hear about money or personal finance in Canada? What advice should Canadians ignore?
GS: I think there is a lot of emphasis on budgeting. It is really good to understand your spending but I think it’s very important to track net worth. And, track that over time because that’s really the end game. If you had a single number that you want to look back in your finance and say how am I doing, it’s about net worth.
The other one isn’t so much financial advice but I think people have to appreciate this powerful, powerful marketing forces out there to relieve people of the money that they have. Way back, there was the diamond industry, how do you sell diamonds? They created this notion that as a groom, you should spend two months’ salary on a diamond. Where did that come from? Does that mean you have got more love for your spouse if you spend two months or three months salary? Is marriage going to last longer if you spend four months salary on a diamond? Where did this stuff come from? And, the same thing about upgrading a house as well. People need to have quartz countertops, this and that. Every aspect of home improvement now the magazines, etc. everything is sort of pulling you to spend, spend and spend. And, the same thing happens with McDonalds upsizing your fries and drinks. Likewise, the merchandise, the clothing stores. Young people are pretty vulnerable to that and you set up these norms that you got to have this level of personal electronics or you have got to have this kind of designer shirt or whatever it is. People get swept along in this wave and it’s not doing them any favours to getting to financial independence. And, if something happens in the world where they are automated out of their jobs or their company gets bought out and they have nothing saved. They have no cash cushion and they are going to start piling up debt on their credit cards at18 percent or more and the downward slide begins.
UK: Great. Thank you so much for your time, Gord.
GS: My pleasure.
This interview has been edited and condensed.