Rich Girl, Broke Girl

Kelley Keehn’s recent book Rich Girl, Broke Girl uses interesting fictional stories about women to teach personal financial lessons.  Keehn understands the circumstances, pressures, and emotions that drive women to make poor financial choices.  The advice in this book is packaged in a way that makes it an easier read for those who’d rather focus on life than money.

Keehn uses the stories of ten women to illustrate different types of financial mistakes and how to fix them.  Each chapter begins with the history of a woman whose financial life isn’t going well.  It then moves on to what she did wrong, some financial lessons, and how she can fix her troubles.  The chapters end with an update on how the woman is doing now that she has made some positive changes.  The anticipation of getting back to the story made it much easier to read the ‘lesson’ part of each chapter.

The most interesting lesson to me was about the woman who let a casual partner move in and stay longer than she wanted.  Although she never intended for this to be a long-term relationship, they lived together long enough to be considered common-law partners.  She ended up losing half of her assets.  

More interesting advice for those who have trouble controlling their spending is to find some frugal friends.  It’s better to have peer pressure pushing you in the right direction rather than the wrong direction.

In a chapter discussing investing, Keehn offers asset location advice to readers wealthy enough that their RRSPs and TFSAs are full, and the overflow is in non-registered investments.  She says to put stocks in non-registered accounts and bonds in the registered accounts.  However, this is the least tax-efficient approach.  It appears optimal if you trick yourself into taking more risk by setting an asset allocation that ignores taxes.  See Asset Allocation: Should You Account for Taxes? for a full explanation.

Another chapter tells a story about Katie who focused on paying off her mortgage by the time she was 55 but had no investments.  The lesson here was that Katie should have invested for a higher return than she got from her mortgage payments.  If we consider extra mortgage payments to be a form of saving, I think Katie’s mistake was that she saved too little.  If she only directed savings to her mortgage, it should have been paid off sooner, giving her more time to build investments.  I agree that a balanced approach of paying off a mortgage and building investments at the same time is a good idea.  However, focusing on just one or the other can be reasonable, as long as the total amount saved is adequate.

Although the cases where I mildly disagreed with Keehn are over-represented in this review, the book is filled with excellent advice.  I read books like this to better understand why people manage their money poorly and how to help them.  It’s clear that Keehn is an expert in this area.

In conclusion, this book is a strong attempt at a difficult problem: engaging people (women in this case) in personal finance lessons.  Readers may see themselves in some of the stories and follow some of Keehn’s good advice.