Book review: Balance by Andrew Hallam, and a test for your next purchase

Suppose you have a month to live and someone offers to erase one memory: your favourite thing you ever bought, or your favourite experience. Most people let the thing go. That small exercise sits at the heart of Balance, a 2022 book by Andrew Hallam, and it changes how you look at your next purchase. Hallam is a Canadian writer who taught school for years and wrote Millionaire Teacher. His book rests on one picture: a good life is a table with four legs, which are enough money, strong relationships, good physical and mental health, and a sense of purpose. If one leg is cracked, he argues, the table wobbles however solid the other three are.

The book is worth a Canadian's time because it joins two questions most money books keep apart: what is worth spending on, and where should everything else go. If you have saved faithfully without being sure what the savings are for, or spent freely and wondered where it went, it is written for you.

Why "enough" matters more than "rich"

Hallam's starting point is that being rich does not make you happy, but having enough money is essential to a good life. Kyle Prevost of Million Dollar Journey, reviewing the book, points out that "enough" is a number you set yourself. Nobody hands you the number.

That sounds soft until you try to use it. Most of us only know what we'd call "more". Hallam offers three tests for working out what is enough for you.

The memory test. Hallam asks audiences to imagine they have a month to live and the Grim Reaper will erase one memory. It can be the memory of your favourite thing you bought, or of your favourite experience you paid for. Most people choose to lose the thing. His rule of thumb follows from that: a purchase is more likely to raise your happiness if it creates experiences you would not otherwise have. A new phone or a newer car rarely does.

The statement test. Open an old credit card statement. Which purchases still make you smile, and which wouldn't even make a campfire story? The ones that fail the test are where your money was running on autopilot.

The trade-off test. Hallam says you can have anything but not everything. A job that pays more but eats your evenings, or fights your values, may cost more than it earns.

Here is what that last one looks like in Canadian numbers. Say a new job pays $8,000 a year more but adds 90 minutes of commuting a day. Over roughly 260 working days that is 390 hours, close to ten full 40-hour work weeks. Whether $8,000 is worth ten weeks is your call, and Hallam's point is that you should see the trade before you accept it.

What he says to do with the rest

For the money that is left, Hallam makes the case for plain index investing. His argument, as Prevost and others describe it, is that you do not need to pick stocks, time the market or pay someone to do it for you. A mutual fund spreads your money across many investments at once. An exchange-traded fund (ETF) does the same thing for a lower fee. An ETF is a basket of many investments that you buy in one go, and it trades like a stock.

Prevost notes that Balance adds a comparison that earlier Hallam books didn't have: building your own mix of ETFs, buying one all-in-one ETF, or using a robo-advisor. In Canadian terms:

• Your own ETF mix is the cheapest, and you have to rebalance it yourself.
• An all-in-one ETF is a single fund that holds stocks and bonds in a fixed proportion and rebalances itself. You buy one thing.
• A robo-advisor is an online service that builds and rebalances a portfolio for you, for a fee on top of the funds.

Fees matter because they compound against you. This example is Canooq's arithmetic, not the book's. Put in $400 a month for 25 years, which is $120,000 of your own money, and assume the investments earn 6% a year before fees. At a total fee of 2% a year you end with about $205,700. At 0.25% you end with about $266,800. The $61,000 difference is paid out of your growth, and you never see a bill. The compound interest calculator lets you try it with your own numbers: enter 4% for the expensive fund and 5.75% for the cheap one.

Which account holds those funds is a separate Canadian decision. The guide to TFSA vs RRSP vs FHSA sets out which to fill first, and Couch Potato investing in Canada shows what a simple index portfolio looks like with Canadian funds.

The last chapter, "Rethink Retirement", suggests part-time work, deferring your Canada Pension Plan and moving somewhere cheaper. The CPP idea has real numbers behind it: according to Canada.ca, your CPP pension rises 0.7% for each month you wait after 65, up to 42% more at 70. CPP at 60, 65 or 70 works out when waiting pays off.

Who should read Balance, and who can skip it

The parts that hold up are the ones about spending. The memory test and the statement test cost nothing, and they ask about your own life instead of handing you a rule. The book also carries more than fifteen pages of notes on the studies behind its claims, which is more than most money books bother with.

It is weaker as an investing book if you have read Hallam before. Prevost says plainly that the passive investing material replays the greatest hits of Millionaire Teacher. That is fine for a new reader and repetitive for a returning one. The stories are fun, and they are also anecdotes: a good one proves nothing about you. And "enough" is left for you to define, so the book leaves you to do the hard part.

The Canadian account and CPP details above are Canooq's translation. Hallam has taught and lived in several countries, so the book itself isn't built around Canadian account rules.

Balance suits someone who already has the basics sorted, such as an emergency fund and no high-interest debt, and wants to think about what the money is for. If you want a step-by-step plan for paying off debt, it is the wrong book. A related idea, spending your savings while you can enjoy them, is covered in Die With Zero in Canada.

Balance: How to Invest and Spend for Happiness, Health, and Wealth

by Andrew Hallam

Page Two, 2022.

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