Category Archives: Book Reviews

Book reveals path to “the vacation of a lifetime”

Retirement, the financial part at least, is a two-phase process. First, there’s savings – personal, workplace pension, government pensions, and so on. Second, there’s the art of turning those savings into an income stream that will pay for your retired life, which could continue for three decades.

A nice overview to this process, albeit from a U.S. point of view, can be found in The Retirement Survival Guide, written by Julie Jason and published by Sterling. Jason, a money manager, takes complex concepts and presents them in a clear, logical way, using charts, examples, and memorable textual sound bites.”

“Creating retirement income is all about making sure you can be financially secure for as long as you live,” she writes. Whether you want to sustain or expand your lifestyle in retirement, Jason notes, you need to take into account all your income sources and savings to make sure you have enough “to cover the gap,” and so that you “won’t outlive your nest egg.”

A good first step, she notes, is to know where you stand. “What you need to know first is how much you spend on `musts’ and how much you spend on `wants,’” Jason explains. A must refers to basics – rent or mortgage, utilities, food, taxes, the “essential expenses.” Everything else is a want. Essential expenses must be paid in full and on time, she advises.

Another important consideration is whether your money “will last as long as you do,” she writes. If you are trying to live off savings, how much should you take out each year without running out? Jason says most financial institutions feel a withdrawal rate of four to five per cent of “your initial assets, adjusted each year for inflation,” is a safe amount. Experts disagree, so Jason offers a nice worksheet to help you come up with a withdrawal rate tailored to your specific situation.

Now is always a good time to start saving, she writes, adding that “time is money.”

“Would you rather have a penny that doubles daily for 30 days, or $1 million? Believe it or not, you’re better off taking the doubling penny… a penny earning 100 per cent daily interest would grow to $10.7 million in 30 days,” Jason explains.

While 100 per cent interest isn’t a realistic possibility, the example shows the power of compound interest over time, she explains. She provides a table showing that if a 30-year-old saved $100 a month, or $42,000 over 35 years, he or she would have $215,600 by age 65, $465,500 by age 75 and $2.1 million by age 95. So, she says, “you’ve never too young, or too old, to start saving.”

A later chapter deals with the problem of the vanishing workplace pension plan. She suggests the use of annuities to ensure you have monthly income for life, and never outlive your savings.

The “Finish Line” chapter gives a nice overview of post-retirement portfolio design for do-it-yourself savers, and finishes with this compelling thought. “Take small steps,” Jason writes. “Don’t rush. After all, you’re getting ready for the vacation of a lifetime.” This is an interesting, well-written and helpful book that would make a fine addition to your retirement planning shelf.

The Saskatchewan Pension Plan  offers many of the levers mentioned in the book. The professionally managed fund has an enviable rate of return since its inception, and you can convert your savings into an annuity payout that ensures you’ll get a monthly pension for life. Perhaps it too deserves consideration when you are planning for retirement.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Book reveals a way to build wealth – conscious spending

We Canucks keep breaking the wrong kind of record – levels of debt. In fact, one would not be surprised if the phrase “becoming debt free” is starting to appear on people’s bucket lists.

An eye-opening booked called I Will Teach You to Be Rich by Ramit Sethi is a nice addition to your self-help library.  Among the many excellent ideas in this book is the notion of “conscious spending.” Sethi writes that becoming wealthy does not mean you must become super-frugal, living as cheaply as you can and buying the lowest cost items possible. Instead, he says it is important to think hard about what you ARE spending money on – conscious spending.

“Frugality alone doesn’t get you to your goals. It’s a helpful but not sufficient condition. So I take another approach of trying to write about money holistically, while urging you to make your own decisions about what’s important enough to spend a lot on, and what’s not,” he writes.

Most of us don’t think before we spend – unconscious spending – he writes. We just put it on the credit card and then hope for the best. A far better approach is to have a “prescriptive budget,” or a spending plan, for the month ahead. Many of us don’t know, he writes, what’s going out in any category – such as subscriptions and membership fees.

“We not only lack a prescriptive budget (“I want to spend 20% on my retirement account, 10% on savings, 20% on going out…”), we even lack a descriptive budget (“where is my money going?”),” he notes.

But the exercise of knowing where you WANT to spend your money in advance of spending it is empowering, he says. You may want to buy lots of shoes, go out a lot, or some other passion. What you want to spend your money on is up to you, there is no standard approach to take, the book notes.

The book is written in a very friendly, informal style – it’s like listening to sound advice on money from a close and trusted friend. It’s a good read with some fresh thinking on a subject that is of growing importance.

Once you’ve moved to a prescriptive budget and are conscious about your spending, don’t forget to make SPP part of your retirement savings plan. Your future you will thank your present you.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

BOOK REVIEW: Wealthing Like Rabbits

By Sheryl Smolkin

I don’t often review personal finance books because it seems to take an inordinate amount of time to wade through yet another statement of the obvious just to glean enough cogent information to give readers a taste of what the book is all about.

But when I read accolades from the likes of Gail Vaz-Oxlade, Preet Bannerjee, Roma Luciw, Dan Bortolotti plus a whole bunch of my other favourite personal finance bloggers in the introductory pages of the book, I thought I’d better keep on going to find out what all of the fuss is about.

Author Robert R. Brown says Wealthing Like Rabbits is written to be a fun and unique introduction to personal finance and suggests that any book that includes sex, zombies and a reference to Captain Picard is “an absolute must read,” regardless of genre.

Brown starts out by asking how many rabbits there would be after 60 years if 24 rabbits were released on a farm on a great big island. Before providing an answer to this question, he introduces the need to save for retirement, although he doesn’t begin to predict how much you or I will need. His only conclusion is that “more is better” because it is better to be 65 years old with $750,000 saved than 65 years old with $75,000 saved.

Then he reveals that there would be 10 billion rabbits after 60 years and launches into a discussion of the history and key features of registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs). Subsequently he riffs about how many zombies there would be in England if France sent 100/week for 40 years.

If you are still with me, you may wonder — what is the point of all this?

Not surprisingly of course, it’s to illustrate the power of compounding, whether in relation to rabbits, or money or zombies. We learn that just $100/wk deposited in an RRSP earning 6% for 40 years will add up to a nest egg of $624,627.

But the positive and the negative impact of compounding interest are also very cleverly brought home in later chapters. I particularly liked the comparison of brothers Mario and Luigi who both had similar incomes and $100,000 for a down payment on a house. They went to the bank to find how big a mortgage they were eligible for.

Mario’s banker told him “he could afford” to buy a house for $525,000. Luigi told the mortgage specialist he needed $10,000 for closing costs and the $90,000 balance had to cover at least 20% of the purchase price of the house so the most he would be willing to spend is $450,000.

The story continues with Mario buying a 3,000 square foot home for $525,000. Luigi sticks to his budget and buys a 1,600 square home nearby for $350,000. Over 20 years, compound interest on the mortgage means that Mario ends up paying $807,538 for his house while Luigi only has to fork out $538,359.

Similarly, when it comes to debt, Brown illustrates that high interest credit card debt can quickly escalate if balances are not paid off every month. Even I did not realize until recently that if you miss your payment due date by even as little as one day, the interest-free grace period completely disappears. In fact you have to pay interest on the amount of each transaction from the date each and every purchase was made.

Brown also reviews the characteristics of a line of credit; a home owner’s line of credit; bank loans and consolidation loans. While generally he believes all of these can cause severe damage to your financial health, he recognizes that when handled properly, they each have their place.

But he draws a line in the sand when it comes to payday loans. Never, ever get a payday loan, Brown says.

He gives the example of Buddy who borrows $400 from a payday loan place because his furnace broke down. He is charged $21 for every $100 he borrows for just two weeks. Two weeks later he pays the payday lender $484. That’s 21% for only 14 days, which works out to 546% annually. And that’s only the beginning.

If Buddy can’t pay in two weeks the payday loan company will charge him an NSF penalty and continue to accumulate stratospheric interest rates on the whole amount. Further defaults mean he will likely be hounded both by telephone at home and at work day and night. The file may be handed over to an even more aggressive collection agency.

In the second last chapter, Brown offers a brain dump of financial tips (which he doesn’t call “Fifty Shades of Brown”):

    • Spousal RRSPs are cool.
    • MoneySense magazine is a great source of personal finance information.
    • Eat dinner at home. Then go out for a fancy coffee and desert to Starbucks.
    • Buy life insurance, not mortgage insurance from your bank.
    • Read Preet Banerjee’s book Stop Overthinking Your Money for the skinny on life insurance.
    • Use the noun“wealth” as a verb. So instead of saving $150/week in your RRSP you will be wealthing your money.

And finally, Brown’s parting words at the end of the book are “you’ve got to show up.” Put some money away for your future. Live in a house that makes sense. Be smart about how you spend your money. Spend less than you earn. Be comfortable living within your means. He says it really is that simple.

Wealthing Like Rabbits is funny and engaging and it hits all the personal finance bases. Regardless of whether you are a Millennial, a Gen Xer or a Boomer, you will find lots of tips on how to save more, spend less and still have a lot of fun along the way. 

The book can be purchased in hardcover for $16.95 and the epub and kindle versions are available for $7.99.

BOOK REVIEW: 397 ways to save money

By Sheryl Smolkin

Earlier this year we interviewed Kerry K. Taylor aka Squawkfox as part of our Personal Finance Bloggers series. Although Squawkfox has been blogging infrequently over the last few months, her blog continues to be a hilarious and invaluable resource for money saving tips.

So when I was looking for books with great cost containment ideas to review for savewithspp.com readers I was delighted to come across Kerry’s book “397 ways to save money” published in 2009. As I flipped through the book, it became apparent that the vast majority of her suggestions have stood the test of time.

This 275 page book is divided up into four parts with several chapters in each part:

  • Big Decisions: (renting, home ownership, financial choices, shopping)
  • Home Management: (home maintenance, energy, cleaning)
  • Room by Room: (kitchen, living room dining room, kids room, garage etc.)
  • More ways to save: (vacation, pets, cheap family dinners, monthly maintenance checklists)

Here are 10 of my favourite tips in the book:

  1. Change your ATM habits: Use only your bank’s ATM machines to make withdrawals. Know how many free ATM withdrawals you can make each month from your account. Some banks offer free accounts including ATM withdrawals for seniors.
  2. Don’t insure your kids: The purpose of life insurance is to serve as income replacement for the insured’s dependants. Pass on agents who try to sell you on the investment aspects of a cash value policy. Instead, save for your child in a registered educational savings plan (RESP).
  3. Barter to save money: Generally bartering is the trading of goods and services without the use of money. Check out the website U-exchange.com to find like-minded people to swap services such as website building for a haircut.
  4. Pass on extended warranties: Don’t buy extended warranties on inexpensive product like cameras and kitchen appliances. The only time a warranty makes sense is if a repair will devastate your budget.
  5. Don’t pay for shipping: Look for a free shipping option when you order from an online store. Many online retailers offer free shipping when you buy up to a specified dollar amount in merchandise.
  6. Turn off all electronic devices: Turning off your unused electronic devices like gaming consoles and computers is an easy way to save electricity. By turning on your computer only when needed for three hours each day rather than running it continuously can save you $75/year.
  7. Watch the price scanner: Mistakes on electronic price scans are common at the grocery store. Watch as your items are scanned at the checkout and you could save many dollars per month and even score free food. The Retail Council of Canada has a Code of Practice and a list of participating stores you can read here.
  8. Open the dishwasher to air dry dishes: Skip your dishwasher’s heat dry cycle by opening the dishwasher door to air dry dishes after the final rinse. I do this frequently because the full cycle is ridiculously long. Its mice to know it also saves me money.
  9. Skip the sofa bed: A sofa that can be used as a bed may seem like a good idea if you have frequent guests, but they can be much more expensive that a regular couch. They take a lot of room you may not have to open and even top of the line models may be uncomfortable. A blow up bed is easy to inflate and move and a queen size costs around $100.
  10. Buy clothing at the end of the season: Winter in Canada is interminable and most things are on sale by December 26th at the latest. If you can make it through the fall with last year’s wardrobe you can refurbish it with quality items at half the cost or less late in the year.

I really like the Hardware Store Shopping List for all of the do-it-yourself energy-saving projects so you save money on gas. However, by the time you fill your cart with items like caulking, weather stripping, attic insulation, low flow showerheads, programmable thermostats, dimmer switches for lights and compact fluorescent light bulbs to replace incandescent, you will definitely have a big upfront bill.

This is a great book to read once, go back to and help you set achievable goals for saving money. You can browse several chapters here and order the book online from Amazon or Indigo for about $11.00.

Kerry K. Taylor

BOOK REVIEW: EASE Manage overwhelm in times of “Crazy Busy”

By Sheryl Smolkin

Most of the books reviewed this year on savewithspp.com have been about personal financial planning and retirement. However, it’s hard to hold down a job and save for retirement if you are always overwhelmed and crazy busy both at work and at home.

Does that sound familiar? Then Eileen Chadnick’s new book “Ease” may help you find the balance you need to break the cycle.

Chadnick is a leadership coach and principal of Big Cheese Coaching in Toronto with more than 20 years of experience in diverse careers including coaching, public relations, fitness and writing. Her articles regularly appear in the Globe and Mail.

Are times of “crazy busy” the new normal? Chadnick says the season of “rush” is now year-round. Demands of work and life continue to accelerate to unprecedented levels. In Ease, she offers a toolkit to manage “overwhelm” in our daily lives.

Here are some of the tools for organizing your life Chadnick explores in detail.

  1. Get it out of your head: Write it down
    Making lists seems pretty basic to me because that’s how I’m wired. But lists covering short and longer term personal and work objectives can certainly help you stay focused.
  2. Get a grip on your schedule
    Don’t schedule two activities back to back in different parts of the city. Build in more responsible time margins. And schedule “white space” — time for yourself — into your agenda.
  3. Prioritize and triage
    Use priorities to establish boundaries but maintain appropriate flexibility. Having clear priorities will act as a compass for how to spend your limited time and give you a reassuring map when there is too much to do.
  4. Manage distractions
    Ah yes. Facebook, surfing the web and email are notorious distractions. But non-urgent interruptions by colleagues and family members can also throw you off course. Identify distractions, manage the expectations of others and create systems for handling email.
  5. Reign in the multitasking
    Being able to multitask is generally viewed as a positive attribute. But if you spend your entire day juggling tasks with little time to focus, you will likely use much more energy and feel more depleted than if you utilize the same amount of hours focusing on serial tasks.
  6. Learn to say no
    Learn to manage your reflexive “yes” habit and how to appropriately say no when it counts. Acknowledge the request. Share your reasons for declining. And where possible make another offer that is more doable. For example, “While I can’t participate in that project I’d be prepared to attend a preliminary brainstorming session so others can run with some of my ideas.”
  7. Managing the paradox of choice at the buffet of life
    Be aware of and take responsibility for the work and life choices you make. Just because you love to golf doesn’t mean you have to play two or three times a week and beat yourself up when you can’t. Take one course a semester instead of two. It may take longer to get your degree but you’ll have time to do other things.
  8. Tame your inner critics
    Do you have an inner voice constantly telling you that the job will never get done or you will never be able to manage? It often comes out when you are tired or can’t sleep. Know your triggers. Become masterful at self-observation so that you can recognize those inner-critic moments and transition to your resourceful, reasonable self.
  9. Climb your mountain one step at a time
    Step back from any project or task and break it down into pieces. Then attempt one step at a time. Remember — small steps add up to a solid journey.
  10. Clear the cache
    Experts say that sometimes the best way to solve a seemingly unsolvable problem is to walk away from it for some period of time. Taking breaks from an issue can trigger a switch that increases mental function, creativity and productivity. Take a walk, go to the gym or bake a cake. While you unplug and shift gears answers will come to you.

I particularly like the chapter on the importance of positive thinking. In one of my early jobs I had a hard time adjusting to the company culture and initially blamed my unhappiness on other co-workers. Shortly after when I decided to stop complaining and take a more positive, constructive approach, my work and my relationships became a lot more manageable.

Much of Chadnick’s advice is common sense and you have probably heard most of it before. However, taken together and with explanations grounded in neuroscience, her ideas form a powerful roadmap for getting your life in order. She is available for private coaching, to speak to book clubs via Skype and to present at conferences.

She can be reached at eileen@bigcheese-coaching.com. You can also check out her website. Ease can be purchased from Chapters/Indigo online for $12.24. In addition, it is available as an ebook for your Kobo or Kindle.

Eileen Chadnick

BOOK REVIEW: THE FOUR HOUR WORK WEEK

By Sheryl Smolkin

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The 4-hour work week was originally published in 2007 and an expanded and updated edition was released in 2009. But I just heard about this #1 New York Times bestseller recently and became curious enough about the author’s philosophy to order a review copy.

Ferriss coins the term “New Rich (NR)” which means people who abandon the “deferred life” plan and create luxury lifestyles in the present, using time and mobility – the currency of the NR. He also says his journey from a grossly overworked and severely underpaid worker to a member of the NR is at once stranger than fiction and simple to duplicate.

His methodology is structured as a 4-step DEAL:

Step 1: D is for definition

To join the NR movement Ferriss says you need to learn a new lexicon and challenge the status quo. For example:

  • Negotiate a remote work schedule based on productivity that allows you to achieve 90% of the results in 10% of the time, thus freeing up time for sports and family travel.
  • As a business owner, eliminate the least profitable clients and projects, outsource as many functions as possible and travel the world while working remotely.
  • Set up a website business to sell a product with virtually no overhead that takes about two hours a week of your time to maintain.

These arrangements seem far-fetched for the average individual, particularly if you work in a lab, construction site or on a farm where you have to be physically present to do your job. Nevertheless there are lots of interesting anecdotes and examples of how many people have successfully applied these principles.

Step 2: E is for elimination

Ferris advocates getting rid of needless busy work to become more effective and more efficient. Adapting the Pareto 60/20 proposition, he says look at your job and your life through the lens of two questions:

  • What 20% of your sources are causing 80% of your problems and unhappiness?
  • What 20% of your sources are resulting in 80% of your desired outcomes and happiness?

For example, he advises freeing up time by “cultivating selective ignorance,” i.e. don’t watch the news and eliminate reading newspapers. I must confess he lost me on this one because I’m a journalist and a news junkie.

But I do buy into his chapter on avoiding interruptions and the art of refusal. Since I’ve retired from the corporate world I’ve managed to almost totally eliminate useless meetings. And checking email only twice a day coupled with a suitable email auto response to “train” your co-workers and clients seems like a laudable (if unattainable in my case) objective.

Step 3: A is for automation

This fascinating (but politically sensitive) chapter explains how not only large companies can outsource and offshore business processes and mundane personal tasks. AJ Jacobs, an editor-at-large at Esquire magazine explains how he outsourced many necessary but non-productive tasks.

He hired the company Brickwork in Bangalore, India that offers “remote executive assistants” to research articles. He also retained Your Man in India to pay his bills, make vacation reservations, renegotiate his cell phone plan and make online purchases.

I’m not sure I can justify the cost of outsourcing as many tasks as Jacobs does but every month when I have to enter data and balance my company bank account, the concept is really tempting.

However, I do outsource transcribing digital interviews by uploading them to the website transcribeteam.com. Less than 24 hours later the transcripts appear in my mailbox at a charge of U.S. $1/minute.

Step 4: L is for Liberation

Once you have eliminated needless busy work and automated or outsourced as many of your job functions as possible, this chapter explains how you can negotiate a remote working arrangement that will allow you to travel and work from anywhere in the world.

Again, the primary premise is that your current job (or any future business) truly doesn’t require you to be physically on the job. Ferriss says:

  • First of all, ensure you are a valued employee by performing well and taking advantage of as much in-house training as possible.
  • Next, call in sick for a couple of days but work from home to show how productive you can be.
  • Finally, make the business case for working at home at least a few days a week.

Then he says you can propose a revocable trial period and eventually ask to increase your remote working arrangement to the full week.

Will this work? Maybe in some cases, but face-to-face interactions with team members can create valuable synergy. And many employees don’t want to be away from the action and opportunities for promotion.

According to Ferriss, the top 13 mistakes the NR make are:

  1. Losing sight of dreams and falling into work for work’s sake.
  2. Micromanaging and emailing to fill time.
  3. Handling problems outsourcers or co-workers can handle.
  4. Helping outsourcers with the same problem more than once or with non-crisis problems.
  5. Chasing more customers, particularly poor prospects when you already have a good customer base.
  6. Not having a dedicated work space for sleeping, living or relaxing.
  7. Answering email that won’t enhance their business and can be handled by an auto-reply message.
  8. Not performing an 80/20 analysis every two to four weeks for their business and personal life.
  9. Striving for perfection rather than great or good enough.
  10. Blowing minutia and small problems out of proportion as an excuse to work
  11. Making issues that are not time sensitive urgent to justify work.
  12. Viewing one product, job or project as the be-all or end all of their existence.
  13. Ignoring the social rewards of life.

It’s easy to dismiss this book as a fantasy because most of us don’t have the vision, or the nerve or the self-discipline to try and apply the principles Ferris espouses. We can only dream of crafting an entrepreneurial lifestyle working four hours a week where big cheques still routinely appear in our bank accounts.

But there are lots of interesting anecdotes and great ideas in this book that anyone can put to good use. I plan to read it again carefully on my own time and make a “To Do” list of strategies I can implement.

My goal? Work less and earn more until I am really ready for full retirement!

You can buy both used and new copies of The Four Hour Work Week on Amazon. The hard cover edition is $16.89.

Timothy Ferriss
Timothy Ferriss

BOOK REVIEW: More money for beer and textbooks

By Sheryl Smolkin

4Sep-moremoneyforbeer

 

“More Money for Beer and Textbooks” by Kyle Prevost and Justin Bouchard is 200 easy-to-read and digest pages of down-to-earth advice about how to finance a post-secondary education without going into massive debt. And the authors do not advocate living an austere party-free existence.

Both are in their mid-twenties and graduated from the University of Manitoba. Kyle is a high school teacher and Justin is the Dean of Residence at St. John’s College on the University of Manitoba Campus. They also blog at myuniversitymoney.com and  youngandthrifty.ca.

They recognize how difficult it is to get a high school or university student to sit down and read a book that won’t be on a final exam — particularly a personal finance book!

That’s why instead of counselling extreme frugality, they look at post-secondary education from the perspective of two guys who wish they knew then, what they know now. They figure they would each be at least $5,000 richer if they had taken their own advice.

They start off by comparing the cost of four years of school living away from home (about $80,000) to living at home (about $34,000). They also run the numbers for a two year college degree ($30,000 vs. $11,000). Nevertheless, they conclude that higher education is and will continue to be an excellent investment in an information-based economy.

When evaluating whether going away to school is a worthwhile investment, they weigh the pros and cons of on and off campus living for students.

One interesting living option proposed is for parents with more than one child attending the same school to consider buying a house with additional bedrooms for renters to help defray the mortgage costs. Prohibitive housing costs in cities like Vancouver or Toronto may make this idea impractical, but it could be a workable solution in smaller college towns.

For kids or their parents who think Canada and provincial student loans are the answer, the comprehensive section on applying and qualifying for student loans and paying them back is an eye opener.

The application process is so complex, the book gives a checklist of 16 types of information to have available before even beginning to complete the online form. And depending on parental income, it is assumed that the Bank of Mom & Dad will make a major contribution to school costs.

Repayment of student loans doesn’t start until six months after the end of university, but interest starts accruing at the end of the final semester. Former students can opt for a variable interest rate of prime plus 2.5% or a fixed interest rate of prime plus 5%. A bankruptcy will not wipe the slate clean but a Repayment Assistance Plan is available in limited circumstances.

The chapter on scholarships and bursaries reveals the surprising fact that every year in Canada about $7-million in free money earmarked for post-secondary education goes unclaimed. There are lots of great suggestions about where to find scholarships and12 scholarship tips anyone can use.

For example, the authors say don’t just Google “scholarships” and apply for the top three like everyone else. The people who really succeed in the realm of scholarships are those who apply EVERYWHERE.

Too much trouble?

Most scholarship applications are similar and once a student has applied to several, he/she can cut and paste the rest with a little creative tweaking. And if the application process is really complicated, the odds are the applicant won’t have much competition.

There are also lots of good illustrations of how scholarship applicants can market themselves. For example, a former McDonald’s employee can emphasize the positive by describing the experience as “building practical business and communications skills in an entry-level position while learning how to contribute positively to building a team atmosphere.”

Providing references with a summary of activities and attributes they may not be fully aware of is another great suggestion that could result in detailed and glowing letters of support for scholarship applications.

Trying to keep costs down while still having a good time?

Kyle and Justin suggest students drink at home instead of in a bar to improve their “booze-to-dollar” ratio. They can also score free soft drinks and save money each time they offer to be the designated driver. For those with the space and inclination, they even suggest making homemade beer or wine can as another way to minimize cash spent on alcohol!

Other chapters deal with summer jobs, student tax returns, credit cards, budgeting basics and the importance of choosing an “in demand” career.

As both educators and recent graduates, the authors are able to strike the right balance between a breezy presentation and delivering lots of useful information. This book can be the catalyst for important discussions between parents and their college-bound offspring.

More Money for Beer and Textbooks can be purchased for $14.40 online at Chapters.

Kyle Prevost and Justin Bouchard
Kyle Prevost and Justin Bouchard

BOOK REVIEW: THE REAL RETIREMENT Why you could be better off than you think

By Sheryl Smolkin

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The Real Retirement by Morneau Shepell Chief Actuary Fred Vettese and Bill Morneau, Executive Chairman of Morneau Shepell was released and extensively reviewed by the media in 2013.

However, I decided to circle back to this book over a year later because it is much more optimistic than many of the personal finance books I have reviewed since January.

Most financial writers seem to be trying to guilt readers into forgoing consumption during their working lives in order to accumulate sufficient RRSP savings to generate 70% of pre-retirement income.

In contrast, Vettese and Morneau present well-reasoned arguments to illustrate that income replacement of 50% or even less post-retirement will result in a “neutral retirement income” (NRIT), i.e. similar patterns of consumption for retirees.

Initially, they note that there are three phases of retirement:

Phase 1: From retirement age to the mid or late 70s or even later if you are healthy you are most likely to travel to exotic locations and pursue expensive hobbies. Therefore your income requirements will be highest in this phase.

Phase 2: In the second phase of retirement you may have diminished physical or mental capabilities. If so, you will travel less and cut back on strenuous activities. Therefore you will spend less money.

Phase 3: In the last years of your life you may be more physically or mentally impaired. You may need to be in a nursing home, or if you are wealthy enough, in an upscale retirement home with nursing care.

As a result, planning to spend more in the first decade of retirement will not necessarily mean that you will run out of money before you run out of time.

I thought it was particularly interesting that when considering available resources that can generate retirement income for Canadians, unlike many other personal financial writers, the authors also factor in the value of “Pillar 4 assets” including real estate, business equity and non-registered savings.

They use the following population breakdown in their calculations:

Income Quartile Average total income (couple)
Quartile 1 $29,000
Quartile 2 $53,000
Quartile 3 $78,000
Quartile 4 $110,000
Quartile 5 $204,000

The bottom quartile is dropped out because it is assumed that government benefits such as CPP, OAS and the GIS will provide better than average income replacement.

For the most part, Quartile 5 is also excluded since a couple with an income of over $200,000 has typically saved in RRSPs and has other Pillar 4 assets that can augment retirement ravings.

Vettese presents an example of a couple in Quartile 3 with $78,000 in annual income at age 65 and assumes they saved 6.5% annually in an RRSP from age 30 until retirement, Once their RRSP balance is converted to a RRIF at age 65, including government benefits they will have an income after retirement of $48,600/year.

Although retirement income for this couple is just 62% of their pre-retirement income, they no longer make RRSP and CPP contributions; have EI deductions and other employment costs; and pay a mortgage or child-raising costs. Their income taxes are also much lower.

The net result is that they have $14,000 more in disposable income to spend post-retirement! Although each family’s financial situation differs, the authors conclude that an NRIT which equalizes consumption before and after retirement generally only requires about 50% of pre-retirement income.

A calculations using a couple in Quartile 4 ($116,000 before retirement) reveals that the NRIT is just 44%. Furthermore, they can achieve their NRIT with 35 years of RRSP contributions equal to 3.5% of household income. And in general the higher the income level, the lower the NRIT.

This book is an interesting read because it presents a different perspective on the perennial questions, “How much will I need in retirement?” and “How much do I have to save to accumulate the amount I will require?”

While Vettese and Morneau suggest the answers to these questions may be “less than you think,” it doesn’t mean you don’t have to save at all. And all of the scenarios assume you retire free of mortgage and other debt. They also presume a drop in employment expenses and taxes payable that may not apply in your situation.

But if you thought the only thing you have to look forward to is Freedom 75, reading this book will cheer you up. Retiring at age 65 may in fact be a perfectly reasonable objective and you might even be able to afford a nice annual vacation or two while you are still well enough to travel.

The Real Retirement can be purchased online from Chapters for $15.64.

Fred Vettese
Fred Vettese
Bill Morneau
Bill Morneau

BOOK REVIEW: HOW NOT TO MOVE BACK IN WITH YOUR PARENTS

By Sheryl Smolkin

10Jul-carrick

The same day I was planning to review “How not to move back in with your parents: The young person’s guide to financial empowerment,” the author and Globe and Mail personal finance columnist Rob Carrick wrote a column revealing how difficult it is for students to get summer jobs to pay for their education and quantifying the cost of post-secondary study.

He cited the Yconic/Abacus Data Survey of Canadian Millennials, conducted for The Globe and Mail earlier this year of 1,538 young people aged 15 to 33. The study found that just over one-third of young people worked more than 30 hours per week at their last summer job. Another 23 per cent worked less than 30 hours at the same job, while the rest were either working multiple part-time jobs, looking for work or taking summer classes.

According to the survey, earnings from summer jobs and other savings totalled less than $2,500 for 46 per cent of students prior to starting college or university, while another 23 per cent had $2,500 to $5,000. However, a year of undergraduate education away at school including tuition, books and living expenses can easily cost $20,000 or more.

That’s why the information in Carrick’s latest book is so valuable. Every new parent should get a copy when they leave the hospital with their precious bundle of joy and beginning at a young age children should be taught the basic principles of financial literacy outlined in the book.

The first chapter discusses sources of funding for college or university and the basics of Registered Educational Savings Plans (RESPs). It is important that new parents understand that the combination of government grants and compounding mean that by opening an account in their child’s first year, saving for a college education becomes almost painless.

He also zeroes in on avoiding the debt trap and the perennial student dilemma: go to school at home or go away to school? He suggests that if the out-of-town program is going to make the student more successful or give him/her the edge in building a career, the additional cost can more easily be justified.

Successive chapters deal with banking, saving, budgeting and the pros and cons of buying a car. Later in the book he looks to the future and covers off the financial implications of buying a home; weddings and kids; and, insurance and wills.

Every chapter has a useful hot list. Examples are:

  • Tips for saving money in your student years
  • Expert tips on building a solid credit rating
  • Five rookie financial mistakes to avoid
  • Ten things you need to know about your company pension plan
  • Top mortgage tips for first-time buyers
  • Top reasons not to buy mortgage life insurance from your bank

Regardless of how well parents and their offspring plan and save, Carrick recognizes that kids may need to move home for some period of time when they are out of work or looking for a job. In fact he did so himself after he finished university.

In those circumstances, parents will have to make “boomerang decisions” like:

  • Whether they should charge room and board
  • Whether to provide some day-to-day spending cash
  • Whether to push their child to take any job you can get.

But kids also need their part by acting like adults, making non-financial contributions and keeping parents updated on their job search. Recognizing that parents may have useful contacts and advice can also help to avoid friction.

The principles of good money management for students and parents Carrick discusses are not new. However, they are introduced and packaged in a way that makes sense for both cohorts.

It’s well worth the couple of hours it will take you to read the book and a good reference you can dip into from time to time in the future when your family is at an age and stage where specific information will apply.

The book can be purchased for $16.57 online at Chapters.

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