By Sheryl Smolkin

 

Today we are continuing with the 2014 savewithspp.com series of podcast interviews with personal finance bloggers. I’m talking to Cait Flanders, who blogs at Blondeonabudget.ca.

In 2011, Cait had $28,000 worth of debt. To stay accountable throughout her debt repayment journey, she decided to start this blog. She paid off the last dollar just under two years later and today she’s going to tell us how she did it.

Cait lives in the Vancouver area, works full time from home as the managing editor of Ratehub.ca and is a contributor to Gale Vaz-Oxlade’s blog, The Globe & Mail, The Huffington Post Canada and Tangerine Bank’s blog.

Hi Cait, and thanks for joining me today.

Oh, thank you so much for having me.

Q: Cait, before you started this blog you had $28,000 in debt. How did that happen? Was it as a result of accumulated student loans?
A: No, I actually never had a lot of student loan debt. To be perfectly honest a lot of it was consumer debt. For years and years I was just swiping my credit card for anything that I wanted to do or see.

Q: You paid off your debt in just under two years, how did you manage that?
A: I literally had $100 in my bank account and it had to last me for six weeks. So I moved home for six months and from that moment forward just lived what I jokingly called “a very boring life,” saying “no” to everything. The only fun thing I let myself do was go for coffee with a friend which was $4 or $5 instead of $50.

Q: So, you wrote about your journey to solvency on your blog and you still post your monthly budget and goals. How have your family and friends reacted to this high level of disclosure about your financial affairs?
A: That’s actually a really good question. I grew up in a house where my family talked about money very openly, probably every day, so I think my parents love it in the sense that, it’s cool to see that I’m continuing that now and just taking those conversations online.

No one has ever said anything about me posting the numbers but I’ve recently made the decision that I’m going to stop posting them because I’m finally starting to realize that it could actually be pretty dangerous. It could lead to issues like identity fraud or theft. So I’m going to do budgeting a little bit differently going forward.

Q: Since you’ve paid off this significant debt, how has your life changed?
A: I’d say the biggest change is I’m no longer stressed all the time. Not having debt gives me much more freedom. I probably let my lifestyle get inflated a little bit since then because when I was paying off my debt I was sometimes putting up to 50-55% of my monthly income toward debt repayment. That’s not a sustainable budget. After two years of realizing that I don’t need all kinds of fancy things or outings to make me happy, life changes.

Q: In addition to blogs about reducing your personal debt, what other subjects do you write about?
A: On my own blog I’ve written about everything from moving, living in other cities, some travels, and sobriety. I write for the education section of the Globe and Mail about every eight weeks and more recently I’ve been talking about minimalism on my blog.

Q: How many hits do you get on your blog each month?
A: Right now I’m probably averaging between 80,000 and 110,000 page views a month.

Q: Wow. That’s incredible.
A: Yeah. It’s crazy. Fifty per cent of that is usually from Canada and maybe 35 per cent is from the U.S. The rest is divided between the UK, Australia and I even have readers in South East Asia which I think is really cool.

Q: So what have you done to promote your blog? Why do you think your readership is so high?
A: Personally, nothing that I can think of. I love talking to people on Twitter. I reply to every single comment that goes up on my site. There has also been press along the way like stories that The Globe or The Toronto Star have picked up. That obviously brings in more people. But no, I haven’t personally done anything.

Q: How long have you been writing the blog?
A: Technically, in October, it would be 4 years.

Q: What have some of the spin offs been?
A: Everything has changed in my career. When I first started the blog, I found a New York personal finance site for women looking for an editorial intern, I asked if someone from Canada could apply and they said that they’d love to have me. That taught me everything I needed to know about being an editor of a website.

Then my current boss Alyssa, at Ratehub.ca who is a blonde on a budget reader offered me a job in Toronto with the company. There have also been other freelance jobs and my relationship with Gale Vaz-Oxlade. She’s just the most incredible mentor and I write for her site. But her friendship, has been one of the greatest and most unbelievable spin offs from my blog and other writing.

Q: Do you actually have to go to an office for Ratehub.ca or do you work from home?
A: Originally I moved to Toronto for 8 or 9 months, just to really get to know the team and build up my position in the company. Then I moved back to Vancouver where I work from home.

Q: In early July you announced you’re embarking on a one-year shopping ban. Why?
A: There are a few reasons. One day I had this epiphany. Even though I’ve always felt like I was a minimalist, I had this moment where I was trying to open my can opener drawer and I couldn’t find anything in there. I just had this freak out that I actually have way more stuff than I probably need.

Then I started thinking that I wasn’t getting anywhere with my current savings and financial goals I realized that that was because I was spending a lot of money on things that probably didn’t really matter. Although I’ve been really good with my money for the last few years I do think that there is always room for improvement.

I think the ban is going to be difficult at times but I just want to challenge myself and learn and grow from that exercise.

Q: So tell me what the rules are of the shopping ban. Obviously you have to pay your rent and buy food and go out occasionally.
A: I have to pay the bills and get groceries. I’m keeping my car so I have to get gas and pay insurance, and I’m giving myself a small recreation budget. It’s no clothes, no shoes, no electronics – things that not all girls buy but some do. I was always bad for picking up nail polish. I don’t need any more decor items in my home. It’s just that kind of stuff.

Q: So, if the one year ban is successful, what comes next? Are you thinking about a book or is there a major purchase you’re saving up for?
A: I think a book is something that all writers want to accomplish in their career but that has absolutely nothing to do with the ban. I haven’t really announced this but when it’s over my goal is that I’ll have money saved so I can take an extended trip to the UK.

Q: If you had one piece of advice for someone who is deeply in debt and wants to turn things around, what would it be?
A: I don’t think everyone needs to put 55% of their income toward debt repayment like I did, but I think just facing up to the numbers is key and then making a plan so debt repayment is a priority.

Q: Thank you very much for talking with me today, Cait.
A: Oh, thank you so much for having me.

—
This is an edited transcript you can listen to by clicking on the link above. You can find the blog Blonde on a Budget here

By Sheryl Smolkin

It’s October already! How time flies. Here are some interesting posts from some of our favourite, always prolific personal finance bloggers.

On Balance Junkie, Tom Drake discusses options for Banking on Your Mobile Phone. There are smartphone apps to run your business, create a budget, check your bank account and set up mobile payments.

How Behavioural Biases Kept Me From Becoming An Indexer is a confession from Boomer & Echo’s Robb Engen that it’s tough to sell a portfolio of high performing winning dividend stocks – his “babies” that he has nurtured through a five-year bull market. Nevertheless the more he reads about, writes about, and teaches others about investing, the more he is convinced that convinced that passive investing (indexing) is the right approach.

4 Questions to Ask Before Buying a Mutual Fund by Our Big Fat Wallet’s Dan Wesley include how the fund has performed as compared to other funds and the costs of ownership. Like Engen, he concludes that if an actively managed fund can’t beat the index, you’re likely better off with a low-cost index Exchange Traded Fund (ETF).

Whether you are a snowbird planning winter away from Canada’s cold climate or dreaming of a one week all inclusive getaway, take a look at Frequently Never Asked Questions for your Travel Medical Insurance on Bank Nerd. Did you know that in general, an emergency due to a pre-existing condition is not covered?

And finally, on Retire happy, Sarah Milton addresses the question Should New Canadians join a Group RRSP? She agrees that RRSP accounts are intended as a vehicle for retirement savings but says that doesn’t mean they only have value if you plan to retire in Canada.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

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.

By Sheryl Smolkin

As I write this, Summer is definitely over. The nights are getting chilly and the tree on our front lawn seems to be dumping a never ending volume of leaves.

If you are offered something for free it seems to always end up costing you money. In Free is a Good Price (but still can be expensive) Big Cajun Man because they have Home Depot credit cards, he and his wife are now victims of yet another massive personal information breach, which may cause them financial Issues in the future. As a result, he got free Equifax credit monitoring for a year, but the services were not really free because his identity is now in the hands of “dastardly thieves.”

Robb Engen asks the question Should You Pay Off Your Partner’s Debt? in Boomer and Echo. The decision to pay off a partner’s debt shouldn’t be taken lightly, as it can lead to resentment or even divorce if the couple is truly financially incompatible. Nevertheless, he and his wife pooled their resources and their finances became a joint endeavour after they started living together in 2003.

Jessica Moorhouse blogs at Mo’ Money Mo’ Houses. She tackles the issue how to manage family finance when one partner is a freelancer with erratic income. For any of you in a similar situation, her only piece of advice is to communicate, communicate, communicate! Being on the same page is crucial, even when you make money differently or one person makes more than the other.

Be cautious of debt repayment companies says Wayne Rothe on Retire Happy. They will consolidate and pay off your loans and set up a repayment schedule to their own company. He says this is something you can do for yourself or with the help of a friend to avoid paying the additional fees that are part of the deal.

And finally, Choosing Mutual Funds in your Employer Pension? FrugalTrader  says pick the index funds – the ones with the word “index” in the title of the fund. If you follow the indexed “couch potato” philosophy of investing, then you’ll pick 4 funds:

• Canadian Index
• US Index
• International Index
• Bond Index

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

 

A recent policy paper from the C.D. Howe Institute[I] documents how the current mandatory minimum withdrawals from registered retirement income funds (RRIFs) and similar accounts have not kept pace with the increased life expectancies of Canadians – a problem for retired Canadians trying to balance their need for current income against the risk of outliving their savings.

Since 1992, the Income Tax Act has obliged holders of RRIFs and similar accounts to withdraw annual amounts, dictated by an age-related formula, that rise until holders must withdraw 20% each year. But in 1992, the federal government was in a deficit position and needed cash. Now it is close to surplus and the timing of the receipt of those taxes is less critical for the government.

To the RRIF holder, however, the minimums pose a threat. They oblige the holder to run tax-deferred assets down rapidly. Today, people can expect to live much longer after retirement, and real returns on investments that provide secure incomes are much lower. RRIF holders now face serious erosion in the purchasing power of tax-deferred savings in their later years.

Back in 1992, a 71-year-old man who withdrew the annual mandatory minimum from his RRIF could expect to deplete 25 per cent of his initial balance’s real value upon reaching his life expectancy, and had virtually no chance of seeing its real value drop more than 90%. Now, he can expect to live to see his initial balance drop about 70%, and faces a 1-in-7 chance of seeing its real value drop more than 90%.

In the same year, a 71-year-old woman making minimum RRIF withdrawals could expect to deplete about 40% of her initial balance’s real value upon reaching her life expectancy. Now, she can expect to deplete about 80% of it. And she faces a 1-in-4 chance of seeing its real value drop more than 90%.

The study authors William B.P. Robson and Alexandre Laurin admit these are stylized examples that will not apply to everyone. Some seniors, especially those who do not anticipate living long, will want to withdraw tax-deferred savings faster than the RRIF minimums. In the coming decades, more seniors, enjoying better health and working at less physically demanding jobs than their predecessors, will work longer and replenish their savings notwithstanding the disadvantage of losing tax deferrals after age 71.

Couples can delay the impact of the drawdown rules by gearing their withdrawals to the younger spouse’s age. High-income seniors whose incremental withdrawals do not trigger OAS and GIS clawbacks will find the burden of paying ordinary income taxes on them tolerable. As room to save in TFSAs grows, more seniors will be able to reinvest unspent withdrawals in them, avoiding repeated taxation.

For other seniors, however – even if they do have room to reinvest in TFSAs – these forced drawdowns make no sense. These seniors include those whose withdrawals – reinvested in TFSAs or not – trigger clawbacks and other income and asset tests; who find tax planning and investing outside RRIFs daunting; who cannot easily continue working; or, who anticipate sizeable late-in-life expenses such as long-term care.

Moreover, foreseeable demands on individual and public resources suggest we should be encouraging saving, rather than discouraging or at best complicating it. Roughly 203,300 Canadians are now age 90 and older; in about 25 years that number will roughly triple. To the extent future seniors have ample assets to finance their needs – especially those such as health and long-term care that rise with age – all Canadians will benefit.

Therefore, the  authors of the paper argue minimum drawdowns from RRIFs and similar vehicles should start later and be smaller, or even disappear entirely.

They say that since tax is payable on RRIFs upon the death of the last to die of the account holder and his/her spouse, in a present-value sense, elimination of mandatory minimum withdrawals would have no significant fiscal impact for the government. Elimination would also have the additional benefit of removing the need for future updates as longevity, yields and possibly other circumstances change again.

Table 1 below illustrates how the RRIF minimum drawdown schedule could be modified to reflect both the increased longevity of Canadians in 2014 and revised interest rate assumptions.

[I]  This blog contains excerpts from the C.D. Howe Institute report Outliving Our Savings: RRIF Rules Need a Big Update:

Age	Current RRIF Prescribed Minimum Withdrawal	RRIF Minimum Withdrawals to Replicate 1992 Account Depletion Probabilities
71	7.38	2.68
72	7.48	2.72
73	7.59	2.76
74	7.71	2.80
75	7.85	2.85
76	7.99	2.91
77	8.15	2.96
78	8.33	3.03
79	8.53	3.10
80	8.75	3.18
81	8.99	3.27
82	9.27	3.37
83	9.58	3.48
84	9.93	3.61
85	10.33	3.76
86	10.79	3.92
87	11.33	4.12
88	11.96	4.35
89	12.71	4.62
90	13.62	4.95
91	14.73	5.36
92	16.12	9.48
93	17.92	10.54
94+	20.00	11.76

Source: Outliving Our Savings: RRIF rules need a Big Update: C.D. Howe Institute

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[1]  This blog contains excerpts from the C.D. Howe Institute report Outliving Our Savings: RRIF Rules Need a Big Update:

By Sheryl Smolkin

I recently put together a list of 40 highly-regarded but very different personal finance blogs and this week Best from the Blogosphere taps into this resource to bring you some new voices.

Switching careers is a life-altering decision, and one that needs to be thought through with care. The gals at Frugalista Finance have been there and done that. In Careers 101: Planning for a career change, they compile a step-by-step checklist to help you make sure you’re on the right track to career bliss.

If you are lucky enough to have a defined benefit pension plan, you may wonder if there is any point also belonging to the Saskatchewan Pension Plan or contributing to a personal registered retirement savings plan. The author of the blog Use RRSP with DB Pension? on “Blessed by the Potato,” says the answer depends on a few factors, chief amongst them your expected tax rate in retirement versus your tax rate now (or in the near future if you choose to contribute now but defer the deduction).

Have you been waffling about finding a financial advisor? Sandra Schmidt, an advisor with Sun Life in Vancouver says there are five financial planning milestones an advisor can help you prepare for:

• Buying your first home.
• Merging your finances.
• Starting a family.
• Setbacks.
• Retirement.

Dan Bortolotti is an investment advisor with PWL Capital in Toronto and author of the award-winning blog Canadian Couch Potato: Your complete guide to index advising. While Dan is well known as an advocate for using exchange traded funds, he readily acknowledges implementing such a strategy is more complicated if you and your partner have several accounts.

The Model portfolios he typically recommends are ideal for investors who have a single RRSP account. But life isn’t so simple once you’ve accumulated a significant portfolio. Chances are you’ll be managing two or three accounts, and if you have a spouse there may well be a few more. In Managing Multiple Family Accounts he says it’s generally most efficient to consider both partners’ retirement accounts as a single large portfolio.

And finally, in order to enhance their income, many people opt to get a part-time job in addition to their regular day job. Nelson Smith on Financial Uproar mines twitter postings to come up with a humorous series of tweets he calls How Not To Get A Part-Time Gig. Bad grammar and spelling certainly don’t help these people make their case.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

A CIBC poll conducted by Nielsen reveals that younger Canadians are more optimistic about their retirement and ability to save but they are less likely to be taking action. The poll also found that expectations of older Canadians fall dramatically.

Thirty per cent of Canadians aged 18-24 say they expect to live better in retirement than they do today but the number falls to 17% for 25-34 year olds and continues to drop to three percent of those aged 55-64.

Despite their optimism, younger Canadians are less likely to have started saving. Forty percent of 18-24 year olds and 23% of 25-34 year olds say they have not yet started saving for retirement, compared to just 16% of Canadians overall.

The poll results suggest that although younger Canadians are positive about their future retirement plans, they may be relying too much on time to meet their retirement goals and not taking necessary actions now that could help them realize their goals.

“Time is on the side of younger Canadians who have many years to retirement, but that’s only an advantage if you take action and use those years to start accumulating savings,” says Christina Kramer, Executive Vice President, Retail and Business Banking, CIBC. “While it’s not surprising that younger Canadians are optimistic about how they expect to retire, the fact that so many people nearing retirement aren’t as hopeful speaks to the importance of having a financial plan in place earlier on.”

The poll also revealed that the majority of Canadians (58%) believe it is still possible to put money away each month and retire in their 60s, particularly 18-24 year olds (71%), and to a similar extent, 25-34 year olds (68%).

This is a positive finding, according to Kramer. “Considering how often we hear talk of the increasing cost of living, it’s good news that so many Canadians, especially younger people, still think saving for retirement is achievable,” she says. “The key is to make a plan and take steps to begin saving – the sooner you start putting money aside and earmarking it for your retirement, the longer you’ll have for your money to grow.”

Advice for focusing on retirement savings

• Talk to an advisor: Meet with an advisor to understand your options, and work with them to develop a plan that can help you in managing multiple financial priorities and staying on track over the long term.
• Contribute regularly: Set up a regular investment plan to automatically withdraw smaller amounts throughout the year, rather than trying to find the funds for a large lump payment at the deadline.
• Save at work: Many employers offer group retirement savings plans, defined contribution plans or the Saskatchewan Pension Plan to their employees and top up employee contributions by a specified amount. Save at work and take advantage of this free money.
• Don’t lose sight of the longer term: While it is important to address immediate financial needs such as debt reduction or saving for a large purchase, it is equally important to keep future goals such as retirement in sight. 

The Saskatchewan Pension Plan is a defined contribution retirement savings plan open to all Canadians. If you have RRSP contribution room, you can save $2,500/year or transfer in $10,000 from another RRSP. In 2013 the SPP balanced fund earned 15.8% and this fund has average a return of 8.1% since it started in 1986. For more details about the plan and how to enrol, see the SPP website.

By Sheryl Smolkin

I’m back at my desk after a week in Orlando with my daughter’s family, including our two year old granddaughter. While Disney and pool time were lots of fun, I’m not sorry to return to late summer weather in Canada. In my book, clear skies and 20 degrees is as good as it gets.

As the new the business year kicks off,  Best from the Blogosphere gets back to some retirement basics. How much do you need to retire? When can you afford to retire? Where do you want to retire?

In How much you need to save for retirement,  GetSmarterAboutMoney.ca says how much you need to retire depends on your age, your lifestyle and the amounts you will receive from government benefits. There is a useful link to a calculator from Service Canada to estimate your income in retirement and seven tips for last minute savers.

While the best known vehicles for retirement savings are Registered Retirement Savings Plans and defined contribution plans like the Saskatchewan Pension Plan, for the last five years Canadians over18 have also been able to open tax free savings accounts.  My Own Advisor’s Mark Seed reminds us of some of the very best things about the TFSA.

Many people have been diligent about saving and accumulated significant amounts, but they are still apprehensive about retiring and dipping into their savings. Boomer & Echo’s Marie Engen answers the question Can I afford to retire? for one couple. She says their challenge is to shift from savings and asset gathering mode to spending mode  — something even the greatest savers have the most trouble doing.  As a result, they may needlessly deny themselves a pleasurable retirement.

Donna McCaw says on Retire Happy that delayed retirement is a retirement plan. In other words, larger numbers of Canadians are choosing to work longer because they like their jobs or they need the money. She quotes D. Banda of the American Association of Retired persons who claims, “Older workers are changing the workplace to an extent women did 30 years ago when they started entering the force in greater numbers.”

And finally, where you retire can have a significant impact on both your finances and quality of life. In his MoneySense blog Financial Independence, Jonathan Chevreau says you should test out the retirement lifestyle in your community to ensure it is a good fit. He concludes that where he lives in Long Branch, Ontario meant an hour commute each way when he worked in downtown Toronto, but it’s a perfect retirement haven.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

 

 

Hi, as part of the SavewithSPP.com continuing series of podcast interviews with personal finance bloggers, today, I’m talking to Tom Drake, author of the personal finance blogs Canadian Finance and Balance Junkie. He also partners on three other sites and writes guest posts on several others.

Tom lives with his wife and two boys in Edmonton. He’s a financial analyst for all of the Sobeys stores west of Ontario. He’s always looking for ways to reduce any expenses, while continuing to save money, in part because his wife is a full-time homemaker.

Welcome Tom.

Hi Sheryl, thanks for having me here.

Q. When did you start blogging Tom?
A. I started in early 2009. I hadn’t really thought about my personal finances too much prior to that. I was never totally terrible with money, but in about a six month span, we got married, and soon after that, we were expecting our first child, and we were also looking to buy a house when the market dipped in early 2009. So those three things kind of put personal finance right at the forefront in my mind.

Q. What were your goals for the blog when you started blogging, and have they changed over time?
A. Well, they have a little. When I first started, it was certainly more about the three major events that I’ve already mentioned. Nowadays, I try to cover as many personal finance topics as possible because through Google searches and even people emailing me directly I discover a lot of topics that I can kind of help them with their own personal finances, even if it’s not something that I’ve had to deal with myself.

Q. How frequently do you blog?
A. Lately it’s been about two or three times a week on the “Canadian Finance” blog. I have multiple blogs, so I’m probably doing something every day. I also post one to two times a month on “Balance Junkie,” and soon I’ll be writing on “Retire Happy” as well.

Q. What other blogs do you have?
A. Well, within Canada, it’s the Canadian Finance blog and Balance Junkie and I’m also a partner with Jim Yih on Retire Happy.

Q. To what extent is there an overlap between the topics that you would feature or write about on your own blog and that, for example, you or Jim or his other bloggers would post on his blog?
A. Well, Jim Yih is very dedicated to the retirement niche, which I honestly haven’t thought about it much. I save money in my RRSP and have savings in my TFSA as well, but I don’t have a huge retirement planning goal right now. So I don’t cover those topics as much. So I’d say my blog is about more general personal finance issues and his is very targeted on retirement issues.

Q. So what will you be writing about on Retire Happy?
A. On Canadian Finance, I cover a lot of tips on how to save money, reduce your utility bills and such. Most of the people who read Retire Happy are beyond that, and they’re looking for ways to use their money better. So I’ll probably be covering things like making sure that your credit card has a decent rewards plan and products like TurboTax. Just about anything that can help people use products that are out there and add something a little more than just retirement to that blog.

Q. Now, you say that retirement hasn’t been your focus as yet. May I ask how old you are?
A. Just about to turn 37 this week.

Q. I see, well, you know what, you’re getting closer to that break point. I think 40 is when the light goes on.
A. Yeah, exactly. I do save a decent amount. I just don’t have a full retirement plan. I don’t know if I’m going to retire at 50 or 70 at this point.

Q. Unlike Tim Stobbs who says he’s retiring at 45.
A. Oh, that would be nice, but I’ll say 50 at the earliest.

Q. There’s probably over a dozen well-known personal finance bloggers or more in Canada. What’s different about your blog? Why do you think it’s a must read?
A. Well, I think with any personal finance blog, readers are going to gravitate to someone that kind of fits their situation. So as a family man in my mid-30s, I get a lot of readers that sort of fit that same mold. Also, archived articles from other staff writers I have had from time to time add a different dimension.

Q. How many hits do you typically get for each blog?
A. I don’t really look at it per post. So much of it is search traffic. I get a few thousand in a day. But as a total network of all the sites that I own, or am in partner with, we get over 500,000 page views in a month.

Q. Wow. You said all the sites that you own or partner with. You’ve told me about two and about working with Jim. Are there others?
A. Yes, Jim Yih gets all the credit for this model, which is basically taking a 50/50 partnership where we focus on our strengths. I like writing personal finance posts, but I’m not as efficient at it as a lot of these other writers. So the people I partner with are really good writers.

Jim’s been writing for over a decade in newspapers and on his own site, even before we turned it into Retire Happy. I’ve also partnered up with Miranda Marquit down in the States. She can be found pretty much in any personal finance blog that you look at. She’s a big freelancer.

These people don’t want to deal with creating a site, working on things like search engine optimization, how to monetize the site, so they actually make some money from it. Those are more of my strengths actually than the actual writing. So it’s been a good partnership with both of them.

And the third person I’m partnering with is Kevin at Out of Your Rut which is another American blog. Again, he’s more of a freelancer. But he has a site and we work to make sure that site makes money as well and gets the traffic.

Q. One of the more popular blogs you’ve posted related to the Smith Maneuver, which allows you to deduct mortgage interest as an investment expense. Can you tell me how that works?
A. Basically what you need is a re-advanceable mortgage. And what that means is as you pay down your principle, you have a home equity line of credit that will increase. So if you pay $500 down on your principle, your L.O.C. increases by that amount. You can use that line of credit to invest in dividend bank stocks.

The goal is that the stocks you pick have a higher dividend percentage than the interest rate you’re paying on your mortgage. Then you can use those dividends to accelerate your mortgage pay down. So ultimately your debt level stays the same.

A lot of people don’t like that, because you’re not really reducing your debt, and you’re leveraging it for investing. But I’m comfortable with it. The dividends I have are certainly making a higher percentage than what I’m paying on a mortgage currently. Obviously, the risks are the way that the mortgage rates go in the future. But dividends have some preferential tax treatment as well, which also helps.

Q. So when did you implement a Smith Maneuver personally?
A. Probably about 2010. Buying my house in 2009, I got the Scotia STEP mortgage which includes a line of credit. But since I had exactly a 20% down payment, I couldn’t actually borrow anything yet because I hadn’t paid down any additional principle. So after about a year of that mortgage, I started out with the Smith Maneuver, and using that extra equity on the house to invest in stock.

Q. So you’ve got a day job. You’ve got two kids. You’ve got your work with your own blog and others. What advice would you give to busy people to fit it all in?
A. I don’t get a lot of sleep. So if you can do a 19-hour day, you can fit a lot. But otherwise, certainly prioritize family first. Obviously, I’ve got my day job. But as soon as I come home, I spend time with my family. Once the boys are in bed, then I go into business mode and write a blog post or deal with various technical issues and such, up until 1:00am or later.

Q. That’s amazing. I’m one of those people who needs my sleep. So you’ve mentioned a number of people you’ve worked with, but who are your favourite personal finance bloggers?
A. Well, some of the ones that originally got me into personal finances haven’t been blogging as much, like Mike at Money Smarts or Preet at Where does all my money go?

Million Dollar Journey is certainly the reason I started blogging. It’s what got me into the Smith Maneuver too actually, and so I still read that one quite a bit. And I read Jim Yih’s stuff a lot. But Robb at “Boomer & Echo” is certainly a great writer.

Q. So if you had to look at all the time you’re spending on this, are you doing it for love or are you doing it for money?
A. I do make a full-time income with my online business, but my wife is staying at home with our kids. So it’s her full time income basically. It’s worth it to juggle sort of both jobs right now, to allow her that time with the kids.

Q. If you had only one piece of advice to people who want to save money and optimize their savings, what would it be?
A. I think the biggest advice for me is basically to have a positive cash flow. I’m not a big fan of budgeting myself. It’s something I don’t think people always stick to. But the cash flow is just simple calculation to make sure that you’re bringing in more than you’re spending. So you want to make sure you’re saving and covering all your bills. And you certainly want to make sure that you’re not going into a negative cash flow. It’s the simplest way to improve your finances.

Thanks very much Tom. It was a pleasure to talk to you.

Thank you. It was great conversation.

—

This is an edited transcript of the podcast you can listen to by clicking on the graphic under the picture above. If you don’t already follow Tom’s blogs “Canadian Finance and Balance Junkie” you can find them here and here. Subscribe to receive blog posts by email as soon as they’re available.

 

By Sheryl Smolkin

 

“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.