By Sheryl Smolkin

According to weddingbells 65% of weddings in Canada take place between June and September with 25% of weddings taking place in the month of August. I don’t know the month when the most divorces are granted, but according to 2008 data from Statistics Canada (the last year for which it was reported), the divorce rate has been relatively stable for the last 20 years, fluctuating between 35% and 42%.

Now don’t get me wrong. I’m a big fan of marriage. In November of this year we will celebrate our 40th anniversary. But considering what’s at stake, it’s well worth asking your prospective spouse a few important questions before you say, “I do,” so you don’t have to unravel the whole thing a few years later when you realize what you really meant was, “I don’t.”

Here are 10 things I thought of. No doubt you can think of others:

1. Religion: How important is religion to each of you? If you are of different religions will one of you convert? If you have children, in which faith will you bring them up?
2. Children: Do both of you want children? How many? How soon? If you cannot have children together is it a deal breaker? Would you consider adoption if all else fails?
3. Childcare: Did one of your parents stay at home to care for you and your siblings? Do you believe there should be one stay at home parent in each family? If so, which one?
4. Abortion: Legally a woman gets to make the decision if she is going to terminate a pregnancy. She may make this decision in a variety of difficult circumstances including personal health problems, lack of viability of the child or if she was a victim of rape. Do both parties share the same personal and/or religious views about abortion?
5. Debt: There is nothing that can take the shine off a relationship faster than finding out later rather than sooner that one or both partners have significant credit card, student loan or other consumer debt. Be completely open about the state of both of your finances and consider how to get them in order before you walk down the aisle.
6. Money management: How will you pay the family bills? Will each of you contribute the same amount monthly or pro-rate expenses based on income levels? Will you consolidate your finances or maintain different bank accounts? Who will be responsible for managing and reconciling accounts on a regular basis?
7. Pre-nup: Is one of you older or more affluent? Have one or both of you been married before? Is one of you part owner of a family business? In these circumstances your prospective spouse may ask you to sign a pre-nuptial agreement giving up some of your rights on divorce. If so, be realistic and get independent legal advice before you agree.
8. City vs. country: Where will you live? Are you willing to trade off a smaller apartment in the city for a detached house in the suburbs and a daily two-hour commute? Is living in a rural area on a huge lot a priority or is it important to you to be part of an urban community?
9. Household chores: Are both of you neat freaks or is one of you a slob? Who is going to do what in the home and how often? If both of you are working are you open to hiring someone to do regular house cleaning for you?
10. Resolving conflict: Can you discuss your feelings openly? Every couple has disagreements. How will you handle yours? Are you willing to consider counseling if problems arise the two if you can’t handle easily?
    

Relationships are dynamic and the discussions you have before the big day are not cast in stone. But if you build your life together based on open communication and shared values, chances are greater that when you encounter inevitable roadblocks down the road you will find a way to work together to overcome these obstacles.

 

By Sheryl Smolkin

This weekend I happened to be in Ottawa when Run Ottawa was taking place. Over 47,000 runners did 2 km, 5 km, 10 km, half marathon and marathon runs in unseasonably hot weather – over 35°C!  We cheered on my daughter who ran 5 kms and it was also wonderful to see so many parents and very young children running hand in hand.

Because Canadian summers are so short, we all want to take advantage of them to do as many outdoor sports and activities as possible. So in this week’s Best from the Blogosphere I direct you to blogs/articles offering safe summer exercising hints.

In 8 tips for exercising in summer heat , Joe Decker advocates staying hydrated, wearing loose, light-coloured clothing and replenishing your electrolyte and salt intake while exercising.

Summer fitness dos and don’ts by Corrie Pikul suggests that you don’t protein-load before your workout because too much protein before a sweat session could elevate your basal temperature, making you feel even hotter. She says you are better off saving the protein bar for after your workout, when it will help you rebuild muscle.

Love Your Summer Workout: 10 Motivation Tricks by Hallie Levine Sklar recommends that you find a shady route if possible and try to walk, run, or cycle on dirt or gravel paths, since asphalt and concrete tend to radiate heat and reflect the sun’s rays, making you feel warmer.

Carolyn Williams  in 5 tips to keep you working out all summer long says a fitness buddy will help keep you from getting distracted by all the other tempting activities summer has to offer instead of exercising. She reminds us to stretch before running to help avoid injuries and set summer goals so workouts become more meaningful.

And finally, 24 tips for a fitter summer vacation by Kissairis Munoz gives lots of hints for healthy summer travel including try to avoid adding in extra meals to compensate for jetlag, beware of buffets and plan a getaway around a fitness event or competition like thousands of visitors to Ottawa who ran this past weekend did!

By Sheryl Smolkin

Today I’m interviewing Lorna Hegarty for savewithspp.com. Lorna has been the President of LCH Resources Ltd. for almost a decade. She has an international consulting practice in human resources, executive coaching and training as well as being a published author. She co-authored The Wealthy Teen with her daughter Carly when she was 15 (she is now 24), and the third edition was recently released.

Q: Writing a book is a serious undertaking. What motivated you to write and update The Wealthy Teen twice?
A: The reason for writing The Wealthy Teen was that as I was raising my two boys I noticed there was such a difference between how the two of them handled money. One would rush and spend his allowance as quickly as possible and the other one would save it. We had conversations around how to handle money and how to save money. I always let them make their own choices. When my daughter Carly came along, there was another way of looking at money and values and how to, as a parent, influence her to think about saving and spending money. I started taking some notes and ended up turning them into a book.

Q: What does wealthy mean to you? Is it all about the money?
A: Not at all. There are so many different ways to be wealthy. The true meaning of wealth is to be grateful and respect the gifts that you have. You can have wealth if you’ve got happiness, health and great relationships, spiritual connections, or creativity. If you are a teen that is   wealthy, you understand and appreciate these gifts.

Q: Your book is not a traditional personal finance book. In fact, you don’t really start talking about accumulating, managing, and earning money until the second half. Why do you begin by having parents and children work through their attitudes about money?
A: Well, money is a really personal concept and it begins with the history of how you were brought up to view money and how money conversations happened in your home. That’s why the first part of the book is dedicated to why you think the way you do, where it came from in your history and what assumptions you have that could be correct or incorrect. I offer an  opportunity for parents or mentors to write down where their views and thoughts about money came from to help them work through the book with their teenager or any other person.

Q: Kids often resist direction from their parents. How can parents engage their children in a dialogue in order to educate them about good saving and spending habits?
A: Well, for me, the best way to engage my children was to tell them stories of how I grew up with money. An example was when I was 10 years old I wanted to purchase a dog from my neighbor. They had a litter, and the dog cost $70. My parents were smart enough to say that I could have the dog but only if I earn $70. So I joined Regal Gifts. I got a few catalogues and pretty much through selling cards and wrapping paper door to door and to friends and family, I was able to raise enough money to buy the puppy. This approach is something I taught my children — they need to really work hard to get what they want.

Q: How soon is too soon? At what age can parents start teaching their children about money?
A: Well, I like the physical aspect of money. I like that I can hold it, I can put it in my wallet, I can see how much I have left on me. For example, if a child does a chore, something easy like cleaning up, you can reward them with a little bit of cash. When would that be? When they’re three or when they’re four. I’ll give you an example.

As I was growing up, we had a stone driveway and it was a really big task in the spring to take the stones that had been shoveled out with the snow onto the grass and put them back onto the driveway. From a really young age, I would say three or four, my parents showed me what to do to take the rocks off of the grass and put them back onto the driveway, and I would get paid 25 cents for doing that and for other little things that did.

I could see the money that we put into a jar and I could see that it was growing. I think the earlier the better when it comes to teaching children about money.

Q: How important are goals? When should young people start setting goals and objectives?
A: Well, I’m going to say pretty much the same thing as the last question you asked — as early as possible. Also, it’s really important to make goals fun. As an example, let’s just say Father’s Day is coming up, so we’re going to set a goal of spending $10 and we’re going to make something special for father. That would involve a trip to the dollar store to look for materials so the child can have some fun with the adult and make a gift that says “I love you.” When a realistic goal like this is achieved, the child and the adult can celebrate the accomplishment.

Q: You discussed developing “E” potential in your book. What does that mean and why is it important?
A: Well, “E” potential is gaining entrepreneurial capability which is really open to anybody. Some of the examples that come to mind are setting up a lemonade stand or selling books or babysitting at a young age before a teen can get a regular summer job, but being aware that they have the potential to earn money. It doesn’t mean they’ve got to work Monday to Friday, 9:00 to 5:00.

Q: Tell me about the principle of the five baskets. How can it help kids to manage their money?
A: Okay, well, savings is 10%, fun is 10%, charity is 10%, investment is 20%, and essentials are 50%. In the book, I suggest having separators or little baskets to put their money in. Of course, young children may not have all the baskets, because they don’t have to pay for essentials like shelter, food or utilities.

Again, I think it’s so important for kids be able to actually handle money when they are younger so they can see physically where it’s going and how it’s being accounted for. Now, for older teens, obviously, bank accounts are ok.

My daughter still uses five different banking accounts to manage her money so obviously, it isn’t sitting in jars at home. After all these years she finds that it is a really good way of watching how her vacation fund is growing and planning where she will go.

Q: How successful have the strategies you describe in your book been in educating your own three children about money?
A: That’s a good question too. They’ve pretty much followed the rules and the principles from The Wealthy Teen. Carly is very, very disciplined. All three of them have always got their eyes and ears open for something they could do that would be fun, exciting, and interesting but also earn them some extra money.

Over the years, I would say that they’ve all pretty much taken the pieces they really believe in and they’ve had fun doing it, seen results, and incorporated them into their own and their partners’ lives.

Q: What reactions have you had from both mentors and young people who have read your book and worked through the exercises?
Well, I’ve had really good feedback. I’ve had couples tell me that they’ve used The Wealthy Teen as a discussion guide before they got married, to have a conversation about money. I’ve had feedback from readers who have used the system for saving money for school, for a trip to Europe, or for a car. It works if you have the ability to stick with it and save to reach your goals.

Q: If you had one message for adults who want to educate their teens about money, what would it be?
A: My favorite question. I strongly suggest that adults be careful with what and how much they give to their children or their teens so youth will appreciate things much more when they have skin in the game or when they’ve learned something.

In the past, I’ve seen family with children, teenagers, young adults, and they shower their children with designer clothes and the best phones. I would tell them to make sure they are living within their own means and as adults, teach their teens to understand the value of money and let them earn it when they want to purchase something.

 

 

 

 

 

 

 

The third edition for The Wealthy Teen can be purchased from Amazon in paperback editions and for Kindle.

By Sheryl Smolkin

This morning when I took the dog for a walk I saw tulips, begonias, apple blossoms, pansies and rhododendrons and that was just in my own yard. My husband has a green thumb and knows how happy I am surrounded by flowers.

He also grows vegetables, so he and his good friend Russ pour over seed catalogues looking for heritage tomatoes and other delectable treats beginning in September. By March they can’t resist at least a couple of visits to the garden centre.

The official start of the gardening season in Canada is the May long weekend, so many of you have already planted hardy seedlings that you may have started inside under lights. But regardless of whether you have yet to put a spade in the ground, it’s always great to get advice from the experts.

And some avid gardeners like to write as much as they love to grow things. Believe it or not, there was even a Garden Bloggers Conference at the Beverley Hilton in Los Angeles earlier this month. Here is the GBC list of lists (albeit U.S.) of top garden blogs.

• Better Homes and Gardens 2014 Top 10 Gardening Blogs
• Allen Smith’s 10 Great Garden Blogs
• 10 Great Gardening Websites You Must Read
• Top 10 Gardening Bloggers On Pinterest 
• Top 50 Home & Garden Blogs 

Here are some other great gardening blogs we found:

Gardens by Laura of Calgary Gardening Services supports sustainable gardening practices.  In a nutshell, she says her company follows practices that will allow future generations to meet their needs by attempting to protect, restore, and enhance landscapes to provide ecosystems that benefit humans and other organisms.

You Grow Girl was launched by Gayla Trail in February 2000 and has grown into a thriving project that speaks to a contemporary, laid-back approach to organic gardening that places equal importance on environmentalism, style, affordability, art, and humour.

In mid-May, Melissa J. Will, the self-styled Empress of Dirt  wrote about how to start a new garden pond for anyone installing a small (under 1000 gallons – about the size of 10-person hot tub or less) prefab garden pond or other little container pond on a patio or balcony.

For those of you in apartments or condos, balcony gardener focuses on smaller-scale gardening. She says, “My downtown city balcony garden is all about containers. It’s a different garden every year. It’s small. I spend a lot less time pulling weeds and watering. It’s fun, it’s challenging and it’s easy to try new things.”

Nikki Jabbour is part of the blogging team at Savvy Gardening. She has some interesting vertical vegetable gardening ideas to boost growing space, reduce insect and disease problems, and beautify decks and patios. In her veggie plot, she uses structures like trellises, stakes, and obelisks. These support vining tomatoes, cucumbers, squash, gourds, peas, and pole beans. But, she also has a vertical vegetable garden on her back deck and patio.

Finally, take a look at Little Green Fingers: A first-hand account of gardening with kids. Several charming recent posts discuss cake decorating with edible flowers, growing pea shoots with children and how to make ice mobiles.

By Sheryl Smolkin

Whether you have recently purchased a resale home or you have lived in your house for many years, when you view your winter-weary residence in the bright spring sunlight you may be hit by the urge to renovate.

The problem is of course that your resources are limited and you want to make sure that any enhancements you make add value to your home, particularly if you plan to sell your property over the next several years.

The Appraisal Institute of Canada offers the following tips for choosing “smart” home renovations.

1. Choose improvements with long life expectancy: Roofing, energy-efficient heating and cooling systems and windows can provide you with worry-free home improvements for as long as 10 to 15 years. But remember…regular maintenance is as important as the initial investment.
   

2. Invest in modern updates in high-traffic areas: Update the core rooms of your home such as the kitchen and bathrooms. This can be as simple as changing door knobs, resurfacing cabinets, or replacing fixtures and counter tops.
   

3. Don’t underestimate the value of inexpensive updates: A fresh coat of paint, modern lighting fixtures, landscaping or gardening, or upgraded door handles can give your home an updated look and feel – and it doesn’t have to cost a lot of money!
   

4. Consider energy-efficient renovations with a high return relative to cost: Energy-efficient renovations are considered one of the highest paybacks relative to cost. Energy efficiency translates into reduced operating costs over time.
   

5. Be careful about over-improvement: Consider your neighborhood and the expectations of buyers in your area when planning your next renovation project. Investing in an expensive project may be an over-improvement for a home in particular market, and the investment may only be partially recognized by home buyers.
   

6. Think about your personal needs: How much you spend on improvements will depend on how long you plan to live in your home. If you you’re thinking shorter-term, smaller and less–expensive improvements may be your best bet to recover your investment.
   

7. Be sure to get a building/renovation permit: Take the time to obtain the proper building permits from your municipality or appropriate authority. This is a good step to ensuring that the renovation work complies with the building codes.
   

8. Hire a designer, architect, or contractor: Talk to a professional when you start planning your renovation project. They can help you draw up a plan, provide renovation advice, or assist in the construction. This will add to the quality of the renovation and go a long way in preventing cost overruns.
   

9. Consider unique features with care: Unique designs or improvements that are uncommon for a particular market may impact your ability to resell home. This is where the expert advice of a real property appraiser can provide an objective perspective on the marketability of the property.
   

While maintaining or increasing the value of your home are important considerations when you renovate, making the home more livable for your family may be what really matters to you. Nevertheless, keep in mind that quality kitchen and bathroom improvements and a new interior/exterior paint job are the top three renos with the highest rate of return. And decluttering can also help to showcase the best features of your house.

By Sheryl Smolkin

Results of Manulife Bank of Canada’s Debt Survey revealed that nearly one in five homeowners expect to access home equity to supplement their retirement income with 10% of respondents planning to downsize and use the excess equity to provide retirement income.

That got me thinking about what options are available to retirees who want to unlock the value of their home to live on when they stop working.

1. Sell high, buy low
   Of course, the most obvious alternative is to sell your home in a metropolitan area where real estate prices are high and retire to a smaller, less expensive community. For example, it will cost you a lot more to purchase or rent a house in Saskatoon or Regina than if you retire to Rosetown or Wadena.
2. Downsize
   If you own a large suburban property with the traditional three or four bedrooms and multiple bathrooms, you may want to downsize and simplify. Again, the amount of equity you can unlock will depend on where you are currently living, where you want to move and how much smaller you are prepared to go.
3. Rent instead
   Even if you have always owned your own home, you may be ready to let someone else worry about escalating taxes, furnace repairs, mowing the lawn and shoveling snow. Investing the proceeds of sale of your home and renting an apartment or a house can give you freedom from those responsibilities, particularly if you want to be able to just lock the door and take off on short notice for parts unknown.The downside is that you get what you pay for. Quality rental stock is in short supply in many areas and the nicer the apartment or house, the higher the rent. Furthermore, rents will increase over time and you may have to move again when your lease is up. You also will not be able to do structural renovations or decorate a rented property in the same way as your own home.
4. Become a landlord
   Can your single family home be converted into a multi-unit dwelling? If you live in a desirable area and you do a tasteful renovation, the rental income will quickly pay for itself and leave you with a stream of income to supplement your retirement savings.The HGTV show Income Property typically focuses on young couples trying to get into their first home, but there is no reason why a similar strategy cannot work equally-well for seniors who want to age in place. An extra bonus is that if you need live-in care later in life, the apartment can be reclaimed for the use of a caregiver.
5. Home equity line of credit
   A home equity line of credit, or HELOC, is a revolving line of credit secured by your home at a much lower interest rate than a traditional line of credit. The operation of a HELOC is discussed on ratehub.ca. In Canada, your HELOC cannot exceed 65% of your home’s value. However, it’s also important to remember that your outstanding mortgage loan balance + your HELOC cannot equal more than 80% of the value of your home.You must pay at least the interest owing every month and you can also make extra payments of principle at your discretion. We have a HELOC which came in very handy several times when family members bought and sold property and needed funds to finance a purchase before the sale of their previous homes had closed.
6. Reverse mortgage
   A reverse mortgage is a home loan that provides cash payments based on home equity. Homeowners normally defer payment of the loan until they die, sell, or move out of the home. CHIP is the only Canadian financial institution that currently offers reverse mortgages. The Pros and Cons of a Reverse Mortgage are discussed in detail in an excellent guest blog by Tricia French on Retire Happy. Reverse mortgages allow clients over 55 to access up to 50% of their home’s value. Payments from a reverse mortgage are tax-free income, so your income-tested benefits such as OAS and GIS will not be affected.You can repay the loan at any time and the amount you owe can never exceed the value of your property. You and your beneficiaries also will not be responsible for any shortfall if interest rates increase and housing values drop.Nevertheless, interest will quickly grow on the amount you have borrowed and start up fees can be thousands of dollars. A reverse mortgage can quickly erode the money you have available when you eventually sell and therefore the size of the estate you can eventually leave to your children.
7. Sell ‘n Stay
   I recently learned about a new concept called Sell ‘n Stay where seniors can sell their home to an investor and lease it back for 10 years or even for life. Unlike a reverse mortgage, the homeowner can access 100% of the equity in their home. The concept, developed by Real Estate Agent Saskia Wyngaard, is currently only available in Ontario.Market value of the house is determined by comparing sales of similar homes that have sold recently in the same neighborhood. The house is offered for sale through an exclusive listing without open houses or staging. Exposure is limited to buyers who are interested in purchasing an investment property with an in-place A+ tenant.The new owner pays for taxes, insurance and repairs. The previous owner pays market rent of about 5% of the value of the house, renter’s insurance and utilities. Since 2013 Wyngaard has been involved in 15 such arrangements with lease backs of 10 years.

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Whatever method you choose to unlock equity in your home to supplement your retirement, the optimum situation is to pay off your mortgage before you retire. This will give you the most flexibility to plan for life after work without the burden of paying off debt.

By Sheryl Smolkin

For the last week, the images I cannot get out of my mind are the pictures and videos of Fort McMurray burning. Every week on savewithspp.com we post blogs that discuss retirement savings and how readers can fund their life after work. But the major asset most of us are depending on to augment government benefits is the equity in our family homes. Imagine having that wiped out in minutes as you flee to safety.

The only good news has been the incredible bravery and grace of everyone involved from first responders to neighbors to governments at all levels. Also, as the Globe and Mail reports, insurance companies across Canada have already begun deploying mobile response units and flying in personnel to the province from across the country to prepare to assess the damage and issue emergency cheques.

Money will never replace photos albums or family heirlooms, but it will go a long way to help people rebuild their lives. That’s why this week we are going to feature a few things you need to know about insuring your home and your possessions against loss or theft.

In a Toronto Star article, Home insurance: 10 things you need to know, Andrew Wicken says the cost to rebuild your home plays a big role in determining the amount you pay for home insurance. Check with your broker or agent to see if you have guaranteed replacement coverage. This ensures you will receive the amount that it actually costs to replace your home and not the amount on your policy. Not all policies have this coverage and rules vary across insurance companies.

What Every Canadian Should Know About Home Insurance Policies posted on InsuranceHotline.com points out the importance of “loss of use” coverage. If your home is uninhabitable after a claim, then loss of use insurance will help your family manage while your home is being rebuilt or repaired. Hotel expenses, meals, and incidental expenses are covered by this portion of your home insurance policy, typically for a specified period of time or to a maximum dollar amount.

The Insurance Bureau of Canada reminds homeowners that it’s your responsibility to report any changes to your property. Contact your insurance professional before you:

• Renovate your home
• Install a pool or spa
• Set up a home-based business, such as a daycare
• Lease all or a portion of your property
• Purchase jewellery or art.

Keeping your insurance company informed with an accurate and up-to-date description of your home and contents can help speed up the claims settlement process after a loss.

The U.S.- based Hanover Fire & Casualty Insurance Company outlines some ways to save money on your home insurance. For instance things that might earn you a discount include:

• A home burglary alarm system
• Dead bolt locks
• Fire alarms and sprinklers
• Updated heating systems
• Updated wiring and electrical systems
• A home near a fire hydrant or fire department
• A home located near a police department
• Well-structured and maintained stairs, sidewalks, driveways, and entrances

And finally, MoneySense author Gabrielle Bauer describes Home insurance as defending your castle. When buying home insurance, she says you’re almost always better off using an independent broker who deals with a number of insurance companies, so he/she can get you the best price possible. Also, to keep your premiums more affordable, she suggests bundling your home and auto insurance policies together because it could cut 15% off your total bill.

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The Canadian Red Cross is accepting donations for the Alberta Fires Emergency Appeal. Ten banks in Canada are also accepting cash donations. All individual donations will be matched by the Government of Canada.

 

By Sheryl Smolkin

Last year when I wrote about the buy vs. rent dilemma which most of us have confronted at some stage of our life, the five questions I suggested that readers consider were:

1. How big is your down payment?
2. How much house can you afford?
3. Is your job secure?
4. What are your family plans?
5. What if interest rates go up?

All of those things are still important, but in the last year dramatic changes in both the Saskatchewan and Alberta rental and housing markets due to the drop in the price of oil may influence your decision.

For example, a report released at the end of last year from the real estate company Re Max says house prices in Regina and Saskatoon have dipped compared to a year ago because there are more properties on the market.

In Saskatoon a recent flurry of construction activity “has created market conditions modestly favoring the buyer,” the report says. “Currently, there are four months of inventory on the market and inventory is expected to increase as more of these new builds come to market next year.” The study also notes that the average sale price for a home in Saskatoon was $361,000 last year. However, by December 2015 it was $354,000 — a two percent drop.

Moreover, the report found similar market conditions in Regina, where there has been a lot of new construction taking place. “High inventory kept Regina in a buyer’s market throughout 2015,” the report says. Prices also dipped in Regina, by about three percent compared to 2014. An average Regina home was $329,000 last year and that figure has now dropped down to $320,000. For 2016, Re Max predicts that in both cities average prices will likely remain the same as for the previous year.

Recently interviewed on Breakfast TV Calgary, blogger Bridget Eastgaard said, “Assuming house prices stay down as long as oil prices remain low and layoffs continue to happen [in Calgary] which is unfortunate, it will give you more time to save and invest so you can accumulate the down payment you need to get the house you want.”

With Saskatchewan experiencing a similar downturn, her advice will also resonate with savewithspp.com readers. “If you are uncertain about your own job security now is a good time to wait it out and see what happens in the next year,” Eastgaard said.

Fortunately, if you do opt to continue renting in the short or long-term, the Saskatoon Landlord Association says it’s a tenant’s market with vacancy rates doubling in the city over the last year. According to the Canada Mortgage and Housing Corporation, the vacancy rate went from 3.4% to 6.5% from October 2014 to October 2015. Chandra Lockhart, executive officer with the landlord association attributes this glut in rental properties to the large number of new, unsold houses and condominiums that have been flipped into rentals.

That means renters have lots of leverage Eastgaard says. “You can pick and choose. You also have the bargaining chips to negotiate perks like parking spaces, utilities included or even ask for the first month rent free.”

So how do you decide?

If you have already saved a 10% or 15% down payment, it may be an ideal time to buy your first home or trade up. But if you are not quite ready, don’t be in a rush. Lots of great rental stock means you can find a nice place to live and you don’t have to worry that you will be priced out of the market in the immediate future.

 

By Sheryl Smolkin

Selecting a career is one of the most important challenges all of us have to deal with, and it doesn’t only happen once when we graduate from high school. I went to law school and embarked on an initial career as a family lawyer. However, nine years later I moved into pension and benefits law, and as a retiree I have a new career as a journalist. My husband has degrees in electrical, biomedical and software engineering, but spent most of his career in software design.

That’s why I think Bridget Eastgaard’s blog The future you are saving for does not exist on Money After Graduation is a “must read” for you and your kids. She says, “One of the most dangerous things you can do for your finances (and your happiness) is to plan your life under the assumption that everything will remain as it is. It won’t. I think we intuitively understand this, but you don’t know what you don’t know, and that makes imagining anything different extremely challenging. But these perspectives and biases can hinder us by limiting our flexibility to adapt to an ever-changing world. ”

So if you or your child are picking college or university courses or even if you are graduating from high school or with an undergraduate degree, how do you know what skills are in demand now and will still be highly sought four or more years from now?

The truth is none of us has a crystal ball. But you can check out Canada’s Best Jobs 2016: The Top 100 for a start. I’ll bet you’d never guess that the top three jobs on the list are: mining or forestry manager; urban planner and pharmacist. And construction managers, police officers and nurse practitioners are also highly ranked.

Heidi Grant Halvorson in the Harvard Business Review writes that The key to choosing the right career is to find a career that fits well with both your skills and values. She characterizes people in two ways. Those who primarily see work and life goals as opportunities for advancement, achievement and rewards have “a promotion focus.” The rest of us are mainly prevention-focused. We see our objectives as avoiding danger, fulfilling responsibility and being someone people can count on. Halverson believes that understanding our dominant focus can help with career selection.

In How to choose a career that you’ll love, New York Times bestselling author and founder of iwillteachyoutoberich.com, Ramit Sethi says, “The smart approach is to explore ALL the careers you’re interested in, test each to see if you’d really enjoy doing them, and move on to other jobs if they’re not a good fit. It’s kind of like window shopping at a mall. A shirt or pair of jeans may catch your attention. You might even try them on, but you wouldn’t just pick any random thing off the rack and say ‘I guess I’ll wear this for the next 10 years,’” he says.

Getting the chance to try different careers and work environments on for size is one reason why co-op co-op programs including one or more paid work terms are so valuable. An interesting blog on myuniversitymoney.com explores the pros and cons of co-op programs. Author Mr. Harvey is a former co-op student and he says the job hunt seemed to be an endless cycle of applying and interviewing for jobs which was a lot of work and stress on top of his studies. However he agrees that co-op students get lots of experience and many students are offered permanent jobs.

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By Sheryl Smolkin

Today I’m interviewing accountant Dave Trahair for savewithspp.com. Dave operates his own personal finance training firm, and he is also the author of five personal finance books. He offers seminars based on his books to organizations, including CPA Canada and its provincial accounting affiliates. His most recent book is The Procrastinator’s Guide to Retirement: How YOU can retire in 10 years or less, and that’s what we’re going to talk about today.

Q: What portion of the population do you think is 10 years or more out from retirement and not saving enough?
A: It’s hard to pin it down to a specific percentage, but I would say the vast majority of people who don’t have defined benefit pension plans are in that boat. Unfortunately, this type of plan is going the way of the dodo bird, because with the low interest rate environment and what’s happening in the stock market, the people running those kinds of pension plans can’t save enough to fulfill their promise. It’s hard to come up with a precise number, but I bet you 80% of people without a defined benefit pension plan are nowhere near ready, financially, to fund their retirement.

Q: Why do you think so many people procrastinate when it comes to planning and saving for retirement?
A: Well, I think for some, it’s just that they’re bad with money, and they spend more than they make. They run on credit card debt, and they’re never really even thinking about getting their lives under control, financially. For many of the rest of us, even if we aren’t fiscally irresponsible, it’s just that life is expensive.

Think of people in their 20s who have just graduated from university. Many of them are saddled with student loan debt and they are having problems trying to find a full-time job in their field. Forget retirement savings. That’s so far down the road. They’ve got more pressing concerns at that stage in their life.

People in their 30s and 40s tend to do things like get married, have kids, and buy a house. These kinds of activities are very costly and therefore, many people find that there simply isn’t any money, at the end of the day to save for retirement. It’s not because they’re wasteful spenders.

Q: Continuing with the same theme, if you ask most people, they’ll probably tell you they’re tapped out. They don’t have extra money left over at the end of the month. Where can these people find the money to save?
A: That’s a very good question, and one of the key concepts in the book. I always tell people when I’m asked, “What’s the first thing you can do to help get your finances under control?” The answer is to somehow track your personal spending.

For effective financial planning you have to start with what’s happened in the past. That is your personal spending. Once you have a handle on where all the money went in the past, then you can take proactive steps to get your finances under control and probably find some areas where you could cut back and free up some spare cash for your retirement savings.

One of the big problems out there is revolving credit card debt. According to the Canadian Bankers Association, only about 60% of Canadians pay off their credit cards each and every month and, therefore, don’t incur interest charges. That means about 40% of Canadians can’t even pay off their credit cards, which means, essentially, that they’re spending more than they make.

Q: My first thought when I got your book was that it’s a great road map for saving in the last ten years before retirement, but the information is quite similar to most of the personal finance books I’ve read. What’s different about your book? What makes it a must-read for all Canadians and, in particular, those who are only a decade from retirement?
A: Yes, fair question. The first point that I’d make in response is that there is no magic bullet when it comes to personal finance. It’s really pretty basic. You could sum it up in one sentence.

All you have to do is live your life, spend less than you make, and do something positive with the excess money. The problem is most people aren’t doing that. There are books out there that play upon peoples’ wish to get ahead financially, easily or automatically. That’s just taking advantage of readers. The really good personal finance books out there, attack the root of the matter (as my book does) which is that your spending has to be less than your income.

What makes my books different — this one and the other ones I’ve written — is that I give away Microsoft Excel spreadsheets people can actually apply to their own situations. I use the spreadsheets as examples in the book, and then I say, “Look, go to the next step. Download the free spreadsheet, punch in your own numbers, and see what conclusion you come to about your life.”

Q: If readers are approaching retirement with consumer debt and a mortgage, where should they put their money first? Should they hold off on making RRSP contributions until they are completely debt free?
A: Good questions. I would say that it depends on the type of debt. If we believe the Canadian Bankers Association that at least 40% of Canadians have ugly credit card debt, the only thing these people should be thinking about is trying to get rid of that obligation. Forget paying down the mortgage. Forget making RRSP contributions. Even if there is a tax refund on RRSP contributions, they are effectively financing it at a very high interest rate because the alternative would be to pay down their credit cards.

There’s a chapter in the book on four people in that situation, which basically lays out the different options for getting rid of credit card debt. The problem is that it really requires a mind shift. It requires people to change their basic habits and it is really, really difficult to get them to do this.

Once a family has paid off their credit cards, the decision becomes “contribute to an RRSP or pay down the mortgage.” The first observation I would make in that case is that either option is a good alternative. You’ve got extra money, whether you pay down the mortgage or make an RRSP contribution, you can’t lose in either case.

However, with the ultra-low interest rate environment right now and assuming the person we’re talking about is in a reasonably high tax bracket, making $80,000 or $100,000 or more, it’s difficult to beat the huge economic benefit of a tax refund.

Q: To what extent should Canadians planning for retirement take future health and long-term care costs into consideration, and how can they quantify these amounts, for budgeting purposes?
A: That’s a very difficult question to answer and a very challenging thing for many people. We have provincial health plans in Canada, so we’re a lot further ahead than our neighbors to the south. The government plans aren’t perfect, but they’re a good basis for covering many of your health costs.

However, some other areas related to healthcare are not covered by the provincial plans, and this becomes a big problem for couples, say, when one of them has an ailment that requires him/her to go into a long-term care facility or nursing home. That can be very, very expensive. This is when people get into trouble with their finances due to health costs. In a lot of cases, it will be one of the spouses who needs long-term care and the other one is still living in the house, so it essentially almost doubles the family’s living costs.

Many people are able to cover the high costs of long-term care because they bought their home and own it out right. That is why I always encourage people who can afford a home to buy it and pay off the mortgage. Then you’ve got something worth significant money so you could sell and downsize or even take out a home equity line of credit to finance costs related to long-term care.

It really is an individual thing that requires a lot of thought and is difficult to pin down. It’s difficult to budget for retiree health care costs and yet the expenses can be onerous if you’re not prepared.

Q: I noticed you were recently interviewed for the “Me and My Money” column in The Globe and Mail. Your investments are very conservative – a high-interest savings account and guaranteed investment certificates. This is very contrary to what even independent financial advisors usually recommend. Why don’t you hold any equities?
A: I have no exposure to the stock market. That’s because I’m a very conservative accountant. I don’t like losses. I have spent a lot of time studying the stock market. I wrote a book on it called Enough Bull a couple of years ago.

If you look at long-term historical rates of returns, say, for the Canadian stock market, the S&P/TSX composite total return index which includes reinvested dividends, has done fantastically well —  9% per year. The problem is, for many reasons, most people come nowhere near what the ideal index has made.

That’s because they get emotional when the stock market crashes. They panic and sell at the wrong time. They sell low and buy high, which is the opposite of what you’re supposed to do. The other issue is that when it comes to personal finance, who has fifty years to go to retirement? You can’t assume that you’re going to earn the long-term, fifty year historical average rate.

I love fixed income products like GICs because they’re easy to understand; they’re guaranteed if you buy them from a financial institution, like any of the big six banks that are members of the CDIC (Canada Deposit Insurance Corporation); and, you can’t lose your money. The downside of course is they’re not paying very much interest. You’d be lucky to get about a two percent average rate of return.

The problem is most people using the recommended strategy of an investment advisor have a lot of exposure to the stock market. They think they’re making six or eight percent after fees and, therefore, laugh at GICs making two percent, but in many cases, they aren’t earning what they think they are.

Q: At age fifty-seven, you’re less than ten years from the normal retirement date of age sixty-five. Do you have a planned retirement date in mind?
A: I don’t really have a retirement date in mind. I mean, I love most of what I do. My plan is to slow down, do less hours, hopefully do some of the things I currently do, like writing and giving seminars, and earn some money doing that. I plan to slow down but I really don’t have any dreams about stopping work at sixty or even sixty-five, so again, that’s an individual choice.

Q: In closing, if you had one piece of advice for people who are ten years out from retirement, what would it be?
A: Well, first of all, I would say you have got to track your spending. I know it’s boring. I know it’s time consuming. I know not everybody is a specialist or likes dealing with spreadsheets. But that’s the most powerful information you can get because it’s personal. That’s what you need to start with: your family’s personal spending.

Q: Thank you, Dave. It’s a pleasure to talk to you today.
A: Thanks for having me, Sheryl.

 

 

 

 

 

 

 

David Tahair, author of
The Procrastinator’s Guide to Retirement: How to Retire in 10 Years or Less