And before you know it it’s almost the middle of August. I haven’t seen any coloured leaves drifting down…yet. But already the days are getting shorter. This week we feature interesting blogs from top bloggers who kept on writing even when many of us were on vacation.
If you are in your 50s and starting to get really serious about planning your retirement, take a look at Rich at any age: In your 50s by David Aston, Romana King and Julie Cazzin on MoneySense. They suggest that you get a ballpark figure of what you will need; max out your savings; and then, pick the right moment.
Are you still agonizing over whether it makes more sense to save in an RRSP or a TFSA? Then take a look at RRSP Myth – Retirement Income Has To Be Lower For RRSP Benefit by Mike Holman on MoneySmart. He gives interesting examples to illustrate that even where income in retirement is a bit higher than in the earning years, RRSPs will likely still save you some taxes or at worst – won’t save you any tax, but won’t cost you anything either.
Mr. CBB gives advice to a couple with $5,000/month of discretionary income on Canadian Budget Binder about buying their first home. He says they should talk to a financial advisor about retirement savings and life insurance; figure out the size of mortgage they can afford on one income; factor in home maintenance costs before they buy; and understand how to be prepared for emergencies.
Dan Bortolotti writes on Canadian Couch Potato about Calculating Your Portfolio’s Rate of Return. Rate of return calculations fall into two general categories: time-weighted and money-weighted. If a portfolio has no cash flows (that is, the investor makes no contributions and no withdrawals), both methods produce identical figures. He says the key point to understand, therefore, is that any differences in reported returns come about as a result of cash inflows and outflows.
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.
I don’t often review personal finance books because it seems to take an inordinate amount of time to wade through yet another statement of the obvious just to glean enough cogent information to give readers a taste of what the book is all about.
But when I read accolades from the likes of Gail Vaz-Oxlade, Preet Bannerjee, Roma Luciw, Dan Bortolotti plus a whole bunch of my other favourite personal finance bloggers in the introductory pages of the book, I thought I’d better keep on going to find out what all of the fuss is about.
Author Robert R. Brown says Wealthing Like Rabbits is written to be a fun and unique introduction to personal finance and suggests that any book that includes sex, zombies and a reference to Captain Picard is “an absolute must read,” regardless of genre.
Brown starts out by asking how many rabbits there would be after 60 years if 24 rabbits were released on a farm on a great big island. Before providing an answer to this question, he introduces the need to save for retirement, although he doesn’t begin to predict how much you or I will need. His only conclusion is that “more is better” because it is better to be 65 years old with $750,000 saved than 65 years old with $75,000 saved.
Then he reveals that there would be 10 billion rabbits after 60 years and launches into a discussion of the history and key features of registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs). Subsequently he riffs about how many zombies there would be in England if France sent 100/week for 40 years.
If you are still with me, you may wonder — what is the point of all this?
Not surprisingly of course, it’s to illustrate the power of compounding, whether in relation to rabbits, or money or zombies. We learn that just $100/wk deposited in an RRSP earning 6% for 40 years will add up to a nest egg of $624,627.
But the positive and the negative impact of compounding interest are also very cleverly brought home in later chapters. I particularly liked the comparison of brothers Mario and Luigi who both had similar incomes and $100,000 for a down payment on a house. They went to the bank to find how big a mortgage they were eligible for.
Mario’s banker told him “he could afford” to buy a house for $525,000. Luigi told the mortgage specialist he needed $10,000 for closing costs and the $90,000 balance had to cover at least 20% of the purchase price of the house so the most he would be willing to spend is $450,000.
The story continues with Mario buying a 3,000 square foot home for $525,000. Luigi sticks to his budget and buys a 1,600 square home nearby for $350,000. Over 20 years, compound interest on the mortgage means that Mario ends up paying $807,538 for his house while Luigi only has to fork out $538,359.
Similarly, when it comes to debt, Brown illustrates that high interest credit card debt can quickly escalate if balances are not paid off every month. Even I did not realize until recently that if you miss your payment due date by even as little as one day, the interest-free grace period completely disappears. In fact you have to pay interest on the amount of each transaction from the date each and every purchase was made.
Brown also reviews the characteristics of a line of credit; a home owner’s line of credit; bank loans and consolidation loans. While generally he believes all of these can cause severe damage to your financial health, he recognizes that when handled properly, they each have their place.
But he draws a line in the sand when it comes to payday loans. Never, ever get a payday loan, Brown says.
He gives the example of Buddy who borrows $400 from a payday loan place because his furnace broke down. He is charged $21 for every $100 he borrows for just two weeks. Two weeks later he pays the payday lender $484. That’s 21% for only 14 days, which works out to 546% annually. And that’s only the beginning.
If Buddy can’t pay in two weeks the payday loan company will charge him an NSF penalty and continue to accumulate stratospheric interest rates on the whole amount. Further defaults mean he will likely be hounded both by telephone at home and at work day and night. The file may be handed over to an even more aggressive collection agency.
In the second last chapter, Brown offers a brain dump of financial tips (which he doesn’t call “Fifty Shades of Brown”):
Spousal RRSPs are cool.
MoneySense magazine is a great source of personal finance information.
Eat dinner at home. Then go out for a fancy coffee and desert to Starbucks.
Buy life insurance, not mortgage insurance from your bank.
Read Preet Banerjee’s book Stop Overthinking Your Money for the skinny on life insurance.
Use the noun“wealth” as a verb. So instead of saving $150/week in your RRSP you will be wealthing your money.
And finally, Brown’s parting words at the end of the book are “you’ve got to show up.” Put some money away for your future. Live in a house that makes sense. Be smart about how you spend your money. Spend less than you earn. Be comfortable living within your means. He says it really is that simple.
Wealthing Like Rabbits is funny and engaging and it hits all the personal finance bases. Regardless of whether you are a Millennial, a Gen Xer or a Boomer, you will find lots of tips on how to save more, spend less and still have a lot of fun along the way.
As part of the SaveWithSPP.com continuing series of podcasts with personal finance bloggers, today I’m talking to Mark Seed, author of the popular blog My Own Advisor.
Mark’s day job is Senior Designer of Quality Management Processes at Canadian Blood Services in Ottawa, but he is passionate about personal finance and investing. He started investing in his early twenties after reading David Chilton’s, The Wealthy Barber.
For the last five years, Mark has blogged about a broad range of topics ranging from asset allocation, to investor behavior, to retirement, to travel.
Thanks for the opportunity, Sheryl. It’s great to talk to you.
Q: You have a demanding day job. You enjoy golfing, biking, hiking, and travel. When do you have the time? Why did you start a personal finance blog?
A: Good question. I try to find the time. I started off blogging because I wanted to share my story about saving and investing towards financial freedom. I figure running my own blog and sharing my own story could help people that are both new to investing and saving and those who are more experienced.
Q: How frequently do you post?
A: Probably two to three articles a week. I have a demanding but also very exciting day job, so in the evenings I write and then I post the next day.
Q: Do you have kids?
A: No, we don’t.
Q: So, how do you decide what you’re going to write about from week to week?
A: I get inspiration from quite a few sources, Sheryl. Sometimes it may be a workplace conversation, or it could be a chat with family and friends outside work. Often there’s a news headline I can play off and add my own perspective.
Q: That feeds well into the next question which is: what subjects do you like writing about the most?
A: Fixed and dividend investing — I practice that approach as you know. Taxation and insurance are also subjects I like to write about. And of course the travel stuff and investor behavior are fun subjects.
Q: There’s probably over a dozen well-known personal finance bloggers in Canada. What’s different about your blog and why do you think it’s a must-read?
A: I think it’s a must-read because I believe I am taking a holistic, DIY approach to investing and saving. I think people can relate to that quite well. I certainly don’t pretend to be an expert in every single field but I’m learning as I go.
Q: How many hits do you typically get for each blog?
A: I’m getting about 1,000 to 2,000 hits per article, which is great. So in some months that translates to maybe 50,000 hits a month.
Q: That’s fantastic! How long did it take for it to build?
A: Early on – I would say the first couple of years – it was really slow. There has been an upward trend in the third, fourth and fifth year and now there is an income stream from the site.
Q: You have to be patient though
A: You have to be patient, absolutely. It takes time.
Q: Tell me about some of the more popular blogs you’ve posted.
A: I think my article earlier this year about driving a fourteen year old car got a lot of hits and comments. The essence of the story was I don’t need a new car so why should I buy one? It works fine and it’s not costing me money. Why spend money on a nicer ride when I can put it in my RRSP or TFSA?
I also got a lot of attention when I wrote about why I’m no longer investing in costly mutual funds and paying fees I don’t understand for underperformance. There have also been well-received blogs about my passive investment strategy and some mistakes I’ve made, like when I paid the wrong bill.
It happens, right? And I think if you publicize those things people go, “Everyone is fallible, nobody’s perfect” and it’s funny to read these things.
Q: Right. So you’ve focused on dividend investing – why do you embrace this strategy and how does it work?
A: I’ll try to keep it fairly short and sweet. One reason is I like having an income stream is because as a shareholder of an established company with a track record of paying dividends, I basically get paid to be an owner of that business. And that dividend payment is very real, because I see the cash coming into my brokerage account every month or every quarter.
The second main reason is that some of these established companies have paid dividends for many years – decades upon decades, in fact, maybe even a generation or more – so they tend to increase their dividends every year as their net earnings go up. So the amount I receive tends to grow over time which is a pretty good inflation-fighting strategy.
The global financial crisis from 2008-2009 was very bad for many people. But most of the companies I owned or started owning and buying at that time paid their dividends even when their stock prices went down 30, 40 or 50%. So there’s value sticking with those companies through thick and thin.
And even though I’ve adopted both indexing and dividend investing, I think it’s the blend that’s important. I’m getting the best of both worlds.
Q: What’s a DRIP account and what are some of the pros and cons?
A: A DRIP account stands for a dividend reinvestment plan, and really it’s an approach to reinvesting dividends paid by the companies that you own free of charge. Not paying transaction fees is huge in my opinion.
There are really two types of those dividend reinvestment plans. One is called “a full DRIP” and the other is called “a synthetic drip.” You can read about how they work in more detail on my blog.
Q: Many investors have multiple accounts: RRSPs, TFSAs, unregistered investment accounts. As a rule of thumb, what kind of securities should they hold in each account and why?
A: Very good question, actually. I do follow some of those rules of thumb. In the RRSP accounts we hold both Canadian and U.S. ETFs but we also own a few U.S. stocks.
The reason why is that we escape withholding taxes applied to some U.S. listed securities. So putting U.S. stocks or U.S. ETFs in an RRSP, a locked-in retirement account or a RRIF is tax effective.
Because there is a 15% withholding tax if U.S. stocks are held in TFSAs (and also RESPs), in our TFSAs we hold basically Canadian content, including Real Estate Investment Trusts, ETFs and some blue chip stocks.
And in our non-registered account we only hold Canadian dividend-paying stocks because those stocks are eligible for a Canadian dividend tax credit if they’re not in registered accounts.
Q: Do you have a favorite personal finance blogger that you read religiously?
A: I have a few, actually. Million Dollar Journey is one guy that really inspired me to create my own blog. I’m a big fan of Dan Bortolotti’s site, Canadian Couch Potato. I think he’s a very gifted writer and certainly one of the strongest advocates I’ve met in terms of the interests of the retail investor. And I also like a Canadian living in the U.S., Mr. Money Moustache.
Q: What, if any, money-making opportunities or spinoffs have there been as a result of your blogging career?
A: You know, there have been a few, which has been great. I think the blog has certainly opened doors to meet some great people, folks I would probably have normally not met. In recent years I’ve managed to develop excellent partnerships with folks in the insurance industry and the mortgage industry as well.
Rob Carrick at the Globe and Mail has very kindly referenced me in a number of articles. I’ve also been interviewed on the radio and I’ve been quoted in MoneySense Magazine,
What does the future hold? Who knows? I’ll keep writing. I’ll keep sharing my stories. I’m certainly passionate about personal finance and investing and I enjoy interacting with others who feel the same.
Q: If you had only one piece of advice to readers about getting their finances in order what would it be?
A: Spend less than you make. It may sound utterly boring. But I think when it comes to finance and investing, boring works because you can’t invest what you don’t save and if you’re not saving then you’re obviously spending every dime you make. So spending less than you make and having money for your future is a pretty good plan.
Q: Thank you very much Mark, it was a pleasure to talk to you.
A: Thanks again, Sheryl, this was a lot of fun. I appreciate it.
This is an edited transcript of a podcast you can listen to by clicking on the link above. You can find the blog My Own Advisor here.
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.
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.
Today in savewithspp.com’s continuing series of interviews with financial bloggers, we talk with Robb Engen. Robb is “Echo” from the very popular Canadian personal finance blog Boomer & Echo. He also has a bi-weekly column in the Toronto Star where his research focuses on budgeting, banking, credit cards, and debt management.
Robb is a happily married Dad living in Southern Alberta. Over the past five years he has gone from taking an amateur interest in personal finance and investing to working towards becoming a full-fledged money expert by taking the four-course Certified Financial Planner program online.
In addition to writing this blog, he appears regularly in the online podcasts Because Money. He and his mother Marie have started a “fee only” financial planning business and Robb has a new blog called Earn Save Grow.
Thank you very much for joining me today Robb.
I’m glad to be here Sheryl.
Q: Robb, you’re one busy guy. Before we start talking about your blogs, tell me a little bit about your day job.
A: Sure. In addition to all that you mentioned, I do have a day job, and I’m the Business Development Manager at the University of Lethbridge. That’s a fancy title saying I fund raise and generate revenue for our sports teams here in Lethbridge.
Q: When did you and Marie start “Boomer and Echo”, and why?
A: We started it back in August 2010, so we’ve been at it almost four years. My mom worked for a big bank for two decades plus, and we always chatted about personal finance and investing.
We just had our first child, so there was a lot going on financially, and I started reading a lot of personal finance blogs. My Mom and I thought we might have a unique spin on financial issues.
We wrote a couple of articles, just to get the feeling for putting that kind of thing together, and I did some research on how to start a blog. Then we just jumped into it, I guess.
Q: How many hits do you typically get when you post a blog?
A: We’ve built up a pretty decent-sized following, and most people follow us by Email. We have about 6,000 email subscribers, and of that, I’d say two to three thousand probably actually click through to the blog to read a new post, and some probably just read it by email.
Q: What have some of your most popular posts been about?
A: I’d say probably the more personal stories. When I talk about my changing careers and what that looks like and dealing with a pension plan versus in the private sector, trying to save on your own. I wrote about the challenges I had as a first-time homebuyer, and that got a lot of hits. My mom’s had the same success talking about personal stories.
Q: How have you been able to monetize your blog? What have some of the spinoffs been?
A: I saw that Google has their AdSense network, and that seemed to be the go-to place for monetizing a blog, so we’ve done okay there. It also seems to be that writing about personal finance and investing tends to find more advertisers than say, if you were to write about cats or maybe photography or something like that.
Q: You also blogged for the Toronto Star’s site “Moneyville” three days a week, and now you’re writing a column for thestar.com so those really are spinoffs from your blog as well.
A: Yeah, and what I noticed were some of the more profitable things that people search for information about are rewards cards and loyalty programs. I didn’t want to inundate my Boomer & Echo blog, with posts about air miles and aeroplan so I started a little offshoot called “Rewards Cards Canada,” and that’s where I talk about that niche area.
Q: How many hours a week do you spend on your own blog and the various other related personal finance activities outside your 9-to-5 job?
A: I’d say, for all the online activities, I probably spend about two hours a night from Sunday to Thursday.
Q: Tell me how the “Because Money” series on YouTube works and the technology used to link Moderator Jackson Middleton with you and the other interview subjects.
A: I attended the fantastic Canadian Personal Finance Blogger’s Conference in Toronto, and one of the takeaways I got was maybe, try to explore some different forms of media. Video blogging has really come into the forefront now.
Sandy Martin, a fee-only planner who writes at Spring Personal Finance knew marketing and social media manager Jackson Middleton, and so we all got together and decided to do this video series called “Because Money.”
It’s all done through the social network, Google Plus. Google owns YouTube, and they formed what they call “Hangouts on Air.” It’s like a Skype video call. You can get up to 10 people, video chatting on hangout at the same time, and you can put it live on air or you can just record it and play it later. We do it live every Wednesday night.
Q: What kind of hits are you getting on it?
A: Pretty good. We get a couple hundred views a week, and when we have better know people on, like Rob Carrick and Dan Bortolotti, we get a lot more views.
Q: You’re also taking certified financial planner courses, and along with Marie, you’re now offering a unique fee-only personal finance planning service online. How does the service work, and how’s it going?
A: What we found was, we built up quite a following over the years, and that people would Email us and ask about their own situation. Without knowing their complete background and history and their goals moving forward, it’s pretty much impossible to give that tailored, specific advice.
So we talked about this and came up with a fee-only model where we’d work with a client for a year. We develop a financial plan together. Clients get unlimited access to us by phone, email, Google Plus, Skype, whatever, and they can talk about their own financial issues without any pressure to buy anything. We are not licensed to sell products.
Q: You recently launched a new blog called “Earn, Save, Grow.” What do you hope to accomplish with this blog, and how is it different from subjects covered with “Boomer and Echo?”
A: I started a new blog because Boomer & Echo focuses a lot on frugality and money-saving tips and a bit of investing. But I don’t know that the audience is quite there for discussions about earning extra money. There’s always the debate whether you should try to earn more money versus spending less.
Obviously, I’m going to cross promote it a little bit with Boomer and Echo, but time will tell what kind of audience moves over there and is interested in how to make more money or do something on the side with their time. I don’t intend to monetize this site, so I won’t have any ads up there, at least for now.
Q: If you had one piece of advice for Canadians struggling to make ends meet and save for retirement, what would it be?
A: We talked about this in “Because Money” with Rob Carrick recently. The real estate market has gone up so much, and people just feel this need to be a homeowner, and without necessarily understanding the full financial costs.
You can’t spend 40% to 50% of your income on a place to live and still expect to save for retirement, have kids, save up for their education and still have some money left over to go out for a beer or go for a nice dinner. I think we have to rethink the idea of renting for a little while so that if you buy a home you can really afford it.
That’s great. Thank you very much for talking to me today, I’m sure the “savewithspp.com” readers will really be interested in what you had to say.
Thanks for having me, Sheryl. It was a pleasure.
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 Boomer & Echo, you can find it here and subscribe to receive blog posts by email as soon as they’re available.
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Send us an email with the information to firstname.lastname@example.org and your name will be entered in a quarterly draw for a gift card.