This week we highlight a series of posts of particular interest to readers who are retired and those who are contemplating retirement.
The big question everyone has when planning their retirement is “how much can I spend so I won’t run out of money.” Mark at MyOwnAdvisor considers various approaches like the rule of 20 and the rule 0f 25. But he concludes there are no hard and fast rules when it comes to determining your retirement number other than taking the first step and figuring out what you’ll likely spend in retirement.
In a short video, Globe and Mail personal finance columnist Rob Carrick interviews Bruce Sellery, author of The Moolala Guide to Rockin’ Your RRSP. Bruce says if you save 10% a year you will probably have enough to retire. To calculated how much you must save, multiply the annual amount you need by 20. So savings of $1 million will be required to pay yourself $50,000/year.
Escaping work may be the dream you are working towards, but if you get bored or your investments take a dive you may want to find full or part-time work. Tom Drake on CanadianFinance blog gives five hints for retirees looking for a job. He advises you not to say you are retired as it will give the impression that your best working days are behind you.
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.
The same day I was planning to review “How not to move back in with your parents: The young person’s guide to financial empowerment,” the author and Globe and Mail personal finance columnist Rob Carrick wrote a column revealing how difficult it is for students to get summer jobs to pay for their education and quantifying the cost of post-secondary study.
He cited the Yconic/Abacus Data Survey of Canadian Millennials, conducted for The Globe and Mail earlier this year of 1,538 young people aged 15 to 33. The study found that just over one-third of young people worked more than 30 hours per week at their last summer job. Another 23 per cent worked less than 30 hours at the same job, while the rest were either working multiple part-time jobs, looking for work or taking summer classes.
According to the survey, earnings from summer jobs and other savings totalled less than $2,500 for 46 per cent of students prior to starting college or university, while another 23 per cent had $2,500 to $5,000. However, a year of undergraduate education away at school including tuition, books and living expenses can easily cost $20,000 or more.
That’s why the information in Carrick’s latest book is so valuable. Every new parent should get a copy when they leave the hospital with their precious bundle of joy and beginning at a young age children should be taught the basic principles of financial literacy outlined in the book.
The first chapter discusses sources of funding for college or university and the basics of Registered Educational Savings Plans (RESPs). It is important that new parents understand that the combination of government grants and compounding mean that by opening an account in their child’s first year, saving for a college education becomes almost painless.
He also zeroes in on avoiding the debt trap and the perennial student dilemma: go to school at home or go away to school? He suggests that if the out-of-town program is going to make the student more successful or give him/her the edge in building a career, the additional cost can more easily be justified.
Successive chapters deal with banking, saving, budgeting and the pros and cons of buying a car. Later in the book he looks to the future and covers off the financial implications of buying a home; weddings and kids; and, insurance and wills.
Every chapter has a useful hot list. Examples are:
Tips for saving money in your student years
Expert tips on building a solid credit rating
Five rookie financial mistakes to avoid
Ten things you need to know about your company pension plan
Top mortgage tips for first-time buyers
Top reasons not to buy mortgage life insurance from your bank
Regardless of how well parents and their offspring plan and save, Carrick recognizes that kids may need to move home for some period of time when they are out of work or looking for a job. In fact he did so himself after he finished university.
In those circumstances, parents will have to make “boomerang decisions” like:
Whether they should charge room and board
Whether to provide some day-to-day spending cash
Whether to push their child to take any job you can get.
But kids also need their part by acting like adults, making non-financial contributions and keeping parents updated on their job search. Recognizing that parents may have useful contacts and advice can also help to avoid friction.
The principles of good money management for students and parents Carrick discusses are not new. However, they are introduced and packaged in a way that makes sense for both cohorts.
It’s well worth the couple of hours it will take you to read the book and a good reference you can dip into from time to time in the future when your family is at an age and stage where specific information will apply.
The book can be purchased for $16.57 online at Chapters.
Although it’s been a cold, wet spring the temperature is finally starting to inch up across the country. And with the end of the school year coming up fast, family vacations are top of mind for many people.
That’s why I thought readers might be interested in Tom Drake’s recent Canadian Finance Blog titled 10 Ways to Save Money on Your Vacation. Saving for your vacation in advance is great advice. Comparison shopping, a CAA membership and finding coupons online for local entertainment are other good suggestions.
In the Globe and Mail, Preet Bannerjee says before you hit the beach, it’s time to do a financial spring cleaning. Just like changing the winter tires, getting the flower beds in order, and scrubbing behind the appliances, it’s about getting your whole house in order. It may not be fun, but it needs to be done.
If your spring plans include a major home renovation, both your bank account and your marriage are in for a stressful time. On yummymummyclub Kat Inokai offers hints on How to Survive Months of Construction with Your Marriage Intact. This is one year when a stay-cation is probably not a good idea. If you can afford it, she says plan to get away from the mess for at least a few days.
And finally, after several months of trying the job as a manager on for size, Tim Stobbs realized he didn’t enjoy it. So he killed his career in management and he’s happy about it. “It feels good to know for sure that I would be a round peg forced into a square hole. I could do it but it would significantly uncomfortable,” he says.
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.
In his new book “Stop Over-thinking Your Money,” Globe and Mail personal finance columnist and television personality Preet Banerjee says personal finance is a lot like physical fitness. In order to be in better shape, everyone knows they have to work out and eat well. A personal trainer delivers results, not by showing clients a new way to perform sit-ups, but rather by simply making sure the sit-ups get done.
Similarly, in this book Banerjee discusses in five simple rules how to think about money and focus on the 20% of what you really need to know in order to be in top financial shape.
Rule 1: Disaster- proof your life
Investing is only one of many factors that affect your personal finances. If you are going to retire well at age 65 you have to put away money for a long time. But if you die, lose your job or become disabled before then, your long-term plans could go up in smoke. That’s why he says disability insurance, life insurance and an emergency fund should be the foundation of your financial plan. Wills and powers of attorney must also be taken care of early on.
Rule 2: Spend less than you earn
Spending less than you earn is the cornerstone of financial stability. It allows you to eliminate money stress and begin creating wealth. Here’s where you learn how to budget. Banerjee highly recommends Kerry K. Taylor’s electronic spreadsheets on Squawkfox.com. By starting with your old or current budget, the many undesirable things you spend money on like take-out coffee, fast food breakfasts and debt repayments will jump out at you. Then you can create a new budget and start tracking your spending more diligently. Surplus can be allocated to savings.
Rule 3: Aggressively pay down high interest debt
Thou shalt not carry credit card balances! When you have high interest debt, the amount of cash flow it ties up on a monthly basis is painful to calculate. Banerjee shows how you can transfer high-interest balances to low interest balances using a line of credit. Then he recommends developing a plan of attack for paying down your debt. While he acknowledges that changing spending patterns to alleviate debt is easier said than done, he says the only way to keep your finances on an even keel is to save more before you spend.
Rule 4: Read the fine print
From today forward, he instructs readers to read every word on any document they put their signature on. Gym memberships, cellphone contracts, loan documents. You name it. He gives the example of a friend whose wife could not collect on his mortgage insurance because the policy was underwritten at the time of death. The policy said it was invalid if he had any alcohol in his bloodstream while operating a motorized vehicle (a snowmobile in this case) when he died. In contrast, a life insurance policy underwritten at the time of purchase paid out within two weeks.
Rule 5: Delay consumption
The fifth rule is simply an extension of the first. Stop worrying about keeping up with the Joneses. As you earn more money or get a bonus don’t get caught up in lifestyle inflation. And avoid the monthly payment trap. Think seriously about whether house renovation is actually an investment and if the personal gain from expensive hobbies is really worth the cost.
Throughout the book Banerjee keeps returning to the message that if you wait to make a perfect plan you may never start. And in the beginning, building up lots of money depends more on putting money away than making money grow because of smart investment decisions. You can control how much you save but you have almost no control over market performance, he says.
This book is an accessible, quick read but like any guide, it is up to you to buy into Banerjee’s five financial rules and implement them. He calls them the roadmap to an easy “A” in personal finance.
But when you are ready for a more sophisticated “A+” strategy he would be happy to provide additional guidance along the way. Who knows? That could be his next book, But until then, you can find him on twitter @preetbanerjee. He is looking forward to hearing from you!
Today we are continuing with the savewithspp.com 2014 series of podcast interviews with personal finance bloggers by talking to Edmonton-based financial educator and author Jim Yih.
Jim’s blog Retire Happy was recognized as the 2011 Best Personal Finance Blog in Canada by the Globe and Mail. He is very active in social media and also made MoneySense’s 2013 list of the top 10 financial tweeters.
While he has been blogging for just over three years, Jim is well known as a personal finance columnist in the Edmonton Journal and other Canadian media for the last 14 years. He also has written eight books.
His company Retirement Think Box consults with innovative employers to incorporate financial education and wellness into their benefit programs using the full spectrum of communication tools including workshops, web-based learning, audio/video presentations and electronic newsletters.
Thank you so much for joining me today Jim.
Thank you very much for having me. I’m excited about this Sheryl.
Q. Jim, you are well known to Canadians as a result of your column in the Edmonton Journal for over a decade, your books and your speaking engagements. Why did you also decide to also start a blog?
A. Good question! Originally, the blog was simply a place to host all of the articles that I have written over the past 17 years. I never realized what blogging would evolve into and how interactive it can be. At the end of the day, the reason for RetireHappy.ca is to help Canadians retire to a better life and make retirement the best years of your life. I hope that does not sound too cheesy but RetireHappy is a major Canadian resource for retirement, investing and personal finance. We really focus on timeless information.
Q. Tell me the topics that are covered in your blog?
A. Retirement is a big topic and we try to cover issues around things like investing, taxes, money management, estate planning, government benefits (very misunderstood) and really any issues around general finance. We even cover lifestyle issues like health, working in retirement and psychological issues.
Q. How often do posts appear? How frequently do you personally post?
A. We publish new content 3 to 4 times a week. I used to write 2 to 3 times a week but it got to be too much. I have a fulltime business as you mentioned. Now I only write once a week and I have brought on a team of other writers to provide opinions and content.
Q. Tell me about the group of other bloggers who post regularly and the added dimension they bring to the blog on a day to day basis.
A. I’ve been around for over 23 years in the financial industry. I’ve got lots to say and opinions to share but I also believe there are many different ways, ideas and strategies to achieve success. So I’ve brought on some great writers in the last 18 months with lots of experience and ideas and I think it makes for a better experience at RetireHappy.ca.
Donna McCaw is retired and travelling the world and sharing practical retirement experiences. She has also written a retirement book called “Its Your Time”
Sarah Yetkiner has built a nice following with her articles on money personalities and the psychology of personal finance.
Doug Runchy is very active and specializes in writing about government benefits. He responds quickly to all comments and he’s just a tremendous resource for our readers.
I’ve assembled some successful great financial advisors like Scott Wallace and Wayne Rothe. And we’ve got some other writers coming aboard this year like Chad Vinimitz, Sean Cooper and Meagan Balaneski. So we’re increasing our contingent of writers and I think it’s proven to be a good strategy.
Q. How many hits does your blog typically get?
A. We get 5000 to 10000 page view per day. We have thousands of people on our newsletter and email list and following us on Twitter. I’m humbled by how quickly this has grown and the size of our following.
Q. What have some of the most popular blogs been?
A. Since inception, my articles on CPP and taking CPP early have been consistently popular. And now with the addition of Doug Runchey talking about it, all the articles on CPP and OAS continue to grow in popularity.
But we also have some Online guides that are designed to be great resources for readers. The most popular is our Online Guide on RRSPs, next would be the one on RRIFs, others include one on RESPs, Government Benefits and Financial Advisors. We are currently trying to update all of these.
Q. If someone is checking out your blog for the first time, should they just dive in, or do you recommend a place to start?
A. There is so much there. We often talk about how to make it easy for readers when there is 17 years of content on the site. So I have 3 suggestions:
Use the search bar at the top. Type in anything related to retirement and personal finance and we’ve probably written about it.
There’s also archive page where we’ve organized every article by category.
Or if you have no idea what you are looking for, start at the bottom of the home page with the must read articles and the most popular articles.
Q. What have some of the spin-offs from blogging been for you?
A. I think its interacting with awesome people online that is the most rewarding. I’ve met a lot of cool people across Canada and even around the world.
I’ve connected with great Media personalities like Rob Carrick, Gail Vaz-Oxlade, Bruce Sellery, etc. I’ve met awesome bloggers like Frugal Trader, Preet Banerjee, Blunt Bean Counter, the Canadian Couch Potato, Boomer and Echo, Tom Drake and so many others.
I also love interacting with readers who write in and tell us how the site has helped them.
Q. I recently read that Scotiabank found that 31% of Canadians planned to contribute to their RRSP for 2013, down from 39% last year. And BMO said 43% of those surveyed planned to contribute, down from 50% in 2013. Why do you think these numbers are dropping?
A. We live in a world that’s all about spending. Every major holiday has turned into an excuse to have a big giant sale. Saving money is simple but not easy. Spending is easier. Spending is more fun. There are more opportunities to spend than to save. That’s led to too much debt and I think for all of us, this can led to lower savings.
Q. What role do you think participation in the Saskatchewan Pension Plan can play in Canadians’ retirement saving plans?
A. What I like about SPP is that they have tried to make savings simple, easy and affordable. I think a lot of people need that. SPP has simplified investment options, the fees are lower, the returns are decent and the process is streamlined and easy. You can even contribute using your credit card!
I think the easier we make it for Canadians to save, they more likely they will do so. More choice sometimes paralyzes people from making decisions. So I think simpler options are necessary and SPP has done that and it’s available to all Canadians.
Q. How can people calculate how much they will need to retire and the amount of money they need to produce that income stream?
A. The average Canadian will need $2.654 million dollars by the time they retire . . . .
That’s a fictitious number of course, but we are all seeking a number. There are millions of calculators out there to help people find it.
However, for most people, the calculation is less important than their savings rate. The formula is so simple. This is not rocket science. Save 10% of your income for as long as you possibly can. Start as early as you can. The more you save the more you will have in retirement.
Q. What do you think the biggest hurdle is for Canadians who want to get their financial affairs in order and save for retirement?
A. For most people, the hurdle is themselves. You need motivation, action and discipline. Eighty percent of what you need to become financially successful and retire happy you already know:
Put together a game plan
Spend less than you earn
Pay off debts
Pay yourself first
Know your spending
Q. If you had one piece of advice to help Canadians get over this hurdle, what would it be?
A. Do something but not too much. Make small changes one step at a time. Find some like-minded people to support your goal. Try to make it fun. If you are competitive try to compete with someone to meet or exceed your savings goals.
Thanks Jim. It was a pleasure to talk to you today.
I really enjoyed our discussion, Sheryl.
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 RetireHappy, you can find it here and subscribe to receive blog posts by email as soon as they’re available.
Canadian consumers of all ages continued to increase their debt burden. Total debt rose by nearly $77 billion, or 6.1 per cent, compared with the same time last year. But consumers 65 and older had the greatest year-over-year increase, at 6.5 per cent, according to the credit-monitoring company.
Therefore, in this week’s Best from the Blogosphere, we focus on both how to avoid going into debt and ways to pay off your debt as you approach retirement.
Unfortunately, there is no quick fix to eliminate debt. Determining how fast we can and should eliminate debt starts with a few simple steps discussed on mint.com.
Lee Anne Davies, a leading expert on demographic change shows businesses the value of understanding aging, retirement and money issues. She partners with Globe and Mail personal finance columnist Rob Carrick in the video Seniors in debt.
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.
Hockey. Swimming lessons. Dance classes. Piano lessons. Just when you finish paying for back-to-school clothes and school supplies, it’s time to register your child for sports and arts activities. And depending on which activity or sport your child selects, your budget can take quite a hit.
In a November 30, 2012 article in the Globe and Mail, Roy McGregor reported that that the average hockey family spends $1,500 a year to be in the game. He said, “Given the choice between outfitting a kid for soccer rather than hockey can be equal roughly to the choice between walking to the corner store and chartering a helicopter to pick up the milk.”
Too many or the wrong extra-curricular activities can also stress out both kids and parents. For example, parents who have fought a losing battle to get a disinterested child to practice the piano regularly may wonder whether they are getting value for the money spent on lessons.
Here are some of the things you can do to both save money on extra-curricular activities and minimize the wear and tear on your family:
When you are selecting extra-curricular activities for your children, consider their interests and aptitudes. If your daughter has been kicking around a soccer ball from a young age or your son begs for dance classes, the choices are obvious. In other cases you may have to be more intuitive.
Most community centres offer swimming classes and a full range of other activities that are less expensive than programs offered by private vendors. However, registration for publically-supported programs is typically limited or may be by lottery. Find out what is available in your area, when registration opens and what the deadlines are.
Number of activities:
There is no magic number of extra-curricular activities for each child. This will depend on the amount of homework typically assigned, transportation issues and the energy levels of both children and parents. With our children, I decided that two per child was more than enough.
Before you commit time and money to activities for your children, think about how they will integrate into the overall family schedule. If you have one car and each child has an activity at the same time at opposite ends of town, it’s not going to work. If your two children have after school or evening activities four or five days a week, there will be little if any time for relaxation and unstructured play.
Location, location, location:
The best of all possible worlds is when your child’s school offers activities like sports, the school play or band practices at the beginning or end of the school day. I also struck gold the year that my son had a piano teacher who made house calls! If the only gymnastics class that trains elite athletes is miles away, driving and car pools may be unavoidable. However, whenever possible, stick to activities that are close to home, particularly for young children.
Saving on equipment
For sports that require expensive gear like hockey or skiing, many communities have equipment exchanges. There are also stores like the Saskatoon Skate Exchange where used equipment in good condition is discounted. Long & McQuade, also in Saskatoon offers rental and rent-to-own programs for musical instruments.
Stick with it
Make a deal with your children that if you sign them up for a program they have to stick with it for the semester or the year. Often classes that seem onerous or too difficult get easier in time and by the end of the series a child who was initially reluctant gets great satisfaction from mastering new skills. Also, they need to understand that your budget is finite and they can’t just drop an activity and expect to be registered in another one.
Cut your losses
In spite of all of your planning, sometimes it doesn’t work. If an inept program leader, unexpected homework loads or frequent colds and flu mean that you and your children simply can’t face the grind of extra-curricular activities, bite the bullet, give something up and see if you can get a portion of the fee reimbursed. It is not worth punishing the individual child or the family for one bad decision.
Do you have tips for parents about kid’s extra-curricular activities? Share your tips with us at http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card. And remember to put a dollar in the retirement savings jar every time you use one of our money-saving ideas.
If you would like to send us other money saving ideas, here are the themes for the next three weeks:
Getting value for your employee benefits
Colleges, universities offer free tuition for seniors