Cut the crap – smarter saving and investing is here

Cut the crap – smarter saving and investing is here

Yes, bold blogpost title.

Just maybe though – you don’t need any more money advice??

I mean, that could be true.

I’ve read dozens of personal finance books over the years.

I currently read dozens of personal finance and investing articles every week.

Heck, I run this blog!

Money talk is cheap.  Actions speak far louder than words.

Tens of thousands of books, articles and more tend to say the same things over and over and over:

• Live below your means.
• Disaster-proof your life.
• Kill your debts including your mortgage sooner than later.
• Establish and maintain an emergency fund of a few months.
• Make savings (and investing) automatic.
• Once invested, stay invested.
• Keep your investing fees low.
• Mind your health.  Any money is useless unless you have your health.

But behavioural changes are very tough…we’re human and we’re flawed.

“As we navigate our lives, we normally allow ourselves to be guided by impressions and feelings, and the confidence we have in our intuitive beliefs and preferences is usually justified.  But not always.  We are often confident even when we are wrong, and an objective observer is more likely to detect our errors than we are.”  -Daniel Kahneman, brilliant author of Thinking Fast and Slow, Nobel Prize winner.

I’m guilty of my own bad financial behaviour over the years; I’m by no means perfect nor even close:

• We bought too much house for what we really need.  We’re changing that though this year.
• I haven’t killed all our debt yet and we probably could have by now.
• I used to sabotage my portfolio.
• We bought a new car many years ago. Buying used would have saved us a couple thousand dollars.
• It took us years to establish this amount in our emergency fund – I ignored it for a while. 

My list could go on…

I do however know what I need to overcome and work on.  This blog is about that journey.  It keeps me honest.   It keeps things very transparent.  It keeps me humble too – sometimes I really don’t know what I don’t know.

On the subject of being honest, transparent, and sometimes very blunt when it comes to money management I thought I would bring in blogger Dale Roberts for an interview.  Here’s a short bio about Dale, from Dale:

Mark, I have an ‘interesting journey’.  I am a former (I like to joke…still recovering) advertising writer and creative director. I had a reasonably successful career working for major agencies and on major brands. I won my fair share of International and Canadian awards. But I was always obsessed with investing and indexing.

So, at age 50 I started a second career, moving to Tangerine as an advisor on their lower fee index portfolios. As I like to joke I cut my income to half to start that venture. My wife says it is not a joke. I did well there rising to the top level and eventually becoming the trainer of the advisors and new hire advisors. I loved that job I stayed there for over 5 years. 

If cutting my pay in half was not enough, I then cut my pay to zero to launch Cut The Crap Investing – my blog.

One day I’ll have to make half a living, my retirement portfolio was only half-ready. While I worked at Tangerine I was mostly in a negative cash flow situation, but I wanted to help Canadian investors. I needed to talk to them on a regular basis. I still ‘talk’, just through a different platform. 

I guess my journey when it comes to financial independence or any retire early dreams is ‘FIRE light’.

Is FIRE (Financial Independence, Retire Early) even right for you?

I was able to make that move as my wife and I paid off our house and vehicles. I have a modest portfolio. You can read about that on Seeking Alpha where I write regularly. The personal finance basics allowed this venture.

My advice which you’ll read about below is very simple:

1. Pay off your debts.
2. Invest regularly in low fee funds or dependable companies. 

It’s that simple.

Here is one blogger’s sure fire path to FIRE.

Thanks Dale.  You know, almost every time I write a blogpost, I think about this Tweet from Preet Banerjee; personal finance is far more psychology than math:

In your opinion, why are good behaviours related to personal finance and investing so difficult to sustain?

I think on the investing side of things we humans are simply not wired to be successful investors. Especially men. Most people have a terrible investment experience. They either don’t know what they’re doing, and they invest outside of their risk tolerance level, or they make very poor investment choices, trying to get rich quick, trying to hit the home runs.  Those decisions usually end in disaster.

We are wired to try and make things happen, to hunt and to kill, to force the issue.

Successful investing is the result of doing quite the opposite.

Let the returns come to you. You have to be patient. Relaxed. All of the successful investors that I’ve known or come into contact with are all very patient and consistent with their money.  Investing is perhaps the only area in life where we can do less and get more. We all know of the story of the investment house that reported that the most successful group of investors was the group that forgot that they had investments. Dead people make for great investors as well. Same goes, whether you by index funds or individual stocks.

As for overall personal finance behaviour, nobody will wake up today and say ‘I think I need a financial plan today’. They probably should though.

Most Canadians have little interest in investing.

I think they have a great interest in money but behaviours get in the way and as you say, as humans we’re not wired for investing.   Like a new diet and/or exercise regime Dale, what extra motivation can you offer Canadians just to get started?

I suggested before Canadians even bother with any investing at all they should do these 3 things.

You?

Of course, Canadians should first get their financial house in order.  Pay off debt. Build up that emergency fund. Do a personal or family cash flow statement as you say – to see where their money is going – in your link above.

I think people would be shocked to find out what they spend, where, and how often.

With some simple tracking, people would also be shocked – how small changes can lead into hundreds of thousands of life-changing dollars over many years.  I think that’s the big carrot actually.  Sitting down and fully understanding that small sacrifices and discipline can add up to make them wealthy over time.

Find the money. Invest the money, sensibly. Keep your fees low. Get the heck out of your own way. Let time and compounding do their magic. Keep it simple.

If you buy a house or property, then buy it within your means and pay that off.

In this post, I highlighted 10 great ways to master your money.   How did you master your money?  Or, what do you have left to master?   Are you aware of your own biases?

Mastering money was never an issue. I am not materialistic in any way. My wife is also not a spender or materialistic. I understood the basics very early.  My only challenge was initially to make money. It was not easy to break into advertising and it did not pay well in the beginning years. I also went on a business venture that did not end well. One guy stole all the money. I was wiped out at 30 and I had to start over.

From there we just built net worth (and that is the number that determines your overall financial preparedness in the end) by paying off our mortgages and debs then investing on a regular schedule. It likely only took us about 15 years to reach the $1,000,000 net worth level.

Being an indexer at heart, I understood the value of passivity and consistency – just staying invested and being lazy with my portfolio.  I’ll admit it took me a while to move to the level of sloth-like passivity that is required though.  My whole investment journey and research has continually and progressively moved to ‘do less get more’. All of my experience, all of my research, all of my observations leads to that simple conclusion. Get out of your own way.  Let the returns come to you.

Your blog title is “Cut the Crap Investing”.    What should Canadians do to cut the crap when it comes to saving and investing?  

This is easy. Cut the crap spending. Cut the crap on investing in high fee (crap) mutual funds. Invest simply and regularly within your risk tolerance level. Don’t take on unnecessary risks.  If you really want to try and beat the market you can buy a U.S. mid cap or small cap fund.

In Canada, like you, I like the stable big dividend payers such as the big banks and telco’s and pipelines and utilities. There are some great ETFs as well. Keep it simple. Keep it cheap. Your Dividends and Indexing pages are a great resource.

(Mark – you bet!   Dividends page is here.   Indexing page is here.)

In retirement it’s perhaps even more important to keep the fees low. If your portfolio is designed to pay you out 4-5% of holdings each year, you can’t put 2-2.5% per year in the wrong pockets.

While high money management fees still exist – they are going away kicking and screaming. 

What can Canadians do better?

I know you read Larry Bates’ book as well Mark.  To see the effect of fees over the long term I’d suggest readers check out his ‘T-Rex Score’ on his site:

larrybates.ca.  It’s shocking. Fees can eat up half or your returns or more over the decades. 

But I think Canadian investors are turning a corner. More money flowed into ETFs last year than mutual funds.  Many of the big financial institutions have been the writing on the wall – they are aggressively moving into the low-fee space in a bigger way.

Most Canadians (I would say about 90%) want a managed portfolio.

Well, they can go to a Robo Advisor and get advice, digital and human, and then get set up in well-diversified lower fee ETF portfolios.

(Mark – you’re right – Hassle-free investing is here with robo-advisor:  ModernAdvisor).

Heck, you can invest for 0.20% plus ETF fees at Questwealth; there are low-cost options at Nest Wealth and many more including the one above.  All the “Robos” are quite different but the good news is, they cover a huge need for Canadian investors now.

Totally agree Dale and thanks for this interview.  I liked Dale’s simple and blunt approach:

1. Pay off your debts.
2. Invest regularly in low fee funds or dependable companies. 

It can be that simple.

If you want to follow Dale head on over to Cut The Crap Investing. I’m sure I’ll have Dale back on the site soon.  All the best and let me know your thoughts on this post below.

Mark