Weekend Reading – 114 years of spending, ways to make more money, commission-free investing and more #moneystuff

Weekend Reading – 114 years of spending, ways to make more money, commission-free investing and more #moneystuff

Welcome to my latest Weekend Reading edition where I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.

Earlier this week, in response to some comments on my site and based on a recent survey with some terrible results, I suggested Canadians should consider becoming their own DIY investor.

For those that haven’t taken matters into their own hands yet, I would love to hear from you.

  • What scares you about investing?
  • What do you want to know more about but were afraid to ask?

Weekend Reads

DGI highlighted the growth of commission-free investing in the U.S.   That is going to put tighter margins on brokerages but this is great news for investors abroad.  Thoughts on commission-free buying and selling? 

Million Dollar Journey answered a reader question about starting an RRSP or investing using the TFSA as a low-income senior.

I also provided a case study about a low-income senior:  can this senior retire with just $250,000 in their RRSP at age 60?  Read on to find out.

Here are some retirement savings targets to consider courtesy of MoneySense:

Savings targets by age

A big thanks to Gen Y Money for including me in her fall roundup of top reading material!

Retire Happy highlighted some RESP withdrawal rules for parents who need this advice with back-to-school now in full session.

I enjoyed reading Leif’s sensible advice (A Physician who FIRE’ed) when it comes to striving for financial independence.

  • “First, you should calculate your net worth. This can be done in a matter of hours.”
  • “The second thing you need to calculate is your annual spending. You may be able to guesstimate this based on credit-card statements and your checking account habits…”.

Done and done.  I don’t post any net worth updates on this site, I don’t think you should obsess over that either, but I would definitely encourage you to track your spending often.  It should be a weekly habit.

Interesting update from one of the early retirement (extreme) bloggers here.  Thanks to Jacob’s extremely frugal ways, he has “…saved 114 years worth of spending. That’s way beyond the 25 years required for the so-called 4% rule for safe withdrawals in retirement. My wife has 62 years worth of savings. At this point, earning more money doesn’t matter anymore.”  Wow, 114 years is a bundle.  There is no way we are striving for that.  You?

How much does it cost to raise a cat in Canada?  Well, I know our two guys cost us a couple hundred bucks per month – but we wouldn’t dare cutback on them.

MapleMoney shared 48 ways to make more money in your spare time.

Great stuff below by Ben Felix about any perceived index fund bubble.  Watch the video, it’s not long, but the punchline is:  don’t worry about such rhetoric.

Reader email of the week (adapted for the site):

Mark,

I would like some guidance. 

The Canada Revenue Agency (CRA) site says I have just over “$31,000 deduction limit” for my RRSP but I’m not sure if I should keep investing inside my TFSA or start contributing more to my RRSP.  I’m in a lower income bracket for now.  Also, you should know my TFSA is currently maxed with TD and CNR stocks, and some GICs.

Would it be best to move the GICs out of the TFSA and start filling it with dividend paying stocks instead? 

Should I always fill up my RRSP before investing in a non-registered account?  Or even TFSA? 

Thanks SO much for your help!

Thanks for your questions!

I know you won’t like this answer but…”it depends”!

Meaning, there must have been a reason you bought GICs inside the TFSA. 

Save for a car? Save for a house?  Ensure you don’t lose money to buy something in the future – during a stock market crash – using GICs?

Ultimately, I think all investors (myself included) need to have a plan for their money before they save it or invest it.  Basically, have a plan before products.

Your financial plan should be much more than just investing.

Financial Goals Update

On the investing front though, I’ve always used my TFSA as a retirement account – specifically a dividend income retirement account whereby I will earn a few thousand per year in tax-free dividends every year as long as I keep maxing out the account and as long as the companies I own keep paying dividends. 

So far, so good!  (This was my last monthly dividend income update.)

Other investors use their TFSA as a cash emergency fund.  Others still, use it for just short-term savings and pull money out of it each year.  Again, plans before products is my motto.

I think once you determine what you want your TFSA for, for long-term growth (?), you’ll be in a great position to make some changes over time.

If your TFSA is maxed, that is great!!!  Congrats.  That is ridiculously good on a lower-income.

If your approach is to use dividend paying stocks or ETFs or more growth oriented assets in your TFSA, then yes, slowly selling or moving out of GICs in your TFSA would align with that strategy.

You can find some of the best, low-cost funds to own for your TFSA here.

Should you always fill up your RRSP before investing in a non-registered account?  Or even TFSA? 

Again, based on my experiences and hearing from others who have been very successful at investing – I think maxing out your TFSA first every year (if you can) is always a great priority. 

Then, if you have money left over (and usually folks in higher income brackets might), then you can max out the RRSP as income gets higher while keeping your TFSA maxed out every year. 

If you’re in a very fortunate financial position to max out the TFSA, and max out contributions to your RRSP every year, and you still have money left over, then taxable investing makes sense.  That’s because why get taxed on investments when they can be tax-free (TFSA) or tax-deferred (RRSP)? 

All the best!

Last but not least – Canadian Financial Summit

Did you check out my presentation at the recent Canadian Financial Summit?   There is still time to get an all-access pass!

If you listened to it, I would be happy to hear your feedback.

See you here next week.  I hope to have my latest dividend income update ready for you!

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, we're inching closer to our ultimate goal - owning a 7-figure investment portfolio for semi-retirement. We're almost there! Subscribe and join the journey. Learn how I'm getting there and how you can get there too!

12 Responses to "Weekend Reading – 114 years of spending, ways to make more money, commission-free investing and more #moneystuff"

  1. Mark, can I assume the numbers in the Moneysense table above are before tax. I’m thinking that the “typical govt benefits at 65” column refers to pre-tax dollars, so I assume that applies to the entire table, but let me know if you think otherwise.

    Reply
    1. I don’t know for sure Dave but I believe so…it would make sense because after-tax would be very difficult to assume for the masses.

      What do you make of the math? Close?

      Reply
      1. Hey Mark
        Yeah, would make sense to me to be before tax as well. Certainly “typical govt benefit at 65” column should be, so I would think the whole table would be. We’re tracking to the 1.38M cell for next year. Happy to sit down and have a coffee with you when the Happy Goat cafe opens up. Just down the street from you. Also just downsized to a Condo from Kanata in January. Just reply back whenever. Cheers!

        Reply
        1. Definitely. I can’t see this after-tax since how would they know (what the tax rates are per person)? Impossible 🙂

          Ha – yes – Happy Goat is opening up soon – can’t wait. The signage on NU Grocery is up too!

          Congrats on the $1.38 M. That’s impressive.

          Reply
  2. Hey Mark, if a person were to invest all in BCE, now paying 4.9% dividends, and using the 4% rule, would their income not last indefinitely? Forget, of course, diversity and will Bell pay dividends another 70 years (and more) to at least match inflation etc.. (Just keeping things very simple)

    Reply
    1. Correct, theoretically. This is why I enjoy dividend paying stocks. I can spend the dividends at 3-5% yield and not touch the capital unless it’s on my own terms. That’s the plan – we’ll see how it works out long-term!

      Reply
  3. Thanks for the mention Mark! Buying shares for free is great, if you are a long-term buy and hold investor. Just don’t end up trading too much, or using an advisor that costs $3000 to set-up a portfolio of index funds that cost 1%/year 😉

    Looks like Canada has a commission free broker too – Wealthsimple.

    As for Jacob – 114 years of expenses equals about $800K. Which is not a small amount, but goes to show how everyone’s situation is different. But it is easy to save a lot of ” years” if you have a high savings rate. If you saved 90% of income, you can have 100 years of spending after a decade of working too ( ignoring compounding of that savings)

    Have a nice weekend!

    DGI

    Reply
    1. Well, I think you know where I stand on ETFs – happy to own VYM for a low-fee and get my 3% distributions and then own other stocks directly to save on fees and take advantage of dividend growth.

      As for Jacob, for him, yes, 114 years = $800k but for most people that would be ~ $4-5M. That’s a bundle. We certainly don’t need that nor will we ever have that. I’m hoping > $1 M without our pensions and other assets should be “good enough”.

      Hope you are enjoying semi-retirement.
      Mark

      Reply
      1. Hi Mark,

        I am retired, not semi-retired.

        I left my job in August. I then found another job that I really enjoy, although I do not need to work. Similar to other FIRE bloggers who left their jobs to become full-time bloggers/writers/business-people, I will call myself retired from now on.

        You can call me FIWOOT too, if you prefer however 😉

        Best Regards,

        DGI

        Reply
        1. Well then, congrats 🙂 I didn’t know if you shut it down for good or not.

          If your partner working? I recall they were – so hopefully she is not too far behind you.

          FIWOOT it is for you. Well done.

          Cheers,
          Mark

          Reply

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