Weekend Reading – Bernie memes, practice failure, cash reserves and more #moneystuff
Hey friends!
Welcome to my latest Weekend Reading edition, highlighting some of my favourite articles from the week that was across the personal finance and investing blogosphere.
Weekend Reading – How much cash, Cashflows & Portfolios, new names for emergency funds and more!
Enjoy your weekend and see you here next week with some ETFs I want to own in 2021!
Weekend Reads
Here are 5 stocks I intend to buy more of in 2021.
Should you pay yourself a salary or a dividend, from your corporation? This post has that guidance.
Nice to listen to Chris Istace go from stressed oil industry worker to a mindful explorer, photographer and more on Vancouver Island with his family over the last few years. Enjoy this recent Explore FI Canada podcast.
A cool quote to think about, one from a newsletter from Farnam Street:
“If you want to do a good deed, do it now. The time will pass, and you will not have the chance again.”
— Leo Tolstoy in A Calendar of Wisdom
From Farnam Street of late: Why You Should Practice Failure.
“If you practice failing every so often, you increase your flexibility and adaptability when life throws obstacles in your way.”
Nice work on Another Loonie on the TFSA vs. RRSP debate. Do you have a preference?
I have mine!!
Millennials, did you know if you just focused on your TFSA for the coming decades HOW MUCH MONEY this account could generate for you??
Check out the TFSA calculator, courtesy of Wealthsimple, from my Helpful Sites page.
Gordon Pape shared some thoughts on REITs to own for 2021. If you’re not a subscriber, he recommended the following three:
- Granite REIT (GRT.UN)
- Summit REIT (SMU.UN)
- Dream REIT (DIR.UN)
Rodney Smith doesn’t seem to be a fan of cash reserves. “My policy of keeping no cash reserve has worked for me for decades. So, let me explain.” He did in this post.
He goes on to say, “the retired investor can be in a similar situation. Dividends are constantly flowing in. They are held as cash until needed for living expenses or to deploy in a stock purchase.”
Fair. But I also believe $hit happens to very good people from time-to-time. So, the last thing any aspiring saver or family wants to get into, in an emergency, is more debt. I think we’re seeing that play out during the pandemic.
Debate away!
Kari from Money In Your Tea did a fine job highlighting a few asset allocation ETFs.
Ah, Bernie memes. Very funny stuff this week as the U.S. started to get back on track following the inauguration. Hooray!
This was my favourite thanks to Jake Tapper:
Guess away, I’ll tell you the answer below!!
Rob is doing well with his passive income stream.
My friend GenY Money shared her PF resolutions for 2021.
On my new site, Joe and I shared why cash flow (not cash) is king.
After reading that post, we also have a $100 Amazon.ca gift card giveaway for you! Enter away!
Happy investing and see you in the comments section!
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
I’m glad to be signed up for your weekly updates now, always find some great links in here. Also big thanks for the shoutout and mentioning my ExploreFI Canada podcast interview as well.
Most welcome Chris and glad you joined the newsletter as well. Always great to meet folks passionate about FI, more mindful and intentional living and more.
Thank you so much for sharing my article on the whole TFSA vs. RRSP debate! I read your TFSA article, and my preference is also to focus on my TFSA. I prefer using my TFSA because I know if I need to withdraw that money later on, I don’t need to worry about the tax implications. I could see myself doing that in 5 or 10 years if we decide to move into a larger home, but nothing is for certain at this point. I definitely agree that future expected tax rates are likely going to be higher than our rates today. So that somewhat diminishes the power of the RRSP.
Your commentary on how much you can benefit from the TFSA alone will be eye-opening for many. As a millennial, I’ve also toyed with the idea of a TFSA-only retirement. Between maxing our TFSAs every year and having a paid-off home (hopefully!), retirement seems achievable.
The key that folks have to remember, and very few people do this I believe, is you must reinvest the RRSP-generated refund. This is a tax-deferred government loan at your current tax rate-time of contribution. If you do not reinvest that refund, 100%, always, and you decide to spend that money on a winter vacation or other, folks are missing out.
My hunch is very, very few people always for 20-30 years max out their RRSP let alone reinvest the refund always. This puts the favour towards the TFSA alone 🙂
Keep up the good work including maxing out your TFSA. You will have $500K if you do that consistently over 30 years. Math says so!
We plan to live off rrsp withdrawals for quite a few years before we collect CPP and OAS. We don’t have any pensions. In this situation, we save on marginal tax rate with deposit and we pay the average tax rate with withdrawal.
This is what I have been doing just shy of 7 years now, although my wife does have her own work pension. We will “likely” defer both of our CPP, and my OAS until age 70, taking her OAS at 65 offsetting much of her pension bridge loss.
Yes, my RRSP has also been beneficial in exactly that way, with higher marginal rates while working and now lower average rates in retirement. In fact, fortunately so far this has been more beneficial in my situation than if many years ago I had access to and was comparing to a TFSA. Its great to also have that tool now as I can reinvest lower taxed RRSP withdrawn money into my TFSA for the future. All in an effort to smooth taxes considering all current and future income sources.
The wild card of course is what will happen with taxes and with these savings programs in the future. I don’t see that as a positive with a growing appetite from many wanting more social spending and governments eager to do that even if it means carrying enormous growing debt and debt costs forever. That means more tax needed from those that have- currently the 60% of Canadians who effectively pay tax.
Same. How are we going to pay for all of this? Maybe I need to stay full-time for a few more years since some taxpayers have to pay for this stuff!
Good question. MMT seems to be creeping in and maybe those advocates are right that we don’t need to worry about endless printing of money and debt issuance. But I doubt it and to me sounds more like – if it sounds too good to be true it is.
You’re smart and will figure out what you need and want to do to make it all come together.
Yeah, don’t know what kind of tax burden my kids will have to suffer. One thing I know is that they will not be able to afford to buy their own living space on their own for quite a while. Lending them money for mortgage down payment is not in our retirement plan but if we will be able to do that, maybe we will.
If we retire before 60 years old, and defer both CPP and OAS, there will be more than 10 years that we have to live off RRSP withdrawal and investment income from non registered account. Don’t want to touch TFSA for as long as we could hold.
Tax will be a pretty complicated problem for us I guess once we retire. My original plan is withdrawal from RRSP and investment income from non registered account in the form of eligible dividends. But if we retire before the kids being 17 years old, it might be the only period we might get some child benefit from the government. With the gross-up of eligible dividends, the child benefit will be reduced. But with the dividend tax credit, the tax due will be reduced.
Well, I know I shouldn’t let the tax tail to wag the investment dog. Anyway, not the time to worry about this yet. Who knows, maybe we will not retire until the kids out of door.
You’ll definitely have some calculations and decisions to make on your actual plan, in due course. I’m certain you’ll be on top of that. But options will be a good thing, and if you can eventually help your children with a home that’s quite a bonus.
And yes don’t let the tax tail wag the investment dog.
That seems smart to me but I’m biased – since we plan to “live off dividends and distributions” along with part-time work. That means we will be too young to touch CPP or OAS, and we’ll also be too young to tap my DB pension or my wife’s DC pension. Those four income streams will come in after our part-time work is done in our 50s. I can’t see us working full-time or part-time after age 60 but during our 50s, for sure.
Great round up Mark.
Isn’t it funny that what most people will remember from this year’s inauguration is a meme that had nothing to do with the new president?
LOL. Well, I watched a bit of it but I was working all day. Funny stuff. All the best Maria!
Thanks for the mention Mark,
Chris’s story shows how you can make giant changes to improve your life today. It’s also inspiring to see that he has taken a chance on Lean FIRE. By having some business income from his wife and some odd job income himself, he has successfully been out of the ‘traditional’ workplace for several years. There are lots of options on the FIRE spectrum, choose the one that works for you personally.
Cheers,
MM
Absolutely re: I’ve always said on this site personal finance is personal. Good on him. We have some different goals that are not so LEAN FIRE as you know but we’re getting to our goals as well. Already surpassed one major investment goal, last one is the mortgage in 3-4 years. 🙂
Thanks, Mark, for including my ETF Asset Allocation article in your post today! I made my 20yo and 18yo kids read it, to help them understand investing in their own TFSAs. My son feels 100% equity is perfect, daughter thinks 80/20 is best for her. These all-in-one ETFs make it so easy for them as beginners to stick to their strategy without much effort to rebalance regularly.
Thanks for posting Kari, I enjoyed looking at your site and reading your article on asset allocation ETFs. Like you, I encouraged my 18 and 20 year old kids to invest in VEQT (with the money they earned from PT jobs – they have real skin in the game). When they were little we invested their RESPs in MAW104, which we’ve been quite happy with, but I’d probably use VEQT if I could go back in time.
Indeed. Smart stuff Bart re: all in one funds or MAW104 and be done with it, for most people 🙂
Yes, for sure, those teens or early-20-somethings have it made if they max out their TFSAs every year with VEQT or other. Wake up in 40 years near a millionaire inside that account alone. Good on you to show them the ropes!