Weekend Reading – Best robo advisors, how to spend money, U.S. taxes 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.
These were my articles from this past week:
I believe I made a strong case for keeping stocks in your portfolio, period.
This is how we spent our tax refund.
Plans for the weekend? We’ve got a few things on the books including a garage sale. I just hope it doesn’t rain for it!?
Thanks for all the kind words about the new newsletter. I hope to make it more personal in the weeks and months to come. Reading stuff like this from various readers makes my day!
“Anyways, I just wanted to say thank you. I’ve been reading you since 2013 and I can honestly say that because of you (and Boomer and Echo and CCP) I am 31 and just purchased a new house, I am very financially stable, and on my way to financial independence. Maybe FIRE is around the corner too?”
(I’m a fan of Boomer and Echo and CCP (Canadian Couch Potato) too).
I intend to turn off the old email subscription platform in the coming week or so, so I appreciate your patience with that.
Enjoy your weekend and see you here next week!
Mark
Other articles…
Going from saver to spender is not easy for some, as this article highlighted.
Stock Street Blog included my beginner investment book recommendation here along with many other bloggers. I had a long list to choose from but I finally landed on this one.
Thanks to HardBacon (gotta love the name) for including me in this list of top Canadian bloggers and journalists here. That’s cool.
Are share buybacks or dividends better for investors? This article suggests the former although using the S&P/TSX 60 index as one of the three indexes to back-test is probably a flag given more than half of that index (certainly a big part of the top-10) is compromised of financials and energy companies that historically pay dividends.
Young & Thrifty believes we suck at personal finance because we suck at grade 9 math.
Sure Dividend listed some U.S. tax considerations for Canadian investors. I generally agree with those rules of thumb:
“We concluded that the best practices are to:
- Hold dividend-paying U.S. stocks within an RRSP
- Hold non-dividend-paying U.S. stocks within a TFSA
- Hold Canadian stocks in a taxable account – especially dividend-paying Canadian stocks, to take advantage of the dividend tax credit.” The only big caveat I would add here is that you should invest in your registered accounts like the TFSA and RRSP, and max them out, prior to taxable investing.
Congratulations to Sylvain who won my gently used copy of Wealthing Like Rabbits. Check your inbox for details since I hope to put this book in your mailbox soon! You can check out my recent interview with the Head Rabbit and author of this book here.
Have a great weekend!
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and now investing beyond the 7-figure portfolio to start semi-retirement with. 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.
re: math
I’ll continue with saying that when money is involved, it very quickly becomes all about the money, and nothing else.
When I was taking math in college, one of the physics teachers (a PhD) created a new physics/math course which basically merged and streamlined a physics and a calculus course. She also flipped the script on teaching methods, doing homework in class — where a teacher was available to answer questions — and assigning text reading/learning for out-of-class work. Pretty sure not one student got less than an 80% final grade for that class, even those with weak math skills.
Then the hammer came down from the math department head. She cancelled the course because…it was now one course bringing in revenue instead of the students having to pay for two courses. The teacher was off the charts furious.
So, the argument that the education systems cares for the well-being of students is complete garbage, especially when money is involved and those who make the final decisions have those decisions dictated and corralled by money.
Scandinavian/Nordic education plans seems to be the way to go. But, not enough people would get wealthy so that’ll probably never happen.
I think Canada needs to improve the math education. Lots of ads I saw does not make any sense. $1 booking fee promotion for a trip? What’s the total cost? $69 only a month to buy a car? What’s the term and what’s the rate? I don’t think this kind of strategy can even work with my kids. But obviously they are effective with lots of adults.
Math is not hard but you do need to work on it and practice it. I feel my kids don’t get enough math practice in school here. Also, I am mad at people who believe “girls are not good at math”. Math does not require any muscles but only brains which girls have a lot. I was always the number one at math in my class since elementary school. I always told my daughter YES, you are good at math, just as your mom who is very good at math too.
Math is a very useful tool and everybody should master that and everybody can.
May, my daughter has had quite the girls honours math group at university, I loved seeing it. Such a smart, fun group of young ladies. My daughter would complain that she wasn’t smart, as her friends were getting 97 and 98 in the tests, whule she was only getting 94 or 95… she is always so hard on herself. Graduating next week with a 90 plus average from UBC.
But back in middle school she did suffer from a teacher who thought girls couldn’t be good at math. So annoying when her older brothers were offered to skip grade 8 math and she wasn’t, when she was just as gifted and loved it, as well.
Geez, those are some great grades…impressive.
Congrats to your daughter. You must be very proud of her.
Yeah, it’s still a long way to go until women can be treated equally.
Sadly, very true May.
Think that’s true as well.
Barbara, awesome for your daughter.
May, you and your daughter…wow!!
When it comes to math there are three types of people in the world, those that know math and those that don’t.
I learned that too. LOL
re: buybacks vs dividends
I might argue that neither are better for the stock holder as it shows the issuing company has no better option for its money, i.e. re-investing profits within the company is currently not a profitable move. Demonstrates various weaknesses within the company.
re: we suck at personal finance because we suck at grade 9 math
This has been thoroughly documented. Unfortunately, with the current ‘No Child Left Behind’-style “education” strategy, not only do we suck at grade 9 math but we also suck at math beyond (and below) that level. Making it easier for children to fail/falsely succeed at math is not an answer for anything. Downward spiral anyone? Personal finance is merely the icing on the cake; the entire recipe needs a revamp.
re: inflation
I always base the number on the annual pay raises of government bigwigs, which usually lands in the ballpark of 10% (+/-). Beyond that, gov’t published numbers mean almost nothing. You can, however, utilize their data to formulate your own personal level of inflation (e.g. exclude all items which are not representative in your life; adjust the weighting of meaningful items, etc.).
Re: buybacks vs dividend increases
Buybacks have greater benefit for company executives and shareholders who seek growth. Dividend increases have greater benefit for shareholders who seek income and income growth.
Well said 🙂
Give ‘Citizens DisUnited’ by Robert A.G. Monks a read to know that execs will always come out on top vs shareholders, no matter the utilization of capital (buyback vs dividend); both allocations are in the name of appeasement, not enrichment.
“The owners aren’t at the helm — but manager-kings are. And there are no limits to prevent these CEOs from enriching themselves at the shareholder expense… no one in the chain of ownership has an incentive to care about corporate governance.”
You may own shares (a claim on future profits) of company XYZ, yet most probably there is no controlling entity (or entities). In other words, you own nothing and get whatever bone the executives choose to throw your way. Mutual funds and index funds have gone a long way in diluting corporate control. We have (unintentionally) traded perceived risk for sub-par returns.
Enjoy your dividends but don’t think they are the pinnacle of corporate action.
“Paying dividends can help a company demonstrate to shareholders that it’s in good financial shape and confident about its outlook.”
Floating on the dividend stream (well versed article)
https://www.cibcwg.com/c/document_library/get_file?uuid=775bdfde-ee61-4667-bca0-223df41252d8&groupId=350963
For inflation, my wife and I assume about 3-4% long-term. We figure it will go higher over time.
Congrats Mark on being on the “influencers” list.
I agree that 600K is not enough to retire at that age, especially with kids and the considerations you’ve mentioned Mark, unless a good pension is coming soon. Many people want to retire for less stress. Retiring with very tight financial constraints and 50 yrs of living ahead isn’t my idea of less stress.
Mark, you’re also right on the differences of 1M in 40s vs. 60’s etc. Big difference. Everyone’s number is going to be quite different. I think having a strong reliable base of “income” with some growth is important for all/most basic needs and ideally the pile is for discretionary to tap over time and backstop along with home.
May, I think you’re wise to see that. I phased in. Was entrepreneur, sold business and went into easier job without staff responsibiities. After 2.5 years was able to go PT 24 hrs/wk for another 2.5 yrs before full stop. Wife went full stop about 6 mths before me going to PT. Re meaningful life – you’re smart to think about this in advance…..read, research, reflect, plan is a good idea for anyone IMHO. I did some and created a little list of activities/hobbies (new and past to be reopened) and a travel bucket list- my goals. So far have accomplished some: bought motorcycle and got into that after 23 yr absence, learned to kayak & bought 2 of those, studied/earned boat operators licence to safely play around with our little boat in this harbour, joined and go to gym 5 days/wk (health & social), joined running group & entered 1st race in 12 yrs, joined seasonal hiking club, learned & did much more on home and automotive DIYs, travelled to ~ 18 new counties (9 more coming this summer!), dozen Caribbean islands, 7 new US states, and discovered more of Canada, read a lot and learned more on financial. Maybe I’ll learn to cook but my wife might not like me in “her” kitchen. LOL Might consider a little more community stuff I’ve gotten away from along with the extra stuff I help my folks with now.
@RBull Wow, your retirement life is so fulfilling. I already have some things I think I can spend more time on. I always like to volunteer at local food bank, I will do more when I have more time for sure. I also plan to volunteer at local community supporting society where I can help people from my home country. Definitely need to find more.
Thanks May. So far it’s working as we envisioned. With luck we can continue.
Kudos to you for helping others and planning to do more. I could do better on this.
Forgot the reference:
https://www.adviceforinvestors.com/news/dividend-stocks/how-to-beat-inflation-with-growing-dividends/
Tim Stobbs hardly retired already with $600K investment assets and two kids. But he admitted that he doesn’t have enough money and don’t remind to work again when necessary. So I liked him more than some other early “retiree” whose math doesn’t add up.
Anyway, as I am actively planning for retirement now, I feel “Flipping that switch from saving to spending in the retirement years” won’t be that big a problem, how to have a meaningful life after that will be some challenge. I found my current life is completely occupied with work and kids. Hopefully it won’t be that hard to find fun things. I used to bake a lot but not any more. Maybe that will be the first thing I pick up again.
I would never think $600,000 is “enough” for anyone in their 40s.
That makes no sense to me given longevity risk, inflation and other factors.
If my wife and I sold our house, we could consider ourselves “retired” as well and publish that everywhere too but the reality is, $1 M invested in your 40s is not enough to completely retire on – if you hope to live another 40+ years.
Retiring now, as a 60-something, with $1 M or so in the bank is probably enough.
True, almost everyone ignores Inflation when considering their future. They say inflation is currently about 1.5% which I think is bull, probably more like 3%-4% when everything is considered. As the attached article suggests 3.5% has been the average since 1929, but if gov’t starts increasing interest rates, inflation could rise quickly.
Most project Returns to cover inflation, which is impossible to forecast, so we’re back to Income. Get a stable rising income and inflation becomes an annoyance rather than a problem.
I think inflation is currently 2.2% and the link suggested 3.1%,which is backed up in this reference dating to 1915.
https://tradingeconomics.com/canada/inflation-cpi
Then there’s the BOC “core” inflation rate which is around what you wrote.
https://tradingeconomics.com/canada/consumer-price-index-cpi
I agree real inflation is probably 3% or a little more. Some write that it’s 6-7%. I don’t see that at all unless they’re in hot housing markets and assigning big numbers to that.
A stable rising income is great idea. Although research shows people spend less as they age 1% for every year over 70 and 2% annually over 80, as an average. Good or bad health may be the biggest influencer.
Inflation is different for different people. As an example, I will likely be buying one more vehicle so if the price of vehicles doubles after that, it won’t affect me purchase wise. We don’t drink (anymore) so price changes in alcohol are irrelevant. There are likely dozens of things in the “basket” that we do not consume, ergo their price change has little effect. Furthermore, inflation can be affected regionally, Vancouver v. small town Manitoba. So I don’t sweat the inflation numbers all that much. Sure there are some items (utilities, property taxes, etc) that can not be avoided and will increase costs but using a reasonable factor ought to be sufficient at our stage of life. We also have the benefit of a pair of indexed pensions as well as the future CPP/OAS. So in conclusion, inflation figures provided by the government are more along the lines of the Pirate’s Code, it’s more like a guideline.
You’re golden ++++++++. One non indexed pension here.
Definitely is different for different people and in different areas. Truth is I don’t sweat it either and I really think central bank is focused hard on not seeing inflation anything ridiculous like in years past. Yeah, it’s a guideline. Cars around here don’t last that long (rust) even if we wanted to keep driving something a long time. Worse where I am. Brake rotors rust badly every day/night from salt air/spray, calipers seize etc. 15 years is usually about it if you take care. Ours will go after 12 probably (~3 more).
Biggest influencers for us are some things we can’t avoid. Utilities, property taxes, other taxes, home repairs etc, fuel lately again and these unfortunately also seem to be what’s rising most. However we also don’t consume all things and adapted somewhat in retirement -booze we’ve got into making our own (drink more than when working- maybe that’s bad!!), vegetable garden now helps, clothes pretty much used only now, etc. plus beg and borrow more now too. LOL Hard to pin inflation on travel. In any case we would adjust this based on what we want to spend overall.
Inflation is huge when looking at long term. Agree inflation rate varies depends on what people consume. For me, I feel inflation impacting us is definitely more than 2%. Both of us are commuting long way. Considering the house price in Metro Vancouver, really no surprise huh? Gas was only very small expense ten years ago. Now it becomes a big financial burden. And we can not escape that. Another one is grocery. We like good quality food and it’s getting more and more expensive. Especially Canada imports lots of food and Canadian currency is so weak. My daughter loves Peru mangos, it’s $70 a cast, only 8 to 9 of them. It’s a good thing engineers don’t need fancy clothes and I am the few women who do not care for dresses, shoes, bags and makeups. So I save money on those and rather to provide nutritious food on table for the family. I feel I might be forced to have a vegetable garden soon in my backyard. But I have bad hay fever so I don’t know how feasible it is.
re: Gas “Now it becomes a big financial burden.” For sure. For those that commute quite a bit in Van. City I cannot imagine the $$ for gas. It would be hundreds per month.
“I feel I might be forced to have a vegetable garden soon in my backyard.” We had one for years and really enjoyed it, not all veggies mind you but a few are great. 🙂
https://www.myownadvisor.ca/square-foot-gardening-101-investing-in-your-health/
Retiring in your 40’s with $600K in investments and no other income is crazy and doomed for failure IMO. Totally different story and success rate if the retirement age is 60+ with the same $600K investment plus CPP, OAS and possible company pension added to the mix. A $600K investment should spin off a growing income of 24K to 30K to begin with.
That’s my conservative estimate as well Bernie. I think our desired $1 M portfolio should churn out about $40k per year, some of that tax-free thanks to the TFSA. Add in some part-time work, and we’re around $60k per year for income in semi-retirement.
Take away part-time work when our workplace pension kick-in, my pension will be $28k per year at age 65; and I think we’ll have enough money for our needs.
“Retiring” with $600k at age 40 makes little sense to me since in meeting Tim, talking to him, he will still work – so that’s not retirement.