Weekend Reading – Building wealth, more dividend income, gifting $200,000 for houses and more
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.
During your busy week, were you able to check out these articles?
Apparently bloggers making some money via their blogs are ruining the personal finance blogosphere.
I offered my take on how many ETFs are enough for our portfolio here.
Welcome to summer, officially, based on the calendar! See you on the site this weekend and next week.
Mark
Other articles…and a giveaway!
I encourage you to enter this giveaway here from my personal finance library – enter to win a draft of this book Building Wealth and Being Happy – The Practical Guide to Financial Independence – a book I reviewed here.
Million Dollar Journey is accelerating closer to his dividend income goal for an early retirement. I’ve certainly got some catching up to do – but working on it in my latest income update here.
Thanks to a reader who pointed this out, an interesting site to help young adults improve their critical thinking here. I was surprised to learn a world-class poker player helped found this organization.
Hard to believe some parents are this generous but I read an article on gifting recently that mentioned:
“…a 60 year-old recent retiree, who is considering gifting $200,000 to each of her two adult children in an effort to help them crack the Toronto housing market. Anne’s been clear that the money is only to be used toward a down payment. Through prudent saving, modest living, wise investing and her late husband’s life insurance policy, she has amassed an $800,000 portfolio. But the question is: can she afford to gift $200,000 to each of her two kids, leaving her with only $400,000 to live on for the next 30 years?”
Can you guess my answer? Sheesh.
A reminder millennials can get rich slowly if they follow the advice here – or anyone can for that matter. This post includes a link to a free ebook from the author.
Happy Investing!
Mark
I want wealth and happiness tell me what it is all about
Thanks for compiling this list Mark. I missed your “Is income ruining the PF community” post and I appreciate you highlighting it once again. Fun stuff!
Bert
All good Bert. All the best!
I want the book so I can review it on my blog and because happiness is important!
Thanks for the giveaway and the interesting links.
re: how many ETFs
Considering there are now more ETF & index fund offerings than there are individual stock offerings, I’d say the financial world thinks investors need even more.
re: critical thinking
Found while reading a Ray Dalio article on Farnham Street (https://fs.blog/; a critical thinking website by a Canadian & former CSIS employee). For those who do not have a STEM education/career, critical thinking is most probably very alien (think Spock), but it’s an invaluable skill to learn (as we will soon see). A great example of this would be one of the very few financial personalities I read with any kind of regularity — Cullen Roche @Pragmatic Capitalism (https://www.pragcap.com/). He was going through the motions working for a big bank until the 2008 collapse. He was scared out of his mind because he had no idea what was going on, so he decided to find out. The take away is to determine what is actually happening vs everything else (e.g. what you believe is happening, what others want you to believe is happening, etc.). I can definitely see huge (& costly) mistakes I’ve made from a lack of critical thinking; it may be a boring and un-fun task but applied to the right situations it will lead to a less stressful/more bountiful life.
(Apologies for the all the 3rd party links!)
re: generous parents
I once knew a wealthy man (since deceased) who gifted each of his 8 children $10,000 every year. This wasn’t done out of generosity or love but simply to reduce his tax bill. Think about that: giving away $80,000 in order to save more than $80,000. Rich people have different money problems than the rest of us.
re: CSA
Nailed it on the head by mentioning the investment “industry” and its lobby groups. Should be painfully obvious to everyone by now that in a Capitalist society money is the controlling/determining factor (e.g. pipeline anyone?). What did you think was going to happen? (Apply critical thinking here!) Also well spotted: “these reforms lack any teeth and will continue to be ignored in practice.” Of course they will. The CSA has a laughable level of investigation/sanction/collection functions (in declining order). Financial practitioners know almost no harm will come to them if they behave outside of regulatory boundaries, so they will continue to act in ways which benefit themselves first and foremost, even at the expense of their client. Critical thinking might help people who wonder if they actually need to deal with financial sector representatives (e.g. is there an actual benefit?).
Enjoy Summer!
I am so in-line with Robb’s comment on the CSA latest reforms. There must some sort of kick back from the adviser group. As a younger couple, my wife and I unknowingly paid an advisor way too much for his companies service…as much as 20% of each monthly investment went into their pockets! Only after I took the time to go through all the piles of paperwork and complicated figures did I realize this. We were so trusting. It would have made a big difference in our finances if I would have become a DIY investor much sooner.
“We were so trusting. It would have made a big difference in our finances if I would have become a DIY investor much sooner.”
I hear ya Paul and it’s very sad the CSA is not doing more to help investors. People just don’t know what they don’t know about fees and commissions.
It’s a true shame we can’t follow the practices like were mentioned in other countries to protect investors. This isn’t acceptable to me and more people would be wise to learn to handle their own affairs.
Nothing wrong with gifting to the kids, if one can afford it. In his case I doubt it’s a wise move. As Brian suggested, relying on capital appreciation could be risky. Even if she invested for Income there is a possibility she could be short of funds should she need to move into a Care facility. The other point is even with a $200k down payment the kids may still not be able to buy or meet the payments of a house in the TO area. I’d rather suggest she Match any amount the kids come up with for a down payment up to say $100k.
Agree, not wise. The article said Anne needs $40K each year form her $800K portfolio to live. This does not even meet the 4% safe withdrawal rate. So she really cannot afford to afford that.
One way to do this is that she pay the mortgage for two smaller properties for her two kids, each of her kids then pay $1K to her to cover the short fall. So it will not be a gift, it will be a 5% interest loan. But if it’s not one’s mom, where can you find somebody to borrow you $200K without any guarantee, even with a rate higher than 5%?
I think I don’t mind to help my kids to buy some real estate (a very far future though as the kids still so young) if price remains so high and I am able. Financially it also makes more sense if you pay the same amount money to pay down your own house instead of your landlord’s. But only if it won’t danger my own retirement.
These articles make me mad because a) there is no way my parents could afford to give me $200,000 for a home and b) I wouldn’t want it or expect it ever from them.
I think parents that truly want to help their kids out is great, but honestly, I’m not sure simply gifting a bunch of money to a millennial is teaching anything about work ethic. Maybe I’m just crusty in my 40s now 🙂
When we bought our first house almost 20 years ago, we just began working in Canada, and it’s less than 3 times of our family income. Last year our new home is more five times of our family income. It’s very difficult for today’s young people to own their own home. I think it actually makes sense, financially, for the parent to help the kids buy real estate in today’s market, provided the parents are capable. But who knows, maybe house price will go down and hopefully it won’t be necessary 20 years later.
I think that’s fine May but it shouldn’t because parents feel the must. I totally get it is a challenge for young people to own a home.
I agree house to income multiples are moving higher, and that’s even in much less expensive areas like here. Although as I’ve stated here before there are much more affordable places to live in Canada compared to the bigger hotter markets that take virtually all of the real estate headlines.
I think more Canadians starting out should consider living somewhere other than the big cities that people seem keen to highly leverage themselves to get into. I’ve had 2 mortgages before and wouldn’t have dreamed of buying a place valued more than twice our income (never went over 50% more, last 2 cash), or having so much net worth tied up in one asset.
If family can help and in no way burden themselves that’s a great thing. Mine didn’t help financially but did raise me well. Thanks Mom and Dad.
I think Anne is probably sitting on a very expensive piece of real estate herself, which would significantly increase her assets. Although the article doesn’t mention this.
As a parent, my love for my kids has no bounds. Thus I can understand a mom wanting to give away half of her liquid assets to them. But it doesn’t seem like a good idea in Anne’s case, unless her own home is worth in the millions.
That’s the thing eh Barbara – you never see all the details in this article. It does say she will be left with only $400,000 for retirement. I wouldn’t think that’s enough but some folks can live off that.
I agree with you and Barbara. There’s probably more to this story financially. If not I shake my head about what Anne is doing.
As an adult child I would not accept a gift from my parents like that knowing it would jeopardize their ability to afford to live.
I hope you are right. Although I understand parents can sacrifice anything for their kids, I don’t think they should. Definitely not standing in the lines of food bank because she gives food money to her kids for down payment.
Bingo.
Totally agree, gifting is fine as long as you/Anne/Boomers can afford it. I don’t think in that case study she can, assuming she has a multi-million dollar home she can sell.
Thanks for the mention, Mark! Enjoy your weekend!
Most welcome Robb and good article 🙂