Weekend Reading – More money moves to weather the pandemic, frugal living tips, commuting pensions 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.
You can find my last edition here – writing about the top considerations for millennials who are just getting started with investing, how many DRIPs are enough to run within your portfolio, and much more.
First up, thanks to Join Piggy for asking me to contribute to their list of frugal living tips. Lots of great ways to save and get what you want at the same time here.
This week, I wrote about how I used to sabotage my portfolio. Terrible stuff really…don’t make the same mistakes I did!!
Rob Carrick wrote about five defensive plays to make to weather the pandemic this fall. Since some of you don’t pay for the Globe content like I do…here is a summary of Rob’s five points and my commentary on them.
- Ask about breaking your mortgage. Yes, you should ask but I don’t think you should break it unless you do that math, re: the penalty is worth it. Our mortgage is currently 1.7% and we’ll be renewing it very soon (for a final time and term)!
- Take some of the risk out of your investment portfolio. Rob writes “sell enough of your stocks or equity funds to get back to your target asset mix….”. While an option, personally, I wouldn’t sell any stocks. I would rather buy stocks in different sectors to rebalance. If you feel your portfolio has too much risk, right now after a major recovery no less, you probably have too much equity in your portfolio anyhow. This is how I rebalance the Canadian equity portion of my portfolio and my sector targets. I try and ensure no one sector in my portfolio is more than 20%.
- Contact your lender if you’re not going to be able to afford your mortgage or debt payments when your deferral ends. I think this is wise advice, get ahead of the curve if you will. If nothing more, this pandemic has delivered all of us some great financial lessons. Here is what I’ve learned from the pandemic and what our future might look like – including I intend to invest.
- Exploit the opportunity presented to renters. Rob highlights rents are down in some major Canadian cities. While that may be true, we’re not intending to rent but instead own our condo in the coming years. Only a few more years of mortgage payments…
- Squeeze all the juice possible from your savings. Rob is correct in that “high interest” savings accounts no longer exist and likely won’t again anytime soon. We have a simple recipe for savings in general: we automate everything. We have savings for near-term expenses and we have savings directed to our brokerage account for investment purposes. That’s it. We also keep our emergency fund steady at this amount although I plan to keep much more cash in the coming 3-5 years as part of our semi-retirement plans in our late-40s and early-50s.
Thoughts on these above???
A reader recently asked me about owning some dividend aristocrats so I directed him to this post. Yes, we own some and we reinvest all our dividends paid by them to own more shares in these companies (JNJ, PG to name a few) commission-free every quarter.
You can see many of my current holdings on my Dividends page here.
On the subject of dividends, Dale Roberts had some thoughts on whether Canada’s energy sector (and dividends paid by some companies) are safe.
With some companies I own, I don’t see any trouble at all. Fortis increased their dividend this week by 5%+ and is intending to keep increasing their dividend by the same rate in the coming years. That’s great news for shareholders like me!
Along with Fortis, this adds to the following dividend increases in my portfolio in the COVID-19 era alone:
- Algonquin Power (AQN)
- Emera (EMA)
- Capital Power (CPX)
- Johnson & Johnson (JNJ)
- Procter & Gamble (PG)
- Microsoft (MSFT)
- Southern Company (SO)
- Verizon (VZ)
- Brookfield Infrastructure (*BIP)
- Brookfield Renewable (*BEP)
*Dividend payment increases made at end of March 2020 prior to adjusted stock split to BIPC and BEPC – new Canadian corporations respectively.
My friend Gen Y Money wrote about her preference when it comes to never touch your principal (NTYP) vs. the safe withdrawal rate (SWR). As you know, I’ve written about the SWR a few times on this site…and…I have a goal to “live off dividends” to a degree.
This is the early path to retirement ignoring any 4% rule.
My goal to live off dividends remains alive and well!
That said, I must say, of course I intend to “eat some capital” but I will do that slowly and eventually on my own terms. So, I would say I’m in the I-will-not-touch-the-principal-in-the-early-years of retirement camp. Too long of an acronym I know so I spelled it out!
Hear me speak at this year’s Canadian Financial Summit!
As a passionate investor and reader of my site, I wanted to reach out today and tell you that I’ll be speaking at the upcoming Canadian Financial Summit taking place October 14-17, 2020.
I must say, it’s absolutely great that the host is having me back to this Summit for a 4th consecutive year!
The great thing about this Summit – it’s 100% FREE for that weekend.
Have internet and a phone or a tablet or a desktop computer and enjoy soon!
Here is what you can learn about during this year’s free Summit:
- How to retire early and on your own terms
- How to invest better, easier, and more efficiently
- How to earn more money by creatively advertising innovative side gigs
- How to see through financial jargon meant to confuse you
- How to check your “retirement readiness”
- How to avoid crippling fees and terrible advice
- How to legally avoid Canadian taxation when you move for work or retirement
- How to use Financial Technology (FinTech) to save major cash
- How to strategically pick the perfect wardrobe without breaking the bank
- How to drawdown your nest egg in retirement & what a safe withdrawal rate is
- How to minimize costs and save cash when doing home renovations
I’m looking forward to your feedback on my talk – how I’m getting semi-retirement ready and sharing my portfolio draw down plans to sustain it!
The Summit will kick off with a live webinar on October 14th and again, is absolutely FREE to view for the weekend.
Should you want to check out all videos after the free weekend window has passed, that’s the only time you’ll need to pay – so sign-up for the anytime, anywhere All Access Pass.
Even better with your All Access Pass, you now have Early Bird Pricing!
How does your net worth compare as a Canadian? Our Life Financial has some interesting stats on that. Personally, I/we don’t discuss our net worth on this site. It’s somewhat irrelevant when it comes to our financial plan – since our plan is focused on how much income our portfolio can reasonably generate. I figure a debt-free condo (soon?) and passive dividend and distribution income we can live from will take care of the net worth calculations for us. I believe high net worth is an outcome measure of doing well financially. I believe Our Life Financial feels the same way. What about you?
Reader question of the week (adapted for the site for length today):
I really enjoy your blog! I also really like your concept of hourly passive income wage – it’s something I’m now tracking myself!
I have a very important pension question for you – could you answer from your perspective knowing you have a pension as well? Thoughts?
Thanks so much.
Readers, sounds good and stay tuned for an upcoming post on commuting your pension!
Happy Investing All!
Good stuff Mark, thanks. I like Rob’s stuff but don’t get #4, buy a condo. I understand the advantages of a condo like lock up and leave and no outside maintenance etc.. No doubt works for many. We own our home. Yes, it has ongoing maintenance. I pretty much do it all and see that as keeping the condo fees in my pocket…which goes towards travel. It also gets you off your butt. Big repairs like the roof, well, I’ve seen that some folks in condos have to pay extra fees that year anyways…so no big difference then home ownership. We have a simple gym in the basement, makes it easier to just “do it”. My wife has a craft room and we have a nice tv room where I can put the dolby digital as loud as I want. I understand that after a few honeymoon years you begin to get into the condo politics. Much simpler to compromise with a spouse then a condo committee! I think that what I’m getting at is not to follow a trend until you really know it’s what you want.
Those are fair points to not own a condo Paul. I get the fees can be prohibitive for some! You nailed it at the end for me: don’t follow trends and carve your own path. That could be a condo or not for sure.
I hope all is well, stay safe!
Definitely interesting all the different retirement investment plans.
I’ve been retired for over 7 years without any company pension. Our plan is very simple – we have more than 2x the dividend income we need to cover all our expenses so our portfolio continues to grow. We have also shelled out a good chunk of early inheritance to our two kids and families.
I didn’t have a huge salary and my wife was stay at home. We have always just had a very simple lifestyle centered around family and the great outdoors. We’re still in the same house we bought in 1982 and paid off in 1991. We haven’t done any renos other than maintenance stuff like flooring, painting, etc. We did all our over-seas travel while I was still working and both my wife and I have completely emptied our bucket-lists.
We just want (hope) to keep doing what we’re doing and hope to stay as healthy as we currently are. We have quite “steady” daily/weekly routines and like it that way. We still keep the weekends as something special.
I know our “steady as she goes” lifestyle is not for everyone but it sure works for us.
That’s impressive Don re: “we have more than 2x the dividend income we need to cover all our expenses so our portfolio continues to grow.”
You sound more than “set” for any long-term retirement. Well done 🙂
Health is the ultimate form of wealth – stay well!
Thanks for the mention Mark. I’m not intending to scrimp and save for my kids either, but I would like to have money in my future years to be able to cover my potential higher cost of living (and not have to have it be something my kids would worry about). Also, if I wanted to go to do a ’round the world’ cruise at 60 (in a post covid era hah where Norwalk and COVID would not exist on cruise ships anymore, haha) I would like to be able to afford that without having to sell assets to cover that expense.
No, I know that from your blog GenY. We’re very similar as you know. Certainly the older I get, the more I realize, our assets are worth spending given our situation. There is no point having money as a tool if you can’t enjoy it for you, your family or your kids. I intend to “live off dividends” i.e., I will not touch my capital in the early years of retirement/semi-retirement. That’s the plan. After I reduce some sequence of return risk in the “early” years I will start eating the capital slowly.
I hope we can travel again my friend!!!
We are in an interesting position. We will eventually canabalize our investment accounts to live off off in the short term. During that time our rental properties will continue to be paid down by the tenants. Eventually we can live off the rents or sell the properties and reinvest the money.
Just another example of how everyone’s plans are different. It’s more important to have a plan than the “perfect plan”.
I could see that Maria. That’s impressive with your rentals. You should have major, positive cash flow in the years to come and can potentially sell more or more assets eventually to create your retirement windfall.
I should have you on the site for an interview to share your story and your retirement game plan. Will flip you an email 🙂
Yes, a good plan and any monitoring to change plans over time is far better than dreaming up anything perfect (which does not exist).
I am in the camp of dividends covering basic living expenses and capital withdrawal cover flexible expense, for the initial years of retirement anyway.
Although I have kids, I don’t really plan to leave any inheritance to them. I also don’t plan to help my kids to buy their first primary residence or whatever. I plan to pay their undergraduate education. They will have a better start already with that. Of course, if I have spare money I don’t mind either paying their mortgage downpayment or leaving an inheritance, but it’s not the goal.
Neither do my parents FWIW 🙂 I have told them repeatedly to “spend your money” and enjoy your time now in your 70s. Life is short and I would much rather them live how they wish now, enjoy things, than have any regrets or worries or other.
You seem to be in a great place to help your kids. Kudos. Very well done May.
I agree, I’m in the ETYP eventually touch your principal camp. GEN Y does mention wanting to leave an inheritance, something that is less of a concern for us without kids.
Yupper! I will definitely eat my capital at some point but I know in the early years, I will strive to “live off dividends and distributions” (from ETFs) while working part-time/in semi-retirement. Maybe 5 years out ish?
All the best man.
Carrick: “Take some of the risk out of your investment portfolio”. I certainly agree that if you own low quality or poorly performing stocks, you should look to get rid of them. The question is when and at one cost.
I prefer the other choice, do your homework up front, before you buy, and don’t buy speculative or lower quality stocks in the first place. Even if one of the quality stocks has under-performed, don’t sell it just to buy another, unless you no longer feel it is a good company. Be Patient and always monitor your holdings, but good companies usually do well over the long-term.
I agree Cannew – I tend to buy more stocks for *rebalancing and I really just keep adding to my portfolio over time. I try to avoid selling stocks as much as possible. *I don’t own any bonds or bond ETFs so I can’t rebalance that way!
Mark, I’m sure you know my thoughts about holding fixed income products in ones investment portfolio!
I do. I don’t own any either for the record 🙂