Weekend Reading – The Latte Factor makes others rich, top discount brokerages, retirement learnings and more #moneystuff

Weekend Reading – The Latte Factor makes others rich, top discount brokerages, retirement learnings 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.

Following our condo move last week, there was more unpacking and getting things organized around the new place…while trying to enjoy some summer vacation time before back-to-work next week.  So, here was my post as part of Weekend Reading:

This reader emailed me a case study to work out – so that happened – can this 60-year-old retire now on a lower income?  Read this post to find out how much he needs.

A VERY Happy Canada Day to you in advance!  Any special plans?

My wife and I might walk down to Parliament Hill because…well…we can now from our new place. Whatever your plans are, I hope you enjoy them.  I’ll be back next week with a new, detailed blogpost about how to get started with investing – don’t miss it!

Thanks to everyone who entered this latest giveaway for Your Ever Growing Income – I’ll email the winners soon!

Enjoy these Weekend Reading articles and chat again soon.

Mark

Other articles

A great set of details here about the tax efficiency of Vanguard asset allocation ETFs with a bond component.  The summary:  the more conservative your asset allocation is (i.e., the more bonds you hold with a Vanguard all-in-one ETF) the greater the expected tax drag on your portfolio will be.

MoneySense ranked the top online brokers in Canada.  Questrade was #1 on this list. If the big bank discount brokerages offered no commissions for buying ETFs, I suspect they would quickly compete for the top of the list. Thoughts?

Co-living is gaining in popularity in Canada.

Here is what Jon Chevreau learned so far in retirement.  As a 40-something striving for semi-retirement in the next 5 years (or so), it was interesting to read this since this is exactly our plan:

“… you may still choose to work for money but on your terms: the magic day is when you’re completely free of debt and have enough saved (and properly invested) that even if you never earned another dime you could meet all your major living expenses, assuming some variant of the 4% Rule.”

We figure no debt and owning a $1 M portfolio should do the trick for semi-retirement.  See how we’re progressing here.

A good reminder the “Latte Factor” got one financial guru very rich (and made everyone else miserable in the process).  You know what?  I say enjoy your coffee or whatever your drink of choice is in moderation.  Automate your savings and then enjoy your double-double or whatever.

You might recall David Bach was the one that popularized “The Latte Factor” – the concept (using coffee as the whipping boy) that small day-to-day purchases, when eliminated or at least significantly reduced, can lead to major financial savings over time.  While true, changes can and should start small (and can snowball from there), I would argue $5 or even $10 here or there is not going to make or break your financial life.  Rather, buying too much house, buying too much car, overspending on meals out and restaurants, and other unconscious spending absolutely will.  Reading about “The Latte Factor” will ironically, make other people rich, not you.

Congrats to GenYMoney and the new addition to the family.  How she finds time to blog I don’t know…

Last but not least, like I mentioned above, Rob Carrick believes your key to financial success is automating your financial life. Rob wrote:

“When you save automatically, you have the freedom to spend anything left over after covering your regular bills and expenses. Drink lattes. Eat avocado toast. Live it up, or dial it down. It’s your call because you’re covered on saving.”  Amen to common sense.

Reader email of the week:

Hi Mark,

Thanks for all the good work you do. It is excellent. Question for you…about U.S. ETFs inside an RRSP.  

Are you moving some RRSP assets into U.S. dollars to invest in the U.S. ETFs or are you purchasing Canadian dollar versions of these funds?   Some may offer CDN-dollar versions but I know some do not.  I would use Norbert’s Gambit to move to U.S. funds if necessary.

Appreciate your thoughts and approach here.

Thanks for your email and comments.

First up, the Canadian dollar compared to the U.S. dollar (right now) is expensive.  So, it could make sense to buy the Canadian equivalents but I don’t bother.  Here’s why – it’s largely a wash short-term and I’ll still have withholding taxes to deal with long-term.  This is because Canadian stocks that hold U.S. assets inside an RRSP are subjected to foreign withholding taxes.

You can read up on what I’ve learned about withholding taxes on this page here.

Second, to your other point, we hold a few U.S. ETFs in our RRSP.  To own them, I use a modified “gambit” to put the Canadian money into the USD $$ side of my RRSP.  My trick is buying inter-listed Canadian stocks and journaling those assets over to the USD side after the transaction settles; that usually takes about three business days.

You can read about that approach and how to get U.S. dollars from Canadian dividend paying stocks here.

Lastly, I must admit, it’s tough with the USD $$ so high versus our Canadian dollar.  But, such is the trade-off to be more diversified beyond Canada’s borders in another currency.  To help me out, I only buy U.S. ETFs a few times per year to keep our transaction costs low.

All the best!

Save, Invest, Prosper!

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Mark