Weekend Reading – What it takes to retire early, investing lessons learned, rising home prices 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.
Earlier this week, I published these articles:
I shared an update on our financial goals. Not terrible but not ideal to be honest.
Although this was somewhat controversial based on the comments I got, I don’t believe any 30- or 40-something should strive for retirement or early retirement. Instead, strive for financial independence. These are not the same things in my book.
The weather in Ottawa is absolutely beautiful today. I hope you have a great weekend and enjoy whatever you have planned.
See you here next week when I will talk to a Millionaire Teacher.
What does it take to retire early? My take? A healthy income coupled with a very high savings rate, with a nice dose of frugality will do the trick.
In no particular order, here are some things that should work out well for you long-term:
- Focus on ramping up savings for investing.
- When and where possible, think of avoiding money waste.
- For any dual-income household, experiment with living on one income (and saving the other). See #1.
- Strive to max out your TFSAs and RRSPs. Then you can consider what is next!
Further Reading: I’ve maxed out my TFSA and RRSP – now what?
Finally, remember that you don’t have to only cut expenses; one of the most viable ways to save or invest more is to keep your eyes open for ways to increase income.
Retire by 40, Joe, who retired from his engineering career at age 38 to blog and be a stay-at-home dad, shared the secret to unlimited income.
Jon Chevreau shared how Canadians are being impacted by rising home prices. Are you being impacted by rising home prices? Are you benefitting? Are you being priced-out? Do tell…
Million Dollar Journey answered a reader question about a low-income senior – whether they should use the TFSA or the RRSP for investing. When in doubt, go TFSA. Why? “Because RRSP withdrawals count as income, which will impact GIS benefits for low-income seniors. TFSA withdrawals, on the other hand, do not count as income and are not government benefit tested (for now).”
Is Investing Risky?
Outstanding podcast with behavioural psychologist and Nobel Prize winner Daniel Kahneman on The Knowledge Project.
One of my favourite books was Thinking Fast and Slow. Highly recommended to get a better understanding of how our minds work.
The Dividend Guy believes in chasing FIRE you got it all wrong.
Route to FI detailed how they intend to be financially independent in another five years.
Nice to hear from Mr. Prairie FIRE (Fred) on the most recent Explore FI Canada podcast.
Reader question of the week (adapted for site):
I really enjoy your site. I have a follow-up question regarding diversity. I read your answer in this Weekend Reading update on that. How exactly are you going to reach your targets?
Thanks for this question.
Like I mentioned in that Weekend Reading edition, answers about portfolio diversification deserve their own blogpost – that is on my radar. In the meantime:
- I’m trying to get my ~60% + Canadian content in my portfolio down to about 50% over time. (It used to be 100% Canadian content almost 10 years ago.)
- I’m striving for 50/50 Canadian and U.S.-listed equity asset mix over time. Check out this article about how I intend to open up the investment taps at some point.
How am I actually going to do that?
I’m going to use Norbert’s Gambit – a “how-to” was provided in this post to save money on exchanging Canadian dollars to U.S. dollars.
My end-goal to improve my diversification for semi-retirement?
- Hold about 20-30 dividend-paying stocks from Canada and the U.S for passive income inside our TFSAs, RRSPs, and taxable account. I will use the dividend income generated from these investments for living expenses. I figure $500,000 invested in these stocks should generate about $20,000 or so in dividend income per year before taxes. Mind you, some of the dividend income will be completely tax-free (thanks TFSAs!)
- Hold a couple of low-cost, U.S. equity or U.S. dividend ETFs that invest in hundreds (or thousands) of stocks from around the world. Again, I figure about $500,000 invested in such ETFs will provide extra diversification in addition to some income. I put U.S. ETFs in my RRSP for tax efficiency and you can read much more about the best U.S. dividend ETFs for your portfolio here. We will spend the distributions generated by these investments and withdraw cash from our RRSPs in semi-retirement, keeping the capital intact.
What are your asset management plans for retirement or semi-retirement?
Partnerships and deals
Should you become a DIY investor? I think you should at least consider it!! In doing so, you’ll keep more money in your pocket and minimize financial fees. That will be some of your keys to financial success. It’s a proven formula.
Have a great weekend!