Monthly Archives: October 2016

Starting is Hard, Doing it is Easy: 9 ideas to get you started

Posted By Graham Bodel | October 19, 2016

Starting is hard. Doing is easy. Even when it comes to the hardest things, starting is harder than actually doing the hard thing.

For the most important things, or the things where we have the most to gain, starting is the hardest thing.

If things are really easy to do, if they’re important, starting is hard.

Why is that? Maybe we’re afraid of the consequences if we fail. Maybe we’re afraid of the consequences if we succeed. After all, what would we fret about all day if all our “to do’s” were done? Who knows where or why but as the proverb goes, “there is an enemy within.”

And if this enemy shows itself in areas which are important or where we have the most to gain or lose – it probably manifests itself as often as ever when it comes to the following:

relationships
personal fulfillment
exercise
diet
finances

These are all big areas where we could stand to gain a lot if we get things right! And the longer we delay starting, the more it stresses us out – we sit in a paralytic trance, waiting for inspiration to hit us and it just never happens.

Perhaps breaking larger goals into smaller, more tangible steps might help, or at least it might trick you into doing something that sends you in the direction of progress. While we don’t proffer advice in many of the above areas and in fact struggle as much as anyone, we think the following smaller steps might help get you on the road to sorting out your financial house. We’re sure there are more but here’s 9 to start:

9 smaller ideas to move you towards getting your finances in order

1.) Make sure you have an up-to-date Will, Power of Attorney designation and Health Directive.

2.) If you have people that depend on you, get insurance to make sure they’re taken care of if something happens to you – term life insurance is relatively cheap and pricing is fairly standardized.

3.) Pledge allegiance to the following mantra: “By far the most important thing I can do to ensure long term financial success is to live within my means.”

4.) If you have children, be sure to open a Registered Education Savings Plan (RESP) and invest enough to get the maximum Canadian Education Savings Grant (CESG)….free money from the government (need we say more?).

5.) If your company has a retirement savings program with matching contributions, it’s usually a good idea to contribute enough to get the maximum match.

6. ) Open a Tax Free Savings Account (TFSA).

7.) If you have investments, grab a pen and piece of paper and write down what you’re invested in, why and how much you pay annually in fees.

8.) If you can’t do number 7 without turning on your computer, educate yourself – we recommend the following Sensible & Concise Investment Books

9.) If these steps still seem overwhelming, find someone qualified and independent to help you.

Postscript – if you’re interested in digging a little further into the enemy within, please read Steven Pressfield’s The War of Art. He calls the enemy Resistance and it’s very real and very, very scary…..

Graham Bodel is the founder and director of a new fee-only financial planning and portfolio management firm based in Vancouver, BC., Chalten Fee-Only Advisors Ltd. This blog is republished with permission: the original ran late September here.

Retirement as a Board Game

Posted By Financial Independence Hub | October 18, 2016

by Mark Venning, ChangeRangers.com

Special to the Financial Independence Hub

At the risk of being too serious over a Labour Day long weekend, I decided to lay out some ideas for future blog posts. In the process, I found my way back to my newly refiled library of articles and reports related to a multitude of topics under the theme of aging and longevity.

This is one of my instinctive ways to begin thinking of the future: appreciate the threads of history and see how far we have come along on a particular subject.

Well, as it happens, when it comes to the subject of “Retirement,” maybe not that far. In some ways, the vocabulary associated with this concept still rests in the same dictionary from thirty years ago in the mid-1980’s to early 90’s. During that period in my retail career, I was setting up exhibits at Seniors consumer shows in Toronto, featuring travel-related products to a 55-plus market (which seemed to be the entry level, as I recall).

If you made the circuit up and down the aisles, you could satisfy all your “lifestyle” needs, from the Craftmatic bed (still going strong), to golf-oriented retirement resorts and back support systems. Twice in the day, you could sit in on a retirement planning seminar, featuring the top ten tips to finding financial security, before you returned to see the rest of the show, from RV sales to cremation services and vacation cruises.

Targeting the Seniors market

Fast forward to 1994, I found myself interviewing for, among other things, marketing positions that targeted this same Seniors market. None of that materialized, but I do recall one interview with the Canadian Snowbird Association in Toronto, where I was given a research project and as part of the process, make a business case to prove I really wanted to work with them. Everybody should be so lucky to be asked to do this. Excellent experience as it turns out.

One of the items the director tossed at me as I was leaving that first meeting was a twenty-page set of US and Canadian articles on the organization. Two main shout-out advocacy points for traveling seniors (notably the “over 65 age group”) were their “threatened” out of country medical coverage, and government clawbacks in health spending. Reading this now, by most press accounts this sounded militant back in 1993.

Thorny after all these years?

How to invest in gold, including in your RRSP

Posted By Pat McKeough | October 17, 2016

At TSI Network, we recommend that if you are looking at investing in gold that you stay away from buying gold bullion, coins (unless you collect them as a hobby) or certificates representing an interest in bullion.

That’s because gold investing in bullion does not generate income. Instead, bullion and coins come with a continuing cash drain for management, insurance, storage and so on.

Instead, that’s why we recommend that you limit your gold investing to gold-mining stocks. Unlike bullion, gold-mining stocks at least have the potential to generate income.

However, if you do want to hold physical gold or silver in an RRSP, here’s how to do it:

More than a decade ago, the 2005 Canadian federal budget made investment-grade gold and silver coins, as well as gold or silver bullion bars, eligible to be held in an RRSP.

To be considered investment grade, gold coins must be at least 99.5% pure, and silver coins must be at least 99.9% pure. As well, only legal-tender coins produced by the Royal Canadian Mint are RRSP-eligible.

Bullion bars are also eligible for RRSP gold investing, as long as they are produced by a metal refinery that is accredited by the London Bullion Market Association. Accredited metal refineries include the Royal Canadian Mint and Johnson Matthey.

However, to hold the coins or bullion bars in your RRSP you need to find a third-party custodian of your coins or bars who will verify that you indeed hold the amount of bullion claimed, and report that to the Canada Revenue Agency on your behalf.

Investing in gold: a practical way to hold gold bars and coins in your RRSP

Never mind a few years more Longevity, what about Immortality?

Posted By Jonathan Chevreau | October 15, 2016

We’ve reviewed several books about Longevity over the nearly two years the Hub has been running, the most recent one being Mark Venning’s review of The 100-Year Life. (See Superlongevity: The 100-Year Life in a Blue Zone).

I mentioned this book in my talk Thursday to T.E. Wealth, in the context of the prospect of an 80-year investment time horizon for Millennials. (Implication of that: 100% stocks!)

But until now, for obvious reasons, we have held off on the “farther out” topic of immortality.

Even so, there is a growing literature on the topic of what I might term “ultra-longevity.” One in this camp is Long for This World: The Strange Science of Immortality.

Published in 2010 by science writing teacher Jonathan Weiner, the book focuses on a real believer in the possibility of human immortality: one Aubrey David Nicholas Jasper de Grey, who he quotes thus: “When you start talking’ about five-hundred year humans, or one-thousan’-year humans, most members of the general public get a li’l bit nervous.”

Indeed, and Weiner himself seems skeptical, despite providing such a platform to Aubrey de Grey. As the back-cover blurb states, “Could we live forever? And if we could — would we want to?”

Robb Engen’s 4 biggest Investing Mistakes

Posted By Robb Engen | October 14, 2016

Learn from your mistakes - motivational words on a slate blackboard against red barn wood

I was 19 years old when I first started investing. I diligently set aside money every paycheque, starting with $50 every two weeks and eventually increasing that to $200 per month, to save for retirement inside my RRSP. Sounds like I was off to a great start, right? Wrong!

Even though my intentions were in the right place, my first attempt at investing was a complete disaster. Here’s why: I didn’t have a plan

It’s good practice to save a portion of your income for the future, even at a young age. The problem for me was that I was still in school and didn’t have a plan – I had no clue what I was saving for.

I had read The Wealthy Barber and The Millionaire Next Door and so I knew the earlier I started putting away money for retirement, the longer I’d have compound interest working on my side, and the bigger my nest egg would be.

Unfortunately, I was saving for retirement at the expense of any other short-term goals, like paying off my student loans, buying a used car, or saving for a down payment on a house.

I didn’t have any short-term savings

Speaking of RRSPs, what was a 19-year-old kid doing opening up an RRSP when he’s only making $15,000 per year?

There were no real tax advantages for me to save within an RRSP when I was in such a low tax bracket. I’m sure I blew my tax refunds anyway, so what was the point?

Granted, the tax free savings account hadn’t been introduced yet, but I would have been better off using a high interest savings account for my savings rather than putting money in my RRSP.

I didn’t have a clue about fees and tracking performance

Like a typical young investor I used mutual funds to build my investment portfolio. I was encouraged by a bank advisor to select global equity mutual funds because, as I was told, they would deliver the highest returns over the long term.

What the bank advisor didn’t tell me was that the management expense ratio (MER) on some of those mutual funds can be 2.5 per cent or more, and high fees will have a negative impact on your investment returns over the long run.

Bank advisors also don’t tell you which benchmark these funds are supposed to track (and attempt to beat) so when you get your statements in the mail it’s impossible to determine how well your investments are doing compared to the rest of the market.

I drained my RRSP early

I didn’t have a good handle on my finances in my 20s and often resorted to using credit cards to get by. Without a proper budget in place, and no short-term savings to fall back on in case of emergency, I had no choice but to raid my RRSPs to pay off my credit-card debt and get my finances back on track.

Taking money out of my RRSP early meant paying taxes up front. Withdrawals up to $5,000 are subject to 10 per cent withholding tax, while taking between $5,000 and $15,000 will cost you 20 per cent, and withdrawals over $15,000 will cost you 30 per cent.

Your financial institution withholds tax on the money you take out and pays it directly to the government. So when I took out $10,000 from my RRSP, the bank withheld $2,000 and I was left with $8,000. In addition to the withholding tax, I also had to report the full $10,000 withdrawal as taxable income that year.

While I can’t argue with my reasons for selling, my dumb decisions beforehand cost me a lot of money and left me starting over from scratch.

Final thoughts

We all make investing mistakes – some bigger than others. If I had to do things over again today I would have done the following:

Create a budget – A budget is the foundation for responsible money management. Had I used a budget and tracked my expenses properly from an early age I would have lived within my means and kept my spending under control.
Open a tax free savings account – Yes, the TFSA wasn’t around back then but for today’s youth it makes much more sense to save inside your TFSA instead of your RRSP like I did. You can put up to $5,500 per year inside your TFSA and withdraw the money tax free. You contribute with after-tax dollars, so you won’t get a tax refund, but you’ll likely be in a low tax bracket anyway, so contributing to an RRSP won’t give you much of a refund either.
Make a financial plan – We all have financial goals and even at a young age I should have identified some short-and-long term priorities to save toward. I’d take a three-pronged approach where I’d use a high interest savings account to fund my short term goals, my TFSA to fund mid-to-long term goals, and eventually open an RRSP to save for retirement. No doubt I’d be much further ahead today if I took this approach earlier in life.
Use index funds or ETFs – Now that I understand how destructive fees can be to your portfolio, I’d look into building up my investments using low cost index funds or ETFs. The advantage to using index funds is that you can make regular contributions at no cost while achieving the same returns as the market, minus a small management. Some brokers also offer free commissions when you purchase ETFs.

Did you make similar mistakes when you first started investing? How did you overcome them?

In addition to running the Boomer & Echo website, Robb Engen is a fee-only financial planner. This article originally ran on his site on August 7th and is republished here with his permission.

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