For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).
May marks the arrival of Mother’s Day, a time to recognize the influence and sacrifice that comes in tandem with motherhood. While the old adage of “parenting isn’t easy” rings true, the financial planning component doesn’t have to be hard. Childhood is a series of stages woven together: each brings a new opportunity for parents to maximize key fiscal benefits and underpin good financial habits for the next generation.
Pre-Baby
Before your baby is born, there are pre-emptive financial strategies that you can implement to get your affairs in order. Firstly, you want to arm yourself with knowledge. Get informed about the benefits provided by the government and your employer to determine what your expected income will be while on parental leave. Take time to research childcare costs and calculate whether you have adequate life and critical insurance.
Most importantly, make sure you have a will in place that designates a guardian to care for your minor child, a trustee to manage the money for your child and an executor who will run the administration of your estate. Finally, review your financial plan with your advisor to account for the addition of a new family member.
Infants and Toddlers (0-5 years)
There are a series of government benefits available for parents with young children. In most provinces, you can automatically apply for a Social Insurance Number and the Canada Child Benefit (CCB) when you register your child’s birth. The CCB is a tax-free monthly payment made to eligible families to help with the cost of raising children under 18 years of age.
You should also consider opening a Registered Education Savings Plan (RESP) to help save for your child’s education. To this same point, you may be eligible for a Canada Education Savings Grant, which provides a 20 per cent grant to be paid on yearly contributions up to an annual limit of $500 and a lifetime limit of $7,200. Your family may qualify to receive the Canada Learning Bond based on your family income and other benefits under a provincial education savings program. You may also be able to claim childcare expenses if you (or your spouse or partner) paid someone to look after an eligible child so that one or both of you could work or attend school. Talk to your financial advisor about the options available to you.
Middle Childhood (6-11 years)
While they may not have a wealth of knowledge yet, children at this age can understand basic money concepts and can start developing good habits. Consider opening a savings account for your child and encourage them to make deposits from allowance, holiday or birthday present money.
Teenagers and Adolescents (12-19 years)
At this stage, the Mirror-Window Effect is at its peak. Mirrors offer reflections, while windows open up new views. By practicing wise money management, you can be the mirror your child needs to develop early but strong financial habits. Continue Reading…
With more than 2.5 billion users worldwide, YouTube has become a platform where everyone creates and shares content and earns big bucks from it.
As a financially independent person you can leverage the platform not only to share the knowledge you have but also to keep a steady stream of passive income. Well-crafted YouTube videos can be high-performing assets: they make your money work for you rather than the other way around.
However, using YouTube is so much more than creating a channel, grabbing your camera, and uploading videos to the platform. If you want to go the extra mile, it takes extra effort. We’ll break down some handy ways how you can get the most out of your YouTube channel.
Focus on niche topics
Creating a niche channel can be an effective way to attract a dedicated and engaged audience.
While it may seem counterintuitive to limit the scope of your content, focusing on a specific area of personal finance can help you establish yourself as an authority in that area. It can also help you stand out from other personal finance channels and make it easier for viewers to find your content.
For example, you could create a channel focused on investing in dividend stocks or building a real estate portfolio. Whether it’s animated explainer videos or talking-head style video, content that is tailored to a specific audience provides more in-depth analysis and insight that resonates with your viewers.
Share your failures
While it’s natural to want to showcase your successes, sharing your failures can be just as valuable to your audience. Personal finance can be a challenging topic, and sharing your mistakes and what you learned from them can help your viewers avoid making the same mistakes.
Sharing your failures can also help you build trust with your audience. Being honest and transparent about your experiences shows that you are a relatable and authentic creator. This can help you establish a loyal following and create a sense of community around your channel.
Collaborate with other creators
Collaborating with other creators in the personal finance space can be a great way to reach a wider audience and provide a fresh perspective for your viewers.
By partnering with creators who have complementary areas of expertise or a similar target audience, you can create content that is more engaging and informative.
For example, you could collaborate with a creator who focuses on budgeting or debt reduction, while you focus on investing or building passive income streams. This can help you create a more well-rounded channel that appeals to a wider audience.
Use storytelling
While personal finance can be a dry topic, using storytelling can make your content more engaging and memorable. By sharing personal anecdotes or using case studies to illustrate your points, you can connect with your audience on an emotional level. Continue Reading…
Are you trying to succeed with investments? Our Successful Investor approach teaches these 3 key rules we teach to subscribers.
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Successful investors try to arrange their portfolios so that they more-or-less automatically tap into the profit and long-term growth that inevitably comes with well-established companies.
And now is a particularly good time to follow our Successful Investor investment approach. Our system of the most successful investment strategies has three key rules:
Rule #1: Invest mainly in well-established, profitable, dividend-paying stocks.
Our first rule in the most successful investment strategies will help you stay out of high-risk, low-quality investments. These investments are always available, in good and bad markets. They come with hidden risks due to conflicts of interest and other negatives. Every year, they lead many inexperienced investors to substantial losses.
Recent standout losers include bitcoin and other cryptocurrencies; a disappointing crop of new issues (IPOs), which tend to come to market when it’s a good time for the new-issue company or its insiders to sell, but not a good time for you to buy; and slapped-together promotional stocks that hit the market thanks to the SPAC phenomenon, which offers a short cut to IPO status.
Rule #2: Spread your money out across most if not all of the five main economic sectors.
This is our key to successful diversification. The widely disparaged resource sector turned out to have some major winners last year, in Canadian oil and gas stocks. Nutrien Ltd., our top fertilizer recommendation, shot up in early 2022 as the Russian invaded Ukraine, which put a big dent in world grain supplies.
On the other hand, if you had disregarded resource stocks with the intention of doubling down on tech stocks, you might have wound up with excessive holdings in tech stocks just as they entered a plunge.
Rule # 3: Downplay or avoid stocks in the broker/media limelight.
We’ve recommended a handful of tech stocks and other broker/media favourites in the past few years, but we always advised against concentrating on them.
Rather than zero in on broker/media favourites, we prefer to apply our first and second rules. If you build a balanced, diversified portfolio of high-quality stocks, it’s hard to go too far wrong, even in a challenging year like 2022 that we’ve recently experienced.
Understanding successful investments
A successful investment is one that provides long-term gains for its investors. Profitability will mean different things to many investors. One key to making a successful investment is you need to disregard or at least downplay investment marketing messages. Continue Reading…
Well, a great deal of time has passed on that post by my thinking and goals remain the same – as least in part for semi-retirement!
Read on to learn why my approach to live off dividends remains alive and well this year in this updated post.
Why my goal to live off dividends remains alive and well
First, let’s back up to the controversy and offer a list why some investors couldn’t care less about my approach and why dividends may not matter at all to some people:
The trouble with any “live off the dividends” approach is that you’d need to save too much to generate your desired income. Fair.
Dividends are not magical – there is nothing special about them. Sure.
A dollar of dividends is = a one-dollar increase in the stock price. True, a dollar is a dollar.
Stock picking (with dividend stocks) is fraught with under performance of the index long-term. I’m not convinced about that.
You can never possibly know long-term how dividends may or may not be paid by any company. Fair.
In many respects these investors are not wrong.
You do need a bunch of capital to generate income.
Dividends are part of total return. [See image at the top of this blog.]
Stock selection can open up opportunities for market under performance.
And the negativity doesn’t stop there …
Some financial advisors will argue your investing world starts to shrink if you demand 2% or 3% (or more) income from your portfolio, so dividend investing leads to poor diversification.
My response to this: I don’t just invest in dividend paying stocks.
Further still, some advisors will argue picking dividend paying stocks may lead to negative outcomes and too many biases.
My response to this: while I believe markets are generally efficient, I also believe that buying and holding some dividend paying stocks (while there could be market under-performance at times) does not necessarily mean I cannot achieve my goals. In fact, that’s the entire point of this investing thing anyhow – investing in a manner that keeps you motivated, inspired and helps you meet your long-term goals.
Consider this simple sketch art from Carl Richards, who is far more famous than I will be, and author of the One-Page Financial Plan and more:
Source: Behavior Gap.
From Carl’s recent newsletter in my inbox:
“Pretend you live in some magic fantasy world where all of your dreams (according to the investment industry) come true, and you actually beat an index every quarter for your whole life. Congratulations!
So here’s my question: You landed in Shangri La, according to the financial industry. You beat the index. But you didn’t meet your goals. Are you happy?
The answer is “No.”
Now let’s flip that scenario on its head. The worst thing in the world happens to you (again, according to the investment industry). You slightly underperform the index every quarter for your whole life. But because of careful financial planning, you meet every one of your financial goals. Let me repeat the question: Are you happy?
And the answer is obviously… “Yes.”
Stop worrying about beating indexes. Focus instead on meeting your goals.”
Amen.
Finally, some advisors will argue that dividends and share buybacks and other forms of reinvesting capital back into the business can be equally shareholder friendly.
My response to this: Well of course that makes sense. Dividends are just one form of total returns.
But you know what?
The ability to live off dividends (and distributions from our ETFs) will be beneficial for these reasons:
1. I continue to believe there are simply too many unknowns about the financial future. So, living off dividends and distributions will help ensure our capital remains hard at work since it will remain intact.
2. If we are able to keep our capital intact we don’t need to worry as much about when to sell shares or ETF units when markets don’t cooperate. We can sell assets as we please over time.
3. Living off dividends is therefore just one way I’m trying to reduce sequence of returns risks. See below.
Source: BlackRock.
As such, we’ll try to live off dividends and distributions in the early years of semi-retirement to avoid such risks.
4. I/we don’t necessarily believe in the 4% safe withdrawal rule. It’s impossible to predict next year, let alone 30 or more investing years.
5. I’m conservative as an investor. Seeing dividends roll into my account help me psychologically to stick to my investing plan.
6. Dividends is real money, tangible money I can spend if and when I choose without worrying about stock market prices or gyrations.
7. It is my hope dividends (and capital gains) can work together to help fight inflation. As consumer prices rise, as the cost of living rises, the companies that deliver our products and services will rise in price along with them.
8. I like dividend paying stocks for a bit of the “value-tilt” they offer.
In a taxable account Canadian dividend paying stocks are eligible for a dividend tax credit from our government. This means taxation on dividends are favourable, it is a lower form of tax; lower than employment income and interest income. This will help me in the years to come.
Will I eventually spend the capital from my portfolio?
Of course I will.
With no desire to leave a large estate, it wouldn’t make sense for us not to do so!
But with a “live off dividends” mindset I can sell assets or incur capital gains largely on my own terms during retirement. I plan to do just that.
Why my goal to live off dividends remains alive and well summary
This site continues to share a journey that includes how passive dividend income can fulfill many of our retirement income needs – whether that might be covering our property taxes, paying our utility bills, delivering enough monthly income to cover our groceries, fund some international travel or all of these things combined.
Here was one of my recent updates below.
We’re now averaging over $3,300 per month from a few key accounts.
(Hint: likely more next month!)
We’re trending in a great direction thanks to this multi-year investing approach and I have no intentions of changing my/our overall approach.
I firmly believe our focus on the income that our portfolio generates, instead of the portfolio balance, is setting us up to deliver some decent semi-retirement income.
Our goal to live off dividends and distributions remains very much alive and well for the years ahead.
I look forward to your comments.
Mark Seed is a passionate DIY investor who lives in Ottawa. He invests in Canadian and U.S. dividend paying stocks and low-cost Exchange Traded Funds on his quest to own a $1 million portfolio for an early retirement. You can follow Mark’s insights and perspectives on investing, and much more, by visiting My Own Advisor. This blog originally appeared on his site on March 27, 2023 and is republished on the Hub with his permission.
The last few years have thrown a number of hurdles on the markets. A pandemic and the recovery phase have been accompanied by recent additional uncertainty from the collapse of Silicon Valley Bank and fears of a global banking crash. Canadians looking at their retirement savings realize how volatility can affect their accounts and might have to save more to meet their retirement objectives or delay retirement.
Despite this volatility, the financial positions of defined benefit (DB) pension plans continued to improve over the last quarter, as indicated by the Mercer Pension Health Pulse (MPHP).
The MPHP, which tracks the median solvency ratio of the DB pension plans in Mercer’s pension database, rose in Q1, finishing the quarter at 116 per cent, a jump of 3 per cent from the beginning of 2023. This is on top of a remarkable jump of 10 per cent during 2022.
While the global banking crisis continues to wreak havoc on markets, a strong January and February helped ensure that Canadian DB plans remained unaffected, and most continued to improve. In fact, many plans’ funded positions finished the quarter in better positions than they have been in 20 years. However, looking ahead, there are several factors that may create more volatility and uncertainty for DB plans:
The global economy at play
The global economy entered 2023 juggling multiple risks. Around the world, central banks were focused on tackling inflation by increasing their policy interest rates and other qualitative tightening activities. On the heels of the failure or takeover of high-profile banks in both the U.S. and Europe, policymakers must now weigh the consequences of continuing these tightening measures with the need to stabilize the banking sector overall.
The war in Ukraine – with no signs of resolution in the near future – could also mean continued global tensions and a reduction in global trade, all of which will negatively impact the global economy.
In North America, there is increased political polarization in the U.S., with the debt ceiling needing to be raised but neither side compromising to reach an agreement. The consequences of the American government debt default would be disastrous for global financial markets.
The Canada equation
North of the border in Canada, in addition to the inflation scenario, Ottawa’s decision to cease issuing real return bonds (RRBs) and proceed with Bill C-228 caused a stir among pension stakeholders. Continue Reading…
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