Canadian Personal Finance News | October 2014

Want to know when to retire? Working just three extra years can make a dramatic difference thanks to more savings and enhanced government benefits.

What if we don't really need what we think we need? This question came to mind as I read about Professor Jeff Wilson and The Dumpster Project. A dean at Huston-Tillotson University in Austin, Texas, Wilson embarked on an experiment to see if it was possible to live in a 36-square-foot dumpster.

"Building a plan around the phrase 'sometimes you get lucky' is not a plan." - Cliff Asness Bloomberg aired a great sit-down interview with John Bogle and Cliff Asness last week. They covered a wide range of topics, but the one I thought was the most important for investors was that both agreed we will likely see a period of lower than average returns in U.S.

Deferring government benefits past age 65 means eventually receiving higher payouts. But in the following situations, you'd be well advised to take Canada Pension Plan or Old Age Security as soon as you can after you retire: You're in poor health.

Here's what's coming down the pike, high net worth investors, and don't say you haven't been warned. The powers that be in Wall Street's massive asset management units have figured out a workaround for the problem of investors no longer willing to pay up for stock or bond picking.

There are two categories of investors in this world: performance takers and performance seekers. A performance taker is satisfied with earning a fair share of the market's return and weathering the risk that comes with it. A performance seeker wants more return and less risk, and pays for it in more than one way.

It's true. Stocks went down. They do that, you know. Maybe we've forgotten. We've had something over 1,000 trading days without a 10% decline (which, by the way, we still haven't had - as of October 9th, the S&P 500 is down less than 5% from the high in September, despite today's drop over 2%).

Let's face it. Being a diversified investor is terrible. 1) You will always be worse than the best performing asset class (and you will always compare your

“The higher the VIX the higher the clicks.” – Phil Pearlman It’s easy to ignore the opinions of the financial media during a bull market because just about everything is working and you feel like a genius. But once stocks … Continue reading →

What’s the point of managing my money so well if, when I finally get to the third stage of finance, I hesitate to spend it on day-to-day comfort and convenience?

While no one likes to pay more in insurance premiums than they have to, an important fundamental principle of insurance is that in the end, there must be enough premiums (plus growth) to cover potential future claims (plus overhead and profits for the insurance company). Insurance coverage that is “too” cheap is actually risky, and coverage that is “expensive” is actually the most secure! In fact, one of the most significant caveats to considering any form of insurance (or annuity) guarantee at all is if the insurance is not going to lose you money on average, it’s actually something to avoid. In other words, insurance guarantees should never be expected to make money on average for the policyowner, or the insurance company will lose money until it inevitably goes out of business and the guarantee will be gone anyway! As a result, decisions to purchase insurance and/or seek out guarantees should always be viewed from the perspective of seeking to trade a small known loss to avoid a big

Couch Potato investing works—but only if you leave it alone. Reacting to today’s economic events could wreck your portfolio.

The Stock Market is often misunderstood especially during periods of high volatility. What we believe should be reality for markets is sometimes not.

"Yesterday, you had to earn your equity risk premium"

If you missed out on contributing to your company's pension plan while you were on maternity leave or sabbatical, there's a way to catch up. Most defined benefit pension plans will let you "buy back" the years you missed, so you can get the pension you would have received if you'd never taken the time off.

When it comes to finances, it's easy to feel lost. We all know we need some kind of budget, but we aren't always sure where to begin. Many people start by categorizing their expenses in a spreadsheet or computer program (like Mint.com or Quicken), hoping to figure out where they're going wrong.

I know, I know. Budgets just sound like Remedial Personal Finance, don't they? Everyone knows you're supposed to budget, so what's the point of another 800 words or so on the topic, right? There's even a vague feeling that once you reach a certain point - either of knowledge, or income, or net worth - budgeting is kind of beneath you.

"Long-term investors shouldn't worry about daily or weekly blips in the markets." How many times have you heard that? It's true of course, but most investors don't heed the advice. And to be fair, it's hard to ignore the financial markets when there's non-stop commentary in the news and on social media.

When I first heard about the concept, I thought credit card hacking was kind of cool. I could make hundreds of dollars just by getting credit cards and buying stuff that I would normally buy anyway? That doesn't sound so bad. But, like usual, my laziness won out.

Some of the advantages and disadvantages of RESP brokerage accounts.

In our retirement workshops, we often look at the components of retirement success and savings as a simple mathematical formula ...

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This seems almost ridiculously easy. Is it so difficult to pick one fund for each of the major asset classes (bonds, Canadian stocks, US stocks, international and emerging market, real estate) and then assign a target weight to each? Instead I see what I’ve dubbed the “advisor six-pack.” No, not the guy at Investors Group with the ripped abs. I’m talking about the portfolio built from a half-dozen mutual funds thrown together randomly. It’s like the advisor swallowed the Morningstar database and then threw up in the investor’s account."

The Tax-Free Savings account allows Canadian residents 18 and over to put aside money tax-free throughout their lifetime. Here's what you should know.

Beware of the following tax traps you could face if you're a U.S. citizen living in Canada.