Editor At Large!

backyardofficeWell, here I am two weeks after becoming the Editor-at-Large for MoneySense magazine. You’ll see this title used often in the media world: typically, as in the case of Financial Post Editor-at-Large Diane Francis, this is sort of a half-way house between full-time employment and a freelance career. In Diane’s case, she still pens a weekly column running in the weekend paper.

In my case, the plan currently is that I will continue to write the Financial Independence column in the print version of the magazine, plus the Financial Independence blog at MoneySense.ca, which may (or may not) be a mirror blog of the blogs you see here at FindependenceDay.com. Frequency yet to be determined. As the Globe & Mail reported on May 22, I have left the editor-in-chief job at MoneySense “but will stay with the magazine as an editor-at-large, focusing more on writing and speaking.”

One young family member I briefed on the difference between the titles was under the impression “At Large” meant some kind of criminal. Not at all! Mostly, however, “at large” means working from home and skipping the two-hour commute I used to have. The photos (above and below) show external and internal views of my new home office: this is much closer to the “Findependent” lifestyle I’d envisaged when I wrote the original edition of Findependence Day in 2008, and to which this website is dedicated.

For those curious about my work methods, I often write the first draft of something outside, then edit and do web formatting inside. For those who heard Preet Banerjee’s podcast with me about the second edition of the book, this is the view of the waterfall he was referring to: I know more than a few who heard that podcast were curious about it. You can find that podcast here or under the Reviews tab elsewhere on this site.

From wealth accumulation to decumulation

jonhomeofficeI may have telegraphed this subtle change in title in the June issue of the magazine, where in the Financial Independence column I speculate on my eventual plan to start drawing down income from various sources. During his excellent talk celebrating MoneySense’s 15th anniversary in mid May, David Chilton suggested that for baby boomers on the cusp of retirement, the next big theme for older writers like myself will be about drawing down income. This theme is well articulated in Daryl Diamond’s book, Your Retirement Income Blueprint. I’ve provided an endorsement for the new edition of that book going to press, which I was happy to do because I intend to follow much of the blueprint myself as time goes by.

Of course, as I also wrote in the retirement section of the “Best Tips Ever” package, I also believe that the longer you delay collecting pensions (like CPP), the better. I’ve also come to the realization that while I may want to have more flexibility on how I spend my time, and spend less time in transit and meetings, it’s likely I’ll continue to write, edit, speak and consult for the lion’s share of my 60s, and the more revenue coming from those sources, the less traditional retirement income sources need to be tapped.

In any case, I have a 5-year plan that includes the writing of several more books and a few twists and turns in my career that I’ll reveal in this space at the appropriate time. In the meantime, I look forward to being “at large” on various MoneySense assignments and eventually for other media outlets and possibly corporate clients.

Findependence — while you’re still young enough to enjoy it

I’d like to think this will be the best of all worlds, which is what the concept of Findependence is really all about. Remember that the subtitle of the US edition is “How to achieve financial independence …while you’re still young enough to enjoy it.” At 61, I’m no spring chicken but I believe most members of our generation will live to 90 or more, and probably work — at least part-time in “semi-retirement” — until well past 70. See for example the book, The New Retirementality. (Nice title, wish I’d thought of it first!)

When I updated my resume, I was shocked to realize I’ve now been a professional journalist and author for 35 years. Since I’ve always practiced the principles espoused in my columns and the book, I’d hope that young people can be assured that this stuff really works if you stick to the program!

You can also expect me to be updating this blog a little more often than has been the case the last two years. See you in June!

Yes, Millennials, you really can get rich … but slowly!

Today’s blog headline (minus the suffix I added) is also the subtitle of a free new investing booklet titled If You Can by William J. Bernstein. This is a terrific and short (16 pages) document that I wholeheartedly recommend be read and absorbed by today’s millennial generation. For that matter, it should be read by just about any investor at any age.

But a warning: if you’re in the financial services industry, you’re not going to like the content. The author is a neurosurgeon who learned the hard way how to invest his own money, and has written a few books along the way. If you’re not in the financial services industry, you may be merely amused by his depiction of most full-service stock brokerages and mutual fund salespeople as the equivalent of “hardened criminals” or “self-deluded monsters.”

At the outset, Bernstein promises to lay out an investment strategy that any 7 year-old could understand and will take just 15 minutes of work per year. Yet he promises it will beat 90% of finance professionals in the long run, but still make you a millionaire over time. The formula will be no surprise to MoneySense readers familiar with the Couch Potato approach to investing in index funds or ETFs. Simply, Bernstein advocates saving 15% of one’s salary starting no later than age 25 into tax-sheltered savings plans (IRA or 401(k) in the U.S., RRSPs or Registered Pension Plans in Canada), and divvying up the money into just three mutual funds: a U.S. total stock market index fund, an international stock market index fund and a U.S. total bond market index fund.

Bernstein a big fan of Vanguard and John Bogle
In Bernstein’s view, the index funds should be supplied by the only financial services company he seems to trust: the Vanguard Group (which sells both index mutual funds and ETFs).

Bernstein is addressing young Americans just embarking on their working careers but the basic idea would apply to Canadian millennials too. Judging by recent Portfolio Makeovers we’ve run showing ETF-based Couch Potato portfolios, the equivalent mix would be 20% each of Canadian, U.S. and international equity index funds or ETFs, and 40% of a bond ETF. And as I’ve written before, don’t even wait till age 25: if you can get your parents to match your savings starting at age 18, the TFSA is the place to put in place these bedrock principals of investing.

And the 15 minutes of work? That would be an annual rebalancing exercise to get the proportions of the three or four funds back to their starting levels.

Millennials can’t count on employer pension plans
Despite this, Bernstein warns younger people that they’ll have a hard go of it because the traditional defined benefit employer pensions of previous generations probably won’t be around much longer. This is pretty much what I wrote in the Editor’s Note for the April issue of MoneySense: that we’re all forced to be our own pension managers these days.

Bernstein says the operative word in his booklet’s title is “If,” because following his simple recipe for wealth (I’d call it financial independence of course) involves a very big “if.” He lays out five hurdles. Number one is excessive spending, second is understanding the basic principles of finance and investing, third is learning and applying market history, fourth is overcoming yourself: the biggest enemy being your face in the mirror; and hurdle five is the conflicted financial industry that is supposedly there to help you with your financial goals. He goes so far as to declare, “The financial services industry wants to make you poor and stupid.” Fighting words, indeed! I might not go that far but it’s certainly a way of looking at the world.

Bernstein’s homework assignments
Bernstein assigns some “homework” to his young readers. They have to read his document twice and read a few books, starting with Thomas Stanley and William Danko’s The Millionaire Next Door and John Bogle’s Common Sense on Mutual Funds. He’s too shrewd to plug his own books but I’ll name one on his behalf that I’ve reviewed positively in the past: The Four Pillars of Investing.

The fact that Bernstein has gone out of his way to give away the booklet should tell you a lot. You can find the link for a PDF here. If you act quickly (today, May 5) you may also be able to get the Kindle version free rather than the 99 cents Amazon.com normally would charge.

To parents of millennials, I’d urge you to download and print this document and hand it over to your kids, perhaps after highlighting the passages you feel to be most relevant. You could give them the link but you know how distracted they tend to be with all the social media noise that abounds these days. Sure, they may say they want to get rich some day but to paraphrase the old saying, “We all want to go to heaven, but no one wants to die first to get there.” For millennials, saving 15% of salary is the financial equivalent of dying, which is why Bernstein titles his document “IF you can.”

Book review by Money Coaches Canada

Just saw a review by Money Coaches Canada of the (Canadian) edition of Findependence Day. You can find Leslie Gardner’s review here.

Here are some of the main points Leslie gleaned from the book:

  • Financial Education is paramount
  • Financial Planning is a life long journey
  • Life does not always goes as planned, but planning makes it go smoother
  • If it sounds too good to be true….. it may be (Big Hat No Cattle)
  • That life isn’t always about retiring, it’s more about living with financial freedom

Also just out is the new June issue of MoneySense, which includes a semi-regular column by me on Financial Independence.