Review: How NOT to Move Back in with Your Parents

51UopHxeZL._SX331_BO1204203200_By Helen Chevreau

You’re a millennial. You’ve recently graduated from university and are beginning your career. You aren’t making quite as much as you’d hoped for, and as it turns out, rent is crushingly expensive.

Okay, you’ll just put off moving out for six months, save some money, live at home. Everyone’s doing it these days. You’re sure that before you know it you’ll be on track to success, living it up in homeowner-ville, sitting pretty. You’re not quite sure exactly how you’ll get to homeowner-ville, but it can’t be that hard, right?

If any of this sounds plausible, I would seriously consider reading this wonderful book called How Not to Move Back in With Your Parents – The Young Person’s Guide to Financial Empowerment by Globe and Mail personal finance columnist Rob Carrick. I don’t want to be dramatic and say it will be your new finance bible, but it’s definitely a book you’re going to be referencing time and time again throughout those first few post-graduate years.

Something I really love about this book is that it’s broken down into great detail. Not only that, but it’s organized according to when in life you should be needing the advice.

Covering all the financial bases

HNTMBIWYP (as I will be referring to it henceforth) actually begins before college, with tips and important information on affording school and budgeting once you’re there. From there Carrick covers pretty much all the financial bases young people need to be aware of.

These include how to manage debt, how to shop around for banks and ‘play the field’ when it comes to your choice of financial institutions, how to create and stick to a budget that works, buying a car, buying a house, financing a wedding and starting a family, and how to protect yourself and your belongings with insurance and wills. Woo — that was a lot!

You’d think it would be easy to get overwhelmed while reading HNTMBIWYP (originally published by Doubleday Canada in 2012), but it’s so well laid out, and flows so well that the information within just makes sense. As I was reading, I came across countless useful tidbits that I had to highlight and make note of for future reference.

Emergency Funds & Building Savings

chapman1One tidbit I’d like to share is the idea of an emergency fund. I recently participated in a video chat with Chantel Chapman of MOGO and Jonathan Chevreau (my dad) in which the idea of an emergency fund was discussed. Chantel, as with most other financial advice-givers, recommended a 3-month salary buffer for an emergency fund.

Carrick suggests, however, that young people don’t worry about the amount right away. He says what’s important is that you just put a little in each month. “Start with a couple of hundred dollars in a high-interest savings account and try to build up to a few thousand dollars.” I like the idea of building up the fund over time, instead of worrying about it all at once.

Building savings over time is a theme that pops up throughout HNTMBIWYP, and is discussed again in reference to making contributions to RRSPs and TFSAs. Carrick recommends here that instead of making a contribution once a year, to have the money come out at steady intervals throughout the year so you feel the brunt of it less heavily. As an added bonus, says Carrick, doing it this way helps us to average out from highs and lows that the market might reach.

Though How Not to Move Back In With Your Parents is an effective tool for those of us with a background of financial knowledge, it is probably most helpful to complete newbies. Rob Carrick is with us, essentially holding our hand, telling us what we need to know and showing us what we need to do to get there. If it were up to me, HNTMBIWYP would be required reading for every person older than 17.

HelenAbroadHelen Chevreau is a student teacher, blogger and global adventurer. She also happens to be the daughter of Hub CFO Jonathan Chevreau. She has a B.A. in English and has been blogging for four years. Her next stop is Scotland for postgraduate studies in education. 

 

What Millennials can learn from the Boomers’ reinvention of Retirement

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L to R for the Digital Citizen Show: Hugh Reilly, Norman Evans, Jon Chevreau

By Kollin Lore

We are edging nearer to 2031, the year when all Baby Boomers will be age 65 and above, and most will at least be contemplating some form of Retirement or Semi-Retirement.

It will also be a time when the millennials will have pretty much all grown up and taken over the workforce.

Next month Jonathan Chevreau and Mike Drak’s Victory Lap Retirement will be published, a perfect time considering the age we are headed towards. However, though the book concerns the older generation, there is much to learn for millennials too.

Earlier in July, Chevreau discussed his upcoming book on Digital Citizen’s ThatChannel with creative director, Norman Evans, Laura Tyson, and host, Hugh Reilly. Click on the highlighted link to access the YouTube video: Get Ready to Earn Your “Playcheque.”

“The Boomers have reinvented every stage in life they have gone through,” said Chevreau. “Now they are going to reinvent retirement, by starting with the word ‘retirement’ because they are not ready to stop … That’s why Mike and I created the phrase Victory Lap.”

This titular ‘Victory Lap’ concerns finding that balance between stress and boredom following retirement. It means staying active and can include anything from travelling the world, to part time jobs, to volunteering to more time with family.

Of the many activities in which to partake during the Victory Lap, volunteering is an especially valuable past time to consider. Read more

New Series: the 7 Eternal Truths of Personal Finance

The print edition of Wednesday’s Financial Post (June 10, page FP9) ran the first of a series of seven articles by me entitled “The Seven Eternal Truths of Personal Finance.”

Eternal Truth No. 1 is Live below Your Means.

The online link is here.

Note there is also a short video accompanying the online article, and a growing number of comments below the piece.

Here is a preamble I wrote for it:

Series Rationale: One of the most experienced personal finance writers in North America is the Wall Street Journal’s Jason Zweig. As he wrote here after writing his 250th Intelligent Investor column, he confessed that there are only a handful of personal finance stories out there:

“I was once asked, at a journalism conference, how I defined my job. I said: My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself. That’s because good advice rarely changes, while markets change constantly.”

In this seven-part series, I look back on my two decades plus of writing about money to distill it all down to these “seven eternal truths.”

As far as I know, the second instalment will run next Wednesday and subsequent Wednesdays over the summer.

The 7 eternal chestnuts of personal finance

Tasty roasted chestnuts

Here is my latest MoneySense blog, covering the 7 big “eternal” chestnuts of personal finance.

For continuity purposes, I also reproduce it below:

One of the world’s best personal finance writers – Jason Zweig of the Wall Street Journal – has said there are only a handful of real personal finance columns to write. The trick, he said (and I’m paraphrasing from memory), was in being able to “reissue” these columns in a way that the public (or editors) don’t notice. Of course, you could go further and say that the news business in general revolves around a few fairly standard memes: if it bleeds, it leads.

In personal finance, however, we’re not in the business of covering disasters and personal tragedies, unless of course the market does a repeat of what it did in 2008. It’s a sad fact that, as investors in Bernie Madoff’s ponzi scheme found to their regret, that when the market tanks we discover who was swimming naked.

The June issue of MoneySense contained 42 items billed as being the “Best Tips Ever.” That issue was a “keeper” and not just because it was the last one with which I was intimately involved. I’m not going to reprise the tips here but instead have come up with a list of seven “personal finance chestnuts” that I hope may be useful to readers and perhaps other PF journalists.

Chestnut #1: Live below your means

This is the granddaddy chestnut of personal finance. If you keep spending your fool head off, you’ll forever be on a treadmill to oblivion. The only way to become financially independent is to consistently spend less than you earn, year in and year out, decade in and decade out. The difference between what you (and your spouse) earn becomes your capital and it must be invested wisely.

Chestnut #2: Pay yourself first

This is closely related to living below your means. The surplus between a higher income and a lower level of spending needs to be directed to savings and investments. Just like your employer takes your income tax off your paycheque before you even see it, you should set up a pre-authorized chequing (PAC) arrangement with your financial institution (“automatic draft” in the U.S.), so another chunk of your paycheque is siphoned right off the top to savings and investments. Yes, you may feel a bit “broke” after the double whammy of paying tribute to the taxman as well as paying yourself first, but as the years go by and your wealth steadily mounts, you’ll be glad you roasted this particular chestnut.

Chestnut # 3: Get out of debt

Starting with non-tax-deductible consumer debt (aka credit cards), then student loans, and finally any lines of credit and ultimately your mortgage. (see Chestnut #4). No investment pays off as well as eliminating high-interest debt and it’s more tax efficient to boot.

Chestnut #4: Buy a home and pay off the mortgage as soon as possible

I’ll keep saying it: the foundation of financial independence is a paid-for home. If you rent, you’re still paying a mortgage: your landlord’s! In that case, your rent will never stop and will keep getting hiked as inflation rises. When you own your own home and the mortgage is gone, you get to live rent-free and you won’t worry about your rent going ever higher in old age. Plus you don’t have to pay capital gains taxes on the sale of your principal residence. (See #7 below). But do accrue for property taxes, maintenance and (for condo owners) maintenance fees.

Chestnut #5: Be an owner, not a loaner

This means owning stocks (or equity mutual funds or ETFs), instead of interest-bearing vehicles like cash or bonds. You’ll never get rich loaning money out, which is what you do when you buy a GIC (or CD in the US) from a bank. If you want to grow your capital and keep up with inflation, you need to own stocks. Better yet, dividends are taxed less than interest and capital gains taxes can be deferred as long as you don’t crystallize profits. You will want some cash or bonds in an emergency fund and as a prudent part of your portfolio once you’re near retirement age.

Chestnut #6: If your employer offers you free money, take it.

Duh! This means you should join the company pension plan, especially if they “match” whatever you put in. And if they give you a discount on the company stock, take them up on that offer too. You wouldn’t say no to a bonus or a raise, would you? Then why wouldn’t you grab the rest of the freebies when they’re on offer?

Chestnut #7: If the government offers you free money, take that too!

This is along the same lines, except of course the government seldom really gives you money, unless you’re among society’s most disadvantaged. For we more affluent folk, there’s no escaping taxes (or death) but you CAN minimize the outflow to the taxman’s grasping hands by taking advantage of whatever few tax breaks he permits. No capital gains on a principal residence is a huge tax break. Apart from that, this means maxing out your RRSP (or your IRA in the U.S.) And don’t forget the Tax-Free Savings Account (TFSA) (or the Roth in the US), which is the mirror image. In the former, you get a tax deduction upfront on contributions; for the latter, you get no upfront deduction but never have to pay tax on investment income generated, even when you withdraw it in retirement. Not quite free money, since you were taxed upfront on the income needed to generate the capital, but almost!

 

 

Millionaire Teacher’s Andrew Hallam reviews Findependence Day

Andrew Hallam, author of Millionaire Teacher, has just reviewed Findependence Day on his blog. Despite being an English teacher, he confesses he doesn’t read a ton of fiction and when he does, tends to be a tough critic. On the other hand, his long-standing interest in personal finance means he’s read hundreds of financial instruction books. So it’s nice to get his thumbs up on Findependence Day, which is a hybrid of a novel and financial primer. Here’s the review and thank you Andrew. The Wealthy Boomer blog had reviewed Millionaire Teacher a few months back.

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