Wednesday, January 31, 2007

Saving Money - Part I

On the path to early retirement the single biggest challenge you will face is controlling your spending. I take it for granted how I handle things, so I thought it would be useful to share a few things that I found cut back on my spending.

Since this is a fairly large area to cover I'm going to break this up into sections. Part I is about cutting back on your utility bills.

Power Bill
-use CFL lights in the house and LED Christmas lights
-turn off that computer when you are done (NOT power save mode)
-unplug anything you are not using right now to reduce phantom loads (for example: if your coffee pot has a clock on it, it's using power, so unplug it when it's not being used)
-if it won't drive you nuts, put all your TV, DVD players, VCR's on power bars and turn them off when they are not being used
-when you have to replace a major appliance look at energy star models
-when the oven is heated up try to cook more than one thing
-if no one is in a room turn off the light (I'm currently treaching my son this one)

Water Bill
-use low flow shower heads (2.5 gpm or less) that allow you to turn off water while soaping up (this also saves on your natural gas if you use it for hot water)
-change your aerators on your faucets to low flow versions (1.5 gpm or less)
-consider getting a rain barrel to save on summer watering of plants
-water the lawn early in the morning to save on evaporation
-buy a front load washer (they use less water and your clothes are dryer coming out so use less power in the dryer)

Natural Gas
-get a programmable thermostat and turn down the heat over night. If you find it too cold use a a few extra blankets on the bed.
-If there is only one bedroom being slept in you might want to consider dropping your house temperature even further overnight and using a space heater for the one room.
-turn down your water heater (the idea is to have warm water not very hot)
-when you leave the house for a few hours turn down the thermostat while you are gone
-install weatherstripping around your doors and if you have old windows use that plastic sheets to stop drafts
-during the warmer months look at your attic hatch to see if it seals well and also check out the insulation in your attic if your less than R40 you might be able to make some serious savings if you upgrade it.

Well that is a few of my tips. If you have more, please leave a comment and share.

Tuesday, January 30, 2007

RRSP or Mortgage: Moneysense Reviewed

Check your mail box today to see if you have the latest edition of Moneysense magazine. If so jump to p.14 and Duncan Hood's column on RRSP or Mortgage? If you don't have the magazine, I'll do a quick summary.

Mr. Hood suggests that the 'debate' about paying off the mortgage vs the adding to your RRSP is over for a few good reasons. First he explains the misconception that your RRSP is tax sheltered while your RRSP is. Obviously if you put money in the RRSP you get a cheque back from the government, but if you pay off the mortgage you pay less interest. So all those future payments will have less interest paid with after tax dollars, so in effect your not only saving the interest, but the tax on all that interest too.

Then Mr. Hood goes on to say it's about risk. A mortgage at 6% is a guaranteed returned, while a 8% mutal fund after the average 2% MER (management expense ratio) gives you the same return, but your exposed to the market risk. So obviously then we should pay down our mortgages first and then contribute to our RRSP.

Ok, I agree with his first point. Saving lots of interest on the mortgage is a good thing. It's the numbers in the second point I'm having problems with. First off most intelligent investors are not paying a 2% MER on anything. If you even use the basic couch potato portfolio you would have got a return last year close to 12% with a MER around 0.5% (or less), for a net return of 11.5%. I locked in my mortgage back in the very low interest days and blended in my new portion when I moved, so I'm only at just over 5%. So my RRSP is 6.5% higher than my mortgage, which in my mind is worth some risk.

The problem with these little articles is they make assumptions. The reality is the answer of paying off the mortgage or save for retirement depends on your own numbers and your comfort level with risk. If your like me a higher RRSP return makes me more likely to save for retirement, but I'm also aware that your mortgage is a reverse compounding curve. So any payments in the first five years really drops your interest payments over the life of the mortgage. So my answer is do both. I've increased my mortgage payments by 15% to assist on the pay down, while still putting a fair amount into my RRSP's. Then any left over cash is getting saved for a big payoff to the mortgage in another year, because if I want to retire at 45 I need to get rid of my mortgage a bit faster than normal. So in the end, do want's right for you.

Monday, January 29, 2007

Your Personal Time Value of Money

I recently did a calculation of how much money I earn after tax for every minute I work (salary - tax & other deductions + RRSP tax credits) at to find I earn about $0.37/minute. This little exercise I found very useful to determine how much time I have to work in order to buy something.

For example, a cup of coffee for $1.47 costs me almost 4 minutes (1.47/0.37 = 3.97), and a cookbook on sale for $10.60 costs me about 29 minutes. While a 32 LCD wide screen TV for $1445 costs me about 65 hours (1445/0.37 = 3905 minutes).

So next time you to buy something ask yourself this: am I getting more joy/usefulness out this purchase than it costs me in time to buy it?

So in the case of the cup of coffee if you drink it during a great conversation for 10 minutes, it might be worth the 4 minutes of work. Yet if you drink it while on your way to work for 2 minutes and then let it go cold, it would be a bad deal since you still have to work for 4 minutes for something that gave you less than 2 minutes of happiness (if that long).

The point of the exercise is to check if your really enjoying or using your purchase. If your not really enjoying or using it, why are you even buying it? For example, wasting power with the old 60 W light bulbs seems pointless to me. I need light and the cheaper the better. I don't enjoy my power bill, so why not buy a CFL that will last at least five times longer and use about 1/6 the power. Yes it costs more up front, but the prices have been dropping and my last set of bulbs cost me about $3 or 8 minutes each for something I will save money with for over five years.

This is just one option, the reality is you need something to slow you down for just a second or two and the question "Am I going to make time (money) or joy off this purchase?"

Friday, January 26, 2007


Q: Why do you want to retire at 45?

CD: Why not? No really, the decision to shoot for retiring at 45 was more or less just a date I picked. 55 was too long and 40 was too short, so I picked 45. I want to retire early and the earlier the better.

Q: So where do you dig up all your information?

CD: My information is from a lot of reading of books from the library and a few Google alerts that sweep the Internet daily for general websites, blogs and news sites with information that could be useful.

Q: Do you get paid to do this?

CD: Technically yes. I get money if you click on a link on the site, but the income is so small that I earn more in half an hour in my day job than two months of blogging. So this is largely a labour of love.

Q: How much time do you spend blogging in a week?

CD: So far about 7 hours a week. Usually an hour in the morning during the weekdays a few hours on the weekend.

Q: Do you recommend any stocks or other investment products?

CD: No, I don't recommend anything. You might even notice in my posts I use the word 'suggest' a lot, which implies that you should take everything I say with a grain of salt and do your own research and make your own decision. After all you are an adult and I don't have to tell you what to do.

Thursday, January 25, 2007

Interview with Larry MacDonald

Well today we are shifting gears a bit folks. We are leaving the world of ‘just bloggers’ and moving on to an author that happens to also be a blogger. Larry MacDonald is a former economist who now manages his own portfolio and writes on investment topics in books, magazines and his blog, Investment Ideas.

CD: You've written in books, magazines and your blog. What do you think blogs offer as a medium compared to other forms of writing?

LM: Blogs are a medium where you can develop a more personal relationship with readers compared to writing books and magazine articles. There is also a greater feeling of freedom in posting directly to your audience as opposed to submitting to an editor.

CD: I have to agree that bypassing an editor is nice, so what do you think your blog adds to the blog sphere?

LM: My blog offers the perspective of an economist who has knowledge of financial markets and over ten years of writing on investment topics. I also like to go beyond main stream media to get ideas and material that hopefully doesn’t repeat or rehash what the reader may already know.

CD: Out of your blog material, what is your favorite post on your blog?

LM: It’s hard to decide which post I like the best. Maybe it was the Jan.27, 2006 post-mortem on the last election entitled ‘Other Registered Parties in the Election.’ It illustrates how I try to add value by digging up material that can’t be found elsewhere yet is hopefully educational and/or entertaining.

CD: Now with all your writing work how many hours a week do you spend blogging as compared to your other writing?

LM: These days a lot of my time is spent looking after my two preschoolers. I write a couple hours in the morning before they wake up and during their nap in the afternoon, splitting my time about 50/50 between the blog and columns for Canadian Business Online and Investor’s Digest.

CD: Well Larry this has been an interesting interview, but to finish off I wanted to ask you when do you want to retire and what do you see yourself doing in retirement?

LM: I left my job as a government economist in 1999 to do what I wanted to do, which was to write books/columns, manage my own portfolio, and spend time with kids. I look on myself as retired already in the sense that I’m doing things I would choose to do in retirement.

CD: Thanks again for your time Larry and congratulations on being semi-retired and loving it. Tomorrow I turn the interview questions on myself, so if you have a question please feel free to leave a comment or send me an email.

Wednesday, January 24, 2007

Interview with Canadian Financial Stuff

Welcome back everyone from our commercial break (aka: the links to your right). Our next interview is with the Big Cajun Man of Canadian Financial Stuff. His posts are often packed full of humor and entertaining rants and I recently had a chat with him.

CD: In the personal finance blog world, you've been called quirky, interesting or down right eccentric. What do you see yourself as adding to the blog sphere?

BCM: Humor, a different point of view, and a small 'c' conservative point of view. I am not trying to tell anyone how to live, and they should really not be following my advice as "gospel" more as a guide towards what has worked and NOT worked for someone. That is the best way to view the blog sphere, as a giant water cooler where folks come and tell you stories and give you FREE advice, and you then go back, think about it, and decide whether you think it is something that makes sense to you or not.

CD: A giant water cooler that’s a good way of putting it. So what do you love about blogging?

BCM: Writing. I am not a very good writer, but I am not a bad storyteller, and I just enjoy telling stories, and vomiting my point of view on anyone who cares to read about it. Sometimes it feels like I can see the people I am talking to, and a lot of times, I am mostly looking in the mirror trying to tell myself what to do about things, that is why it is pretty easy to write, but really hard to read.

CD: Storytelling can be a lot of fun, but also a lot of work, so how many hours a week do you spend blogging?

BCM: About 7 hours a week or so (an hour a day or so). Sometimes I get ahead of myself, and will have a few topics already queued up, but usually it is a spur of the moment decision of what I am going to babble about that day. I have a family blog as well, which I tend to update at the same time.

CD: Seven hours a week isn’t that bad, but do you find the entire work/home/blog balance difficult to keep?

BCM: Right now, it's not very hard, but my wife sometimes ask why I keep doing the blog, given the amount of time I spend on it, and how little I make doing it

CD: That kind of begs the question, what do you hate about blogging?

BCM: The technical aspects are a pain the butt. I know too much of how this whole thing works, and I wish it was easier to publish things, and figure out how to get folks to find you. I have spent two years trying to get a readership, but it is still quite small for now. Sometimes finding topics is a little hard too, but I have a large enough network now of different sites I can usually get 1 or 2 postings out a day.

CD: So moving along to my favorite question, when do you want to retire and how much do you think you need to do it?

BCM: I want to retire NOW, given I am 46, yet I know that it is unlikely that I will ever "retire", because I have many different things that I do, that I can't see myself stop doing. I hope to finish with my current occupation in about 15 years, if I can arrange my finances the right way, but I also have a 2 year old son, so it isn't likely that I can do this either, given how much kids cost as well. Unless I find a huge influx of money, I will work until I can't any more. There is a long list of things I would do if $4 Million appeared out of nowhere (this is about what I figured I'd need to stop doing my job), most of them to do with the community and sports, I'd stay very busy.

CD: So the retirement question reminds me that the Canadian government allowed pension income splitting recent and before that was announced there was also talk of income splitting for working couples. What are your thoughts on system that would finally balance large income gaps between spouses?

BCM: I make infinitely more than my spouse, in mathematical terms (she has no income right now), and I am taxed severely for this. My wife is worth about $1500 in tax rebates, and that is about it. If she and I could split my income or create a household income, I'd save over $10,000 in taxes collected from me, which astounds me. I never thought I'd be paying this much in taxes, and I pay more now in taxes than I earned (gross) my first year of working full time (by a lot). The Canadian Tax system favors dual income families who put their kids in day care, that is the bottom line, and it frustrates me that the government refuses to admit this is the case. What would happen if there was a household income, is a very good question. Maybe a lot of folks who are working, who don't want to might find a way not to have to do that? Maybe not, I am not sure.

CD: I’m completely agree that the system does favor dual income earners. I personally get piss off over people that swear that their kids are the most important things in their lives, but then bitch about the costs of daycare. Ok, I’m getting sidetracked into a rant. I’ll save that one for another day. See you tomorrow folks when I’ll have an interview with Larry MacDonald.

Tuesday, January 23, 2007

Interview with Million Dollar Journey

Our next interview is with Frugal Trader from MillionDollarJourney. This newer blogger has been on a roll with some great posts and an aggressive goal to obtain a net worth of 1 million by the time he turns 35. I was lucky enough to get a hold of him to ask a few questions.

CD: First off I have to ask about your goal to get to a million dollars. You state in your 2007 goals that you want to get a 12 to 15% rate of return in 2007. Based on the fact that the average stock market rate of return is 10%, do you think can really beat the average for the next 8 years to make your goal at 35?

FT: Bold statements, I know. Most people say that it's a fool's dream to try and beat the market every year. However, you have to think big in order to achieve big. Looking forward, I think that 12-15% return on my savings is achievable through a combination of my stock and real estate portfolio.

CD: Ok, let’s say you keep betting the markets. To date you are doing a great job of building your net worth as you indicated in a December post that your net worth was at $198,500 and you were saving $1830/month. Even if you use your current net worth as the start point and keep the same savings rate at a 15% rate of return you would have $990,957 in 8 years. So that's not giving you a lot room for error on your rate of return and/or savings rate. So do you still think your goal is reasonable and are you willing to adjust that goal as things change from the current plan?

FT: If things change from the current plan, loss of major income etc, then I'm definitely going to have to consider changing my $1 million dollar goal by 35. However, if things go as I plan, with our annual increases in salary and alternate income sources, I plan to increase our savings amount every year. All net passive income will go to savings. I also plan to increase our real estate holdings, which will also bulk up the net worth.

CD: I know you mentioned you don’t have any kids on your blog, but have you considered what impact having kids could have on your plan?

FT: From what I've been hearing from young parents is that kids aren't that expensive until they get a bit older when they get into activities OR if they need daycare when they're young. We're fortunate that our parents live in the same city as us and they'd be more than happy to look after the kids while we're at work. Another issue is when my wife takes maternity leave, that year will be tough as well as she brings in half of our income. However, if we maintain a frugal lifestyle and get our passive income sources up, I believe that we can maintain a high savings amount. We don't have any kids yet and don't plan to for the next year or two. So by the time we're 35, they should be just about ready to start school and other activities.

CD: Well it looks like you’ve thought about your plan a fair amount, so when you reach your goal of a net worth of $1 million do you intend to retire?

FT: That is a great question. My goal for $1 million was never about retirement, it's about financial independence. It is goal I have set for myself so that I will constantly learn about and improve my finances. In my opinion, by the time I'm 35, I don't think that $1 million will be enough for my wife and I to retire on.

CD: Ok, so when you do you want to retire and what do you want to do in retirement?

FT: When I do retire, which will probably be in my 40's, I plan to spend more quality time with my wife and future kids. I will most likely continue investing/trading and look for other ways to supplement my income without working for the man. I guess what I consider retirement is leaving the 8-4 office job, not necessarily stop working.

CD: Speaking of work, your blog is fairly new the blog sphere and many bloggers seem to burn out in a few months. What do you plan to do to help prevent/avoid this?

FT: I see my blog as a personal outlet for my personal finances. It helps me solidify some of my financial thoughts and ideas. I also enjoy the discussions that start from my readers based on my articles. As long as I stay motivated with my finances, I can't see myself stopping my personal finance blog/diary.

CD: Great to hear your got some motivation, so how many hours do you spend blogging in a week?

FT: I admit, I'm a computer/web junkie. It started in my early teens and it has continued until now. When I was setting up the blog, I spent at least 3 hours / day on the blog. Now, it's more maintenance and researching new ways to improve the blog. So, the past few weeks, I've probably dedicated around 1.5hrs / day which equates to 10.5hrs / week. If I could, I would blog all day long. Alas, I have a full time job that requires a bit of my attention. :)

CD: Well that was very enlightening for me Frugal Trader. Thanks for your time and I’ll be back with the third blogger interview tomorrow.

Monday, January 22, 2007

Interview with the Canadian Capitalist

The Canadian Capitalist has been around for over two years now and is considered to be one of the best objective personal finance blogs in Canada. I recently got a hold of this blogger to discuss his blog.

CD: Your blog has been mentioned in Moneysense magazine, the Toronto Star and the Globe and Mail and too many blog rolls to count. How does it feel to be a respected Canadian blogger on personal finance?

CC: It is a humbling experience. My blog is still small, so it is very nice to be recognized.

CD: A few of your readers have commented on the quality of your writing and suggested you should write for a magazine. Would you?

CC: I haven't considered writing columns for magazines so far but maybe I should consider such a part-time gig.

CD: After reading your blog for about a year now I can't help but notice how easy you make writing a blog entry every weekday. After trying to do the same for a few months now I'm starting to understand the work involved. So how much time do you spend a week working on your blog?

CC: I spend at least an hour each day on the blog, so my weekly commitment would be at least five hours. It also depends a bit of how easy it is to write. Sometimes thoughts just become words effortlessly and sometimes I stare at the blank screen for an hour and couldn't put two sentences together. I also spend a bit more time reading books, newspapers, online columns and other blogs, but I would be doing this anyway, so it doesn't count as blog work.

CD: Do you find maintaining a balance between your family/work/blog difficult with the time commitment involved?

CC: I don't find maintaining the work/blog/family balance difficult at all. I typically spend an hour writing after the kids have fallen asleep. I do find it difficult that with two young boys, a blog and a two-career family, I have very little time for other activities.

CD: Do you feel that your are more educated after writing this blog for just over two years? Why?

CC: I feel that writing the blog has been a good learning experience. I love blogging because I have a dialogue with my readers and I have learnt a great deal from their comments. For example, one reader pointed out that I could avoid currency conversion charges with TD Waterhouse, which would help me and others avoid those pesky fees.

CD: Do you think your blog has made a difference in other people's lives? Why?

CC: Surprisingly, I have to say that I am not sure that I have made much of a difference in my reader's lives. Most, if not all of my readers are themselves financially savvy and they would do just fine even if my blog never existed. Perhaps, in the future, as more people read the blog, I would be able to make a bit of a difference.

CD: With over two years of posts what are some of your favorite ones?

CC: Diversify, Diversify, Diversify highlights the perils involved in over weighting a hot sector and In Every Little Bit Adds Up, I share a story on how small amounts saved can lead to a serious chunk of cash.

CD: Numerous bloggers start a blog than burnout or go inactive in a few months. What advice do you have to bloggers just starting out?

CC: One advice I can give bloggers who are just starting out is to write because they love to and not for any other reason, especially money. I also suspect that most bloggers who start out underestimate the time commitment needed to write even one post every day. In a few months time, as the effort required becomes clear, most people get discouraged and quit. I would also suggest trying out blogging on one of the free sites first to see if it is something they would like to do.

CD: An in closing I have to ask, so when do you want to retire early?

CC: I want to retire (in the sense that I don't have to really work for a paycheck) in my mid-fifties. I am 33 now and though I am pretty sure that I will be retired in another 20 odd years, I am not sure that I can plan for such a long term. I figure that if I set short-term goals for the circumstances I am reasonably sure about, the long-term will take care of itself.

CD: Thanks for your time CC. Tune in tomorrow folks for another blogger interview.

Friday, January 19, 2007

Thank You & Update

First off let me say to everyone who reads this blog: THANK YOU!

I started this blog because I thought the world could use a bit more coverage on retirement planning than it normally gets in the media (which is often from mutual fund salespeople and bank financed studies). I didn't think anyone would actually read it that much, but today I actually looked at my web counter and realized I had passed 5000 in about 8 or 9 weeks (I didn't get a web counter right away). Not to mention the volume of comments, which I have learned a lot from so keep them coming.

Next week I will start the Blogger Interview Project posts (once I finish writing them all this weekend). I'll have interviews with Frugal Trader of Million Dollar Journey, Big Cajun Man of Canadian Financial Stuff, Canadian Capitalist and Larry MacDonald (who recently mentioned this blog in in his Roundup). I'm also putting myself on the block for next Friday, so any burning question (or even silly ones) send me an email or leave a comment and I will answer them.

Have a great weekend,

Thursday, January 18, 2007

Late Retirement

It's been in the news lately. We have now removed the mandatory retirement in many provinces (see a good article here).

What's been failed to mention to most people is the price they have to pay for a late retirement. Yes, you can keep having an income, but I won't get too attached to those benefits of yours. If your curious check your own work policies, but you will notice that a lot of benefits like life insurance, long term disability and worker compensation board coverage may no longer apply after you turn 65. You might also find your paycheck shrinks a bit due to rising premiums for health and vision coverage.

So do take care of yourself if you plan on working past 65, since it looks like some of the benefits from your work place that would normally look after you are no longer going to be there.

Wednesday, January 17, 2007

Financially Independent

Financially Independent (FI) is the twin brother (or sister) to early retirement. Different package, but the same toy inside. You have enough money to not work if you so choose.

During my lunch break yesterday I can across a series of three posts on the attitude to achieve financial independence over at Violent Acres. They were vulgar, in your face, but true. Here are the three posts Part I, Part II and Part III.

What really got my attention, beyond the writing style, was in Part III there was one phrase that said "I guess the real question is: How bad do you want it?"

And that is the real test of wanting FI or early retirement. You have to understand how badly you want this dream of yours compared to everything else in your life and commit yourself to making that dream come true. Otherwise your plans will always seem to fall apart on you regardless of anything else. You have to find your motivation and commit yourself.

Tuesday, January 16, 2007

Investing in the Home over an RRSP

This recent article in the Globe and Mail gave me a small pause. The author was suggesting that you should forget about your RRSP's and instead concentrate on improving your home as a safer rate of return.

I think he is forgetting one very important thing: in order to get any gains out of your home you have to change markets to try and maintain your lifestyle. Otherwise any gains you have made in your home will get consumed as you buy into another home in the same market.

One other thing that got me was the sales pitch that your home is a safer way to invest over the stock market. Which if you live in Alberta right now this may not apply at all. Home real estate is famous for being very subjective and unstable in the short term.

The last thing that put my guard up on this idea that investing in home improvements will produce a rate of return. This depends on what you do as an improvement (see this article for ideas) some may actually cost you some house value.

Monday, January 15, 2007

Tagged - Five Things You Didn't Know About Me

Like any good virus I got hit the other day with one working it's way through the blog sphere. I have been Tagged by Million Dollar Journey.

Unlike other nasty viruses this is a bit fun. I've got to post five things you didn't know about me and then pass it along to others.

So here we go.

1) Beyond writing as a creative outlet I also paint. Mostly landscapes and more modern pieces.

2) I can't sleep in during the weekend. My all time record in the last few years was 8:30 am.

3) I still read more than I write, even with this blog. My personal library is current around 70 feet of books when you add up all the shelf space.

4) Beyond blogging my other favorite genre of writing is fantasy.

5) I can drink coffee right before bed with no effect on my sleep.

So now I get to pass this along. I'm tagging Canadian Money Blog Reviewer and Getting Rich Together.

Friday, January 12, 2007

New Housing Increases

Over at Canadian Financial Stuff, he has a interesting post on new housing prices going up. While reading the post I jumped over his source from The Daily (Statistics Canada). I expected the big gains in housing in Edmonton, Calgary but a was bit shocked that the next two highest cities for the year are Saskatoon(12.7%) and Regina(10.2%). Both Saskatchewan cities beat out Vancouver and Toronto for price increases year to date.

So what gives? Well SK going under a bit a boom partly from some carry over from Alberta oil industry, but there are some other interesting projects underway like the SaskPower Clean Coal Project which wants to build a $1.5 billion dollar Clean Coal power generation unit. Provided they approve it this year, it promises to be a near zero emission coal power plant. Then they have built the Canadian Light Source project is Saskatoon. Not bad for a province that was typically just known for wheat.

Thursday, January 11, 2007

Blogger Interviews Project

Later this month I'm planning a week long series of posts with interviews from various personal finance bloggers in Canada. So far the project is going along great, but I'm now one slot short of my original plan and I'm not sure who I should ask to fill in that slot.

So dear readers, here is your chance: which personal finance blogger would you like to see interviewed? Please leave a comment with your requests and I will try my best to get the blogger with the most votes.

Wednesday, January 10, 2007

Do you withdrawl your RRSP's early?

I was reading an interesting story early this week about 40% of Canadians withdrawl from the RRSP before retirement. The top reasons for those who use the funds were to pay for a house downpayment (37%) or cover living expenses (20%).

The article presented this as something bad rather than putting it in a good light. Out of the 1026 people surveyed most (60%) never pulled out anything from their RRSP's. Out of those who did about 152 people used it to buy a home, which is good thing for retirement planning in my mind. Then that leaves about a mere 82 people (out of 1026 or 8%) who used the RRSP's to cover living expenses, which is not a great idea. So 92% of us are doing the right thing with our RRSP's overall.

So why was this even a news story? You might want to notice who did the survey, the Bank of Nova Scotia. Perhaps they like to sell you some more RRSP's this season. Keep your eyes open everyone we are going to be drowning in "stories" about retirement savings over the next few months.

Tuesday, January 09, 2007

Retirement Savings Burnout

Every once in a while I just feel depressed about trying to save for retirement. For example during the income trust disaster last Oct, I got hammered in my taxable account and I still had some expenses related to my move in the summer draining the last of my savings. I felt broke and was wondering what is the point of trying to save when something just happens to mess it all up.

At times like this there is no one size fits all solution. Some people get a good night sleep and feel better. Others play with the kids or visit some family or watch a movie. In my case, I find I often have to take a break from the retirement planning books and stop playing with savings calculators. Once I have some distance from it all I tend to feel a bit better.

There is only two truly bad ideas on how to feel better: spending your way out it or stop saving. Both are doomed to create more problems in the long run. After all getting to early retirement is a bit of a marathon. You save for years to reach your goal and sometimes that finish line might as well be at the other side of the globe. For some people, short term goals can help avoid burnout. First save $100, then $1000 and then $10,000. Small steps that keep you heading in the right direction. I've read from numerous people that the first $100,000 is the worst to save and after that you really start to see compounding work its magic.

So don't worry if you feel a bit of burnout while saving once in a while. It's hard work some days, but the payback will be worth it.

Monday, January 08, 2007

TSX Sinking Like a Stone & Rebalancing Your Index Funds

In case you missed it last week, the TSX index dropped like a stone to finish at 12,478 on Friday , down considerablely from the 13,000 when I last wrote on the index.

The good news out of this for any index investor is if you timed your rebalancing over the holidays, you might have cut you losses. I managed to luck out and cash out 10% of my TSX holdings prior to last week and move it to another fund. So I manged to cushion my personal lost to a mere 0.4% of my RRSP's total value. If you weren't so lucky it might be a good time to use any extra cash in your account to buy in, since these sell off's tend to be a bit of an over kill (Does any remember the panic at the beginning of Nov 2006?).

There has been some debate lately on how to time your rebalancing. There is evidence to suggest that you should wait until a given class of assest is out by 5% or more rather than just doing it once a year. I personally can't be bothered. I like my index investing because I can literally do it in my sleep. I only do one complete rebalance at the start of the year and otherwise just use my monthly cash installments to top any fund that is lower than the rest.

So that's my method of rebalancing. If you have a great easy way to handle it better, I would love to hear about it, so please leave a comment.

Friday, January 05, 2007

Suggested Blog Reading - Part I

The great thing about blogs is there is just so many of them with interesting points of view. Here are a few that I read regularly.

Canadian Capitalist - A fellow engineer in Ottawa that posts every weekday for over two years now! A wide range of topics are covered including spending, saving and current events. A must read during my lunch hour if nothing else for all the interesting debates that tend to come up in the comments to some of his posts.

Canadian Financial Stuff - A quirky blog by another guy in Ottawa. It often features interesting rants and different ideas on the world of personal finances.

Canadian Money Blog Reviewer - A newer blog that seems to off to a promising start. Offering a wide coverage of topics and a very open door policy on topics/help for readers.

The Dividend Guy Blog - If you own any stock with a dividend in Canada you have to read this blog. The author is from Alberta and has some solid advice on dividend paying stocks.

Million Dollar Journey - A blog about a 27 year old trying to get his net worth to $1 million by the time he is 35. So far so good, this blogger is very active in the personal finance blog sphere and you will often see his comments on other blogs such as mine.

Well that's just a small sample of a few the blogs I read. I'll post more later.

Thursday, January 04, 2007

Working in Retirement

Well my vacation is now over so it's back to work here. Sorry for the last few days off, but I was a bit busier than I planned.

So I found an interesting article on working in retirement that basically said that 58% of working Canadians plan to keep doing some paid work into their retirement years. In fact, the baby boomers are very keen on the idea with a huge 65% who want to keep working. So the obvious question is: what's changed?

I think some fears about having enough money are driving this trend, but a bigger motivation is looking for some meaning to their lives in retirement. People spend most of their lives working, so when that is gone there is a sudden void in their lives that they don't know how to fill without work. Is this wrong? In my mind, not really. Some work in retirement can be fun and useful beyond money concerns to provide social contact, mental stimulation and meaning to people's lives. The trick is to not let become too large a part of your retirement, otherwise your really haven't retired at all.