April's Great Reads

I have a short reading list for you this month, since most of us are either rushing to file our taxes or rushing to get outside after a long, cold winter. Notable articles that didn’t quite make the top three include this one from Andray Domise on how - if 40% of Canadians withdrew from their RRSPs last year - maybe it’s the design of the program that’s to blame rather than the people who are using it “incorrectly,” this one from Jennifer Chan on how she set up her finances when she first graduated law school with $40,000 in debt, and this one from Jonathan Clements on the four financial questions that reasonable people can disagree on.

And now:

Here’s a Counterintuitive Idea for Your Retirement...

From Paula Pant

If you know there’s such a thing as “the 4% rule” but don’t really know it's provenance or what said rule actually says, this is the article for you. Paula has a long-proven gift for clear financial writing, and this article is one of the best entry-level explanations of what the “rule” is, why it matters, how it might be flawed, and what to do about it for those of you who want to know more but don’t want to dig into past issues of the Journal of Financial Planning.

Read the full article here.

Three Ways to Increase Your Portfolio’s Longevity

From Anthony Isola

“Concentrate on improving the lifespan and healthspan of your money. The same principles will exponentially increase the quality of your life.”

Read the full article here

Some Alternatives to Evidence-Based Investing

From Josh Brown

“Systematic approaches to investing are the best way to express the fact that a) the future is unknowable b) no one can reliably guess at what’s going to happen for extended periods of time and c) other approaches that rely on instinct, intuition and rapid-fire decision making are too inconsistent (and costly) to depend upon for something as serious as building a retirement plan or funding future liabilities.”

Read the full article here

You can read this month's entire list below:

It's Time for Canada to Get Rid of the RRSP | Andray Domise

Solid take from former financial planner Andray Domise on how the RRSP program was designed for a past reality and doesn't work for the people who need it most:

"So what we’re left with is a savings scheme that benefits almost everyone except the people it was designed to protect, and often have the most need for access to emergency cash."

Unanswered | Jonathan Clements

“There are four questions where reasonable people can disagree—and where it’s all but impossible to settle the debate, in part because we find ourselves peering into an extremely cloudy crystal ball.”

I Paid Off $40,000 of Student Loans By Organizing My Finances Like This | Jennifer T. Chan

“Once you set things on autopilot, it’s uncanny how much you’re able to let it work in the background while you do other things with your time.

Great ReadsSandi Martin
Book Review: Worry Free Money by Shannon Lee Simmons

Worry Free Money: The Guilt-Free Approach to Managing Your Money and Your Life by Shannon Lee Simmons isn’t making empty promises in the title. There’s literally no guilt in it. None.

The revolutionary thing about Worry Free Money is that it doesn’t start with spreadsheets, calculators, or systems. Oh, there are plenty of great tools in here, but you don’t even meet them until the Hard Limit system shows up on page 74; instead, Shannon spends the first quarter of the book identifying and dismantling the reasons money and spending are so entwined with our feelings of adequacy, belonging, and success. Her training as a life coach is evident throughout, but particularly here, where she makes it clear that the tools in the following sections aren’t going to fix your relationship with money if you aren’t willing to look at why it’s broken in the first place.

Anyone who can write 301 pages about personal finance without relying on shaming readers into following “the rules” must be incredibly entertaining or super smart. Shannon is both, and more: she’s empathetic, funny, and so, so practical.

Who should read it?

Almost everyone should read Worry Free Money: Newly independent kids just learning how to adult, singles, couples, families, people with enough money, people with more than enough money, self-employed folks, 9-5 lifers, people thinking about retiring and people who are financially independent, people who love spreadsheets and people who don’t.

If you’re already confident in your ability to happily spend less than you make, however, or consistently save enough to reach your goals, carry no debt, and have never woken up at three in the morning wondering if you’re screwed, Worry Free Money probably isn’t for you (although it might give you valuable insight into how other people think about money). The book also can’t help you much if — for any number of reasons — you aren’t earning a living wage, have to choose between paying for necessities like food, shelter, power, and clean water, or are facing troubles no amount of facility with personal finance can solve.

If you only have time to read one chapter:

Chapter 11: Saying No without Feeling Guilty, hands down. If you have little difficulty saying “no” to spending on yourself but find it incredibly hard to say “no” to friends, family, and community (join the club, btw), you’ll breathe an enormous sigh of relief once you get through Chapter 11. Trust me.

If you only have time to read one paragraph:

“There are bound to be some Life Checklist goals that you have already accomplished and some that you fantasize about achieving, even if they aren’t realistic in terms of what you can actually afford. Those things might include travel, becoming debt-free this year, renting a bigger apartment without roommates, starting a business, putting your kids in Montessori school, buying or renovating a home, rock climbing, a year in Provence — the possibilities are endless. Chances are your people — your Joneses — will have many of the same boxes on their own lists. When you see them ticking off the boxes faster than you are, beware of falling victim to the Inadequacy Influence. You may feel anxious, frustrated and ready to throw money at them, simply to prove that you can have all those things too. When you feel that happening, focus instead on what you have already achieved on your list and what’s truly important going forward. And know that you haven’t failed at life. You’ve just made different choices.”

(from Chapter 2: The Joneses and the Life Checklist)

If you only have time to read one two sentences:

“If budgeting isn’t working for you, it’s not you. It’s the budget”

(from Chapter 5: Why You Need to Stop Budgeting)

March's Great Reads

It’s that time of year - at least in the middle of Ontario - where it starts to feel like winter’s this close to ending...and then it snows again. Seriously, the only thing keeping me alive right now is that this late winter garbage weather makes great maple syrup.

March’s great reads might give you just the excuse you need to curl up inside until the snow melts and spring really, truly arrives. If you can’t read anything else because you’re busy tapping trees and boiling sap, at least read the top three (and seriously, thank you for your service). For everyone else with time on their hands, the rest of the list includes being (rightly) terrified of people who know what the stock market will do next, Dan Bortolotti’s review of the new Vanguard ETFs, how making non-registered accounts joint to avoid probate fees puts seniors at risk of abuse, and a single piece of advice from a strong, righteously angry woman.

What if You Stop Expecting it to Be Easy?

From Jacquette Timmons

“Couples with a strong and healthy connection value the mundane because they recognize the power of how what you do day-in and day-out matters much more than what you do on occasion. And they apply a similar sentiment when it comes to money. Yes, there are some within my industry that thrive on you being attracted to the notion that financial success is all about the sexy headliners – the latest IPO; picking the latest top-performing mutual fund; focusing on what the market did (or didn’t do) yesterday and such; or, how many commas and zeros do you have following them, etc. With relationships and with money, the truth is far less exciting. A good portion of your relational and financial success rests in the aspects that are rather boring and quite unsexy. This matters because in much the same way as you don’t measure the strength and intimacy of your relationship on one day, the same is true when it comes to money. The ‘small,’ daily choices matter more than the grand one-off events or days.”

Read the full article here

Strategic Faith

From Daniel P. Egan

“Most of us will invest for about 50 years, from age 30 to 80. Over that period the primary driver of non-savings growth will be that you invest in a reasonably diversified, risk-aligned portfolio with low cost and tax drag. Once those boxes are checked, the exact flavor you choose isn’t hugely important. Market-cap, SRI/ESG, Smart Beta, Trend, Risk Parity, Global CAPE, home biased. Sure, sounds good. Go for it. Bikeshedding. They’ll all have periods where they look best, and periods where they under-perform. Except! Except if you don’t stick with it. Except if you flop in and out of strategies with each glittering fad and temporary disappointment... Distill most investing mistakes down, and you get a simple story: the single biggest factor is simply cumulative time invested. Anything we can do which increases the total time an investor holds a reasonable portfolio, is a win.”

Read the full article here

YOLO

From Tony Isola

“Many [retirees] constantly focus on the threat of running out of money rather than enjoying the fruits of decades of saving and sacrifice. Michael Kitces wrote an excellent article on this subject: ‘Why Most Retirees Will Never Draw Down Their Retirement Portfolio.’ He brings to light something called the ‘consumption gap.’ In theory, the whole point of saving and investing for retirement is that upon reaching retirement, it’s time to spend down the money and enjoy it. In practice, a growing base of research finds that for most of their retirement, retirees are just continuing the growth of their pre-retirement portfolios, suggesting a ‘consumption gap’ between what retirees could and should spend versus what they actually do. Most retirees do not begin to touch their principal until they reach well into their eighties. Leaving your entire principal to heirs means you under consumed your retirement portfolio and needlessly sacrificed a higher quality of life; unless, of course, that was your goal to begin with. In my experiences, it is often not.”

Read the full article here.

You can read this month's entire list below:

Will the Market Go Up or Down from Here? | Dirk Cotton

“The answer is yes. It will go up or down from here”

....and what to do about it.

Be Terrified | Josh Brown

“Imagine the sheer arrogance and borderline mental illness required for a person to assume that they can accurately foretell the actions of a hundred million investors around the world.”

Raising Red Flags on Probate Fees | Wanda Morris

“There is a clear lesson here: don’t create a joint account simply to avoid probate fees.“

“Private Banker” | Josh Brown

“There are great advisors working in conflicted situations and managing these conflicts becomes a sort of career-long struggle for them. It’s admirable, but it’s not your problem as the consumer. There are plenty of great advisors working in situations that do not require this daily conflict-management effort, because they are compensated correctly from the start – not for selling one product or service over another, but for giving advice to you without commissions from a third party or additional goals they need to meet.”

Our Single Best Piece of Advice for Women (and Men) on International Women’s Day | Kitty

“I wish I could take my younger self by the shoulders and shake her. I want to tell her that if she wants anything done, she must start doing for others.”

Great ReadsSandi Martin
February’s Great Reads

Your portfolio is probably down right now, and I don’t want to minimize the worry some of you are feeling, especially those of you who are about to start, or are already relying on withdrawals from your investments for income. It’s no fun, but it’s also not something you can control. These market cycles are why I use conservative rates of return in my projections and build retirement income plans with sequence of return risk in mind.

If you’ve already got a retirement plan, try to take my friend John Robertson’s advice: “use that fear to learn something...about your risk tolerance, or how to manage fear.”

And that’s all the ink I’m going to spill on market moves. Instead, the reading list this month includes a really deep look at what may be the true significance of the blockchain, using a regret minimization framework to make decisions, and taking the broken bond crisis record off of the turntable.

Why Willpower is Overrated

From Brian Resnick

What we believe about using our will to change our circumstances is probably wrong. Resisting the temptation to overspend, for example, is more about avoiding the temptation in the first place than about exercising iron self-control.

“The students who exerted more self-control were not more successful in accomplishing their goals. It was the students who experienced fewer temptations overall who were more successful when the researchers checked back in at the end of the semester. What’s more, the people who exercised more effortful self-control also reported feeling more depleted. So not only were they not meeting their goals, they were also exhausted from trying.”

Read the full article here.

How Perception Shapes Reality

From Brendan Mullooly

If you’ve been checking your portfolio daily...don’t.

“If somebody has the mental fortitude to look at their investments every single day without acting impulsively or affecting their mood, more power to them. However, I don’t think most of us fall into this category. We’re more likely to become slaves to our daily investment update, allowing it to dictate our mood and making us second-guess every position we hold. This habit applies a short-term feedback loop to long-term assets, which is a noisy mismatch, prone to misinform.”

Read the full article here.

The Actually Helpful, Nuanced, Non-Bullshit Way to Choose a Future Career

From Kitty

This career advice is hands down the best, at any age. Read it all, but especially this part:

“Some financial experts advocate for pursuing the highest-earning option, no matter what. We are not of that school. Our perspective is that life is too short to spend a third of it doing something lame. You have more options than just “engineer.”That said, money should play into the decisions you make. If Job A and Job B are equally intriguing, and Job B pays $35,000 more on average, you should probably go with Job B. Especially if you can use that extra $35,000 to fund the hobbies that are your true passions.Picture your perfect life. The life that would make you feel content down to your core. What does the budget for that life look like? “

Read the full article here.

You can read this month's entire list below:

Making History by Doing Nothing | Morgan Housel

Morgan Housel on the art of patiently doing nothing:

“People want to make history and do something. It’s mental torture to match hands-off patience with decisive action. They are opposite skills, even if they rely on one another”

Groundhog Rates | Phil Huber

“If this doesn’t deter you from making rate bets, I don’t know what will…”

Beyond the Bitcoin Bubble | NYTimes.com

Best. Blockchain. Article. Ever.

Complexity Bias: Why We Prefer Complicated to Simple | Farnam Street

So true in finance.

“People without the requisite knowledge to understand it feel alienated and removed from important conversations. It leads people to believe that they are not intelligent enough to understand politics, or not educated enough to comprehend economics.”

The Market Can Go Down? | John Robertson

“If you are feeling emotional about the markets then try to use that fear to learn something — either about your risk tolerance, or how to manage fear when markets are erasing years of gains instead of weeks.”

Minimizing Regret | Dirk Cotton

“I imagine myself at some point in the future long after having made the decision and I imagine that it turned out very badly. My future self then asks, ‘Do I still think it was a good decision? Would I make it again?’ If my future self answers no, then my present self doesn't make that decision.”

Great ReadsSandi Martin
January's Great Reads

The New Year is always a really exciting, invigorating time for me. I’m that annoying chippy chipmunk who runs her annual spending summary on December 31st and who starts work on January 2nd with a really long list of the organizing she got done over the holidays.

One of the things I spent time thinking about was why I do what I do with this reading list every month. Some of my close friends know that I broke up with Facebook this year, and that I’ve been consciously reducing or restraining my media consumption habits...which sounds strange coming from someone who reads 30+ articles a day, curates them on Twitter, and puts out the best handful in a monthly newsletter, I grant you.

In reading Morgan Housel’s How to Read Financial News last month, I had one of those moments of clarity that usually only come when I’m far away from any means of recording it: I do what I do with this monthly feature because not everyone has the time (or, frankly, the desire) to read at the volume I do. I might not always hit the marks you’re specifically interested in, and sometimes I’m playing a totally different game than you are (that’s for all you other planners out there), but my goal with Great Reads each and every month is to filter through the noise (as I see it) and find you some signal (again, according to yours truly). I hope my work is of value to you, at least once in a while.In fact, I’d love your feedback on this feature.

Click here to take an incredibly short survey, and my sincere thanks to everyone who has already done so.

Signal on the list this month is Morgan Housel (yes, he’s on here more than once, I know) on walking the knife edge that is patiently doing nothing and solving hard problems with simple solutions, Ken Kivenko on the glaring lack of investor representation in the regulatory consultation and rule-making process, an article about keeping up with the Joneses that manages to avoid calling the Joneses stupid (for once), and a killer critique of retirement income strategies that invest to earn higher returns before buying guaranteed income (if your definition of “killer” involves actuarial math and liability matching. Mine does, surprise!)

2017 in Review

From James Osborne

We’ve collectively invested one of the calmest, most profitable years for market returns in a long, long time (turns out money these days doesn’t care who’s in power), and the big question roiling away in the back of many minds is “should I let it ride?”Here’s my friend James Osborne with a clear year in review aimed at US investors, and a spectacular paragraph on what to do next aimed at everyone:

“Or, you could be happy, satisfied, pleased with a better-than-average year, and know that when years like this come, we take them. We don’t take it for granted, but we take it. And the consequences are pretty straightforward. If a great year like this one leaves your portfolio out of balance, you rebalance. After a year like this, you do what you said you were going to do after a year like this. Instead of fretting, instead of trying to guess if the rally will continue or when the inevitable correction will come, do what you said you were going to do. That’s the only way this works. Not changing your mind, not going with your gut instinct or making a move based on what you think the President will tweet next. Having a plan is the beginning. Having the discipline to stick to that plan is the other 95%.”

Read the full article here.

Time for a Big Shift

From Meir Statman

The behavioural science behind how we deal with the enormous change from earning an income to living off of our savings:

“An elderly couple moving to an assisted living apartment call their son in another state for help in moving their belongings. A widow in her 90s finds it difficult to clean her home, yet refuses to hire help. These people are not wealthy, but neither are they poor. Each has more than enough to pay a moving company or cleaning crew, without risk of running out of money before running out of life. Yet they resist, insisting that they cannot afford these services. Why do people behave this way?”

Read the full article here.

You’re on Your Own Now

From Josh Brown

Another piece written mainly for a US audience, since Josh is specifically referring to the GOP dilution of the Department of Labour’s Fiduciary Standard, but his commentary can easily be applied to the advice community in Canada, some of whom have dug in and are desperately fighting against banning embedded commissions and enacting a fiduciary standard here with the same arguments that Josh refers to here: that such regulations will reduce freedom of choice and access to advice for smaller investors.

“When industry lobbying groups put phrases into bought-and-paid-for politicians’ mouths like “freedom of choice”, what’s actually happening is that consumers are being given the “freedom” to choose solutions that are marketed inappropriately and designed to transfer their wealth into the pockets of others. They’re being “empowered” to inadvertently act against their own self-interest with the help of unscrupulous salespeople and deceptive advertising practices.”

Read the full article here.

You can read this month's entire list below:

Solving Hard Problems with Simple Ideas | Morgan Housel

Just make sure you're working with the right simple ideas!

"When you’re dealing with uncertainty and complexity, simple ideas are not dumbed-down ideas. They are often complex solutions gift wrapped for you in a way that makes their application practical and sustainable."

This is Why it Seems Everyone Else Has More Money than You | Liz Weston

These kinds of articles circulate periodically, and usually the question posed in the title is answered with some version of a smug eye roll and “because everyone else is a dummy”. Not this one.

How To Read Financial News | Morgan Housel

“[G]ood, relevant content is extremely rare. You should have no tolerance for the lower half of categories in this chart, and asking yourself where something fits before reading it is vital. Giving yourself permission to move on quickly provides more time to find something relevant.”

The Return You Need | Dirk Cotton

“It's a little like saying, "I really need to buy some very dependable income with this money but I think I'll bet it at the racetrack first because if I win I'll be able to buy even more safe income!" You need to consider other possibly less attractive outcomes.”

Retail Investors and the regulatory "consultation" process | Ken Kivenko

“The problem isn’t only that industry is powerful and has lots of money and that its lobby groups, funded think tanks, law firms etc. can participate in the public consultation process. While this is true, the fundamental problem is that the rule-making process is deliberately designed to exclude investors; they are given no meaningful opportunity to make their views known at any point in policy and rule making.”

Great ReadsSandi Martin