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Weekend Reading: Bill Negotiation Day Edition

By Robb Engen | December 14, 2019 |
Posted in
Weekend Reading_ Bill Negotiation Day Edition
I’ve long advocated for people to take a bill negotiation day – a day off work once a year to call their bank, telecom provider, and other other service providers and negotiate their monthly bills. These companies are not known for voluntarily offering loyalty discounts.

Banks add new service charges and increase monthly account fees on the regular. Home and auto insurers seem to jack up annual premiums with impunity. Cable, phone, and internet providers have no qualms about imposing a $5/month increase every year. It all adds up.

Long-time customers need to be proactive about using loyalty to their advantage. Annual calls to review your recurring monthly bills can save you hundreds, if not thousands of dollars a year.

One advantage of working from home on my own schedule this past week is that I’ve had time to look into my ever-escalating bills and actually do something about them. I started with TELUS, who recently increased our internet bill by $5/month and charged us $35 last month for going over our monthly data cap.

I checked the website for any sign of a deal and noticed a prompt to call about a loyalty discount. I got through right away on that direct line and the agent immediately offered a $10 per month discount on both our cable and internet bill, plus unlimited monthly data if we agreed to a new two-year contract.

I happily agreed with the offer and $240+ per year in savings.

Next up was the monthly account charges for my TD small business account. For years I’ve had a basic plan and paid around $8 per month. But as business activity has increased my transactions have gone up and I paid a whopping $26 in fees last month. 

I logged-in through the TD mobile app, selected ‘contact us’ and called the small business team directly. Again, getting through right away, I explained to the agent how I wasn’t happy with the fees. She suggested an ‘everyday plan’, which included more transactions and, more importantly, waived the monthly fees if I kept a $20,000 balance. 

Not entirely satisfied, I asked for November’s $26 fee to be reimbursed and she agreed. Net savings for 12 months should be around $260.

Two phone calls. 20 minutes of my time. $500 in savings.

I won’t stop there.

The Alberta government imposed cap on auto insurance rates is set to expire in 2020, so premiums will likely skyrocket. That means, instead of blindly accepting my auto insurer’s renewal notice this coming spring, I’ll be shopping around for the best deal. 

I’ve already cut my investment costs to the bone with my one-ticket investing solution (VEQT). But if you’re still invested in high-fee mutual funds, the coming months is a good time to review your fees and consider switching to a robo-advisor or low cost do-it-yourself portfolio.

This holiday season challenge yourself to a bill negotiation day – get in touch with your service providers and negotiate some savings for 2020.

Questrade vs. Wealthsimple Trade

Known for rock-bottom trading fees for stocks, and free ETF purchases, Questrade has been the go-to discount brokerage for fee conscious investors. But recently Wealthsimple launched a zero-commission trading app called Wealthsimple Trade – putting Questrade on notice and challenging for supremacy in the world of self-directed investing.

I spent some time reviewing Wealthsimple Trade to see how it stacks up to Questrade. Here’s a quick summary:

Wealthsimple Trade features:

  • Zero-commission stock and ETF transactions (buy and sell)
  • RRSP, TFSA, and non-registered accounts
  • $0 account minimum
  • No inactivity fees

Questrade features:

  • Zero-commission ETF purchases
  • Stock trades and ETF sales for as low as $4.95
  • Get $50 in free trades for new accounts
  • RRSP, TFSA, non-registered, RESP, LIRA, Margin, RIF, LIF, Joint and Corporate accounts 
  • Ability to purchase options, IPOs, over-the-counter (OTC) securities, and international equities
  • $1,000 account minimum

One important note about Wealthsimple Trade is that it’s an app – meaning it’s only available on your mobile device or tablet. You cannot access your account via desktop, and Wealthsimple Trade does not integrate with the existing Wealthsimple robo-advisor platform.

Yes, trades are free. That means Wealthsimple Trade primarily makes money on foreign currency conversion (buying U.S. listed stocks and ETFs in Canadian dollars). Since investors cannot hold U.S. dollars inside the Wealthsimple Trading platform, clients will pay the corporate rate plus 1.5 percent on the conversion. 

Questrade allows investors to hold USD inside their registered accounts, potentially avoiding currency conversion fees inside the platform. Clients can also access the trading platform through a desktop or mobile device. Finally, Questrade offers more robust market data, research tools, and offers more account options than Wealthsimple Trade offers at this time.

The bottom line: If your investing needs are simple inside an RRSP and TFSA, and you frequently contribute small amounts, then Wealthsimple Trade is a great way for self-directed investors to build up their investments while trading for free.

If you’re investing needs are more complicated, like if you have a LIRA from a previous employer, or you want to trade in USD, then you’re better off with the Questrade platform.

This Week’s Recap:

I was feeling nostalgic this week and wrote my 2010-2019 decade in review.

Over on Rewards Cards Canada I looked at the best Air Miles Credit Cards in Canada.

From the archives: Have we reached peak stock market?

Weekend Reading:

Our partners at Credit Card Genius share the best credit card offers, sign-up bonuses, and deals for the month of December.

Preet Banerjee looked at some new research on how we handle credit card debt and determined that the avalanche method (tackling highest interest rate first) beats the snowball method (smallest balance first) in both math and behaviour. I came to the same conclusion when I compared debt reduction strategies.

Here’s Preet’s video explanation of the best way to reduce consumer debt:

Professor Scott Galloway explores the Dunning-Kruger effect and the difference between luck and effort.

Rob Carrick asks, what happens to Millennials in retirement when they can’t get into the housing market?

Investor advocate Robin Powell looks at sustainable investing and determines the same rules apply when it comes to fees:

“Active management is a zero-sum game before costs, and a negative-sum game after costs. The average sustainable investor using active funds must underperform the average investor using passive funds. It’s simple arithmetic.”

Here’s the Sketch Guy Carl Richards with a great article on how to talk about money.

‘Tis the season of reflecting: Nick Magguilli shares his favourite writing of 2019.

Canadian Portfolio Manager Justin Bender explains when to sell your losers.

Along the same topic, Dale Jackson explains why shifting the assets from tax-loss selling into a TFSA or RRSP makes sense.

Here’s a question I get a lot, and one that the Globe and Mail’s John Heinzl answers perfectly: I’m afraid of a market crash – Should I go completely into cash?

I loved this post from the Millionaire Teacher Andrew Hallam: When money, pleasure, and your brain decide to dance:

“When subjects took what they thought were the more expensive brand-name aspirins, they reported feeling about 30 percent improved pain relief, compared to when they took the lower-priced pills. As with the wine, they weren’t just faking this. The higher relief was real. This placebo effect wasn’t just fantasy.”

Here’s Hallam again with a history lesson on “great returns that never lose money.”

Cut the Crap Investing blogger Dale Roberts asks, Is this the end of the traditional 60 / 40 balanced portfolio?

On the My Own Advisor blog, the proven path to early retirement is ignoring the 4% rule.

Mortgage expert Rob McLister explains why, finally, the cost of getting a reverse mortgage in Canada is getting cheaper.

Finally, here’s a fun post explaining every type of FIRE (Financial Independence, Retire Early) personality

Have a great weekend, everyone!

2010-2019: The Decade In Review

By Robb Engen | December 11, 2019 |
Posted in
2010-2019: The Decade In Review
With the ’10s quickly coming to an end, it’s a good time to reflect on the past decade and list our accomplishments. Looking back, this was an incredible decade of growth and happiness for me and my family. We are so grateful for what we’ve been able to achieve.

2010 was a big year for me. I had just started a new job. My wife and I were getting accustomed to living on one income with a new baby at home. I started this blog. 

We began to assemble the building blocks for financial success. I started a budget and began to track our net worth – which was just $102,000 at the beginning of the decade.

Fast forward to the end of 2019 and our net worth is more than $800,000. That’s an impressive 23 percent compounded annual growth rate.

But I’m getting ahead of myself. Here’s how we got to where we are today:

2010

We still lived in a two-bedroom starter home that we had purchased back in 2003. I made $75,000 as a business development manager at the University of Lethbridge. My wife stayed home full-time with our newborn. We dreamed of upgrading our house and had our eyes on our dream house in a thriving new neighbourhood. 

One year earlier I had opened a discount brokerage account at TD and, using the $25,000 I had transferred from my previous employer’s group RRSP plan (which was invested in high fee mutual funds), bought my first dividend paying stocks.

I was totally enamoured with dividend investing. It helped that I started DIY investing in July, 2009 – well after the turmoil of the global financial crisis. My dividend stock picks earned an incredible 35.54 percent. Clearly, I was the next Warren Buffett.

2010 was also the second year that TFSAs were available and I had maxed out my contribution room each year – again, investing in Canadian dividend payers.

We had opened an RESP for our daughter in 2009 and continued to contribute $50/month – basically all we could afford at the time – into a term deposit / GIC at TD Bank.

Oh, and an F-18 Hornet crashed during a practice run at the airport while I was president of the Alberta International Air Show Association. I got my first taste of media interviews. Fun times.

Finally, I started this blog in August 2010 as a way to document my financial journey and hold myself accountable to my goals. I didn’t imagine it would completely change my life over the next 10 years.

2011

The highlight in 2011 was the purchase of our new house – a brand new one that we built as our forever home. We had saved for 18 months to top-up our downpayment to 20 percent of the purchase price and avoid costly CMHC fees.

We moved into the house in August that year, and found out shortly after that we were about to have baby number two.

The new house came with a big mortgage and a shift in our financial priorities. I drained my TFSA – worth $14,500 at the time – to help top-up the downpayment. Unfortunately, I wouldn’t contribute to it again for several years.

My investment returns were less prolific that year – earning just 9.82 percent – but my RRSP had grown to $41,000. 

A funny thing happened with this blog. It earned $137 in January that year. Then $195 in March. Traffic started to increase, advertisers started to get in touch, and by the end of the year the blog had earned $13,000.

We ended the year with a net worth of $190,000. But we were just getting started.

2012

This was an incredible year both personally and professionally. The highlight, of course, was the birth of our second daughter. Our family was complete. 

I also started to make serious money from this online venture. Not just from the blog, but I also offered freelance writing for other websites, most notably my long-standing gig with the Toronto Star. I also launched the Rewards Cards Canada blog.

We decided to incorporate and capture the earnings from my online activities into a small business. The idea was to stream dividends to my wife (co-owner) and reduce our tax burden.

That year we earned $66,000 from our online business. We knew we were onto something, and that solidified our plan for my wife to stay home full-time. We had a reliable second income stream.

I bought out the lease on my 2007 Tucson and for three months we were car-payment free. Then we bought a new Santa Fe (curses) late that year – a decision that meant forgoing TFSA contributions for another four years.

2013

This was one of those completely forgettable years where nothing notable happened. We paid our bills, saved where we could, and tried to survive as parents of a pre-schooler and a toddler. 

My RRSP grew to a respectable $91,000 after a top-up loan caught up most of my unused contribution room. Our net worth continued to climb and was now sitting at $327,000.

2014

The highlight of 2014 was that we took out a home equity line of credit and paid a contractor to develop our basement. That meant adding new debt to our finances and another strike against reaching all of our savings goals.

No regrets, though, as we have enjoyed the space and got the line of credit paid off relatively quickly. 

My RRSP finally crossed the $100,000 threshold and the dividend stock portfolio returned a respectable 8.53 percent. But cracks started to form in my strategy.

The problem was when I realized my bad behavioural biases weren’t doing me any favours as a stock picker. I strayed from the blue-chip dividend growers (since I already owned most of them) and bought a few smaller cap stocks and high yield stocks that didn’t do well. 

At work, I got the last salary increase that I’d see for five years as the provincial government froze wages for non-bargaining public sector employees. I would have to rely on my side hustle more than ever. 

Only there was one problem. A major change to Google’s algorithm meant a few of my high ranking articles no longer appeared on the front page when you searched those terms. I lost 90 percent of my search traffic overnight, and online income dropped by 20 percent. Uh-oh.

One major step I took to combat this loss was to start my own fee-only financial planning service. I took on my first few clients in 2014. Who would have guessed this would be my main source of income today?

2015

The single most important thing I did in 2015 happened when markets opened on January 2nd. I sold all of my dividend stocks and switched to an indexing strategy – more specifically a two-ETF solution of Vanguard’s VCN and VXC.

I don’t want to downplay the significance of this change. I was a die-hard dividend investor, and there’s a bit of a cult following of dividend investors online. I lost blog readers because of this move. I likely lost the respect of certain dividend bloggers.

But looking back I know it was the right thing to do, both from an evidence-based perspective and from a personal behaviour perspective as I was simply not cut out to be a stock picker.

My RRSP soared to more than $119,000 and our net worth grew to more than $450,000. Online income recovered back to 2012 levels. The side hustle was back!

2016

My wife and I celebrated our 10th anniversary in 2016 with a childless trip to Vancouver. It was glorious. We also ran eight kilometres around the seawall at Stanley Park. I was hooked on running

Financially, this was another one of those forgettable years. I wrote about how the waiting was the hardest part. We were paying off our line of credit, paying off our new car, and saving what we could. But our big goals were still a few years away. We just had to keep chugging along. 

The lone bright spot was that our car loan was paid off in November and we could finally start diverting that money into a TFSA.

We also started maxing out the kids’ RESPs. And my RRSP kept growing – now to $133,000.

Our net worth reached a milestone – smashing through the half-million mark and ending the year at $532,000. Ok, it was a good year.

2017

Our youngest daughter started Kindergarten in the fall of 2017, giving us a small taste of freedom (at least for the weekday mornings). 

With no car payment, and our line of credit nearly paid off, we made a big effort to save in 2017. I put $10,000 into my RRSP. I also put away $1,000 per month into my TFSA, an approach I still take to this day until it is fully maxed out.

The result was a $100,000 increase in net worth – to $635,000. Financial freedom at 45 was becoming more and more realistic by the day.

I also ran in three races in 2017 – a 6k and two 10k – with plans to do my first half-marathon in 2018.

2018

With both kids in school full-time, my wife had time to help me with the online business – taking care of the accounting, scheduling, design, and administration (true weaknesses of mine). That’s been a life-saver and helped take the business to new heights. 

Markets didn’t cooperate in 2018, but my RRSP was now worth $166,000 and I grew my TFSA to $29,000. We paid off the last of our line of credit and could focus solely on our savings goals. It was time to ramp it up!

Our net worth by the end of the year nearly reached $700,000.

I finished two half-marathons: the first in Calgary in a time of 1:52:34, and the second here in Lethbridge in a time of 1:52:26 (hey, at least I’m consistent).

2019

What. A. Year.

We went on an epic 32-day trip to Scotland and Ireland. We earned more from our online business than I did from my day job. I quit my job

Unreal. 

Our net worth crossed the $800,000 mark. We’re so close to reaching our $1M goal by the end of 2021. My RRSP is so close to $200,000.

I switched to an even simpler portfolio, with the new Vanguard all-equity ETF (VEQT).

We’ve managed to put ourselves in such great shape financially that I felt comfortable leaving my day job to focus entirely on blogging, freelancing, and financial planning.

I’ve been at it for three days and I can’t believe I didn’t do this earlier. It’s an amazing feeling to work for yourself and not have to answer to anyone else.

What’s next for 2020-2029?

The 20s are shaping up to be a great decade. My wife and I will work side-by-side at home on our online business. We can come and go as we please, and attend all of our kids’ activities and special events. 

We’ve got the travel bug and plan to visit Maui in February and Italy in April. I doubt we’ll stop there, now that I don’t have a limited amount of vacation days to hold us back. We’ve talked about going back to Scotland again soon.

Then there’s my well-documented goal of reaching $1M net worth by the end of 2021. That’s still well within reach, even though I’ve shed one major income source.

I want to have the mortgage paid off by the end of 2024. That’s a stretch goal, but it can be done. 

Looking far ahead to the end of the decade, it’s not out of the question to reach a net worth of $2M. 

Final thoughts

I could have stayed in my day job for another 5-10 years, collecting a nice salary while earning another good income stream on the side. That would’ve been the smart move, financially speaking, and allowed us to meet and exceed all of our lofty savings goals.

But life isn’t about earning the most money, or saving the biggest pile. The fact is, I wasn’t happy rushing the kids off to bed so I could write another article or work on a client’s financial plan. I wasn’t happy spending my weekends working online instead of sledding, skating, or swimming with my kids – or spending quality time with my wife.

The truth is, I was burning out. It’s tough to work all day, spend a few hours with my family, and then pull out my laptop for another two hours every night. I did that for nine years. Did I really want to spend another year, or two, or five, doing the same thing?

The clear answer was no. We have a viable online business that has more earning potential than my day job ever had. I just need to put some daylight hours into it to uncover its true potential.

Plus, I actually enjoy it! I love writing about personal finance and investing. I love helping people achieve their financial goals and dreams. It’s the perfect job for me because it still feels like a hobby.

The ’10s have been an eventful decade, and we’re looking forward to see what the ’20s bring.

What did you accomplish this decade?

Weekend Reading: Misguided Sh!t Advisors Say Edition

By Robb Engen | December 7, 2019 |
Posted in
Misguided Sh!t Advisors Say Edition
I love sending readers and clients on a mission to test their financial advisor. I get them to ask about lower cost portfolio options such as index mutual funds or ETFs. The responses are typically hilarious – so much that I wrote an entire post on the sh!t my advisor says.

A reader I’ll call Michelle emailed me about a recent conversation with her advisor about switching to ETFs.

Hello Robb, I love your articles. Thank you!

I spoke to my advisor about switching to a low cost ETF strategy for my RRSP. She told me there can be liquidity issues with ETFs and that she always sells them with limit orders and it can take time. Is this true? I own one with CI First Asset that she recommended.

Also, she was trying to scare me that I’d be responsible for ensuring I drew down my RRSP properly, implying this was a difficult task that I might not be able to manage. I will have to start drawing down in 10 years.

Your thoughts would be much appreciated.

Michelle’s advisor is right in that limit orders are useful when buying and selling ETFs. That’s because the liquidity of an ETF is best measured by its bid-ask spread. The smaller the spread, the more liquid the ETF. Bid-ask spreads on large, liquid markets like the S&P 500 will be very tight at all times. Spreads will be wider in less liquid, more “niche” exposure ETFs.

Stocks with higher trading volume tend to be more liquid. But an ETFs liquidity reflects the liquidity of the underlying stocks or bonds it holds.

When in doubt, avoid trading too close to the market’s open or close, and always use a limit orders. Stick to broad-market ETFs. Look for all-in-one solutions like Vanguard’s VBAL, VGRO, or VEQT. It’s never been easier to be a do-it-yourself investor.

The advisor’s other comment – about Michelle drawing down her ETF portfolio – is nonsense. First of all, retirement is 10 years away. Why stay in expensive, actively managed mutual funds for the next decade on the assumption that Michelle’s advisor will do a good job assisting in the portfolio drawdown at that time?

Yes, retirement withdrawals can be complicated, and many investors will need guidance. But Michelle can pay for that guidance when the time comes, rather than overpaying for advice through product fees today. Or, she can take control of her DIY portfolio and follow a total return strategy to generate retirement income. Or, she can switch to a robo-advisor who can assist in portfolio withdrawals for a fraction of the cost of a full-service advisor.

There are plenty of reasons why commission-based advisors want to prevent their clients from switching to low cost index funds and ETFs. The most obvious is that actively managed mutual funds simply pay more commission to the fund dealer and advisor. 

If we believe that, then it’s easy to paint commission-based advisors as devious and evil. But a recent paper titled, ‘The Misguided Beliefs of Financial Advisors‘ suggested that most advisors actually mean well, they just simply don’t know any better.

“Advisors give poor advice precisely because they have misguided beliefs. They recommend frequent trading and expensive, actively managed products because they believe active management, even after commissions, dominates passive management. Indeed, they hold the same investments that they recommend.”

If you work with an advisor at a bank or investment firm, don’t be afraid to challenge or question their advice, especially when it comes to fees on the products they recommend. For every high-fee, actively managed product there is a low-fee, passively managed equivalent that is most likely better suited for your portfolio. Insist on the low fee option.

This Week’s Recap:

This week I wrote about our tendency to kick debt down the road.

From the archives: How to create your own financial plan with these eight steps.

Over on Rewards Cards Canada: What’s the difference between Air Miles Cash Miles vs. Dream Miles?

Friday was my last official day in the office – hopefully forever! 

Finally, a quick update on life insurance as a few readers asked if I had the option to convert my group insurance to a private policy. It turns out I can, but only to a maximum of $200,000. I’m happy with my decision to go with a new $600,000 15-year term life policy.

Promo of the Week:

One of the top no annual fee cash back cards on the market is Tangerine’s Money-Back Credit Card. Cardholders can earn 4 percent money-back on purchases in up to three categories for their first three months (2 percent thereafter), and 0.5 percent back on all other purchases.

Our partners at Credit Card Genius have a great promo offer for this card right now where you’ll get a $75 Amazon e-gift card on approval.

This Week’s Recap:

An economist tackles a big question – will the stock market crash in 2020?

A Wealth of Common Sense blogger Ben Carlson explains why bull markets last much longer than you think.

Rob Carrick shares some lessons from your fellow Canadians on how to be successful with TFSAs.

Mr. Carrick also shares an important piece on how investment firms are ducking responsibility for bad advice that costs clients:

“The investment industry talks endlessly about the value of the advice it provides. But no loophole goes unexplored in finding ways to avoid taking responsibility when that advice goes wrong.”

PWL Capital’s Ben Felix is back with his latest Common Sense Investing video about investing in IPOs:

Nick Magguilli (Of Dollars and Data) shares his psychological tricks for worry-free spending.

Michael James discovered an error in the rules-based spreadsheet he designed to manage his portfolio and now wrestles with a decision to fix his mistake.

The most dangerous of all people is the fool who thinks he is brilliant. Jason Zweig shares his own experience with overconfidence.

Million Dollar Journey compares bond ETFs, GICs, and high interest savings accounts in this fixed income investing summary.

Finally, travel expert Barry Choi shares eight hotel booking tips to ensure you get the best value when booking hotels online.

Have a great weekend, everyone!