Today I’m answering reader mail for a feature I call the Money Bag. I’ll answer questions and address comments from readers on a wide range of money topics, myths, and perceptions about money. No question is off limits, so hit me up in the comments section or send me an email about all the money things you’re dying to know.

To start, we’ve got a question from Robb (not me) who received an early inheritance and is looking for the best way to invest the lump sum to meet some unique objectives:

Investing a Lump Sum for Monthly Income

“Hi Robb, today my wife and I received news that my mother-in-law would like to gift us $300,000. The money is currently in a CIBC income fund paying her approximately $1,500 per month.

 

Her only request is that we continue to pay her $1,500 per month while she’s alive. She turns 85 years old this summer. It is a request we are more than happy to continue for her.

 

Our question is: What is the best way for us to invest the funds for the short-to-medium term to meet the goals of paying her $1,500 per month, manage the additional tax we will face with the additional income, and keep the funds earning a return while being able to access it in case my mother-in-law needed a lump sum for some unforeseen expense. We’d appreciate your professional opinion and insight.”

Hi Robb, thanks for this question. Very interesting. Here’s an option for you to consider.

What I’d recommend is putting $54,000 (three years’ income for your mother-in-law) into a high interest savings account such as EQ Bank Savings Plus Account. The account pays a 2.3% everyday interest rate* and acts as sort of a hybrid chequing/savings account. Funds are eligible for deposit insurance.
*Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.

Then I’d take $90,000 and invest it into a GIC ladder – something like this:

• 1-year GIC = $18,000
• 2-year GIC = $18,000
• 3-year GIC = $18,000
• 4-year GIC = $18,000
• 5-year GIC = $18,000

When the 1-year GIC matures, put that money into the EQ Bank savings account to replace your mother-in-law’s first year of spending. Rinse and repeat each year as those GIC’s mature.

You have lots of options with the remaining $156,000. One suggestion would be to put a lump sum onto your mortgage (you might be allowed to put down 15 percent of the original mortgage, for example. That might be $45,000 or $50,000.

You could use another $50,000 or so to accelerate some of your RRSP and TFSA contribution goals (i.e. make two years’ worth of contributions to catch up on any unused contribution room).

Finally, you could open a non-registered (taxable) account and invest the remaining $50,000 or $60,000 in something like VBAL – the one-stop balanced ETF from Vanguard.

With this balanced approach you’ll have three years worth of liquid cash, plus the GIC’s renewing every year for another five years, so essentially eight years worth of income for your mother-in-law. You’d also have the VBAL investment acting as more of a longer term hedge.

Plus, you’ll have made big contributions to both your mortgage and to your retirement savings. I’m sure your mother-in-law would feel good about helping you accelerate your retirement goals while still preserving her monthly income stream.

After two or three years you could evaluate her health and how the plan is working and make any necessary adjustments. If you feel you need to have a larger lump sum available for health reasons or an unforeseen expense you could certainly sell some VBAL (or if markets are down use some of the EQ Bank savings and replenish it when markets pick back up).

You would have to pay some taxes on the interest income and to deal with that perhaps you keep an extra few thousand of the lump sum on hand in your personal chequing/savings account to take care of that (the extra RRSP contributions should offset any taxes owing, though).

Best credit card for general spending

Here’s Andrew, who wants to know what the best credit card is for everyday spending.

“Hi Robb, I have the Capital One Aspire World Elite MasterCard (grandfathered version) with 2 percent return on spending. Do any other rewards credit cards have comparable returns to this card on general spending? The BMO World Elite and MBNA World Elite used to be comparable, but returns on both have been devalued.

 

I do also have the American Express Cobalt and Scotia Momentum Visa Infinite for spending in specific high-yield categories such as groceries and gas, but that’s not what I’m asking about.”

Hi Andrew, I’ve found that nothing beats the 2 points back on every purchase offered by the grandfathered Capital One Aspire Travel card and so that’s why, like you, I’ve hung onto it and still use it today. (Ed. Note: Capital One unfortunately closed the Aspire Travel card to new applicants some time ago but continues to keep it open for existing cardholders).

I will say that I’ve gotten more into credit card churning lately and so if I have a new rewards card that needs to reach a minimum spending requirement before the bonus points kick-in then I will funnel all of my spending onto that card until I reach the minimum spend (i.e. spend $1,500 in three months). The return on these bonus points typically far outweighs the 2 percent back I’d earn with the Capital One card.

Here’s what I have in my wallet:

Daily spending

• Capital One Aspire Travel World Elite MasterCard – Everyday spending when not churning a card. Also useful for Costco shopping (pays 2x points on every purchase).
• American Express Cobalt – Groceries at Safeway, Save-On), plus liquor, and dining out (pays 5x points in these categories).
• PC World Elite MasterCard – For groceries and gas at No Frills (30 PC points per dollar spent at Loblaw stores and Shoppers Drug Mart).

Travel cards

• Scotia Passport Visa Infinite – no foreign exchange fees
• American Express Platinum Card – big bonus points, unlimited airport lounge visits, hotel perks
• Marriott Bonvoy American Express Card – hotel points, perks
• RBC WestJet MC – airline points, perks

Churning cards (I always keep an eye out for these promotional offers)

• American Express Gold Card – when it’s first year free and 25,000 bonus points
• Scotia Amex Gold – when it’s first year free and 15,000+ bonus points
• RBC Avion Visa Infinite – when it’s first year free and 25,000 bonus points
• TD Aeroplan or First Class Visa Infinite – when it’s first year free and 25,000+ bonus points
• CIBC Aventura Visa Infinite – when it’s first year free and 25,000+ bonus points
• BMO World Elite or World Elite Air Miles – when it’s first year free and 35,000 points or 3,000 Air Miles

And, you can check out the always up-to-date hot credit card deals (courtesy of Credit Card Genius) in the links below this post.

Buying a vehicle is likely the second biggest purchase we’ll make in our lives. It’s expensive, a long-term investment, and you rely on it. Most of all, no one wants to overpay or end up with a lemon. Unfortunately, buying a car requires most shoppers to be organized and well-researched. Then you’ll need to spend a few evenings and weekends negotiating, which isn’t as fun as going for a test drive.

What if you could take the pain out of the car buying experience and shop from the comfort of your couch? Two online marketplaces help consumers do exactly that; find the best deals from the most reputable auto dealerships and save you time and money.

This comparison column takes a look at two of these services: Cargurus vs. Unhaggle:

CarGurus Canada

CarGurus launched in Canada in 2014 and is now the fastest growing major auto shopping site in the Canadian market.

CarGurus is free to use and helps consumers find deals on new and used vehicles from top-rated auto dealers. The site ranks shoppers’ search results according to the best deals, with each clearly marked as “great,” “good,” “fair,” “high price” or “overpriced.”

Rankings and deal ratings are determined by a number of data points including the Instant Market Value (IMV) for each car as well as dealership ratings determined by verified consumer reviews. IMV assessments are based on an analysis of hundreds of thousands of listings and take into account variables including year, make, model, trim, options, mileage, location and vehicle history.

Related: How often should you service your vehicle?

Organic search rankings on the site are strictly data-driven, so consumers get a transparent view on how the available listings compare. Shoppers can refine their search based on vehicle preferences, distance radius, deal ratings, and dealer reputation.

Dealerships can use free and paid subscription services, allowing them to connect directly with shoppers by listing inventory on the CarGurus site. Notably, dealerships cannot pay to improve their deal ratings: a shopper’s organic search results are unbiased by advertising relationships.

CarGurus lets consumers know if a dealer is trustworthy and provides a positive experience. CarGurus’ Deal-Ratings offer a trusted and unbiased view into a shopper’s local market and are not influenced by whether or not a dealer pays to be featured on the site.

Unhaggle

Unhaggle has a national dealer network throughout Canada serving every major make and model vehicle. Since launching in 2011 Unhaggle has serviced more than 1.5 million Canadians.

Consumers looking to purchase a new vehicle visits Unhaggle and can see what their desired vehicle would typically sell for in their local area based on proprietary average market price data.

From there, sign-up to receive a free report that outlines the invoice cost, applicable incentives, provide access to a payment calculator and a referral to a local dealership.

At this point consumers can either be contacted by the dealer or they can reach out to the recommended dealer on their own. Unhaggle partner dealerships work to negotiate a fair and transparent deal.

Dealerships will often negotiate a deal with the customer virtually, including providing a trade-in appraisal and completing a credit application. Then all the customer needs to do is sign the final paperwork at the dealership and drive off with their new vehicle.

Consumers can expect to save an average of $3,241 using Unhaggle.

The service is free to consumers, while dealerships pay to advertise. Dealers will then be showcased in Unhaggle reports and have the opportunity to respond to consumers.

CarGurus vs. Unhaggle: The verdict

Unhaggle focuses exclusively on new cars and allows consumers to build and price any vehicle, similar to a manufacturer’s website. The main benefit being dealerships can factory order or dealer trade to get the customer the exact vehicle they are looking for even if it may not be in their existing inventory.

CarGurus primarily focuses on used cars and has limited availability of new cars, in terms of the number of dealers and inventory. However, CarGurus’ focus on dealer trust and transparency lends itself well to the used car market where consumers should be more cautious about their purchases.

Each marketplace gives prospective car buyers a trusted ally to guide them through one of the largest and most nerve-racking shopping experiences of their lives.

The FIRE movement (Financial Independence, Retire Early) has taken the personal finance blogosphere by storm of late, with numerous bloggers chronicling their journey towards financial independence. Several high profile bloggers have even achieved FIRE, gaining wide spread attention from mainstream media and leading to book publishing opportunities.

The quest for financial independence certainly isn’t new and often boils down to a desire to ditch the cubicle and “find your passion”, whether that’s blogging full-time, writing a book, or living a location-independent lifestyle.

But there’s an air of privilege surrounding most FIRE stories: A stereotypical tale is the high-earning, childless couple living in remote U.S.A., saving 70 percent of their income and looking to retire by 40.

There’s also the question of what early retirement actually means. Leaving a corporate job to pursue your passion isn’t retiring; it’s called a career change. Instead of answering to an employer, you answer to yourself. While that’s a dream pursuit for many of us, by definition it’s called entrepreneurship, not retirement.

The FIRE community is also dominated by men, a fact not lost on lawyer and freelance writer Madeleine Holden, who documented the batshit lengths these guys go to retire by age 40. Gender discussions are quickly shutdown on FIRE forums, ignoring the unique challenges of saving while female.

Another problem with FIRE is the idea that anyone can just pull up their bootstraps and save enough to leave their job within a short period of time. In conventional FIRE wisdom you need to save 25x your annual expenses before you call it quits. That’s a tall order for most of us, especially those living on a modest income or dealing with any number of challenging circumstances (health, location, etc.). It’s easy to preach FIRE from a position of privilege.

Michael James argues that FIRE is within reach even for those with modest means, but the problem he says is that we design expensive lives for ourselves with big houses and long commutes.

“A few good early choices can set you on a great path for life. But make the wrong expensive choices early and you’re committed to a path of paying off debt for decades.”

My issue with the FIRE community is not the pursuit of financial independence but the Derek Foster-ian “I retired early, and you can too” articles that fail to highlight the unbelievably extraordinary circumstances that lead to someone retiring at 38.

It’s no secret that I’m pursuing financial independence, but the idea of early retirement hasn’t entered the equation. If I decide to leave my public sector job it will be to continue promoting financial literacy through this blog, writing my column at the Star, and through my fee-only financial planning practice.

When work is highly enjoyable and fulfilling it ceases to become “work” and the thought of retiring full-stop rarely enters the mind. That’s my FIRE pursuit.

This Week’s Recap:

On Monday I wrote about solving the home bias in my portfolio by switching to Vanguard’s new all-equity one-ticket global ETF (VEQT).

On Thursday I offered some suggestions for what to do with your tax refund.

Promo of the Week:

TD Bank has released a trio of excellent offers for its travel cards that are worth a serious look for travel rewards collectors. First up, you can get up to $400 in travel and the first year free when you sign up for the TD First Class Travel Visa Infinite Card. I’ve used the card in the past but have never seen an offer this strong. Best to redeem these points for hotels on Expedia.

If you don’t meet the income requirements for the Visa Infinite version you can grab the TD Platinum Travel Visa Card. You’ll still get the first year free and up to $250 in travel rewards.

Finally, the best offer of the bunch is the TD Aeroplan Visa Infinite Privilege Card, which comes with a steep annual fee ($399) but offers a juicy 50,000 Aeroplan miles (25,000 miles after first purchase and another 25,000 miles when you spend $1,000 in the first three months).

Weekend Reading:

It’s been a while since the last U.S. recession (2007). Morgan Housel shares his thoughts on what lies ahead.

Squawkfox blogger Kerry Taylor looks at behavioural economics and how to rewire your brain to master money.

The Irrelevant Investor Michael Batnick explains the irrational behaviour of what happens when you win and lose.

Speaking of irrational behaviour, PWL Capital’s Ben Felix thinks one of the single biggest challenges for investors is understanding that dividends do not matter:

An interesting piece on why insurers write off your car rather than paying for the repair. It seems like new tech is to blame:

“We actually see more cars getting totalled than we have in the past because the cost to repair them is higher than it has been historically.”

Downsized: How a late-career job loss during prime earning years can derail retirement plans.

Are you the money person in your relationship? Here’s why that’s problematic.

On that subject, Mark Goodfield of the Blunt Bean Counter blog shares some advice to help bridge the financial literacy gap with your spouse.

Is your company Group RRSP any good? Here’s how to make the best of a bad plan.

Nick Magguilli says the difference between the natural world and the investment world is there are no laws, only tendencies.

Cut The Crap Investing blogger Dale Roberts takes a long look at annuities and reviews the excellent book, Pensionize Your Nest Egg.

Finally, this father was shocked to learn the incredibly high fees charged on his child’s RESP, which his “advisor” put into segregated funds with an MER of 3.61 percent. Criminal.

Have a great weekend, everyone!