Weekend Reading: Is It Time To Go Vegan Edition

By Robb Engen | October 30, 2021 |

Weekend Reading: Is It Time To Go Vegan Edition

Our family switched to a plant-based diet two years ago. We have our reasons – a dairy intolerance was the driving force but there’s also environmental concerns, the ethical treatment of animals, a healthier diet, etc. We’ve never looked at it from a financial perspective, mostly because we haven’t noticed much of a change in our grocery spending. Fresh fruit and vegetables are expensive, as are protein supplements.

But if you have noticed the items in your grocery cart are getting more and more expensive then maybe it’s time to re-think your regular diet of meat and dairy.

That seems to be happening already. Sales of beef, chicken, and pork are all down significantly this year as meat prices continue to rise and more plant protein options arrive on the scene. 

According to the Food Professor, Sylvain Charlebois, prices for milk, butter, and yogurt are expected to soar next year:

Everyone has their own shopping habits and preferences, so your basket of goods will likely vary from mine. If prices for gas, lumber, and meat are rising but you work from home, don’t plan on building a deck or fence, and eat a lot of plant-based proteins then you probably won’t feel the pain as much as a daily commuter who’s in the middle of a renovation and eats beef, chicken, and pork on the regular.

We’re not preachy vegans here to tell you to change your diet. You do you. But if concerns about your health, the environment, and the ethical treatment of animals haven’t persuaded you to eat more plants then perhaps the soaring cost of meat and dairy will.

If you want to add more plant-based meals to your life then a good “in-to” book for you to try is Mostly Plants: 100 Delicious Flexitarian Recipes from the Pollan Family. 

Their motto is, “Eat food, not too much, mostly plants.”

Jillian Harris and Tori Wesszer’s book, Fraiche Food, Full Hearts, is also worth a read.

Our biggest challenge with a plant-based diet is finding appropriate and healthy meal options at restaurants – especially when we travel. Also, living in southern Alberta, the plant-based selections at the grocery store are sparse at best (although the dedicated shelf space is getting bigger).

But you can absolutely make delicious meals with plant-based ingredients. We’ve come a long way from the sawdust veggie burgers of the past. 

Readers: Have you changed your diet at all to combat rising food prices? Let me know in the comments.

This Week’s Recap:

In my last post I reviewed The Rule of 30, an excellent new book by retirement expert Fred Vettese. 

We were grateful to receive an extra copy of the book to give away to a lucky reader who commented on the review. Congratulations to Jessica, who commented on October 20th at 10:45 p.m. I’ll be in touch this week to send you a free copy of The Rule of 30.

From the archives: The Misguided Beliefs of Financial Advisors.

Promo of the Week:

I’m still amazed how much cash Canadians have sitting around in their big bank chequing and/or savings account earning nothing. I get it, there’s comfort and safety in having your money with one of the big five or six banks. But there are so many other options to increase your interest rate by 100x or more so you are at least attempting to tread water with inflation.

My go-to option is EQ Bank’s Savings Plus Account, which pays 1.25% interest. EQ Bank is an online bank and an offshoot of Equitable Bank, which has been around since 1970. Deposits at EQ Bank are insured by CDIC for up to $100,000 per insured category, per depositor. 

I like EQ Bank because it pays an everyday high rate (within the top 3-5 of the market leaders at all times). I don’t want to bother moving my money around to different institutions chasing short-term interest rate promotions (looking at you, Tangerine).

Weekend Reading:

Our friends at Credit Card Genius share an incredible 17 easy ways to collect extra cash back.

“If you had just put ten thousand dollars into…” – Ben Carlson looks at the 10 most dangerous words in investing.

New York Times columnist Ron Lieber mansplains why women may be better investors than men.

The good news about retirement income? A lower starting withdrawal rate doesn’t guarantee you’ll have to live on less.

The Canadian Couch Potato Dan Bortolotti is back with a new book – It’s Time To Reboot Your Portfolio. I’ve pre-ordered a copy and will share my review later this year.

A great post and lesson from Millionaire Teacher Andrew Hallam, when speculation crashes.

Preet Banerjee offers a beginner’s explanation on the Evergrande crisis. This is the Chinese company that owes $300 billion to creditors:

Here’s Morgan Housel on why there’s rarely a time when the people who were right in hindsight didn’t sound a little crazy at one point.

Why high interest instalment loans are becoming increasingly more common among Canadians with low credit scores or short credit histories.

Des Odjick shares her personal story about how to financially prepare for a pet emergency.

The Evidence-Based Investor Robin Powell explains why the FAANG stocks have been so dominant.

Will your nest egg last if you retire today? Michael James shares how he thought about market returns when timing his own retirement.

Twitter went wild when its CEO Jack Dorsey tweeted that hyperinflation “is happening”. Pragmatic Capitalism author Cullen Roche explains why that is not the case at all.

The New Yorker revisits Tim Ferriss’s The 4 Hour Work Week, and why its message may have been uncannily prescient about today’s work-from-anywhere trend.

Finally, everything you want is out of stock or more expensive. Global’s Erica Alini explains what’s happening with our supply-chain woes.

Have a great weekend, everyone!

The Rule Of 30: Book Review

By Robb Engen | October 19, 2021 |

The Rule Of 30: Book Review And Giveaway

I’ve read a lot of personal finance books over the years. Most say some version of the same thing. Live below your means. Pay yourself first. Avoid debt like the plague. Invest your savings for the future. Rarely do I see a novel concept that gets me excited to share it far and wide. But that’s exactly what author Fred Vettese did with his latest book, The Rule of 30.

Mr. Vettese is a retirement expert, author of the best selling Retirement Income For Life, and a former chief actuary of Morneau Shepell. His retirement planning books are must-reads for Canadians in or approaching retirement. 

The Rule of 30 is aimed at a different generation of Canadians: those aged 30 to 45. The book follows a Wealthy Barber-esque fable of a young 30-something couple (Brett and Megan) and their neighbour Jim, who happens to be a retired actuary. Similar to The Wealthy Barber tale, Brett and Megan have a series of weekend discussions with Jim to figure out how to save for retirement.

What exactly is this magical rule of 30?

Easy: Save an amount equal to 30% of gross income, minus the amount you are paying towards a mortgage or rent, minus extraordinary short-term expenses like daycare costs.

The rule aims to strike a better balance between competing financial priorities. It also makes it easier to decide how much to set aside each year, and is more realistic and achievable than saving a flat percentage of pay, especially during the expensive childcare years.

This is all about consumption smoothing – not depriving oneself of a standard of living during the years of juggling competing financial goals. It backloads the high savings rate to later years when childcare expenses are long gone and the mortgage or rent payments make up a much smaller percentage of your gross income.

I love it! This brilliant yet simple rule is exactly what young Canadians need who are financially tapped out and feeling like they’re falling behind. They can’t do it all, so why strive to save 10-15% of your income for retirement while you live paycheque to paycheque?

Mr. Vettese says to follow the rule of 30 until you’re within 10 years of retirement. At that point, take stock of your retirement-readiness and adjust your savings percentage accordingly.

For the record, most people still cling to the arbitrary 10% savings rule.

What I like about the rule of 30 is that it acknowledges the fact that life is hard for young families. Saving too much at an early age can have negative consequences for your enjoyment of life. The rule of 30 gives young savers a break, but offers clear guidelines about how much to save when short-term extraordinary expenses ease up and income increases.

Again, the rule of 30 involves saving 30% a year for retirement, minus mortgage payments or rent, and minus extraordinary short-term, necessary expenses like daycare. 

It’s essentially a way to save until age 55, at which point a more precise calculation can be made for your required savings rate with help from a retirement calculator (or a fee-only financial planner).

Let’s see the rule of 30 in action.

Fake clients of mine named Ronnie and Lisa have a combined gross income of $166,666. The rule of 30 says they should save $50,000 (30%), less mortgage payments and childcare costs.

Their mortgage costs $2,300 per month, or $27,600 per year. They also have daycare expenses of $1,200 per month, or $14,400 per year.

This leaves Ronnie and Lisa with $8,000 per year to save for retirement. Astute readers will note that is just 4.8% of their gross income.

But the childcare costs won’t last forever. In five years those costs will be reduced to zero. At that time, with 2% annual salary increases, Ronnie and Lisa now earn a combined $184,000 per year. The rule of 30 says they should save $55,200 (30%), less mortgage payments and other extraordinary costs.

Their mortgage costs are still $2,300 per month, or $27,600 per year. They don’t have any other extraordinary costs.

This leaves Ronnie and Lisa with $27,600 per year to save for retirement. That’s now 15% of their gross income. Fantastic!

Ronnie and Lisa follow this path, increasing their savings rate as their income rises until eventually their mortgage is fully paid off. Let’s say they’re now earning a combined $225,000 gross income. The rule of 30 says they should save a whopping $67,500 for retirement (30%). And they can do this because their mortgage is paid off.

The beauty of the rule of 30 is all along the way Ronnie and Lisa can maintain a fairly smooth spending rate. There’s no period in which they are suffering financially. They give themselves a break on saving for retirement during their expensive childcare years, when the mortgage also makes up a larger percentage of their gross income and take-home pay. Then they ramp up their savings as their income increases and extraordinary costs disappear. 

Dangers of The Rule of 30

Mr. Vettese acknowledges the dangers of this variable approach to saving for retirement. What else can be classified as an extraordinary short-term expense? A car loan? A home renovation loan? The author says there will always be expenses that fall into a grey area, and whether to include them as an offset to retirement savings is entirely up to you. But there’s no incentive for you to ‘game’ the system since you’re only cheating yourself at the end of the day.

Another danger is the risk of job loss or health issues that prevent you from earning income in your later years. If you’ve backloaded savings too much then there’s a good chance you won’t be prepared for retirement.

Mr. Vettese suggests paying off your mortgage five years before retirement (staying within the rule of 30, that would mean increasing the mortgage payments and reducing your savings rate). He also suggests discounting your projected income in your final working years by about 30% to hedge against one spouse losing their job.

Other Retirement Savings Enhancements

Besides saving 30% of gross pay, minus mortgage or rent, minus extraordinary short-term expenses, Mr. Vettese offers plenty of other insights in The Rule of 30. 

He suggests investing in stocks and bonds instead of real estate. While buying condos or other real estate properties and renting them out has been a popular alternative to investing, Mr. Vettese says that as long as you have contribution room in an RRSP or TFSA, the use of tax-assisted investment vehicles is a better bet.

He also says to use a target-date-fund approach to set your asset mix, rather than using a static 60/40 balanced portfolio throughout your entire investing lifetime. That means starting with a high equity weighting (up to 100%) in your portfolio when you’re young, and then gradually increasing the bond weighting to an “ultimate-mix” of 50/50 just before retirement. Mr. Vettese says this approach has been more effective than a 60/40 asset mix over 30-year periods.

How Much To Save For Retirement?

I laughed when I read the opening chapter about how much you should save. Mr. Vettese was scouring books and the internet to find a source promoting a specific savings rate. None could be found. Then he wrote this:

My last find was an online article by Global News, which reported that “you may have heard you should be saving 10-15 percent of your pre-tax income”. This was tantalizing, since I wasn’t sure I had heard that, though it did sound vaguely familiar. Alas, this little nugget turned out to be little more than hearsay. The article didn’t cite the source of this 10-15 percent range or attempt to confirm that it is indeed correct. It smacked of urban legend.

The reason I laughed is because this article sounded familiar to me and indeed I was interviewed for it by Global’s Erica Alini. Hey, I made it into the book – sort of!

Mr. Vettese attempts to offer an answer to the question of how much to save for retirement with the rule of 30. He acknowledges that in reality, no one percentage can be certain to carry most savers across the finish line safely without causing undue hardship along the way. 

He says if he absolutely had to provide a one-size-fits-all flat percentage of pay, he would make it 12% with the caveat that you might have to change that percentage as you get closer to retirement. Expressed differently, he would suggest saving 5% of income in your 30s, 15% in your 40s, and 25% in your 50s. This alternative represents a rough approximation of the rule of 30 (and lines up neatly with my Ronnie and Lisa example above).

Time For a Giveaway!

The Rule of 30 is a brand new book (released today!) by retirement expert and former chief actuary Fred Vettese. It offers an absolutely brilliant solution to the burning question of how much to save for retirement throughout your working years.

In addition to the rule of 30 and other retirement savings insights, Mr. Vettese shares his insightful wisdom about why the future will be different with a look at inflation, wage increases, interest rates, expected returns for bonds, and the wildly unpredictable stock market.

In short, this is book is an absolute game-changer for young Canadians and offers a fresh perspective on saving and investing for retirement. If young Canadians read only one book about personal finance, make sure it’s The Rule of 30.

I was fortunate enough to receive an early edition of The Rule of 30, plus an extra copy to giveaway to a lucky reader. You can enter to win that copy by leaving a comment below sharing your current savings rate (if you’re in the accumulating years) or past savings rate (if you’re already retired). Or, feel free to leave any comment in general about the rule of 30.

This contest will be open until Friday October 22nd at 8 p.m. EST. I’ll announce the winner in the next edition of Weekend Reading.

Good luck! 

Weekend Reading: Giving With A Warm Hand Edition

By Robb Engen | October 17, 2021 |

Weekend Reading: Giving With A Warm Hand Edition

CIBC’s Deputy Chief Economist Benjamin Tal raised eyebrows this week when he said that one in five first-time home buyers is getting help from their parents with a gift, on average, of $150,000. Not only are more first-time buyers getting financial aid from the bank of mom and dad (up from 15.5% in 2015) but the dollar amount has more than doubled (up from $71,000 in 2015).

While the main story here is about rising home prices and growing inequality, I wanted to address the topic of generational wealth transfer. According to a J.D. Power study, as much as $700-billion in financial assets is set to be transferred to the next generation in Canada by 2026.

Like it or not, many retirees have more than enough assets to live their desired lifestyle and leave a significant estate to their beneficiaries. Why not incorporate some planned monetary gifts to your children or to a favourite charity during your lifetime?

Assume you live a long and healthy life to age 95 or so. That’s not as far-fetched as it sounds. FP Canada’s assumption guidelines suggest a 65-year-old male today has a 50% chance of living to age 89 and a 25% chance of living to age 94. A 65-year-old female has a 50% chance of living to 94 and a 25% chance of living to 96.

Now assume you have more than enough assets to meet your spending needs for 30 years, plus you plan to remain in your home. 

Would you prefer to leave a large inheritance to your children at age 95, or give them smaller and potentially more meaningful amounts at key milestones such as buying a first home, starting a business, paying for post-secondary or an advanced degree, or filling up the grandkids’ RESPs?

When I discuss the idea of giving with a warm hand with my clients there’s often resistance because of a fear of spoiling their kids. They often see financial struggles as a rite of passage, as if living with four roommates in a rundown two-bedroom apartment while you work part-time to pay your way through school is the way to build strong character.

But you can give your young adult children a financial leg up without turning them into spoiled and entitled brats. 

It’s about acknowledging that your kids are coming of age in a different world where affordable housing and education, defined benefit pensions, and company benefits have all but disappeared. We’re living in a gig economy with temporary contracts, no benefits, and housing and education costs that are spiralling out of control.

Your 20s and 30s are filled with so many competing financial priorities. Why not, if you have the means to do so, help your kids through this period so they can get started on the right foot?

This doesn’t mean they’re financially tethered to you. You’re not paying their cell phone bill and making car payments when they’ve left the nest. But smart and strategic monetary gifts at appropriate life milestones can help your kids through what’s becoming an increasingly difficult financial environment.

Of course, everyone needs to put on their own oxygen mask first before assisting others. Make sure your own retirement needs are met before making large financial commitments to your kids. That means not dipping into your HELOC or heaven-forbid your own retirement savings to give your kids a down payment gift.

I’d love to hear your thoughts on giving with a warm hand versus leaving a large estate behind. Let me know in the comments.

This Week’s Recap:

Author Mike Drak finished his excellent three part series on retirement lifestyle design by taking us from thought to action.

I’ll be making my MoneySense debut shortly with an article on growth investing. I’ll share that along with a fairly regular MoneySense column exploring other investing topics.

Promo of the Week:

The American Express Cobalt Card has long been considered the top overall rewards credit card in Canada. Cardholders get 5x points on groceries, dining, and food delivery, plus 2x points on travel, transit, and gas. 

The best part of the Cobalt card, in my opinion, is the flexible points redemption. You can use your points to pay for almost any purchase you make with your card, or transfer your points to other programs like Aeroplan, Avios, and Marriott Bonvoy.

Sign up for the Cobalt card today and you’ll earn 2,500 bonus points for every month in which you spend $500 (up to 30,000 points in the first year), plus a Welcome Bonus of 20,000 Membership Rewards points when you spend $3,000 on your card in the first three months.

Weekend Reading:

Can you buy bitcoin with a credit card? Our friends at Credit Card Genius look at the pros, cons, and pitfalls to avoid.

CBC Marketplace caught two real estate agents on hidden camera breaking the law and steering buyers away from low-commission homes.

A good rebuttal to the bogus Royal Lepage “study” that showed how buying a home is actually cheaper than renting. It’s not even close:

“People are stretched thin both by the actual monthly outlay for ownership versus renting of similar dwellings, plus the gargantuan size of down payments required to even get to the position of having a large mortgage.”

You might be able to hedge your rising heating bill before this winter by locking into a fixed rate for your household energy needs. I did this thanks to a nudge from U of C economics professor Blake Shaffer:

Here’s Nick Maggiulli from Of Dollars and Data on why it’s never too late to change.

Millionaire Teacher Andrew Hallam answers five common questions people ask him about investing.

Frugal Trader from Million Dollar Journey gives some excellent advice on how to become a millionaire.

Finally, here’s former Vanguard CEO Jack Brennan offers three tried-and-true wealth building tips in this Acorns interview.

Enjoy the rest of your weekend, everyone!

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