Friday, 23 January 2015

Financial Facelifts, Soundbites, and Showing Your Work

As much as I love recording Because Money with my good friends Jackson Middleton and Robb Engen, and getting to shoot the breeze with our knock-out roster of guests, I come away from each episode regretting that I didn't get to say just this one more thing. (And that I waved my hands around too much. Again.)

In our latest episode, we welcomed Alexandra Macqueen to talk generally about the thousand-word financial makeovers that run in nearly every Canadian newspaper, and specifically about the #EricandIlsa debacle that ran in the Globe and Mail last weekend. The video, transcript. and links to the relevant sites and articles are up on for your viewing pleasure.

Here's a point that I wanted to make and didn't quite get to: most of the value in a financial plan (or facelift, or makeover, or what-have-you) is in showing your work, not in the answers themselves. That is, the fact that recommendations are made for you is equally - if not more - important than the fact that recommendations are made at all.

All of the information you'd get in a plan to build your retirement income, pay off your debts, control your spending, decide between renting and buying, take a lifetime pension or the commuted value, or anything else is out there already: online, in a book, or in a research journal. But because it's not specific to you, it is therefore is not as clear or motivating as a plan that addresses your situation directly and in detail.

Let me give you an example: Doug Runchey is a Canada Pension Plan expert who writes very detailed and informative posts over at Retire Happy.The relevant information to calculate your own pension amount, or the breakeven point to apply for benefits depending on your life-expectancy, or how the Child Rearing Drop Out provision works is all right there in the post, and yet after each one is published there quickly appears 93 comments that are all variations on the question "but what about me and my particular situation?"

Every financial facelift says essentially the same thing: smooth your lifetime consumption and taxes by saving enough in the right kind of registered account, spend less than you earn, think about which goals are the most important and which ones you can move around, make sure you've got appropriate insurance, etc.

Is it the right advice? Sure. Is it worth repeating? Absolutely. But unless it's advice for you, addressing your bank balance, your income, your behavioural blind spots, and the values that make you get out of bed every morning, it's the financial health equivalent of  "eat more vegetables, fewer processed foods, and exercise more" repeated over and over again in slightly different words.

Tuesday, 13 January 2015

What I Want For You In 2015

This is the year.

I want so many things for you this year: I want you to have more than you need and to enjoy the luxury of spending within your means, on things that are meaningful to you. I want you to have fulfilling employment, self-employment, or no employment. I want your income to be steady, predictable, and abundant.

I want those things for you even though this might be the year of illness, job loss, costly emergencies, and plain old doing what you have to do because you have to do it.

Some of the things I want for you might be out of your reach: your income might come in fits and starts. Your boss might be miserable and your co-workers more so. Your expenses might exceed your income.

You might (understandably) be asking yourself what on earth I'm getting so excited about if there's a good chance that 2015 might not be better than last year and might actually be worse.

So when I say "this is the year", I don't want to follow it with empty promises of abundance and the unspoken implication "but only if you work with a financial planner". Nope, 2015 isn't "the year you hire a financial planner".

2015 is the year of clarity.

If that sounds a little womp-wah to you, then I'm sorry. We're not reinventing the wheel here. But let me submit to you that the pursuit of clarity is under-rated.

How would your life be better if you were absolutely clear about what you want your life to look like, the resources you have or will have at your disposal, and the obstacles that you'll have to get over, around, or through to make it happen? 

Would knowing how you're invested make it easier to make decisions about the uncertain future? Would having a clear debt-free date encourage you to keep on keeping on? Would a precise knowledge of how you spend help you understand why you spend and when to cut back (or spend more)?

I submit to you that it would. At the risk of really oversimplifying your complicated life, understanding where you are now is the only way you can make plans to get to where you want to go. Clarity about your direction is the only sure defense against getting lost when bad news spins you one way and good news spins you the other.

One thing to understand about the pursuit of clarity is that it's not a once and done activity. Life changes. Goals change. People change. My husband and I have been married for fourteen years, and I don't think there were two in a row that were the same in terms of jobs, homes, cities, or plans.

My hope for you this year is that - no matter what your circumstances - you take the time to get really, really clear about what those circumstances actually are, and plan to repeat the process when they change.


If this all sounds a little hippy-dippy, pie-in-the-sky for you, then here are some practical ways to get cracking on clarity:

If you have no idea how you spend your money:
Pull out or download your bank and credit card statements, and add up everything you earned and everything you spent last year.

If you have no idea what you're invested in:
Make friends with Morningstar or Globefund. Request the fund fact sheets from your financial advisor. Check out this interactive primer from the Canadian Securities Administrators and commit to looking up anything you don't understand.

If you have no idea when you'll be done paying off your credit card, loan, line of credit, or mortgage:
Use this calculator from Get Smarter About Money and figure out when each of your debts will be gone.

If you know all this stuff already, but don't have any idea what it all means for your real, everyday life:
Start reading, listening, and thinking. The Wealthy Barber Returns. The Value of Simple. The Because Money podcast. This subreddit. Happy Money. MoneySense magazine. Depending on your position in life, your interests, and the amount of time you have, there's a book, blog, magazine, or podcast out there for you. Probably more than one.

Friday, 12 December 2014

The Secret to a Successful Financial Plan

Let's revisit the first part of a post a few months ago: 

Fill in the Blank: I Don't Want to Spend Money On...

When you think about all the things you hate paying for, it's easy to fall into the negativity trap. So many of those things seem well out of our control, don't they? Car insurance just isn't one of those things you can up and stop paying for. Neither is that mortgage payment.

So I want to be very clear about why this is a valuable way to spend some of your time, because listen: this isn't an "I'll be happy when..." exercise. Moping through your life telling yourself that all you need is a paid off house, or kids who finally pay their own way, or X number of dollars in your savings account to be happy is a loser's game.

I have learned the secret to a successful financial plan, and it's this: intentional contentment.

First: contentment isn't a passive, let's-fold-our-hands-in-our-laps-and-act-happy-about-everything-that-happens-to-us state of mindlessness. It's an active attitude of "we can do hard things because hard things are worth doing". It's difficult to cultivate and maintain in the face of life's many disappointments, but although it sometimes resembles giving up and submitting to the status quo (from the outside, at least), it's a conscious, mindful decision that most people have to make every single day in the face of (sometimes) incredibly hard realities.

There's an aura of perceived failure around someone who isn't in a position to make any big changes in a life that looks pretty unfulfilling from the outside, isn't there? A lot of the rhetoric around poverty seems inspired by the "you should be doing something to make your life better" success mindset we as a society have idolized for more than a century.

But contentment - as unfashionable as it sounds - is actually the only consistent key to a successful financial plan. Because the truth is, a financial plan isn't really a plan at all, although it shares many of the same characteristics like action items, measurable goals, and policy statements. You and I both know that your formal financial plan could expire the day after you read it if you lose your job or your house burns down or one of your kids gets really sick. This year's savings might fall by the wayside. You might end up further away from your debt-free date than you started.

Contentment is the opposite of fear and greed and restlessness. It's the quality that allows you to look around your life, identify the things you're grateful for, those things from which you can extract the most joy at the least cost (and we're not just talking money), and consciously choose to orient your life around doing or having more of those things. If how you spend your money every day is your most important financial characteristic, shouldn't you be content with it? If you're not content, why not? What can you do to change your circumstances or - if you can't, or if change will be a long time coming - what can you do to change your attitude about your circumstances?

Combing through your expenses and identifying the ones you hate paying for is not the opposite of cultivating contentment. It's the first step in a series of decisions that smart people make. Getting very, very clear about you don't like about your current situation, defining the direction you'd like to travel in to get closer to the things you do like, and then creating systems to help you get there? That's real financial planning. The rest of it is just math and details.

A strong set of contentment muscles are what gives you the energy to be flexible when life happens. Someone practiced in the art of finding happiness and fulfillment wherever she happens to find herself is already mostly prepared to adjust her spending downward in the face of post-retirement market declines, or defer the much-desired house because she's just not earning enough as soon as she thought she would to make it a wise purchase.

Listen, contentment in your direction is what gets you to your goal. A goal is a real, measurable thing: start my own profitable business by the age of 34. Pay off my mortgage by the age of 48. Save enough to live happily off of my investments and only work if I want to by the age of 57. Those are goals. They can move.

A direction, however, is a total orientation of your life towards reaching those goals. It's what you do the day after you read your plan, and the systems you put in place to get and keep you moving towards your goals, whatever those may be: planning meals within a pre-determined weekly food allowance so you can save for a house, for example, or learning how to code in your spare time so you can increase your salary or start a business, or taking public transit so you save your car expenses towards financial independence instead.

The daily practices of a life with direction can either be onerous, and chafe so much that you give up or grumble your way through a miserable life, or you can settle into them with an attitude of contentment and get happy on the way to your goals, not just when you eventually reach them.

Your choice.

Tuesday, 18 November 2014

How (and Why) to Choose Between NestWealth, Wealthsimple, WealthBar, ShareOwner, and Steadyhand

The point of this post: Each online investment management company has a slightly different fee structure and value proposition. Calculating their relative cost for your circumstances will let you compare their relative value depending on the kind of service you want to pay for. (Includes a link to the Canadian Online Investment Advisor Fee Calculator.)

Canadian investors have traditionally had three choices for their savings:
  1. Open up a self-directed brokerage account and invest directly in stocks, bonds, ETFs or mutual funds.
  2. Go to the bank or invite that mutual fund/insurance salesperson you met while you were dropping your kids off at school over to your house, who will sell you mutual or segregated funds that cost in excess of 2% per year and pay her a commission based on the kind of funds they are and how expensive they are for you to own.
  3. Find a fee-only investment manager close enough to you to do business with, provided you have enough money (somewhere in the $500,000 to $1,000,000 range), and feel that paying 1-1.5% annually on that money is worth the management and financial planning advice you'll get.

As a financial planner and occasional personal finance blogger, it's really very tempting to look at each of these companies and declare a winner based on cost alone, or the combination (or lack) of services I value most, or what I think the average investor should want from portfolio construction. But the reality is that each of us falls somewhere along parallel spectrums: an ability spectrum, that moves from "comfortable with DIY" to "needs full-service advice", and an asset spectrum that starts at "small nest egg" and runs all the way to "significantly large pile of money." In short, you and I and the neighbour across the road might all need more or less help with more or less money, and while one provider might be a perfect fit for me, another might be just the ticket for you.

I unequivocally believe that - provided you have the relatively small amount of time necessary to set it up and maintain it and the relatively large amount of intestinal fortitude to stick with your plan no matter what the markets are doing - a self-directed, simple Couch Potato portfolio of low-cost, index ETFs is the best investment strategy for most Canadians. 

A reasonably intelligent person should be able to follow an able guide like John Robertson's soon-to-be-released The Value of Simple and do just fine, sometimes in combination with the service of an advice-only planner like me or most of the people on this list from MoneySense Magazine, or possibly by paying for the DIY Investor Service offered by PWL Capital to get set up.

But there are valid reasons to want someone else to manage your investments on an ongoing basis for you. Sound asset allocation, rebalancing across multiple accounts, and tax-efficiency can be worth paying for if you're not going to be up to bothering with it yourself, and the value you get from having a calm sounding board when markets (or market noise) get crazy might actually be priceless, if - like almost all of us - you're tempted to get out of the market when you shouldn't and question your plan just when you should be sticking to it dispassionately.


I want to be really, really clear about costs here: the lower you can get your annual investing costs, the better off you'll be. This can't be overstated. Seemingly small amounts add up over a lifetime of investing to very large amounts of your savings (see this post from Michael James on Money for a good set of charts). However, the question shouldn't be "what's the lowest cost?", it should be "what's the lowest cost that I will stick with?"

I also want to be clear that "investment management" and "financial planning" are not the same thing: financial planning is the context, the "what do I want my money to do for me", and investment management is the tool, the "and this is how my money is going to do it" - one of many tools, and (often) not the most important one.


If you're seriously looking at what the online advisors are offering (and you should be), I'd invite you to use the Canadian Online Investment Option Calculator** as a starting point to calculate the relative cost of each service. With that information, you can compare the different services based on where you fall on the "how much money do you have?" spectrum. That's the objective part of the choice.

The subjective part of the choice (although each provider would probably argue that it's not subjective at all) is all the rest of the information that you should spend some time gathering, preferably by calling each provider available in your province or territory, telling them where you fall on the "needs little advice" to "needs lots of advice" spectrum, and simply asking:
  • how the portfolios are constructed
  • how often they're rebalanced
  • what institution is the custodian for your money
  • whether financial planning is included in the fee, if it's purely investment management, or if all you're paying for is access to the model portfolio with no other advice
  • whether your money is managed across accounts as a single portfolio or whether each account is managed separately
  • how simple it is to give them your money and get on with your life, and how simple and jargon-free the statements, online dashboard, and any ongoing communications are
  • how often you're able to talk to someone if you need to get persuaded off the ledge while the markets go crazy
  • how well-developed their retirement income and decumulation strategies are
Again, the answers to these questions and the results of the calculator should function as a guide to your decision. The decision itself is yours, and might be based on characteristics that I haven't even mentioned. 

If you're investing at the bank or with a salesperson that comes to your door, and have decided against investing on your own, write this down on a piece of paper right now:

"I will give myself until (date - no more than a month from now) to investigate the different online invesment options, and then I will decide on one and start the transfer process"

If you're investing with an asset manager who's charging you a percent of your total assets to manage them, and have decided against investing on your own, write this down on a piece of paper right now:

"I will give myself until (date - no more than a month from now) to investigate the different online investment options, compare the service they offer to the service I'm actually getting from my asset manager, and then I will decide whether to continue with my asset manager, negotiate a lower fee, or start the transfer process"

Or you can make a decision by virtue of not taking any action at all, and continue to pay for an Advisor Six-Pack, pay a high price for services you're not actually receiving, and be more susceptible to fear, error, bias, and fund-of-the-month-itis.


*Not to be confused with their build your own portfolio service, which - for the purposes of this comparison - isn't a contender.

**I have to thank John Robertson, blogger behind and author of The Value of Simple for his invaluable assistance with the vagaries of conditional formatting and =if formulas, as well as Randy Cass of NestWealth, Tea Nicola of WealthBar, Michael Katchen of Wealthsimple, Bruce Seago of ShareOwner, and David Toyne of Steadyhand for their remarkably candid responses to my very wordy emails and many, many questions. Any errors in either the calculator or the information are purely mine.

Friday, 24 October 2014

Boomer and Echo | Budgets, Cash Flow Plans, and Spending. Yawn.

I know, I know. Budgets just sound like Remedial Personal Finance, don’t they? Everyone knows you’re supposed to budget, so what’s the point of another 800 words or so on the topic, right?

There’s even a vague feeling that once you reach a certain point - either of knowledge, or income, or net worth - budgeting is kind of beneath you. It’s so remedial that the cool kids don’t do it, and I’m here to look over my librarian glasses and tell you that the cool kids are wrong.

But first, in true librarian fashion, let’s define the terms. When I talk about budgeting, or planned spending, or cash flow, I’m really talking about three separate but related things: tracking your transactions, clarifying your limits, and projecting your trends. Not to get too timey-wimey on you, but that’s the past, the present, and the future, all rolled up in one neat little concept. Nice.

Read the rest at Boomer and Echo

Thursday, 25 September 2014

Because Money Episode 22 | Ellen Roseman

We had the privilege of hosting Ellen Roseman on Because Money this month, and spent a great half-hour talking about how how consumers can protect themselves and fight back when they've been wronged, as well as her involvement with FAIR Canada as an advocate for better investor protection.

The full transcript can be found here.

Thursday, 11 September 2014

Fill in the Blank (Part One): I Don't Want to Spend Money On...

At first glance, it sounds like an incredibly stupid exercise, I grant you.

Um, I don't want to spend money on insurance, on my mortgage payment, on those never-ending, teeny-tiny little school activity requests that dribble home every other day, on fixing my car (again), on buying new shoes for kids whose feet won't.stop.growing, or on the property tax shortfall notice I got last week. And that's just for starters.

Realistically, at least for most of us - a lot of the things we don't want to spend money on won't go away just because we decide we don't want to pay for them anymore. Ten months out of the year, my kids need shoes, and - last time I checked, anyway - two-, four-, and six-year olds aren't allowed to get jobs.

The point of digging down into the things you want to say "no" (or even "hell, no") to - like loan payments or groceries that you waste or tv you don't watch - isn't so you can dwell on how much you hate paying for those things. That's just the beginning.

Getting really, really clear about the things you actively dislike or don't care enough to bother spending money on is only the first step. The next step is heady, fulfilling stuff: getting really, really clear on those things you truly DO want to spend money on.

Start working on that list of things you don't want to spend money on. Next post will be all about the YES.

I've had a chance to do some work with Heather Thorkelson lately. She's a small business strategist (among so many other things) working with entrepreneurs to align their work with their dream of work, whatever (or wherever) that might be. I admire her an awful lot, and she wrote something a few weeks ago about this very topic of saying no so we can say yes that she said I could share with you:


Beyond the “find my passion” stage: how to find direction in an unconventional market

I’m going to be straight up with you – I think everyone’s gotten a little carried away with this whole “find my passion” business. First off, it’s a bloody tall order that leaves most chasing their tails, reading every self-help “find yourself” book out there for years and still not coming to a conclusion.

I’ve got a better idea. Ideas to be exact. It’s an approach that worked for me, and many of my clients. Heck I even heard Oprah talking about Step One the other day so I must be on to something!

Step One: Get really clear on what you DON’T want to do.

You’d be surprised at how powerful of an exercise this is. My answers when I asked myself this back in 2010 included things like;

1) I don’t want to fill out useless spreadsheets for other people to prove that I was ‘working’ but that no one would ever actually read. (Hi, can I please have those three hours of my life back?)

2) I don’t ever want to work with people I don’t like.

3) I don’t want to ever have to ask for permission for my measly three weeks off a year where I can go and really LIVE.

4) I don’t want to do work that has no meaning for me personally. And if it does lose it’s meaning, I want the built-in flexibility to shift gears and move toward greater service and fulfillment.

Savvy? Pause here and go answer that question yourself.

Step Two: Figure out what makes you happy.

For real. Not the fleeting stuff like shoe shopping.

What gives you a profound sense of happiness and brings you right into the NOW every time you experience it? Helping people? Being in your ‘zone of genius’? Public speaking?

Also ask yourself what kind of humans light you up? (HINT: You should be working with them!)

I know this is a lot harder than it sounds. My clients often struggle with this, but it’s some of the most important self-awareness work you’ll ever do. So sit down with a pen and paper, activate the brain cells, and get scribbling, love. If you’re really having trouble, think about what you’d want people to say about you at a speech in your honour ten years from now.

Step Three: Time is your most valuable asset. How do you want to spend it?

This may seem too pie-in-the-sky for many of you, but honestly, when I started building my workday around how I truly wanted to spend my time, my happiness increased ten-fold.

Be honest here. How do you like to spend your time? In nature? On a surfboard? Snuggling with your dog? Making out with your lover? Traveling on trains? You need to build your livelihood in a way that accommodates for that. It may not be entirely possible in the beginning, but when you know how you want to spend your time you have something tangible to work towards.

Forget that new-agey “passion” hoo-ha. The reality is you probably have many. And therefore many viable options. Figure out how you want to live and the options will become clearer.

Yours truly,
The pharmaceutical rep who became a life coach who then became a web designer who then because a business strategist/polar expedition guide in the process of figuring out a formula that would work for me.

(PS: Every step was awesome, every step brought me income, and every step helped me figure out what I truly wanted in this stage of my life. The road may not be straight, but it promises to be interesting.)


You can find Heather at her website Republic of Freedom, on Twitter, or on Google+. She's currently working on The Leap Guide: Everything you need to know about building the livelihood of your dreams through freelancing.

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Sandi Martin is a fee only financial planner who specializes in business and personal budgeting, investment advice, and debt management strategies.
Telephone, internet, evening, and weekend appointments are available to clients across Canada.