Welcome to our mid-summer (July-August) letter. I’m thrilled getting glimpses of how you are enjoying summer — grateful for your notes, phone calls, FB pictures, even in person. In fact YOU have contributed much for this mid-summer edition: (i) question from you after the June letter; (ii) a radical graphic on housing prices you shared with me, (iii) your responses in two of our survey questions on saving and budgeting, also easing the migraine of debt. All that’s from you so I’ll just put this together for easy reading and add some insights where I can.
(Sorry the “graph” pictures below are fuzzy . Be sure to click on a brief video link in the section on Housing Prices.)
Question on Impulse Buying – in favour of Bigger Rewards.
I received this question after our June letter. If you thought impulse buying was unique to younger generations you haven’t seen how a homebound person at any age can shop, Covid or not. Someone you know might appreciate if you share this with them.
Impulse can be a child with $20 birthday money saying to a store clerk: “is there anything I can buy with this?” Or you’re scrolling through social media and an advert catches your eye: click and you’ll soon find more like this until you put on the brakes or run out of money.
Consider a few tips in designing your anti-impulse strategy: call me if you’d like more help:
- Were you already planning to buy this? Does it fit a specific need you had in mind?
- Are you buying to keep up with other people? … that’s a sad and dangerous habit.
- What’s it costing? Peace of mind, fear of unknown, sacrificing bigger dreams?
- Would solving a different (emotional?) need give more happiness than this purchase?
- How can you reward yourself, something bigger/better, for delaying this purchase?
- Saving $10/day could be $50,000 in ten years: superb reward for a safe daily habit.
- Have you tried a 30-day “no spending” challenge? Some keep it going for 90 days!
- Was there a time your bucket was truly empty? How did you cope? What did you learn?
- Picture a big bold colourful reward instead of today’s tiny trinket: choose bigger!
- Daily habits: escaping impulse “today” gets easier and happier with every day.
- BONUS: have fun each week or month with 20% of what you save; invest the rest.
- Working two jobs plus university and #1 child in diapers, I let myself stop at a vending machine once a month for a chocolate bar. It was a good habit as we needed every dollar, especially in my first graduate year when we needed two months’ assistance for rent and food.
- Young family while everything has been shut down for covid: parents working from home; childcare, sports, and travel all canceled. They’ve used this to make an astonishing boost to their investments.
- On the other hand, someone forced into retirement told me they had always spent their income like it would never end — but the money train is gone and renting an apartment on CPP/OAS offers no extra pleasures.
- Or these tidbits which show we don’t suggest saving absurdly for no reason. A mid-70s couple spoke of counting their nickels and I suggested watching their twenties instead. Another worried over the cost of foreign travel until I showed it was 1% of their net wealth and how quickly we’d make it back again – so they relaxed and are envisioning new trips to enjoy once the world has safely re-opened.
This fits with our Survey questions below. As we’ve only touched the surface here let’s discuss further one-on-one. Be sure to reward yourself well in ways that are both meaningful and memorable. You can avoid impulse because you are going to feel so much better for it. Many happier rewards will come as you take care of your money.
House Prices – Have You Seen THIS?
We all know house prices have gone through the roof. See the real impact by clicking on THIS LINK. If the link fails ask me for a video file (too large to enclose here). It’s amazing to watch different countries’ house-prices growing, falling, shifting over the years. Canada won by a light-year during this period. Pause though on some of the lessons and what this could mean for you or your family.
- Younger generations are taking quite a leap in buying new homes today. Housing values are sky-high due to lowest-ever interest rates, lack of new-builds, economic growth and immigration, also a belief that what goes up will keep going up. But watch how this link illustrates how U.S. and other countries’ home prices changed over time. Yes home values can pause or even fall 10% or even 25% (like 1987-1992). People getting a first or second home can do well if they avoid over-borrowing. People choosing to rent while investing vigorously can build a nifty nest egg to buy when interest rates pop the bubble on house costs. Either approach can make sense, so reach me if you want help sorting how this can fit your personal needs and resources, and how you decide what is right for you.
- Many seniors/boomers are living in an absolute gold mine. Some have no interest in selling because it’s their home, their happiness, their way of life … and “so what if property values go back to January or last year”. It’s still a huge gain and will serve them well. Others have decided to downsize and invest for higher income and growth, and they too come out ahead with their decision. Realize you cannot hit the top of the market: a couple sold in 2003 expecting housing would collapse and they’ve since been paying rent (missing all the growth since then). So if you and I are talking about such decisions we’ll include the personal value you enjoy by living in your home and how it fits your daily life, or other options to upgrade or downsize if it will help you enjoy life more.
- There’s never been a harder time to outbid everyone else who wants the house you have your eye on. We can talk about your own situation or how to help friends or family making this decision, yet beware: (i) if you skip the property inspection you may only have a hole in the ground. (ii) If you get a mega-mortgage today and interest rates rise from today’s 2% to 5% you may be losing the keys like it was 1982/1983 again. (iii) Canada has the strongest home-ownership in the world, where other countries include far more rentals: it’s no scandal to rent while saving a bigger nest egg for your future home. (iv) Chronic financial stress is a major cause of family break-down, so to the best of your ability, focus on what builds your greatest happiness together, and everything can find it’s place in time.
Survey Q#2: Confident to Save or Budget.
This follows our May & June issues with the Lifestyle and Retirement Poll. What first strikes me here is that our clients are vastly ahead of the general population in confidence and in their personal results. Pat yourself on the back, first of all because you’ve decided money is properly important to you, and because you have a financial plan (which most people are missing). 74% of you report doing well. With your own discipline, saving year by year, you are confident to reach results that are important to you. 26% are not yet feeling confident but I assure you all, following the steps to financial health and freedom will pay you well. Two thoughts here, and let’s discuss one-on-one:
- Imagine living on 80% of your income, saving the rest as your nest egg. Or even saving 5-10% and gradually shift more income to speed your savings. Funny thing, people thought they’d be fine if they could just earn 20% more but what happened was they raised their spending and kept getting twisted up in debt. SO, aim for a spot where you spend less than your take-home, and save that difference. Future results will astonish you. You might keep a car longer, wear clothes longer, adjust your food bill, even reduce your carbon footprint, and while spending less you can enjoy life as much or more than before.
- Budgeting may sound a bit scary at first. Yes if one spouse is doing it while the other protests, that doesn’t end well. There are ways to budget in hindsight, foresight, or automatic systems – we can help you choose a way that works best for you. We can find how money has been escaping your grasp – so now it will be growing for you. How much happier it is when you’re treating yourself for success, seeing your debt shrink and savings expand.
This is terrific news for you; as three-quarters of our responses are confident in this area (three-times the national average) you can get here too. ALL our clients can come to feel so confident. As we build a plan and pathway for each client you can be absolutely confident your future is going to be stronger. That’s our whole focus – assuring and securing the life you want to be enjoying.
Survey Q#3: Relieving Migraine of Debt.
This clearly connects with everything above and we’ve touched some solutions already. 79% replied they are debt-free or using debt in a tax-deductible way to accelerate wealth. This shows — following the path will yield strong results and peace of mind.
But one out of five are severely worried, carrying an endless grind and burden of debt. It isn’t healthy to waken every day distressed whether you’ll get out of that hole. Truth is, 70% of North Americans feel this way. Good news is, every study has confirmed that people with a certified financial plan will escape debt faster and be free of constant worry even sooner.
A couple of stories offer a glimpse of more freedom in your future:
- Imagine a young family, big mortgage, high costs … even gifts from “mom and dad” leave them all too close to the financial cliff. Fact is, I was there at times, and most of us have been there. We got through because income rises, children grow, expenses shift, mortgage renewals may be well timed, and debts shrink as you follow the plan. I remind you as I’ve said before, people’s wealth can grow at an astonishing rate in the 10-15 years before retirement, compensating for earlier years of nail-biting. Five years from now – ten and fifteen years from now – you’ll see that your rewards just kept growing all the way. You’ll be in the happy 79% and no longer in the stressed 21%.
- A different story arose being downsized to a job paying half as much, and they were fretting how to ever clear the mortgage before retiring. Many seniors carry debt today. As these people were renegotiating their mortgage for lower payments they couldn’t understand how they’d ever pay it off before retiring. I replied, “I want you to imagine at the age of 70 you’re still paying $350 a month on a mortgage to keep living in your home – half of some peoples’ condo fees!” The penny dropped, he said “Oh I get it!” They revamped their mortgage, cut their stress, and felt the freedom to enjoy their life again.
Wherever you are, whatever the starting point, there’s hope. Usually we’re helping eliminate debt so you’re getting closer to the life you want. Other times it’s about reframing what debt means in your situation, easing the load so you can be happier at this time of your life.
Investments have continued growing amid the normal ups and downs. Canadians with one vaccination are nearing 71% and fully-vaccinated are 56% of our population. The world is nearer 15% which gives every opportunity for variants to arise. Delta and others may dampen industry, trade, and travel, etc. but we’re getting through this. Before long covid will fit alongside the cold or flu. Our economy is growing, corporate earnings are rising strongly, dividends will increase, investments will reach higher. All this, as we continue this second half of 2021.
Yours in Financial Security for LIFE!
Brian Weatherdon, MA, CFP, CLU, CPCA. 905-637-3500
627 Guelph Line, Burlington, Ont. L7R 3M7. 1-877-937-3500
Certified Financial Planner, Certified Retirement Coach
Author: A Lifetime Of Wealth — And How Not To Lose It (2013). Protecting Life, Loved Ones, and Future Dreams (2013). Your Business, Your Retirement: Halton Retirement Study (2015).
** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. Returns are from publicly available sources and research from a variety of firms including but not limited to Canada Life, CIBC, Dynamic, Mackenzie Financial, RBC / PH&N, and more. Opinions in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to coordinate with your legal and accounting advisers to further your financial goals in home and business. We are grateful always to receive your comments and questions.