Dear Garth

Party on. The doctor is IN.

Hi Garth: I see sometimes you post emails people have sent to you. Suppose I should start off with the whole “love your blog, been following for years…..and all that stuff”(true,btw). I have a question about the best way to invest (if you can call it that) a very small amount of money for my children. We are a typical Albertan family that got caught up in the downturn of oil. The difference being that we had (key word-had) a fairly decent savings for our age. We were very lucky to sell our house and at this point have zero debt and are renting. Unfortunately after two years of either no employment of employment that pays very little, we have no savings left and are barely making rent let alone enough to invest. I am not entirely optimistic about my husband’s and my future retirement but we would like to try to do something, however small, for our children’s future. At this point it is not looking very likely that we will be able to help our children out financially when they were older so we would like to invest/put away at least a small amount that could hopefully turn into more when they are older. We cannot commit to a monthly investment. As I said earlier, just paying the monthly bills is the priority at this point. Is there anything worthwhile that we could put, say $2000, towards that would make any sort of difference for them in 10-15yrs? Thank you, Pam.

Hang in there, Pam. At least you had the foresight to get out of your mortgage and trash debt. As for the kids and your future… If they’re 18 or older, open TFSAs for them and invest the cash in a growth ETF or two (I’d pick one that paces the S&P 500). You could buy a strip bond, but rates are dismal, so no joy there. If they’re minors then why not simply invest the money in your own TFSA in a similar ETF and let it grow for the next decade? Or you can put it into an RESP, investing the same way, and receive a 20% free top-up from the feds. Free money. Take it.

Or just take the two grand, get in the car and drive to southern Ontario or the Lower Mainland, and get jobs. Your province is pooched.

Dear Garth: I am an avid reader of your blog and love the photos! I am wondering if you could give me any tips on how to improve my financial situation.

I am a 26 year old laboratory technologist earning $53k/year in Victoria, BC.  I have 120k, 80k of which is stuffed into my RRSP and TFSA in a 60/40 portfolio of ETFs. I keep the other 40k in my savings account as my RRSP and TFSA are maxed out. My rent is $900/month. Other expenses include things related to my vehicle and life in general.

If you could write about non-registered accounts, I would find that very helpful. I do not seem to understand how taxes work around investments in a non-registered account and that is the only thing preventing me from investing most of the money in my savings account. Thank you, Olivia.

Wow, O. Twenty-six, and you have three entire years’ worth of take-home pay saved. Impressive. But forty grand sitting in a savings account making 0.25% or less is a crime. Get it invested, girl! A non-registered account is merely an investment vehicle which holds the same stuff as you put into your TFSA or RRSP, and everyone should have one. Remember that RRSPs defer tax – not eliminate it – so all withdrawals will be taxed as income. TFSAs are great, but you’re limited to about five thousand a year in new money, which is no match for Olivia. So a non-reg account should provide hugely better returns than a savings account and still be tax-efficient. ETFs that rise in value are untaxed unless you sell them. When you do cash out, half the profit (at least for now) is tax-free and the other half is taxed at your marginal rate, which is 28%. So on a $1,000 profit the tax is a mere $140. Ditto for dividends – they qualify for the dividend tax credit, so the amount payable is also seriously reduced. The interest you’re making now, by the way, is taxed at twice the rate.

Uh, wait… Apparently there are about 400 young blog dogs who would like your email…

Hi Garth: I am a 32 year old male with a wife and two children under 2. I make about $70 000 a year, my wife is not working now and won’t be for the next couple of years. We have a $130,000 mortgage left on a house we bought in North Oshawa for $235,000 5 years ago. We don’t have any debt we own our vehicles and have only some TFSA balanced mutual fund accounts for about $20 000. Our house could sell for somewhere around $600,000 if we put the sign on the lawn today, and we would have $400 000 left. We would want to put the $400,000 in a balanced ETF for 3 years as we plan to rent and after when interest rates rise and house prices drop we would plan to buy a house after the market settles off hopefully cash and have no or very little mortgage. Do you think it’s a good time to cash out? My wife is nervous about renting but I feel that we could cash out now and buy again later and hopefully live mortgage free in a larger forever home. Thanks, Andrew

So, 95% of your net worth is in your house, and you have only twenty thousand liquid. Not good, balanced, diversified or safe. Sounds like you’ve saved nothing for the kids, either. Irresponsible. As for the house, it could realize a huge tax-free capital gain, and completely transform your situation – from an indebted, illiquid young father with three dependants and no resources, to a family with over $400,000 in growing assets and more choices. Invest it properly for five years (not three) and it should be $600,000. The danger you face? That she’s right. You sell. Houses all go to $3 million. You never own again and she never forgets. If that happens, we never talked.

Dear Mr.Turner: I quite like reading your blog not only because of your witty remarks and often hilarious pictures, but also because of your willingness to give advice when asked. I live in Calgary and am a part owner of a townhouse (my brother being the second owner). Our neighbors are for the lack of a better word trailer trash that managed to buy a property purely on the basis of low interest rates and leveraged real estate system. I would love to sell the house to someone similar to them so they can enjoy each other’s company but the real estate in Calgary is not doing well at the moment and I would lose money. Is there any chance that some of the Toronto’s real estate frenzy may come back to Calgary once the province of ON has implemented some sort of a real estate tax? Thanks, Max.

No, Max. Not gonna happen. Regarding the row house, this is real, common and almost-unsolvable problem for people who buy duplexes, semis, townhomes or condos. You can never repel the deplorables who may end up living out their irritating lives one wall away from you. This is one of the most compelling reasons for securing a detached property. Or a farm with guard cows. Maybe you could tell them there’s a Trump rally in Red Deer, then change the house numbers while they’re away.

Garth: “I read your blog everyday. I am finally moving out of my mom’s basement this summer (August). I am a full-time teacher and have been for 3.5 years now. I have just over 50 thousand in savings  + whatever is in that luxurious teacher pension I have been contributing to. I clear about $3,850 a month.
What is my next move? Should I be renting a condo close to work or buying a condo close to work? There are some pretty good deals out there. I do not want to pay condo fees and I do not want to pay lawyer fees and closing costs and whatever fee is associated with buying. I am a single guy and do not spend much time at home. I do not mind living in a 500 sq. ft place. I am in desperate need for some help and advice. Thanks, Max.

Huh? You’ve been taking home almost $48,000 for more than three years, still live with Mom, have saved only fifty grand and are writing a pathetic blog saying you’re desperate, asking if you should rent your own place? And they let you be a role model for children? Next!

Hi Garth: First of all, I love your blog, reminds me buying a house is not the meaning of life.

Stats: Age-32, Salary-50K, Savings-60K. I, like many others grew up in a haze of house horniness, determined to give away all my savings for a slice of K-W. Luckily I was out-bid once, and soon after found your web oasis. Shortly after, I opened a brokerage account under the supple tax shelter of a TFSA, and balanced it in the manner you suggested.

The problem I’m having now; some of my juicy dividend producing ETF’s have gained 14 – 20%! I bought these with the intention of holding for a number of years, at what point should you solidify these gains? Or is it better to hold and maintain the balanced dividend stream? Thanks! James.

Good boy. Now remember that while ETFs can be purchased and held for years in the same configuration (just ensure you get the weightings correct when you start) you need to rebalance periodically. Once a year is enough, or twice if you’re anal. Markets move, cash builds up from interest and dividends or you may contribute more capital – all reasons to rebalance. The idea is to bring assets back to your target weightings, which will often mean selling off portions of the winners and adding to some (or all) of the laggards. It’s counter-intuitive, of course, since most people are incapable of crystallizing gains (‘this baby’s goin’ to the moon’) or forcing themselves to buy losers. Failure to sell or buy at the correct times is the No.1 reason most Canadians fail. Other than not coming here. Or being humble.

82 comments ↓

#1 Ricky on 03.12.17 at 6:45 pm

Hi people, I just inherited 250k, I want to invest it all asap, my tfsa and rrsp’s are maxed already. Should I invest in all Canadian bank stocks or etfs?
Thanks
Ricky

#2 Jerry on 03.12.17 at 6:48 pm

To say Alberta is toast is putting it mildly. How many mega projects will be started with $50/barrel oil? US inventory is the highest its been in years. This coupled with the fact that Trump will strip mine the US will just result in more commodities on the market. I’m surprised housing is only down 5% in Calgary. Why would you move there unless you could get a good paying job? I’ll be housing will tank soon when severance packages run out.

#3 acdel on 03.12.17 at 7:18 pm

#2 Jerry

Very easy solution, build the pipelines from coast to coast and allow Alberta Oil to sell to world markets. I know it is too much to ask for a country to act as a country, especially to pay for our way of life and a future less reliant on carbon in a country than can reach minus 60 without the wind chill.. Imagine trying to build a railway from coast to coast in today’s time. ha!!

This is why yesterday’s blog was such a bonus to all of us; it will probably never happen due to us allowing a few special interest goofs to control our future.

Thanks Doug and Garth for writing about the real future of this country, cudo’s to all the young one’s in today’s blogs that are doing well; good job! Smarter then me..

#4 I'm Not Poloz on 03.12.17 at 7:18 pm

@ Ricky # 1

Poloz will advise you to invest in a house in the greatest city of the world—Toronto.

BTW, 0.25% is not criminal. Inflation is very low according to Poloz & the BoC.

Poloz likes lower interest rates so that upper class starlettes in Toronto can purchase the latest C$15,000 handbag from a Holt Renfrew or Hermes store on credit.

Lower interest rates increase investment in Toronto to force female immigrants to work in conditions like they were in Bangladesh, Cambodia, Thailand, or Sierra Leone for a pittance, while the upper class Canadian women complain that they are oppressed in their teacher union CUPE 3000 public servant job, because the Superintendent of the building they work refuse to turn off the air conditioning in 40C+ weather.

Do these empowered people in Toronto come to work naked like they do at Toronto Gay Pride?

Remember folks, an immigrant woman works either for free or 0.50 on the Dollar for every dollar earned by a Canadian woman. That is the Wage Gap they don’t tell you in school.

Poloz wishes for a 0.50 Loonie to boost exports while encouraging more exploitative labour in Canada.

#5 Bubblicious on 03.12.17 at 7:36 pm

OMG, OMG, OMG, OMG!!!!!

It is astonishing to think fools in Toronto’s outer, wasteland burbs are so dumb as to buy condos like these that have inflated 60% in price in as little as 1 year.

Holy cow!

https://www.thestar.com/life/homes/2017/03/11/willowdale-506000-etobicoke-420000.html

#6 Rexx Rock on 03.12.17 at 7:38 pm

A lot of bs on this blog.26 years old and has savings of $120,000.Give me a break ,saving that in Victoria for 6 years working.I guess its a good laugh reading all these bs stories.

#7 Nonplused on 03.12.17 at 7:54 pm

To the teacher guy:

My personal opinion is that young single men and women normally should not buy. Garth has discussed many of the reasons but they can be summed up as “mobility”.

What if you transfer to a different school across town? Suddenly that condo you own next to the old school doesn’t seem so convenient. What if there is a large special assessment? As a renter you can bail at the end of the term but as an owner you are coming up with the money one way or another. What if you find that special someone and decide to play house? The condo you had as a single guy probably needs to be sold or rented out. Do you want to be a landlord? What if you decide to take that $50,000, take a year off and see the world? Again no dice if you own a condo.

There isn’t really much upside for single people to own real-estate until their life plans are settled. And even then they aren’t so settled. It doesn’t hurt for new couples to rent until they are confident things look good. Otherwise it’s off to court to decide who gets the house and who pays for it.

#8 Interest Rate Risk on 03.12.17 at 8:06 pm

“Remember: Lower market interest rates [lead to] higher fixed-rate bond prices [which lead to] lower fixed-rate bond yields [which lead to] higher interest rate risk to rising market interest rates. Because of this relationship, it is particularly important for investors to consider interest rate risk when they purchase bonds in a low-interest-rate environment.”
— U.S. Securities and Exchange Commission

https://www.sec.gov/investor/alerts/ib_interestraterisk.pdf

#9 Gasbag Boomer on 03.12.17 at 8:17 pm

Blog and picture, LMAO!!!
Thanks Garth..

#10 Kudos Garth on 03.12.17 at 8:22 pm

Your blog genuinely helps Canadians .

Wish I was aware of it years ago. That said , I’ve learned a lot and can pass the knowledge to our boys . Our educational system desperately needs mandatory personal finance in high school

I thank you

#11 acdel on 03.12.17 at 8:29 pm

Here is an excellent article on what Garth has been preaching. I am getting way too grumpy right now, so have a good evening all!

http://www.macleans.ca/economy/economicanalysis/how-canadas-big-banks-pumped-up-the-housing-bubble/

#12 rgeezie on 03.12.17 at 8:35 pm

Garth – reporting in from bubbly central coquitlam bc – I sold my home a little over a year ago fully expecting a pull back from the ridiculous prices we were seeing in this very solidly middle class neighbourhood. For a while there it looked like you (and me) would be proven right; listings sat around most of the fall and winter – not much selling but prices didn’t budge. It was only a matter of time till prices headed south…So I thought…. I can report that in the last 2 weeks all the properties I was watching and hoping to get on the cheap have been sold at or near asking. The 3 I asked about all sold to HAM. Looks like they have found other ways to get their $$$ out of China. My saving grace is that I took the money I made and put it into preferreds and ETFs. The downside is that I have an impatient wife and 2 growing rug rats that want their own rooms and a backyard to run around in….Oh well can’t win them all…

#13 brian on 03.12.17 at 8:53 pm

Put a provincial sales tax on every property ,not just new but preowned ,every million dollar home adds $80,000 to the provincial coffers for infastrcture or other needed projects.Tax stupidity and we will soon be in the black

#14 not 1st on 03.12.17 at 8:58 pm

What a bunch of millenial suck ups.

#15 Am I a millennial at 32? on 03.12.17 at 9:00 pm

My boomer parents just sold their home for 2.58 million in Vaughan which they had purchased for 900k in 2011. Even accounting generously for the renovations they did, they gained well over a million in appreciation in just 6 years. They enjoyed living in it too.

Meanwhile I choose not to leverage and instead rented and invested. I haven’t made 1/4th of what they did and I had to live in an embarrassing 600 sq-ft ‘investor spec’ condo the whole time. Now I get to look forward to living in such conditions probably for the rest of my life – maybe raise my kids in a tiny condo too or forgo having them. Boomers eat the millennials.

This is what reality looks like for us. I used to have heated debates with my parents about risk and diversification…now all I get from them is just pity and despair as we all come to terms with what is a slow sad generational decline in standard of living.

I save and invest 50% of my 95k/year income and I’m falling behind each year.

#16 Tony on 03.12.17 at 9:08 pm

Re: #1 Ricky on 03.12.17 at 6:45 pm

Canadian bank stocks are probably the worst place on Earth to put money. Heads you lose and tails you lose. Interest rates fall and bank profits fall. Interest rates rise and real estate in the GTA and Vancouver crumbles and credit freezes up. I’d be buying platinum certificates and would buy uranium when West Texas crude hits the 44 dollar U.S. mark.

#17 Andrew Woburn on 03.12.17 at 9:15 pm

Will spoiled boomers bankrupt the millennials? Probably not – Politics – CBC News

http://www.cbc.ca/news/politics/retirement-health-care-generations-taxation-1.3552609

#18 joblo on 03.12.17 at 9:27 pm

Are these like REAL letters?

Yes. I’m not that creative. — Garth

#19 Smoking Man on 03.12.17 at 9:31 pm

Dear Garth

My real name is Jay Smokeweeded, on the Nictonite calendar I’m 800 years old, don’t look a day over 45 if I have a good tan going.

I lost 10 million dollars in the last six months and I’m not to bothered by it. I’m unemployed at the moment which creates a bit of a problem at home as I need to cut my trips to Seneca down to once a week.

I understand that I am made up of atoms and electrons that are influenced by vibrations of other atoms and electrons in my vacinity. I know my future is pre-determined by the moving universe and that a thought and action is a result atom dancing rather than a conscious decision on my part. Our destiny can not be changed.

As proof, the atoms and electrons influencing my thoughts and actions right now are changing due to swallowing right now from a bottle of Jack Danial’s liquefied atoms which will alter the thoughts in my head and thumb typing. So as I always do, enjoy the ride.

Let’s set Sat, May, 13, 2017 for the Blog Dog tea party, or tailgate at the general store.

Dr. Smoking Man
Phd Herdonomics

#20 truthbetold on 03.12.17 at 9:59 pm

What’s with all these under 35’s with decent jobs (even a pension) putting 40% in fixed income. If you have a DB pension and you are young and making good money you should likely be 80 % at least maybe 100 in equities. Let that stuff grow, you already have your fixed income covered. If you feel conservative, then go 75/25. Sheesh.

#21 The Limited Sage on 03.12.17 at 10:09 pm

#13 not 1st

What a bunch of millenial suck ups.

——————————————–

Don’t you have a cloud to go yell at or something?

#22 Electric Universe on 03.12.17 at 10:12 pm

#18 Smoking Man on 03.12.17 at 9:31 pm

Dear Garth

My real name is Jay Smokeweeded, on the Nictonite calendar I’m 800 years old, don’t look a day over 45 if I have a good tan going.

I lost 10 million dollars in the last six months and I’m not to bothered by it. I’m unemployed at the moment which creates a bit of a problem at home as I need to cut my trips to Seneca down to once a week.

I understand that I am made up of atoms and electrons that are influenced by vibrations of other atoms and electrons in my vacinity. I know my future is pre-determined by the moving universe and that a thought and action is a result atom dancing rather than a conscious decision on my part. Our destiny can not be changed.

As proof, the atoms and electrons influencing my thoughts and actions right now are changing due to swallowing right now from a bottle of Jack Danial’s liquefied atoms which will alter the thoughts in my head and thumb typing. So as I always do, enjoy the ride.

Let’s set Sat, May, 13, 2017 for the Blog Dog tea party, or tailgate at the general store.

Dr. Smoking Man
Phd Herdonomics
..

Well thank goodness you have your book royalties to live off of.. phew…. or just go back to engineering development at dehavilland.

#23 AR on 03.12.17 at 10:25 pm

Jobs, good houses $150,000-$250,000, access to hiking, cycling, boating, X country and downhill skiing. Accessible, cheap. Soccer, hockey, back country, fishing. An airport 1 hr flight to Vancouver. College, hospital, restaurants… Friendly folks. Why stay in Calgary if you’re mobile and house free?

Got a first aid ticket or a steam ticket? Got a trade or a profession? Lots of entry level mill jobs and with time permanent and well paying jobs.

Central BC. The Cariboo. Look it up.

#24 Smoking Man on 03.12.17 at 10:32 pm

#21 Electric Universe on 03.12.17 at 10:12 pm
#18 Smoking Man on 03.12.17 at 9:31 pm

Dear Garth

My real name is Jay Smokeweeded, on the Nictonite calendar I’m 800 years old, don’t look a day over 45 if I have a good tan going.

I lost 10 million dollars in the last six months and I’m not to bothered by it. I’m unemployed at the moment which creates a bit of a problem at home as I need to cut my trips to Seneca down to once a week.

I understand that I am made up of atoms and electrons that are influenced by vibrations of other atoms and electrons in my vacinity. I know my future is pre-determined by the moving universe and that a thought and action is a result atom dancing rather than a conscious decision on my part. Our destiny can not be changed.

As proof, the atoms and electrons influencing my thoughts and actions right now are changing due to swallowing right now from a bottle of Jack Danial’s liquefied atoms which will alter the thoughts in my head and thumb typing. So as I always do, enjoy the ride.

Let’s set Sat, May, 13, 2017 for the Blog Dog tea party, or tailgate at the general store.

Dr. Smoking Man
Phd Herdonomics
..

Well thank goodness you have your book royalties to live off of.. phew…. or just go back to engineering development at dehavilland.
……….

Designing tests and certifying aircraft boring. I would rather be a banana picker in south America just to have a free supply to all the local moonshine.

The universe talked to me via the UCC and dancing atoms. Go south young man go south…

#25 Cheap Houses on 03.12.17 at 10:38 pm

None of this matters. We are heading into another great depression. This one will be interesting though as we have technology to help us. Can’t wait !!

PS….I have some beers in me.

#26 Smoking Man on 03.12.17 at 10:42 pm

My crystal ball is calling for CAD banks to be upping the fixed rate mortgages this week.

TD to do it first.

I’m also feeling that there may be a movie deal for my book. The dilemma. Tone down Zumanga, agenda 21 shit and become famous, or say f-you not changing.

What would Hemmingway do?

The deplorables will love it just the way it is and the whole world is going Deplorable. Denmark this week, then France next.

I’ll just stall them till Herdonomic reality catches up to them

All the big players going hard with, Diversity, Inclusion not realizing that it’s being rejected.

Denmark and France will make them wake up.

Dr Smokey

#27 Bungalow Jack on 03.12.17 at 10:43 pm

#18—“I know my future is pre-determined by the moving universe and that a thought and action is a result atom dancing rather than a conscious decision on my part. Our destiny can not be changed.”-

Easy to picture a self-indulgent youth in the classroom getting jollies by sabotaging Miss Krabappel, and pushing other kids’ buttons.

Then exaggerations became fibs, the fibs morphed into lies, the lies multiplied and became chronic.

Into. The. Life. Of… Muskoka Jim.

Years pass by, addicted to dopamine, and instant-gratification.

Rinse and repeat. Take another drag off another cigarette from another pack on another day. Take another drink from another bottle to dull another hour. Take another trip to the fantasy house for weekends of lost time. Post some more drivel and push some more buttons. Tell some more whoppers…

Another Day In The Life.

Cross-addictions and self-absorption.
MeMeMeMeMe. It’s THEIR fault. WaaWaaWaa.

Holy smokes! This is how you’ve made use of the greatest gift…

Oh, …the atoms made you do it…

Self-abuse.

Is what I’m thinkin’!

#28 45north on 03.12.17 at 10:46 pm

acdel: from your link: Ottawa may finally be on the verge of reducing the moral hazard in home lending. In October, Finance Minister Bill Morneau said he would explore changes that would require mortgage lenders to accept a greater share of the pain when mortgages default. Morneau proposed requiring lenders to pay the equivalent of a deductible, either a fixed amount or a proportion of the total loss.

Paul Morneau was pretty clever with his new qualification rule: nobody had to pay more – at least not right away but requiring lenders to pay a proportion of the total loss could only be done with the full political backing of the Liberal Party of Canada.

the Canadian housing markets may well be overtaken by events: if the US Fed raises interest rates on March 15 and Canadian banks raise their rates then people who have just bought homes are going to have to come up with extra cash. Some of them right away.

#29 Smoking Man on 03.12.17 at 10:55 pm

#26 Bungalow Jack on 03.12.17 at 10:43 pm
#18—“I know my future is pre-determined by the moving universe and that a thought and action is a result atom dancing rather than a conscious decision on my part. Our destiny can not be changed.”-

Easy to picture a self-indulgent youth in the classroom getting jollies by sabotaging Miss Krabappel, and pushing other kids’ buttons.

Then exaggerations became fibs, the fibs morphed into lies, the lies multiplied and became chronic.

Into. The. Life. Of… Muskoka Jim.

Years pass by, addicted to dopamine, and instant-gratification.

Rinse and repeat. Take another drag off another cigarette from another pack on another day. Take another drink from another bottle to dull another hour. Take another trip to the fantasy house for weekends of lost time. Post some more drivel and push some more buttons. Tell some more whoppers…

Another Day In The Life.

Cross-addictions and self-absorption.
MeMeMeMeMe. It’s THEIR fault. WaaWaaWaa.

Holy smokes! This is how you’ve made use of the greatest gift…

Oh, …the atoms made you do it…

Self-abuse.

Is what I’m thinkin’!
……
Show me in the archives where I have ever blamed anyone.

When you go all in with something, the end result doesn’t matter. It’s the view and thrill on that trip that counts. Not for everyone, not recommending this type of adventure for most.

You will figure it one day, a doctor may say you got six months to go before your atoms radically change quickly, and you’re still here 7 years later. I won the lottery.

#30 contractor on 03.12.17 at 10:59 pm

You have been greatly misinformed!

Perhaps nobody knows how to quantify it or data is skewed to tell a false story.

But Canada’s housing market bubble is a result of foreign money! It’s not 5%!!! It’s a lot greater!

Go out and talk to the contractors building the homes(I’m in the business) to see what they say. Just in the last few months for example Indian investor’s just put 50% down on 60 homes in one subdivision! This is common across Canada now…I talk with those in the business…

I recommend a 25% foreign ownership tax across Canada and 50% in major cities.

This is the truth!

#31 Lee on 03.12.17 at 11:17 pm

#14 millennial,

And someday you’ll inherit 2.5 million. Boo hoo. You’ve got it better than most.

#32 Piet on 03.12.17 at 11:25 pm

#120 Self Directed on 03.12.17 at 11:35 am

#59 Piet on 03.11.17 at 8:26 pm

“Prepare for it.”

We prepared for it by investing in our offspring. The RESP was an excellent investment, generating a good rate of return. The adult children are highly paid professionals now who have told us not to ever worry about money, so we don’t care about those extra expenses that are likely to occur as we approach the terminal phase. We are going to blow the savings while we can still enjoy doing so.
………………………
Self Directed wrote:
Entitlement meet Codependency. A very unhealthy “you owe us” attitude. You’re spending your kids money today, not yours. #badparents
………………………
Piet says:
Interesting response, Self Directed. You are definitely not Asian, with your belief that the next generation has no duty to care for parents. In our case the offspring will still come out ahead, as they inherit the million-dollar family home to add to their high-six-figure salaries; so whatever.

#33 Mark on 03.12.17 at 11:31 pm

“interest rates fall and bank profits fall. “

Are you kidding? Interest rates have been falling for the past 35 years. Canadian bank stocks have pretty much only been straight up over that interval. With banking and financials now making 40% of the TSX index.

Falling interest rates have created the best of times for the financial sector as they’ve enjoyed expanded margins and expanding loan volume. Its the long-term rising rate environment that will prove to be toxic for the banks. Especially the US banks, which are as good as dead meat as long-term interest rates keep rising. But even Canadian banks will be hard pressed to continue their outperformance relative to the rest of the Canadian economy as the other half of the long-term interest rate cycle begins in earnest.

#34 AfterTheHouseSold on 03.12.17 at 11:33 pm

Max
“I live in Calgary and am a part owner of a townhouse
(my brother being the second owner).”

Max, you are probably not aware that you have broken one of Garth’s commandments:
Thou shall not buy a house with anyone other than the person you are sleeping with.

There are a host of nightmare scenarios that could arise from buying property with family or friends:

Is the other party married? Happily? A divorce could put you into a forced sell position at an inopportune time, like a falling market.

Develops a drug or gambling addiction and is unable to meet the mortgage obligation.

Job loss, illness, death.

The more people involved in a house purchase, the more variables that are out of your control. The deplorable neighbours may be the least of your worries.

#35 NEVER GIVE UP on 03.12.17 at 11:40 pm

#10 acdel on 03.12.17 at 8:29 pm
Here is an excellent article on what Garth has been preaching. I am getting way too grumpy right now, so have a good evening all!
http://www.macleans.ca/economy/economicanalysis/how-canadas-big-banks-pumped-up-the-housing-bubble/
====================================
Government has been outright hostile to small business for over a decade. Small business can use their credit cards to finance their business but some schmuck who works at the dollar store or a visiting student can get a mortgage for under 2.5%. The student can get a loan without showing income!
All of this is Government driven. Dont blame the banks for taking the easy way out. Giving out business loans takes actual work!

Acdel please pass me the tums!

#36 NEVER GIVE UP on 03.12.17 at 11:50 pm

#31 Piet on 03.12.17 at 11:25 pm
#120 Self Directed on 03.12.17 at 11:35 am

#59 Piet on 03.11.17 at 8:26 pm

“Prepare for it.”

We prepared for it by investing in our offspring. The RESP was an excellent investment, generating a good rate of return. The adult children are highly paid professionals now who have told us not to ever worry about money, so we don’t care about those extra expenses that are likely to occur as we approach the terminal phase. We are going to blow the savings while we can still enjoy doing so.
………………………
Self Directed wrote:
Entitlement meet Codependency. A very unhealthy “you owe us” attitude. You’re spending your kids money today, not yours. #badparents
………………………
Piet says:
Interesting response, Self Directed. You are definitely not Asian, with your belief that the next generation has no duty to care for parents. In our case the offspring will still come out ahead, as they inherit the million-dollar family home to add to their high-six-figure salaries; so whatever.
==================================

Actually Piet I have seen lots of parental abuse in China as well as Canada. It is really all over the map and not really a national trait.
Many Canadians bend over backward with respect for their parents as do many in Asia.
There are many senior homes in China with the loneliest of inhabitants you can imagine. parents have one child who works 2000 km away.
At the same time here in Canada, there are vultures waiting for parents to die so they can get their hands on the loot! Sadly in China much of the loot is transferred before death inviting abuse.

#37 Daveyboy on 03.13.17 at 12:00 am

@14

Move out of there. Toronto is not the centre of the universe. 90% of the people who have made those gains In real estate r not smart enough to invest it. Move to the u.s. if you can.Median house price 188.

Keep your head up . I am 33 and have done the same thing as you.

Moved to Arkansas unemployment level 2.8 % . Houses 3 bed 2 bath 1500sq feet 150k. Rents for 1100 .

#38 mousey on 03.13.17 at 12:03 am

Is my math wrong? $400,000 at 8.5% compounding annually gets you to just over $600,000. Where do you get 8.5% annual return?

#39 Karl hungus on 03.13.17 at 12:18 am

Haha Alberta is pooched ? What a joke. Alberta is the economic envy of Canada. The money engine. won’t be long for Alberta to be back on top (next year). Betting against Alberta is like betting against the US.

#40 Millmech on 03.13.17 at 1:10 am

#22 AR
A lot of those jobs will be gone in five years due to the beetle kill wood running out,smart money there selling and moving out.I have relatives up there and short term is good long term you will be out of luck.
Good prices on land though,makes you laugh when you read the comments about land prices going up because “they are not making anymore of it”.My bil bought close to 60 acres with three houses on it for less than $500,000 you know the same price people pay for a 600 square foot box in Vancouver.

#41 Millmech on 03.13.17 at 1:16 am

#14
If you want to really mope and beat yourself up you could have bought into Snap with $10,000 and five years later sold it for $24,000,000.
Kind of makes your parents returns look pretty paltry in perspective,remember there is always someone who has done bettter and someone who has done worse.

#42 crowdedelevatorfartz on 03.13.17 at 1:21 am

Pam,
Get the hell outta Cowtown.
You’ve wasted 2 years waiting for the turn around.
Leave.
While you can still afford it.
You can always move back.

#43 Sydneysider on 03.13.17 at 1:33 am

Wow, the Albertan character really comes through in Pam’s post. I am sick of Vancouverites whining about 10 cm of snow these past 3 months… Hang in there with your community until better times arrive.

#44 Stock Picker on 03.13.17 at 5:28 am

Pam…you need to get out of Canada….employment stats in BC and Ontario are being falsified as private sector hires are dead and government hires mask reality for specific political reasons. Texas is the place you want to be.

Garth….the S&P 500 is underperforming badly and the 5000 even worse. Something’s up…..

Ten year yields pushed 2.75 in the last auction….bonds are dead dead dead money. Corporate Canada is not safe with Trudeau and Wynne listening to the likes of Gerald Butts and puppet master George Soros. Being the ‘ anti Trump is already draining American investment out of Canada.

The real estate market is a dead man walking….classic late bubble behaviour. Get out unless you’re in there for another 100 years…..the intervening years won’t be pretty.

Capital flight out of Canada is in full flood. The word out of the majors in Houston were that Trudeaus Liberals have created a toxic environment for investors…money is drying faster than spit in a sand storm. Not surprised that this isnt front page for the CBC….but it sure is on CNBC. At best the energy patch in Canada can be described as a falling knife….with no floor in sight. Trudeau was laughed out of the room….again….not a story on the CBC. His brand of socialism didn’t earn any hugs from Americas new leadership. The new tax regime in Canada is a death knell for new investment.

#45 Michael on 03.13.17 at 5:36 am

” Sounds like you’ve saved nothing for the kids, either. Irresponsible. ”

There is nothing irresponsible about not saving for the kids – what is wrong with expecting them to make their own way? I started working when I turned 16, my brother when he was 14. Each of us paid our own way through school (I with assistance from student loans). Early responsibility in life for managing/planning one’s own financial affairs builds character and long-lasting life skills.

#46 Charles on 03.13.17 at 6:17 am

Kudos to you for giving so much advice – but seriously Garth if you keep on responding the Financial Post people are going to start getting jealous!

#47 Wrk.dover on 03.13.17 at 6:30 am

So the first letter writer is worried that they won’t be able to provide their children with their first car and down payment for a starter home after they put them through university? Until they find a job first?

Explains where the letter writer got his/her start in life, the golden goose doesn’t lay gold for this snowflakes offspring too though?

#48 Karl on 03.13.17 at 7:46 am

‘Betting against Alberta is like betting against the us’

Take a deep breadth . Pride is a good thing, but don’t let it cloud judgement

Here’s hoping for an Alberta recovery .

#49 OMERS on 03.13.17 at 8:13 am

#37 Mousey….

Is my math wrong? $400,000 at 8.5% compounding annually gets you to just over $600,000. Where do you get 8.5% annual return?

The answer is OMERS Pension Plan…Returned a Net for it’s members at 10.3% for 2016. Booyyaahh

#50 armpit on 03.13.17 at 8:37 am

One can move to Clair N.B. and move into a duplex, while the other apt pays your mortgage, taxes, and traveling expenses to Florida in the Winter.

https://www.realtor.ca/Residential/Single-Family/16649384/773-PRINCIPAL-Street-CLAIR-New-Brunswick-E7A2H6

#51 cropgrower on 03.13.17 at 8:59 am

…the lab tech seems a little suspect to me….

#52 TurnerNation on 03.13.17 at 9:29 am

The commute. Smileless soulless Kanadians ride the slave train (subway) in silence.
Bloated distended mortgages sap all.

Attention Kanadian Komrades today’s prices from the realty and banking Kartels:

West end sht bungee or slanty semi:
1 million.

SFH 1.5-3m

#53 Victor V on 03.13.17 at 10:33 am

How Canada’s biggest banks have become complicit in the housing bubble

http://www.canadianbusiness.com/economy/how-canadas-biggest-banks-have-become-complicit-in-the-housing-bubble/

#54 aa3 on 03.13.17 at 10:46 am

The housing bubble seems to be chasing the dream Canadians have had for 2 generations now – the dream of getting something for nothing.

The ideal of house buyers is they put down like $50,000 on a $1 million home. And in the near future, the home is worth $2 million. Meaning the person got a million dollar gain for doing nothing.

It is similar to the dream of politics for virtually every Canadian I talk to. That their favoured politician will get elected, and then the politician will steal money from other Canadians, and give the money to them.

#55 Victor V on 03.13.17 at 11:06 am

Foreign home buyers’ tax won’t be enough: Ryerson report

http://www.cbc.ca/news/canada/toronto/foreign-homebuyer-tax-not-enough-to-stop-rising-toronto-home-prices-1.4021937

Author Josh Gordon, an assistant professor at the Simon Fraser University School of Public Policy, says a levy on foreign buyers needs to be done soon to calm the market, but even that might not be enough.

“It’s not going to be sufficient. They also need to have an annual property surtax that is offset by the income tax you pay,” said Gordon.

“Those who own property based on foreign sources of income or wealth are hit by the surtax and everyone else is more or less spared. That discourages foreign ownership and that would bring prices down better than a foreign buyers tax.”

#56 Eurovision on 03.13.17 at 11:10 am

Dept is no longer serviceable with home equity, the race to bottom begins.

#57 Tudval on 03.13.17 at 11:23 am

#29 contractor ” Just in the last few months for example Indian investor’s just put 50% down on 60 homes in one subdivision! ”

You mean foreign investor just financed construction of 60 homes that will be rented to and used by Canadians?? Imagine the horror, the scourge of foreign capital, comrade Lenin is turning in his grave.

#58 Eks dee Sipal on 03.13.17 at 12:03 pm

THE GREAT RESET IS COMING. ARE YOU READY?
“The President’s wife arrives, stunned. This is Mrs. Kennedy. In the middle. At this point, no one knows, no one knew, rather, whether the President was alive or dead… Mrs. Kennedy conferring with the Dallas policeman who had sped the President to the hospital. And into the emergency room, goes Mrs. Kennedy…
A corsage of roses flies inside the car in which President Kennedy was shot.”
https://www.youtube.com/watch?v=ev33TWVAbtI

#59 Ace Goodheart on 03.13.17 at 12:20 pm

“Surtax” coming to Toronto (but only for people who don’t pay income tax……like seniors and those on fixed incomes?):

https://www.thestar.com/business/2017/03/13/foreign-buyer-tax-alone-wont-solve-toronto-housing-woes-report.html

Watch how fast this pushes the elderly and low income earners out of their houses. A tax to own property. A first in Canada?

#60 not 1st on 03.13.17 at 12:52 pm

I like how the group that elected `mr selfie and tax you to the wall` now want Garth to tell them how to turn $2000 into $2 million overnight or retire at 35 with $150k in the bank.

I hope this group works until they drop. They have single handedly sunk canada for a generation cause they fell for style over substance and morality over pragmatism. Good job.

#61 Kris on 03.13.17 at 12:54 pm

Suppose a few provinces like BC & ONT come up with a tax on homebuyers who are raccoons. We don’t expect such a tax to have a big impact on the market, because the number of raccoons buying houses is typically low.

If (as many people claim), foreign ownership is similarly negligible, why the worry about a foreign buyers tax? For that matter, why did the B.C. market take a much larger hit, if foreign buyers are only 5% as claimed? If 95% of the bidders are still competing for the same properties, how can prices take a 30% hit simply because the 5% of buyers were dissuaded by taxes?

#62 oncebittwiceshy on 03.13.17 at 1:04 pm

Omers: “The answer is OMERS Pension Plan…Returned a Net for it’s members at 10.3% for 2016. Booyyaahh”

Ah, the sweet naivette of Omers pension plan holders. Do yourself a favour and call up your plan actuary and ask them what your liabilities are to date. I would question that 10.3% net.

It means absolutely jack that you made 10% if your liabilities are 15 – 25%.

As interest rates dropped, over the last several years in particular, pension plan liabilities increased exponentially.

Think of it this way. If you gave me $1000. and I promised you $100. per year for life when interest rates were at 10%, what would happen when interest rates dropped to 5%. Booyyaahh. You’re either getting $50. or I better get $200. Oooops.

#63 jess on 03.13.17 at 2:56 pm

How to transfer from 401k -financial services objected

Connecticut model and now Idaho to follow
” National Institute on Retirement Income report, “for any given level of benefit, a defined pension plan will cost less than a defined contribution 401(k)-type plan… They stretch taxpayer, employer, or employee dollars further in achieving any given level of retirement income.”
http://www.truth-out.org/opinion/item/39809-how-we-got-out-of-a-401-k-and-into-a-real-pension

http://www.collegefreakz.com/401k-inventor-says-created-monster/

#64 cto on 03.13.17 at 3:04 pm

61 Kris

“how can prices take a 30% hit simply because the 5% of buyers were dissuaded by taxes?”

Exactly,

The foreign buyers and for that matter many new Canadians have been groomed by their cultural ethnic real estate agents, mortgage brokers within their ethnic community. These are not bad people but many have drunk the cool-aide. They will bid what ever they can get their hands on. Some are middle income, some are rich. Regardless they get the funds and are note afraid to spend it! ALL OF IT!
This is what is push prices up in Cities with ethinic communities.

#65 jess on 03.13.17 at 3:04 pm

sometime yesteryear 2009 … shock
Bar names foreclosure lawyers under scrutiny

..”Alarmed by complaints about the number of lawyers preying on vulnerable homeowners, the State Bar last month identified 16 attorneys who are under investigation for misconduct related to loan modification.”

“In my 21 years in attorney discipline, I have not seen a crisis of this magnitude. It is truly unprecedented,” said Interim Chief Trial Counsel Russell Weiner, who is waiving investigation confidentiality in favor of public protection. The waiver, allowed by statute, is rarely used, but Weiner said the seriousness of the problem demanded a strong reaction by the bar in order to protect consumers. This is the first time the names of more than a few lawyers being investigated have been made public.

“The number of attorneys using their law licenses to essentially take money from unwary, but trusting, consumers is astounding,” Weiner added. “There are literally thousands of victims who have lost money they could not afford to lose. Under the circumstances, the need for public information and protection is paramount.”..
http://archive.calbar.ca.gov/Archive.aspx?articleId=96371&categoryId=96412&month=10&year=2009

meanwhile stilled shill shocked
State Bar groups in California and Florida are struggling to discipline lawyers accused of cheating homeowners through foreclosure ‘rescue’ and home loan modification schemes that often bill clients thousands of dollars but do little to help them. Most disciplined attorneys keep their licenses to practice law.
===========
https://www.publicintegrity.org/2016/08/02/20018/lawyers-exploit-foreclosure-rescue-fee-loophole
https://www.publicintegrity.org/2016/08/09/20044/alleged-housing-scam-grows-brooklyn
Lawyers exploit foreclosure ‘rescue’ fee loophole
Government decision enriches attorneys, stings homeowners
By Fred Schulteemail 5:00 am, August 2, 2016 Updated: 11:51 am, August 2, 2016
Attorney-affiliated firms that aggressively market mortgage reduction plans have mushroomed in the past few years because of a loophole in a government program called “loan modification.” Created in 2009, the program was designed to help struggling homeowners facing foreclosure brought on by the recession. But a government decision to exempt lawyers from a ban on charging advance fees for modification services has led to scams that have cheated thousands of homeowners.

#66 Oncebittwiceshy on 03.13.17 at 3:08 pm

Sorry, edit: “you’re either getting $50. or I better get $2000.”

#67 TCContrarian on 03.13.17 at 3:28 pm

“Failure to sell or buy at the correct times is the No.1 reason most Canadians fail.” -GT
***********************************************

In other words you have to, in some intelligent way, choose when it’s appropriate to ‘buy’ and when to ‘sell’; and which assets.
The ‘when’ is purely dictated by the markets NOT some artificial calendar date that suits the adviser’s schedule.

So, unless you engage in some form of ‘timing’ the markets, you will never outperform them.
Also, it helps if you could go against the ‘herd’ mentality and act contrarian – even if it means buying the some yellow metal (aka ‘gold’).

TCC

#68 Herd Mentality Wins on 03.13.17 at 4:14 pm

Can we all agree that the greater fools are people like me that have been financially prudent, saved, lived below their means, and invested – all for nought when I have fallen behind the doubling and tripling of RE prices in the last decade.

Even if prices fall, they will never be where there were 10 years ago, let alone 2 years ago. And the slow melt will take many many years which means the amount you pay in rent while ‘waiting’ will be more than any reduction in prices.

That is the dirty little secret of sitting on the sidelines – you have to wait at least a half a decade, probably closer to a decade to capitalize on renting for years instead of buying. Remember, prices are sticky on the way down especially after a 13 year bull run.

Its great if you are 20 or 60, but if you are in the middle with dependents, you are screwed – moving constantly, changing schools, ‘waiting for for your life to start’

My mother once said, ‘once you save enough to think you are putting a solid DP down (20%) , the prices will have gone up.’ That was the only thing she ever said on RE, and who knew it would be so right. I should have accepted that simply advice years ago rather than thinking I knew better than the herd.

Nothing

#69 boopsie on 03.13.17 at 4:57 pm

Hahaha
Kevin O’Leary allegedly going to run in Dufferin Caledon, where the Belfountain General Store is! Source National Newswatch.

He’d better not be expecting free sprinkles (although he could use a few). — Garth

#70 Tudval on 03.13.17 at 5:06 pm

61 Kris“how can prices take a 30% hit simply because the 5% of buyers were dissuaded by taxes?”

It has been answer many times. There was no 30% hit on prices. In fact most segments are up, expect for houses over 2mil. Averages went down bc fewer sales at the top where 1. there were more foreign buyers 2. 15% tax caused them to look for cheaper homes 3. psychological impact on other buyers, which will wear off eventually. 4. Sales go down because one sale at the top end could trigger 3-4 sales down the price scale.

You want more? You only have the short term impact, long term there’s more that can go wrong, even less supply of rental condos etc. The point is that it is wrong to interfere with free markets. It has been proven again and again that the end result can only be negative, whatever you think about the unfairness of the free market today is.

The statist-socialist model of heavy government intervention inevitably leads to a closed society and control of all aspects of life which results in poverty for all. Doing less (then totalitarianism) and continually tweaking rules and regulations with an eye to the next election (the neo-liberal way) is even worse, as winners and losers are decided by the government (and inevitably the winners will be the “friends and family” of the politicians), rather than the free market which is infinitely a more equal opportunity arbitrator.

#71 cto on 03.13.17 at 5:14 pm

Our Provincial Finance Minister would like to sit on the fence a little, because he says “there’s not enough data”.
Seems he likes it that way. When this whole thing blows up and lays waste to our economy, the finger pointing will start.
Wouldn’t a finance minister like to have that ace card in his pocket to pull out any time…
“there wasn’t enough data to tell me there was a problem!”
This is the complacent way the Ontario Liberals have been acting for years.

#72 Entrepreneur on 03.13.17 at 5:17 pm

And my dad always said that “house prices go up, prices come down.”

Many young people are in the same boat as you #68 Herd Mentality and it looks like the debtors have won but hopefully the corrections happens soon. This housing bubble has ruined our communities, provinces, country. All I have to say is “What leaders” and “What country are they in now.”

Hang in there and there are many people in the same scenario.

#73 Shut down CMHC on 03.13.17 at 5:20 pm

Realtors crying like little babies about government about free markets wont mind cmhc being shut down

#74 cto on 03.13.17 at 5:26 pm

#29 contractor

“Go out and talk to the contractors building the homes(I’m in the business) to see what they say. Just in the last few months for example Indian investor’s just put 50% down on 60 homes in one subdivision! This is common across Canada now…I talk with those in the business…”

I believe you! I’v seen it too!
They may be a small group of people 5-10% but they are buying all the real estate out there.
In a year or two, they may or may not regret their decisions but they play a big force in pushing the market out of control.
it needs to stop.

#75 aa3 on 03.13.17 at 5:33 pm

Say you had gone huge on a mortgage a few years back.. ya you would on paper have equity. But you would also have huge monthly payments to make, huge and rising property taxes, huge maintenance bills.

Theoretically if you sold it AND took your gains out of that real estate market, the paper gains would become real.

But not 1 in 100 people do that in a real estate boom. And indeed as soon as any appreciable number of people try to cash out, the market collapses, and the paper gains go away.

#76 Paul on 03.13.17 at 5:33 pm

Tudval on 03.13.17 at 11:23 am

#29 contractor ” Just in the last few months for example Indian investor’s just put 50% down on 60 homes in one subdivision! ”

You mean foreign investor just financed construction of 60 homes that will be rented to and used by Canadians?? Imagine the horror, the scourge of foreign capital, comrade Lenin is turning in his grave.
———————————————————-

Oh you must already own, not competing for a home.
Dip

#77 Brian on 03.13.17 at 5:38 pm

I echo the despair by some of the posters. Early 40s, renting, screwed. Sure the fed will raise but it’s not going to change anything. The herd does win despite the stupidity of it all.

#78 Paul on 03.13.17 at 5:48 pm

#73 Shut down CMHC on 03.13.17 at 5:20 pm

Realtors crying like little babies about government about free markets wont mind cmhc being shut down
————————————————————-
Just make buyers qualify, It’s nudge, nudge, wink, wink,
Under C.M.H.C.

#79 Lee on 03.13.17 at 5:49 pm

#62, once bit

It’s actually you and me that will make up the shortfall in the pension assets through taxation. He’ll get his pension either way. He’ll just dish out more as a taxpayer along with the rest of us. The government can’t let the pension go dry.

#80 Contrarian Coyote on 03.13.17 at 6:34 pm

#60 not 1st on 03.13.17 at 12:52 pm
I like how the group that elected `mr selfie and tax you to the wall` now want Garth to tell them how to turn $2000 into $2 million overnight or retire at 35 with $150k in the bank.

I hope this group works until they drop. They have single handedly sunk canada for a generation cause they fell for style over substance and morality over pragmatism. Good job.

Schaudenfreude much? Where does she say she voted for Mr. Selfie and wants to turn $2K into $2mil overnight.

Grow up and give the woman a break. She’s doing her best and reaching out for advice with her last bit of savings with an eye on her helping her children in the future.

I’d wager her situation is vastly more realistic than what most of passes for comments on here.

#81 JS on 03.14.17 at 10:17 am

http://www.zerohedge.com/news/2016-03-04/ridiculous-joke-abandoned-rotting-vancouver-house-listed-72-million