Apology

I must apologize to the 40-year-old who wrote to this blog yesterday for free financial advice. I failed to understand she is, well, sensitive. Special. And I was, like, so unfair. Apparently it is no fault of hers that she lives in a $200,000-per-year household without investments, real estate, savings nor a budget. It was crass, paleo and crusty of me to miss the fact the letter was intended not for guidance and corrective advice, but to elicit admiration and approbation. For that, I am sorry. An email full of gold stars and emojis is on its way back.

To be totally fair, and avoid the legal action I am sure is coming from BC Human Rights and Anti-Boomer Commission, here is her letter (and some comments):

“While I was initially excited to read the advice of someone I respected, and leverage it to make positive changes in my financial life, my feelings quickly melted into disappointment and hurt as I read through.

I certainly expected a certain dose of acerbic ribbing — I’ve been reading your blog long enough to know the tone. But I also expected it to be accompanied by useful advice, beyond “put away 20% of your take-home, save $2 mil for retirement”. Google could have given me that information, without the public flogging.

– Is that $2 million per person, to for a couple, at minimum?
– Does that $2 million included projected CPP/OAP earnings?
– Do I still need $2 million if I have a home that is paid off at retirement?
– Does that 20% take-home investment include the RESP contribution, or is the RESP contribution on top of that?
– How much should one ideally have socked away in an RESP for each child by their 18th birthday?
– How much emergency cash reserve should I have in the bank, and should I be addressing that first, or alongside my retirement contributions?

If you could re-address my questions in a constructive manner, it would be very helpful to me, and probably a lot of others, too. I can’t be the only financially illiterate almost-40-year old reading your blog.

And as a side note to you and your evil Comments trolls, the $10,500 monthly earnings I stated are recent — within the last two years. Prior to that, we were earning half that amount, and paying $2,000 in rent. Not a tonne of savings opportunities there. And not wanting to feed my kid processed food or have them living in a neighbourhood scattered with used hypodermic needles, where crackheads haunt transit stations and doorways (AKA “the affordable parts of Vancouver”)… does that really make me a “hedonistic, self-centred wombat”?

If I were you, I wouldn’t be sleeping well at night either; pinning a scarlet dollar sign to a well-meaning fellow citizen, just to set an example/get some laughs — not good karma. – Late to the Investment Party.”

The answers, Late, are easy to provide (and kinda obvious). Two mill for a couple will provide an income stream to replace about 60% of what your household brings in now. Seeing as you save nothing, that’s probably still not enough. No, it does not include CPP. Use that to buy kibble for your next Frenchie. OAS will be clawed back completely (and may not exist in 25 years).

A paid-off home in Vancouver in two decades with your spending habits? In your dreams. No, not included. As for the RESP, it’s only $2,500 a year and for that you get a 20% government grant. One less latte a day, babe. And how much education money you have depends on future unknowns. Since you have nothing now, just start. As for emergency cash, none. That’s what a LOC is for. Besides, you’d just spend it.

Your problem isn’t strategy or knowledge, it’s discipline. Budgeting. Saving. Plus attitude. I know it’s hard to believe, but there are people who scrape by in $2,000-a-month condos and somehow avoid being mugged in transit stations and doorways. Apparently not everyone shops at Whole Foods Market, and yet they still manage to keep their teeth and fend off child mortality.

Regarding your greatest fear – becoming a responsible adult (and mother) only to eventually die without partying enough –  how is that not being both self-centred and hedonistic?

Finally, as for being a wombat, that’s an affectionate term for a marsupial that poops in cubes. Seriously. It loves being noticed.

The scary middle

It’s a drag being a disintegrating wrinklie. And moisterdom is no picnic. But hitting 40? Terror. No longer young. On the path to being old. Expected to be adult – mired in career, house, marriage, family, mortgages, prenups, pension plans, tat removal, dental crowns, daycare, glasses, budgets, a minivan. Ayee!

You can be young, poor and still cool. You can be old, impoverished yet mercifully pitied, supported. But at forty life’s just one massive ball of expectations. Besides you may sag a little. Lose some hair. Dread a class reunion. Middle age. How the hell did that happen?

Fortunately, GreaterFool is here to help. Send in the first victim…

Hey, Garth! I followed your advice: sold my YVR condo 2 years ago, started renting, paid off all debt and stuffed the remaining $20k into RRSPs. I know that’s pretty paltry savings for a 37-year old, but clearly I had my head in the sand for a long time, and in my defence, I never had parental handouts or any education in the realm of finance. [Do I get a Participation Award, at least?]

Fast-forward to today, and I have a 1-year old baby and a husband, and I’m going back to work. Together, we net $10,500/month. Our fixed costs are daycare ($1,000/month), car expenses for two commuters, and the usual grocery and utility bills. Our savings stuck at $20k, thanks to me being off work for a year and vet bills for an old, sick French bulldog, who has now passed. European cars and dogs — fun to own, expensive to fix.

So here’s my question: given that my husband and I are pushing 40 and have basically nothing saved, how much do we need to sock away a month to ensure we’re not living in a tent city on Hastings when we retire? How much do we have to sacrifice now? $2,500/mo will get us an okay rental in an okay part of town; $3,000 will rent us the condo of our dreams. Do we raise our child on KD or buy the organic vegetables? Do we vacation at the local spray park or book that all-inclusive in Ixtapa?

Here’s my biggest fear: we scrimp and save every penny now, living just to work, but one or both of us kick the bucket before we are able to enjoy our lives. How do we come up with that magic number that allows us to have some fun now, while ensuring we have enough saved for the future? Is there a general rule of thumb? Or are we just screwed, no matter what?

Sincerely: “Late to the Investment Party”

Dear Late. Yes, you’re nicely pooched. You and your squeeze are netting almost $130,000 a year, which means the gross household income is approaching $200,000. And yet you save nothing. You have no real estate to feed. No investments. No equity in anything. Only one kid to farm out. And for this abject failure you blame the poor, deceased dog. Shameful. The Ghost of Frenchies Past will be coming to visit you at midnight.

Everything should have changed, L, when you decided to have a family. If you’re going to create another life, there’s a responsibility to look after it. Now you’ll be lucky to survive anything – job loss, sickness, marriage breakdown. To think you’re immune is arrogant and wrong. You need a plan, a budget, routine savings, an investment strategy and discipline to salt money away for the kid plus the long years ahead.

Your biggest fear is not enjoying yourself enough before one of you croaks four decades from now? That sounds like the mother of all excuses to be a hedonistic, self-centred wombat. Come back when you’re 67, unemployable, and tell us how that worked out. So, start an RESP for the kid and take advantage of the 20% government grant. Fill up your two TFSAs as soon as possible by putting aside 20% of take-home pay. That still leaves you $8,500 a month – twice the income of the average family. I know it’s a lot to ask, but cut down on the pedicures, the vacation every four months, the clothes. And what’s wrong with KD?

The goal at age 65 should be two million. You now have twenty thousand. And a bad attitude. By the way, good luck tonight.

More female forty-something angst. This time it’s his fault.

I know I’m supposed to suck up to you first but I wouldn’t be writing if I didn’t read your blog and think that you had all the answers so, I’m not really going to. Oh, except for saying I really love the pictures you put on the blog. They are hilarious.

My question is sort of two-fold… My husband is worried we won’t be able to retire early. As a result, he’s wanting to purchase some land now, somewhere where will want to retire, becasue he thinks if we wait it’ll be too expensive. (we want to stay in in Ontario)

I am 38 and he is turning 43, no kids and a dog (of course). We have a really great relationship with money and typically agree on how to save, invest, and spend it. Except on this. My thinking is that we don’t know where we’ll want to be in 10-20 years, or where his job will take him, so why waste money now on property we won’t really be using.

We have NO debt, $350,000 in rrsps, tfsa (not with any bank), and a work DC plan. We sold our home in 2013, right before the BIG boom but still did well on it. After that we moved into a van for fun for 9 months and then ended up in toronto for a amazing opportunity for my husband.

We are not house hungry, we love renting and pay $1,900 for a 1-bedroom in a really hip area of town so that we can both walk to work and everywhere else. The idea of commuting is a no-no. We both work full time, together we earn over $100,000 after taxes. My husband works in an industry that is DYING for people and he’s amazing at it so I can just imagine his opportunities continuing to flourish.

Our current MUST PAY expenses are around $4,000/month (rent, storage, phone, internet, life and home insurance, Presto/occasional car rental, and utilities). We have a $15,000 emergency fund (we both hate banks so your recommendation for an LOC was a vetoed) and save about $20,000 a year to put towards investments. Typically we push a bunch into RRSPs and then use the refund to put into our TFSAs. (note: we’ve only really started doing this once we lived in an apartment. Before, we put all our extra money into paying off our mortgage, which I realize NOW was stupid).

We’re not lavish people when it comes to material things but we do enjoy going out and pamerping ourselves (dinners, theatre, sailing, yoga, trips to the spa, etc.) and I will admit, that we could definitely save more money if we cut back on those things. Is there anything else I can share that’s helpful before you crush me with your wisdom? Feel free to use this on your blog. – Z.

Lots good here, Z. The net worth is okay, nice and liquid and fully invested. Good you’re renting in hipster city instead of owning. Overhead is reasonable, no debt, stable relationship (anyone living in a van for nine months passes the test), personal discipline – and you aren’t guilting the dog.

But get the boy to drop the hippie-lumberjack-land thing. Bad idea for so many reasons.

This may seem vaguely romantic, until you’ve actually done it (I have). For people used to dwelling in a hip urban space, who eschew cars and indulge in yoga and theatre, why do you want a life of hardship, pellet stoves, earwigs, people who wear baseball caps backwards in pickup trucks, ticks, septics and a bad Internet connection? Now imagine putting up with it all when you’re old. Yuck.

Second, it costs a pile to build, rather than buy a resale place. Raw land needs to be serviced – major money just to get electric poles in place, let alone dig the septic bed and drill a well. Construction costs are absurd (go price a 2-by-four), and the spending never stops on things you get for free with a resale (like decking, towel bars, curtains, landscaping, a garage or paving).

Third, timing. You’re right. How can you possibly know now what you’ll desire in two decades? Where you’ll be? What you can afford? FOMO has proven to be the wrong reason to buy anything – especially true when it comes to something (empty land) most people don’t want. Better idea: get him a camo jacket, a subscription to Field & Stream, hip waders and a dog whistle. He can always use it on Queen St. East.