The slush fund

SUNK modified

The Big Owe gave his maiden in Toronto on Monday, and all but promised that by this time next year you’ll be able to put $10,000 a year into your TFSA. The baby finance minister did not use the exact phrase, of course. They were the usual political weasel words:

“Once the budget is balanced our priority will be to provide tax relief for hard working Canadian families. It’s too early to get into too many details, but obviously there are a number of alternatives.”

Not really. There’s only one option on the table. Family income-splitting is way too expensive, and now socially unjustifiable. Ain’t gonna happen. Cutting the GST? Hardly. The last cut helped plunge Canada into a record deficit when the economy turned south. And no general income tax cut, either, since a third of the population is moving towards retirement and about to pay less and collect more.

That leaves the TFSA. Doubling the contribution limit (as was promised before the last election) is a very sexy tax break. Almost half the population has now opened a tax-free account (even though most people totally squander it). The banks spend boodles promoting these things (because they directly profit, especially when people squander it). And, finally, most of us like the idea of TFSAs, without actually using them.

Less than 17% of people with a TFSA have the maximum amount in there ($31,000). A stunning 57% of all TFSA money is sitting in cash, with another 23% in GICs. That means 80% of us have blown the chance to turn on this money machine, instead opting for returns of between 1% and 2%. Unbelievable. And how many of the 43% who have TFSAs have growth assets like stocks or ETFs in there? Just nineteen per cent.

Are we a nation of financially illiterate fools? Of course. Forty-seven per cent of those with TFSAs say they’re using them to save for a house. Forty per cent more put money in so they can take it out later and buy stuff. Like holidays and countertops. In fact, Ottawa’s own current self-lubricating ad campaign about Conservative tax breaks features a couple who just used their TFSA to reno the kitchen. Sigh.

And it all had such promise. Invest after-tax income, grow it aggressively for a few decades in a taxless environment, then have a pot of money to dip into when you retire. A nice change from the RRSP, from which all withdrawals are taxed at source, or from the RRIF, where you’re forced to withdraw taxable income.

Let me show you what Owe’s policy shift might mean.

If you’re 30, have $15,000 in a TFSA now and next year start adding in the maximum allowable $10,000 annually (I think) what can you expect for your two hundred bucks a week? Well, by age 65 and assuming a 7% return (in line with the last thirty years of financial markets), that would be $1,542,517.

Hmm. To have an equal after-tax amount coming from a typical RRSP, that plan would require a balance of $2,005,000. And guess how many folks in the country have a two-million-dollar retirement fund? Other than most people who come here, of course?

Now, accumulating a $1.5 million TFSA by putting $10,000 a year requires compound growth of $1.17 million – money which would otherwise be taxed. That means you save, and Ottawa loses, about $350,000.

See why the government ad suggests a TFSA is ideal for financing granite and stainless? Why there’s not even a mention of this vehicle as an investment rocket? Why almost nobody is linking it to retirement, or the serious accumulation of wealth?

The more the feds goad people into seeing this as a glorified personal slush fund, the less they stand to give up. The big Owe actually doesn’t care about some couple with $12,000 in a TFSA savings account at BeeMo earning 1% because it’s costing the Treasury only $36 a year. But a couple with the maximum $62,000 invested for a 9.6% return (what the TSX did last year) robbed Ottawa in 2013 of at least $1,785 in revenue.

Here’s the bottom line. Most of the people you know spend more time every day worrying about their hair than any of this. They’ll never get it. Never max out a TFSA. Never invest within it. Never harness this beast. And that’s great. Because when the feds pull the trigger before the 2015 election and double the limit, the enlightened among us can pounce.

This is a simple lesson in why there is the 1%, and the 99%.

So pick.

212 comments ↓

#1 Lettin' it slip on 04.07.14 at 6:53 pm

First?

#2 saskatoon on 04.07.14 at 6:55 pm

middle earth garth.

http://imgur.com/S60cT23

#3 TurnerNation on 04.07.14 at 6:55 pm

Kaputs doing well again. Tops are messy affairs.

#4 GPG on 04.07.14 at 6:56 pm

But as a central banker, I am haunted by a comment made by Winston Churchill in 1926, shortly before things began to unravel in the global financial markets. Speaking at the Waldorf Hotel in London, he said: ‘In finance, everything that is agreeable is unsound and everything that is sound is disagreeable.’

http://www.prudentbear.com/2014/04/hft-rigged-markets-and-man.html

#5 Silent the people on 04.07.14 at 7:01 pm

Well said Garth!

#6 Bill Clinton on 04.07.14 at 7:02 pm

Garth for finance minister or PM!

#7 VanCity D-man on 04.07.14 at 7:04 pm

Can’t wait for Big Owe to double our annual TFSA contribution limit!

#8 Porsche on 04.07.14 at 7:04 pm

When I make back the 250K I have in capital losses, I’ll worry about saving tax on capital gains

#9 Mike on 04.07.14 at 7:12 pm

Pikachu I pick YOU! :)

#10 Al on 04.07.14 at 7:15 pm

Thank you Garth!

#11 Pounding sand in Peachland on 04.07.14 at 7:16 pm

It’s that time of year

#12 Jas Girn on 04.07.14 at 7:17 pm

:)

#13 Godth on 04.07.14 at 7:17 pm

The Father Of High Speed Trading Speaks: “The Market We Created Is A Casino; A Complete Mess; A Rigged Game”
http://www.zerohedge.com/news/2014-04-07/father-high-speed-trading-speaks-market-we-created-casino-complete-mess-rigged-game

#14 AK on 04.07.14 at 7:19 pm

“Most of the people you know spend more time every day worrying about their hair than any of this.”
====================================

Actually, most people worry about being the “First” to post on this blog than anything else. :-)

#15 Smoking Man on 04.07.14 at 7:20 pm

Why is that I have a little voice inside my head that’s keeps saying, the liberals will be coming after anyone’s maxed TSFA or any surplus loot that can easily be identified as surplus..

More of a nightmare…

#16 StatsFreak on 04.07.14 at 7:22 pm

I love you, Garth.

(have I mentioned that lately?)

xoxoxoxoxoxoxoxo

#17 omg on 04.07.14 at 7:30 pm

Yikes Garth – keep quiet about the idea of using the TFSA as a long-term investment account. Let the poor scmucks spend it on renos and vacations.

If everyone uses the TFSA for long-term investing and there is too much tax leakage, some future government will start taxing the money when its withdrawn, or clawing back more of the OAS and CPP.

#18 Dern on 04.07.14 at 7:31 pm

“This is a simple lesson in why there is the 1%, and the 99%.” Love this! #truth

#19 TFSA MAX on 04.07.14 at 7:32 pm

Got mine and the wife’s maxed… both earned about 12% last year :)

#20 sideline sitter on 04.07.14 at 7:33 pm

Like I posted last night (this morning, actually) , I just bought my first ETFs in my TFSA… Next stop, bonds in my RRSP!

My parked cash will now move into a driving lane (hopefully the fast lane, but I’ll move ahead in a balanced way).

#21 I'm stupid on 04.07.14 at 7:36 pm

If they actually do it, it’s going to be the best retirement vehicle ever created.

#22 Millenial on 04.07.14 at 7:40 pm

I’m not a real man garth, I’m 32 and sitting on a bunch of cash with no opened tfsa or rrsp accounts. I’m scurred the stock/bond market will crash.

#23 Pete in Barrie on 04.07.14 at 7:40 pm

I was chatting with a colleague on the weekend. He has 5 kids under 10 years of age. Since his wife started working they have been tossing a few dollars into a TFSA so that they can use it later to pay down the mortgage. He was convinced it was only for savings, not investing. I was promoting RESP for them as they have not started them yet, and for eligible families, I think it should be the first place to invest.

I could be wrong, but what really surprises me is how few people understand what a TFSA is. Perhaps that is because it has the wrong name – should be changed to a TFIA.

#24 Ralph Cramdown on 04.07.14 at 7:40 pm

I think you’re being overly optimistic. Nobody who hasn’t got their current TFSA maxed out, or at least contributed the annual limit last year, is going to think “woo hoo!” if the limit is increased. Tax benefits don’t have to benefit a lot of people much, but they have to get a bunch of people to believe they will, might or could benefit. Many folks with maxed out TFSAs already vote blue, any why would somebody who can’t max it out now think an increased limit benefits him?

Income splitting too expensive?
TFSAs already overwhelmingly underutilized by likely swing voters?
General tax rate reductions too easy to reverse by future government?

Maybe mortgage interest deduction, with a low annual cap, and possibly a clawback for higher income earners. It has to be something that overwhelmingly favours the majority of those likely but not guaranteed to vote conservative, and ideally excludes those most likely to vote further left (e.g. renters).

#25 len on 04.07.14 at 7:49 pm

“that is why there is the 1% and the 99% is a complete and utter nonsense”. The 1% are well connected rentiers who derive their income by skimming the 99% – like first and easy access to extremely cheap money.

Stop being such a shill for the establishment. Could the 99% do better? Sure, but then how would the rentiers get so fabulously ahead of the rest of the herd – and remember, you are part of the 99% in terms of wealth, not the 1% and definitely not the .001% who really can move policy in their favour. So yah – fawn over the “smart” money some more and never forget who sends the crumbs your way Garth!

Gee, I wonder which one you picked. — Garth/em>

#26 espressobob on 04.07.14 at 8:01 pm

If I’m not mistaken it was Garth Turner who invented the TFSA? I call it a free lunch. Thanks!

#27 Humpty Dumpty on 04.07.14 at 8:06 pm

The Yuan Fund…

At least 40 central banks have invested in the yuan and several others are preparing to do so, putting the mainland currency on the path to reserve status even before full convertibility, Standard Chartered said.

Twenty-three countries have publicly declared their holdings in yuan, in either the onshore or offshore markets, yet the real number of participating central banks could be far more than that, said Jukka Pihlman, Standard Chartered’s Singapore-based global head of central banks and sovereign wealth funds.

Pihlman, who formerly worked at the International Monetary Fund advising central banks on asset-management issues, said at least 12 central banks had invested in yuan assets without declaring they had done so.

http://www.scmp.com/business/banking-finance/article/1466621/central-banks-investment-yuan-puts-currency-nearer-reserve

#28 Mr Landlord on 04.07.14 at 8:07 pm

Hi Garth,
WhAt percentage would have a nest egg of 2 Million not including their house in Canada?

#29 Shawn on 04.07.14 at 8:12 pm

Sticks and Stones Will Break My Bones…

When you don’t like something it’s good to resort to name calling.

Is one who makes an income from rent and income on property an evil “rentier” or just someone who sacrificed consumption years ago and saved their money and invested it? No one is forced to pay rent to any particular rentier. Many renters may not like paying rent, but I think they do appreciate a place to live.

Is one who lends money practicing the evil of “usury” or are they simply lending money which allows someone else to consume now. Most borrowers are glad to get their loan approved. It’s particularly ridiculous that some will dredge up the “usury” term at a time when interest rates are lowest in history.

Is one who tells a tale of personal success an unsavory braggart or are they someone to possibly emulate?

I don’t think most highly successful people are into name calling.

#30 jan on 04.07.14 at 8:16 pm

Shit, I know that car under ice.
He’s a Toronto realtor who just can’t get a listing to hold on to before he gets screwed by a colleague who makes a better promise to the vendor.
Its a tough living but hey, somebody’s got to do it….LOL.

#31 Scalgary on 04.07.14 at 8:17 pm

Garth,

Hope you are recovering well!!!

Great post as usual! Can you please write a blog on how to preferreds?

Thanks a lot!

#32 World According To Garth on 04.07.14 at 8:18 pm

So lets sum up…..

TFSA for the 3% to 5% (we contributed but everyone else we know who is NOT employed by the Govt is broke)

Which brings me to point two. NO WAY they can cut taxes cuz then there is no money to pay for the bloated snivel service, their pensions and their benefits.

The year will be 2015.75 folks…….just wait for it.

#33 Ben on 04.07.14 at 8:18 pm

What’s 1mm in 30 years? Bugger all! Heroic compound growth estimates also in maturing (in more ways than one) economies. Still good news, but we are not saved.

#34 b on 04.07.14 at 8:19 pm

From your mouth to God’s ear, Garth. Let the TFSA limit rise up!

#35 mark on 04.07.14 at 8:20 pm

If someone’s been saving, at what monetary figure do you suggest they reach before beginning to put those savings into investments?

10k, 15k?

#36 Nemesis on 04.07.14 at 8:22 pm

“Because when the feds pull the trigger…” – HonGT

Funny AuldWorld, the RealmOfSlushFunds…

Combatting them is, in some regards, the DirtiestOfWars…

TheWork sure is fun, though… albeit, occasionally messy.

http://youtu.be/bq8lftiOIHc

Do you know where your SlushFund is tonight?

LosPistoleros do.

#37 Smoking Man on 04.07.14 at 8:24 pm

Why real estate will never go down in Canada.

Today had the pleasure of talking to a lovely young lady, 25ish on the train today. Smart as shit. This kid has a great job and a promising future..

Climate change was to topic, to my amazment she was so into it. I put her onto ClimateDepo.com for counter ballance. Would and fazz her one bit, “That’s big oil old timer, they pay these guys to lie” she said. I said how about all these scientist jumping ship, “Big Oil gramps, they have lots of money to buy people.The science is solid, I went to western university.”

I asked when did you start learning about this. “Oh all in grade school and espacialy in high school.”

Now this girl is not an idiot, but trying to invoke some crittical thinking was like trying to get a rabbi to eat a pull pork sandwitch, a devout Muslim to draw pictures of Mohamid. This climate shit is a religion….

I then asked what would happen if you told your freinds that you no longer swallowed Man Made Climate change. She laughed an said. “They would think I was crazy and probably stopped talking to me.”

So then I asked what about home ownership. Does real easte ever go down, are you affraid of a crash. She said and I Quote, “Real estate never goes down, some of my freinds have bought condo’s and the rest of us are looking to buy. Rent is a waiste of money. my girl friend and I are both single and we might partner up and get something down town, don’t need a car, and it’s good for the enviornment. we are looking at one place
on the weekend, stainless steal appliances and amazing granite, and
washrooms. ”

Yes fellow boomers, this next gen is going to sure take care of us…..

#38 Smartalox on 04.07.14 at 8:25 pm

Wait a minute, isn’t the dollar limit for 2014 TFSA contributions $5500?

Wouldn’t that make next year’s limit $11,000, not $10 000?

Any word on getting the Americans to recognize the TFSA as equivalent to a Roth IRA, so that dual citizens are not unfairly taxed on their TFSA gains? Similar to the way that RRSPs are treated as equivalent to 401k?

C’mon Finance, get our there and negotiate that treaty. The fact that this wasn’t in place 6 years ago is an embarrassment to this government.

F’s promise was for a $10,000 TFSA limit. — Garth

#39 sheane wallace on 04.07.14 at 8:29 pm

Are we a nation of financially illiterate fools?
……………………………..
Yes we are. Brainwashed and brain-frozen.

Of course they need suckers to save in GICs and subsidize their ZIRP/zero interest rate policies, they know very well that we are stupid and plan to capitalize on that.

Despite Garth’s advice very few will invest in the stock market. Average Canadian is financial illiterate. If we were financially educated we would never have fallen for the housing folly. Germans did not. Supposedly ‘smart’ people keep talking about how wise is to invest in real estate. Flipping houses is a hot topic, even today. I have close friends doing it. This spring. Recently somebody told me that houses will keep going up and 2 million dollars crack shacks in Vancouver is not the market top. He thinks 5 millions is in the cards.

Garth, you are looking 2-3 steps ahead and your advice is very sound. However I am afraid of the system risk that is building and I am slowly becoming more and more convinced that we are going to see very nasty unforeseen outcome, including some sort of capital controls and seizure of funds, specially registered funds.

In a way CMHC is exactly that – miss-priced risk at the expense of taxpayers. Why not take over CPP? private funds? It is very tempting specially if the alternative is a currency collapse. If we continue our way currency crises is a given, when the times come I am afraid that might serve as an excuse to seize private funds for example take over registered funds and promise some future government pension that of course will be eaten by inflation.

Not going to happen? I don’t know, 10 years ago I would have said that it would be unthinkable that stupidity could go so far and for so long. But here we are, in the new normal. Leaders are suicidal these days and that scares the hell out of me.

#40 johnny m on 04.07.14 at 8:29 pm

“I’d be surprised how few people understand the tfsa”.
Few people understand rrsps. People contribute every march but haven’t the foggiest what they are buying!!!

#41 TheCatFoodLady on 04.07.14 at 8:40 pm

I put it down to unintended consequences consisting of a combination of no money to save, (real or perceived lack thereof), better rate of return than vanilla savings accounts & poor, (deliberately?), marketing of the product by the government as well as banks.

Poll after survey after series of random questions has made it clear few are preparing for retirement other than buying RE. A new or newish vehicle was never going to change that.

Ordinary savings accounts – the majority of people DO like to have some cash available – pay squat compared to a TFSA ‘savings account’. I don’t know what the official numbers are but most I know aware of TFSAs use them for any/all savings – no matter what they’re saving for.

I’m not sure the government is advertising the benefits of TFSA enough & I have to agree – they’re poorly named. As to banks – snicker!

Here’s what my bank says one can place in a TFSA:

***
What types of investments can I put in a TFSA?

Rate this response

Eligible investments that you can place in your TFSA portfolio include cash deposits, GICs and mutual funds (similar to what’s available for RRSPs). ***

That’s CIBC.

#42 Ronaldo on 04.07.14 at 8:42 pm

#21 I’m stupid on 04.07.14 at 7:36 pm

”If they actually do it, it’s going to be the best retirement vehicle ever created”

Yes, but only for the few that will use it properly. Otherwise it will be just another tool for the 1% to shelter tax just as the RSP was for those few that used it in the past 50some years. The [email protected] is not going to promote anything but interest bearing vehicles and people will continue to lend the banks cheap money so they can lend it back to your neighbors 10 times over at twice the rate they pay you. How can they lose? This is why you buy the banks. Thanks to Garth and this blog, at least those that read it will have a good chance at making it work for them.

#43 Mishuko on 04.07.14 at 8:42 pm

I love your 99% commentaries.

Almost to the same level is SM’s rantvice and the other good moldy dwellers that share their stories.

Cheers!

#44 I Got Screwed on 04.07.14 at 8:45 pm

I agree with it all, however, the part about 17% of people having less than the maximum $31,000 can be at least partially explained by people who were not residents when the TFSA came out. I’ve maxed my TFSA but that is sadly only only half the amount many others are entitled to.

#45 Notta Sheeple on 04.07.14 at 8:47 pm

“……This is a simple lesson in why there is the 1%, and the 99%………”
=========================

Kind of tough to get ahead when you have a government allowing you to be replaced with a TFW at 15% less than market wages.

#46 Jim on 04.07.14 at 8:47 pm

Assuming the next 30 years will look like the last 30 years?

30 years ago there was no fractionalized high speed counterfeit liquidity.

#47 Mike on 04.07.14 at 8:49 pm

I remember being excited at the prospect of the TFSA limit rising to 10,000 before I was ever able to open one. Although, I distinctly remember them indicating (initially anyways) that they would “double” the TFSA limit. Also, would they be adjusting for inflation as they do now? And didn’t they also promise income splitting in addition to increasing the TFSA limit?

#48 Math Teacher on 04.07.14 at 8:51 pm

Would doubling the $5,500 contribution limit be $11,00 per year for the TFSA and not $10,000?

#49 Old Man on 04.07.14 at 9:04 pm

I am watching the live results in Quebec and they are now calling a Liberal majority government, so we shall see.

#50 Quebec Friend on 04.07.14 at 9:05 pm

Liberal government elected in Quebec…

Remember whatever I told you some weeks ago.
Don’t worry about a come back of the separatists in Quebec, it’s just an old dream of a small remaining part of the baby boomer generation. Most of Quebecers love Canada and are proud to be part of it.

It’s a great news for all of us!

#51 Retired WI Boomer on 04.07.14 at 9:06 pm

Boy, I would like to see TFSA limits doubled. That would give the 99% the opportunity of a lifetime to get closer to, if not exactly into the 1%. If you are in the lowest quartile (bottom 20%) you could earn & invest your way to the top quartile (top 20%) without giving up your life.

Notice the old fart said “invest” not “save” like in a bond, or GIC. If your young 80%-90% should go into the markets, the balance into something like preferrers or bonds.

Only a minority use the TFSA to the max now, do you think doubling the contribution room will entice many others? I do NOT your statistics show your populace up to their necks in debt now.

Yes, next generation’s top quartile get this stuff, the rest by choice, or bad luck will never see it. Financial literacy is rarely taught in public schools, we do our kids a serious disservice by not teaching them at a very early age.

#52 Ralph Cramdown on 04.07.14 at 9:07 pm

Maudit money (PKP excepted) and the ethnic vote strikes again.

#53 notagreaterfool on 04.07.14 at 9:07 pm

What will the Big O do about the housing market?

#54 Shawn on 04.07.14 at 9:08 pm

Some Won’t Bother Trying…

Ben at 33 said:

What’s 1mm in 30 years? Bugger all! Heroic compound growth estimates also in maturing (in more ways than one) economies. Still good news, but we are not saved.

******************************************
There is a grain of truth in that but it’s mostly an excuse and a copout.

Today’s one million probably buys (on average although not in houses) about what $100,000 did 50 years ago.

50 years ago many workers just starting out may have said, what’s $100k in 30 years? bugger all. But you know, those who invested diligently starting then and kept that up for 35 years could easily have ended up with a million today. One thing’s for sure they ended up with a lot more than those who invested nothing.

Today’s inflation is basically the lowest in about 40 years. The time to worry about inflation was the 70’s and 80’s. Not so much today.

Also if you are waiting for “we” to be saved you have it all wrong. You will need to save yourself. Investing is not a communal activity. You must look after yourself.

The 1% will never be more than 1% of society. Same with the top 10%. It’s up to each person if they want to try to join one of those groups. It’s not for everyone. Poverty certainly has its virtues, at least for some people.

Ironically enough, saving and joining the 10% or the 1% means sacrificing current consumption. That means investors take LESS out of the system for many years and consume less but they get the right to more than make that up in later years. Others can consume more NOW because investors forego current consumption. Giving up one piece of cake today may mean you get to eat ten pieces of cake in 40 years.

Is it worth the wait even for the extra 9 pieces? That is for each of us to decide.

#55 Obvious Truth on 04.07.14 at 9:12 pm

#39. Life can be tough but will never be that bad. It’s just paper and yes everyone is making more of it. Just go with the flow. Think of it as a gift and not a burden.

Canada can print money and run deficits for a couple decades.

It’s fun collecting gifts.

#56 Cici on 04.07.14 at 9:22 pm

I’m not holding my breath for the $10,000 TFSA promise. I’m with the Financial Post on this one…it’s all about the income-splitting promise just in time for elections, which is probably the main reason why The Big Owe has taken the elfin deity’s place.

http://business.financialpost.com/2014/04/07/joe-oliver-taxes-finance/

I doubt it. The cost is $2 billion a year and it benefits an absolute minority of people, most of them decidely middle-class. — Garth

#57 tam on 04.07.14 at 9:22 pm

What do i say to the bank when i walk in there to open a TFSA to get the 7% and avoid the GIC hard sell?

Why would you open one at a bank? — Garth

#58 Scully on 04.07.14 at 9:25 pm

Smoking Man,
LOL! Good little consumer she was. Not able to think for herself. We’re doomed. Might as well wait for global warming. ;-)

#59 tam on 04.07.14 at 9:26 pm

Why would you open one at a bank? — Garth

Thanks for replying.
where do suggest i go to open my TFSA?

Where you can buy better assets, such as an online brokerage. — Garth

#60 Old Man on 04.07.14 at 9:27 pm

I challenge the blowhard Caesar to call an early election or resign. Come on Caesar make my day you coward and let Canada vote, as your sordid days are numbered.

#61 economictsunami on 04.07.14 at 9:28 pm

What happens when debt monetization gone wild overtakes the world?

No fiscal discipline needed; just binary/ alchemy solutions.

Central banks will be financing governments on a permanent basis…

http://www.economist.com/news/finance-and-economics/21600142-central-banks-will-be-financing-governments-permanent-basis-now-you-see-them?fsrc=scn/tw/te/pe/ed/nowyouseethem

Draghi’s $1.4 Trillion Question Lingers as ECB Mulls QE…

http://www.bloomberg.com/news/2014-04-06/draghi-s-1-4-trillion-question-lingers-as-ecb-mulls-qe.html

Stay tuned…

#62 Cici on 04.07.14 at 9:32 pm

OK, and for all those cheering about tonight’s Quebec Liberal victory, the news isn’t really that great. There’s a reason why that gang of crooks was voted out under Charest, and Couillard is no better. Oh, well…no referendum at least.

The problem with voting in Quebec is that there are no good options anymore. People vote according to a severe recency bias, i.e., come every election they are so dissatisfied with whatever party is in power that they will vote them out.

We’re running all the time but getting nowhere fast…

#63 Piccaso on 04.07.14 at 9:36 pm

Why would you open one at a bank? — Garth

Thanks for replying.
where do suggest i go to open my TFSA?

Where you can buy better assets, such as an online brokerage. — Garth
…………………………………………………………………….

LOL… Guess who owns RBC Action Direct or TD Ameritrade. CIBC I imagine also has a online brokerage but never heard them pump it.

#64 Ford Prefect on 04.07.14 at 9:42 pm

The TFSA is the Tax Fantasy Savings Account, as in “I am going to save money (really!) and then I will hold it for years in a TFSA (I mean it!) and then I will be rich from all my tax free investments that have increased ten fold! and then I will cash out and live the good life”.

What exactly is the chance of the above happening? I figure about 1% or less for most people.

Is that not what I wrote? — Garth

#65 Godth on 04.07.14 at 9:46 pm

#46 Jim

Assuming the next 30 years will look like the last 30 years?

30 years ago there was no fractionalized high speed counterfeit liquidity.

Houses always go up Jim. Technology will save us Jim. 5:1 oil returns are the same as 100:1 Jim. Financialisation will sate us through re-hypothecation Jim.
Chief Seattle was an Idiot Jim. Don’t worry be happy Jim. SOMA Jim? We have lots of SOMA. Nuclear radiation is good for you Jim, no need to duck and cover.

#66 John in Mtl on 04.07.14 at 9:51 pm

@#50 Quebec Friend on 04.07.14 at 9:05 pm
@ #49 Old Man on 04.07.14 at 9:04 pm

Its a good thing the PQ didn’t get elected but I’m afraid we are in for far, far worse now that the liberals are back

The populace has a short memory indeed! The libs will carry on where they left off, more corruption, lies, broken promises. Curious also that apparently the Charbonneau commission has “vital information” about them that could have helped the people make up their mind in a more enlightened way but the commission is not allowed to speak or reveal anything until after the elections. Will we have to do this merry-go-round again in 6 months, 1 year?

I’m too old for this… as the saying goes.

#67 espressobob on 04.07.14 at 9:54 pm

Online discount brokerage accounts rock! The learning curve is up to the individual!

http://www.tdwaterhouse.ca/products-services/investing/td-direct-investing/index.jsp

http://www.rbcdirectinvesting.com/netaction.html

https://www.cibc.com/investorsedge-newlook/

Index investing is well worth learning!

#68 sheane wallace on 04.07.14 at 9:57 pm

#54 Shawn

Today’s inflation is basically the lowest in about 40 years. The time to worry about inflation was the 70′s and 80′s. Not so much today.
………………………………………..

There is nothing further from the truth. You are comparing apples and oranges. Inflation in the 70’s and 80’s was measured differently, if you apply the same old inflation measures today the inflation would be north of 6 % now, check with shadowstats/John Williams.

Current CPI ‘inflation’ measures exclude fuel, heating and food prices, education and insurance is weighted incorrectly, there was a very good video on the topic on Youtube by Peter Schiff, google it.

Wrong believes like this are the reason that this is going for so long. If people realize than we have strongly negative interest rates of 4-5 % there would be revolt and interest rates will skyrocket which itself would be a good thing in long run, it is better to get big pain now rather than enormous pain later.

Manipulating statistics in the old ‘English’ countries – Britain, UK, US, Australia will allow for this to go for a while but make no mistake, the crash is imminent and the longer we actually believe that we can defy the gravity the hardest the fall will be.

It is going to be spectacular. Keep dreaming about low inflation.

#69 wicked as it seems on 04.07.14 at 9:57 pm

I presently have a cool 37K in my TFSA, up 6 big ones is not too shabby….under NO circumstances would I withdraw a cent for the next 7 years (i will be 70 then) What do you have in yours Garth?

#70 sheane wallace on 04.07.14 at 9:58 pm

wrong beliefs, darn soellchecker

#71 Vangrrl on 04.07.14 at 10:04 pm

Hey, prices are dipping a bit in Van! You can pick up this little gem in my east Van hood for the wicked sale price of only 898K!!
http://www.rew.ca/properties/V1055886/3896-glen-drive-vancouver

#72 Compounding on 04.07.14 at 10:13 pm

Tax free gains – amazing. If you could (theoretically) fold a piece of card 1mm thick 100 times, it would be wider than the known universe; the power of compounding tax free is compelling :)

#73 Randy Randerson on 04.07.14 at 10:16 pm

What exactly is the chance of the above happening? I figure about 1% or less for most people.

Is that not what I wrote? — Garth

—————-

Brilliant response, only a minority of the populace will understand interest compounding.

#74 Ford Prefect on 04.07.14 at 10:23 pm

#64: Garth, where I differ from your take is that the TFSA is not going to benefit more than a tiny percentage of the populace. So we should scrap it and set up something like an enhanced CPP that will benefit many if not most people.

And no I am not a sorehead. My partner and I have a maxed out TFSA held via an investment advisor. It is just that I do not want to have to live in a gated community when the rest realize that they are screwed.

#75 joblo on 04.07.14 at 10:31 pm

Remember Income Trusts?
Anyone? Anyone?

No comparison. — Garth

#76 Waterloo Resident on 04.07.14 at 10:35 pm

That photo of the SUV in the water is funny and it reminds me NOT to take risky chances. Buying a house and expecting it to only go up is a huge risk. Driving a heavy SUV on thin ice and expecting the ice not to let go underneath is a huge risk.
I know of a guy in Barrie who runs a ice fishing hut business, he secures 2 large aluminum pontoons to the side of his 4×4 (pontoons taken from an old pontoon boat) They have saved his truck from going through the ice on numerous occasions. He would have lost his truck 3 times now if it wasn’t for those safety pontoons, they kept his truck afloat when it went through some unexpected thin ice.

In a similar way, if someone is planning on buying a house then try to do the same thing; plan for the worst while hoping for the best.

When i say ‘plan for the worst’, that means plan for your house value to drop 30% over 6 to 10 years. If such a thing happens then the bank will call your mortgage and you will only have a few days to cough up the cash to make up the difference in what you owe and what your house is worth.

So if you have a few hundred thousand in ‘safety’ cash laying around, then sure, go buy that $600,000 house. (and if you have pontoons on your truck then sure, go venture out on that thin ice).

If you don’t then don’t play on thin ice, you might go through it and lose everything you’ve got.

#77 Uh Oh Canada on 04.07.14 at 10:37 pm

Garth- I would personally like to thank you for giving a financial illiterate like me the confidence to invest successfully. I’ve been at it for over a year now and things are going great. Thanks to you and google I averaged 10% last year and am now working towards a balanced DIVIDEND portfolio.

A while ago, I used my total dividends for the year and bought a penny stock. (I only use money I can afford to lose on those penny stocks.) The stock doubled, I sold, and so I doubled my dividend earnings. Didn’t think investing would be so fun!

Thanks for your humanitarian work. You are saving some of us illiterates.

#78 T.O. Bubble Boy on 04.07.14 at 10:39 pm

Family income-splitting is way too expensive, and now socially unjustifiable. Ain’t gonna happen.

I agree… BUT – you can give a spousal loan for *1%* this year!!!

Everyone who is in a position to do this… DO IT NOW. Take most of the investments from the higher income spouse, and loan that cash to the lower income spouse. The higher the income difference, the more reason to do it.

#79 espressobob on 04.07.14 at 10:39 pm

Compounding?

http://www.youtube.com/watch?v=vII-GxsrR2c

#80 T.O. Bubble Boy on 04.07.14 at 10:50 pm

@ #69 wicked as it seems on 04.07.14 at 9:57 pm
I presently have a cool 37K in my TFSA, up 6 big ones is not too shabby… What do you have in yours Garth?
—————————–
Have you contributed the maximum amount ($5000 originally, and now $5500)?

$37k on the max $31k invested over the years = about a 7.2% gain per year. Not too shabby… but with markets up well over 100% since 2009, I’m sure there are higher TFSA balances out there.

I’m sitting almost exactly at $45k (as of today) = just above a 15% gain per year… and I screwed up in year 1 (2009) by putting $$$ into a “high interest savings TFSA” and making all of $50 on the first $5000 that year.

Who is the highest of the blog dogs?

Anyone at $50k or above in the TFAA?

Garth, you must be $60k+?

#81 GenXer on 04.07.14 at 10:50 pm

“If you could (theoretically) fold a piece of card 1mm thick 100 times, it would be wider than the known universe; the power of compounding tax free is compelling :)”.

The only hard part is finding a playing card larger than the entire universe and then folding it over on itself. I’m sure F had a solution for that, but left office before he could share the secret.

#82 GenXer on 04.07.14 at 10:54 pm

– “Now this girl is not an idiot,”

At what point in the conversation did you apply critical thinking to understand whether it was her view of the world that was problematic?

#83 LadyInWaiting on 04.07.14 at 10:58 pm

Mr Turner I understand the need for your repeated emphasis on saving and investing for retirement, but there are other reasons for savings that have a shorter time window. Buying a home is one of them. Saving for imminent college expenses. The need to purchase a working vehicle. It is hard to countenance a substantial drop in said savings accounts, so alas these funds just sit and languish in GICs at dastardly low levels of interest. It is not possible to invest these pots of money. Anyone who survived through 1999 and 2008 will be aware of the costs associated with even modest investments of monies destined for relatively immediate purchases or expenditures. So Mr. Turner, as you chastise everyone for their financial ignorance, please be aware that not all savings can be directed toward our gold-plated retirements, some funds need to be saved for short-term needs. Peoples incomes these days are generally not sufficient to allow for BOTH short AND long-term saving and investing. I do not deny the need to re-focus people toward long-term goals, but the middle class cannot sustain the competing demands on their shrinking incomes.

#84 FormerSaskie on 04.07.14 at 11:01 pm

I know that the amount deposited into a TFSA is monitored and overages are penalized. Is the growth of the assets also monitored by government?

#85 chris on 04.07.14 at 11:02 pm

Garth, some people don’t have as much money as you do.

#86 lore rowland on 04.07.14 at 11:02 pm

something like this for my daughter makes sense. she’s in her 30’s. me, I like enterprise,and invested all of my income back into a business that now does well, good income for myself and for the people working for me. bricks and mortar… think selling a house is fraught?…try selling a business. too many speculators not enough enterprise…problem with our economy today. and yet, somehow the ole Enterprise travels on, where so many have gone before…heavily taxed and monitored, underfunded. the plight of small to medium businesses in Canada.

#87 Larry1 on 04.07.14 at 11:10 pm

For those who are funding TFSAs and RRSPs (in self-directed accounts say) for both spouses, what’s the best way to ration stocks and ETFs across his’n hers TFSA/RRSP.

#88 4 AM Sunrise on 04.07.14 at 11:11 pm

All my jobs and jobine(tte)s, as they say in Quebec (derivations of “une job” – means the same as in English), never paid me enough to allow me a $10,000 RRSP contribution room.

If I get to put $10,000 into my TFSA next year, it would be pure awesomeness.

#89 4 AM Sunrise on 04.07.14 at 11:12 pm

…and I saw awesomeness because I have a job right now, just not the kind that generates a T4 at tax time.

#90 Baa on 04.07.14 at 11:12 pm

Way cool. Thanks, Garth. I shall be prepared.

#91 Nemesis on 04.07.14 at 11:23 pm

#NonSequiturZen

http://youtu.be/EESXCz5KHio

[NoteToSaltyDogz: you have to kiss a lot of Kittens before you StumbleUpon a CatFoodLady… and when, eventually, you succeed… They’re invariably with SomeOneElse. Still… TheChase is everything. TheFinish is best left for Historians…and PersnicketyPerfectionists.]

#92 sciencemonkey on 04.07.14 at 11:24 pm

@38 Smartalox, I agree. Sucks to be taxed by the IRS on those gains. The question is, however, can I still use the TFSA to avoid Canadian taxes? How hard is it to report investments gains to the IRS given that Canadian brokerages won’t give a tax report on TFSA accounts? I’m meeting with an HR Block US tax person this weekend, and apparently the cost to report a TFSA is $350. Might be worth it since that’s only 1% of the TFSA limit.

#93 Freedom First on 04.07.14 at 11:27 pm

Thank you for the TFSA Garth, as I know it was your idea and that you were instrumental in having F push it through to reality. Also, your advice on how to take the maximum full advantage of both the RRSP and the TFSA plans is excellent. Time spent either becoming financially literate to invest directly oneself, or in finding a really good financial adviser, is time well spent.

Also as critical for one’s financial health, in my own humble opinion, is the personal development of financial restraint and financial discipline required to both recognize, and thus control the spending on “needs”, and, “wants”. Keep it simple. Garth’s financial lessons/advice, and formula for investing in diversified assets, will work for all income levels. There is $50,000 a year families who are financially sound, and there is $150,000 a year families who are financial train wrecks. Fact. I agree with Garth. Pick one.

#94 Question Everything on 04.07.14 at 11:27 pm

I am one of the 19% that actually has maxed out their TFSA with a stock broker holding the typical diversified portfolio Garth constantly talks about. And Thank you very much for all your advice Garth; it’s been awesome!

I’d love for the Feds to up the limit to 10K/year no question, but here’s what I’ve been worrying about lately, if they can increase the limit, what is to stop them to decrease it at some later point in time or do away with TFSAs all together and decide that the only way in which Canada will get out of the debt hole 20 years down the line is to tax all accounts, including TFSAs?

Are there any “safeties” built in somehow that they can’t just do away with them? Either way, I’ll keep on maxing out my TFSA each year and keep on re-balancing my portfolio each quarter but it would be nice to know if there’s to prevent the Feds from closing these down at some point.

Thanks for any input anyone may have on this topic.

#95 Obvious Truth on 04.07.14 at 11:29 pm

#46

We have it way better today. All this high octane trading has helped costs for us little guys and decreased spreads. It’s the PMs crying the blues.

The next 30 years will likely give us even greater opportunity.

#96 Mark on 04.07.14 at 11:32 pm

The problem with doubling the TFSA limits is that it reduces the overall amount of leverage available and usable by Canadians. And discourages investment in “stuff” that isn’t investible by way of TFSA’s.

For instance, you can’t put non-listed small business shares in a TFSA. You’re stuck with the GICs/Cash/shares of larger publicly traded companies. Expansion of the TFSA in this fashion could have an impact on the overall start-up culture in Canada.

Personally I think a better policy tool would be a lifetime investment interest exemption. Exempt the first $500k (for instance) of investment gains, whether they be interest or capital gains, from income tax, on a cumulative basis. Allow individuals to choose whether they claim the exemption or not in a given year.

#97 Son of Ponzi on 04.07.14 at 11:40 pm

This is a simple lesson in why there is the 1%, and the 99%.

So pick.
————————
Yes pick up a pitchfork and storm the Bastille

#98 Son of Ponzi on 04.07.14 at 11:43 pm

DELETED

#99 Look in the Mirror on 04.07.14 at 11:50 pm

Hmmmm….what would you rather see, people buying homes and being happy, or people like those following this blog that are real angry, but have invested there TFSA’s?

#100 Son of Ponzi on 04.07.14 at 11:54 pm

#52
Maudit money (PKP excepted) and the ethnic vote strikes again.
——————
So, the ethnic vote exists.
How about HAM?

#101 Son of Ponzi on 04.07.14 at 11:58 pm

Why would you open one at a bank? — Garth
Thanks for replying.
where do suggest i go to open my TFSA?
——–
Where you can buy better assets, such as an online brokerage. — Garth

And while you are online, buy some bit coins as well.

#102 Bobs ur uncle on 04.08.14 at 12:33 am

#74, Ford prefect
Agree wholeheartedly. I am covering my butt, but do I want to live in a place where everyone else is piling up the whiskas in the checkout aisle? I would gladly take a bigger CPP hit to have a larger net for others’ retirement. Since, as Garth is at pains to point out, they are generally too clueless to do it themselves.

#103 Dr. Wu on 04.08.14 at 1:03 am

Churchill, like many war criminals, did have lots of good quotes. But no amount of self serving book writing (history re-writing) and eloquence can change the facts:

http://online.wsj.com/news/articles/SB10001424052970203771904574175763132225506

And after this fiasco, he was given a staring role the WWII operation.

#104 Nemesis on 04.08.14 at 1:06 am

@HommeDuTabagisme/#37

Loathe though I am to become involved in ‘that’ debate – lacking as I am in the AppropriateQualifications [I know, you don’t much like those, SM – but, as between friends, could we please put that particular side-issue on the back burner for the moment?] – and, “LordKnows”… I have held my tongue on this matter for some time… interminably, to be truthful.

Accordingly, this… for now, is all I have to say about “that”…

Do you think the InsuranceIndustry and the Pentagon are… like… Stupid?

Hmmm… on second thought, don’t answer that question immediately… I have a LongMemory and an inordinately DarkSenseOfHumour.

So, instead, reflect upon that question for a moment or two…

Right.

Now, have a look at these [and don’t forget, this is the only time that I’m ever going to address these matters here, CasinoMan – so… DoYouFeelLucky?]…

[UK Guardian] – Now the Pentagon tells Bush: climate change will destroy us

http://www.theguardian.com/environment/2004/feb/22/usnews.theobserver

[ScientificAmerican] – U.S. Military Forges Ahead with Plans to Combat Climate Change

http://www.scientificamerican.com/article/us-military-forges-ahead-with-plans-to-combat-climate-change/

[RUSI] – Environmental Change and Security

https://www.rusi.org/go.php?structureID=researchother&ref=P4ACE4A287E44A

[G&M] – No climate-change deniers to be found in the reinsurance business

http://www.theglobeandmail.com/report-on-business/rob-magazine/an-industry-that-has-woken-up-to-climate-change-no-deniers-at-global-resinsurance-giant/article15635331/?page=all

#BonusZen/*FoodForThought:

http://en.wikipedia.org/wiki/Precautionary_principle

https://www.rusi.org/publications/whitehallreports/ref:N510A58EC38FDB/

*SomeHeavyLiftingInvolvedOnThatLastOne

#105 TakingResponsibility on 04.08.14 at 1:09 am

“So pick.”

Well, that could be a worthy life passion…

#106 Tony on 04.08.14 at 1:21 am

Still the same crap in Canada somehow a greater power still thinks they can tell you what to do with your money. No shorting stocks in a LIRA or a TFSA. Buying put options aren’t cheap in the long run in a TFSA. How do they expect people to make money?

#107 Tony on 04.08.14 at 2:48 am

Re: #20 sideline sitter on 04.07.14 at 7:33 pm

If this is any help the utilities index in America will likely lose the least. Ignore the utilities index on the TSX as it’s grossly overpriced compared to the utilities index in America.

#108 a prairie dog on 04.08.14 at 3:05 am

G, that was another nice mixture of the prose and the Cons.

#109 drydock on 04.08.14 at 3:17 am

Quebec elections are eternally , “voting for the best of the worst.”
The party changes , “but the song remains the same.”

#110 David McDonald on 04.08.14 at 5:22 am

I am pleased the PQ lost the election in Quebec. Quebecers like the rest of us just don’t need the uncertainty in these stressful economic times. There are real problems in health care, education and general good government that need solving right now. This is no time for a referendum and pragmatic Quebecers voted that way.

In the long run Quebec needs to return to normal politics so Quebecers can throw the bums out without necessarily and unwillingly provoking a referendum on sovereignty. That will reduce the stress and heartache for people like me who can’t imagine Canada without la belle Province.

#111 TS on 04.08.14 at 6:10 am

#5Thanks for replying.
where do suggest i go to open my TFSA?

Where you can buy better assets, such as an online brokerage. — Garth9 tam on 04.07.14 at 9:26 pm
____________________
I’m new at investing. Could you please recommend some brokerages?

#112 Eatin' Bonbons on 04.08.14 at 7:02 am

Today is a good day for Quebec!
I imagine many folks there or with family and friends living there will breathe easy for a few more years.

#113 T.O. Bubble Boy on 04.08.14 at 7:17 am

@ #111 TS on 04.08.14 at 6:10 am
#5Thanks for replying.
where do suggest i go to open my TFSA?

Where you can buy better assets, such as an online brokerage. — Garth9 tam on 04.07.14 at 9:26 pm
____________________
I’m new at investing. Could you please recommend some brokerages?
———————–

Just Google “best canadian discount brokerage” to find some articles/reviews.

There is a good summary table here:
http://www.moneysmartsblog.com/canadian-online-discount-stock-brokerage-comparison/

And, another here:
http://www.milliondollarjourney.com/review-canadian-discount-brokerages.htm

If you have a smaller account balance, something like Questrade probably has the lowest trading fees.
(the Big Banks typically only lower the fees for $50k+ or $100k+ accounts)

#114 Aggregator on 04.08.14 at 7:45 am

Well that's that for Quebec. And now back to hiking pension contributions, tuition fees, taxes, government spending and begging for more transfer payments. Chart

#115 Gman on 04.08.14 at 7:52 am

So Garth. I like you and your philosophy. However you have to stop talking about that 7% return. Do you honestly think we will get 7% returns for the next 20 years? I do not. I think it will be more like 3%. If you think I am wrong, then at least when you mention these compund returns please use a band 3% – 7%.

I don’t plan on making 3%. — Garth

#116 maxx on 04.08.14 at 7:56 am

#13 Godth on 04.07.14 at 7:17 pm

Wow.

Imagine those profits deployed in the hands of individual investors- economies, and hence tax revenues would be robust in the extreme. What we now have are profits which are nowhere near evenly distributed- not even polarized. We have a tiny minority of über-rich and a rapidly shriveling society, with few decent jobs and a debt burden the likes of which has never been seen before.

…and the beat goes on, with FIRE getting the chequered flag treatment from governments at every turn…..

#117 T.O. Bubble Boy on 04.08.14 at 8:02 am

@ #84 FormerSaskie on 04.07.14 at 11:01 pm
I know that the amount deposited into a TFSA is monitored and overages are penalized. Is the growth of the assets also monitored by government?
——————–
Yes – but there are no “penalties” for investing well… there were some headlines in the first few years of the TFSA where the government looked into $100k+ balances (this is after say 3 years of contributions = $15k total). I believe that this was simply looking for illegal tax evasion (you know, like Mitt Romney putting “worthless” hedge fund investments in his tax-free accounts in the U.S.).

#118 Eatin' Bonbons on 04.08.14 at 8:14 am

@78 T.O. Bubble Boy
I am trying to get more of an understanding of this Spousal Loan, I think it could work for our case (Husband earns well, and I earn a fifth) but I am not sure of the benefit or whether RRSP investments belonging to the higher earner count for the ‘loan’.

Could I ask if you have a site that would give examples of why do it and the advantages, or if you could write up an example- that would be awesome.

My banker touched on it briefly as a strategy for the future, but despite the general explanation, I couldn’t see the advantage of paying the interest on top of the yearly fee already paid to the advisor.

Thanks!!

#119 Louis on 04.08.14 at 8:24 am

How do you diversify and balance 31k$ without getting eaten up by fees ?

What would a 31k$ TSFA portefolio look like ?

#120 T.O. Bubble Boy on 04.08.14 at 8:37 am

I think Garth may touch on housing starts tonight… BIG miss in the numbers.

Also – CMHC seems to be almost as dedicated to frankennumbers as the RE cartel.

For example, check out the Toronto press release:
http://www.marketwired.com/press-release/march-2014-housing-starts-in-toronto-1897085.htm

It begins the press release with the “six month moving average of the monthly seasonally adjusted annual rates of housing starts”… sounds like a frankennumber made up of other frankennumbers! (a “frankentrend”… I think I may copyright that one)

If you only read the first paragraph (with the “frankentrend” number), you may reach the conclusion that things are flat: 34,537 units in March compared to 35,895 in February.

Then, you read the actual data, and it is a 55% drop:
16,998 units in March, down from 38,171 in February
(those are seasonally adjusted)

#121 Jean from Quebec on 04.08.14 at 8:38 am

Garth,

Now that the liberals won in Quebec, they are supposed to create a ”REP” (or Property saving regime) which allows first time buyers to dodge provincial taxes -and- you can reinvest what you get into a RRSP or TSFA. Would you support maxing the REP then the TSFA or would you fill the RRSP with the money you dodged?

#122 Holy Crap Wheres The Tylenol on 04.08.14 at 8:44 am

#15 Smoking Man on 04.07.14 at 7:20 pm
Why is that I have a little voice inside my head that’s keeps saying, the liberals will be coming after anyone’s maxed TSFA or any surplus loot that can easily be identified as surplus..

More of a nightmare…

_____________________________________________

That’s what Switzerland and the Cayman Islands are for!

#123 Ralph Cramdown on 04.08.14 at 8:52 am

#68 sheane wallace — “Inflation in the 70′s and 80′s was measured differently, if you apply the same old inflation measures today the inflation would be north of 6 % now, check with shadowstats/John Williams.”

Now first, shadowstats is a joke. I don’t know whether Mr. Williams actually believes his own bumf or whether he’s in on it, but it’s easy to see. He gives away the game on his own website: “The approach here is simple, and some argue that the inflation differential since 1980—suggested by the BLS’s own estimates—is too large to be realistic. The numbers are what they are, and refinement to the approach certainly is possible. Keep in mind, though, that the differences here are in weighting and in quality adjustments, not in the underlying surveying of raw prices.” His graph shows two lines, the official stat and his own. They are identical down to every last minor wiggle, except his is transposed higher. Now it’s a simple math question: If you have the sum of two different functions, and by weighting them differently you get an identical function transposed vertically, what do you know? That one of the functions is simply a constant! Williams just adds a few percent to government CPI every month and says “look, if I add to CPI, I get a higher number!” This doesn’t even qualify as a parlour trick.

MIT’s brilliant Billion Prices Project largely validates the government’s view.

Further, the reason economists study inflation is that it has REAL effects. It affects the economy in predictable ways. It affects almost all companies, but in different ways depending on the structure of their balance sheets and income statements. It affects wages. It affects financial institutions, and the prices of nominal and real return bonds. In short, it isn’t hard to show actual inflation in myriad places in the real economy. If the sum total of your supposed proof is a guy who adds three percent every month and says “look, higher,” and a collection of old men who cite the price of gasoline (up 3% in a year in Canada despite a 10% dollar decline, down slightly in the US) and selected other consumer goods, you might as well call this phenomenon “Harvey.” As in the invisible rabbit.

“Current CPI ‘inflation’ measures exclude fuel, heating and food prices, education and insurance is weighted incorrectly”

No, broad CPI does not exclude food and energy. Broad and core CPI are different, and the reasons for that have been explained many times in many places. How should insurance and education be weighted? This is an example of how everybody experiences inflation differently. Middle aged and older men seem most sensitive for some reason.

#124 T.O. Bubble Boy on 04.08.14 at 8:56 am

@ #118 Eatin’ Bonbons on 04.08.14 at 8:14 am
@78 T.O. Bubble Boy
I am trying to get more of an understanding of this Spousal Loan, I think it could work for our case (Husband earns well, and I earn a fifth) but I am not sure of the benefit or whether RRSP investments belonging to the higher earner count for the ‘loan’.

Could I ask if you have a site that would give examples of why do it and the advantages, or if you could write up an example- that would be awesome.

My banker touched on it briefly as a strategy for the future, but despite the general explanation, I couldn’t see the advantage of paying the interest on top of the yearly fee already paid to the advisor.

Thanks!!
————————–

This isn’t really about RRSPs.

I’ll give you an example using a normal non-registered trading account (and rounding off tax rates):

Spouse A is in top tax bracket (say, 40%)
Spouse B is in lower tax bracket (say, 30%)

Spouse A gets $1,000 in interest income, that is $400 in tax.

Spouse B gets the same $1,000 in interest income, that is $300 in tax.

Now… clearly, the higher the investment income, the bigger the benefit (it wouldn’t be worth doing for say $1000).

BUT – another key point: the lending spouse has to include the loan interest as income on his/her tax return but if the loan was used to purchase income-producing investments such as stocks, the lower-income spouse who received the loan will get to deduct the interest paid.

And, overall, this evens out investment portfolios between spouses… this would help in retirement by potentially keeping both spouses in lower tax brackets (vs. one in a high bracket, and one in a low bracket). It also gives flexibility if one spouse is unemployed etc. (more investment income coming in).

Now – to your point on RRSPs… a spousal loan @ 1% to then help Spouse B max out RRSP or TFSA could be a great idea. Think about if a spouse has $31k in unused TFSA room and who knows how much in unused RRSP room… lots of tax-free gains possible, and the loan is lower than inflation!

#125 Holy Crap Wheres The Tylenol on 04.08.14 at 8:57 am

#37 Smoking Man on 04.07.14 at 8:24 pm

Why real estate will never go down in Canada.

Today had the pleasure of talking to a lovely young lady, 25ish on the train today. Smart as shit. This kid has a great job and a promising future..
…………………………………………………………………………………… Yes fellow boomers, this next gen is going to sure take care of us…..

_____________________________________________

Their all the same, young idealistic tree hugging, naive!
This answers it pretty much!
http://www.youtube.com/watch?v=eNAtGmQ6i3o

#126 T.O. Bubble Boy on 04.08.14 at 8:57 am

(just be careful on the spousal loan for RRSP/TFSA, because you don’t want to have to withdraw from those accounts to pay the interest on the loan back to Spouse A)

#127 T.O. Bubble Boy on 04.08.14 at 8:58 am

A link to spousal loan summary (I copied 1 section from here):
http://turbotax.intuit.ca/tax-resources/sbt-split-income-spouse.jsp

#128 Holy Crap Wheres The Tylenol on 04.08.14 at 9:02 am

#121 Jean from Quebec on 04.08.14 at 8:38 am

Garth,

Now that the liberals won in Quebec, they are supposed to create a ”REP” (or Property saving regime) which allows first time buyers to dodge provincial taxes -and- you can reinvest what you get into a RRSP or TSFA. Would you support maxing the REP then the TSFA or would you fill the RRSP with the money you dodged?
____________________________________________

Now that Pauline Marois has been shown the door Quebecers can get back on with their lives and more important issues.
“c’est con pour toi”

#129 quebec economist on 04.08.14 at 9:28 am

#115 Gman

You want 6% to 8% without any effort and without hiring Garth to give you advice, then buy.

XTR- iShares Diversified Mnthly Inc Fund ETF

This is a well balanced ETF and includes bonds, preferred stock, dividend paying stocks (US and CDN)…REITs….Utilities

For full holdings go see:

http://ca.ishares.com/product_info/fund/holdings/XTR.htm

Presently yielding 6.6% dividends + gain in price…

Any idiot can make over 6% with these balanced ETFs
(fee 0.55%). Once you online brokerage account is set up, it take 1 min to buy… 1 min to sell…

cheers.

#130 Tony from Calgary on 04.08.14 at 9:36 am

“I don’t plan on making 3% — Garth”

Height of arrogance. With that kind of confidence in a market, Garth, you should be selling houses! Or perhaps you could be one of those politicians (which you once were, ironically) who takes credit for a booming economy (“its my policies, stupid!”), but blames that same economy when things start to tank (“it’s the economy, stupid!”).

Regardless of what you “plan” to do, none of your choices dictate the returns the market will *offer* you.

A farmer can pour his heart and soul into his field, but if the weather is fickle he is at its mercy. A homeowner can put as much granite, landscaping and other finishing touches in his home to increase the value, but if the housing market is fickle he is at its mercy. I can shuffle paper & pencils around better than anyone in my bloated bureaucratic government office, but when the electorate become fickle and start demanding cuts to the public sector I am at their mercy. And a politician-turned-blogger can plan to make 7% off ponzi financial markets all he wants (and advise others to as well, for a fee), but if the economy is fickle than he (and his clients) is at its mercy as well.

Another severe market downturn a la 2008 (which won’t happen according to you; ironically that’s exactly what all your naysayers who come on here to say houses won’t fall in value, yet you crap all over them for holding such silly beliefs) to the point that short selling is banned and you’ll see what the market has to offer… insolvency.

Cheers,
TFC

Actually during 2008-2010, a balanced portfolio averaged positive 5%. Over the last decade it averaged 7.3%. And no, there’s is no other 2008 coming. — Garth

#131 Holy Crap Wheres The Tylenol on 04.08.14 at 9:38 am

#13 Godth on 04.07.14 at 7:17 pm
The Father Of High Speed Trading Speaks: “The Market We Created Is A Casino; A Complete Mess; A Rigged Game”
http://www.zerohedge.com/news/2014-04-07/father-high-speed-trading-speaks-market-we-created-casino-complete-mess-rigged-game
_____________________________________________
Most people do not and can not trust their brokers, the markets, the stock exchange, and regulators even less.
Would you trust them? After the last crash the top few per-centers made money and the rest of us lost money. How does that figure? At least at a casino from the minute you walk in you know its gambling and the house has the advantage. Unless you are a Smoking Man and have your UCC.

Easy solution if you are scared: Don’t buy individual equities. — Garth

#132 Gravity does not mind idiots on 04.08.14 at 9:43 am

#37 Smoking Man on 04.07.14 at 8:24 pm
Why real estate will never go down in Canada.

Today had the pleasure of talking to a lovely young lady, 25ish on the train today. Smart as shit. This kid has a great job and a promising future..

>>>>>>>>>>>>>>>>>>>>>>>>>

Smokie, no amount of wishful thinking will levitate you. Reason will not kick in, but debt will. I agree it won’t go down because of sanity, it will go down when insanity will have eaten all its resource. Die of starvation. It’s coming… the slower the deeper.

#133 quebec economist on 04.08.14 at 9:44 am

however, if you want 100%-200% gain in the next year,
buy, (in your TFSA of course!)

NOV (@0.16)
NMX (@0.12)
QST (@2.47)

Those are my safest gainers for the year…
Just trying to be helpful, you should not believe me, that would be stupid, but check those out, lots of market research went into finding these…

If you think I am bullshitting, then write price and come back in 6mths…at least 2 out of 3 should work out…play at your own risk…

Cheers,

1%

#134 Daisy Mae on 04.08.14 at 9:48 am

“That means 80% of us have blown the chance to turn on this money machine, instead opting for returns of between 1% and 2%.”

**********************

Increasing TFSA limits to $10,000 is a safe bet for the feds.

While appearing to be assisting ‘hard working Canadians’ — they’re such good guys, after all — the feds know full well most taxpayers are ignorant of the potential and/or won’t be in a financial position to contribute. So this is a safe bet.

#135 HD on 04.08.14 at 9:50 am

@T.O. Bubble Boy

$37k on the max $31k invested over the years = about a 7.2% gain per year. Not too shabby… but with markets up well over 100% since 2009, I’m sure there are higher TFSA balances out there.

———————————-

http://www.moneysense.ca/save/tfsa/the-great-tfsa-race-penny-stock-investor

I am personnally at $37K

Best,

HD

#136 Joe on 04.08.14 at 10:01 am

“…assuming a 7% return (in line with the last thirty years of financial markets)…”

What markets is this return based on? Is inflation taken into account? Does it include management fees? I (and probably many others) would love to see more data on this 7% claim.

#137 Daisy Mae on 04.08.14 at 10:02 am

#21 I’m stupid: “If they actually do it, it’s going to be the best retirement vehicle ever created.”

*********************

And it was Garths’ idea — not Flahertys’.

#138 Penny Henny on 04.08.14 at 10:03 am

garth-Most of the people you know spend more time every day worrying about their hair than any of this.

What’s wrong with my hair?

#139 World Traveller on 04.08.14 at 10:10 am

You could invest in a TFSA or buy this house for 1.2 million LOL!

http://www.blogto.com/city/2014/04/house_of_the_week_1549_dundas_street_east/

#140 RogerK on 04.08.14 at 10:14 am

The Globe and Mail has a good review of discount brokerages and I use Virtual Brokers (their top pick). I’m 66 and think of my TFSA(to the max) as the last pot of money from which to draw in retirement so about 20 -25 years away hopefully. Hence I have a long term investment horizon and investments in their can afford some risk. I only invest in EFT’s and in my TFSA its VDU and VEE at the moment, on which I’ve earned 18% since last June….a lot better than any real estate because businesses generate increasing PROFITS which get distributed as dividends. Real estate can never do that.

#141 Toronto_CA on 04.08.14 at 10:16 am

Garth – I have to say I always wondered why these accounts were named and marketed as being good for “savings” rather than invested. I have never heard anyone using the Roth-IRA in the USA (same function) as a savings account; there people use them to invest for retirement.

I am gobsmacked to think there is a nefarious purpose to marketing it as a savings account to the masses…because as you say if the middle class actually used these accounts to invest, they would cost the government much more than if they used them to hold cash for next year’s vacation.

I guess I shouldn’t be so naive? I try to reach out to everyone I can to tell people not to use ING’s great “1.3%” TFSA account.

On a positive note, I am aware companies are FINALLY starting to offer TFSA withholding/saving on paycheques and letting people buy funds to put in there. This isn’t as good of course as a self registered TFSA with ETFs BUT it’s a damn sight better than putting it in the “Orange/Tangerine Guy’s Shorts”.

Or a new condo.

#142 TS on 04.08.14 at 10:24 am

To #113 T.O. Bubble Boy on 04.08.14 at 7:17 am

Thanks very much for your help! I’ll definitely check these out. You certainly bring a wealth of information to this blog. It is much appreciated.

#143 Joe Schmoe on 04.08.14 at 10:24 am

Hmmm…crunching some numbers on this…

Assuming the current 39% marginal tax rate in AB, the TFSA and RRSP come out the same Future Market Value…RRSP is pretax moola, whereas TFSA are after tax moola. So you invest $10K now and pay 39% tax later (or less if your income is lower) or invest $6100 (10k After Tax) and pay no tax later.

Makes sense that the two are parable…govt can’t allow for more RRSP room due to needing the cash, but understand future retirement needs so are giving a future “break”.

I never played with the numbers before…interesting.

Of couse radical swings in tax rates/TFSA/RRSP rules are not accounted, and I used a annual compounding rate.

#144 Joe Schmoe on 04.08.14 at 10:25 am

Oh yeah…Garth you forgot to account for the tax on the TFSA contributions…

#145 Shawn on 04.08.14 at 10:30 am

TFSA Diverification

Louis asks at 119:

How do you diversify and balance 31k$ without getting eaten up by fees ?

*****************************************
Well a few ETFs could do that easily but anyhow you don’t need to diversify or balance your TFSA, unless that is your only account. You should diversify and balance across your entire investment portfolio (RRSP, RESP, TFSA, Taxable account).

If you have a large RRSP there would be nothing wrong with putting just one or two stocks or ETFs into the TFSA as long as overall the portfolio was balanced and diversifed to a suitable extent.

#146 Doug in London on 04.08.14 at 10:40 am

If The Big Owe really wanted to do something to help people out with retirement, he would reduce the tax payable on RRSPs when they are deregistered. That would help a lot as many people approaching or in retirement have a lot of money in their RRSP accounts. Is that likely to happen? Don’t count on it.

#147 Waterloo Resident on 04.08.14 at 10:44 am

How would posters at this blog like to go to prison for 3 to 5 years, all for the crime of ‘breaking the law’?

Yes, in America it will soon be against the law to speak freely. Read this article and see for yourself how things are going just nuts in the good old USA:

http://www.infowars.com/supporters-rally-to-defend-family-facing-red-dawn-showdown-with-feds/

Quote: “Dave Bundy was arrested on Sunday by BLM officials after refusing to follow a dispersal order as he filmed cattle from a state highway. According to Dave’s brother Ryan Bundy, snipers had guns trained on them throughout the incident. Feds claimed Dave Bundy had violated the ludicrous “First Amendment Area,” outside of which free speech is banned.”

So free speech outside of certain key areas are now banned in America? And you can go to prison for 15 years just for talking or taking photos with your camera?

What next? People posting articles on blogs will soon be arrested for speaking their minds? Looks like it.

Stop reading dump web sites. — Garth

#148 Ralph Cramdown on 04.08.14 at 10:47 am

#115 Gman — “Do you honestly think we will get 7% returns for the next 20 years? I do not. I think it will be more like 3%.”

The current S&P 500 earnings yield is 5.45%, dividend yield is 1.97%, annual US population growth is 0.7%. Inflation is positive, though there is a wide chasm between what the government reports and what goldbugs and crochety old men believe.

So are you predicting an asteroid strike? Supervolcano eruption? Pandemic?

#149 gladiator on 04.08.14 at 11:11 am

Just wanted to add:
if you compare RRSP (where you put pre-tax money) with TFSA (where you put after-tax money), and assume that investments in both will grow at the same rate, then it makes no difference which one you choose, ONLY if you tax rate is the same when you contribute and when you withdraw funds. If your tax rate will be higher when you start withdrawing funds, then TFSA is a better way to go. If you plan to have a smaller income in retirement and, consequently, pay a lower income tax rate, then RRSP is better.
Personally, I wouldn’t trust the government my money even if I plan to have a lower rate – I love the control the TFSA gives me.

#150 Toronto_CA on 04.08.14 at 11:19 am

Interesting housing start numbers today! I know we’ve all heard this before but…the beginning of the end?

http://www.huffingtonpost.ca/2014/04/08/housing-starts-march-canada_n_5110650.html?ref=topbar

“Canada’s residential real estate markets showed signs of a sharp slowdown in the first quarter of the year, with housing starts plummeting in March to around 157,000 at an annual rate, from 191,000 the month before.”

#151 airhead princess on 04.08.14 at 11:35 am

Canadians don’t get how generous our government is being with retirement savings plans…RRSPs…TFSA…RESP’s….LIRA…..RRIF’s…….you certainly don’t have these vehicles in the US……the ones that exist are paltry and of far less value.

The IRA for example…..a company mutual fund managed in a pool by an expensive external team that you have no say over. The Roth IRA a self invested account…still locked into a managed plan…..both the former with big fee’s and no flexibility. Both have limits of $5500 per year….the US really stinks in this regard.

There are no TFSA’s or RESP’s in the US…..there was a tax deferred health saving plan….but it doesn’t allow for anything more than a box of bandaid’s in reality. But now Obozo care has ended that.

Don’t forget about the US estate tax which we don’t have. Peoples biggest ‘retirement savings plan’…..the house….is also subject to standard taxes…..without any capital gains tax treatment which the US also doesn’t have.

Some other countries have it much better….take Holland for example where workers get 85% of lifetime wages….but overall Canada has been doing a better job for retiree’s and savers since the rise of the Conservative Party.

http://business.financialpost.com/2014/04/07/cbc-expected-to-make-deep-cuts-thursday-in-wake-of-losing-hockey-night-in-canada/?__lsa=0a37-aa42

Making moves to staunch the bleeding by getting rid the pigs in the trough like the CBC is another sign that your government is on the right track on behalf of the taxpayer. The Conservatives have been fighting the Trudeau legacy judiciary trying to reign in the after effects of liberal appointments and the corruption of thirty years of tax and spend government. These same judges are adamant that they will hold progress back long enough for the Liberals to return to power….but remember the bad old days under the liberal party….rising taxes and no retirement savings vehicles.

#152 Second Hand Smoke on 04.08.14 at 11:36 am

Increasing the TFSA contribution limit to $10K per annum would definitely be a great move with tremendous potential. Unfortunately the group that stands to benefit most, young adults, is generally in a very financially precarious state that doesn’t lend itself well to stashing $10K away each year.

With that said, at least the tool is in place, and there is the option to do so. I am levered up in individual stocks because I am sick in the head but I expect to do very well over the long-term. My goal is to generate enough in capital gains, dividends, etc. each year (i.e. $10K) such that I can divert that amount to my TFSA – in other words a self-driven wealth generation machine.

#153 Son of Ponzi on 04.08.14 at 11:53 am

#148.
So are you predicting an asteroid strike? Supervolcano eruption? Pandemic?
——————
Black swan.

#154 VICTORIA TEA PARTY on 04.08.14 at 12:02 pm

#50 Quebec Friend.

Right on! Very true.

Those very few Pure Laine diaper-wearing, laxative-pounding ageing Separatiste Wretches have, mercifully, had their day, many of whom practiced their separatist campaign rhetoric while flopping lazily on Florida’s English/Spanish-speaking beaches and cheap-assed trailer parks! Hola! Some even ventured to Cuba! And there’s no French-speakers there, either! Quelle hypocrisy, another major confusing platform plank of the Separatists.

Now they move into the winter of their eternal, totally well-deserved ,discontent as the spoiled brats of Canadian Confederation, damned to the Hell that only history will so magnificently provide as the next few years quickly pass by, leaving them as a bump on the rump of pissed-off separatists everywhere in this world of ours.

I wonder what all these decades of constant whining and threatening and emotional blackmail all this has cost the Rest of Us? And those referendums! All in the aid of exactly what?

Garth, you raised their alarums too soon.

Now a majority of Quebec voters have elegantly chosen to remain in Canada and to begin the long and painful task of rebuilding their shattered economy.

Welcome back!

#155 PG73 on 04.08.14 at 12:04 pm

I find this site has decent charts for the Ottawa market. Assuming the underlying #’s are reasonably accurate they give a good snapshot.

Just updated for March – condo avg price trending down – inventory trending up (new record?)

http://www.hometeamottawa.com/stats.asp

#156 Lurcher on 04.08.14 at 12:10 pm

Full page ad in the Province newsrag today (page A7): “RBC Realtor Appreciation Week”. Lots of exciting events this week for realtors to say a big “thank-you” for all the hard work they do.

#157 Bob Loblaw on 04.08.14 at 12:10 pm

IMHO income splitting, for Harper, is now about nothing more than saving what little credibility he has left. Worst. Prime Minister. Ever.

#158 Son of Ponzi on 04.08.14 at 12:11 pm

Don’t get it.
Someone gives me $ 100 to invest and I pay him/her a $ 7 dividend.
So, if I myself want a 7% return, too, then I must invest the $ 100 for a 14% return.
Sounds risky to me.

#159 Aggregator on 04.08.14 at 1:03 pm

Financial Times just posted a new subscriber article titled: Canada's housing market tops (over)valued chart

So let's see, practially every Eco PHD has now calculated the same results showing Canada as the most overvalued housing market in the world, yet some how, some way, the market (or just the numbers) don't seem to capitulate to reality. Scary.

There's no doubt at this point that some exogenous force is moving our market. The question is, what or who is doing it.

#160 Spaccone on 04.08.14 at 1:08 pm

@158 Son of Ponzi — well you would be investing OPM in risky things…say non-Canadian mortgages paying 10%+ on interest and other fee income…and the person giving you that $100 would understand that it’s risky (Prospectus). The catch is the risk is all the person lending you $100 (and your reputation)…what you’d be looking for is to leverage OPM to build a large capital base upon which to charge fees on.

That being said…my shoeshine girl advised me yesterday that I should invest in a safe, balanced and occasionally rebalanced portfolio now and that houses are too risky at these levels. The taxi driver at the end of the day pretty much parroted the same thing. Might be time to liquidate balanced portfolios (goodbye nicely performing REITs and well, everything) and back up the truck and buy pressed corn-flake and chalk McMansions in comatose neighbourhoods and apartment units with both hands.

#161 bdy sktrn on 04.08.14 at 1:18 pm

The current S&P 500 “earnings yield” is 5.45%
————————-
do you mean growth rate?

#162 BCD on 04.08.14 at 1:23 pm

Between wife and I we have added 30K in TFSA this year (first year of contribution). We plan to add another 30K next year and if they up the limit to 10K a year we should be maxing out contributions in 3-5 years every year. I think this is a great savings vehicle. It will be all in a GIC at 2.25% and I never have to worry about rebalancing, or losing money etc. Not bad. . .and when interest rates rise so will the ones on investments. Could be a good decade if health holds as we enter our biggest wage earning years.

#163 not 1st on 04.08.14 at 1:35 pm

#158 Son of Ponzi on 04.08.14 at 12:11 pm

You need to brush up on business then because most business are operating on margins in the 20-25% ROR They don’t mess around with little miniscule sub 5% gains.

Only the common joe would accept a 5% return to have his capital return 4 times that for the company.

#164 Son of Ponzi on 04.08.14 at 1:48 pm

#159
ROR? Return on Return?
Circular reference.
Also, what will happen once they bring production back home.

#165 World According To Garth on 04.08.14 at 1:57 pm

What next? People posting articles on blogs will soon be arrested for speaking their minds? Looks like it.

Stop reading dump web sites. — Garth
———————————————————–

History is written by the victors. Or in today’s case, the bankers, corps and the govt’s they control.

Sites like infowars are always called “wacko’s”. I agree Alex has a big fat mouth. That being said, when I ask people to prove what much of what he says is WRONG. All I hear is crickets.

Garth…..there is a reason CNN and other “lies/propaganda/brainwashing sites” are dropping like flies. That BS about “oh you get your info from the internet” does not wash because ALL INFO comes from the internet. So before you call another site or person “trash”, please make sure you can back up that what they are saying is “wrong”.

I think the informed people on this site know for certain that much of what we hear from the Govt is lies (Real Estate, Stats Can etc) but yet infowars is a wacko site but no one steps up and points out that site is lying about….

JUST……SAYING……

#166 not 1st on 04.08.14 at 2:04 pm

#162 BCD on 04.08.14 at 1:23 pm

You do know that inflation is running at 3%? Lots of ways to lose money and 2.25% locked into a GIC is just one of them.

#167 airhead princess on 04.08.14 at 2:05 pm

#162 “It will be all in a GIC at 2.25% and I never have to worry about rebalancing, or losing money etc. “….

Not bad you say? Did you just read about your gas, electric, property taxes, carbon taxes, school taxes….civil service wages….groceries….housing….airfares…etc etc etc all going up in double digits rates. By the time you go back and get the money you’ll realize there isn’t be enough left after inflation to buy your wife a can of cat food….pick up your game friend……being old and hungry is not a pleasent thing.

#168 not 1st on 04.08.14 at 2:28 pm

#164 Son of Ponzi on 04.08.14 at 1:48 pm

ROR = Rate of Return
ROC = Return on Capital

And these aren’t businesses that moved overseas. These are all around you and never left.

My business operates in the 20% ROR range and then I invest some proceeds in REITs, rest is cash and living.

#169 Renter's Revenge! on 04.08.14 at 2:32 pm

I agree with the hush-hushers.

The first rule of TFSA Club is: You do not talk about TFSA Club. The second rule is: You DO NOT talk about TFSA Club.

#170 Ralph Cramdown on 04.08.14 at 2:32 pm

“The current S&P 500 “earnings yield” is 5.45%”

The inverse of the P/E ratio; the E/P ratio or earnings yield. Companies use some of their earnings (or at least their cash flow) to pay dividends, replace and expand the capital stock they use to make their products, buy back shares, or they just let it accumulate in a huge pile overseas waiting for more favourable tax treatment before repatriating it to the US.

I just find it a wee bit bearish when someone predicts a 3% return over the next 20 years. You can buy the phone company and earn more than that in dividends. Even if it never raised the dividend in the next 20 and the share price went nowhere, you’d make more than 3%. How likely is that?

I know, I know… the “black swan” of commercialized pocket quantum telephones and internet, making those thousands of miles of fiber and copper suddenly worthless.

#171 Son of Ponzi on 04.08.14 at 2:43 pm

#168
ROC.
“I don’t care about Return on Capital, but about Return of Capital” Mark Twain.

#172 World According To Garth on 04.08.14 at 2:49 pm

So are you predicting an asteroid strike? Supervolcano eruption? Pandemic?
—————————————————————–

My vote is pandemic. Its the best way to kill off lots of people while preserving all the wealth, land and resources.

#173 TnT on 04.08.14 at 2:58 pm

#162 BCD

TFSA Account that pays 3% since 2009

http://www.peoplestrust.com/high-interest-accounts/todays-rates-2/

This is for all those who “can not” OR “will not” invest their TFSA for what ever reason…

#174 Ralph Cramdown on 04.08.14 at 3:10 pm

#165 World According To Garth — “I think the informed people on this site know for certain that much of what we hear from the Govt is lies (Real Estate, Stats Can etc) but yet infowars is a wacko site but no one steps up and points out that site is lying about….”

Too low a bar. The question isn’t ‘is website x wrong?’ but ‘how will spending five minutes a day reading website x help me improve myself, make more money, make the world a better place?’

Doomer and conspiracist websites are about as useful in that respect as the ones updating us on which stars are dating, breaking up, showing side boob, losing/gaining weight… One sells diet pills and the other one sells iodine pills, just pick your flavour of gullible.

#175 2CntsCdn on 04.08.14 at 3:21 pm

Keep chipping away Garth. As frustrating as it must be, you are doing the right (and honorable) thing. Maybe with 20 more agonizing years of driving sensible idea’s into the masses craniums you may get the one percent-ers up to the two percent.

I always suspected the masses were confused, stubborn, stupid, lazy, afraid and geared to follow any herd ….. but not until reading this blog the last few years did I realize how pathetic most are. I can write this because everyone reading will think I’m talking about someone else : ) (another quality of idiots).

A few will get it and convert … most won’t. This site is the only neutral corner I have found (not geared to sell me anything) to hear solid money making and money preserving idea’s. I have been one of the questioning and confused …. once you become educated enough to separate good advice and idea’s from BS you will be able to pick the right people to help you down the road to financial independence. But where most will fail is that once you get the good advice there is still some hard work and dedication to see the plan through.

Nothing is guaranteed in life, and there will be times when things go backwards …. but that is allowed for in a good plan. Knee-jerking around and catching the last smidgen of upside to every trend (and ALL the downside) doesn’t work. Keep on keepin on Garth.

#176 Old Man on 04.08.14 at 3:28 pm

Any institution that calls themselves Peoples Trust reminds me of Allstate Insurance Company about being safe in their hands. All is well until something happens and they have no money to pay claims or go bust. Beware of the higher yields as its bait; am waiting for the Smokingman Trust to open in the near future as will become a sure bet. :)

#177 Sheane Wallace on 04.08.14 at 3:31 pm

#123 Ralph Cramdown
……………………………………….

Looking at the prices in US – gas, food, I tend to agree with John Williams and disagree with you.

Gas has increased at least 10 % on average in the last 15 years, maybe more in the last 10.

The same for drugs (I actually did work for pharmaceutical company until recently and their statistics did show increase in drug costs between 8 and 12 % per year)

Exclude all the costs of TVs, computers, electronics etc., that are negligible part of your expenses and then calculate inflation.

Everything that matters – food, education, medical costs, drugs, housing, insurance, energy has increased and that increase is much closer to John Williams’ numbers than to the official CPI numbers,

#178 BCD on 04.08.14 at 3:40 pm

#166 not 1st on 04.08.14 at 2:04 pm
#162 BCD on 04.08.14 at 1:23 pm

You do know that inflation is running at 3%? Lots of ways to lose money and 2.25% locked into a GIC is just one of them.
___________________________________________

And investing in Stocks, bonds and ETF’s is just another one of them.

We all have our acceptable levels of risks. I don’t need to make 7% as other parts of my life prove more satisfying then trying to make myself rich and worrying about rebalancing etc. etc. I am a saver by nature, that’s something you can’t put a % interest gain on. At the end of the day I figure that if my money is keeping up with inflation (and 3% is debatable) I am doing alright.

#179 Smartalox on 04.08.14 at 3:48 pm

@ sciencemonkey #93:

From what our US accountant told us, FATCA makes the banks and brokerages withhold tax when you try to take money out of your TFSA, like they would if you take money out of your RRSP. One can recover the tax withheld in the name of the US of A, by filing a US tax return, where under the current tax treaty, if more tax is paid in Canada than would be owed to the US, then the difference is refunded. By law, US citizens are obligated to disclose the particulars of their foreign accounts to the IRS so that they know exactly where to find your money.

The real problems occur when dual citizens face US taxes on things that are not taxed in Canada. Capital gains on a principal residence, for example: if your home doubled in value, you sell it, and net a million dollars, this is tax free in Canada – but the gains are taxed by the US. So you’d get taxed on income by Canada, AND taxed on capital gains by the US.

Same for gains made in a TFSA (or RESP, or trust account sponsored by an American) but these are still likely to be minor, compared to gains from selling one’s home at this point.

Or so I’ve been told, but consult a cross-border tax professional for an assessment of your own situation.

#180 2CntsCdn on 04.08.14 at 3:51 pm

I take some of that back …. a bit nasty and harsh. Replace the word “idiots” with “frightened masses”. I hear people ask for help and idea’s on this site … and then argue with Garth when they get good advice and then keep doing what hasn’t worked for them ….. ridiculous.

#181 Dual Citizen In Canada on 04.08.14 at 4:01 pm

#172 World According To Garth on 04.08.14 at 2:49 pm
So are you predicting an asteroid strike? Supervolcano eruption? Pandemic?
—————————————————————–
My vote is pandemic. Its the best way to kill off lots of people while preserving all the wealth, land and resources.
————-
No, a Neutron bomb is the best way.

#182 Shawn on 04.08.14 at 4:04 pm

Explosive Gasoline Inflation?

Sheane wallace just above claims:

Gas has increased at least 10 % on average in the last 15 years, maybe more in the last 10.

****************************************
A claim like that begs for a mathematical check.

Let’s say gasoline is $1.40 per liter where you live and has inflated 10% per year for 15 years.

So the price 15 years ago was $1.40/ (1.10)^15

= 33.5 cents per liter. Really? That price was more like about 35 years ago and if so represents 4.2% per year inflation on avearage for 35 years.

I told you a million times not to exxagerate. It weakens your case.

#183 Godth on 04.08.14 at 4:09 pm

I don’t plan on making 3%. — Garth

You better get busy manifesting another planet Earth or two to satisfy your wants.

#184 #swaggot on 04.08.14 at 4:14 pm

>7% return

If we’re going to continue seeing 7% returns in the financial markets, then there won’t be any recessed RE valuations.

#185 Shawn on 04.08.14 at 4:15 pm

Inflation…
Cars have not gone up much…

In 1986 I bought a new Honda civic hatchback in Halifax. Paid right around $10k plus taxes. Civics today are bigger… I think you can still get a basic car the size of that old civic for around $13k today although not a Honda. Has the Honda hatchback of similar size more than doubled in these 18 years? Double would be 3.9% inflation per year. I don’t think the price has doubled.

In 1997 I bought a new dodge grand caravan in Edmonton (mistake) for $22k on sale. Very basic model. Crappy engine.

Today you can buy a brand new dodge grand Caravan for that same price on sale. I hear the ads. Vechicle will be a lot better than the 1997 model was. No inflation there.

It’s not so much we have high inflation in prices, it’s that we have more things to buy and expect more. Things like cell phones did not much exist 30 years ago, but today it’s considered a necessity. Is that inflation? Or is it a rising standard of living?

#186 Shawn on 04.08.14 at 4:17 pm

Egad, 1986 was 28 years ago, not 18. So if the cost of something similar to my old style Honda Civic has doubled that’s just 2.5% inflation per year.

#187 Nemesis on 04.08.14 at 4:29 pm

#InvestigativeMischief

[Forbes] – Who Is Alex Jones, Anyway? Five Fun Factoids

http://www.forbes.com/sites/jeffbercovici/2013/01/09/who-is-alex-jones-anyway-five-fun-factoids/

[SouthernPovertyLawCenter] – Profile: Alex Jones

http://www.splcenter.org/get-informed/intelligence-files/profiles/alex-jones

#188 Smoking Man on 04.08.14 at 4:30 pm

#176 Old Man on 04.08.14 at 3:28 pmAny institution that calls themselves Peoples Trust reminds me of Allstate Insurance Company about being safe in their hands. All is well until something happens and they have no money to pay claims or go bust. Beware of the higher yields as its bait; am waiting for the Smokingman Trust to open in the near future as will become a sure bet. :)
………..

How about Smoking Man’s Nugget Casino, Searchlight Nevada. If I can get em down to 3 it’s a deal…

Under New Ownership the sign will read…

ROB FORDS nabour….. Smokey….

Should pull in a lot of curious Rd Traffic…

#189 Derek R on 04.08.14 at 4:38 pm

#177 Sheane Wallace on 04.08.14 at 3:31 pm wrote in answer to Ralph Cramdown:
Looking at the prices in US – gas, food, I tend to agree with John Williams and disagree with you.

Gas has increased at least 10% on average in the last 15 years, maybe more in the last 10.

There are four reasons why prices can rise and inflation is only one of them. Consider this:

All prices are governed by supply and demand. Firstly by the supply and demand for the goods in question and secondly by the supply and demand for money. So the money price of goods is determined by two supplies and two demands and changes in any of them will cause a change in price.

So taking gas as an example, there are four causes for a change in the price of gas:

1) Change in the supply of gas — more gas supplied -> lower prices — less gas supplied -> higher prices.

2) Change in the demand for gas — more gas needed -> higher prices — less gas needed -> lower prices.

3) Change in the supply of money — more money in circulation -> higher prices — less money in circulation -> lower prices

4) Change in the demand for money — more money needed -> lower prices — less money needed -> higher prices

Only in case 3 are higher prices caused by inflation. In case 1 they are caused by gas shortage; in case 2 they are caused by more gas being used, and in case 4 they are caused by a reduction in debt, taxes or the price of some other essential that must be paid for with money.

So gas may well have risen in price but that could be because gas has become more costly to supply or because more people need gas than before or because other essentials have become cheaper. It doesn’t have to be because of inflation.

#190 Brad T in Cal on 04.08.14 at 4:44 pm

#8 Porsche – Let’s start a support group for bad investment choices and unfair market manipulation. I, too, have nearly 250k in capital losses.

Garth is bang on about a lot of his stuff, which is why I keep reading him. But he often misses the big picture on a very important point… Wealth accumulation was so much easier 20 years ago. People had safe investment options. Today – safe pretty much equals no return.

#191 I'm stupid on 04.08.14 at 4:46 pm

@42 Ronoldo

That’s a ridiculous argument you’re trying to make. An increase in the tfsa contribution is available to everyone. If people are too stupid to realize the gift that they’re being given it’s their fault. You can do what ever you want, even if that means not taking advantage of tax free growth. But don’t blame your own stupidity on the 1%. The fact is that the majority of 1%ers earned their wealth, it wasn’t given to them.

The entire 1% -99% protest demonstrates the sense of entitlement today’s youth has. No will give you anything because you don’t deserve anything. If you want something you need to earn it like everyone else.

I wasn’t given a dime, I took any job I could because I had no choice. I’m not suggesting I’m a 1%er but I do live a good life. It wasn’t always like this, I worked hard to get here. My mom has very little employable skills and my dad died when I was 16. That’s called being screwed. I couldn’t afford to morn after he died because the bills needed to be paid. I worked my way threw school and finally got to a place where life is easy. Guess what… I deserve it and I don’t feel bad about it because I only know the sacrifices I made to get here.

Now you have all these silver spoon fed kids crying foul. The reason they don’t earn a good living is because they fear good old fashion hard work. They all want to do something they love or are passionate about. That’s ridiculous. I hate what I do for a living but I love what it affords me to do, and that’s the honest truth.

#192 Aggregator on 04.08.14 at 4:53 pm

CPI items chartbook for nominal chasing stock investors that suffer from real return syndrome and 'I'm too lazy to measure real world prices because it's not on my trading screen'.

Average Retail Prices (in dollars) Last Data Feb '14

Average Retail Prices 1

Average Retail Prices 2

Average Retail Prices 3

CPI Sub-Items (Index) Last Data Feb '14

CPI Sub-Items 1

CPI Sub-Items 2

CPI Sub-Items 3

CPI Sub-Items 4

And that's even calculated according to StatsCan's quality adjustments. For example on rental CPI: StatsCan's calculations are based on user preferences like the number of rooms a property has, but not square footage. Well, what happens when more one bedroom condos are coming to the market that are shrinking in size every year? According to StatsCan's methodology, an 800 sq.ft one bedroom that rented for $1000 a few years ago is the same quality as a 400 sq.ft. for $1000 today. In other words, 0% change in quality and price because the user still rented a one bedroom, regardless of its size.

This is how the government is taking advantage of CPI because as long as they keep re-weighting the expenditure basket every two years and change the methodology from time to time, Canadians could have the same standard of living as Mexicans in twenty years at a steady 2% inflation.

You have to measure value, not the price! Again value (real physical world) not the price (digits/numbers).

#193 World According To Garth on 04.08.14 at 5:17 pm

Doomer and conspiracist websites are about as useful in that respect as the ones updating us on which stars are dating, breaking up, showing side boob, losing/gaining weight… One sells diet pills and the other one sells iodine pills, just pick your flavour of gullible.
———————————————————–
Says who? YOU?

Your the expert? Yes because no one in Govt EVER lies right? Like how there were WMDs in Iraq? A DESTROYED country later and 100s of thousands of dead men women and children.

Too low a bar? Real easy for you to say that Ralphy without being an average person in Iraq OR Afghanistan OR Libya who watched as their family was blown to bits from 20, 000 feet by a cowardly CANADIAN F-18 Fighter Bomber….

MILLIONS of jobs jobs jobs recovery recovery……yet… 50 million plus on food stamps? You don’t need to be a PhD in economics to know its bullshit.

Again I will point out that CNN, CBS, Newspapers, Main Slime Media in general are losing all their customers because all they spew is Govt spin and bullshit. Bin Laden was killed by SEALS but we have no body. The Pentagon and Flight 93 crashed but there is NO WRECKAGE …..yeah okay. Dozens of children massacred at Sandy Hook but not one photograph and proved to be done by actors with one of those kids showing up for photos with Obozo three weeks later at the whitehouse.

The conspiracy theorists are the idiots that “tow the line”, “do what they are told by big Govt”, “believe everything we the Govt tell you”. A conspiracy is 2 or more people conspiring something nefarious. Well if govt gets together, and lies about nefarious things they are doing……THEY are the conspirators. But you will never hear that spin on the Main Slime Media……NO WAY.

FAIL……as usual.

#194 99percenter on 04.08.14 at 5:19 pm

Beware when you battle with monsters for you may become the monster, the 1%.

If I become a financial genius, become the 1%, 99% will still be suffering. Can you picture this farce of reagan capitalism continuing for the next 500 years? The solution is to make it more fair and even for everyone before we slide headlong into despotism.

I shouldn’t need to understand global finance, gamble on the markets, to survive. Business people sure can do that if they wish for some extra pocket money. However not before every person is provided for under the current system. This includes food, water, shelter and a meaningful job. That’s all most people want. They don’t want a mansion with a pool. Fear makes people want these luxuries as security. Fear that if you don’t play the markets and become a cut-throat businessman that you will be eating catfood under a bridge at 61.

Fear is what drives people to overvalue housing. Eliminate the fear of being poor in old age and people will be happier, less house horny and not have to gamble with markets to survive. The trend since reagan has been for people to be in their own control of their retirement, which is obviously a bad idea. Your own statistics reflect that, no one knows what the fuck they are doing.

(people that say “its a sure bet” “markets always go up” “7% for life!” are the most deluded gamblers in my experience) “historical trends indicate!!!”. Nobody is clairvoyant and we are one global food crisis away from money being worthless. A few days of food scarcity and all major cities would descend into complete chaos. But i guess you are an optimist.

#195 Ronaldo on 04.08.14 at 5:26 pm

#191 I’m Stupid – was not making an argument. Simply stating facts. Most people will not take advantage of many of these programs that the government has provided. And I agree with most everything you stated. We all have a story. Mine would make yours look like a walk in the park. And that is a fact.

#196 Victoria Real Estate Update on 04.08.14 at 5:49 pm

Information request: total residential mortgage insurance in force

Here’s some of the information I have:

Genworth Canada: $309.65 B (as of Sept. 30, 2013)

That seems to be a bit high.

CMHC: $559.8 B (as of Sept. 30, 2013)

Canada Guaranty’s insurance in force is about 5% of the total in Canada.

Does anyone know what Canada Guaranty’s total mortgage insurance in force is?

Are there any other private residential mortgage insurers in Canada other than Canada Guranty and Genworth Canada?

#197 sheane wallace on 04.08.14 at 5:50 pm

#182 Shawn

gallon of gas was less than a dollar in the states 15 years ago. Now is 3.50-4. You do the math.

As for Canada current prices are 1.33 and I do happen to remember 50 cents 12 years ago. However this is obscured heavily by taxes in Canada that are both fixed amount and variable amount/look at gas prices taxes.

So I firmly stand by my estimate

#198 not 1st on 04.08.14 at 5:52 pm

#178 BCD on 04.08.14 at 3:40 pm

You should investigate a little further what happens to your money when you buy a GIC. The bank will take it and give you 2.5% and tie it up for 3-5 years. They then lend it to a company like ford or GM and get a corporate bond guaranteed back in the 7% range. Then the company takes it and makes a return in the 20-25% range and pays some of that return back to people who actually hold the stock.

Everyone makes money along the line except you who barely breaks even or if you do keep up with inflation, you tied up a portion of your capital for a long time to do it and thats poor investing.

#199 Derek R on 04.08.14 at 5:53 pm

In essence you have to remember that prices could just be rising because there are more people but the same amount of “stuff”. That’s basically why the price of houses has risen. There are more people wanting houses than there used to be 50 years ago and there’s still the same amount of land to build on as there was then, so the price of a plot has risen hugely because we still need the same size of a plot for a house as we did then.

Compare that with something like a computer where the cost of a fast 1 GB machine has fallen like a stone over the last 50 years because we have vastly more knowledge of how to make one with less materials and energy than we did then.

#200 sheane wallace on 04.08.14 at 5:55 pm

#189 Derek R
……………………….
Inflation is increased prices. I am not saying that is always result of monetary expansion. Of course in the case of gas it is because of pick oil. What is the cost of Oil in Saudi Arabia? 50 cents a gallon? What is the cost in Canada? 5 dollars a gallon?

Rich countries, specially oil producing countries can subsidize the internal consumption.

Norway has 860 $ billion dollars sovereign fund investing their revenue from Oil and Gas. Where is our fund?

#201 sheane wallace on 04.08.14 at 6:04 pm

#194 99percenter

exactly.
————————————–

And of course nobody is noticing increasing food prices in shrinking packages? I recall official stats of 30 % increase of food prices in 5 years (2008-2013)

#202 sheane wallace on 04.08.14 at 6:14 pm

http://www.gasbuddy.com/gb_retail_price_chart.aspx

here it is, select 2004-2014, Toronto, Ontario, prices rise from 2.51 to 5.03, that again includes fixed government tax in it for Ontario.

4 % yearly you say?

#203 sheane wallace on 04.08.14 at 6:15 pm

and let’s not forget the added ethanol – 10 % in most cases

#204 Yes You Can Save on 04.08.14 at 6:31 pm

I don’t understand the people complaining they can’t save due to competing demands on their income. My husband and I have ho-hum jobs (electrician and mid-level office worker) yet live off one income and save about 50k a year. How do we do it…rent, have a single affordable car, and prioritize. We don’t substantially do without but we don’t have tons of toys either. We would say that our lives are rich without the added expenditure on consumption. We do use a bit for travel and enjoyment. With the possible exception of low-income earners savings can be achieved if they are made a priority.

#205 World According To Garth on 04.08.14 at 6:47 pm

Norway has 860 $ billion dollars sovereign fund investing their revenue from Oil and Gas. Where is our fund?
—————————————————————

$100K average salary pension/benefits up the as Govt Workers that’s where……

They don’t have HUGE bureaucratic Muni/Prov/Federal bullshit like they have in Canaduhhhhh over in Europe.

#206 Lorne on 04.08.14 at 7:21 pm

#205 World According to Garth
No, all Norway does is make sure it’s citizens are looked after well their entire life as a result of their oil and gas…unlike Canada where we ensure our Corporation executives are looked after….but not our entire population. Those damn socialists…they just don’t get it!!

#207 Daisy Mae on 04.08.14 at 7:41 pm

#185 Shawn: “Things like cell phones did not much exist 30 years ago, but today it’s considered a necessity. Is that inflation? Or is it a rising standard of living?”

*****************

It has become a necessity. And more are giving up their land lines because we don’t need both. So cost-wise, it’s ‘six of one…’

Considering all a smartphone can do, it’s good value for the money. I can’t imagine anyone not having one…

#208 jess on 04.08.14 at 7:44 pm

securitized rental bonds update

Game of Homes

http://inthesetimes.com/article/16424/game_of_homes

http://truth-out.org/news/item/22937-slumlord-wannabe-blackstone-violates-local-housing-laws-by-making-tenants-maintain-rentals

#209 joe campbell on 04.08.14 at 7:59 pm

the problem with TFSA and RRSP is not that they are bad instruments, it is that they make income tax more complicated and unpredictable.

i do not think income tax should exist and believe sales/user based/pollution/land/minerals should be the only form of taxes(essentially user taxes). write-offs for the rich and companies and CPP and EI premiums for the poor is not my idea of equal taxation.

TFSA is in theory far better than RRSP as it is simpler. enter the banks who try to not allow you to self direct your own money, tax transfers between accounts, over charge on fees etc. all for a needless complication. the only one the TFSA is aiding is the upper middle class, but mostly the banks.

as for RRSP, who can guess what levels the already high withholding tax will rise to. RRSP is a game where you guess how long you will live, guess future tax law changes, guess returns and income and how long you will work until. all in an effort to reduce your average marginal tax bracket.

the only tax code change that should exist is averaging your tax rate over your entire life, not annually. no need for rrsp, tfsa etc. why cant it work? who would continue working at 65 when they could retire and the gov would owe them money for not working(as they likely would have over paid taxes in previous years). this wouldnt really be a great argument as a good actuarian could simply ensure sufficient taxation based on predicted retirement trends.

just end income tax and I would be happier.

however as Sir john built our country on tax avoidance for the rich through insurance at the company he chaired(manulife) i wouldnt expect tax equality any time soon.

#210 None on 04.09.14 at 10:47 am

.#193 World According To Garth on 04.08.14 at 5:17 pm
Dozens of children massacred at Sandy Hook but not one photograph and proved to be done by actors with one of those kids showing up for photos with Obozo three weeks later at the whitehouse.

=============

Seriously? Dude, you are f*cking disgusting – 6 year old kids died and you’re talking conspiracy theories. I usually find your posts amusing but this really shows how sick you are. Get some help pal.

#211 espressobob on 04.09.14 at 5:44 pm

#209 joe campbell

The whole idea of investing is to create tax efficient income streams down the road! Nothings perfect.

#212 pookster on 04.11.14 at 12:26 pm

Wow, I wish I have that extra $200/week to put into TFSA but it’s possible if I put my mind into it. Everything is possible if you set your priorities right. This year in Feb, I put $10,000 into my TFSA and I already made 3.6%, better than the dinky .5% in my “high interest” savings account.

I’ve mentioned many times that I am blessed to be renting in beautiful Vancouver. I live in 3BR upper suite of a bright and clean home for $1300. I currently have a room mate living with me. I don’t believe it when people say that there is no affordable living space to rent in Vancouver. I’ve seen many! Once my room mate moves out, I’m thinking about moving into a smaller space. I can easily find a decent one for $650-850/month. I like the feeling of not committing to pay for mortgage for the rest of my life. I have the freedom of moving around depending on my financial situation. Yeah it sucks to move and it is a pain in the butt, but I’d rather have some extra money in my bank account than being in debt.