Money all over the place. What to do, what to do? | Page 2 | General financial discussion | Discussion forum

Re: #17 above:

I'm glad to hear you had a rewarding conversation with DH and that you may not be as far apart as it initially appeared in your attitudes to money. Perhaps you are learning from each other's contributions to the family's well-being.

I have no problem with him needing a decent RV except the fossil fuels that are likely spent in hauling it around, adding to the destruction of the atmosphere, but that's another issue! I hear you can hook up solar panels to them for electrical power etc now. It could well be that there are new ones that are better designed for environmental efficiency and therefore a better investment even if more expensive initially. But this is a market I am not familiar with.

I appreciate that a job offer involves much more than the pension plan. However, since you'd said you're averse to planning, I thought I'd better mention it. Most young people never consider such things at all. I know I never did, except to note that there was a pension plan.

I hear that you're not going to spend money on a financial planner come hell or high water. I hope your judgment is as good as you think it is.
What I suggest is that you keep a list over the next few years of questions that you find really difficult to resolve. There will be some if you are a thinking person, which you are. The people who don't have questions haven't really thought about things.
When you have accumulated a few of these, you might approach this woman or someone like her. A good one has spent years doing what we do in our spare time and can do more than churn out boilerplates - which is what most of them do. By then, you will be able to detect in the initial free half-hour consultation whether you think this person has the wherewithal to resolve your remaining questions. The more books I read, the more I realize I don't know, and that somebody out there really does know. When you hire yourself as a financial planner, you hire an amateur. Would you hire an amateur physicist?
One person who used to be on this forum but who hasn't contributed for a long time, whom I thought seemed very much on top of things, said once that he consulted a (well recommended) financial planner once just to get a second opinion as to whether he was doing things the best possible way, and to find out if there was something he was missing. He laid out his plan and his spread sheets and asked for input. Made sense to me.

Bottom line is that you have to be convinced that the person would add value beyond what they cost. The verdict on that will depend on the quality of the questions you pose and the quality of the answers.

On the other hand, if DH's pension is really enough, and fully indexed, maybe you can afford not to worry so much.
We have enough for the basics from indexed pension plan, CPP, OAS and mandatory RSP withdrawals. All of that is indexed to inflation with the possible exception of RSPs. However, the government covers the RSP situation to some extent by gradually increasing the mandatory withdrawals. At some point, if we live long enough, we will turn them into annuities, to ensure they last as long as we do. I am not worried, as we have additional money as well. But my spouse still finds it difficult to envision that we have "enough" so still works PT, but this is entirely voluntary as far as I'm concerned, and I, like most people on this forum, am the money person in the household.

I don't blame you for doing price checks and using the Scanning Code policy to save money here and there. I do the same thing, use coupons, price matching, buy in bulk where appropriate, belong to Costco (worth it for some things for us), accumulate points wherever available as long as I was planning on shopping there anyway, carefully scrutinize credit card offerings for best return, use LEDs, stagger my electrical usage to lower-priced times of day wherever reasonable, have never spent a dime on cigarettes and hate the taste of coffee. Penny-pinching adds up over time to thousands and thousands of dollars. Most of our travel is heavily subsidized by points redemptions, but we don't travel a lot. We could afford to spend more if we wanted to It's a good place to be.

Schrodinger's Ape said
...
3. Investment-wise, I'm pretty sold on the couch potato model. It seems easy enough, and the evidence seems to back it up. With our small portfolio, I think e-series funds are the way to go for now, and that buys me time to learn more about ETFs and things like that. I'm a little confused on the dis/advantages of getting an e-series mutual fund account vs opening a TD Direct Investment account though. I've heard bad things about TD-DI, and the mutual fund account seems to go through Easyweb, which we already have ....

The TD e-series Funds Account is only for holding units of their e-series index mutual funds.

In contrast, the TD Direct Investment brokerage accounts can hold units of other TD mutual funds as well as units of mutual funds from other companies, like Mawer and PH&N. For households with less than $15,000 in TD-DI accounts, there is a $25/quarter maintenance fee unless one satisfies one of their exceptions. The commission and fee schedule is here.

For the wife.

Schrodinger's Ape said

Norman1 said
If there's anyone would could do it all himself, it would be someone like Peter Aceto, CEO of Tangerine Bank. I'm sure he could read financial statements. But, in Globe & Mail: How the CEO of Tangerine Bank is investing his money we find that he has an investment advisor.

The way I read the article, he has an investment advisor for half his investment portfolio, and he and his wife manage the other half with low-cost mutual funds. So he's trying to beat the market with half his investments, and yeah... that's going to be a full time job in and of itself. And sure, if you're investing a CEO income's worth of investment, you can afford to pay someone to maximize your returns. But the fact that he only lets the guy manage half the portfolio tells me he doesn't have full confidence in the idea of beating the market... otherwise why not let the guy manage all of it?

"About 50 per cent is with an investment adviser and the other 50 per cent is what my wife and I invest directly. We invest in index-linked, low-cost mutual funds. We’ve chosen not to do ETFs because, yes, it’s a lower cost, but there is still some management and work to do."

Investment management is not that expensive anymore. It is what one get when one buys actively-managed mutual funds. MER is in the ½% to 2% ballpark.

That interpretation is not the only one.

One could also say he is not confident index funds are the best way to invest. He likely knows how market indices are constructed and that they are intended to be barometers of the market and not a recommended portfolio of the market.

Indices can end up being very bad portfolios. For example, around the year 2000, a highly overvalued stock name Nortel got an astonishing 30%+ weighting in the S&P/TSX Composite Index. Index mutual funds had to apply to regulators for special permission to exceed the customary 10% limit for any single stock holding.

Active managers can beat the index. In 2013, many Canadian equity funds had returns in the 30% range. The TSX Total Return Index for that year returned 11.97%. I thought I had made a mistake when I calculated the return on my portfolio. The calculated return was around 29%. I double checked and the number was correct.

Another possibility is that he is diversifying over both management styles: active and passive. He will get results that are a blend of both styles, while waiting for the proponents to sort the arguments out.

Also, the idea of maximizing returns does not apply with equity investments. It's not the same as shopping for GIC's where one can calculate definitive returns before investing. With stocks, one constructs a portfolio that will hopefully give a return that is at least double that of GIC's. There's no maximization. If one happens to be really lucky, then that portfolio could end up being the best out of everyone's out there. But, that's not really what it is about.

Thanks for the article about Aceto's investing style, Norman. I find it interesting, and more revealing than I would have expected.
His strategy, though, of dividing his assets between simple DIY and full service wealth manager, is only useful for people who have quite a large portfolio. The guys who make all the decisions etc usually won't deal with anything less than 500K, and you get a better deal if you give them a million plus, at least from what I have observed.

But I think that Norman's point in bringing this to our attention is that DIY can be very dangerous, and everyone can benefit from at least a second opinion.

I think that OP will have to come to terms with the fact that in the financial world, there are unavoidable costs. Whether it's trading costs, bank fees, MERs, paying advisors, or buying insurance that you may never need to draw on, you are going to get dinged. None of us like it, but that's the way it is. What you are looking for is a fair price, given how a particular market works.

And, once you have enough money to throw around, the cost of a good advisor may become negligible or irrelevant. I would bet that Aceto is not paying more than 1% of assets annually for this service. Those kinds of advisors get access to funds at lower MERs than what the DiYer can access. They have the power of bulk buying. Trading costs are, I think, included. So, with a large portfolio, you likely won't spend significantly more than DIY, and stats show that you will in most cases end up with more for your money because you won't get to make your own decisions.
This is not to say that the pros don't sometimes screw up or have poor ethics. It's all about finding the right person, which brings us back to the beginning.

OP - Since you've been doing well with modifying your DH's views on money, maybe it's time to get him to look at the economics of cigarettes. Not only do you have to buy them, but they make other things cost more too - insurance, medicine, support services if he gets cancer or COPD, etc. I'm sure you know this, and I'm sure you're worried about it because you've mentioned it several times. The cigarettes are undermining all your good financial work. It won't be easy, but he's high risk. Add that to what sounds like a stressful life, being on the road alone a lot, spending a lot of time cooped up in an RV, probably not able to get much in the way of healthy recreation, questionable diet, etc. Booze may become a factor as well in such circumstances.
And you're about ten years younger than him.
So... better get that life insurance policy asap...

Another thing to remember about life insurance is that you are less likely to need it as time goes on. Right now is actually when you need it most - when your personal income is low and your joint expenses and worries are high. If you don't have a good answer to the question of how everything would work out financially if he died tomorrow, then you need life insurance today.
Sometime down the road, if everything goes well, you may be able to reduce the amount of insurance you have on him. Right now, however, seems to me you are playing with fire and hoping it won't blow your way. You can always change insurers later or type of insurance. Just get something in place, now. Work out the fine points later. I think you'll find all insurance companies work on the same principles but rates will vary. The variation in rates is not so much about being competitive as it is about what their losses have been in the past with various demographics, and what their actuaries are telling them. Make sure you don't exceed the insured limits on payouts established by Assuris. If you are likely to exceed it, get two policies with 2 different companies. It's a good idea to also look at the financial viability of the insurance company in question, but I am not the one to tell you how to do that. I would think that the big names you have cited should be fine. It might be wise to use a broker.

While Norman is technically correct about what insurance represents, I think that for most of us, in practical terms, it is a kind of necessary gamble.

I wouldn't have raised these issues if I didn't think you could probably hear them. I did it really to try to give you some support in what I think you already know you have to do.

I wouldn't worry about funeral planning if it were me. Funeral homes like to get people signed up; that's their job, and their livelihood. It's enough if you've discussed what you might like to happen in a general way.
I have also heard of instances where, even though pre-planning had taken place, a funeral home would then try to up-sell the bereaved after the death. Another funeral director told me this is not acceptable in the trade, but, still, apparently it happens. When people are not emotionally encumbered, they make more sensible decisions. When they are bereaved, they are vulnerable. Whatever you want done should probably go into a signed written statement rather than a plan at a funeral home.

good luck with the life insurance people. I am wondering, do you think DH put two and two together that the reason the premiums are so much higher for smokers is not just because they're higher risk per se, in a general sort of way, but because he, in particular, is expected to have a shortened life because of the cigarettes? Perhaps that notion would have more impact, the idea that he can count on a shortened life. It's not just about being part of a category. It's personal.

That's a tough situation, and no doubt a challenge to live with.
Maybe his apparent acceptance has to do with his apparent inability to fix the problem.
Let's hope he is able to do something before it's too late.

You might also want to look at critical illness insurance. I'm not pushing it; just something to consider and decide if you want it. It too might be very expensive for a smoker. I have no personal experience with it except to say that I thought it was an expensive product even for someone who has never smoked.

Sounds good. I think the work plan is a better deal.

Critical illness insurance makes little sense to me except for a small portion of the population. Few of the people for whom it might be a good idea can afford it. Better in most cases to save up and self-insure, as it doesn't pay out very much anyway.

Schrodinger's Ape said

He has tried to quit, too. Multiple times. Just never seems to stick. I think it's because he knows he "should" but doesn't really "want" to.

It is not as easy as that. There is an actual physical addiction to the nicotine and it is not just psychological. I would be supportive even if he is able to gradually reduce how often he smokes instead of quitting "cold turkey".

One acquaintance smoked for decades. She joked that as a smoker she would go quickly and not linger for years as non-smoker would. I don't think it really hit her how serious the effects would be until she developed COPD and had to push around a portable oxygen tank.

She was eventually able to quit. But, it was too late.