A survey released last month in support of Financial Literacy Month (#FLM2017) by the Canadian Payroll Association reveals that Canadian workers would be very pleased if their employers decided to offer or enhance financial education programs this holiday season.

In fact employees have a strong appetite for employer-provided financial education programs, with an astonishing 82% indicating they would be interested if employers offered financial information at work. But, busy workers have timing expectation — 54% would prefer that employers offered lunch and learns but only 8% would be interested if information was offered after work hours.

Currently, 38% of Canadians rely on financial advisors and banks for financial and retirement planning advice. A further 27% of people surveyed lean on friends, family and the internet for this important information.

Employees’ appetite for financial education at work is not surprising, considering results of the CPA’s National Payroll Week Employee Survey revealing that nearly half (47%) of working Canadians are living pay cheque to pay cheque. Survey results also illustrate that many Canadians are challenged by debt, are worried about their local economy and are not saving enough for retirement.

In addition, the more recent November 2017 survey results show that working Canadians are experiencing a high level of financial stress, and that too few are keeping a close eye on their finances. Half of employees feel that financial stress is impacting their work performance. What’s more, just 52% say they budget frequently; with an astounding 31% of this group saying that they keep their budget in their head. Of those who do budget, 52% say they usually or always stick to their budget.

“We know that many working Canadians are struggling to make ends meet financially and they need help,” says Janice MacLellan, Vice President of Operations at the CPA. “While many Canadians are well-intentioned, our survey results show that they are not making enough progress towards financial health, and ultimately, this is impacting their work and their lives.”

The CPA continues to champion its key message “Pay Yourself First” to prepare for a healthy financial future. Currently 61% of Canadian employers offer a “Pay Yourself First” option through payroll which enables employees to set up automatic payroll deductions to direct a portion of their net pay into a separate retirement or savings account. Of those employers that do not currently offer this option, an additional one-third are considering making it available.

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Members of the Saskatchewan Pension Plan can pay themselves first by having contributions withdrawn directly from their bank account using the PAC system on the 1st or 15th of the month. Other methods of contribution to SPP include: using a contribution form to contribute at your financial institution; using your VISA or MasterCard; through online banking; or by mail to the Plan office in Kindersley.

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Recently Kyle Prevost (Young and Thrifty) hosted the online Canadian Financial Summit which included video presentations and interviews with 25 Canadian personal finance experts. While the presentations were free from September 13-16, you can still buy a pass to view these presentations.

Blogs by many of these people are regularly featured in SPP’s Best from the Blogosphere, but there were some interesting people on the agenda who are new to me. Today I introduce you to some of their recent work.

Alyssa Fischer is the writer behind one of Canada’s top up and coming blogs MixedUpMoney.com. In How My Accountability Buddy Became My Secret Financial Weapon she writes that grocery shopping with her husband is important because they help each other stick to their budget. She says, “If I let myself spend money in a frivolous fashion each time I needed a pick me up, I would be right back where I was 3 years ago. In debt, maxed out, and over my limit.”

Martin Dasko on Studenomics graduated from college debt-free and the purpose of his blog is to help readers get to financial freedom by age 30 (no debt, money saved, and the ability to do whatever they want). In Why You Should Save $10k in The Next Six Months (and how to start) he explains that personal finance is often about habits and choices. “You may decide to find new ways to make more money or spend less.  Having money in the bank will make your life better because you will have options and you can plan your next move,” Dasko notes.

Chris Enns is an opera-singing-financial-planning-farmboy and the man behind Ragstoreasonable.com. He wonders whether he can be an artist and be profitable. He also questions the following core beliefs  so many carry in the creative industry.

• That breaking even is enough.
• That paying the bills is enough.
• That building a profitable creative business is next to impossible.

He recognizes that wanting just “enough” to live his life is holding him back in a huge way. Instead he says shifting his thinking to “making a profit” is more likely to pave the way to building his savings and planning for the future.

Janine Rogan is the talented writer and CPA behind JanineRogan.com.  Rogan suggests that if your bank balance is too high you are more likely to spend too much. For example, even though you have $15,000 sitting in your chequing account, some (or all) of that money may be spoken for.

But you may feel you can splurge because you have extra cash on hand. Therefore she suggests that you should set guidelines for a maximum bank balance in your chequing account and once you hit that threshold excess cash should be moved to a savings or investment account.

Rogan says, “Shifting the expectation to living on less because you only have a set amount of cash in your bank account means that you will function in more of a frugal mind set.”

Half-banked.com is Desirae Odjick’s personal finance blog for millennials who want to manage their money and still have a life. She offers Five ways to learn about money for free (without leaving the house). They include:

• Taking out a stack of books from your local library.
• Watching money videos on YouTube.
• Reading a whole pile of financial blogs.
• Tracking your spending.
• Visiting the Canadian Financial Summit .

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

By Sheryl Smolkin

Today I’m interviewing accountant Dave Trahair for savewithspp.com. Dave operates his own personal finance training firm, and he is also the author of five personal finance books. He offers seminars based on his books to organizations, including CPA Canada and its provincial accounting affiliates. His most recent book is The Procrastinator’s Guide to Retirement: How YOU can retire in 10 years or less, and that’s what we’re going to talk about today.

Q: What portion of the population do you think is 10 years or more out from retirement and not saving enough?
A: It’s hard to pin it down to a specific percentage, but I would say the vast majority of people who don’t have defined benefit pension plans are in that boat. Unfortunately, this type of plan is going the way of the dodo bird, because with the low interest rate environment and what’s happening in the stock market, the people running those kinds of pension plans can’t save enough to fulfill their promise. It’s hard to come up with a precise number, but I bet you 80% of people without a defined benefit pension plan are nowhere near ready, financially, to fund their retirement.

Q: Why do you think so many people procrastinate when it comes to planning and saving for retirement?
A: Well, I think for some, it’s just that they’re bad with money, and they spend more than they make. They run on credit card debt, and they’re never really even thinking about getting their lives under control, financially. For many of the rest of us, even if we aren’t fiscally irresponsible, it’s just that life is expensive.

Think of people in their 20s who have just graduated from university. Many of them are saddled with student loan debt and they are having problems trying to find a full-time job in their field. Forget retirement savings. That’s so far down the road. They’ve got more pressing concerns at that stage in their life.

People in their 30s and 40s tend to do things like get married, have kids, and buy a house. These kinds of activities are very costly and therefore, many people find that there simply isn’t any money, at the end of the day to save for retirement. It’s not because they’re wasteful spenders.

Q: Continuing with the same theme, if you ask most people, they’ll probably tell you they’re tapped out. They don’t have extra money left over at the end of the month. Where can these people find the money to save?
A: That’s a very good question, and one of the key concepts in the book. I always tell people when I’m asked, “What’s the first thing you can do to help get your finances under control?” The answer is to somehow track your personal spending.

For effective financial planning you have to start with what’s happened in the past. That is your personal spending. Once you have a handle on where all the money went in the past, then you can take proactive steps to get your finances under control and probably find some areas where you could cut back and free up some spare cash for your retirement savings.

One of the big problems out there is revolving credit card debt. According to the Canadian Bankers Association, only about 60% of Canadians pay off their credit cards each and every month and, therefore, don’t incur interest charges. That means about 40% of Canadians can’t even pay off their credit cards, which means, essentially, that they’re spending more than they make.

Q: My first thought when I got your book was that it’s a great road map for saving in the last ten years before retirement, but the information is quite similar to most of the personal finance books I’ve read. What’s different about your book? What makes it a must-read for all Canadians and, in particular, those who are only a decade from retirement?
A: Yes, fair question. The first point that I’d make in response is that there is no magic bullet when it comes to personal finance. It’s really pretty basic. You could sum it up in one sentence.

All you have to do is live your life, spend less than you make, and do something positive with the excess money. The problem is most people aren’t doing that. There are books out there that play upon peoples’ wish to get ahead financially, easily or automatically. That’s just taking advantage of readers. The really good personal finance books out there, attack the root of the matter (as my book does) which is that your spending has to be less than your income.

What makes my books different — this one and the other ones I’ve written — is that I give away Microsoft Excel spreadsheets people can actually apply to their own situations. I use the spreadsheets as examples in the book, and then I say, “Look, go to the next step. Download the free spreadsheet, punch in your own numbers, and see what conclusion you come to about your life.”

Q: If readers are approaching retirement with consumer debt and a mortgage, where should they put their money first? Should they hold off on making RRSP contributions until they are completely debt free?
A: Good questions. I would say that it depends on the type of debt. If we believe the Canadian Bankers Association that at least 40% of Canadians have ugly credit card debt, the only thing these people should be thinking about is trying to get rid of that obligation. Forget paying down the mortgage. Forget making RRSP contributions. Even if there is a tax refund on RRSP contributions, they are effectively financing it at a very high interest rate because the alternative would be to pay down their credit cards.

There’s a chapter in the book on four people in that situation, which basically lays out the different options for getting rid of credit card debt. The problem is that it really requires a mind shift. It requires people to change their basic habits and it is really, really difficult to get them to do this.

Once a family has paid off their credit cards, the decision becomes “contribute to an RRSP or pay down the mortgage.” The first observation I would make in that case is that either option is a good alternative. You’ve got extra money, whether you pay down the mortgage or make an RRSP contribution, you can’t lose in either case.

However, with the ultra-low interest rate environment right now and assuming the person we’re talking about is in a reasonably high tax bracket, making $80,000 or $100,000 or more, it’s difficult to beat the huge economic benefit of a tax refund.

Q: To what extent should Canadians planning for retirement take future health and long-term care costs into consideration, and how can they quantify these amounts, for budgeting purposes?
A: That’s a very difficult question to answer and a very challenging thing for many people. We have provincial health plans in Canada, so we’re a lot further ahead than our neighbors to the south. The government plans aren’t perfect, but they’re a good basis for covering many of your health costs.

However, some other areas related to healthcare are not covered by the provincial plans, and this becomes a big problem for couples, say, when one of them has an ailment that requires him/her to go into a long-term care facility or nursing home. That can be very, very expensive. This is when people get into trouble with their finances due to health costs. In a lot of cases, it will be one of the spouses who needs long-term care and the other one is still living in the house, so it essentially almost doubles the family’s living costs.

Many people are able to cover the high costs of long-term care because they bought their home and own it out right. That is why I always encourage people who can afford a home to buy it and pay off the mortgage. Then you’ve got something worth significant money so you could sell and downsize or even take out a home equity line of credit to finance costs related to long-term care.

It really is an individual thing that requires a lot of thought and is difficult to pin down. It’s difficult to budget for retiree health care costs and yet the expenses can be onerous if you’re not prepared.

Q: I noticed you were recently interviewed for the “Me and My Money” column in The Globe and Mail. Your investments are very conservative – a high-interest savings account and guaranteed investment certificates. This is very contrary to what even independent financial advisors usually recommend. Why don’t you hold any equities?
A: I have no exposure to the stock market. That’s because I’m a very conservative accountant. I don’t like losses. I have spent a lot of time studying the stock market. I wrote a book on it called Enough Bull a couple of years ago.

If you look at long-term historical rates of returns, say, for the Canadian stock market, the S&P/TSX composite total return index which includes reinvested dividends, has done fantastically well —  9% per year. The problem is, for many reasons, most people come nowhere near what the ideal index has made.

That’s because they get emotional when the stock market crashes. They panic and sell at the wrong time. They sell low and buy high, which is the opposite of what you’re supposed to do. The other issue is that when it comes to personal finance, who has fifty years to go to retirement? You can’t assume that you’re going to earn the long-term, fifty year historical average rate.

I love fixed income products like GICs because they’re easy to understand; they’re guaranteed if you buy them from a financial institution, like any of the big six banks that are members of the CDIC (Canada Deposit Insurance Corporation); and, you can’t lose your money. The downside of course is they’re not paying very much interest. You’d be lucky to get about a two percent average rate of return.

The problem is most people using the recommended strategy of an investment advisor have a lot of exposure to the stock market. They think they’re making six or eight percent after fees and, therefore, laugh at GICs making two percent, but in many cases, they aren’t earning what they think they are.

Q: At age fifty-seven, you’re less than ten years from the normal retirement date of age sixty-five. Do you have a planned retirement date in mind?
A: I don’t really have a retirement date in mind. I mean, I love most of what I do. My plan is to slow down, do less hours, hopefully do some of the things I currently do, like writing and giving seminars, and earn some money doing that. I plan to slow down but I really don’t have any dreams about stopping work at sixty or even sixty-five, so again, that’s an individual choice.

Q: In closing, if you had one piece of advice for people who are ten years out from retirement, what would it be?
A: Well, first of all, I would say you have got to track your spending. I know it’s boring. I know it’s time consuming. I know not everybody is a specialist or likes dealing with spreadsheets. But that’s the most powerful information you can get because it’s personal. That’s what you need to start with: your family’s personal spending.

Q: Thank you, Dave. It’s a pleasure to talk to you today.
A: Thanks for having me, Sheryl.

 

 

 

 

 

 

 

David Tahair, author of
The Procrastinator’s Guide to Retirement: How to Retire in 10 Years or Less