The world has changed over the past 30 years or so, and the advice baby boomers give their adult children isn’t always relevant in today’s world.  Money reporter Erica Alini offers a millennial’s view in her book Money Like You Mean It: Personal Finance Tactics for the Real World .  She delivers on her promise to offer useful financial advice for the world that millennial’s live in, and her writing style makes the book easy to read. Millennial Challenges Alini devotes a significant chunk of the book to the challenges millennials and women face.  She covers the familiar themes of high housing prices and student debt.  She also covers an under-appreciated problem that millennials face more than boomers did: “easy access to credit” and aggressive marketing to get people to use that credit.  Borrowing for any aspect of your lifestyle has been normalized.  Thirty years ago, people who never ate out and had no car weren’t seen as freaks.  Marketing has rampe...

My wife pointed out that some readers of my post on the rout in long-term bonds may not know what “long-term bond” means.  Typically, bonds pay interest for some number of years after which you get the money you invested back.  So, a $10,000 30-year bond would pay interest on the $10,000 for 30 years, and then the investor would get the $10,000 back at “maturity”.  I think of any bond whose maturity is more than 10 years away as a long-term bond, but others may have different cut-offs. Here are my posts for the past two weeks: The Rule of 30 The Rout in Long-Term Bonds Here are some short takes and some weekend reading: Tom Bradley at Steadyhand has an intervention for stock market forecasters. Morgan Housel explains that every year, something big and unexpected happens.  Housel is always clever, but I find his essays rarely actionable, at least for an index investor like me.  This article, however, is actionable.  We need more ready cash and other saving...

The total return on Vanguard’s Canadian Long-Term Bond Index ETF (VLB) since 2020 October 27 is a painful loss of 24%.  Why did I choose that particular date to report this loss?  That’s when I wrote the article Owning Today’s Long-Term Bonds is Crazy . Did I know that the Canadian Long-Term bonds returns would be this bad over the past 18 months?   No, I didn’t.  But I did know that returns were likely to be poor over the full duration of the bonds.  Either interest rates were going to rise and long-term bonds would be clobbered (as they have been), or interest rates were going to stay low and give rock-bottom yields for many years.  Either way, starting from a year and a half ago, long-term bond returns were destined to be poor. Does this mean we should all pile into stocks? No.  If you own bonds to blunt the volatility of stocks, you can choose short-term bonds or even high-interest savings accounts.  This is what I did back when interest rates...

Frederick Vettese has written good books for Canadians who are retired or near retirement.  His latest, The Rule of 30, is for Canadians still more than a decade from retirement.  He observes that your ability to save for retirement varies over time, so it doesn’t make sense to try to save some fixed percentage of your income throughout your working life.  He lays out a set of rules for how much you should save using what he calls “The Rule of 30.” Vettese’s Rule of 30 is that Canadians should save 30% of their income toward retirement minus mortgage payments or rent and “extraordinary, short-term, necessary expenses, like daycare.”  The idea is for young people to save less when they’re under the pressure of child care costs and housing payments.  The author goes through a number of simulations to test how his rule would perform in different circumstances.  He is careful to base these simulations on reasonable assumptions. My approach is to count anything ...

I’ve seen some complaining that government benefits (like CPP) aren’t keeping up with inflation the way they are supposed to.  Some people have substantive complaints about how the Consumer Price Index (CPI) is calculated, but others are simply unaware of how CPI changes get applied. News reports generally just compare today’s CPI to what it was a year ago.  Lately, we’ve seen some big jumps in inflation.  People see that these inflation increases are larger than the CPI adjustments to their government benefits.  However, for government benefits and other CPI-indexed figures, the government averages CPI numbers from November of one year to the end of October of the following year.   A CPI adjustment that takes place in January is based on CPI figures from 14 months earlier to 2 months earlier (and how much that average increased over the previous year’s average).  This creates about an 8-month delay in applying CPI increases. So, assuming inflation moderate...

Close Friend:  My wife and I are just a year away from being able to start our CPP benefits when we turn 60.  I’m not sure if we should start them right away or wait until we’re older to get bigger benefits. Michael James: I don’t usually get involved with giving this kind of advice about people’s specific situations, but you’re a close enough friend that I’ll try to help.  Let’s go through a standard checklist of questions to help you decide. CF:  Fire away! Do you need the money? MJ:  The first question is “Do you need the money?” CF:  Of course I need money.  What kind of question is that? MJ:  Hmmm.  You’re right.  That question isn’t very clear.  I think the idea is whether you need CPP benefits to be able to maintain your standard of living. CF:  Well, I’m retiring in a few months, and I don’t really know what standard of living I can afford. MJ:  Another good point.  Let’s try to make the question more precise....

Recently, I had some trouble getting a sensible limit on my new credit card because I wasn’t given a chance to properly explain my capacity for making payments .  I finally got to speak to a human at BMO who eventually increased my credit limit.  She told me that valid sources of income include investment income.  However, she seemed to be reading a script and couldn’t expand on whether that only meant taxable income, or if it includes any type of investment return (such as unrealized capital gains).  So, I just presumed that unrealized capital gains were fine and got my credit limit increase. The larger lesson here is that getting credit after retiring can be challenging.  So, be careful about giving up a high-limit credit card until you’re sure you can replace it.  My efforts to tell BMO the size of my portfolio (mostly held by their bank) fell on deaf ears.  An eccentric person with $20 million in a chequing account at BMO couldn’t get a credit card...