Becoming suddenly single through divorce or the death of a spouse can be extremely difficult. Gail Vaz-Oxlade and Victoria Ryce teamed up to write the book CEO of Everything to “offer sensible advice and emotional support so you don’t have to figure out every twist, turn, and bump in the road on your own.” Vax-Oxlade’s experience with divorce and Ryce’s widowhood give them lots of personal experience to draw from. The authors show keen insight into human nature in several ways. One example concerns the fact that in many ways we are the sum of our habits. “You can stop flossing your teeth for a while, but three weeks is a new pattern setting up to take hold; you need to end it before it becomes entrenched. Ditto eating too much or too little, isolating yourself, or drinking yourself to sleep at night.” This book deals mostly with non-financial matters in the difficult road from couple-hood to living on your own. However, I’ll discuss primarily the financial parts of the book ...

My December account statements finally came in and like I’ve done each year for some time, I’ve calculated my return for the year. Because of the new CRM2 rules, my account statements give my annual return, but it’s done separately for each account. I think of my portfolio as a whole that just happens to be spread across multiple accounts. It was an above-average year. My internal rate of return (IRR) that takes into account cash flows was 13.65%. As a benchmark, I use Vanguard ETFs in the same asset allocation as my portfolio and compute the IRR with the same cash flows. Because I actually own Vanguard ETFs, my return doesn’t differ much from this benchmark. The only exception from indexing in my family portfolio was a small block of Berkshire Hathaway stock that my wife held for years, but sold in October. I use ETF VTV as a benchmark for Berkshire. My portfolio’s benchmark return was 13.62%. This is a hair below my actual return, so Berkshire outperformed VTV somewhat. ...

Having a good credit score matters. It affects whether or not you can get a mortgage or other loans, the interest rate you pay, whether a landlord accepts you as a tenant, and a whole host of other reasons. However, just checking your credit score doesn’t improve it. It’s also questionable whether the credit score you see matches the score that banks and other institutions see when they check on you. To improve your credit score, you need to maintain reasonable debt levels and pay your bills responsibly. Instead of monitoring your credit score, you can just get a free copy of your credit report from Equifax and TransUnion once per year to make sure it’s accurate. You can do this by calling them and going through their automated phone system to order a mailed copy of your report. If something is wrong, you can try to get it fixed. These free credit reports don’t give you your score, but they do list your creditors and a measure of how responsible you’ve been with payments for...

Here are my posts for the past two weeks: Pre-Suasion What Do You Have to Show for Your Work Comparing Your Investment Returns to a Benchmark Here are some short takes and some weekend reading: Dan Hallett has some thoughtful criticism of risk ratings of mutual funds and ETFs. Personally, I don’t think of risk as “low,” “medium,” or “high.” I think in terms of possible losses. Each asset class has some amount of loss I should reasonably consider to be possible. I usually think of the entire worldwide stock market as possibly dropping 50% for some period of time before eventually recovering. The possible percentage drop is much lower for fixed-income products. For any individual stock, the possible drop is 100% (with no recovery). Using these percentages, I look at my portfolio, imagine these drops happening and ask myself “will I be OK?” Canadian Mortgage Trends reports that CMHC is raising premiums for high-ratio mortgages, making mortgage insurance more expensive...

Robb Engen at Boomer and Echo recently revealed his 2016 investment returns and how they compare to benchmarks . More bloggers should set a good example this way. The end of his post piqued my interest when he wrote that the new CRM2 rules will give you your “money-weighted rate of return; however you can track your portfolio returns more accurately with the help of a rate of return calculator.” The prospect of a better method had me following the link to Justin Bender’s post called “Rate of Return Calculator – Modified Dietz Method.” He offers spreadsheets to help you calculate your returns and says that “By using an approximate time-weighted rate of return (such as the Modified Dietz method), investors will be better able to gauge their performance relative to index benchmarks.” Measuring investment skill Justin’s calculators don’t actually “track your portfolio returns more accurately.” Your money-weighted return is a good measure of the return you got. But comparing it ...

A question that I think people should ask themselves, particularly early in their working careers is “What do you have to show from all the money you’ve earned so far?” It’s not too hard to add up all the money you’ve been paid over the months or years. For anyone who has worked for a least a few years, the total will look impressive. So, where is it? Obviously, we need to spend some of it to for food, clothing, and other necessities, and there’s nothing wrong with a few indulgences, but surely there is something left of all that money. Or maybe not. One good answer to this question is savings. If you can say, “I’ve been saving for 5 years now, I’ve got no debts, and I have a portfolio worth nearly $50,000,” I’d say you’re in good shape. Another good answer is equity in your home. But don’t mistake mortgage payments for saving. The interest is gone. Principal is what matters. And if you’ve re-advanced your mortgage or taken on a line of credit for a new kitchen, you may...

Social Psychologist Robert Cialdini has followed up his 30-year old brilliant book Influence: The Psychology of Persuasion with another great book Pre-Suasion: a Revolutionary Way to Influence and Persuade . This latest book discusses how to set up conditions that make people more likely to be persuaded. It’s filled with surprising results on how we can be influenced without realizing it. While this book is definitely written for lay-people in an easy-to-read style, it’s not hard to see the author’s academic roots. The book finished with 160 pages of references and notes! Cialdini explains a number of important principles of “pre-suasion,” such as the fact that we tend to overestimate the importance of the thing we’re thinking about right now, and we tend to think the things we focus on are the cause of events. But, it’s the specific experiments and stories that make the book fascinating. A Toronto consultant used to get resistance on the price of big projects from clients u...

Here are my posts for the past three weeks: Toll Roads and Bridges Clients of Skilled Financial Advisors Taxes and Cashing in Points How People Can Go Years without Saving a Dime 59.9% Here are some short takes and some weekend reading: Morgan Housel explains why what looks like goofing off may be the best way to make progress. All the best things I’ve ever done in my career were achieved while I looked like I was goofing off. Unfortunately, it’s impossible to tell whether someone is in important quiet reflection or whether they really are just goofing off. Dan Bortolotti gives us a great overview of couch potato investing, including the advantages and disadvantages of different approaches. He makes a good analogy between making dinner and investing. The easiest way to invest is like eating at a restaurant. Then there’s bringing home pre-prepared food, and finally buying index ETFs is like cooking from scratch. This makes me wonder how to extend this analogy to ...

Lenders offering installment loans keep popping up. Most of them charge sky-high interest rates mainly suitable for people who don’t really understand interest. I recently saw a Money Mart ad for loans of 1-5 years with text “The APR for the loans is 59.90%” buried in the fine print. They aren’t the only ones charging this rate. Anything above 60% per year is considered “interest at a criminal rate” in the criminal code. So, these lenders are staying well clear by maintaining a buffer of 0.1%. This is how I imagine the discussion going when these lenders chose their interest rate. “Is 60% criminal, or is it only over 60% that’s a problem?” “Not sure. Maybe we should back off to 59% just to be safe.” “Are you crazy? We can’t leave that much money on the table. Let’s go with 59.99%.” “Is that getting too close? Maybe just 59.9%.” It could be that this big decision over how much interest to squeeze from their customers was more sophisticated than this. Maybe just ...