The economy isn’t doing that great.  Sure, it’s improved marginally in the past year or so, but that doesn’t mean that it’s easy for most retirees to get by.  High unemployment makes it hard to pick up that part time job to make ends meet and the price of things never seem to stop going up.

Getting a stimulus check from the government for $250 would likely be at the top of any Social Security recipient’s list of things they would like to happen this year.

However, it isn’t very likely to happen.

History of the $250 Social Security recipient stimulus check

In 2009, a $250 check was paid out to Social Security recipients which was supposed to make up for the fact that there was no cost of living raise for Social Security payments because of low inflation.

The Social Security cost of living raise for 2013 will be 1.7% which isn’t a big increase, but means that there won’t be any kind of stimulus check given out.

Summary

As to the question of ‘Will there be a $250 stimulus check for Social Security recipients?” – the answer is almost certainly no.

 Will there be a stimulus check in 2013?

Will there be a $250 stimulus check in 2013 for SSI recipients?

 

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Will There Be A Stimulus Check In 2020?

by Mike Holman on February 11, 2013

One of the more common questions I get at this site is “Will there be a stimulus check in 2020?”.

The answer unfortunately, is almost definitely no.

Why do people keep asking this question?  Well, back in 2008, the US government did give out $600 stimulus checks to most Americans.  Needless to say this money was very well received and I’m sure most people wouldn’t mind seeing more of those checks.

Who doesn’t like free money?

History of the stimulus check

In 2008, a $600 stimulus check was paid out to most taxpayers in an effort to boost the economy by getting more cash into the hands of people likely to spend it.

In 2009, a $250 stimulus check was sent to all recipients of Social Security (retired people) and SSI (Supplemental Security Income) for disabled people.

Will there be another stimulus check this year?

The factors which might produce another stimulus check could include:

A bad economy – While the current economy isn’t great, it’s better than it has been in the past.  Even housing prices seem to have bottomed out.  Unless there is a major slowdown in the economy, this will not provide much motivation for another check.

Election year – My theory is that politicians will try to buy votes when given the opportunity.  Given that 2019 is not an election year, this shouldn’t be an issue.

What is a stimulus check?

A stimulus check is a check mailed out to a significant number of Americans in order to give government tax money to those most likely to spend it and help stimulate the economy.

Summary

There will be no stimulus check in 2020.  I know that might be disappointing, but the reality is that is just isn’t going to happen.

Will there be a $250 stimulus check in 2013 for SSI recipients?

Will there be a $250 stimulus check for Social Security recipients in 2013?

 

 

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Should I Have An Open House When Selling My House?

by Mike Holman on February 11, 2013

There was a recent article in the Globe & Mail where a real estate agent was interviewed about her opinion on holding open houses if you are selling a house.

To summarize, the agent thought that open houses were a waste of time with only nosy neighbours dropping in to check out your belongings.

I disagree.  I think those are the words of a lazy (and quite possibly untrustworthy) real estate agent who doesn’t like doing open houses.

Benefits of having an open house

When I sold my first house, some prospective buyers who had scheduled appointments with their agents, also came on the weekend for the open house. 

Why would they do this?

  • Less structured – They don’t need an appointment, so there is some flexibility as to the time and day when they check out the house.
  • No agent – No need for an agent, which makes things easier to schedule and allows the buyers more time to look at the house without using up their agent’s time.
  • Bring a friend/relative – Easy opportunity to get other opinions on the place.
  • Second look – If you are seriously interested in a house – why wouldn’t you want to have a 2nd or even 3rd look at it before signing your life away?

Is it just neighbours who go to open houses?

Neighbours can indeed be nosy, but they can also have friends who might be interested in moving to the area.  It’s very possible that your eventual buyer will be a result of one of your streetmates who sees your house and tells someone about it. 

The more people are at your open house, the more ‘buzz’ there is and the greater the chance that you will get an offer or have more bidders on your house.  Neighbours will always be welcome at any open house I have.

Casual dropins

Do casual ‘window shoppers’ ever buy houses?  I’m certain they do, because I almost did.

About 10 years ago, I got into the habit of looking at local open houses to get ideas on how to fix my house up.  One rainy Saturday I checked out this one house and fell in love with it.  It was large with a great third story party room (I was single and childless at the time) with a walkout deck.  I thought it was fantastic.

Because I casually dropped in on that open house, I went from being a curious neighbour (I lived on the same street) to calling my agent, scheduling a visit and seriously considered making an offer.  In the end I didn’t because it was a bit expensive for me and it needed some work which would cost even more.

Although I didn’t buy that house, I suspect there are other examples where someone attended open house for ‘fun’ and ended up buying the house.

Why not have an open house?

And really – What is the downside of an open house?  Sure you have to clean up and vacate the place for a few hours, but you have to do that anyway for scheduled appointments. 

Do you want to do everything you can to sell your place or not?

What do you think – Are open houses worthwhile if you are selling a house?

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LinkStuff: Online RESP Chat With Globe And Mail Today

by Mike Holman on January 4, 2013

Announcement – I’ll be doing an online chat on RESPs with the Globe & Mail today at noon to 1pm, so if you have any RESP related questions, please check it out. And unlike most of the questions asked through this blog, I promise not to ignore any of them. 🙂

Here is the link.

On with the links

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2012 Investment Portfolio Returns – A Good Year

by Mike Holman on January 2, 2013

Time to take a look at the 2012 investment returns.  You can usually tell the performance by how early in the year this post appears.  When the market has done well, I can’t wait to calculate the return and see how much more money I have.  In bad years, I tend to delay performance calculation.  This year – the numbers look pretty decent.

My portfolio allocation

My portfolio allocation is loosely based on the Canadian Capitalist’s sleepy portfolio. I’ve made a few changes from his portfolio and this is what my desired allocation is:

Asset class ETF Target (%)
Bonds XSB 20
Real return bonds XRB 5
Canadian equity XIU 11
US equity VTI 32
International equity VEA 32

I’ve been a good little indexer this year (for a change), so my actual allocations were pretty close to those numbers.

Past returns

Here are my returns from the last seven years:

Year Return(%)
2006 14.7
2007 4.1
2008 -17.0
2009 20.24
2010 7.3
2011 -1.8
2012 13.3

My annualized rate of return over the seven years is 5.16%. At that rate, $100,000 invested seven years ago would now be worth $142,260.

The rate of inflation over the last six years has been pretty low at just under 2%, so my annual real return is about 3%, which is pretty reasonable.

I have a relatively low amount of Canadian equities (11%) which helped this year as the S&P500 (13.5%) and Europe/Pacific (14.8%) handily outpaced the TSX60 (8.1%).  This doesn’t mean anything, as there are other years where the Canadian index is the winner.  My investment philosophy is to keep my investment fees low and diversify.

How did your investments do last year?

 

 

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LinkStuff – US Election

by Mike Holman on November 16, 2012

Last week saw Barrack Obama re-elected as president of the US.  I can’t claim to fully understand the US government system, but the fact that the Republicans still hold a fair bit of power means that there will likely be a lot of conflict over the next four years rather than good governance.  It appears that their current power distribution is similar to Canada if there is a minority government in place.

On with the links

Rob Carrick of the Globe & Mail wrote a very good article called Three smarts ways to find a discount brokerage.  Rob was nice enough to include a couple of my articles, but that’s not why it is a good read.  His main advice is to use multiple sources of information on discount brokerages.  Here is a different link to the article if the first one is behind a paywall.

Rob from Canadian Mortgage Trends wrote about some differences between US and Canadian housing markets.  He’s not suggesting that the housing market in Canada won’t crash, but it’s important to note that there are some significant differences.

Ben Rabidoux has one of the better arguments as to why Canadian house prices will fall.  Now if he could just provide a timeline for that fall….

 Mike from Oblivious Investor has a very good piece on what to do about low interest rates?

Robb from Boomer & Echo compared some free chequing accounts.

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Today’s post is going to be short and sweet.  When making financial decisions, take a look at the long term view first.

Most people go through a life path where they start their careers, progress with their careers, buy a house, maybe have kids, pay off all debts, save for retirement and eventually retire.

The biggest expense areas can be grouped into the following:

  • Housing costs
  • Retirement savings
  • Living (basically any other spending).

One of the problems that I see with some people is that they spend too much money on living and not enough on retirement savings and paying down debt.

If you are a person who makes the minimum payment on your debts (including mortgage), doesn’t save much for retirement and only saves for things like vacations – you are headed for a bit of a crash at retirement time.

One of the biggest problems with an “I’m not saving for retirement” strategy is that the strategy will work exceedingly well for a long time.  You’ll have a great life and won’t have any money worries assuming you can balance your budget.  The problem is that once you retire, you’ll have to adjust from living the high life to living in near poverty.

If you are middle class or higher, you need to save for retirement in order keep some sort of decent living standard in retirement.

Cut expenses, save for retirement

If you are young (less than 30), then I wouldn’t be concerned with retirement savings.  If you are over 30, you need to start thinking about saving for retirement.  Even if it’s not possible now – think about how to make it happen in the near future.  The retirement savings money has to come out of your living budget category.  Yes, that means you will have to cut back on your living expenses.  You can decide which ones to cut.

Housing is a funny category.  It’s common for people to buy an expensive house, but then only make the minimum mortgage payments for 30 years or even longer.  It shouldn’t take 30 years to pay off a house, in fact it shouldn’t take more than 20 years in my opinion.

Make a plan to pay off your house in a reasonable amount of time.  This extra money will come from your living category. 

Summary

If you spend too much money on ‘living’ and aren’t putting enough money into future expenses like retirement – try to think ahead and how you would like your life to be.  Do you want to be debt free someday?  Do you want to retire early or work part time in your 50’s?  Those things won’t happen by accident – you need to do some planning and some saving.

 This post was part of the Blog for Financial Literacy effort organized by Glenn Cooke from LifeInsuranceCanada.com

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How To Save $100,000 For An MBA Or Other Higher Education

by Mike Holman on November 13, 2012

A reader asked me how he can save $100,000 in order to do his MBA. My first thought was “with great difficulty”.  $100 grand is a lot of cash to save even if you make a high salary.

Obviously, to save money you must spend less than you earn and save the difference. Cutting your spending and increasing your income are the two options you have.

I’m not going to get into money saving tips – there are a million…no, perhaps even a billion blogs out there dedicated to that sort of thing already. I will say however, that saving money is 99% motivation. If you are keen to save money for a desired goal and have the financial capacity to do so, then you will do it.

If you need someone to explain obvious money saving strategies like cooking and eating at home is cheaper than eating out, then trust me – that MBA won’t do you a bit of  good. Just keep eating out and enjoy your life.

Increasing your income by working extra hours or from a part-time job is another possibility, but it might not be practical for everyone.

Save or borrow for an MBA?

I think the reader should consider borrowing money to do the MBA.

Most people complete an MBA in order to increase their earning potential. They might spout some other nonsense about their intentions, but they are lying. It’s all about the money!

Assuming an MBA increases your future earnings, waiting to save up for an MBA means that there will be fewer post-MBA higher-earning years.  If you borrow money and complete an MBA now, you can start earning the big MBA salary earlier and there will be more years with the extra income.

For example if the reader is 30 years old and takes 10 years to save up $100,000 to get the MBA, he will be 40 before he starts making big MBA money. Assuming he retires at 65, that gives him 25 years of post-MBA higher salary earnings.

But what if he borrows the money at age 30 and goes the MBA now? If he starts the post-MBA salary bump at age 31, that gives him 34 years where he is earning a higher MBA salary.

That extra nine years of increased earnings adds up – even if the post-MBA salary bump isn’t that large.

If your salary increases after the MBA, that will make the $100,000 loan easier to pay back.

And yes, this argument can also be applied to any post-secondary education which is why it can make a lot of sense for students to borrow in order to complete a degree or other training if it increases their future earning potential.

What if my post-MBA salary doesn’t increase?

If you spend a $100,000 on an MBA and end up going back to your old job – needless, to say you probably wasted your money. Not everyone benefits from an MBA.

It’s important to be able to pay back your MBA student loan, even if your salary doesn’t increase. To do this, you have to look at your current pre-MBA income and determine if that is possible. If not, you might want to consider saving up part of the MBA cost first and then borrow the remainder in order to reduce your risk.

Summary

$100,000 is a lot of money to save and it would take most people a long time.

If you want to invest in post-secondary education (ie MBA) to increase your future earnings, consider borrowing the money you need unless you can come up with the cash in a reasonable amount of time.

Make sure that whatever education you choose has a reasonable chance at a payoff. Even MBAs don’t pay off for everyone.

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