Increase your will power, improve your life
But in the short term, you may need to ration!
Get the details here…
Some ideas that are so much more important than the credit crisis…
Barack Obama addresses the paradox of racial tension and hope…
100 billion solid arguments for couch potato investing
“INVESTORS collectively spend around $100 billion a year trying to beat the stock market. That’s the finding of a rigorous effort to measure the total costs of Americans’ efforts to surpass the returns they would have received by simply holding a stock index fund. The huge price tag helps explain why beating a buy-and-hold strategy is so difficult.”
Mark Hulbert writes about the research of Eugene Fama, and the high costs of investment complexity. (Note that Canadian fees are significantly higher than those in the U.S., so this research would probably be even more compelling if conducted here.)
Why Rob Carrick hates principle protected notes
Another example of complexity gone wrong!
Rob mentions it only briefly here, but a simple way to get the benefits of principle protected notes without the high fees and small print is to invest the bulk of your principle in a GIC (guaranteed investment certificate) for five years and a comfortable percentage (five to 25 per cent, depending on your risk tolerance) in equity ETFs. See the previous post to this one for details on ETF portfolios.
Investment complexity, or all you ever need to know to invest successfully
While I was collecting some articles I’d written from various websites last week, I came across a review of my first book, Financial Serenity,Successful Financial Planning and Investment for Women in Quill and Quire Magazine. First, I’d like to state for the record that it is an honour to be reviewed by Quill and Quire, and that I always feel sorry for critics, who are paid by the word and can’t, therefore, say ‘this is/is not my cup of tea’ which is essentially what all criticism is. (As H. L. Mencken noted “Criticism is prejudice made plausible.”)
But one of the great privileges of blogging is that one gets to respond to one’s critics. Financial Serenity has lots of flaws, which is why I look forward to writing the sequel. In the language of critics, it is amateurishly and indulgently written, which is natural since I was an amateur indulging myself when I wrote it. Also, I was working as a financial advisor at the time, which means that I was still under the influence (of the investment industry). So if you happen to have a copy of the book, please ignore all the investment advice is favour of the updated view below.
In the two negative reviews the book received (among many positive reviews, I’m grateful to report) the primary criticism was two-fold: the book didn’t go into complicated investment stuff like contrarian investing and how to read the financial news, and it ‘borrowed heavily from New Age ideas.’ Therefore I wasn’t, the critics suggested, taking women or their needs seriously.
People: the complicated investment stuff isn’t in the book because it isn’t important to know. The result of knowing it is this:The most educated investment professionals on the planet underperform the stock market most of the time.
That means that wise investors (those that value their time as much as their money, and see managing risk as a fundamental component of achieving returns) can outperform the most complicated investment strategies by investing in a portfolio of index funds or in a diversified portfolio of growth stocks.
As for the financial news, here’s my best advice on the subject: ignore it.
Invest in a conservative, diversified portfolio on a monthly basis through boom and bust. Rebalance your portfolio once a year. If you need help, get coaching, not investment advice, from an advisor you like, trust and feel understood by. Pay them for their time, not for selling you stuff.
And here is the thing about New Age ideas: again, if you are a student of personal finance for 10 years or more, you’ll figure out that people do not succeed or fail because of what they know, but because of what they feel. Our beliefs create our feelings and determine our behaviour; our behaviour creates our reality. You can call it “New Age ideas” or you can call it behavioral investment science, but whatever you call it, it is the foundation of financial success.
All the knowledge on the planet cannot help you if you make bad decisions, and until you figure out who you are as an investor and what you want from your money, you’re likely to make bad decisions.
OK, that’s enough of my rant for the day. The thing that brought all of this on was a great article by Rob Carrick in the Globe and Mail on putting together an ETF portfolio. (If you don’t know what ETFs are, visit Moneysense at the link below for more information.) For many years now, I’ve recommended that investors consider the couch potato portfolios promoted by Moneysense Magazine and/or the growth stock portfolios offered by Canadian Shareowner. (Full disclosure: I do some copywriting, not much, for Shareowner Magazine.) But I’m particularly excited about Rob’s article because it provides an option for people who want to invest in a socially responsible ETF portfolio.
So, skip the complex and go for the useful, here:
To find out why an index fund portfolio should be the primary investment strategy of Canadians, please (really, pretty please) read about the Couch Potato portfolios at Moneysense.
And if you’re interested in spending a bit more time on your investments, would like to invest directly in stocks and would like to know what does matter when you do, or you’re looking for an very inexpensive way to trade in ETFs or stocks, visit Canadian Shareowner.
Now, all of this begs the question — if it can be so simple, why is there so much complexity out there? Why do most of us wander through life feeling as if we need to be Chartered Financial Analysts in order to invest well? In part, I think, the answer is attributable to human nature — some of us just really like complexity and competition. We’re happy to spend hours a day or pay thousands of dollars in commission if we can beat our neighbour’s returns by a few percent. (Odds are we won’t, but the thrill of possibility is worth the risk.) The other answer is probably simpler: fees and commissions. Need I say more?
Freedom for the road ahead
From financial planning to real estate investing, there are many ways to make early retirement a reality
Originally published in Alberta Venture Magazine Vol. 9 Issue 1 - January 2005
by Lori Bamber
Financial independence. Early retirement. Whatever you call it, we want it. Stuck in rush hour traffic, or listening to the boss drone on during another meeting, we dream of the day when every day is like Sunday.
Unless you own a successful business or have a generous pension plan, making these dreams real can seem daunting. Early retirement means we have less time to work and save, and less time to let those savings compound, even though these days we need those savings to last longer than in times past. Veteran financial advisor Rob McCullagh, a certified financial planning instructor at the University of Calgary, refers to a revealing anecdote about three generations of men. The grandfather started work at 17, toiled until age 65 and died 12 years later. The father began work at 22, worked until 60 and died 17 years later. The third generation son began work at age 25, plans to retire at age 55 and may very well live 30 years or more into his retirement.
Despite all of the obstacles, many people will do all the right things to become financially independent at an early age. Will you be among them? To increase your odds, we’ve outlined some of the problems you’ll face - and, more importantly, the strategies you’ll need to overcome them.
Don’t let your upkeep be your downfall. We’re all looking for lush investment returns without risk, but your grandmother probably knew more about the formula for wealth creation than today’s money managers. In fact, it’s tragically simple: if you want to retire early, you must save. And to save, you must spend less than you earn.
Successful wealth accumulators save first. Set up a monthly automatic investment plan and stick with it. And if you’re convinced the short-term result will be big trouble at the end of the month, be assured that cutting your expenses doesn’t have to be painful. For example, 1001 Ways to Cut Your Expenses author Jonathan Pond claims you can save up to $500,000 over a 40-year period just by keeping your cars 10 years or longer (save $350 a month in auto lease or purchase payments and insurance, invest it at 5% over 40 years and voila - $520,000). Another high-gain, low-pain strategy is accelerating your mortgage payments. A $582 mortgage payment every two weeks rather than $1,163 once a month (assuming a mortgage rate of 5% on a $200,000 loan amortized over 25 years) will save you more than $25,000 in interest - and retire your mortgage almost four years earlier. Do that by age 40, put that $25,000 and a biweekly contribution equivalent to your former mortgage payment into an RRSP at 8% for 15 years and you’ll add an additional $482,000 to your larder. If you’re just starting out, carve $50 from your weekly spending, starting at age 20, invest it at 8% and you’ll have more than $2 million at age 55. If you can’t think of ways to cut $50 a week from your spending, you’ll find hundreds at www.stretcher.com. But the best tip is probably the simplest - think before you spend. Ask yourself that vital question: Is this worth more to me than financial independence?
Avoid borrowing to pay for anything that’s not increasing in value more than the rate of interest you’re paying on the debt. For those aiming for financial freedom, consumer debt is the enemy. Carrying just $10,000 on your credit cards at 18% will cost you $1,800 per year; pay off the balance instead and invest that $1,800 in an RRSP at 8% over 20 years and you’ll have nearly $89,000 for your efforts.
With a few small lifestyle adjustments, we’ve just created more than $3 million in wealth. The question is, will you?
Keep your eyes wide open. We make decisions every single day that affect our ultimate financial destination and most of those decisions involve trade-offs. The motivation is in the vision: if we don’t know what we’re aiming for, it’s inevitable that we’ll choose the wide-screen TV and the new car over an uncertain, distant future.
According to Debbie Ammeter, vice-president of Advanced Financial Planning at Investors Group, people spend more time planning their annual vacations than their retirement. But there are questions that should be asked long before the morning after the retirement party: “Do you and your spouse have the same vision? Do you want to travel or just spend time at home? A clear picture is primar-y.” Ammeter also suggests that we consider alternatives to total retirement, like phased retirement with part-time work.
Jim Dillon agrees. He retired from an executive position in the brokerage industry in his early 50s, but it wasn’t long before he was back at work full time. And it wasn’t because he ran out of money. The problem was that his friends were still working - there was nobody to golf with. Dillon also found that while he was tired of the daily grind, he missed the challenge and learning opportunities work provided. Ten years later, he’s now retired again.
Not all early retirees will have the same opportunity to re-enter the workplace if they get cold feet, so it’s important to plan well: we don’t want a permanent solution to a temporary restlessness. You may even want to consider taking a sabbatical leave a few years before your planned retirement date. By giving yourself some space to think, you may even find that what you want is not early retirement but a new and challenging career.
Once you’ve hit the sweet spot - accumulated assets sufficient to produce income for the rest of your life without further employment - your work is not done. In fact, you’ve swapped one vocation for another, and putting your wealth in the hands of a professional can be terribly self-destructive unless you’re savvy enough to be a full partner in the decision-making process. There are no hard and fast general rules at this point, but there are a couple of principles that will save you from the worst mistakes.
In the last 15 years, diversification has come to mean holding the right mix of managed mutual funds, but a broader approach is healthier. Begin by thinking about what each asset is for: growth, inflation protection, income, liquidity, or safety of capital? If you understand that your Real Return Bonds (bonds that pay a nominal rate of return plus the rate of inflation) are meant to protect you when inflation rises and provide safety of capital, you won’t be disappointed when their returns aren’t as high as the latest hot stock.
Consider the most significant risks to your wealth: poor health, divorce, market risk, inflation and your spending. A healthy, fulfilling lifestyle is the best prevention, but Ammeter also suggests that you see a financial planner to help you determine and mitigate the risk of failing health with options like long-term-care insurance that can safeguard against catastrophic expenses which might otherwise decimate your best laid plans.
Be sure you’re comfortable with the worst-case scenario. It’s easy to work a few extra years but it’s challenging to get a job at 87 when you’ve outlived your savings. On the other hand, if you are content with a simple lifestyle, you might be perfectly comfortable living off the Canada Pension Plan, Old Age Security and perhaps the Guaranteed Income Supplement. (Count on a minimum monthly income of about $1,600 per couple or $1,100 per person.)
If you want a more luxurious retirement lifestyle, analysts advise that you shouldn’t consume more than 4% of your net worth per year, and if you want your assets to last 30 years or longer, reduce that to 3.79% per year. To achieve an annual income of $70,000 over and above your government benefits (in today’s dollars) in 10 years, you’ll need almost $2 million and an investment yield in retirement of 6% if inflation averages 3%; just over $1.55 million if inflation averages 2%.
At the end of the day, retirement is personal. The way we earn, save, spend and invest our money is unique, and our success depends on finding a plan that works for us as individuals. For that reason, we wanted to leave you with three very different strategies for achieving early retirement. One of them, or a mix of all three, may be the ticket to your retirement dreams.
The first strategy is for your inner real estate titan. Ozzie Jurock, author of Forget about Location, Location, Location, is Canada’s pre-eminent real estate guru, attracting thousands to his seminars. Many of his devotees report using his advice to build portfolios of rental properties and significant wealth; we asked him how to retire early.
“I tell people to buy a condo, no money down, with a ratio of (rental) income to price of 1% per month,” says Jurock. “For example, if you buy a condo for $100,000 you should be receiving $1,000 per month in rent. It pays for itself. Do that five times and you have $5,000 a month. Eighteen or 20 years from now - and we’re making the assumption that the value doesn’t go up and rents don’t increase -you’re going to have free cash flow of $5,000 a month.”
It sounds good, but how to buy with no money down? Isn’t it risky? “You’re starting the ‘yeah, buts,’” says Jurock. “We think nothing of working all our lives to save $400,000 and then putting it all in the hands of a 25-year-old financial advisor with no real education. Yet when I advise people to buy a condo, they say ‘that’s too risky!’ There are a whole bunch of ways to get 100% financing. It may not be at 4%; it may be at 6.3%. ‘Oh, that’s horrible,’ I can hear people saying. My wife and I owned 28 condos in the ’80s when interest rates were 13.5%. If you’ve got rental income to service the debt, what’s the problem?
“There will be headaches,” continues Jurock. “There’s always something. You have to do the work. You’ll have to learn how to be a property manager, but there are thousands of books on the subject. Go to the library.”
You’ve also got to decide if you’re an investor or a flipper, adds Jurock. An investor doesn’t buy property which doesn’t have the rental income to purchase price ratio defined above; a flipper is betting that he’ll be able to sell for more than he paid and is taking on significantly more risk should the market turn against him. Do your research, he says. Have a plan of action. Develop relationships with professionals who will assist you along the way. Most importantly, challenge yourself: once you change your belief system, you’ll find ways to overcome the obstacles.
There is power in a plan. Asked if it’s possible to retire early, financial planner Rob McCullagh replies that it’s all about how well your foundation is built. Are you successfully and consistently contributing to an RRSP and saving outside of an RRSP? Have you articulated your vision? We also have to be clear, says McCullagh, on the difference between investment and speculation. Speculators may have been burned by the markets in the last five years, but investors with a long-term window see the opportunity.
The first thing to do, he advises, is catch up on your RRSP contribution. According to Statistics Canada, as of 2002 Canadians had accumulated more than $274 billion in unused, allowable RRSP contribution room. But contribution room is defined by actuarial studies to provide for our income needs in retirement, the same way that pensions are designed. “If your employer was behind on your pension contributions,” says McCullagh, “you’d expect dramatic action.”
It isn’t just about retirement, he says, but about building security and comfort. People with savings are in a better position to make decisions throughout their lives. They’re also much calmer. “Many of my clients now say things like, ‘We didn’t think it was possible, but now we’ve saved a little money and we feel great about getting our statement.’ We’re not in control of the market,” says McCullagh, “but we are in charge of many other aspects (of wealth creation). Make sure you prepare for all outcomes, including inflation.”
For help with that preparation, McCullagh believes in the value of professional financial planning. He tells of a client who began saving only $50 a month in an RRSP and $50 in a non-registered plan. Today he’s saving $5,000 US a month - made possible by a healthy income and good habits developed early.
Don’t get caught in the treadmill of returns, he says, but have the courage to step back and put all aspects of our life in order. It’s about vision, consistency and discipline. A financial planner can’t help you control the markets, but they can help you get back in control of your own financial destiny.
Sometimes a simple life is the sweet life. Alan Dickson, author of Advance to Go, doesn’t think the stock market volatility of recent years will stand early retirement. “I’m sure there are people there who have made enough to retire by investing in the markets, but I’ve never met any,” he says. “I’ve met lots who have lost money. I think it may be a good thing when the stock market is down: it doesn’t tempt us to get into it.
“We have to focus on the other side, preserving our money rather than making more. The old adage ‘A penny saved is a penny earned’ isn’t accurate in a our tax environment - a penny saved is more like two pennies earned when you consider tax and the cost of going to work. We have to think about where we’re spending money.
Asked for an example, Dickson refers to friends, a couple who retired on Vancouver Island at age 55 with a combined total of about $150,000 in their RRSPs. They’re now both 66, and, as they intended, their RRSPs are almost depleted. With only CPP and old-age benefits, they’re living very comfortably.
“You have to make some choices,” says Dickson. “You can’t have all the vices. But you can’t spend willy-nilly even if you have millions in your RRSP. In 1885, when the average income was $500 a year, Mark Twain was spending $30,000 on household expenses. Then he went broke and had to go back to work. Well, it wasn’t just household expenses-he also played the stock market. It isn’t how much you make; it’s what you spend. People equate happiness with what you have and I just don’t see it. There are so many simple things we can do to just enjoy life and it doesn’t cost very much.”
Time off for good behaviour
This article, by Lori Bamber, was originally published by BCBusiness Magazine in 2004.
It’s called burnout.
For some, it may be the sense that it shouldn’t be quite so hard to get out of bed in the morning. Or that life is moving too fast – and there truly must be more to it than this. Chances are, you’re among them – the many hard-working, capable British
Columbians who wonder where they lost their edge – and more importantly, wonder how to get it back.
In fact, in Six Months Off, authors and sabbatical devotees, Hope Dlugozima, James Scott and David Sharp cite research that found 70 per cent of people between 35 and 49 dream about taking an extended period of time off work. One in five people dream about it every single day.
As the pace of business accelerates, cell phones, the internet and wireless handhelds transform work into a round-the-clock endeavor. In turn, burnout – from chronic dissatisfaction to the fatal-heart-attack variety – has become an ever present risk for both people and the companies that employ them.
Sustained profitability depends on highly creative, committed, engaged and energized people, and employees suffering from burnout don’t fit that description. For every one of them that flickers and fades, the company loses.
Sabbaticals, or extended leaves of absence, are becoming an alternative cure for a problem once seen to have only two solutions: early retirement or a new job.
Not all sabbaticals are the realization of a long-held dream, but some planning will ensure you get the most out of your time off and preclude the worst-case scenario: six months on the sofa, out of action, possibly fired, brooding about work.
Just ask Nigel Brown of lifeplanningmatters.com, a Kelowna-based retirement planning expert. Of late, he’s finding his services are in demand for those in need of a less permanent period of time off: “With the pace of business and the difficulty of maintaining a life balance, [sabbaticals] should be seen as a necessity – for employee retention, continued work excellence and preventive health measure.”
Brown recommends the planning process begin with identifying why you want or need to take a sabbatical, perhaps with the help of a life coach who can ask the right questions without imposing his or her own fears and agendas. Start a journal, says Brown, to document and clarify the proposition and to plan and document eventual experiences. Remember that the goal is to free up your mind from schedules and tasks. Don’t plan too much. Brown suggests having a plan for 30 per cent of the time, leaving the balance open for what he calls “Aha! opportunities.”
Leaving room for the unexpected may also be the key to discovering your next, best life. For example, BCBusiness contributor Pam Withers had to quit work for her husband’s last overseas sabbatical. “I decided to write a novel to keep myself out of trouble,” she says, “and it totally, totally changed my life – as it’s become a best-selling series of novels. A sabbatical will shake you out of your routine – new opportunities open up, new ways of thinking about things. New doors open for you.”
That’s what some employers fear: the employee will step through that open door, taste freedom and never come back. But Brown notes that if employees discover that it is truly time to move on, that is also a long-term benefit to the employer.
Funding the Sabbatical
More companies now offer paid sabbatical programs. However, if yours doesn’t, there are alternatives:
A deferred salary leave plan (DSLP) allows Canadian employees to defer a portion of
income – and the related income tax – to provide for a “self-funded leave of absence.” You can save a substantial portion of your gross income while feeling much less pain on the net side. If you are a single B.C. resident with $90,000 in employment income, for example, you’ll pay about $25,000 in tax in a given year, for a net income of about $65,000. If your employer agrees to defer 25 per cent of your annual salary for each of the next four years within a DSLP, reducing your gross pay to $67,500, you’ll pay $16,187 in tax.
Your net income, then, is $51,313 – an annual reduction of only $13,810. (If you’ve just received a raise, this might be an interesting option to consider. You won’t miss it when it doesn’t appear in your bank account until that fifth, felicitous year.)
If your employer doesn’t offer a DSLP program, and you have lots of unused RRSP contribution room, consider using the RRSP hidey hole to save and then fund a leave of absence. And remember – a sabbatical needn’t be expensive. It’s about discovering yourself, not necessarily mapping the globe.
In either case, you can save a year’s income within four years.
Danny Guillaume
CEO of Historical Xperiences, Creator of Storyeum, Tunnels of Moose Jaw; founder of Petcetera
Serial entrepreneur Danny Guillaume founded West Coast Video, one of the first large-format video store chains inVancouver, while still in his 20s. After selling to Blockbuster, he took a sabbatical before founding Petcetera. After selling Petcetera to a major U.S. chain, he took another sabbatical prior to launching The Tunnels of Moose Jaw, a very successful attraction in Moose Jaw’s formerly dilapidated downtown. Guillaume then set his sights on Vancouver’s Gastown, but “put the idea on the shelf” for almost a year before he began work on the project. Yes, another sabbatical.
BCB: Why take an extended period of leave prior to moving on to a new project?
Danny Guillaume: It is really tempting, when you let go of a business, to rush into something else. There is a real sense of emptiness, even of loss, and the tendency is to grab hold of something else to fill that emptiness. It’s really quite frivolous, with something as important as your work, to jump in just because you’re inspired in that moment.
Taking time is really about learning to understand yourself on a deeper level. Everything else comes out of that – the commitment, inspiration, creativity, passion, the strength to grow – it all springs from knowing who you are: what you love, what you want to contribute to, what you’re good at, how to compensate for your weaknesses. It’s a challenge to allow yourself that time, but it’s vital. I can build a much bigger, better business in four years if I take a year [off] than if I rushed in and worked for five.
BCB: What did you do during your last sabbatical?
DG: As we were building The Tunnels of Moose Jaw, I got the idea we could bring the same kind of revitalization to Gastown, but nobody believed we could find this kind of space here. After we opened there, I spent some time driving through B.C., getting more of a connection with our geography and history. And I spent a lot of time roller-blading.
One day I looked up and there it was. ‘It’ was the old Woodwards multi-storey parking lot, now home to Storyeum’s 104,000-square-foot facility. Somebody said it was condemned, and when I started to get a sense of how big it was, as I paced it off, I just knew. But I still took time. I surrounded myself with big sticky notes, playing with the ideas, writing out the ideals. Every business I create has to be profitable, but it also has to contribute to the community and to economic development. I wanted the satisfaction of making people happy, of moving them. That takes design, and it won’t happen if you’re in a hurry.
I walked in Pacific Spirit Park. Nature slows us down to a different speed. If we live at a rate of 10, nature is living at about one or two. If you spend enough time there, you begin to think and move to that slower beat and it’s there you begin to get back to yourself, to a real sense of who you are. When I’m out in the world, moving at the world’s pace, I begin to feel smaller – coming back to myself reminds me how great our potential really is. The walls and restrictions start to disappear.
Taking time has always been part of who I am. I took a year off to travel after I finished high school and I realized then how much differently¬ – better – I learned at that pace. So much more awareness, just being present.
BCB: What’s next?
DG: We want to be the best in the world at this business. And I’m looking forward to my next time off. I spend the first few weeks in gratitude. I reflect on what has just happened to me. A lot of lessons come at you, and it takes time to really absorb everything there is to learn. The second half of a sabbatical is about what’s next – what new adventure is in store for me? I’m looking forward to doing something
extraordinary.
Jon McComb
Co-host of the World Today on CKNW; took a six-month sabbatical that ended in August
BCB: How did you plan for this sabbatical?
Jon McComb: If you had told me in January that I would be leaving work for six months, starting in February, I would have said you were crazy. I didn’t even consider it as a possibility – there was no way I could take six months off, not with this kind of job. But my mind and body finally just said ‘Stop. It’s time to stop.’ And the people at Corus Radio in Vancouver have been completely supportive. Management sometimes gets a bad rap, and it can’t be easy to have one of your key on-air people disappear for six months, but I’ve been amazed. Nothing is impossible.
BCB: What did you focus on during your leave?
JM: Reacquainting myself with myself. Four months of decent sleep. From the simple standpoint of just taking a rest, I feel so much more alive. I have an over-developed sense of responsibility – it’s been about putting that down, lifting my nose from the grindstone and taking a look around at my life. As Einstein said, ‘You can’t solve a problem on the level at which it exists’. What was once just a creeping dissatisfaction had become the focus of my life, and I couldn’t solve it at work.
I took a lot of walks on the seawall. Spent time with the trees. I learned some new ways to perceive life – a process called ‘somatic experiencing’ that allows one to get out of the mind, the gerbil cage. And I learned to ride a motorcycle.
BCB: What did you learn during the process?
JM: It’s all about perception. If you asked [my co-host] Philip Till about the stress of being on air, he’d laugh at you. ‘What stress? What do you mean, stress?’ It’s about not getting stuck in the story – if you can slow everything down, you can let that go.
BCB: Is it important to do something entirely outside of your realm of experience?
JM: Absolutely – if only to ensure you don’t sit on your couch for six months. Learning to ride a motorcycle was a challenge for me; taking the B.C. Safety Council course, getting my licence. And there are times, oh, how to put this delicately, when one is perhaps slightly above the speed limit, when you are absolutely, completely focused. All of your energy and attention is in the moment – you’re thinking about nothing except keeping yourself from getting killed. You’re hanging on. You’re not thinking about the past, or about the future. And it was fun. One thing that I’ve learned from all of this is how important it is to stop being so serious; to have some fun.
Dr. Robert Krider
Associate Professor of Marketing, Faculty of Business Administration, on sabbatical from Simon Fraser University
The benefits of the traditional, academic sabbatical – a period of study and research as well as renewal – are now influencing the way businesses view sabbaticals for their employees. At its best it’s a way of revitalizing the business by revitalizing the individual employees: carving away the distractions and obligations of a normal office schedule creates an island of time in which new learning, thinking and creating can take place.
BCB: What are the primary benefits of the academic sabbatical to the employee?
Dr. Robert Krider: Uninterrupted time to focus intensely on interesting and difficult problems. Increased control over my life, both in what I do, and even more importantly, when I do it. If I’m inspired to work at 3 a.m., I do. If I’m not working efficiently at 11 a.m., I don’t waste time spinning my wheels – I go do some chores or get some exercise to recharge. Improved health: Many of the minor aches and pains of a 50-year-old disappeared.
My patience with my family and pleasure in their company increased dramatically. The physical and mental difference was obvious to people around me, who commented on it. I was able to get caught up with the recent developments in my field. Even if I’m not working right at the cutting edge, at least I know where it is again. As an academic, my life is about constant learning, and this process simply means having the time to learn intensely again.
BCB: The value to the employer – will you return to work renewed and recommitted?
RK: That’s a pretty safe bet. I found that by about three months into the leave, I was thinking ahead on how to take control of my life when I return to SFU. I also get to see how things are done elsewhere, and to bring good ideas back to my employer.
BCB: What do you feel might be important to an employer designing an employee-leave program?
RK: I and many of my colleagues in B-schools would love to do an internship in a corporation. Whether a couple of weeks, a term, or a year, such an exchange would be very valuable for us – and might even have some impact on the bottom line of the host corporation.
Brenda Eaton
Deputy Minister to the Premier of British Columbia
Recently returned from an eight-month sabbatical, a cycling trip through Spain, South Africa, Sri Lanka, Thailand, Tasmania/Australia, New Zealand and Uruguay, with her long-time partner Brent Beach.
BCB: At what moment did you know you wanted – or needed – this sabbatical?
Brenda Eaton: This was my second sabbatical. In 2003 we had just been through an intensive core-services review – restructuring our Crown corporations – and it seemed like a natural time to go again. About a year before we left on this trip, I went down to the Premier’s office and said “Mr. Premier, I have this great idea you’re going to love.” (She laughs.) He was quiet for a while and then he said, “Well, if this is something you really want to do, I think we should find a way to make it happen.” You have to give your employer lots of notice and find a time that works for them, too.
BCB: What was your primary purpose in taking the time off?
BE: My husband asked ‘What are your objectives for this sabbatical?’ I thought, ‘Are you crazy? I just want to go away.’ But as I thought about it, I knew I wanted to get fit again, to have a break from work and rejuvenate my batteries, and I wanted to see other parts of the world.
BCB: What were the most memorable moments?
BE: There were so many. Spain was a highlight. We followed a pilgrimage trail (Santiago de Compostela Camina). I have never met so many people before at such momentous times of their lives. Sri Lanka – we had been there before, five years ago, when it was so war-ravaged. It is a poor country, with no tourist infrastructure but it has evolved so much, after only two years of peace. South Africa – we went on safari and drove down the coast, all the way from the north to Cape Town; it is an extremely beautiful country. New Zealand – stunning, stunning natural beauty.
BCB: Did it change you?
BE: No. I mean, I learned a lot, yes. But the change all happened before I went. You change when you make the decision to go. You become clear on what you want from life, what is important.
BCB: What should other people know about sabbaticals?
BE: That it is possible, with a little planning. But don’t overplan; enjoy the
luxury of letting events unfold. There is so much sheer pleasure in riding to the end of a lane and deciding to turn right instead of left, to stay there for a couple of days. The freedom is fantastic.
There is a certain amount of confidence involved. I was disturbed by the number of people who came up to me and said ‘I admire you so much for doing this.’ Why admire? I thought. As I talked to people, I found that they were afraid that if they left, they might not have a job to come back to. These were extremely talented people and I wanted to say ‘You’d be hired back in a flash.’
BCB: Are there benefits for an employer when an employee takes a sabbatical?
BE: This kind of experience helps give you a solid grounding in yourself. To be strong at work, you need to be grounded in your own values and principles. I came back full of energy, and I know that with this government, I’m going to need it. Energy and enthusiasm, more of that can-do feeling.
BCB: The most important lessons learned on this trip?
BE: How incredibly kind and thoughtful people are, around the world – how proud they are of their countries, many of which don’t have a patch on B.C. I came back with an undying appreciation [for this province]. It’s so safe here, so clean. So beautiful. Our systems work. We have democracy. There’s no fear.
And it helped me as a manager; planning a sabbatical really reinforces good management practices. Practices like delegation, team-building, succession planning – principle-based decision making – you won’t be there, so decision must come from principle. The organization becomes stronger.
Ask an expert: Educated savings
Make sure your child’s schooling is covered with these tips
A couple of things to note before we begin: this article was originally published in Chatelaine Magazine in 2005, and the education savings legistlation has changed since then in a number of positive ways. At some point, I’ll find time to post an update here, but in the meantime, please just click on the link below to get the lastest numbers. Everything else still applies. Oh, yes — and this is a really unflattering photo (no idea why Chatelaine chose to use it) but I’m leaving it in because I know that my blog is direly lacking in images. I want you to know that my face is not chubby, and I only have one chin.
Contributing $167 per month to a registered education savings plan(RESP)from your child’s birth to age 18 will add up to more than $71,000. Although there are other education savings options, such as savings or investment accounts you open “in trust” for your child, only resps offer the benefit of a substantial contribution from the federal government, through the Canadian Education Savings Grant(CESG). Free money – yay!How an RESP works
You can contribute an annual maximum of $4,000, and the per-student lifetime limit is $42,000. The CESG will match up to 20 per cent of contributions to a maximum grant of $400 per year(and under new legislation, up to 40 per cent of the first $500 contributed, depending on income)until the student turns 18, with a lifetime limit of $7,200. If you miss a year, you can double your contributions the next year and receive a maximum grant of $800.
Family versus individual resps
You can open either a family or an individual RESP. If you have more than one child, the family option allows the sharing of benefits. This means that although contribution and CESG limits apply to each individual within the plan, if one child doesn’t use her full share of the money, the other can use the remainder later for that law degree. Anyone can open an individual RESP for one child and contribute money to it, but only immediate family members can contribute to a family plan.
Your options
There are two main types of plans.
Scholarship plans A large group of unrelated investors make contributions to a scholarship fund(much like a mutual fund). All contributions for children of the same age are pooled together. The income is divided between the students who actually go on to post-secondary education. But be careful: while scholarship funds are convenient because someone else is managing them, you may face stiff penalties(including the possibility of losing your money)if you stop contributing or your child starts a hip-hop band rather than continuing his education. Read your contract thoroughly.
Non-scholarship RESP These are available from almost any financial institution. They have the same investment range as registered retirement savings plans – you can choose anything from guaranteed investment certificates to mutual funds and stocks. While you’ll need to take a more active role in making investment decisions and weigh the risks, you have greater control, flexibility and the potential for higher returns. If your kids have had enough after high school, or you can’t afford to continue to contribute, you don’t lose your contributions, and the income earned on that money is lost only if your RESP contract says so. CESG amounts go back to the government.
The best time to start contributing to an RESP is now. Don’t wait until you can contribute $167 per month – even if you can put aside only a few dollars a week, begin today.
For more information, enter CESG in the search engine at http://www.hrsdc.gc.ca/ or call 1/888/276-3624.
Financial expert Lori Bamber has spent more than 16 years helping Canadians take care of their money.
Could you be your own boss?
Four things to think about before taking the entrepreneurship plunge
By Lori Bamber
Originally published in Chatelaine Magazine, April 2006
I want to start my own business. Can you give me some tips on how to succeed financially?
The allure of owning your own business is undeniable: creating the job of your dreams, greater control of your time and, potentially, more money. But entrepreneurship also carries a whopping financial risk, so it’s important to know what you’re getting into. Here are the key points to keep in mind.
Save up
Once you have a solid business plan in place, ask yourself where the start-up money is going to come from. Inadequate capital is one of the main reasons new businesses fail. To make sure you won’t be one of the casualties, you should have enough money to generously fund your business – and your own personal financial requirements – for at least a year, preferably two. Most small businesses are financed by a combination of personal savings, personal credit and “love money”(investments and loans from family and friends). You need to think long and hard about the consequences – which include a trashed credit rating or even bankruptcy – of not being able to repay loans. Borrowing from loved ones can also cause turmoil, so be sure your dad and cousin Rachel know the risk. Then be extremely frugal about operational expenses. Never assume your business will support you right away – that’s very rarely the case.
Put your house in order
As your business expands, access to credit will become more important to you than ever before, so your credit rating should be squeaky clean. To find out exactly where you stand, apply for a copy of your credit report at Equifax or TransUnion Canada – and make sure it’s correct. Next, make it a priority to pay off any personal consumer debts, such as credit cards and lines of credit, before you give up your job income.
Get help
You may be the queen of catering or website design, but can you handle payroll, receivables and tax planning? Hiring an accountant for a few hours every month can make all the difference. Clients who’ve told me they lost money in their business often admit they could have stayed out of trouble if they’d had a better handle on their cash flow. An accountant can also make sure you don’t miss any tax breaks.
To find an accountant who specializes in your kind of business, ask other entrepreneurs for recommendations. If you’re a do-it-yourselfer, there are a number of comprehensive software programs(I like QuickBooks and Simply Accounting)and small-business tax guides that can help you.
Start small
Once you’re ready to launch your business, begin on a small scale (working weekends and evenings, for instance, while you’re still employed). This will allow you to hang on to your primary source of income, test your market, develop your skills and identify the pitfalls, all with a safety net.
Whatever you dream, get started! A sound business strategy and smart financial plan can take you anywhere.
Financial expert Lori Bamber has spent more than 19 years helping Canadians transform their relationship with money.