I don't know about you, but it has been a wild few years for most people I've spoken to. Do you remember how kids weren't allowed on playgrounds in 2020? I'm still mad about that.

Then, in 2021, there was a great debate about reopening and vaccines. How much coercion should be placed on society to vaccinate? How safe are the mRNA vaccines? Even among my physician clients and friends, this was a contentious topic!

Then 2022 hit, and the world realized that all of the money printing and financial support handed out to people and businesses during the previous two years was a tad overkill. Inflation is now a word that everyone knows the definition of, whereas I would get blank stares when I spoke about it in the past.

In 2023, we had a large mental shift. COVID is no longer top-of-mind, inflation appears to be slowing, and next year looks to be back to normal.

Except, normal will be different.

I don't like trying to predict the future since it is easy to get it wrong. But there are large thematic shifts that I think you should be aware of as you make your financial and life decisions.

Interest Rates

As of December 2023, it appears that the days of increasing interest rates are behind us. The central banks of Canada and the US are signalling that the next movement will be an interest rate reduction. When that will start and how quickly it will happen is anyone's guess.

The key point here is that if you are hoping to renew your mortgage at 2% as you may have in the past, that's probably not going to happen. In fact, I'm not sure we will see mortgages below 4% as a norm unless another major financial catastrophe happens.

With rates coming down but not likely going to zero in the near future, it means that your fixed-income holdings, if you have any, are on the road to recovery. It also means that owning safer investments will still make you some money since we aren't likely going back to 0%. Now that rates have some meat on them, things like permanent insurance are very attractive. The tax savings opportunity is too big to ignore.

What to do about your mortgage 

I've fielded a lot of questions this year about whether to take a variable or fixed mortgage and how long to lock it in for.

I think some context is crucial in finding the best answer.

The bank you are negotiating with has entire floors of people in those big office buildings in Toronto who are dedicated to trying to guess where rates will be and pricing their mortgages and GICs based on that. Ok, lots of those analysts are now working from home, but the point stands.

Will you be able to outguess them about where rates are headed? Recent history shows us that even the people who set the damn rates don't even know where they are going!

If you are renewing your mortgage soon, keep in mind that whether you choose variable or fixed - a 5-year mortgage or shorter, you can't know the future. We all want to pay as little interest as possible, so the banks have to be competitive. If you choose wrong, and another alternative ends up being better, that's okay. You can only make a decision based on the information you have now. Do your best not to succumb to hindsight and beat yourself (or me!) up over something you couldn't know.

Variable mortgages were very popular in the past when rates were super low. I'm seeing more people choose fixed because the price is better than variable today. Fixed was popular before the era of ultra-low rates from 2008 to 2022. If you want to have a chat about your renewal, I am always happy to do so for my clients.

First Home Savings Account (FHSA)

While I think this is a terrible policy from the federal government that increases demand in a supply-constrained sector, it is a fantastic tool to reduce your taxes if you haven't already purchased your principal residence. You get the tax deduction like an RRSP and the tax-free withdrawals of a TFSA. If you haven't already bought your house and plan to do so within 15 years, I can't think of a better place to put your house money. This is even better than the First Time Home Buyer's plan within your RRSP. Though you can, and probably should, do both.

The limit is $8000 annually per person, which carries over for one year. So, if you don't get it in by the end of this year, you can catch up next year.

An idea I have been toying with is forthcoming in a future email series about helping your adult kids launch into their own homes and careers, but I'll give you a preview. It is worth considering opening an FHSA for your adult child and helping them with the $8000 contribution if they are currently working full-time and earning enough money to benefit from the tax deduction. There is more to it, which I'll flesh out in the future.

Getting your wills done is a priority, and we can help 

Do I need to explain why you should have your will, or are you already well aware? OK, here's one bit I'll tell you about. If you die without a will, your spouse doesn't automatically get your assets, like your corporation. The province has a distribution table that will be followed, which could mean your spouse only gets $200,000!

In the past, I have had a hard time completing this task for clients. It has lingered on agendas for years where my amazing clients wouldn't see it through because it was either costly, complicated or the lawyer didn't finalize it. I'm a fan of using your trusted lawyers if you have them. If you don't, and this is something that has been on your list for years, my firm now has a team that can do it for you.

We are one of the only investment firms that can do the estate planning and create the legal documents for you without having to take everything to a lawyer. It creates cohesion between your investments and estate documents as I will be there while you speak to the estate planners, and everything is mapped out visually online. It's a pretty neat virtual system that my clients who are going through it appreciate! The best part about it is we actually get 'er done!

Let me know if you want to cross this item off your list in 2024.

Repay your CEBA loan!

If your corporation borrowed money in 2020 and 2021 from the CEBA program, please make sure you repay it before January 18th, 2024. If you have the money in your corporation now, pay it off today! If you don't pay it back in time, you will not get the $10,000 or $20,000 grant. So please, don't forget!

Everyone who is good with their money will be cutting back on their spending

We have lived through a 14-year period of ultra-low rates and rapidly increasing house prices. This combo has created bad financial habits that are already unwinding in Canada.

It has been very popular to borrow against your home equity to buy stuff. Sometimes, people used that loan to renovate their home, buy an investment property, or just splurge.

When the interest rate on that line of credit was under 3%, it was hard to feel the problem. Now that those rates are much higher and house prices have been so volatile for a couple of years, people are tightening their belts.

I'm often asked how so-and-so can afford their lifestyle. There is no shortage of people of all incomes and professions who are living well above their means. I urge you not to compare their conspicuous consumption with yours. All else being equal, those who have similar incomes but more 'stuff' are likely swimming in debt.

I'd rather have a strong balance sheet than the new VR system, which, if you know me, is saying a lot!

If you feel like you're drowning in debt, please know that it is possible to swim out of it. I work with many high-earning clients who are feeling the pinch because their debt payments have increased by thousands per month. If you are ready to work your way out of it, I can help. My office is a strictly confidential and judgment-free zone.

Caring for your health is relevant now more than ever 

I don't know about you, but I'm getting older.

That's it. That's the whole point.

Ok, let me flesh that out a bit… I'm in my 40s now. Until around now, I had a bit of an invulnerability complex. It's pretty stereotypical for a guy in his 20s and 30s to feel that way. But when you hit your 40s, and you start to see a lot more of your friends and acquaintances get hit with tragic health issues, it makes you rethink your delusions.

In addition to speaking to my clients about their life and disability insurance, the major change in my advice this year and going forward is to talk about Critical Illness insurance. I don't know about you, but I've seen some of the healthiest and wonderful people be diagnosed with cancer this past year or two.

Not only does a major illness wreak havoc on your body, but it can destroy your finances. Critical illness insurance pays a lump sum, tax-free amount to you (or your corporation) if you are diagnosed with a major illness, which comes in handy to pay bills and afford extra support. I think I will dedicate an email to this topic in the future because I now see this as a three-way tie with life and disability insurance as top wealth protection priorities. I didn't see the risk until now in my social circle. The risk was always there! I just didn't see it.

So, in 2024, take care of your health and sanity. You can do some things like buying insurance and hiring help to protect both.

Compassion in the face of struggle

I am in the multi-year process of writing a 'field guide' to help young people navigate money. What's different right now for anyone coming out of residency, internship or starting to see financial success in their business, is that the cost of living in Canada is wild.

I try not to get too political in my work, but it is impossible to be apolitical when you speak about the economy and investing. Suffice it to say, the problem of housing affordability isn't going away under either major federal party. (Shoutout to the BC NDP and what they are doing right now to tackle housing affordability.)

What's left is for us to find our way within the parameters that exist and will exist.

So here's my hope for you in 2024. I hope that you can find compassion for yourself, your spouse, family, friends and friendly neighbourhood advisor as you navigate the changing times we have ahead. Inflation has hit everyone, even if you are a specialist physician earning over $500,000 annually. The cost of mortgages is much higher, but tax rates on salaries and dividends haven't changed to match.

Everyone has a different struggle. In the midst of this struggle, some compassion for yourself and others goes a long way. We can think and problem-solve better when there is less stress.

My heart goes out to young people who increasingly have a bleak view of their future because the cost of housing seems out of reach even for specialist physicians. The increasing homelessness and exploitation of newcomers are also issues close to my heart that will have ramifications for years to come in Canada.

Through all of that, be kind to yourself and others. We are so fortunate to be able to provide a safe home and warm food to our families.

Nikita and I will prioritize rest while our families are home from school for the holidays, but we're here for you if anything is urgent. I look forward to seeing you continue to succeed in 2024. We are rooting for you. (Hence the picture at the top. Thank you for reading all the way to the end.)

Photo by Riccardo Bergamini on Unsplash

Let's get right to it, here is why I think you should stop putting money away in your RRSP every February

1. Makes it optional so you can easily skip it. Spending now feels better than saving for your future. So, our brains will rationalize why we should spend instead of save if we make it an annual choice. 

2. If you're incorporated, your withdrawal in Feb from your corp will be taxed this year, but the deduction for the contribution will usually be for last year. You will get an unpleasant tax bill next year if you ever stop making February contributions.  

Underlying this is a common miscalculation. We think too fast when it comes to taxes sometimes. 

It's like going to an all-you-can-eat sushi place for dinner after not eating all day. You order a whole bunch of food because you're hungry now. But your future self will be over-stuffed after a few maki rolls, and they will be cursing your current self for being inconsiderate! 

"Curse you for making me eat all of this! I will not be charged waste fees!"  

If it's February and you put money into an RRSP, you will likely get a refund when you file your taxes in a couple of months.  

You do this now, but it all applies to last year. 

I'm going to say that again. You made the RRSP contribution in February (Or January), which is attributed to last year. Then you get the tax refund from last year's taxes.   

And yet, you get a refund now! Yay! 

  But. 

The income taxes on that big withdrawal from your corporation in February will be due next April. By then, you will forget about all of this. The tax refund you got this year will be long spent. And you will owe money to CRA. Queue fist shaking. 

"Curse you for saddling me with a huge tax bill! I don't even remember what I did with the tax refund last year!"  

Sound familiar? 

But what if you keep making Feb deposits to your RRSP? Sure, that avoids the second problem above, but what if one year you can't? Maybe you had a rough year or an unexpected expense. You will end up with a monster tax bill and will be unhappy with your past self. It's not worth it. 

I hate annual bills. Who remembers to save up for them? Almost no one. So, if you're rushing to come up with RRSP money each February, know this. 

There's a better way.  

Set up monthly contributions to your RRSP and have that money invested every month. We can set that up for you. All of my clients eventually switch from being February contributors to being monthly contributors. You set it and forget it. You pay yourself first. You order enough sushi to enjoy yourself without a stomach ache. 

If you coordinate this with your accountant and accurately withhold taxes, there is no huge bill or refund come tax time. A refund is just getting your own overpayment back. 

Accountants differ on whether you need to file a T1213 if you're incorporated, but either way, paying into your RRSP monthly doesn't increase your withholding taxes if you do it right. 

Here's how I can help, I will: 

1. Create a financial plan to find out how much to put in your RRSP. Sometimes the answer is $0 (if you're in residency/internship/early startup stage etc., then a TFSA is often a better option) 

2. Communicate to your accountant that you will put money into your RRSP every month 

3. Get a calculation from your accountant how much taxes you should pay every month considering #2; often called an income schedule 

4. Walk you or your banker through how much money goes to CRA and how much goes to your personal bank account 

5. Set up a monthly withdrawal from your personal bank account to your RRSP under my care 

6. Get that money invested in efficient, evidence-based investments – I’ll take care of this part entirely 

It might seem like a lot of work, but we do most of it for you. And, once it's done you can sit back and let your money work for you. No more 'RRSP season' anxiety.  

PS: I've moved offices to down the street. I'm now on the 7th floor of 2 Robert Speck Parkway. The old office was empty as the accountants I shared it with have gone permanently remote for all their staff and partners. It didn't make sense for us to keep it. The view from my new office is better. Come by and check it out! 

Photo by Tim Gouw on Unsplash

Pretty much everything in the financial world is upside down right now. The advice I have been giving for the last 13 years of my career has turned on its head. That means you should look at what you are doing with your money and decide if you should still be doing it.

Things have changed because interest rates have gone up

For all of my career until now, I've had to explain inflation to clients. Few people really understood it since it hasn't been a problem for more than 40 years. When prices rise by a percent or two a year, it's hard to notice. And if that's the inflation rate you've seen your entire life, I wouldn't blame anyone for not paying attention to it.

It's like when your wife goes to the hairdresser for the first time since the start of the pandemic and gets an inch trimmed off, and you don't notice. But then her mom comes over and compliments her haircut. Suddenly, what didn't matter now matters a whole lot. HOW WAS I SUPPOSED TO KNOW? IT WAS AN INCH! I'M SORRY!

Anyway.

Everyone now understands inflation after seeing the prices of everything from gas to food to housing rise rapidly in the past year. Rapidly rising prices is a bad thing. For an example of what can happen if we don't tame this, think about Germany in the 1920s. It got to a point where a wheelbarrow of money couldn't buy a newspaper. What happened in the following three decades is not something anyone wants to repeat.

Right now, Argentina, Venezuela and Turkey are facing uncontrollable inflation. As the value of their currencies tanks, they can't afford to import much since no one wants to touch their currency. What would happen to our national food supply if we in the Great White North couldn't afford imports anymore? We could say goodbye to fresh fruits and vegetables for eight months of the year, that's for sure!

Like a kid way past his bedtime and hopped up on sugar, running around a fancy restaurant, we need to get inflation back under control before something bad happens.

Luckily, we aren't the only country facing this problem. Pretty much every government in the world printed too much money to save people and businesses from bankruptcy due to the lockdowns. In hindsight, we now see that pretty much every government in the world overshot, and now there's too much money lying around chasing limited goods, which causes prices to go up or money to be worth less. Hence, inflation.

How do you cure inflation? The quickest way (since few politicians are involved) is to reduce how much extra money businesses and people have lying around through higher interest rates. This economic engineering is effective because it causes a ripple effect.

If you or your business has to pay more interest, there's less money to spend on other stuff. You might even consider paying off debt faster as interest costs rise, which means less money for stuff.

This brings me back to how much of my advice to clients now is upside down from the past 13 years.

Should you invest or pay off debt?

The math used to be easy. If you had a mortgage or a line of credit with an interest rate under 3%, it was better to pay that off slowly so you had more cash to invest. Investments rise at 6-8% annually on average, depending on your risk tolerance. So, in the end, you would be wealthier having carried the debt longer and investing more. Of course, many people feel uncomfortable doing that, which is why personal finance is, well, personal.

For the first time in 13 years, I have been telling some clients to prioritize paying off their credit lines and even mortgages instead of investing. And I'm in the investment management business!

When the interest on your debt is 6% or more after tax, it's hard to find an investment that will reliably beat that in the long run by enough to make the stress of it all worth it. Please don't misconstrue this as advice for your specific situation. Tax efficiency is a big part of the discussion that I am omitting here.

Pro tip: Go back to the drawing board with your financial plan. If you were over-funding your investments because that was smarter than paying off debt, you might want to review that.

Savings accounts and GICs got a six-pack over the summer

Back when you were in school, was there one person who was an ugly duckling until one summer they got hot? That's GICs, they're so hot right now.

For the first time in my career, I've had to find and research the best savings account and Guaranteed Investment Certificate (GIC) rates.

My favourite line used to be 'GICs are a guaranteed way to go broke slowly.' But now with these paying out over 4%, I have to think twice about whether they fit in a client's portfolio.

Pro tip: Do I think you should sell your investments in the midst of their current loss to buy a GIC? No. A recovery is all but inevitable. But for someone with new low-risk money to invest, these are now viable options along with so many other options.

Lower unemployment is now bad for the economy

Before this year, when we saw lower unemployment numbers, we cheered. It meant more people got jobs. But now there are more jobs available than people to fill them, especially in retail and restaurants. When unemployment is too low it becomes harder to find employees.

Ultra-low unemployment is also bad for everyone else because it tells the Bank of Canada that the economy, like me in my twenties, is too hot and needs to be taken down a notch.

If employers have to raise wages to attract employees, it gives more money for people to spend on limited goods which worsens inflation. The worse inflation is, the higher interest rates have to go to bring it back down. Economists call this the 'Wage-Price Spiral'. If you think your mortgage is expensive now, it can get worse if the economy doesn't cool.

Getting a raise is cool until everyone is doing it. Then it's inflation.

 House prices have stopped rising

I am gun shy to comment on housing because for a good chunk of my career I was pessimistic that house prices would continue to rise at 8% per year. Back then I had naïve ideas like, "governments care about young people and housing affordability," and "interest rates can't stay near zero for much longer."

I've since smartened up and realized just how focused government policy is on winning the next election at the expense of long-term planning. Excuse me while I cash my license plate rebate cheque on the way to the 12-hour lineup at the ER.

If you calculate the value of a one-bedroom suburban condo rising by 8% per year, the price balloons to over $10 million in a generation. Does that sound reasonable?

So, here we finally are. While it might not feel great that the value of your house or rental is declining, this shows that your kids and grandkids may not be forced to live in your basement forever.

Many of my clients (including my parents) immigrated here from countries where breaking into the middle class and buying property is nearly impossible. Property has to be inherited. No one wants that as the norm in Canada. If you want your kids/grandkids to be able to afford a roof over their heads, then a decline in house prices should be welcome.

Owning rental properties may not be worth it for a while

Basically, the above but applied to rental properties. What happens if the growth of your investment is slow for a long time because rates rest at a higher point?

If house prices were rising in the 8% range when mortgages were in the 2% range, what happens to house price growth if mortgages are above 4% for the foreseeable future?

To be clear, I don't know where rates are going, but 2% mortgages are an exception, not the norm. Mortgages above 4%, are more historically normal.

Pro tip: If the price of your condo only rises by a few thousand per year but the cost of your mortgage goes up by ten thousand, I think you should consider whether to continue down that road. Remember, GICs are paying out over 4% these days with no tenant to manage.

There are more things I can write about but like Tom Brady's career I am guilty of dragging this on for too long.

I'll end on a sincere, positive note. The future for investors is bright if you make the right decisions today. There are far more viable investment options now than there have been since 2008. 0% rates made so many things unprofitable, and pushed people into high-risk assets to try and eke out a return.

We have more viable options to make money today than we have had since 2008. In that way, the financial world isn't upside down. After thirteen long years it's finally right side up. If you know someone questioning what to do with their money in this higher-rate world, please let me know. I'll be nice. I promise.

There are four big worries on investors' minds as we head into the summer of 2022:

1. Inflation

2. War in Europe

3. Interest rate hikes

4. A possible recession

All of these things are interrelated. But, what I'm most concerned about is inflation.

Thankfully, so are the powers that be in the financial world. Almost every monetary authority across the world is facing a similar problem and they are all hands on deck to solve it. That alone, should give us some comfort.

When the pandemic hit, doctors, healthcare workers and scientists went all out to save the day. Because of that, I knew we would eventually pull through. Same deal here but with inflation.

Could it all go to zero?

As usual during market downturns, I've been on the phone a lot with clients and investors listening to their fears and concerns. I'm not going to sugar coat it. It sucks to be an investor right now. But not because this is a bad time to invest.

It's a better time to invest now than it was when stock prices were higher.

It sucks because these issues are hitting all areas of investments. You name it and it's down:

• Stocks

• Bonds

• Houses

• Gold

• Oil

• Crypto (I haven't had anyone call to ask about buying Crypto since it has collapsed by over 60%!)

My heart goes out to retirees who are heavily invested in bonds to provide them with a fixed income to pay their bills. The decline in bond prices has surprised everyone. But those bonds will eventually mature and be reinvested at higher rates.

For stock market investors, if you've invested for longer than two years then you will have gone through corrections in the past. History shows us that in the long run, a diversified portfolio of global business (aka stocks) eventually recover and continue to reward their investors. So, unless you are planning a sizeable withdrawal soon, I give you permission to mentally check out of 'stock talk' for a couple of years.

I've said this before during many market corrections in the past.

If your portfolio goes to zero, it will be the last thing you will need to worry about. The world as we know it will have ceased to exist.

On that cheery note, let's take stock in all of the things investors have lived through in my 15 year career:

1. Great financial crisis of 2008 - It was far worse than what we have seen in this correction so far. Check out the Big Short if you haven't seen it already to refresh your memory.

2. Fears that the recovery in 2009-2012 weren't real and it would all crash again - Looking back, we know that markets recovered, but those were some nervous years!

3. Debt ceiling debate - Remember when the US congress threatened to shut down the government by not raising their debt ceiling? The world wondered if the US was going to crumble if they defaulted on their debt. That passed and we hardly remember it.

4. Fukushima nuclear disaster - it was the worst many people had ever seen and disrupted so many things in Japan and nearby export-heavy nations. Some Asian nations are still recovering. But investors in Canada have long since recovered.

5. European debt crisis - Remember when Portugal, Italy, Ireland, Greece and Spain were almost kicked out of the EU because their debts were so high? Some people thought the EU would dissolve and that would send many countries into a tailspin. I remember this being on the news cycle for months.

6. Taper tantrum - in 2012 the Federal Reserve wanted to reduce Quantitative Easing and the markets freaked out. Here we are now essentially begging for Quantitative Tightening to control inflation. Oh how the times change!

7. Trump

8. Brexit - Do you remember why Canadians and Americans were so worried about this? I don't. It happened. It's not working out. But unless you're British or living in the UK it doesn't affect us as investors as we feared it would.

9. The Pandemic - it can be easy to forget that there was a month where oil prices were negative and someone would have paid you to own barrels of oil. All you needed was a tanker in your garage! But needless to say, it was a wild time in all respects. Almost everyone was bailed out by their governments either directly or indirectly. I think I heard the word 'unprecedented' an unprecedented number of times.

And you know what? A few years after all of these happened, we sort of forgot they happened. #toosoon for the pandemic, though.

Ok, so this too shall pass. But wait, there's more!

How should you prepare for a recession:

1. Don't make changes to your investments. We won't know we are in a recession at least six months after it has started. Stock markets always work to predict the future. That means the stock market will start falling well before a recession hits. That's what we are seeing now. The market is predicting a recession will occur, but its often wrong, so, we shouldn’t take this to the bank. #punintended The market will also start to recover and rise well before the economy recovers from the recession, if we end up having one. You don't have a crystal ball or a genie in a lamp. Intelligent investors are in this for the long run and don't need to play the losing game of trying to predict the future. Sit tight and stick to your financial plan.

2. Pay off debt and preserve your savings. I'm not worried about my clients losing their jobs en masse as I mostly work for doctors, dentists and business owners. But interest rates are rising at a pace similar to what happened when my parents first arrived to Canada in the 70s. They have since hated being in debt because they saw what could happen. In contrast, I work for many young people, meaning people 45 and under, who have never seen a mortgage rate higher than 4%. And yes, my definition of 'young people' is always five years higher than my current age. It's how I stay young forever. No one knows for sure where rates will be in a few years, but they will most likely be higher, so pay off what you can!

3. Be greedy when others are fearful. It's an old quote from Warren Buffett and a mantra that has made him unfathomably successful. I've been watching some of his old interviews and it is incredible how consistent he has been over his decades long career; and how right he was about passing fads and concerns of the day. When the markets are afraid, this is when we should be hungry to invest more because we can do so at cheaper prices. To be clear here I'm talking about investing in a well diversified portfolio of businesses, not crypto!

4. Pay attention to other things than the news and your portfolio value. If you're my client, you have strong evidence supporting how your investments are managed. See point 1. This too shall pass and you are going to outlast this market correction. On the other side of this is growth and you getting closer to your financial goals, but only if you stay the course. Looking at your portfolio or the news is going to make this journey harder than it needs to be.

5. Spend time with your friends and family to make up for lost time during the pandemic. I include this because my marketing consultants say I should always have an odd number of items in my lists, and because I'm free next Saturday. Want to hang out?

Jokes aside, this is a tough time. Give me a shout if you want to talk or vent about what is going on in the world. This is what I am here for.

Have you decided what you are going to do about your kids' school in the coming weeks? If so, please reach out and let me know!

I know it is without question that you want what is best for your kids. You want to keep them safe, but also keep them growing and learning.

But there's a problem; your brain conspires against you to make bad decisions when it comes to your money.

Why this math is essential:

I want to be clear, whatever choice you make, I honour and support your choice. I'm sure you did not come to that decision lightly. I know my wife and I agonized over these decisions for months for our five and three-year-olds. I'm not here to judge your decisions, just to offer my experience and skills to help you through this decision. 

I've had conversations with brilliant people who are doing the math all wrong. As a Financial Planner, I help clients think through major financial decisions using math, evidence and data. I want you to make the right choice for your family; they deserve the best. And I want to equip you with the correct methodology to make that decision. 

The way I see it, there are four options:

1. Public school - we have one of the best public school systems in the world. I have brilliant teacher clients, and this is a fantastic option. We are all already paying for this through our taxes. But some schools and school boards will have a hard time keeping class sizes low and limiting a new outbreak.

2. Private school - whether it is a Montessori, Waldorf or other private school, your kids will be in smaller class sizes, which will hopefully be safer. Your kids will also get to socialize. But this is expensive, and there is no guarantee that an outbreak won't occur in a small school or class.

3. Remote learning with a nanny - you keep the kids home, but you hire a nanny to take care of your kids and keep them on task while you go to work. You get the safety of isolation and can still earn a regular income. But finding someone is challenging, and your kids' social development will be limited.

4. Remote learning with you - you keep the kids home to learn online, and you stay home to teach them. This option is likely the safest as you can isolate completely, but if your kids are like mine, the sibling rivalry can crank up to 11! Also, it might be the most expensive option of them all. More on that later.

There are no clear winners.

Every option has pros and cons. There is no obvious choice for everyone in every situation. You have to balance safety, cost, social/emotional impact, academic impact, and logistics for your family and business or practice. 

You can't easily sacrifice your career, because your family's financial future depends on it! 

It is a lot to consider. I can help you with the methodology and math behind the cost.

DIY vs. Hiring Help - *MOST PEOPLE GET THIS WRONG*

I've had two separate doctors tell me that they are going to work half-time because they thought hiring a nanny was too expensive. 

Their conclusion is so wrong and based on no math. But it is a common emotional bias called Loss Aversion.

People fear losing (i.e. writing a cheque to a nanny) more than they are elated at gaining (i.e. earning more by working full-time).

This bias is purely emotional, and it is financially destructive. 

In both cases, these physicians earned more than $250,000 when they are working full-time. They floated the idea to me that they would work half-time to stay home with the kids. They couldn't stomach the cost of a nanny between $35,000 - $40,000 for the year.

"People fear losing (i.e. writing a cheque to a nanny) more than they are elated at gaining (i.e. earning more by working full-time).

This bias is purely emotional, and it is financially destructive."

Here's the math:

Scenario 1: DIY and work half-time
Full-time earnings: $250,000
Work half-time so lose: $125,000
= $87,000 in after-tax income

Scenario 2: Hire help
Full-time earnings: $250,000
Pays a nanny to assist remote learning: $40,000
=$111,000 after tax and nanny cost + Childcare Tax Deductions

In this example, the additional cost of staying home half of the time to teach the kids is $24,000 a year after-tax, plus whatever the Childcare Tax Deductions saves them in taxes when paying someone else for childcare.

If you're a high-income earner, that equates to about your annual RRSP contribution to get the retirement of your dreams. Plus, you would get a further tax deduction for that RRSP contribution. You could fill your TFSAs and pay down your mortgage. You could take your family on vacation...wait... a staycation!

It's up to you and your spouse to decide if it's worth it. I wish I could help you weigh the benefit of this extra time teaching your kids against the impact of physically distant learning. But that is way outside my wheelhouse as a Portfolio Manager and Financial Planner.

What I know for sure is, it is objectively more expensive to take time off work for the majority of doctors, dentists and entrepreneurs whom I serve.

Conclusion: Most and Least Expensive

The least expensive option is to send the kids back to public school. We already pay for that in our taxes.

The most expensive option is to stay home if you are a high-income earner. If you would like me to help you with the math in your case, please let me know and we can schedule some time to go through it.

Key concept: Loss Aversion

People fear losing (i.e. writing a cheque to a nanny) more than they are elated at gaining (i.e. earning more by working full-time).

PS You can and should apply this principle to many other things in your life. I've had physicians say they will spend 20-30 hours learning to incorporate their practice rather than paying a lawyer $1500. This decision makes no sense because a doctor can earn many times the cost of hiring a professional if they chose to work those 20-30 hours instead. I don't think any of those doctors thought learning how to file incorporation paperwork was fun!

PSS For business owners and professionals on an inclining income trajectory (every year you earn more than your last), failing to follow this principle can have a negative compounding effect on your income. Successful business owners know how to leverage their time by hiring others to do the work that isn't their highest value. Do what you love, and pays you the most; hire others for the rest.

What did you decide to do about your kids' school? Hit 'reply' and let me know!

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