Our First Investment Event & We’re Not on the Same Page

Giving Murray’s investment visual: “That is death!’

DH = Dear Husband

(Just to let you know, I didn’t write this post to advertise Nick Murray or Investors Group. DH and I attended an IG event at which Murray spoke this past week, and I’m sharing my understanding of his advice as well as the way it is impacting our journey towards debt-freedom and financial freedom. I’m not advertising Dave Ramsey either. His debt-reduction plan is the one we’ve been following for over 3 years, so I make frequent reference to it. But no kick-backs for me in either case.)

Our first financial planning event

DH belongs to a network group of self-employed men and women, and besides meeting once per week, they try to support each other’s businesses. The financial planner in the group, who knows that DH and I are interested in upping our investments soon, invited us to an Investors Group event at which an eminent financial planner was to speak. It would be the first financial planning function that we had ever attended.

We went on Thursday evening, dressed in casual jeans, and were rather surprised to find a room full of people in suits. “Those must be all of the financial planners,” DH surmised. If so, there sure were a lot of them. Most of the audience consisted of people older than we are – late 50s to early 70s and higher – with a few spiffy looking young people interspersed here and there.

 

Murray’s advice

The man of the hour, Nick Murray, was indeed impressive, with both the credentials and the powerful presence to command everyone’s respect. He spoke slowly, emphatically, and with dry, dry humour. Generally level and unhurried, he would occasionally belt out a point he wanted to drive home. Here are the 3 basic guiding principles for investing that he presented:

  1. We have longer life-spans than ever, and they’re getting longer. 50 years ago, retirement was a relatively brief period of time that lasted between the end of a career at age 65 and death at age 72. The average North American today retires at age 62. And the average North American couple retiring today is expected to have at least one in the partnership living until 91. Door #1: Your money will outlive your life. Door #2: You will outlive your money. Set yourself up so that you walk through Door #1.
  2. There is a very common, very wrong piece of advice floating around out there: As you approach retirement, change your investment portfolio so that it includes more “safe” investments, like bonds, and fewer stocks since they are more prone to the volatility of the market. “This is death!” yelled Murray. And he offered the right piece of advice: Keep your investments in dividend yielding stocks. Why? Because if you go “safe”, you’re essentially going fixed-income, and you’re setting yourself up for poverty in old age as the cost of living keeps going higher and higher through the 3 decades of your retirement. But if you stay invested in stocks, although there will be yearly volatility, there will also be an average growth that consistently outpaces the rising cost of living.
  3. Don’t panic when the downswings happen. When you hear, “This time, it’s different,” remember it’s not. Historically, and without exception, people stay ahead of the rising cost of living when they have a well-managed, diversified stock portfolio. “Diversification means,” said Murray, “that you’ll never get rich overnight when a company’s stock price suddenly soars. And you’ll never lose your fortune overnight when a company’s stock price suddenly plunges.”

“That is death” visual

Murray’s “That is death!” point was the one point he really wanted to drive home, and he provided a visual to reinforce it. Starting with the left arm bent at the elbow, forearm going straight across his rib cage, parallel with the floor, he said, “This is your fixed income.” Bringing the right arm into play,  he placed his elbow at the fingertips of his left hand and brought his right hand up to form a 45 degree angle (as I demonstrate above). “And this is your rising cost of living,” he explained. “That is death!”

My question: Debt-payoff or investment?

During the Question and Answer segment of the evening Thursday night, I braved a question. “If we have debt, would you advise us to lean towards paying it off or towards investing.” Murray responded with grace. “That’s a good question,” he said. “I would say it depends upon the debt. If you have a high interest credit card debt, for heaven’s sake, pay it off. But if you have a low interest mortgage of 3% and your average returns on dividends run around 5 or 6%, it makes more sense to invest – unless having a mortgage is really bothering you.” I wanted to say, “But Dave Ramsey says …” but I didn’t.

Impact upon our situation? Not on the same page

DH and I have been on a journey out of debt for the past 3 and a half years, and we’ve been on the same page in following the steps Dave Ramsey outlines in his book The Total Money Makeover. Having paid off all non-mortgage debt ($102,000), we’re now saving an emergency fund. The next step, according to Ramsey, will be to pay off the mortgage as aggressively as possible while investing 15% of our gross income. Our mortgage is now down to $120,000, and I’m fixed on the goal of having it paid off by June of 2019.

I’m committed to Ramsey’s plan. And having listened to Murray’s advice, I’m in favour of investing in dividend yielding stocks that will help see us through what will hopefully be decades of retirement, despite the rising cost of living. I say “help” see us through because, besides DH already having a small portfolio from his high tech days, we have my teacher’s pension ahead of us. We’ll be pretty well set up with that, but of course we want to be better set up, and of course DH wants to bring new life to his small portfolio.

He’s not so sure about prioritizing the emergency fund now. He’s not so sure about prioritizing the mortgage in a few months. He feels the waste of too little investing when times were good. And the waste of no investing after the high tech bust of the early 2000s. At this point, gainfully employed in his home business for over 6 years, having paid off his business debt, and having attended this IG event, he’s chomping at the bit to invest. Now.

So there it is. Ramsey’s plan has worked wonders for us over the past 3.5 years, and I’m committed to it from this point forward too. DH isn’t. We won’t be making any decisions immediately. We’re in the midst of renovations, and any week now, DH will be doubly swamped with the Christmas rush. But once the dust settles, we’ll be taking action. I’m dreading the possibility of locked horns on this issue. I feel really strongly about staying the course. I’ll keep you posted.


What do you think? Should we keep following Ramsey’s plan? Or should we make investing the priority now? Your comments (and advice) are welcome.

 

 

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prudencedebtfree

23 CommentsLeave a comment

  • I’m with you. Investing 15% of your income is not “not investing.” And honestly, the stock market isn’t going to do for the next seven years what it did for the last. We both missed out on that one, but that’s just life. I think you’ll get more psychological benefit out of having money in the bank and paying down the mortgage (while still investing 15%!) than you would out of investing 30% instead.

    • Thank you, C. Remarkably, after I talked with DH about it last night (that would be a few hours after I wrote the post), he simply agreed with me. That is not typical! I think he might have been experiencing a temporary sense of panic after that presentation. So we’re both back on track with the Ramsey plan – and we will apply Murray’s advice for that 15% that we will be investing until the mortgage is gone.

    • Well, you are quite right, Kay. As I told C. above, DH simply agreed with me when I talked with him about it a few hours after I’d written the post. (How did that happen?) But I’m worried about you. If you haven’t been investing, and if you have no plans to invest, aren’t you setting yourselves up for abject poverty in your old age?

      • Malachi 3:10King James Version (KJV)

        10 Bring ye all the tithes into the storehouse, that there may be meat in mine house, and prove me now herewith, saith the Lord of hosts, if I will not open you the windows of heaven, and pour you out a blessing, that there shall not be room enough to receive it.

        Amen 🙂

        • That scripture supports tithing, but it doesn’t discourage planning for retirement/old age. If you prioritize tithing over savings, I respect that, but I believe you can do both. You might not be able to save much after tithing – way below the 15% recommended by Ramsey, for instance – and way, way below the 50%+ of the early-retirement “badasses”, but any amount would help. Or do you think it shows a lack of faith in God’s provision to invest in retirement savings? (And just tell me if I’m asking too much!)

          • noooooooooooooo, you can never ask too much! 🙂 We decided a long time ago to investi in God’s Word.
            Matthew 6:19-21King James Version (KJV)
            19 Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal:
            20 But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal:
            21 For where your treasure is, there will your heart be also.
            It does take oodles of faith, but God’s promises are real. Our faith is the key. 🙂

  • An e-fund is a must. There are too many variables in life not to be prepared. It’s the old balance of short term versus long term goals, you need to find the balance between both. That’s why Ramsey’s plan works so well.

    • I agree, Brian. No matter how wise it is to prepare for the more distant future, it can only be effectively done on the foundation of being “current” as Ramsey says (on top of all lifestyle expenses – not going into debt to buy your groceries) and of being prepared for the unexpected – which, as we both know, happens.

  • We have been wrestling with the invest more than 15% or early mortgage payoff question for a while. We also have been influenced by Ramsey but don’t feel the need to follow everything exactly. Now that we are in striking distance of paying off the mortgage (within the year), we are just going to go for it and then ramp up investments afterward.

    • Kalie, that is such a great position to be in! I lean against being too flexible with Ramsey’s plan – simply because we did very poorly when we followed our own. When either of us feels inclined to modify things, it’s a red flag for me. In your case, without having the years of poor money management that we had – I’m sure your choices to modify are just fine. I look forward to hearing of your mortgage payoff!

  • I’m surprised you’re going to go the Dividend investing route. 40/60 or 20/80 bonds/low cost index funds is typically a great introduction to investing.

    Of course, I shouldn’t be one to speak, my first investment was that “commercial property” that is now inaccessible by roads.

    I think that there is value to paying off the mortgage quickly, but I also think its fair to remind you that 15% is probably more than enough to invest for retirement because you’ve got a pension (I think that’s you), and Canadian Health Benefits make retirement a less risk proposition than here in the states.

    Best of luck, sounds like you are already on the same page.

    • That’s a really good point about health care, costs, Hannah. I hadn’t even considered that.
      I’m not convinced that we won’t invest in any bonds, but the point that Murray was making was that as people get close to retirement, they should not change their portfolios towards a greater reliance on “safe” bonds. Dividends offer the surer promise of staying above the rising cost of living.
      And you never know what might happen to that commercial property of yours. It could end up being fodder for your best story yet!

  • I think these kinds of discussions are really useful, even if they’re frustrating in the moment. Whenever Mr ONL and I have some disagreement over what to do with our money, we each always end up learning something, and it helps our whole approach evolve.

    I wonder if there’s a compromise position in there — keep paying down the mortgage once you get to that point, but trim it back a little to increase your investing a bit. While I definitely understand the psychic gains that can come from paying off your home (and we’re aiming to do this, too, by the time we retire in two years), you don’t want to sink all your money into a low-rate mortgage when you could be getting higher rate gains on some of it. But then again, what’s best on paper isn’t necessarily best for YOU. I’d say, find the approach that lets you both sleep well at night, and go with that. 🙂

    • Thanks, ONL. I suspect that what we’ll do is to aim to pay the mortgage off by June 2019, and instead of beating that goal if the opportunity arises (which, with DH’s variable income is always a possibility), we’ll put more in investments when the windfalls occur. You’re right in saying that people can learn after working through a disagreement. I have been perhaps too fixated on the mortgage payoff – and DH was certainly in a panic about the need to start investing again. I think our “whole approach” has evolved well : ) And only two years to go for you! Fantastic!

  • There are literally a hundred variables that can go into an investment plan for a given household. There certainly isn’t a right or wrong answer. The key is to clearly identify the objective (e.g. retire in 20 years and be in a position to draw $75,000 annual income), develop a realistic plan that gets you from point A to B and ensure your daily actions support your plan.

    • I think that DH and I have to clarify our point B. When people say “retirement”, I think there are limitless interpretations of that word – so to begin with, we both have to define it more specifically. Thanks for your comment, Savvy James : )

      • “When people say “retirement”, I think there are limitless interpretations of that word – so to begin with, we both have to define it more specifically.” So very true. ‘Retirement’ has come to mean different things for different people. For the wife and I, we use it in the traditional sense, meaning we are focused on a specific point – 60 years of age – where we will be in a position where we don’t need labor income and we will stop working.

        • A very measurable goal, Savvy James! I think that DH and I have a more fluid idea of retirement. We will hope to be in a position where we don’t need to do paid work, but we might still pursue work that we really love – paid or volunteer – with the freedom of being able to stop for long periods of time if we choose.

    • So far, Ramsey’s plan is working very well for us. Fortunately, a few hours after I wrote this post, I talked about it with my husband, and he agreed with me : ) So we’re back on the same page. Thanks, Jayson.

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