The Wealthy Barber Podcast - Preet Banerjee: All Things Canadian Personal Finance | The Wealthy Barber Podcast #1

Episode Date: September 5, 2024

Welcome to the inaugural episode of The Wealthy Barber Podcast!   Our first guest is Preet Banerjee—one of the top financial educators in Canada, having been a regular for years on CBC's The National, renowned speaker and author of the bestselling book, “Stop Overthinking Your Money.” Recently, Preet completed a doctorate with his research focusing on the value of financial advice to Canadian households and how to improve the outcomes for the mass market.    In this episode, we discuss what Preet learned from his research and all things Canadian personal finance, from RRSPs versus TFSAs, to active versus passive investing, to whether investing in Canadian rental real estate still makes sense, to who has the better hair and much, much more. You'll enjoy this discussion with Preet Banerjee, a great communicator and a truly great guy.   —----   The Wealthy Barber Podcast is Canada’s go-to source for approachable, entertaining, and free financial education. Hosted by none other than David Chilton—former Dragon on CBC’s ”Dragons’ Den” and the best-selling author of ”The Wealthy Barber” and ”The Wealthy Barber Returns”—this podcast is here to help Canadians manage their money better. Much better.   Find all episodes and more Canadian personal finance content at https://thewealthybarber.com. —----   Show Notes: (00:00:00) Introduction (00:01:59) Preet’s Research (00:06:16) Biggest Problem Young Canadians Face Today (00:10:32) RRSP vs. TFSA (00:13:06) FHSAs (00:14:38) Active vs. Passive (00:20:40) Men vs. Women Investing (00:23:52) Inflation (00:29:14) Who has better hair? (00:29:47) Giving Advice to the Masses (00:32:36) Group RRSP Matching (00:34:58) Investing in Rental Real Estate in Canada (00:37:41) Getting Help From Parents (00:40:19) Emergency Funds (00:43:08) Has the Pendulum Swung Too Far (00:45:23) Other Personal Finance Creators (00:48:02) An Experience That Changed Preet’s Perspective on Life (00:51:35) Conclusion

Hey, it's Dave Chilton, The Wealthy Barber and former Dragon on Dragon's Den. Welcome to The Wealthy Barber Podcast, where we'll be hosting some of the top minds in the world of personal finance. Yes, that's to balance me out. The podcast is about making the subject not just easy to understand, but dare I say, even fun, honest. Whether you're trying to fund your retirement, figure out how to build a down payment, save for your kids education, manage debts, whatever, we'll be here to help you do it. Over the past 35 years, I've assisted millions of Canadians in getting their financial lives in order through books and speeches, and now I'm bringing that same approachable, no-nonsense advice to your favorite podcast platforms. Again, complemented by the top thinkers and

communicators in this space. Before we jump in, a quick but important note. Nothing we discuss here should be taken as investment advice. We don't know you and your personal financial situation, so we're not here to tell you we're specifically to put your investment dollars. We're here to educate, get you thinking, and we hope entertain. But please do your own research and or consult with your financial advisor before taking any action. Our guest today, our first guest, the amazing Preet Banerjee, one of the top financial educators in Canada, having been a regular for years on CBC's The National, renowned speaker and author, of course, of the bestselling book, Stop Overthinking Your Money.

Recently, Preet completed a doctorate with his research focusing on the value of financial advice to Canadian households and how to improve the outcomes for the mass market. Perfect. personal finance from RSPs versus TFSAs to active versus passive investing to whether investing in Canadian rental real estate still makes sense to who has the better hair and much, much more. You'll enjoy this discussion with Preet Banerjee, a great communicator and a truly great guy. Hi, everybody. It's Dave Chilton, The Wealthy Barber. We're here for our first podcast. It's Dave Chilton, The Wealthy Barber. We're here for our first podcast. Preet Banerjee, my favorite in the industry, is our opening guest with this new initiative. We're looking for 20 to 30 people to actually watch this, maybe as many as 40 people will

tune in. No, I think over time we'll build a lot of momentum. Preet, it's great to see you. Give us a quick update what you're doing now. I mean, one of the things that's always drawn me to you is that you are not all about the money at all. In fact, you've turned down many opportunities in the financial industry that would have made you more money than things you've pursued. I've always noted that you're trying to do the right thing. You're always trying to advance education. Where are you focusing your energies now? Thanks for asking that question. And thank you so much for

having me on as your first guest. I feel like this is a tremendous honor. I've been such a big fan of yours for such a long time, and you are like the godfather of personal finance in Canada. So this is a real honor for me. So thank you so much. get better quality advice and outcomes for people in the mass market. That's the easiest way to put it. Now, to explain why I'm doing that, it actually came partly as a result of what I've always kind of felt. But also, about seven years ago now, I went back to school to pursue a doctorate. And my research question was looking at the value of advice to households, specifically in Canada. And the main outcome of that research is not earth shattering at all. It basically comes down to this. People who have a lot of money have access to great advisors and there's a lot of levels of quality of advisors available to them, but they can get some really great financial advice if you have a lot of money.

If you don't have a lot of money, you're more likely, not always, but more likely to deal with someone who has a quota, has paid on commissions, or is working not in your best interest. It's more sales-based. And so a lot of people who potentially are at the most malleable part of their lives are not getting great advice, and they think that they're getting advice. And so they're really shortchanged. That was kind of the big takeaway for me from my research. And so it kind of have galvanized my thinking as to, we got to do a better job of improving the outcomes and the financial outcomes specifically of the mass market. There's a lot more that can be done there. I would argue it's a much more important demographic to target. The people already have money. You know what,

if they're not getting perfectly optimized returns and what have you, I don't really care. I mean, you could do better, but I'm not really too concerned about that. I'm more concerned about the people who are continually being shortchanged. And how do you get at that? Are you going at them directly through your educational efforts, online, books, et cetera? Are you doing it by trying to work with the companies that are giving them that frontline advice and changing their behavior and their approach? Yeah, it's kind of all over the place. There's some stuff I do behind the scenes.

So I do work with a lot of companies behind the scenes as a consultant in wealth management, trying to get them to be more planning centric as opposed to product or portfolio centric. Right. Also trying to make sure that they understand the opportunity in dealing with the mass market and doing a better job there. I do do some personal finance education, although as you probably know, and anyone who subscribes to my channels or listens to my podcast know, I don't really put out content on a regular basis because it was actually never for the purpose of building up a following. I just really enjoyed teaching people when I had time to do it.

And so I think maybe I do owe it to people to put out a little bit more, especially now there is so much bad information out there and it's exponentially growing, the volume of information. Some of it's good, but there's a lot of it that is really, really bad. And so I feel this calling now to come back into that space, restart a podcast, maybe consistently put out YouTube videos. And I think I might actually do that. US included, at explaining things in a fashion that the average person who doesn't know the industry jargon can understand. And you always make it entertaining enough to keep their attention. I hope you do come back.

I mean, the more good educators we have out there without an ax to grind, without products to sell, the better. Okay, I'm going to fire some questions at you or just talking points and let's bounce back and forth again with you carrying the ball for the most part. It's funny. I thought this was a strange podcast coupling because you and I agree on everything. You know, we've always seen everything in a very like-minded fashion. I thought I could just leave and let you talk or vice versa.

But let me start with this. What do you think the biggest problem facing Canadians is right now? But let's go to young Canadians first. Let's divide out and go to young Canadians. What are they up against that worries you most? Canadians first. Let's divide out and go to young Canadians. What are they up against that worries you most? Okay. So I'll take the angle of they are living in a world where their opportunities are different. The world is different than the parents that, you know, the world that they grew up in. And they have all this legacy thinking about what is the right way to manage your money,

which doesn't jive with the realities of today, coupled with social media, which is completely crippling people's view of what's right, what's wrong, what's moral, what's not moral, what you should achieve, what you can't. And it's just a cognitive overload. And I think that's part of the reason why we see such an increase in the mental health strain that we're seeing as a society. And more and more people are turning away from dealing with things by just doom scrolling all day long. And it's just their personalities are being warped by the algorithm. So it's a lot of things to pack into sort of like one thing, but it's kind of like a conflation of all these factors.

How do you think that's affecting them on a financial planning front? How do you think that's affecting them on a financial planning front? Well, I think it kind of encourages this present bias that we have. So I'm big into behavioral finance and the psychology of thinking about money. And one of the things that we have, if I could boil it down very quickly, the Colesnose version of this, 99.999% of our evolution was all about surviving until tomorrow morning. So all of our decision protocols that we have are built-in sort of cognitive processes. We're all about short-term survival. And financial planning and accumulating wealth is really about long-term trade-offs.

And that part of our brain didn't evolve until the very last 0.001% of our evolution. We're not good at engaging it first. We have to sit down, engage and plan. It just doesn't come natural to people. So when you're surrounded by all these signals that are all just focused on consumption in the moment, it really warps your sense of, you know, what people are aspiring to achieve and how you compare yourself to people around you. And it kind of makes you more present bias, which you're trying to really get away from if you're thinking about planning for the future.

I couldn't agree more. I see it all the time. And we've always talked about how people compare and covet, and it drives them to spend money that they shouldn't be spending. Now with social media, providing all of their friends with a platform to highlight only their best moments,

it becomes so difficult to avoid that trap. There's this great study that looked at the impact of someone in your neighborhood winning the lottery. And I think it was actually studied in Alberta. But what they found was if someone in the neighborhood won the lottery, their neighbors were more likely to go bankrupt. And the rationale behind this is we compete on what we see, right? But we can't compete on what we don't see. What we see is conspicuous consumption. What we don't see is how people funded it.

We don't know how big the mortgage, how big the loan is, how much debt people have. We just see the product of that. And so when you don't have the full picture, it's a warped landscape. Okay. I can give you a great example of that. Here in Kitchener-Waterloo, we have a very lovely area with beautiful homes. I get more calls from that area from people looking for financial help who are in huge trouble than any other area in town, including low income areas. That's the area that reaches out to me the most because they're drawn into the spending by seeing what their neighbors are doing. The debt loads are out of whack. And of course, we've had the rising interest rate environment until recently that's exposed them.

So I couldn't agree with you more. Those are the kinds of things I talked about in the Wealthy Barber Returns, but it's very difficult to alter that behavior when, as you point out, it's coded into our DNA. We're fight or flight. We're short-term thinkers for the most part. I mean, you said that our brains didn't evolve until recently. I have many friends whose brains still haven't evolved. They're still not there. And you see so much more ADHD now. And of course, if you have ADHD, all of this stuff becomes a lot more challenging for sure. So I couldn't agree with you more on all of that.

All right, jumping over to a completely different subject, RRSP versus TFSA, where do you sit on that? Same type of thinking I've had? I think generally speaking, first off, let me say, I think people spend way too much time trying to optimize a perfect situation. When you get to the point where you're down to dollars and cents when you've actually run the numbers, pick one and just go with it. But for the most part, if you really don't know what you're doing, the TFSA gives you

flexibility and you can change your mind more easily later on. That being said, an RRSP is more compartmentalized. You're less likely to rate an RRSP than you are a TFSA. The other thing that has changed recently is I think a lot of people aren't really factoring that there are now a lot more income-tested benefits available for people pre-retirement, so like the Canada Child Benefit and what have you. If you make an RRSP contribution, it reduces your income, and therefore, you might actually get a little bit more of the CCB. So that's a factor that hasn't really been

calculated by a lot of people who say, no, it's definitely, it's, you know, the RRSP and TFC is just a mirror image of each other. It doesn't matter. It kind of does matter if you have kids. So the analyses get better. But again, you know, as long as you're moving in the right broad directions, and you have some semblance of a plan, and you've thought about it, you're probably ahead of the game. So spend a little bit of time looking at the different articles and looking at it. But it sounds like the slight edge generally, I'm biasing towards the RRSP because of these psychological opponents, as well as that additional bump in some of these income tested benefits that we didn't have 10 years ago. It's funny when people say to me,

RRSP or TFSA, my first response is yes, be doing one of those two things. So I agree with you totally. And I think your point about the benefits is one that doesn't get enough attention. But you know, another point in this field that doesn't get much attention, you read all these articles talking about your marginal tax rate at time of withdrawal of the RRSP. And that's the key variable in the mathematical analysis. I agree with that. But where a lot of experts get it wrong is when people take money out of their RRSP, it's not all taxed at the highest marginal rate. They're often taking $40,000 and $50,000 out in a year, and it's the average tax rate on that withdrawn $40,000 and $50,000 they'd need to compare to the time of contribution

tax rate. And that tends to favor the RRSP a little bit more. My own research on this, which has become a big obsessive compulsive says the RSP is the winner in a lot of cases. Like you, I like the flexibility of the TFSA, but I find that works against people in a tremendous number of situations. It's not as compartmentalized. They do rate it for emergency fund reasons, including going to Cancun and buying a hot tub. And so I'm a little concerned that sometimes it loses its way. FHSA, what do you think about FHSAs? By all accounts, it looks like an amazing option for people because it is so flexible. The way that you can roll it over, if you don't end up buying a house, it seems like that's the new sort of default option for a lot of people. Now, when it first came out, the thing that kind of ticked me off was it's convoluting what people need to know. And the world of personal

finance, the number of acronyms, the number of different plans, different strategies, different loopholes are just getting more and more expansive, which serves to paralyze a lot of people from doing anything, right? So when they have like this choice paralysis. And what I argued was, based on what you're trying to do with this, why not just take the home buyer's plan and just modify that one part of the existing RRSP and do all the things that you want to do with this FHSA without having to create a new account, which took some time for institutions to actually make available and what have you, all this red tape, extra costs. So I thought that that was poorly thought out. But again, that I think was more of politics than it was what was actually best from a planning perspective.

But you're so right on that. In fact, last year, we had a couple of Canada's major institutions, still didn't have them available at all late in the year because they were complex to put into play, et cetera. That being said, they're wonderful. I mean, I agree with you. There may have been a more effective way to do it by rolling it into the home buyer's plan, but they are fantastic. And if you're saving for a home and you qualify, you have to take advantage. The best of both worlds with TFSA and RSP.

Active versus passive. Do I buy a professionally managed mutual fund that does its own stock picking or do I emphasize an index fund approach? Yeah, so I'll tell you two answers to this one. So my personal thinking is I am a cheap, lazy bastard. And if I can outperform the majority of professional investors, the majority of retail investors by seeing it on my hands, buying a low-cost, well-diversified, globally diversified portfolio matched to my risk tolerance that is super low cost, that savings per year is going to allow me to capture more of the market returns

that are available. But what I will tell you is that whether people go passive or active, not as many people are capturing the returns that are even available for either of those main strategies. Because if you have someone who is actively managing a portfolio for you, and you are actively managing whether you're in and out of that portfolio, or when you make your contributions and withdrawals, or you've got a couch potato portfolio that's low cost, globally diversified, you're not supposed to touch it, but you get scared out of the market and you pull out at the wrong time and buy back in at the wrong time, you're not even getting the returns available for either strategy. And so my overall thinking is

I need to relax my stance a little bit about being dogmatic about everyone should have low cost and you have to have a portfolio that you are more likely going to stick with through thin and thin. And I know that will come across as antithetical to some real purists out there, the over-optimizers. But at the end of the day, what is the outcome we're looking for? Is it getting people the most of what they are capable of getting? Or is it getting them a low cost, globally diversified portfolio that's passive, that they're not going to stick to and they're going to blow themselves up because they make bad behavioral decisions? So again, my overall thinking is passive, but you also have to think

about the human, right? Who is the person that you're giving this advice to? Is it going to stick for them or not? That's a critical component. But why would they be more likely to have it not stick going passive than active? Well, what we've seen, there's actually a paper that was released and the title I think is just called Abusing ETFs. And it looked at these index funds in the form of exchange traded funds and people trade in and out of them. They use them like market vectors. So they're timing the market and they think, well, this is the best way to get into the market. And I think if you can convince people, look at all the merits of passive investing and what have you, and they're like, yeah, that makes sense.

It takes you 20 minutes to convince them, because it is a convincing argument. That's what I do and that's what I would recommend, but it's just as easy for them to get convinced out of that. Because what happens is our sense of what is right and wrong goes out the window when the markets go south. When we have a big correction, people second guess no matter what strategy they have, no matter how much research there is out there, no matter how many back tests they've seen about what happens if you sell after a 20%, 30%, 40% decline, the human part of us says, I need to get out and you look for safety.

And so if you are more inclined to do that, I think that's actually something to focus more on than the active versus passive. That being said, I don't want to make it sound like I am a proponent of active. I'm just saying the reality is there are a lot of people who you will never convince that passive is the way to go. And if you did, and they do it reluctantly, and they end up worse off, that's a bad thing. But I do want to say that I am a big proponent of passive, low-cost, globally diversified, simple boring investing.

That's what I do, and that's what I would recommend to basically everyone, just recognizing that people are human. You know what's interesting is that in all the years I've been doing this, 40 years now, I've met no consistently successful market timers. And so you're a hundred percent right. They've got to stay the course. I think my father's been the best at this and he has harnessed the power of being oblivious. He doesn't panic during a market downturn because he's not aware there is one. All he's doing is following his sports teams and going for walks. I tell him

the market's down 20%. He goes, oh, that's unbelievable. I didn't know that. He pays no attention and therefore he's not drawn in emotionally because you're right, we're likely to panic. Funny story is I made a very good market timing call in my life and it cost me money. Back in 2006, 2007, I was speaking in the States a ton. I was in Florida a lot, in Naples. I was in Vegas. I was seeing what was happening in the real estate down there and I thought this is absolutely absurd. People flying down and buying 9, 15 properties and not even getting tenants in some cases because they were so confident in the capital appreciation. So I thought the market's top heavy.

It's going to carry over to the stock market. I started talking about it on stage and I got out before the crisis. Only market timing move I'd ever made. And I was so proud of myself. I waited so long to get back in. I went against everything I've ever preached and I timed the market, got it right. It still cost me money because I waited so long to get back in. And by the time the market had gone up, it was above where it was when I

got out for heaven's sakes. So I should have listened to myself, you know, and we all make those kinds of mistakes. I think that underscores, you can have the technical knowledge and it can be ironclad in your mind, but when markets go south, everyone, it is human nature to second guess yourself. And it's just a lot more difficult than people think. So that's a great story. And your dad, you talk about him every now and then on Twitter and on your video series, which is great, by the way. I absolutely love it, man. You're so succinct and powerful with your messaging.

It's fantastic. But your story about your dad reminds me about the first time I was playing poker. I was playing with some friends. I didn't know the first thing about the rules. And I ended up winning the night because I didn't even know when I was bluffing. So, I mean, ignorance is bliss sometimes. It absolutely is. Okay.

So the active versus passive argument, I think we're on the same side there. I mean, you know, the corniest line ever, every book has it is it's time in the market, not timing the market. But the reason it's in every book is it's bang on. It's so accurate. Do you know what's interesting after, again, doing this for four decades, I don't find women as likely to jump in and out of the market. All the research shows they're much less likely to pay meme stocks. They're less likely to buy into option trading courses. Now the research is coming

out and saying it's testosterone level based. The higher your testosterone level, the more likely you are to embrace risk, including imprudent risk. Have you noticed the same thing that some of this silly investing, this aggressive investing with low payoffs tends to be more male dominated than female? Yeah, absolutely. And there's corollaries with the world of gambling. And if you take a look at some of the statistics during lockdowns, gambling sites shut down because there were no sports being played. You saw a lot of betting-like behavior in the stock market fueled by options and also by influencers who are giving people bad advice without any repercussions, without any oversight. They're unlicensed, and there's no real easy way to go after someone giving really bad advice when they're not licensed

online. And so, yeah, this was all fueled by this testosterone-driven sort of thinking. And the research also shows that men tend to be more overconfident. I don't know if we needed research to tell us that. But that translates into more risk-taking in investing and gambling. You know, and the other thing the research shows is that as much as it sounds like a stereotype, women are more patient. They have longer holding periods for mutual funds, for index funds, et cetera. I mean, frankly, if you're a conventional married couple, just let the wife manage the money seems like a good move. Wouldn't you agree? Well, I think what's interesting

is you have to take an approach where your partner is at least aware of what's happening. You may have someone who is maybe sort of the point person when dealing with different decisions, but I always think about, well, what happens when the person who is defaulted to being in charge of the finances, something happens to them? This is a situation that I'm sure you've seen time and time again. The person left making the decisions has no idea what to do. And it is a situation that could be avoided with better communication about money. That doesn't mean both people have to have the same level of interest in personal finance or same level of financial literacy about the technical aspects, but you need to know

what would happen if you went away or something bad happened to you so that I could maintain what we built together or that I don't do something that was counter to the strategies that you put in place because I didn't know what was going on. I think it really should be more of a partnership, but that doesn't mean that each person needs to nerd out on this stuff. Completely agree with that. Like, absolutely. In fact, it's interesting.

I just did a video the other day on the importance of the partnership approach. But to your point, it doesn't have to be 50-50. But it's funny. I put this video out and then I've had two, not one, but two divorce lawyers get in touch with me and say, Dave, it's worse than you think. When couples manage their money separately, they're much more likely to get divorced and much more likely to have friction as it gets exposed years into the marriage that one's done a wonderful job and one's done a horrible job.

And the resentment obviously starts rising, et cetera. So I think you're right. They've got to communicate. It's good for the one person to understand what the other person is doing. If one's taking the leadership role, that all makes perfect sense to me. I've argued lately that the past inflation we've had in the last few years until quite recently has been devastating for a lot of young Canadians, especially when they're already dealing with very high mortgage payments or huge down payment savings needs. I don't know what you do about it. Prices aren't about to

reverse themselves and go back. It's tough for young Canadians right now. Agree? A hundred percent. And I put out a video of my own a little while ago because I was seeing this same perspective that is completely wrong that people have that if inflation gets down to 2% consistently, problem solved. And I think a lot of people think that if you go back down, when you have disinflation down to 2%, that prices somehow go back to where they were before the spike in inflation. And they don't realize that that spike in inflation, which was less of a spike, it was a little bit more prolonged than everyone thought, that is now baked in and we're just increasing at 2% from that level. So that contracted increase has had a really destabilizing effect on society as a whole in terms of how wages respond to that

in terms of labor shortages in different parts of the labor market. And everyone, everyone is posting photos about, you know, look at my grocery bill, or I can't believe this has now doubled in price. And different parts of where we spend money have different rates of inflation. Someone took a look at the different prices of different things at grocery stores. And what they found was that the lower end, where people who are more budget conscious, everything that they bought tended to go up at about two to three times the posted level of inflation. It has had an asymmetrical impact as well. I think people who are very wealthy have been less affected by inflation. This has contributed to a greater bifurcation and stratification of wealth that we've seen

in society for decades now. No question. If you look at the wealthy, a lot of them don't have mortgages. And of course, the interest rates have gone dramatically up, dragging the payments along with them. You couple that with the food inflation, oil inflation, and everything else. I mean, I'm going to help people right now, and they are not acting in an undisciplined fashion, yet they can't save the 10% to 15% that I for so long have advocated, as have you. The money's just not there.

And where I'm seeing it come into play a lot is the number of people 35 and under who are saying we're only having one child. I'm hearing that more and more because it's dictated by their finances. Also, by the way, and this may be a good thing, I'm not sure, it depends on the circumstances, but the divorce rate I think is inevitably going to go down a bit because a lot of people are saying the cost of living is so high, housing in particular, that we can't afford to get divorced. We both can't have reasonable residences, reasonable places to stay. So the ripple effect of all this is quite large. My biggest concern is it's squeezing out saving,

that the high home prices coupled with the inflation in food, et cetera, are making it so tough for young people. How's it like to be a young single person? If you don't have a partner, how do you get through all of this? It's just so challenging. You're 100% correct on all of those points. Again, we agree on basically everything. Yeah. So this is great. We can espouse this from the tops of every mountains, but I'm seeing the exact same things. And I think it was about 10 years ago now, I remember very clearly, I was on the National with Peter Mansbridge and we were talking about the debt to income ratio in Canada.

Because at the time, even back then 10 years ago, alarm bells were going off and they've kept on going off ever since. And I said, this is actually one of the repercussions that you don't see in the data because people don't really publish this is that marriages are becoming loveless, sexless marriages because people can't afford to leave their home, right? you afford things. And what people don't realize is that there are certain property rights that you might be exposed to once you cohabitate with someone over a certain period of time. And it varies provincially, right? And so the Marriage Act is regulated federally, but when it comes to cohabitation and you're not married, that's a provincial domain and they have different rules. So after one year, you might be considered common law in one province, whereas in other provinces,

you're not. And sometimes it's automatic as soon as you have a kid. So a lot of these people are moving in together thinking, I won't make that decision about getting married, but this is better for our finances. Well, if it is really a financial consideration, you should probably understand the financial ramifications if things end up going poorly and it's not an amicable breakup. Because especially when you have uneven levels of wealth, there's some serious considerations there. Well, that leads to my next point, because I can't believe how many people are asking me about prenups now and occupancy agreements. I mean, it's one of the more common questions I'm getting. We're going to start seeing prenups come in at a huge percentage of marriages. A lot of times, by the way, why they're coming to me is that one parent group is giving one of the to-be-married people or to-be-common-law people a huge amount of money to help them with the down payment. is concerned that if the couple splits up not long after,

half that money could end up going under the matrimonial home laws, et cetera. And so they're trying to safeguard against it legally. That's somewhat, to some extent, understandable. I get it. But all of these things you're starting to see come through a lot. Just to change the subject back to, you mentioned CBC and going on The National.

When you first took off and started doing all of the interviews and CBC in particular, I'm not saying this to be funny. This is true. I couldn't believe how many people said to me, Preet is like a young Dave Chilton, except he's a better dresser and he has better hair.

I used to hear that. And you know me, I got upset about the hair. I didn't care. They thought you were smarter and you were a better dresser. But when they said you had better hair, I was like, what are you talking about? He has better hair. That's blasphemy. That's, that's absolutely not true.

But yeah, you used to do a great job on all those shows. You know, the art of doing what you did, it is very difficult to be interviewed on things like the national because you have to give an outstanding response, but you don't have the time to cover off the exceptions and the nuances. response, but you don't have the time to cover off the exceptions and the nuances. And that balance of trying to be succinct while not steering some people in the wrong direction is much more difficult than most people realize. You have to be an experienced communicator to do that well. You do it exceptionally well. Even today, I've noticed that you've said, but caveat here, et cetera.

And you're not trying to hedge your bets. You're trying to make sure you don't steer people in the wrong direction. Yeah, it's very tricky. And finding that balance is very, very difficult. I'll tell you a story. When I first started writing for the Globe and Mail, I started writing in the Globe investor section. And at the time I was just writing a blog. I was quite technical. And so it was a very niche audience. So I wrote for the Globe investor and was like, hey, this is great. Then someone said for the larger sort of overall business section, do you want to write something in this section? I said, sure. And they said, you got to make it less technical, like way less technical than the blog and way less technical than the Globe

Investor section. I was like, all right, great. And then one day, the Globe Life section was doing a Money Tuesday weekly section or something. Hey, we'd really love you to write in the Life section. And I submitted my first column. They said, oh, you can't include numbers. Sorry, you want me to talk about personal finance and not include numbers? I was like, yeah, you can't talk about numbers at all. And that was the best lesson I had about trying to figure out how do you reach a lot of people and get information across without leading people astray because there are

so many exceptions when it comes to personal finance and what have you. And I also think back to, I think it was Stephen Hawking's book and his editor talked about how in a brief history of time, he submitted his first manuscript and the editor said, listen, for every equation you have in this book, halve your audience. So whatever the potential audience is, every equation, cut that in half, right? And it's like an exponential sort of decrease. So that's why apparently, if I remember, the only equation is E equals MC squared. It's the only equation in that book. And that's always sort of stayed with me is that trying to find that balance. And it is very tricking. I still struggle with it. I think you do it very well. Also, your movement over to

behavioral finance, it made it a little easier because a lot of those teachings and preachings are universal in their application. But when people ask a specific question, like I remember when I used to go on a lot of the phone and radio shows. And of course, you're getting a very specific question from somebody, but you're trying to answer in a generic enough way that you help them. But again, don't steer the other people in the wrong direction. And there's so many nuances. It is challenging stuff. Going back to RSPs, you made a very good point about qualifying for certain government assistance, et cetera. But you know, the one that blows me away is how many people who teach this forget to talk about group RSPs and there's matching available from the employer. And I have

three or four huge pet peeves in personal finance, but seeing as many plans as I do, nothing drives me nuttier than this. When people are turning down a match on the first 3% of the first 6% they put in dollar for dollar, and you've only got a 60% and 70% participation rate. What? Drives me crazy. You know, it's interesting. I spoke for a Boston robotics firm. They brought me in years ago for their 401k, a group RSP in essence in Canada.

And for every dollar the employee put in, they matched with $4.95. Don't ask me where they got that, but I think it was from a profit sharing formula. So you got essentially five for every one you put in and they still had 25% of people not doing it. And so I went up in front of the audience and I said to them, your boss has said to me, what are you going to tell them to get them motivated? And I'm going to say, if you don't do that, you should be fired. You're obviously not an intelligent person. There's very low chances you're adding value to this company. I would use that as the litmus test for whether you should be here in the first place.

Like, can you imagine? But again, we're seeing that kind of thing more and more. You know, what's funny too is that a lot of the group RSPs don't make the index fund option available, but I think you're going to see a movement towards more low cost funds being available because if the average fund loses people 25% to 30% over an extended period of what they could have made in an index fund, that's a big hit. So I think employers should pay more attention to that. They have been the last few years finally, by the way.

Another thing that people could, you know, that might benefit them is understanding the vesting schedule. So maybe you don't have a great investment option, but, you know, when you think about how much of a match that you're getting, it far outweighs the imperfectness of that investment option. And if you hit your vesting period, take it out and put it into something better. But don't leave that free money on the table just because of that. And you know what else I'm seeing, which is smart, is some young people are, let's say

they get a dollar-to-dollar match on the first 3%. They're using the group RRSP on the first 3% to get the match. And then they're setting up a separate RSP and putting it in a lower cost products. That makes perfect sense. And again, I think we should be educating more on that because that's something that people haven't thought enough about in past years. I'm looking at the real estate situation in Canada, being a landlord, and I'm just shaking my head. And unlike previous decades, where I've talked very favorably about investing in real estate for certain types of people, I now basically am throwing my arms up there and saying, don't be a landlord. There's other

investment alternatives out there that I think are better. Too much hassle. The tenant problems are real and growing. The system is being gamed more. Where do you sit on that? 100% agree. I mean, you could not pay me to be, I mean, that's the way it's supposed to work, but it's not even how it's working today. I mean, if you went out today and got an investment property, you're underwater if you're charging market rents, right? And so your cashflow negative hoping on appreciation from this point, which most people agree is at a standard deviation or two away from the long-term means. So things are just not in your favor if you're thinking about becoming a landlord now. Now,

if you've been a landlord for a long time, you've got tons of equity and you're able to carry lower than market rates. I don't know why you would, but if you could, great. But for someone thinking about it now, it's a totally different environment than it used to be. And I could not agree with you more. And I've actually been a lifelong renter. There's a brief period of time where I was kind of in an ownership relationship, but that was because my partner at the time had bought the house and it wasn't my idea. And renting has been great for me because I've had the discipline to save the difference and put it away into different investments. In my case, just the stock market and just sit on my hands.

And it's done amazingly well. But that discipline, it's much harder to miss a mortgage payment than it is to not make that voluntary contribution. So that forced savings component, in terms of home ownership, that's worked out well. But now even the premium for what you're paying for a house today, man, it is tough. That was a classic accidental line you started with when you said you could not pay me to be a landlord. That's the problem. A lot of the tenants aren't paying. They've all figured out that if they don't pay, they go in front of the tenant review board, which takes

11 to 13 months right now, at least in Ontario, and they've got all the leverage. And so they're often not paying for a few months. Then they're've got all the leverage. And so they're often not paying for a few months. Then they're asking for money to leave. And they'll say, let's say, for example, I want 15,000 and the landlord's going, well, I'm charging 3000 a month. That's five months. I'm ahead to actually give them the money. They're being rewarded for not paying. But my favorite story is a colleague of mine, nice room above the garage, fully furnished, very, very well done. $2,000 a month. The person gives them first and last and stops paying, of course, after the first month.

But worse, sells all the furniture except the bed on Kijiji. The tenant sold the landlord's furniture on Kijiji. And we're hearing stories like this nonstop. Now, going back to your very interesting point that you rented, not many people have done that. I've met a lot of people who've done that and done it well. They've used pre-authorized checking and forced savings techniques to make sure that the difference was invested to maximize RFPs, TFSAs, and even had enough to spill over into a lot of non-registered accounts. And I think you're going to see more people forced to do that. They're not going to necessarily do it by choice.

They're not going to be able to buy a home. They can't build a down payment. The most important advice in finance right now is choose your parents wisely. That is the most important advice. You and I can't do anything more than that because without parents helping you out, how do you put a down payment together? Yeah, you're a hundred percent right. And I'm laughing. I don't want people to think that I'm making fun of the situation, but it's more a product of just how dire it's been for so long. That's unfortunately a sign of the times because it's just so difficult if you start out without that advantage. I think it was CIBC released a report recently that talked about gifting down payments, which the percentage of first-time homebuyers who are getting gifts from parents is

very high, and the conditional average, so conditional on getting a gift from parents. In Vancouver, I think it's well into the six figures in terms of a gift for the down payment. When you look at what it would take if you didn't have assistance, for someone who is earning the average level of income, it used to be the case five decades ago that you could scrap up the money to save for down payment and get a very decent home. And now a lot of the people who bought 20, 30 years ago, or even 10, 15 years ago, were in a situation where they could not even afford the house that they're in currently, right? If they had to do it today. And I think that is a very important signal that this is beyond crisis levels. The fact that people who are homeowners,

because they bought 10, 15 years ago, could not qualify today. Their income's even a little bit higher. They could not qualify today for those same houses. Tells you how bad the situation is. That is a great point. That is a great point, a very good way to look at it. That drives us home extremely effectively. That CIBC report was quite good. I think Ben Tao may have been involved in it, and I like his stuff. He's always very, very insightful. But if you talk to real estate agents, they have across the board told me that that CIBC report understated the level of involvement of parents. And I've had some real estate agents say to me that for first-time buyers, they think it's 80% of them are getting some form of help from parents.

That makes more sense to me based on the math that I'm looking at. So I think the CIBC may have made a good point, but actually been conservative when they got their numbers out there. Okay. Next question's an interesting one because it's one of the few things that I've disagreed with a lot of the mainstream people on. I think we give too much blanket advice on emergency funds and what size they should be and that everybody should have one, et cetera. And then when I sit down over the kitchen table with people and I help them, I run into a lot of situations where I think it's foolish to even have one. So for example, the other day I'm helping people, two teachers who are married to each other, they're not going to lose their job.

Okay. It's just not going to happen. Their job security is fine. They could have an emergency pop-up, but they have equity in their home that they could easily access if they had to. I'd prefer they don't go that route. They have a little bit in savings, not a full six months, like is often recommended, but I don't want them to go that route. I'd rather they take full advantage of the TSFA and invest for long-term growth. They've already got the good pensions. And I could give you many more examples where I think people can get away with a smaller emergency fund that is often advocated. Do you think it has to be more customized advice on that front? Yeah, I think it does. And I'll give you an example in the opposite direction.

And that is when people hear rules of thumb, like three to six months, that is not enough. If you are in a very specialized occupation, that could be very volatile. And you know that replicating that income level would take you years to find a similar job or to retrain slightly differently into a different sort of tangent. And so 12 months might not be enough for someone like that. And so I think being more thoughtful with advice is important. Rules of thumb serve a purpose. It gets you started. So the book that I wrote, Stop Overthinking Your Money, which is now over 10 years old, the ethos of that book was, here's the 20% of thing that's going to get you an easy A. And then if you want to get an A plus, you can do that. It's going to take a lot more learning and knowledge and thinking about it to do that. But I think, you know, rules of thumb serve a purpose.

But if you are interested in, you know, taking it a little bit further, I think it does make sense to sit down when you're ready to plan and think about these things in a little bit more detail. So I'm kind of on the edge on this one in terms of you're 100% correct, but at the same time, rules of thumb, they serve a purpose. It's just knowing when it's outlived that purpose

for your specific situation, I guess is the trick. I really liked your example of somebody who's making a big income and may need more because we've seen it in Waterloo. We've had a number of people who were in tech sales

making 150 to 300 and lost their job and have not been able to find anything similar. And obviously if their expenses were geared to the 150 to 300, they're in trouble. One of the things that I preach to a lot of people in sales where the job security is not there is to not raise your expenses to those levels, just live a much more modest lifestyle and just be safe that way. And I think more and more people are starting to listen to that, but it's tough not to spend to your income level. I mean, it's the way we're hardwired is people want to have nice things. They want to go on trips. In fact, I find the younger generation wisely spends more on experiences than on stuff.

I've always advocated that. Sometimes I think that pendulum swings a little too far though. They're spending too much period. But again, I find a lot of young people I'm running into have given up a little bit. They just don't think they can get there on things like home ownership and proper savings levels. And they've responded to that by saying, I'm going to at least enjoy the moment. And I kind of get that, although obviously as the wealthy barber, I'm not too thrilled with that attitude. You're seeing the same types of things. Yeah. And your comment about the pendulum swinging a little bit too far in the other direction is so perfect. I think it perfectly encapsulates what we see with a lot of things.

So for example, I think you just had a video about, you know, small expenses and how a lot of people say only focus on the big expenses. Don't worry about, you know, what you spend on these small expenses. And I've always, as I've seen that sort of thinking evolve and develop over time, people saying, yeah, of course you can have that latte, of course you can have this and that, within reason, right? What I've noticed is the turning point in my own personal finance trajectory was when I was trying to woo a girl at Starbucks, a barista, and I went into Starbucks twice a day on the way to work,

on the way back. And I got a latte because it took longer to make. So I had more time to talk to her. And I was doing that for months. And I sat down and added up because my roommate at the time was like, how much money are you spending before you ask this girl out? And it was like to the thousands of dollars. And I was not making a lot of money at the time. It was ridiculous. And then that was like the turning point for me because I was so disgusted with how much I was spending on these seemingly small but frequent expenses. And I wasn't getting joy out of that latte. I had ulterior motives. But the point is our habits, we don't even realize how much they creep up. And listen, if it is in your plan, if you get a lot of joy from going out and getting a takeout copy, that's great, but it's got to fit within the rest of your budget. You can have like one of those. You can't do that with everything. And those little things do add up.

That's the whole point. But I seen the pendulum swing there way too much. And people are saying, no, it's okay. You can love yourself and all this stuff. That's a good message too. But there is sort of a happy medium. Going to social media and then we'll wrap up with this. I think there are a lot of good people. Whom do you like on social media? So I know that you had

Ben Felix, I believe. Did you not have him on one of the podcasts or you went on his potentially? Excellent. I think he's very good. I went on his. Yeah. Who else out there do you like and enjoy listening to and think can add a lot of value for our listeners? Yeah, there's a number of great creators out there that I really enjoy for different reasons. So I like nerding out, listening to the Rational Reminder podcast, which is Ben Felix and Cameron Passmore. And now Mark McGrath has joined that stable of hosts. Ben Felix's YouTube channel, which is his long form video.

So not the podcast, but his stuff is excellent. I really like Richard Coffin's The Plain Bagel, another YouTube channel. He's about to hit a million subscribers. Yeah. And a nice guy too. Yeah. He definitely, I haven't met him personally, but he comes across as a super decent. I wish we could replicate people like him. I really like Patrick Boyle. So he's a former hedge fund manager. I believe he's based in London, might've been out of Ireland, but the way he deadpans his humorous takes on some more sophisticated financial machinations out there is just, it kills me. He is so hilarious. One of his latest videos, you know the trend that influencers have where they take a lavalier mic, which is designed with a clip to clip onto a piece of clothing so you don't have to hold it?

Right. And how everyone holds it with their hands and like right up to the lips and it's completely distorted and it drives me nuts. And I know it's like the technique and whatnot, but he's gone to the next level. He took an entire boom arm and is just holding it with his hands for a part of the video to just sort of, it's just hilarious. So those are just three. I could go on and name a whole bunch, but those are the three that I pay most attention to now. I like the way they deliver information. I like that they're educating people. They don't really have an agenda that they're pushing. So yes, Ben and Richard, they work for firms that provide advice and investment management to people

and financial planning. But they're not pushing it down your throat. They're purely educating people. And their strategy is, hey, if you like us and you like this information, you don't want to do it yourself. Obviously, it's clear that they can do it for you. I think it's a great way to approach content creation. Yeah, I really like those guys too. They do a very good job.

They're good communicators. And again, they seem like very nice people, which sounds corny. But you want to deal with people that you respect and you think are truly trying to help. And I like their approach as well. And they make a lot of good points. Like they are very much, very consistent with what you and I believe. And so maybe that's why we like them. We like them. We're very shallow people. We like people who agree with us and we don't like people who disagree with us. It's that simple. Well, we really enjoyed having you on. I mean, you're a great guy. You're one of the nicest people I've crossed paths with. Let me ask you one last question.

I'm going right back to the intro. You really are unusual in that you have said no to opportunities that would have made you a lot more money than some of the things that you've gone on to do. Not that you haven't done well. You've done very well. You've had a great career. But not many people in finance operate the way you have. What explains that? Why are you a little

bit different in a good way? Thanks, David. So it's coming up to 20 years ago now, but I was really ill to the point where I legitimately thought I was going to die. And it really changed the way I looked at my life and what is important. And not far after that, there was a book written, I forget the name now, I think it's Brioni Ware, it's called Regrets of the Dying, and she was a palliative care nurse. And she basically spent a lot of time with people in their last moments on Earth, weeks, sometimes months at a time, talking to them about what are the things that you regret about your life. It came down to a couple of things that just seemed so clear in retrospect, and that is I didn't spend more time with my friends.

No one really cares how hard I worked at work. Making time for the little joys in life, very basic, simple stuff that everyone kind of knows. So like, yeah, that makes sense. But until you truly understand that when you're in a position where you think all that can be taken away from you, that truly changes your life. So there was a period of time where my motto was, I do not work more than two days a week. Partly it was, I physically couldn't for periods of a time. Then after that, it kind of stuck. I was like, you know what? The things that

really drive joy in my life are ridiculously simple little things like my morning cup of coffee. That is a moment that I take very seriously. It drives so much joy. Back when I had a motorcycle, it was a nice day. The freedom to, on a Tuesday afternoon, hop on my bike right out into the countryside, sit down, enjoy a cup of coffee, and just watch the world go by. That drove so much joy for me. Travel, stuff like that. And so it wasn't until I had that experience, which changed my perspective, that I really started to look at life differently and value things differently. And it's kind of the best and worst thing that ever happened to me. Bad because it was a physically bad thing and I still have after effects. But I think the enjoyment that I get,

this is going to sound kind of morbid, but there've been a couple of times where in the last couple of months, I've thought to myself, hypothetically, if someone came to you and said, you've got a month left to live. Do you have any regrets? I said, I'm ready to go. Like I have had a great life. This is amazing. I could not be happier. Everything's great.

So that wouldn't have happened. That perspective wouldn't have happened unless I had that thread of it all being taken away. So that's what made me different for better or worse. Well, you know what? Hearing that you may go in a month, I'm so glad we got you on the podcast now when we did. Thanks, David. Well, I love the way you think though, because remember when you and I first became friends, you were always bugging me to come and go in the car and go around the racetrack at 100 miles an

hour. And I would keep saying, let's just go to A&W and get a team burger. Like we had very different views on how to get a little joy. I have the strangest approach. Everything you said, I agree with. But what I do is I get some free time and instead of enjoying the walk on the beach in the morning coffee, I go golfing and make myself absolutely miserable. I've never really understood the logic behind my approach. Anyway, enjoyed having you on immensely. Would love to have you back on at some point. You're a fantastic guy. One of my all-time favorites in personal finance. I mean that sincerely. You're a guy who commands a lot of respect. I have never in my career heard a negative word about you.

Not one negative word. Oh, wow. And I think that what you said earlier is true about your illness leading to new thinking. But even before you had that, you were a person who clearly wanted to help others. I could see that the first time I met you, that that motivates you and drives you. So thank you from everybody who benefited from your communication techniques over the years. And thank you from us for coming on the show. Wow. Thank you so much, David. It's been a real absolute privilege and honor to be your first guest. I could not think any higher of you. Everything you just said, I mean, multiply that by 10 in your direction. So this has been amazing.

Thank you so much. And you've been a great mentor for me.