Check out our new documentary DEBTASIZED.

Check out our new documentary DEBTASIZED.

Want to Beat the Bank? Understand the Basics

Want to Beat the Bank? Understand the Basics

Whether you are a borrower or a beginning saver, the best way to beat the bank at its own game is to learn some basics so you can make a better decision.  I talk with Larry Bates, author of Beat the Bank, as he shares tips for outsmarting financial institutions and keeping the most of your hard-earned money in your own pocket rather than the bank’s.

One of Larry’s biggest messages is that if you understand the cost or fee structure of the financial products you are using, you can choose options that lower that cost.  By keeping more of your money, each and every year, these seemingly small savings build up over time and can have a significant impact on your long term finances.

Larry describes this with his simple wealth formula:

The amount you invest, the longer time you invest and the returns you make are offset by fees, taxes and inflation.

Take advantage of all six of these factors, not just one, and you will beat the bank.

To do so, here is a good game plan:

Pay off debt before anything. For debt, Larry’s formula works too, just backwards: The more you owe, the longer you owe it, and the higher your interest rate is, the less you have to build wealth in the future.

Your first priority, even before you start making a savings plan, should be to eliminate high-interest unsecured debt like credit card debt. The sooner you do, the more money you’ll be putting in your own pocket instead of the bank’s. The longer you take to pay off your debt costs you money in terms of both interest and future savings. Initially, compound interest works against you when it comes to debt, meaning you will pay more interest in total the longer you take to pay off a loan. If you focus on getting out of debt sooner, you not only save on interest, you allow yourself more time to invest those savings.

Learn More: The Rule of 72 with Ted Michalos

Build an emergency fund. Once you eliminate debt, the next step is to build an emergency fund to avoid having to rely on credit cards again. Don’t worry about investing until you have enough in the bank to cover unexpected expenses.

Opt for low fee investment options. After you’ve created an emergency fund, your next step can be to focus on long-term savings. If you are investing in mutual funds, investigate the fees paid to the financial advisor to manage those funds. Traditional fund fees can range from 2 to 4% of the balance invested and these fees are applied regardless of whether your investments made money or lost money. 

Consider a robo-advisor instead. A robo-advisor is a new and automated tool that can give you the same level of service and returns for managing your investments but at a much lower cost – around 1% of your balance, instead of 2 or 4%.

Another option is ETFs or exhange-traded funds.  Like mutual funds, they hold a basket of stocks similar to the market. You still get diversification but at way less cost.  You do need an online brokerage account to invest, but once you learn the basics it’s a fairly easy, and lower cost, investment option since the cost can be one-tenth of that of a mutual fund.

And remember, start early. Even small investments will add up over time.

Be mindful of taxes on RRSP withdrawals. Making early withdrawals from the plan for purchases other than a down-payment on a home or education will result in a heavy tax deduction.  The same holds true if you withdraw money from your RRSP to pay down debt. You lose a portion of your savings, and future earning power, by withdrawing from a registered savings plan too early. Larry recommends not touching your RRSP until you’re ready to retire. Instead, if you think you’ll need to regularly withdraw from your savings, consider putting money in a tax-free savings accounts (TFSA) instead.

Use Cost and Time to Your Advantage

No matter the financial situation you are in, whether you have some debt or have eliminated your debt through a bankruptcy or proposal and now want to start building some savings, use the wealth formula to your advantage. Begin sooner and opt for lower cost products and you’ll have more money in your pocket in the future.

For a more detailed look at how to beat the bank, tune in to today’s podcast with guest Larry Bates or read the complete transcript below.

Additional Resources:

FULL TRANSCRIPT – Show 233 Want to Beat the Bank? Understand the Basics

Want to beat the bank? Understand the basics

Doug Hoyes:    Lots of ground to cover today so I will dispense with the introduction and get right to it: Who are you, and what’s the title of your new book?

Larry Bates:      I’m Larry Bates; I’m a former investment banker. The title of my book is Beat the Bank: The Canadian Guide to Simply Successful Investing.

Doug Hoyes:    Beat the Bank. So we are recording this at my Hoyes Michalos office, here at Yonge and King in downtown Toronto. And you used to work for a period of time at – among other places – Scotiabank, which is at Scotia Plaza just down the street here, a couple of minutes walk from where we are.

                          I would like you to start by telling this story that you tell in your book, that day in 2013 when you were sitting at your desk up there, Floor 68 of the Scotiabank tower there, Scotia Plaza, you got a call from your sister Mary. Tell me about the call, what happened, and what was going on with Mary?

Larry Bates:      So Mary said to me, “Hey, Larry, all we hear about is how well the stock market’s doing, but this bank mutual fund that we own hasn’t done very well and we just don’t understand why, can you have a look? And so I googled the fund, and I said to my sister, “Do you realize you’re paying 2.3% in fees?” And she said, “We’re paying fees?” And I said, “Yeah, 2.3% a year”. And she said, “Oh, well you mean 2.3% of our returns, right?” And I said, “No, no, 2.3% of your total amount invested every single year whether the market goes up or down, which means if you’ve owned this fund for the past 15 years, 30 or 35% of your money has been stripped away in fees.”

                          And Mary was … she was shocked, and she was upset. Like most Canadians, her retirement savings are precious to her, every penny counts.

Doug Hoyes:    Well, let’s just talk about how big a number that is, because 2 to 3% doesn’t sound like a big number, and I get this in my business all the time, “Oh, mortgage rates went up from 3% to 4%, that’s only 1%, it’s not a big number”. No, when something goes from 3 to 4%, that’s one over three, that’s 33%; it’s a massive number.

Larry Bates:      Yes.

Doug Hoyes:    So 2% to 3% of everything I’ve got invested. So I’ve got, let’s say, a $100,000, that means I’m paying could be $3,000 a year.

Larry Bates:      Yeah, she was paying 2.3%, so on $100,000 that would be $2,300 a year. But the bigger issue is – and people don’t do this – they don’t multiply that by say 20 or 25 or whatever, they look at the one year. Oh, 2% doesn’t sound like much but if you invested for 20 years and you pay 2% a year, that’s 40%.

Doug Hoyes:    Yeah, it’s a huge number. And I’m asking a question that there’s no answer to, but that’s what I do here: How much would a typical mutual fund earn in a year? So put the 2.3% in perspective for me.

Larry Bates:      Well that depends on the mutual fund, but say it’s a balanced mutual fund that’s invested in a mix of stocks and bonds you might hope that over time the average return on a mutual fund might be 6% or 7% before fees.

Doug Hoyes:    Before fees.

Larry Bates:      Now, mutual funds invest in stock so the value goes up and down, it can go up and down dramatically, so you might never have a 7% return in a given year, but on average of the ups and downs you might average 7%. So let’s say you do average 7%, but your fees knock your return down from 7% to 4.7%.

Doug Hoyes:    That’s a huge number then.

Larry Bates:      So 2.3% in fees deducted, so that’s a massive drop. And it has a huge impact; it’s a deceptively high impact because of the loss of compounding. Compounding at 7 basically produces double the return of compounding at 4.7.

Doug Hoyes:    Yeah, it’s a huge number.

Larry Bates:      People don’t see that, yeah.

Doug Hoyes:    Yeah, if you start out with $100 and I start out with $110, I’m going to be way ahead of you 20 years from now because I am compounding on the whole $110, not the $100.

Larry Bates:      It’s the rate that drives the differential. No, no, see if you start with $110, I start with $100, and we both grow at the same rate, you’ll still end up with 10% more than I.

Doug Hoyes:    Okay.

Larry Bates:      Let’s say you’ll grow to $220, I’ll grow to $200 like the relative … you’ll still have 10% more than I. But if you compound at 7%, start with $100 and compound at 7%, I start with $100 and compound at 4.7%.

Doug Hoyes:    A huge difference.

Larry Bates:      You’ll end up with double the return that I have.

Doug Hoyes:    All because of that.

Larry Bates:      It’s the compounding of the rate that drives it.

Doug Hoyes:    Now, so my first thought, and I’ve read the book and I totally understand what you’re saying, but okay I don’t have a whole lot of choice, dude, like if I want to buy a mutual fund I’m going to pay 2.3% or 3%, or whatever, and I am not sophisticated enough to be knowing which Bitcoin stock I should be buying so I want to have someone else handling it.

Larry Bates:      Yeah.

Doug Hoyes:    So that’s kind of the price of admission, if I want to get my car fixed I’ve got to pay someone, it doesn’t really matter what they’re charging me, that’s just the cost of admission.

Larry Bates:      Well, Doug, I would say that was the case 20 years ago, maybe 10 years ago, but today investors have a much wider range of choice of much lower cost investment products and services. So there is a better way. And this is really the main message of my book and how you can beat the bank and end up with a larger retirement nest egg, which is the point: Take a little time to learn investment basics and you’ll be in a position to make a much better decision for yourself and your family, and build that larger nest egg, and take advantage of the lower cost products out there.

                          And if you walk into a bank branch, or your insurance advisor comes over to your home and talks to you about investments, the great majority of those folks they’re good people, but they sell products that are super expensive and deceptively expensive; you don’t see the cost. Take a bit of time to learn the basics, understand that, and understand a bit about the lower cost products that are out there that will build a bigger nest egg.

Doug Hoyes:    So give me an example – not with names, but conceptually – what is a lower cost product then than the mutual fund I can buy at the bank that’s going to charge me 2% or 3%?

Larry Bates:      Well, the most common product, alternative to those high cost mutual funds, are index ETFs. So what does that mean? They’re exchange-traded funds. They’re a lot like mutual funds, they’re very similar, but in order to get access to them you need an online brokerage account. That’s not that difficult if you know what you’re doing. Again, learn the basics and you could take advantage of it. And a mutual fund might charge – as we talked about – 2% a year, which adds up in a huge way over time. An index ETF fund might hold similar stocks to the mutual fund, but they will charge about a tenth of the cost, or even less. So let’s say they’ll charge a quarter of a percent a year, or even a tenth of a percent a year, which dramatically reduces your cost and will dramatically increase the share of your return you actually get to keep after fees.

Doug Hoyes:    It becomes a massive number.

Larry Bates:      Yeah.

Doug Hoyes:    Okay, and we can delve a little bit more into that, but I mean everyone who is listening to this is going: Okay, wait a minute, this is Debt Free in 30, why do we have some investment guy on, what are we talking investments? And the reason I wanted to have you on is because the objective of getting out of debt is so that you can then invest. So I’ve got two questions for you. Number one: Do you agree that it is better to get out of debt before you start investing? And let me give you a really specific question: If somebody listening has credit card debt where they’re paying 20%, would you agree that that’s probably something you need to take care of before worrying about putting money into ETFs?

Larry Bates:      Yes, absolutely.

Doug Hoyes:    So that’s pretty simple then?

Larry Bates:      20% annual interest costs on credit cards obviously is very destructive.

Doug Hoyes:    Which is an after-tax rate, because you’re paying it with after-tax income. So unless you’re got some ETF where you’re guaranteed of earning 40% a year after then it’s kind of a no-brainer question. So okay, the goal is get rid of debt, and we can get into the nuances of that, I mean are we talking about mortgages or not? Well let’s stick with the obvious situation. I’ve got a bunch of credit card debt and I want to get rid of that first. So maybe I end up having to do a bankruptcy, having to do a consumer proposal, I pay it off on my own, whatever.

                          So now I am starting off with no debt, but I also have nothing, I have no investments. So I was doing a proposal, I was paying Hoyes Michalos a few hundred bucks a month for the proposal, that’s now finished so I have freed up a few hundred dollars a month in cash flow, and so now I want to start putting it to work for me.

                          So what advice would you give someone in that position? I don’t have a lot of money yet, I don’t have, you know, 100,000 bucks there. I’m just starting out, maybe I’m a young person, maybe I’ve gone through debt and I’m coming out the other end, I’ve got a few hundred dollars a month that I want to invest. Is there anything out there that I can do?

Larry Bates:      Sure. Sure there is. Well first of all I think most folks need to build an emergency fund.

Doug Hoyes:    I agree. So don’t be worried about the stock market if you don’t have a couple of hundred bucks in the bank to cover emergencies, kind of thing, or more than that.

Larry Bates:      Or a $1,000. Yeah. So let’s assume that you’ve gotten rid of your bad debt – however that might be defined, high-cost debt – you’re stable, you’ve built an emergency savings fund, and now you’re in a position, well okay you’re saying a certain amount per month and you’re in the luxurious position of being able to invest some of that money for the long-term. I would say the easiest choice if you want to invest for the long-term – again, not for six months or a year – but if you’re looking to save for retirement which is the biggest savings and investment challenge for most people, I would suggest looking, if you’re starting out, at robo-advisors.

Doug Hoyes:    Okay. What does that mean?

Larry Bates:      A robo-advisor, it’s a relatively new type of service and there are several robo-advisors out there that offer good investment service at low cost. Go online, answer a few questions, they’ll recommend an investment approach for you, or a portfolio, or a mix of funds, usually low cost ETFs as I had mentioned earlier. And if you agree, if that makes sense for you, then you start transferring over whatever it is, a couple hundred dollars a months, or whatever your number is, and that’s a super easy way to start building an investment portfolio.

Doug Hoyes:    And I can do that with a few hundred bucks, I don’t need millions of dollars to get started on that.

Larry Bates:      Right.

Doug Hoyes:    And so now this podcast is not a commercial for anybody, we’re not getting paid by any of these robo guys to be here. If they want to pay me then, by all means, start sending me cheques, but no one’s paying me, you’re not paying to be here, I’m not paying you to be here, we don’t have some investment fund. Because a lot of the investment shows you listen to: “Yeah, we recommend A, B, C mutual fund”. Well of course this show is sponsored by A, B, C. But we don’t have any of that, nobody is sponsoring us.

                          However, I’m curious, and you don’t have to answer this question if you don’t want to, but are there specific names that are robo-advisors? Like how would I recognize who a robo-advisor is? Who are some of the big names in that industry?

Larry Bates:      Probably the biggest name in Canada is Wealth Simple; they are the folks that have been the most aggressive in advertizing.

Doug Hoyes:    And do you get paid by WealthSimple?

Larry Bates:      No.

Doug Hoyes:    Okay. So neither do I so you’re giving me- these are names that you are aware of that are legit, but they’re not paying you to say that?

Larry Bates:      No, I mentioned them because they’re the largest.

Doug Hoyes:    But if they want to send you, you know, a few $100,000 you’d be happy to talk to them?

Larry Bates:      What I would suggest is, just Google “robo-advisor Canada scorecard, or comparison, or rating”.

Doug Hoyes:    So do some research is what you’re saying?

Larry Bates:      Just search, you’ll find some independent views on robo-advisors. There’s probably eight or ten robo-advisors in Canada. The most recent major one that launched was RBC launched their own robo-advisor service. And the other banks are getting in the game as well.

Doug Hoyes:    With each passing day there are more and more of them out there is what you’re saying?

Larry Bates:      Yeah, and I think it’s a great way, sort of low-maintenance, easy way for investors, for Canadians, to begin investing. And it also can be a great service right through your investing lifecycle, from starting to invest through until you’re retired. That’s not the only choice, but it’s probably a great alternative to consider.

Doug Hoyes:    So why is it, then, that these robo-advisors are charging, you know, point one, or point two, or point three percent, and the big guys, the old-fashioned guys, are charging two point three, or three percent? Am I getting a lot crappier advice then from the robo-advisors than I would be getting from somebody who’s charging a lot more? So let me ask the question a different way. You said that a balanced fund could generate six, seven percent a year before fees; would the robo-advisor fund be generating around that level and would the standard mutual fund be –? So am I getting the same return whichever one I’m using?

Larry Bates:      I would say that, yeah, you could end up with a comparable return before fees.

Doug Hoyes:    Before fees and way higher?

Larry Bates:      But after fees you’ll likely end up with a larger return.

Doug Hoyes:    So I’m not losing anything by going the robo-advisor route, in terms of the actual mathematical return before fees?

Larry Bates:      No, you know, in terms of bad advice, I would say the bad advice comes from the great majority of advisors, unfortunately, out there in Canada, the real human advisors who would end up recommending very high-cost products which leave the investor with only a fraction of returns. That’s where I think the bad advice is. The robo-advisors, by the way, they usually recommend their portfolios [are] these low-cost GTFs which charge a tenth or maybe a quarter of a percent. Now if they tack on —

Doug Hoyes:    They’re charging a fee too, yeah.

Larry Bates:      They may tack on a quarter or a half a percent on top of that. But that still leaves you with much lower fees than the 5 million Canadian households who own high-cost mutual funds.

Doug Hoyes:    Could be still paying a couple of points less.

Larry Bates:      So one way to look at it is: Retirement is expensive. Get yours for less.

Doug Hoyes:      Get yours for less. Retirement is expensive, get yours for less, by not paying all these fees in the 30 years leading up to retirement.

Larry Bates:      Not by taking any more risk or buying wild stocks, or whatever – by minimizing our costs.

Doug Hoyes:    So this sounds to me like going to the grocery store and I can buy the name brand or the no-name brand. The no-name brand is cheaper but it’s made by exactly the same manufacturer who makes the name brand, so I’m getting essentially exactly the same stuff, I’m just paying less.

Larry Bates:      That’s right.

Doug Hoyes:    It’s pretty much as simple as that?

Larry Bates:      Yeah.

Doug Hoyes:    Okay, now let’s go back to the title of the book, Beat the Bank[s], so that doesn’t sound complimentary to banks.

Larry Bates:      It’s a bit provocative, I suppose.

Doug Hoyes:    A bit provocative, okay, so there you go. And why is it necessary to beat the banks? Now I understand what banks are, and so in my world I have people coming in here, in this very office, where you’re sitting in that very chair, and they tell me, “Yeah, I’ve got all this credit card debt and I’m paying 20% interest on it”, or, “I’m going to a second tier lender and paying 45% interest on it”. And I’m going, okay, yeah the banks make huge profits, billions of dollars a month if you add them all together. So getting out of debt and getting that out of the way allows you to beat the bank from the point of view of debt. Is there something analogous that you’re saying on the mutual fund side? Is it really the same thing?

Larry Bates:      It’s very analogous; it’s like the mirror image of that.

Doug Hoyes:    It’s the mirror image.

Larry Bates:      Yeah. The mutual funds, most of them, and there are some exceptions, but the great majority of mutual funds sold by the banks and the industry generally contain these deceptively high fees which extract a very large chunk of the average Canadian’s investment portfolio, of their retirement accounts. So they’re kind of like the credit cards of the investment world.

Doug Hoyes:    They’re the credit cards of the investment world. Okay, now that I understand, it’s a high-priced product.

Larry Bates:      Yes.

Doug Hoyes:    It’s as simple as that, then. Okay, now so I understand why you want to beat the banks, that they’re making huge money and it’s coming out of your pockets, so you’d be better off doing it the less expensive way. Kind of like, pay off your credit cards and then you’re not paying the bank huge fees.

Larry Bates:      Kind of like switching from a credit card, 18% or 20% debt, to a lower-cost —

Doug Hoyes:    Yeah, line of credit or something like that.

Larry Bates:      It’s very similar.

Doug Hoyes:    And you’re getting perhaps the same thing.

Larry Bates:      But you need to understand a few of the basics. If you just go into the bank branch, or if you just do what you’re told, which is what most Canadians do, you’re going to be directed into this high-cost stuff.

Doug Hoyes:    Well, so let’s go through some of the basics. And again, this isn’t an investing show, and I’ve got a few more questions about debt. But can you, in a brief period of time, walk us through what you would consider either the fundamentals of investing, or what –? I don’t know, what’s the formula if I really want to build up my wealth? How would you –? Can you simplify that for us?

Larry Bates:      The book’s a couple of hundred pages —

Doug Hoyes:    So everyone needs to read the book to get the full flavour of it.

Larry Bates:      Yeah.

Doug Hoyes:    But can you give us kind of an overview?

Larry Bates:      Sure, I talk in the book about the wealth formula. There are six factors which will determine the success or failure of every investment you make. There are three wealth builders and three wealth killers.

Doug Hoyes:    Three wealth builders, three wealth killers. So let’s start with the builders.

Larry Bates:      Okay, let’s start with the builders. Very simple, the amount you invest, the time period over which you invest, and the rate of return. Now that’s very simple right?

Doug Hoyes:    Yeah.

Larry Bates:      The more you invest, the longer the time frame, the higher the rate of return, the more money you’re going to end up with. So that’s pretty straightforward. But the magic comes with that compounding, you know, over time that gain on your investment accelerates and accelerates with the benefit of compounding. So that’s why Albert Einstein said that compounding is the most powerful force in the universe, it’s deceptively powerful and you want to be able to capture that. And I’ll give you a little example, everybody talks about Warren Buffett as the –

Doug Hoyes:    I’ve heard of him.

Larry Bates:      – most famous, successful investor in the world. And sure he’s a smart guy, but more than anything else he has benefitted from investing over a long period of time. He’s 85, he’s been investing since he was 20. That’s the big secret, time is a huge driver. So those are the three wealth builders: The amount, the time, and the rate of return.

                          But you got three wealth killers. The first one is fees. And this is where most Canadians really fail, because they listen to their advisors who put them into high-fee products which cause so much damage, and also really undermines or destroys that compounding magic that you want to be able to keep. So that’s fees.

                          The second one is taxes. Taxes also destroy wealth. Now most Canadians do a decent job at that using TFSA accounts to invest, or RSP accounts, so most people have that somewhat managed.

                          And then the third wealth killer is inflation. Over time the value of money declines as the cost of goods and services go up. There’s nothing you can do about that, you just have to beat inflation. Now let me give you a little example. Let’s say on that on your wealth builders side you are able to generate an average annual return of 6% a year, that’s pretty good, but what about the wealth killer side? Let’s say that you’re paying 2% a year in fees, so now that 6% is 4%. And let’s say that you’re paying a 50% tax rate, so now that 4% is down to —

Doug Hoyes:    2.

Larry Bates:      Only 2% after tax. And let’s say that inflation is running at 2% a year, well now you’re down to a net zero, you haven’t gained anything in your purchasing power. So that’s an example of how a pretty good return can be diminished by those wealth killers. So that’s the basic formula, so if you can understand those basics and try to manage those six forces as best you can in your own portfolio, in your investment approach, then you’ll do well. So that’s sort of like a fundamental of investing, that’s the wealth formula, and if people understand that a little bit they’ll make smarter choices.

Doug Hoyes:    Makes a huge difference. And again, Beat the Bank, it’s got all of that in that. So we already talked about if I got a whole bunch of credit cards, and you said, yeah, get them paid off, that’s kind of a no-brainer. But what if I have a mortgage? So let’s say I’ve got a house that’s worth – I don’t know – $500,000, and I got a mortgage that’s $100,000 – $200,000. I’m not bumping up against the limit, it’s a reasonable number. At what point do I say, mm, I just got a $4,000 bonus at work, should I use that $4,000 to pay down my mortgage, or should I use that to phone up my friendly robo-advisor and put $4,000 into that? How do I make that decision?

Larry Bates:      Well, I would say first of all both those decisions are good ones. You’re not sort of blowing the money on a trip or whatever —

Doug Hoyes:    So you kind of can’t go wrong?

Larry Bates:      Pretty much you can’t go wrong either way as long as that debt reduction is a permanent debt reduction. If you’re paying off debt and then borrowing again the next month that’s not going to do any good.

Doug Hoyes:    If it’s your key lock on your house and you just borrow again, then you haven’t really accomplished anything.

Larry Bates:      Exactly. But if the choice is between permanently really knocking down that mortgage principal amount and maintaining your monthly payments, which will accelerate the reduction of your mortgage principle amount, the decision is between that and investing for the long-term, it depends but both are great choices. Permanently reducing debt does as much for your net worth as making a long-term investment.

Doug Hoyes:    Yeah, because compounding works both ways.

Larry Bates:      Yeah, exactly.

Doug Hoyes:    If I’m investing my assets build up more, but if I am paying down debt I am not going to have to make those debt payments forever.

Larry Bates:      Yeah, it can make a dramatic difference in the total interest you pay over time. But people face this question, some people do this is sort of classic Canadian move of let’s say they get a $4,000 bonus, they put it in their RSP let’s say in February and then in April they get a tax refund of a couple thousand dollars.

Doug Hoyes:    Using that to pay down on the mortgage.

Larry Bates:      And then they go and use that to pay down their mortgage. I mean that’s a great way to manage it, sort of to have your cake and eat it too. It also depends, are you comfortable with taking stock market risk?

Doug Hoyes:    That’s a very good point.

Larry Bates:      Because, you know, the market doesn’t go up at 6% or 7% a year, it’s all over the place, it bounces around. I would suggest that you stay away from the stock market unless you’re prepared to be in it for the long run, and if you are in it for the long run through all history that’s paid off, but you’ve got to be able to stomach the volatility.

Doug Hoyes:    Yeah, there’s lots of one-year periods where the market has gone down, there aren’t a whole lot of 20-year periods where it has.

Larry Bates:      In fact, if you look at the S&P 500, the biggest U.S. stock index, in other words the U.S. stock market, there has never been a 20-year period where the market’s been down.

Doug Hoyes:    So if I bought it at any point and waited 20 years I was up?

Larry Bates:      A hundred percent of the time.

Doug Hoyes:    Yeah, and I think your point about risk is a key one because when you’re deciding should I pay down my mortgage or invest, well there’s a mathematical way to do that. I guess how much is the interest rate on your mortgage? How much do you think you can earn on a mutual fund, or an ETF, or whatever is it? But there is also, and I think you’re absolutely right, the risk component. If I pay down my mortgage I don’t have a mortgage payment, so if I happen to get laid off, if I want to retire early, well I’m living in my place and I’m not paying a mortgage on it, I don’t have to earn as much, my risk level is dramatically dropped. So I agree that it is not just a mathematical question, I think it’s also a risk question.

                          Now, a final question for you.

Larry Bates:      Sure, yeah.

Doug Hoyes:    Retirement. Have you ever heard of retirement? You know what that is? This is a big thing for everybody.

Larry Bates:      I’m trying to figure that out like everybody else is.

Doug Hoyes:    Yeah, when are you retiring there, Larry? So you’re busier now than when you were working at the bank, so what advice do you give people when they’re thinking towards retirement? What should I be keeping in mind? Obviously if I’m a young person it’s a long-term thing, if I am older then it’s a shorter-term thing, but how do you advise people when it comes to retirement?

Larry Bates:      I think for younger folks it is, you know, if you’re in your 30s for example it’s so far away.

Doug Hoyes:    It’s almost not a real concept.

Larry Bates:      It’s not worth trying to figure out exactly what the plan is, because life gets in the way, things change. For those folks I would recommend attempting, to the extent that you can, and I know saving is really, really hard, but if you can, save some of your monthly income, or annual income, and tuck it away. You’ve got the big advantage of taking advantage of time. The longer the time you have the more —

Doug Hoyes:    Time is your friend.

Larry Bates:      Yeah, time is your friend. So try to take advantage of that. For folks who are in their late 40s and 50s, I think you have to start thinking about what your income is going to be in retirement, what that might look like, and what your expenses might look like, and see what the gaps are there, and think about, okay, well I’ve got to find some way to fill that gap. And investing, probably for most people, is going to be a part of that.

Doug Hoyes:    And so your thought process, as we said at the start, is get out of debt first, particularly the high interest rate debt. The mortgage, well you can debate that. But it’s a no-brainer – credit cards, payday loans, anything like that, that’s got to go first.

Larry Bates:      Absolutely, yeah.

Doug Hoyes:    And then look to ways, and really what you’re saying is, yeah, you’ve got to think, you’re going to have to do better research. Your book is a great place to start, but like you said, there is Google out there, you know, should I invest in a TFSA or an RSP? Well, do some searches and start thinking for yourself and go from there.

                          So how can people find your book? Where is it available?

Larry Bates:      The book is in stores across the country. It’s also available on Amazon, or on, in both print and in ebook format, Kindle and Kobo. The book is in libraries across the country. You can check out my website – – there is some great information there including a very handy and, for most people, very shocking little tool that demonstrates the impact of fees they’re paying over time. And you can find me on social media as well.

Doug Hoyes:    Where can I find you on social media? What’s your Twitter handle?

Larry Bates:      I don’t even know what it is, I think it’s @LarryBatesBTB. Yeah.

Doug Hoyes:    So I will put links in the show notes to all of that stuff. So your website, how they can find the book – which of course they can find through your website as well – and your Twitter handle and everything. Is there any final bit of advice you would like to give everyone listening, and particularly someone who has perhaps come through a period of having a lot of debt, they’ve managed to clean it up, or getting very close to cleaning it up, what are the next things they really need to be focusing on?

Larry Bates:      Well, I think the main message of the book is: Take a little bit of time to learn some basics and it will serve you well over the next years and decades. And saving is tough, but it can feel pretty good to be an investor, a long-term investor, and then to see your money grow over time, especially if you understand a little bit about what’s going on. It can mean less stress and ultimately more smiles.

Doug Hoyes:    Excellent. Less stress and more smiles, I think that’s a great way to end it Larry, thanks for being here today.

Larry Bates:      My pleasure, thank you.

Doug Hoyes:    That’s our show for today. And as I said at the start of the show here on Debt Free in 30 our goal is to help you become debt free, so on most of our shows we talk about debt. Today we looked ahead to when you are debt free and have money to invest, and I think Larry gave some great advice on how to get the most bang for your buck on your investments. Small savings in investment fees make a big difference in your overall returns, and in fact you’re not talking about small savings you’re talking about huge savings when you look at it in percentage terms, so I think that’s an excellent way to do it.

                          For more information, including links to Larry’s website and his book, you can go to the show notes at, that’s H-o-y-e-s dot com, where you can also find a full transcript of today’s show. And when you do go to the bookstore to buy Larry’s book just tell them: “Yeah, I’m here to buy two books, ‘Beat the Bank’ and ‘Straight Talk on Your Money’, do you have both of them, please?” So that would be my unbiased advice there.

Larry Bates:      A great one-two punt.

Doug Hoyes:    Yeah, absolutely, totally unbiased advice there. Excellent, thanks for listening. Until next week, I’m Doug Hoyes, that was Debt Free in 30.

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