Episode 370: Dave Chilton (The Wealthy Barber): Timeless Financial Advice

22:14And I'm very sensitive to all that. So trying to weave that in and not mislead people, but keep it relatively short and keep it hopping. That's very difficult to do. You have to put a fair amount of time into creating these two and three minute scripts because of that. Oh yeah, totally. It's tough to strike that balance. Very tough. You mentioned earlier that your book gave you some fame and some notoriety, which opened a lot of cool doors. So I got to ask, what is the best part about being the wealthy barber? Two things, both a result of all the feedback we get. It's nice when people are always reaching out saying you made a huge difference.

22:46We get letters and texts and emails literally every day from people saying I retired early because of the wealthy barber. I mean, 2.1 million copies sold in Canada and a lot more in the US as well. And then the pass on rate was very high. So the number of people who read it and were influenced in some way, and then they take the time to reach back out to you. That's wonderful. But also from my selfish perspective, the learning that's come from that. You and I have talked off air, Ben, about the number of people who send me their comprehensive financial plans, their spending summaries, their investment portfolios, et cetera.

23:16It's been a great way to learn. I mean, I've said this in interviews and it sounds dramatic, but it's true. I doubt anybody in the world has seen more financial plans and more people's finances than I have. At the peak of the wealthy barber, even during 2008, 2009 type thing, we were getting thousands a year, thousands a year coming through. Now, obviously, you're not looking at all of them in depth, but I'm looking at some of them. And I learned a tremendous amount. I think I learned more from that. It also made the revised version of the wealthy barber better because you're seeing all this frontline stuff.

23:45Where are people going wrong? What are they doing right psychologically? What are they most struggling with, et cetera, et cetera? So I think just dealing with the public and all the feedback and all the learnings that have come from that have been a great part of it. And then, again, selfishly, it opened up a lot of doors. If I hadn't had that self-published success, Janet and Greta Podleski, the Looney Spoon sisters, would have never found me. And that obviously led to a dynasty for them. They were so clever and so talented. And then Dragon's Den flowed from that. And that's been a lot of fun.

24:12And so I've been very blessed. I mean, I've really enjoyed my career. I get quite sad when I think about how old I am. I really do. I've loved my life. I've had a lot of things go my way, fantastic parents, health. My kids have been healthy and happy and I really enjoy things. And I don't get down very often, but the speed of time can knock me down a bit. I hate the fact that time is flying by this quickly. You got to expand a little bit on the Podlitsky story because that's an insane story. Just like a 30 second for the audience. Yeah, two sisters who just literally, I would say, stalked me to try to get me involved in their cookbook to the point of actually being a bit scary.

24:48and then I kept saying no and then finally I took the manuscript I flew back from Ottawa and I happened to stop in to see my parents and I showed my mom and my mom looked at it while my dad and I were catching up on sports and said I love this book you should get involved and it's all because of my mom I did and of course it ended up setting pretty much every Canadian publishing record wow crazy they've gone on to have five more Greta's on her own now and Janet went a different direction and they've had six consecutive books Greta's been involved in all six that have gone to number one in the country of any type of book.

25:19They've had excellent US success on QVC and in the bookstores. We had frozen foods, greeting cards, kitchen utensils. Who would have believed all from this idea? But they're immensely talented. They really are. And it was a lot of fun. That was a wonderful experience in my life. I have to ask you, how often do people actually reach out to you and send you their portfolios looking for your feedback? Non-stop. Now, I would say that not always the full portfolio, but financial questions, snapshots of parts of their financial lives, if not their whole financial lives, literally every day, many times, every day, many times, never stops.

25:55And all the questions that keep coming. And you know, for a long time, we got back to 100 % of people. Now I would say we get back to 80 something percent of people, but even the ones we don't get back to, we get back to, but we get back to you to say, sorry, I can't take a look at it. I don't look at the portfolios as closely as I once did. And I didn't do that to give specific advice. I don't think that would have been appropriate. I did it more for my own learning, but I do look at a lot of the financial planning questions. And one of the things you can see is where people are getting bad advice or whether they're doing something on their own and they're getting off the rails.

26:25But yeah, what a great learning experience. And lately, it's been incredibly helpful to me to see so many spending summaries where people have chronicled where every nickel and dime is going and then they send it in and say, hey, take a look at this. And I love it. I don't care if I sound like a complete loser and social geek. I love sitting in and looking at people spending summaries and they're all a little bit different. Yes, there's a tremendous number of common denominators and we're all spending on food, shelter, et cetera, but how much weighting we put in the different areas and how we spend it and where we go wrong, where we overspend, it's fascinating to see.

26:57And it's really helped me again, putting together the revised version of the book. I think you mentioned to me at one point that you used to do some pretty detailed analysis of people's portfolios when they would send them in. what were your observations on individual investor returns from that experience? Well, Ben, it's funny because you're one of my heroes in this industry. And I mean that I love following your stuff and how in-depth you go, but you and I are very much alike. I ended up teaching more or less the basics and wrapping them in stories and wrapping them in humor. But the real Dave Chilton is a math geek to the nth degree and a guy who studies all of this stuff too much.

27:32So like I'm almost as weird as you are. I don't think as weird the way you could quote all the studies, et cetera, but I'm right there. So when I started getting all these portfolios, I loved looking at them, not so much how they were constructed, but the performance and just checking it all out. The problem is you have to be very careful on a couple fronts. Number one, you can't just take everybody who sends it because remember a fair number of people are sending you the portfolio because they're doing poorly. So they're self-selecting based on bad performance. And therefore you have to be very careful what conclusions you draw.

28:02You almost have to just look at the portfolios when you're studying them of the people who are sending you questions for other reasons and then also showed you their portfolio. Then the second thing is when you're trying to calculate their returns, it's tricky. Because remember, unlike an example in a book, money's coming in, money's going out. Sometimes money is heavily weighted in the US market, sometimes more so in Canada. Sometimes people go to cash for a while, then they go back in. You have to have all that data to make the proper calculations. So you may have hundreds and hundreds and hundreds of people sending you through the portfolios, but not comprehensive data that allows you to do the proper analysis.

28:40But I got enough of them. In fact, at one point, I shared this with Rob Carrick back in 2010-ish. I had 51 where I had comprehensive data, strange number, but 51 exactly, and looked through them all. I used the old BestTrack software from the two math guys from Kitchener-Waterloo, coincidentally. And then I had University of Waterloo people check it through. and I have a better example in a minute, but 0 for 51 in terms of keeping up with the markets. That wouldn't you think somebody would have lucked into it? That they would have had a concentrated portfolio and one or two of the stocks would have carried 0 for 51 over 10 and 15 year periods.

29:15It was quite remarkable. But the biggest thing that jumped at me was the underperformance on average was significantly bigger, even when they were in mutual funds than the mutual fund expense ratios. So instead of being 2 to 2.25%, it was 3.75 to 4 % quite often. And of course, as you three know, it's because people were buying in when markets were high, often getting out when markets were low. But beyond that, even when they weren't doing that, they tended to be quite adept at picking the funds that were about to underperform. So we may not be able to pick the future outperformers, but we seem to be quite good at picking the future underperformers.

29:55And I think it's basically because a lot of times we buy the funds that have been hot over the last year, two and three, they've been overweighted in the hot sectors and regression to the means bites the people as soon as they get in and leads to some sub-performance. So the basic summary of the data was it was depressing. Not far off, by the way, a lot of what you see from Delbar. I think a lot of my numbers were very similar to what their conclusions have been over the years. The other one was years earlier. We had over 100 where we did a lot of the same types of things. Now, out of fairness, I think seven or eight people in that group did, in fact, outperform over extended timeframes.

30:32A little bit of it was interesting. Some of them were accidental outperformers where they had bought into very conservative portfolios, say, Canadian banks. But they had one or two of the right ones during an early part of the declining interest rate environment. And they've been able to outperform accidentally. But you know what I've never crossed paths with is traders who outperform. So all of these, I never see people moving in and out and outperforming the broad market averages. I have seen a couple interesting outperformers who do it consistently well. They're doing it almost full time. They have backgrounds in finance and they're focused, you'll find this fascinating, on Canadian small and mid-cap stocks.

31:11They're underfollowed. They're under-owned by institutions. They think they can get an edge just by getting to know management teams, studying the industries. And sure enough, over very extended timeframes, they put up significant outperformance numbers. But remember, 99 % of your listeners, and you have a sophisticated audience, can't duplicate that success. They don't have the time and the expertise and the contacts to follow up in doing it. The bottom line is if you add those two studies together, and I call them studies because I took them very seriously, and you're at 150-ish something portfolios over 10, 15, and 20-year periods, and you see eight to nine total outperforming and not dramatically so, but outperforming, maybe too dramatic.

31:49It tells you the kinds of odds people are up against. It is tough to beat the broad market averages purchased through a low cost ETF. Beyond tough. Yeah. Wild. Your point about people buying funds that tend to underperform. There is a 2018 paper from Rob Arnott on that. It's the folly of hiring winners and firing losers or something like that. They basically show that funds that have performed well recently tend to own securities that have high valuations, which explains partially why they've performed well, people buy into those funds and end up underperforming. So it's exactly what you observed in those studies.

32:20Yeah. And I think lately we may have had a few exceptions to that in the last 10 years, because some of the high price stocks just kept getting higher and higher and higher price stock valuations because of momentum, because of passive investing, and because some of their models were very good and we underestimated the power of say the network effect. But in general, I think that observation will always hold. And boy, I wish we could find the future outperformers. I would love to be a guy who could figure all that out and share that information with people, but I'm not him and I would argue that person's not out there.

32:50So Dave, if somebody has a large pile of cash to invest, how do you think about and communicate that decision between lump sum now or dollar cost average over a certain number of months or years? It's such an interesting question because it's something we're seeing way more of now. This question is very relevant. I'm sure in your practice, you're seeing much more of it than you did 10 and 15 years ago because we've got inheritances coming into play because of demographics and because we have more wealthy people. But also you have a lot of business sales now by the baby boomers. And those two things are causing this question to be asked much more often.

33:23And I think in general, when you study it carefully and you look at the long-term performance of the various asset classes, it's pretty tough to argue the math of saying, hey, go into equities, fall more, if that's what you're trying to do. So I'm saying, assuming you're going to have a significant equity component, get into it right away. That you're not going to be able to outguess the market because it's such a strongly performing asset class relative to cash, relative to what else you'd have to be into. The odds favor maybe even two to one, two and a half to one, that being the best of the strategies.

33:51But psychology does play a role here. And a lot of times you're dealing with people, let's say the person who sold a business who's not been involved in the markets very much. All of their wealth has been tied up in the business. To suddenly take all of that and put it in the markets is dangerous because if the markets do have a pullback, I would argue that person may be a little bit more inclined to panic and think, I just got all this money. It took me 30, 40, 50 years. It took us 100 years as a family to build it up. I'm not sure I'm comfortable taking on that level of risk, even if the math says I should.

34:20What about easing it in? And then you can go the dollar cost averaging route. But I was saying recently, I think it was on a video, it may have been in a conversation that some of my friends have kind of mixed the two. So they've gone in with 40 to 50 % and then they've dollar cost averaged whatever they were trying to get in equities over a two to three year period, the rest of it. Again, the price of markets probably makes a little bit of a difference, but Ben has spoken about that sounds great in theory, but in practice, none of us can tend to apply that particularly well. We can say the markets are expensive and therefore we're going to wait, but often they become more and more expensive and you wish you hadn't done that.

34:53So a lot of these things, again, sound like they're common sense, but they don't hold when you put them up to true studies. So I don't think there's one answer for anybody. I really don't. If a young person comes into a lot of money, let's say we're seeing more grandparents leave money directly to grandkids now. So let's say one of the grandkids is lucky for it to be a lot of money. Then you can make a pretty strong argument, let's go heavy into the equities quickly because if there is volatility right out of the gate, on the downside, you've got the luxury of being patient, you're less likely to panic, but you've got to know the client here.

35:23I think that's a big part of this, is getting to know the person and what their mental makeup is like before you give them the advice. Yeah, I think that's a great point, Dave. I know that a lot of people in theory think that easing into the market a little bit at a time is going to be easier than just making a lump sum investment. And I think there is some truth to that. But what I've seen many times, even when we've done this strategy with clients is if you're going to dollar cost average, say once a month over a year, now you have what was one difficult decision becomes 12 difficult decisions.

35:5512 decisions. And even though, yes, you're supposed to automate it, you're just supposed to make those purchases. I can't tell you how many times I've had clients call me in the third month saying, whoa, whoa, let's put a pause on those monthly contributions or monthly purchases because I'm nervous. So I think you have to look at both sides of the psychology element. That's a great point. And it goes back to something I said when Ben was on our podcast, my father, who pays no attention, literally zero to the equities he has, has it right. He never tries to outsmart anything. And over the long term, that's really served him very, very well.

36:30And I think you're 100 % right there, Dan, when you start easing in, if the markets pull back, it's just human nature to think they're going to pull back even more. And you're going to pause even though you're buying low at that point. So again, knowing the client and what they're likely to do to react to all of these things is a very important part of this. Although forecasting reactions to stressful market times is not easy. None of us really know how we're going to behave in those times until they actually happen. So that's a tricky one. I'll tell you the most interesting observation I'll give you about this lump sum dollar cost averaging.

36:59If markets are roaring along, they're fantastic. The three of us, the four of us would naturally think markets are expensive. Maybe it's a time to dollar cost average. Now, Ben would say, yeah, but probably should do that. I agree. But that's not the way the average person thinks. If markets are roaring along, that's when they're most likely to say, let's throw it all in. And when markets are struggling, that's when they say, let's dollar cost average. Instead of jumping in when the markets are low, because again, we extrapolate from the short-term trend when emotions are involved, fear, and it tends to guide our decision processes, oftentimes we'll do the exact opposite of what we should do when fear gets involved.

37:37Another one of the great dilemmas that investors face is this idea of if you've got extra cash, should I invest more or should I use it to pay down debt? So I'm sure you've taken this question from many people. how do you help them work through that decision? Yeah, I would say that might be the most common question that I take. I think you're dealing with a different level of income and wealth. You don't take that question as often. But when I'm out in the public, that's the one I'm asked the most often. And I think it's a tricky one. I mean, let's go to the extremes. Obviously, if it's credit card debt and somebody is paying 21 % on that debt, non-deductible interest paid off.

38:12And that's a guaranteed 21 % return after tax. Even the best of the long-term performance isn't going to come close to that. So that makes a lot of sense to me. And if on the other hand, it's 0 % debt, your parents have lent you some money, they're not even charging you interest, then prepaying it, paying it earlier than you have to, makes very little sense when you can take that money and invest it in whatever else. So those extremes show you, you have to be thinking about the potential returns versus the interest rate on the debt, obviously. And then what do you use for the potential returns?

38:39So if you look at historical returns, and let's say the standard and poor is 500, you might say it's 9 % or 10%. I would argue though that that might be a little high because we've had a great run lately, number one, in markets you're buying in at a fairly expensive level. And so if you're thinking all that through, you might want to use 7.5%. I'm just throwing out a figure. And then you start thinking, is that going to be higher than the debt interest rate? So if it's a relatively low rate of 4 % on a mortgage, then I think, yeah, you might want to invest for long-term growth. If you can put up with the volatility, et cetera, that makes a lot of sense to me.

39:10And by the way, that's how most of the people I meet who've handled their money well have done it. They haven't paid off the mortgage as early as you think. They have instead invested for long-term growth. And of course, the markets have been quite strong over the last 30 years and then been rewarded. If on the other hand, though, you're looking at a debt that's a car loan debt of 7 % to 8%, that's a different matter. Then that's guaranteed 7 % to 8 % after tax. I would tend to pay off the debt before I invested for the long-term growth. And a lot of this, again, still comes back to knowing the client, knowing the person involved, and are they likely to stick with the plan and be able to put up with the volatility and everything else?

39:45So the answer is depends very much on the facts involved. What role do you see for financial advisors in people's lives? Well, I'm pretty strongly opinionated on this. I mean, I've said for years, if your financial advisor is saying that he or she is going to add value through investment selection and outperforming the broad market averages run, because they're likely not only to not be able to do that, but to underperform significantly, you want the financial advisor to be trying to add value through financial planning, including estate planning, insurance needs analysis, trying to minimize your taxes to whatever extent possible, helping you to communicate effectively with your kids, making sure your risk tolerance level is matched up to your portfolio.

40:27It's those types of things, even being a psychologist and coaching you through all of this and making sure you're staying on the straight and narrow during the ups and downs that the market inevitably throws at you. So I think that's the role of a good financial planner. And if one or a good financial advisor, if they're doing that and doing it well, then often the fees that you see are very much justified. But in Canada, let's be honest, we see a lot of the fees embedded in the high mutual fund expense ratios. And a lot of the advice given is not very deep or it's not there at all. In fact, I would argue probably the latter.

40:59They don't give advice very, very often. And so again, it's all over the map, but I think you're going to see more and more firms in Canada use the model that you're using. When I'm in the States, your model is the one I see all over the place and have, by the way, for 20 years now. So most of the friends I know down there, and I'm not talking the ultra wealthy or even the super athlete, I'm talking high middle income and up, they tend to be going to firms like yours and getting the fiduciary responsibilities and everything else wrapped into all of this. And it's comprehensive planning at quite a reasonable feat.

41:30So I think you'll see more and more of that going forward. You're also seeing a huge growth in do-it-yourselfers. Now, some of this is people that are trading irresponsibly and gambling too much for forget that segment. You're also seeing a growing group of people who are doing this well. they're going on YouTube, they're listening to Rational Reminder, they're reading the right books and they're saying, I can do this and I'm going to keep going along this line. Then maybe once every few years, I'll use a fee-only financial planner and I'll write a check for a few thousand dollars to make sure I'm on the right track, get more comprehensive advice from a true expert and go that path.

42:03I think you're going to see more of that too. So I think a mix of what you're doing and that will become more and more popular over time. You know where people stink in the financial advice business, but it's a little better than it was two years ago. It's retirement income planning. So again, firms like yours that are using software and are involved with clients who are quite well to do, you're doing that and have done it for years. But in general, even some of the high-end advice we see in the financial field in Canada and the States, that's been a big weakness. Now, some people argue, oh, it's because selfishly they don't want you deaccumulating.

42:37I'm not even sure that is it. A lot of times it's just they never really became experts in that. They didn't gain access to the software. The last two years, though, positive change. The software has become more ubiquitously used. And I think you're seeing a better job. There's been so much pressure because of all these good YouTube videos that people are putting out on how people should be thinking that a lot of clients are saying to their advisor, you weren't saying those things to me. You weren't asking me those questions. I'm learning this from YouTube. It's forced the industry, I think, to pick up its game a little bit, which is a good thing.

43:07Okay, let's jump to home ownership. You hear from lots of people, but how often do you actually hear from people that share with you details of their home purchases, ongoing costs, details of the sale in the end, and ask you for your thoughts or feedback? Not often enough. I mean, I love this stuff. Like when I said earlier, I was a geeky guy. I probably get more into this than almost anything, even in the stock market return stuff. I don't know why, but I've been fascinated for 20 and 25 years by all of the expenses associated with home ownership and all of the arguments made for renting, against renting, all of it.

43:39I love it all. That's one of the reasons I love Ben, because he's into this stuff to the nth degree and he's even nuttier than I am. So I can just use his stuff and kind of learn from that. But I'd say over the years, maybe 80 to 100 people have given me truly comprehensive summaries. Really? Wow. That's wild. Now that sounds like a lot, but it's really not because remember, I've been around for 35 years. So it's two or three times or five times a year, eight times a year, whatever it is, some years you get more, some less, you get something where somebody is used to spending summary. And then they've taken all the data and they've put it all under what should relate to home ownership costs.

44:17And it's fascinating because I said this in interviews for a long time, people constantly underestimate how expensive it is to own a home. And that is not saying you shouldn't buy a house. I own a home and I have forever. My daughter owns a home. My son wants to own. I'm not against homeownership, but it's more costly than people recognize. And often you'll see the stat if you look at books or you go online one to one and a half percent a year for ongoing maintenance and everything else. But they'll say not of the total value of the land and building, just of the building. This is my personal data.

44:48It should be of the whole thing. That's my personal data. So if you want to use the one to one and a half percent, I'm okay with it, but it should be of the value of your entire property, including the land. That ends up coming out more well-matched to all the data I've collected over the years. What you'll find when you do this is that you spend way more on things you don't even remember. And so I got a hot tub. Should I allocate the hot tub to the cost of home ownership or not? Well, let's forget that argument for a second. You know, when you did that, you also had to get the plumber over and that was several hundred dollars.

45:18You also had to cut a different hole in your deck to move it here and to there. That was several hundred dollars. People forget all that stuff all the time. And even buying little things, whether it's buying a new broom or fixing an eavesdrop, all of that doesn't get counted. But when you start throwing it in along with the major things like roofs and landscaping and all the things that people do, I'm telling you, it adds up to a lot. And as I mentioned earlier, you now in many regions in Canada, the states have property taxes rising at a greater than CPI rate. You have home insurance in many regions, especially stateside, rising at a greater.

45:48All this has to be thought through. And again, I'm not saying don't buy a home or if you own a home, sell it. I'm saying that these are the facts. Homeownership is very, very expensive. And I'll tell you, it never stops. There's always something going wrong with your home. The people who want to rent, I always go, I get it. I don't do it, but I always go, I don't have a problem with people arguing that. It's not throwing your money away, by the way. That doesn't make any sense to me. You're paying for a service and you're getting that service back. What is that? Well, that service is the comfort of being in that rental unit.

46:18It's your shelter. And so there's no issue with that. Which is a better move for people? Well, that's something, again, Ben has probably examined that more closely than anybody now. And I thought your video that came out a few months ago was really interesting, saying that in Canada, despite the fact we've had this roaring real estate market, had somebody truly invested the difference, the full difference, prudently, let's say broad market averages, they end up about the same. And you and I have talked off air about how instinctively that makes sense to us, that they should be about the same. Because if there's ever a huge difference, it gets arbitraged away by different weightings of people going into the two different approaches.

46:55So that makes sense. Now, will people invest the entire difference and will they invest it prudently? Those are very fair questions. Let's be honest. The vast majority of people underperform the markets for a variety of reasons. Also, they may not invest the full difference because I would argue they underestimate what the full difference is. It's quite significant. And so homeownership can still be a very good move for people. Let's be honest. It's the ultimate forced savings program. Some people convince themselves ahead of time that they can't be happy without owning a home. I don't think that's necessarily true, but if they're very convincing to themselves, they can make it into a self-fulfilling prophecy.

47:31They'll rent and not be happy because they told themselves they wouldn't be. I do think there's advantages to owning, though. I mean, you can't get forced to move by a landlord who's changed his or her mind on some front, and therefore you control your destiny a little bit more. And when you have kids in particular, that can be important for schooling reasons, friends reasons, and everything else. And of course, we have tax-free capital gains with the principal residence exemption. So again, I own a home. I'm pro-home ownership. But the people who say it's dramatically wiser, it's the way to go compared to rent.

48:02That's just not mathematically true in many cases. And one of the things is a false conclusion. So many people have looked at this and said, well, if you just look at people's wealth levels, people who own homes are much wealthier than people who rent. Yeah, but you're not comparing the same universes. It's not a properly done study. A lot of the people who rented, rented because they had to, because they were lower income and they had to rent and therefore you've got a distorted situation. Can I go off on a tangent? Do it. You know, one of the worst studies you'll ever see, and you've seen it done many times, is when people say what people who get a university education earn over what people who don't.

48:39It's crazy. The first six or seven I looked at, I thought, how can none of these people see that they're not doing a good job of picking their samplings properly? What does somebody earn who went to university versus what does somebody earn who didn't go to university but could have? Okay, that has to be the two samplings. How can people not see that? Well, it's a little bit like that with the homeownership situation. It's what's somebody's home wealth if they bought a home versus somebody who could have bought a home that didn't. That would be a very interesting thing to study, which is more or less what Ben's been trying to tackle.

49:12There is one study with US data. I can't remember the name of it. It's 2006 paper, I think, that does try to do that. They do find a very slight advantage for homeownership, which I think speaks to the behavioral considerations that you mentioned earlier. So there is probably something there, but they controlled for that. And they found instead of the massive difference that you see in the raw data, they found a tiny little difference. That's interesting. By the way, I should have known when I brought that up that you would be able to quote some study from somewhere. I should have known. I think we're all disappointed that you didn't know the author of the study.

49:42Yeah. It was Dershowitz, I think, wasn't it? Yeah, I can't remember the author. Ben's losing it. He is losing it. On my video on that topic, I mentioned that in one of my videos on this, and somebody made a comment that I loved that was to your point just now, that if you look at the net worths of people who own private jets, they're going to be really high, but that doesn't mean that owning a private jet will make you wealthy. Oh, you know, really? I'm going to return mine then. I didn't take that through very well. We were laughing at Ben's on his study thing. I was writing a video script about three months ago and I forget what it was about.

50:15And Aiden says, well, why don't you Google it just to make sure, or you can chat GPT it. And I said, no, no, I'm going to call Ben. He's way better than Google and chat GPT because he'll be able to tell me what studies have looked at it. Sure enough, he gave me a great answer and off he went. So yeah, he's like my personal chat GPT. That's pretty funny. All right. So you probably touched on this, but what do you think are the biggest mistakes that people make with respect to home ownership? Well, I still think that The Millionaire Next Door, a book I really enjoyed all those years ago, had it right that a lot of people buy too big a home, stretch, put too much money in their home, they squeeze out savings to some extent.

50:51I'll tell you, it's much deeper than the fact it means a bigger mortgage. All the other associated expenses go up too, property taxes and everything else. But here's the point that doesn't get made enough. It often drags your non-home spending up with it. That when you buy a really nice home, you tend to naturally spend more on cars than you would have otherwise. So that's just one example. Many others. Furnishings, obviously, is a natural. You have to buy more of them and you tend to buy higher quality, etc. But I think a bigger mistake is the people who move a tremendous amount. The cost of moving, you should do video on that, Ben, because that is bizarre how big it is.

51:26When you start thinking about you're paying a four and 5 % commission when you sell, and remember, that's on the sale price. That's not on your equity. If you think about, I have 50 % equity in that, well, now you're giving up eight to 10 % of your equity when you sell a home. Then land transfer taxes, legal costs, moving fees. These people that move five and six and seven times and are constantly trying to go up that ladder. I'm telling you, the total losses are huge. So I think that's one of the big mistakes that I've seen. I love tinier homes. I mean, obviously I'm biased. I live in one, but I really do.

51:57I find a lot of them are very cozy. You can make them very charming. They're easier to keep up. Forget the expense. I like a lot of the other advantages. I've lived in this relatively small home for a very long time and have no intention of leaving. So it's kind of the common mistakes that you see people make. But I do think that you've got to pay attention to a lot of the old-fashioned advice. Location obviously matters. And I know parents, they are fanatical about reviewing the schools and their reputations and everything else. And some of that makes sense to me. I have to ask you, Dave, are you sitting at the card table that you wrote The Wealthy Barber on?

52:28No, I would be, but it's actually in Sarnia because I'm writing The Wealthy Barber on it. Okay, you are. So the same card table 40 years ago, but it's broken. And so every time I move it or my dog bumps into it, it falls down. and I'm really getting annoyed. Okay. I have to straighten it out and pick up all the pages, but I thought it was cool to write the book on the exact same table. Yeah. So it's been fun, but this is not it. No. So Dave, I want to ask you a question about the home buyer's plan, but before we do, we should just give a quick introduction for our non-Canadian listeners or listeners who might not know what the plan is.

53:01This is a government plan that allows you to borrow funds from your tax deferred retirement savings and use them to purchase a home. And then the expectation is you will need to pay back that loan over the next 15 years or so. So for people who have done this or thinking about doing it, what's your advice for how to manage the repayment plan? That's a funny question because I honestly can say I hadn't really thought much about this until six to eight months ago. And I was laying in bed one night. And for some reason, I was thinking about this. And I was thinking, I should do a video on that. And then I started thinking, why would you ever pay that back early?

53:40That doesn't make any mathematical sense to me. And yet I'd seen many articles saying, pay it back early if you can. And I'd seen some people in the financial field say it. And so I kept running through my mind. This doesn't make sense because when you pay it back early, you're not getting the deduction for that. This isn't an original contribution. So you're putting money in. It's going to grow. and yes, the growth is going to be tax deferred, but it's still going to be taxable. You could take that same money and front your TFSA or do other things with it. And because again, you're not getting the deduction, but in the case of the TFSA, it comes out tax-free, you end up ahead.

54:11So then I started comparing it to other alternatives too, including non-registered accounts. If you're investing for growth and it kept winning. So again, to confirm I was on the right track, that's the one I called Ben on. And so it's funny you bring that up because that's the exact one that I called him on. And I said, he said, absolutely. Of course, he had looked at it as he always does. And really, it's not very close, is it, Beck? It just doesn't make much sense to repay it early. It really doesn't. It's a rare case where you get to use the full amount of the pre-tax dollars from your RRSP to gain an economic benefit, which when you're investing inside the RRSP, you're really only benefiting from the after-tax portion of the assets in the account.

54:47So I totally agree with you. It's a pretty small optimization for most people. It is. But still, you may as well take advantage of it. Yeah. No, I agree. And those small optimizations can add up. One of the ones that I spoke about in the video recently, and I know you're acquainted with, is that we have a lot of people with group RSPs in Canada and 401ks for your US audience where they get matching. But in some cases, more so in Canada than the States, they don't have any low-cost ETFs or low-cost index funds available as one of their options. They don't want to turn down the matching, though, especially at dollar for dollar, for example, so they embrace the higher-cost fund.

55:22They have to, but they should only put into the max and they should open up a self-directed RSP or 401k in the States and put the rest of the money, I guess, not a 401k, but a self-directed plan in the States and put the rest of the money in there and gain access to a lower cost. Now that one is actually a fairly big optimization because over 10, 20, and 30 years, depending on how much money we're talking about with the excess contribution, it can add up to a tremendous amount of money. So those little things matter if you learn them all and do them well over the years. Yeah, that's a good one.

55:52If it's a group RRSP, a true group RRSP and not a DC plan, you can usually transfer it out with no fee once per year, at least in a lot of the plans that I've seen. So we will often tell people to do that. You can. Yeah. Check with your HR department because that's obviously a very good move. There's the odd HR department that in the old days would say, if you do that, you don't get the matching going forward. But I haven't heard of that in a long time. Interesting. On that buying an expensive house, one of the other ones that's interesting there, just to come back to that for a second, you kind of already said this, is that I have seen research that people buy nice houses, they tend to spend more on other stuff.

56:24They tend to have more material desires. They tend to be more exposed to impulse purchases and stuff like that. So it really does have a whole bunch of other knock-on effects. I think that's a really important and under-recognized point. No, it is. I mean, again, I think the millionaire next door, I really believe those two guys nailed a lot of things. That was 30-something years ago, and their teachings hold today. In fact, maybe even more so because, again, of the availability credit that we spoke of earlier. People can get themselves into more trouble now than they could when I first started out in 1987, 88.

56:55Yeah. On that topic, how important is saving to people's financial outcomes? And maybe as an extension of that, how important is not going into debt to people's financial outcomes? Well, I mean, saving is everything. You can say, well, mathematically, if you double your return rate from X to Y, it might be more important than doubling your saving rate depending on the specific numbers, et cetera. But the bottom line is you can't invest if you don't save initially. and we've got to get our savings rates up in Canada for sure. It's still my primary focus is how to reduce spending and increase saving.

57:24I still talk about that more on stage and doing else than I do even investing or anything else is what can we look at to get our spending down a little bit and therefore get our saving up. It's vitally important, but I think there was a chapter in the Wealthy Barber Returns that I really wish everybody would read about how little you have to drop your spending rate to raise your saving rate dramatically. And I don't have the numbers off the top of my head, but I think in some ways it's the most important chapter of the book because it motivates people. They go, oh, great. That's interesting. So if I'm trying to take my savings rate from 4 % to 10%, well, that's a big jump.

57:59I don't think I can take it up two and a half times. Yes. But if you drop your spending rate from 96 % down to 90, that's only a 6.25 % drop in your spending rate and you've accomplished the same thing. And people are quite surprised by that. Well, I can't drop it that much because so much of my spending is forced on me. It's my mortgage payment. All right, well, let's take a look at how much money we're talking and let's divide it by 30 to see how much it is a day each month. And then people go, I think I can do that. And it's why I've always argued that some of the TikTok influencers in finance, many of whom are very good.

58:31But one thing a lot of them have wrong is that the small spending doesn't matter that much. You see a lot of these videos saying, oh, forget not buying your Starbucks coffee and forget these types of things. It doesn't make much difference. It's all about the size of your mortgage or car. That's not true. And it actually really annoys me because I would argue if they're saying that they haven't done a lot of financial plans. They haven't helped a lot of people right across the kitchen table. When you get them saving 10 here and 20 there, and it all adds up at the end of the month to$500. Well, that's 6 ,000 a year.

58:59That's almost a full TFSA contribution. And I find when I help a lot of people make the adjustments to the small spending things in their lives. They don't miss them very much. In fact, they adjust usually within a week or two. It's not the major sacrifice they think it's going to be. So yeah, saving is still at the core of all of this. At the end of the day, it's what starts the financial planning ball rolling. And we've got to help people to do it as effectively as possible. But I'm the first to recognize in this high cost environment where incomes haven't kept up in many instances to the cost of living, it's very, very difficult.

59:31So when you're on stage, Dave, what do you tell people they can do to actually save more? I've fallen in love with the spending summary idea. And it's funny, I didn't do a good job in The Wealthy Barber. I gave it a mention, but not much of one, to be honest. And I fixed that in The Wealthy Barber Returns. And I'm fixing it even more so in the revised version of the book. There's very few things in my career that I've seen in real life have the impact of someone doing a full two or three month spending summary where they literally write down everything. And there's a few good things that come from it.

1:00:01The most obvious is you see where the leaks are and you go, you know what? I mean, I'm just spending too much money there. and I've got to make some changes. But also it helps you to spend more efficiently. I find a lot of people go, you know, I'm spending$800 doing this, but I don't get enough joy from it. I don't get enough bang for the buck. I'm still going to spend the money, but I'm going to spend it on something else. So there's two big benefits from putting together spending summaries. And one of the strangest things I've learned about them, didn't know this until I got involved in helping so many people, is oftentimes after a spending summary, they don't make conscious changes to their spending.

1:00:32They don't take the next step of saying, okay, taking what I've learned, I'm going to do a formal budget. They subconsciously make a lot of the changes on their own because they're not happy that they've seen the money slipping out here, there and everywhere. They are positively impactful for everybody who does them. There's no exceptions. People coming back to me and say, I did that comprehensive thing you told me to do and it didn't work. Everybody comes back and says that really was beneficial to some extent. And for me personally, again, I love looking at them and seeing how differently we all spend our discretionary money and how some people it's hobbies, some people it's eating out.

1:01:05I tend to eat out and spend way too much doing that. But then I make the cutbacks that you need to in other areas. And this is something you see a pattern of is that some people recognize if you're overspending in one area, well, math says you better cut back in another. But with this ubiquitous available credit I keep referring to, that's not forced on you anymore. And some people don't recognize it. And they treat a line of credit, for example, as a second income. And they just keep drawing down from it. You guys would be amazed at how many people I see who have significant lines of credit, let's say$150 ,000 to$200 ,000 on the line of credit, not available on, and they haven't done anything dramatic.

1:01:42They haven't done a rental. They've just lifestyled it up to those levels over a 10-year period by spending$10 ,000 and$15 ,000 and$18 ,000 more a year than they're actually bringing in on an after-tax basis. It's insidious. It pulls you in. And you have to pay it back. And of course, when rates were so, so low, remember on the lines of credits at some points, we were seeing two, two and a half percent interest. Well, if you owe a hundred grand, you're talking$2 ,500 a year in interest. You're making interest only payments. You're talking $200 a month. And they're thinking, what? I can run up a hundred grand in debt and travel all over the world and have all this fun.

1:02:14And it only costs me 200 a month. What a great country. But then when interest rates all of a sudden went up to six and seven, this isn't as much fun. Plus you have to pay the money back. It's not your money. And so I think a lot of people got in the habit of using these lines of credit, as I said in the Wealthy Barber Returns, as quasi homemade reverse mortgages. But they didn't really set out to do it. It wasn't that they needed to do it late and late. They needed to tap their equity. They just did it accidentally as they kept drawing into them. When you're in my shoes and you see all these plans, it's hard not to dislike lines of credit.

1:02:44I know people can tell me why they have positive value. Absolutely. They do give you flexibility. They can be used effectively as an emergency fund substitute, etc. But again, when you're sitting in my shoes and you're seeing all these plants and all these people get pulled in by them and spending way too much, it's hard not to be negative lines of credit. Yeah, Dave, I think the spending summaries are a great exercise. I know when I did it myself, I went through all my expenses. I realized I was spending half of my income on booze and cars. And then the other half I just wasted. So I'm wondering how, as you've gone through people's budgets, what are the big leaks?

1:03:19What are the big, you've mentioned restaurants, for example, eating out? Are there other ones that are big gaps for a lot of people? Yeah, there are. It's interesting. None of this is going to surprise people. It doesn't even surprise the people doing it. So it's not that they go, hey, I'm a little shocked that I spend that much on concerts. It's that it's so much more than they thought. So they knew they spent too much, but they spend too much squared. That's the reaction you see a tremendous amount. So I'm going to start out with my biggest pet peeve in personal finance and it's cars. When I started out on stage, I would always say to people, I don't care how you spend your money as long as you're saving the appropriate amount.

1:03:55In fact, it's none of my business. Do whatever you need to do. But again, when you look at the percentage of people's incomes, they're dedicating the cars and some family units, it makes no sense. It's putting them in such a squeeze. When you have these housing costs draining so many people, and we talked about not just the mortgage, but the other costs too, we can't afford to be spending what we're spending on a lot of cars. Remember, I'm a lot older than you three, but when I was young, you would have one okay car and then one not so good car in the family. And you'd rotate back and forth depending on where the person was going, whether they wanted to have the nice car.

1:04:26Now, most families have two pretty nice cars and two new models. And insurance costs have gone so up. So that is one that drives me crazy. But probably the most interesting one in the last few years is kids sports. So the people who actually write down everything they can spend on kids sports and total it up properly, including the hotels, the gas and everything else, the numbers are getting pretty shocking. They really are. So that's one that really jumps to me. And the problem is it's so much fun. And for a lot of people, it provides a great social opportunity. And you, by the way, have to think this through on a second level.

1:05:02I'm not spending some other money because of this, because we're not taking a vacation during hockey season. That has to be accounted for because we're not doing other expensive things on weekends because we're always at a rink. Those things have to be counted too. But even when you factor them in, kids sports is a very interesting one in terms of the amount of capital it's drawing. And the second one that I talked about in the video is pets. We all love pets. I have a dog and I wouldn't ever not have this dog. I love the dog. But what's changed in the last five and 10 years are the vet bills.

1:05:31We've gotten better diagnostic equipment. Let's be honest, a lot of the vets have gotten more aggressive in terms of suggesting testing and everything else as they've had more corporate ownership. And the problem I have this, if I go to young people, 20s, 30s, early 40s, as they're trying to build wealth and afford these expensive homes, you can't budget for it. So if I take on a major expense that Dave Chilton says, oh, you maybe shouldn't have bought that car. Well, maybe I can make sacrifices elsewhere and I can get through. You can't budget for the pet because you don't know about that$12 ,000 bill that could come through in a couple of years and throw your finances into a big, big problem.

1:06:07So that worries me. But again, I'm not going to look in the camera and say, if you're younger, don't buy a pet. I don't have the right to say that. And I love pets. But the reality is, it really is jumping up and biting a lot of people, if you'll pardon the pun, which was accidental, by the way. But as I was saying it, I thought, that's quite clever, Dave. That is quite clever. That was really good. Man, the one nice car and one not so nice car definitely unlocked some childhood memories for me. Yeah, that's what it was like. And not only that, If you noticed lately, not much, but a little bit of people going back to one car.

1:06:38And I'm not talking people in downtown Toronto where it's easier because of public transfer. I'm talking about in areas you normally wouldn't go to one car. Lately, I'm hearing from some people doing it. Funnily enough, some of them get forced into it accidentally. What happens is they have a car accident or something and their car is in the shop and they adjust over the three or four weeks and they go, you know what? We could save a ton of money here. We've somehow made it work. The first week was a ton of complaining, even some arguing back and forth. But by the second and third week, we found some flow.

1:07:07And maybe we should do that. Can you imagine if you cut a car out of your budget, what that saves you in terms of payments, gas, parking, and insurance? That alone is a TFSA. And so I think you're going to see a few more people look at this too, although I'm often wrong on cars. I keep saying people are going to wisen up here and spend less on cars. And then I see these spending summaries and it's not happening. For many years, Cameron used to always make fun of me. We had one car for years and years. And just this year, we got a second one. That's interesting. So you were a one car family. And now did your spouse work out of the home too?

1:07:37No, she was at home with the kids. We got four kids. So it was a lot of transporting around. I mostly stayed at home, which was how we made it work. But then it was actually the cancer where I had to start going a whole bunch of appointments. We were like, okay, we need a second vehicle. That makes sense. But speaking of spending mistakes, Ben has four kids. So really, that might be the biggest one right there. can't do anything about it now. What's done is done. That is expensive and it is done. So when you review people's budgets, if you can qualify someone as a good saver, what do you find in general that good savers still splurge on?

1:08:14Well, I love that question. I'll tell you again, I was totally wrong on this. And still, I started looking at spending summaries. I always felt like, I think most people think if somebody is a very good saver, they're miserly or even cheap and they just don't want to price. It's not that way at all. I mean, certainly there is a group of people like that, But most of the good savers I cross paths with have areas they overspend by almost any measure. They spend a disproportionate amount relative to the rest of us, their hobby. But again, as I said earlier, they recognize that if we're going to do that, they better make appropriate cutbacks elsewhere.

1:08:42But you also see a lot of good savers who've wisely figured out other hobbies out there that I can do and get great enjoyment from that are quite inexpensive. And I mentioned a video years ago, I compiled a list of qualities of the people who I've dealt with over the years and help who've handled their money really well that weren't related to finance. And were there any common denominators? Unfortunately, I don't have a lot of depth here and great insights, but I have one. They were all walkers. That's weird how they're all big walkers. But it makes sense when you think about it. You're out for an hour, not spending anything, but fresh air tends to make us think better.

1:09:19It slows life down. You make better decisions. all of those types of things. So I'm a believer, those kinds of hobbies, whether it's doing your own gardening, which can add up, but for most people is reasonably inexpensive. I mean, I see my daughter, for example, they'll get together now and play some board games for a night instead of going out. They'll do that because restaurants have become so expensive. All those little things make huge differences over time. And earlier Cameron was asking about some spending tips. You know, the most old fashioned spending tip we all got from our grandmothers, but I still think may be the best, is to inject some time between the decision to buy something and the actual purchase.

1:09:53The data we're starting to get on that is ridiculous. It's crazy. For online purchases, you know when people wait 24 hours to make the purchase? In 30 to 50 % of cases, depending on the study, they don't go ahead with the purchase. But what kills me is in 25 % of cases, they forget about it. So it's not like they decided, no, I'm not going to do it. They never thought about it again. But I kind of believe that because we can all spend a little carelessly online. I mentioned the TikTok influencers a moment ago. One of the great tips that a lot of them have given is do not set up all your account information on your favorite websites because it's too easy to hit the one click.

1:10:31Then it's too easy to buy. Make yourself fill it out every time. It slows you down. And when you slow down, you tend to think more holistically about the practicalities of all of this, but whether it makes sense is the best use for the money, spending it right here. All of that really matters. Putting time into all your decision processes really, really helps. Well, and now Amazon's going the other way where you can order something as you go to bed and it's there long before you get up in the morning. It's crazy. It's crazy. It really is. Where do you think I got this amazing shirt? Yeah. I said, I'm going on rational reminder today.

1:11:07I better get a shirt and I just get one click and it's on me. No, you're right. It's so easy to buy. I mean, people always talk about, isn't it wonderful about how all these new technologies have taken away the friction? No, the friction to some extent played a positive role in a lot of our lives in a lot of these areas. The fact that you actually had to reach into your wallet and pull out cash and see that hard earned money leaving and you could only spend the amount of cash you had. All of this stuff now is so easy that it's easy to give into human nature and get yourself in deep trouble. So let's keep going on technology a bit, Dave.

1:11:41What can people do to cut spending in the face of the massive social pressure, social media to spend? It's tough. You look at it where I think it's been most influential is weddings. The wedding industry is just so competitive now. And I don't mean the wedding companies competing, the sites competing. I mean, the different people getting married competing. Everybody's trying to create photograph moments and Instagram moments. And it seems like all of them keep stepping up and the cost of weddings is nuts and social media is driving that and even bachelor and bachelorette weekends all of this i mean it's so true everything you hear we're seeing highlight moments from everybody's lives but something in our mind screws with us and makes things that's their regular lives and we're trying to keep up to all of that by nature we all want status we shouldn't but we do with status comes weight in our opinions it comes flattery comes opportunity we all want it and we think one of the ways to get it is by our possessions and by the way we appear to others.

1:12:36And so we're always trying to look our very best. And again, it's easy to give in to all of this advertising, all the social media. Lately, I'm finally seeing more people cutting the ties, getting off social media and saying, hey, it's beaten me. I have a female friend in my life who's very wise and she said, it's better than I am. The algorithm has beaten me. I can't go on and win the battle. It gets me. I want to look like that. I want that subject. So I'm off. And she's been happier since she got off. A lot of people can do that, but I think more of us need to try over time. One of the things that we're seeing researchers say, we need to talk about all this more, but not among the experts on a podcast in our friend groups.

1:13:17So in the people close to you, you need to be talking about money in general, money, fears, money, everything, why I spend too much. For some reason, when you do it with close friends and family, it tends to be more impactful and lead to better things. But none of this is easily answered when these darn algorithms and big companies are becoming more and more powerful. They're becoming more and more adept. And of course, with AI coming, it's going to get even more. So we are literally inundated with advertising. It never stops. And it's hard to close your mind off to it. It's hard not to want to compete with others.

1:13:48I'm very lucky that way, by the way. I'm not wired that way, as most people are. I don't tend to care much about stuff. In fact, I don't like it. I find it weighs you down. I don't like when people give me things. I don't want anything for the holiday season. I don't want anything for my birthday. I like living a simple life. And you can tell by the clothes I wear that I don't tend to think along those lines. I drive a Jeep with 90 ,000 kilometers on it. I don't drive a super fancy car. I've never owned a boat, any of those things. And my argument is, I think that's one of the reasons I'm one of the happier people that I know in life.

1:14:18I'm not always competing to have the best and the newest and the brightest. I still have a BlackBerry phone. Can you believe that? I think I'm the only person who still uses a BlackBerry. It's crazy. And I love it, by the way. I love the keyboard. You can't even get some apps on it anymore. People say, Dave, you need to connect with us in Slack. I say, can't get Slack in a BlackBerry. I can't get that. The barcode stuff doesn't work on my BlackBerry. So I have to go to restaurants. Can you give me a physical? And I said, no, just give me anything you want then. We don't have physical menus. I said, whatever.

1:14:47But yeah, I'm not into that stuff and it's really helped me over time. And people say, despite that, you're pretty happy. And my argument is it's not despite that. It might be because of that to some extent. When you're not caught up in this race to materialism and always having to have the best and the biggest, it's a very healthy thing. I got to get you to talk to my mom and convince her that I really, truly don't want anything for my birthday because she still doesn't believe me. Yes. Mothers battle that. There's no doubt about it. Mothers battle that for sure. But yeah, getting to know you, you seem like the type who wouldn't really be into all that stuff.

1:15:17And I think you and I are both lucky. In fact, I think all four of us are. We have something in our lives that we really enjoy in the finance field. We can listen to endless podcasts and watch all this stuff. We find it fascinating. As you watch people get older, the happiest people are still curious. They're still into growing. They're still into learning. Every day, they're looking forward to getting up and seeing something. My dad's 93, battles some dementia. The guy's still super curious, still super excited about things. It's a very fortunate way to be. And if you can have things that we're learning is where you spend a lot of your time.

1:15:48Well, that doesn't cost much. In fact, nowadays it costs nothing. So what a great thing to have. Yeah. And I agree with you in terms of the materialism. There's a lot of people who are just innately not interested in acquiring new things. It doesn't give them any enjoyment, but one of the difficulties I think for a lot of people is the social comparison. So you might not particularly get a lot of enjoyment out of driving a nice car, but your neighbor's got a car that's double the value of yours and just, it may bother you just on that level too. So what are some of the ways that people can try to get away from comparing themselves unfavorably to others?

1:16:25Well, let's go to that specific example. Think how much less expensive it is instead of you buying a car that you go and wreck your neighbor's car. To me, vandalism could be the answer there. As long as you get away with it. But I think it's all tough because what's happened is our reference groups have expanded so much over the years with all of this media. And so we're now comparing ourselves to everybody on social media and the Kardashians. In the old days, we tended to compare ourselves to our neighbors and to our coworkers. And oftentimes they were in relatively similar income levels. And you might have one person in the group who inherited a fair amount of money and lived beyond where you were.

1:17:04But for the most part, you're surrounded by people like that. That's why I think a lot of teachers have handled their money well. Teachers tend to hang around teachers. They often tend to marry teachers for heaven's sakes. It's inbreeding. I'm not comfortable with it, but you see it a tremendous amount. But boy, do they tend to handle their money well and live within their means. The Millionaire Next Door talked about that. Their reference group has stayed people of similar incomes. Now, again, I'm not saying you should only match up with people by their T4 slip, but it does have some benefits.

1:17:32And as you start hanging around people, whether it's through social media or directly of all different incomes, it's hard not to get pulled up a little bit. I see this on vacations where you have young people grow up together. They grew up in their teens, they've stayed very close friends, but then various levels of achievement economically, and then some want to go to the very expensive places, and it's a stretch, but the problem is the other ones are going anyway because they still want to stay a part of that group. And that big vacation is so much fun, but it ends up costing them too much. No easy answers to all of this.

1:18:02And I think, again, talking about it openly is a very healthy thing to do. I think having a partner to talk about it with and keep you in check is very important. I really do. But there's no easy answers to any of it. I mean, it is tough. And again, remember, I was talking in a tweet the other day about how everybody is out to get us on the spending. Everybody's trying to get us to spend money, our own kids, often our own spouse, our inner self is trying to get us. But everybody we come across is advertising to us. The government wants us to spend. They may say they want us to save and come out with things like TFSAs, but they don't want us to all of a sudden become super savers.

1:18:37We'll crash the economy. So you really don't have anybody on your side. You have to be pretty determined to rise above all of this. On the other side of the coin, what do you think people should spend generously on? Well, I think people have to find the one or two things that make them happy and spend whatever they need to there, but then make the appropriate cutbacks in the other areas. And so I think the answer would vary from person to person. I do think looking for some relatively inexpensive hobbies, I'll tell you probably the most interesting expense, I would argue, in all of finance, cottages.

1:19:09I think cottages are fascinating to study. A lot of times people have inherited a cottage, although there's been capital gains tax involved at some point in Canada, but cottages are incredibly expensive. When we talk about home expenses, remember, at least we're not paying rent too. They're saving us the rent. That has to be part of the comparison. That's not true of the cottage. And cottage repairs are expensive and everything else. But boy, even though it's a physical building, it provides people with more experiences and more fun family times and more connection than almost anything. In fact, for a lot of my friends, it's the most important things in their lives.

1:19:44It's brought them together. So how do you measure where the balance falls and how much can be spent there? All of those are very, very tricky. And it goes back to, again, one of the big teachings of the wealthy barber. You've got to make those calls on your own. You've got to decide where to spend the money. What gives you joy? What can you afford? But I need to help you to save first. So let's get your 10 % to 15 % first. And then what you do with the remaining is up to you. But you can't also be going into debt beyond that. And that's where we've fallen down a lot in the last 10 % and 20 % years.

1:20:15I mean, you three see the debt to GDP figures. Always a strange figure, by the way. I mean, you've got stock and flow in one figure and everything else, but it still tells you that we're more indebted right now than I think any other country in the world, are we not? On a private debt basis, I see it when I look at people's financial plans. Even student debt now has really crept up in a lot of cases in Canada. We're not at the US's challenging levels, but it's really crept up. So I've been a lifelong fan of Dragon's Den, which is similar to Shark Tank in the US. You were a phenomenal investor on Shark Tank.

1:20:50I loved it when you were on the show. Sorry, on Dragon's Den. Thank you. I'm curious, what were your biggest learnings from being a dragon? I had a lot. I mean, I really did. This sounds corny and motivational speaker, but the biggest thing you learn being on Dragon's Den is how nice people are. You end up dealing with a ton of people through the due diligence process. Everybody's polite and kind. The problem nowadays is we get all of our news from the news. We We get all of our glimpses of the outside world from that. And by nature, it tends to skew negative, dramatically so. But when you're out there just meeting people in something like this, you recognize most people are kind and nice.

1:21:23They just want to do fairly well and raise their kids and add value to the community. And it's important for people to keep that in perspective. Most people are, in fact, very, very kind. But I did learn some valuable lessons on the show. The attention to detail you need to bring to business is pivotal. We talk about visionaries, but it really comes down to execution and attention to detail is everything. I remember we had one pitch that was very well done in terms of what they're going to do going forward, but they'd already produced their final packaging and there were two spelling mistakes on it.

1:21:50I couldn't do it. I could not do it. A couple of the other dragons went in and the company did not end up doing well. If you're going to let spelling mistakes get out in your final packaging, that is not a good sign. You have to have strong attention to detail. The second thing is everybody comes on that show and they're hoping to harness our connections, harness the things we can bring to the table to get on shelf. but the hardest thing in business is getting off the shelf. How are you going to create demand for your product? So yes, we can help you with the distribution, but how do we get that person to grab it and say, I want that.

1:22:22I've heard about it. How do you rise above all of this noise? Remarkable to me how few people came on the den with any kind of marketing plan, any kind of coherent list of things they were going to do to draw attention to what they were trying to do go forward. So those are things that you learn and you watch over and over again. But maybe the most important thing is as much as the people really matter, and I invested primarily in the people, the numbers are key. And there's certain KPIs for every one of these businesses that you have to grab a hold of. And also, you've got to be very careful of the entrepreneur who doesn't know her or his numbers at all.

1:22:59That goes back to the attention to detail. I learned a lot. Jim taught me a lot on the show because he's not strong in math. That's not his strength. He knows his own numbers of Boston pizza inside out. Sure does. He can tell you to two decimal places what most of them are, even though that's not a strength because you have to. When George's former partner got him going down that path, you need the numbers to make good decisions. I remember Arlene said something to me once we were doing due diligence on a food-related business, and there was so many positives. And I went back to her and said, I think we should go forward with this.

1:23:32And she said, the gross margin is not good enough. I don't care how many positives you're giving me. The gross margin is not good enough for a food product. We're not going to be able to support the marketing. She ended up being right. One KPI swung her against it. So again, it is about investing in people, but the numbers matter. And those people have to understand their own numbers because that's what guides so many of the decisions going forward. Great fun doing that show, by the way. I've stayed a pretty big private company investor since then and I've really enjoyed it. Again, you meet a lot of people.

1:24:02There's no liquidity for most people. I don't think they should do it because executing the due diligence is very, very challenging, time-consuming as well, but it's a lot of fun. And I think unlike if you go in a private equity firm, for example, when you're in Canada and you're in a dragon's den situation, you can influence the outcome. So you're investing in a private company, but you can open the doors for them. You can find them new suppliers. Well, where else can you do that? This is really interesting. If you want to throw yourself into it, the returns can be very good, but then the time involvement becomes overwhelming.

1:24:33That's what happened to me. I was doing so many deals, I couldn't keep up with all of them and still run my own business and see my kids. Wow. Do you have any highlights from your Dragon's Den investments that were super fun investment based on, I don't know, the outcome or the process or anything? I had a lot of fun, but the one that makes me still laugh the hardest was the hardline curling broom. He came on, he was a letter carrier and he developed this part-time and it was a curling broom that was lighter and therefore better, et cetera. And he pitched us And I went in and we went out. And then as soon as I got in, he calls me one night, Archie, great guy.

1:25:05And he's almost in tears. I think he literally might have been in tears. He said, it's a disaster. They've said our curling broom is too good and they've ruled it out for tournaments. And I said, that's not a disaster. I said, the vast majority of curlers aren't going to tournaments and they're going to hear our broom is too good to be in tournaments. I think this could work out quite well. I said, we want to turn on the PR machine here and we want to draw as much attention as possible to the fact that we just got ruled out of tournaments. And we did, and the business took off. Wow. In fact, listen to this, because this gets crazy.

1:25:35Stephen Colbert picks up on it. And Stephen Colbert one night comes out, and this is when Trump is first thinking of running for president, first time. And he says, in the United States, we've got a lot of big stories right now full of conflict and drama. Donald Trump is thinking of running for the presidency. But in Canada, they've got something even more dramatic. They've got a new curling broom so good they've had to outlaw it from all tournaments. And then he did his speech on us. He showed Dragons then. He showed Archie. Well, you can't buy that kind of coverage. And the broom became very, very successful and is still a big part.

1:26:06Anytime you guys go out, if you're ever in a curling environment, you'll see the brooms. And so he did very well. But in general, the investments on Dragons then that got involved and did very, very well. You're always going to strike out in a few that probably the best one was I lent one couple. I think it was$54 ,000 and I didn't get the first payment. Oh, wow. Usually you get the first payment because they're paying you from your own money. They still got some of your money left and they can make it look like this is going to have a happy ending. No, didn't get the first payment. That one wasn't good.

1:26:33But in general, it was a lot of fun. I learned a tremendous amount. And it's one of those few experiences that was all positive. Everybody was nice. The CBC was great. I've stayed very close friends to the other dragons, except maybe Kevin don't see him as much, but the others I've stayed very close to. That's great. Well, Dave, you've been very generous with your time. Thank you so much. We always end our interviews with the same question. how do you define success in your life? Well, I think getting on the Rational Reminder podcast may be how I define success. That is the pinnacle for most people.

1:27:06Yeah. I think honestly, you've had a successful life. If you think you've bettered other people's lives, you can feel that you've made a positive difference in people's lives. That's certainly a part of it. No doubt. I felt successful because I'm happy. I think my natural disposition has been a positive one, but I'm also the luckiest guy going. I mean, I had two of the best parents ever. We talk in Canada a lot about, okay, there's white privilege, there's male privilege, there's all of those things. Well, how about good parent privilege? That is the ultimate privilege that you had nothing to do with, you lucked into.

1:27:38I lucked into two wonderful parents and that made a huge difference. I had a really good friend group growing up and they've been very influential on me. Life has really fallen my way. I have no complaints. I'm a very, very lucky guy. So if I do feel successful, it's mostly because things have kind of fallen in my lap and let's hope it continues that way for at least another 10 or 15 years. Great answer. Dave, we really appreciate you coming on the podcast. This has been a great conversation. I think the audience is going to love it. Well, it's my pleasure. You guys are great. And I meant what I said earlier, your podcast has helped a lot of people and you've got to feel good about that.

1:28:10I mean, the feedback that you guys generate, the ratings that you generate, and nobody doesn't like your podcast. And when you sit back and actually think about it, that's hard to do nowadays. People are so opinionated and so extreme. In fact, sometimes people won't like something just because everybody else seems to like it. And so the fact that you guys seem to have a formula with universal appeal and you've had such wonderful guests on, oh, I do want to say one more thing. I was talking about the passive income flows being a huge influence in the market before Mike Green. I just want to go on record saying that.

1:28:44I talked about way back in the 90s, because you could see the numbers building in the 401k monthly purchasing. And then you started looking at the total amount of trading. And this was early, but you're going, wow, if this continues like this, this is a story. And how it all plays out is hard to say. In fact, it's interesting, somebody as bright as Mike, who studies it so carefully, I don't even think he's really put out, how's this all going to end? Where's it going to go? I think at one point he thought, of course, people are going to start deaccumulating. But I think a fair number of people are going to keep a fairly big equity component now relative to the old years.

1:29:18And so that deaccumulation may not happen to the level that he at one point forecasted. But it's interesting he's drawn so much attention to this. And it's a fun thing to examine. You can see passive is really taking off. And Dan, of course, in Canada, you played a huge role in that. You drew attention to it probably more than anybody else in the country. Well, I hope I haven't distorted the markets. way to go Dan did you tell these guys that when you came on the podcast they said that your last name actually meant passive in Italian yeah that's the actual I had forgotten that's the technical definition yeah I did tell where do you guys see Mark at all I want you to keep this rolling because all your audience wants to know where's Mark Mark right now is in France I think I still talk to Mark daily he's doing well he's on a trip in Europe with his family he just took them to Disneyland hope he doesn't mind me sharing that yeah he's having a great time he's doing exactly what he said he would do.

1:30:08He's taken a little retirement and we'll see what he does when he's back in Canada. Anytime somebody just disappears quickly, you don't hear from them at all. And then the people who know them say they're in Europe. This is the talented Mr. Ripley. Okay. There's the chance Mark's no longer with us is what I'm saying. Okay. Something not good is happening. And I suspect Ben was involved. That's as far as I'm willing to go at this point. Anyway, it was great seeing you guys. Thanks for having me on. Thanks, Dave. You're the best, Dave. Thanks.

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