Rob Carrick has two decades of experience writing about business, economics, investing and personal finance. Rob covered both Bay Street and Parliament Hill before becoming the personal finance columnist for The Globe and Mail in 1998. He is the author of five books. Rob was kind enough to do a phone interview with me. This interview was done on September 22, 2017 (Friday @ 1000). The duration of the interview was 24 minutes and 4 seconds.
Urgen Kuyee: Hi Rob, please tell me a little bit about yourself. Which school did you go to? How did you get into personal finance? How long have you been writing for The Globe and Mail?
Rob Carrick: I went to York University and got a undergrad degree at political science. Then, I went to Carleton and got a journalism degree. I worked for The Canadian Press for a while and I worked for The Globe and Mail. I started off writing about investment about 20 years ago at The Globe and then, I branched into personal finance a couple of years after that. I have been doing that for about 17 years now.
UK: What is the best thing about working as a personal-finance columnist for The Globe and Mail? What are some of the challenges?
RC: I think it is one of the best beats around because everybody is interested in it now. When I first started, it was a little more limited. But, now everybody seems to realize the importance of being smart about money. From teenagers to seniors, I think personal finance is totally relevant now. It is more important than ever and more challenging than ever. So, it is a great beatbox to clear interest and error. The challenges are trying to keep up with all the latest developments. There are more players now than there ever were. Also, you know the economic situation in Canada and globally. There is a challenge of sort to explain how personal finance as experienced by individuals is tied to things that are going on in Canada and around the world. So, that’s a big challenge as well.
UK: Last month, you wrote an article about how some postsecondary students and their parents are about to make a $20,000 mistake. What are your thoughts on what young Canadians should study?
RC: Well, what I was concerned about was rather than saying what people should study, what I am saying is people should be very active in researching what they study so that they pick something with good career prospects. I am pretty confident that people can get jobs with all kinds of different backgrounds. But, I think you need to map out how you are going to get the job based on what you plan to study. So, the $20,000 mistake is spending money for tuition, books, residence or accommodation on a program that you don’t really know whether there is any connection to the job market.
UK: For those already in college or university, can you give some tips on saving money during postsecondary years?
RC: I was just looking at a survey yesterday and it said like 47% of university grads under the age of 40 regret how much they borrowed. So, I think the number one lesson here is to squeeze your borrowing as low as possible. Of course, you will need to borrow some money and that’s fine. It’s an investment in your future earning power if you get the right field to get into. But, I think that is the main thing – to cut debt. There are all kinds of smaller things you can do. Having a budget and sticking to it. Deciding how much you are going to spend on socializing, on grocery and sticking to it rather than just thinking what you want to spend and realizing you don’t have anything left and you have spent next week’s money as well. You have to be super careful on that. Textbooks are another one that really catches my eye because I have got a son in university right now and there are textbooks he is being urged to buy that costs $100 +, $100- $200. And after first year realizing, he hardly uses his textbook. So, I think students should be very careful about where they spend textbook money and do they really need to buy these expensive textbooks. They may not.
UK: Yes, I can relate. When I was in school, there was a new edition for textbooks almost every year, which really sucked.
RC: Exactly. It is a money making scheme where students are the suckers.
UK: Why are so many Canadians struggling with debt? It is a serious issue here in Canada. Does our banks play a role here? They do let Canadians borrow huge numbers with ease.
RC: Yes, I think the banks do play a role because they profit when we borrow. When you go to a branch and you are talking to the account person about your finances, they may say – well, have you considered opening a line of credit, that’s really a good way to borrow. When you go to get a mortgage, they are often willing to lend you. Let’s put it this way, they are willing to lend you a certain amount and it’s probably not wise to borrow as much as they are willing to lend you. The reason is that, the more you borrow, the more money they make. They want people to keep borrowing. Now, they don’t want their customers to get into trouble because that might mean customers wont pay what they owe back. There’s no question that banks sell lending products and make a lot of money from doing that. But, I think the real reason why people are in debt so much is for two primary reasons. Reason one, we live in a consumer culture. There is so much mass media urging us to buy things and showing us cool things to do, cool experiences and cars, trips, new iPhones and all that stuff. At the same time, the economy is still slow on rise for a few years and wages have not been rising much above inflation. So, people are not really getting ahead and I think they are keeping up by blowing. They are looking beyond their means essentially and I don’t know how long it can continue where blowing is growing much faster than wages are growing.
UK: This might sound depressing but some of my co-workers are still unsure about, what is a TFSA and what is a RRSP? Could you explain the differences?
RC: A TFSA is sort of like an all-purpose savings tool where you take money, your after tax money and you can invest it or you can put it in a savings account. All the gains you make are tax-free. Truly, it’s great because you can use it for a home savings down payment, you can use it to invest for your retirement and you can use it to fund your sabbatical year, few years from now. It’s totally all-purpose and once the money goes in, you can take it out, you can put it back again and it is super flexible. A RRSP is a retirement savings vehicle. You put the money in and you get a tax deduction for doing that. So, the RRSP is more like a way of putting money aside for a retirement in the long future. TFSA could be used for that. It could be used for all kinds of other things as well. I would say if you are young and just starting out in the workforce, you probably want to look in a TFSA and then, maybe later on, you probably want to have both.
UK: A 27-year-old nurse, she (or he) makes about $60,000/year and she wants to save for her retirement. Would you tell her to go with a TFSA or RRSP?
RC: 27 years old?
RC: I would probably go for the TFSA on the assumption that at 27, you are probably going to have a long long career and get lots of promotions and raises and you will be in a higher tax bracket. Then, when your income gets a lot higher and you move up in the tax bracket, then you might want to switch to an RRSP.
UK: The 27 year old nurse gets enlightened after reading this interview and wants to invest her money in the stock market? You suggest, she go with mutual funds? Bonds? ETFs? Index funds? And why?
RC: I would suggest a robo-advisor. You can get access to low cost ETFs. With a little extra money, it will manage everything for you. All you have to do is hand over your money and someone says we will put it to work for you. They build a portfolio designed through your age, your risk tolerance, your needs and your goals.
UK: So, keep it simple.
RC: Keep it simple. Basically, you send money to a robo-advisor and they put it in all the right funds and all the right proportions and they rebalance it from time to time. It is a great way to get access to low cost investing and without having to become an expert on investing.
UK: We all heard about the massive cyberattack on Equifax. Equifax stated approximately 100,000 Canadians may have been affected. I know you made a neat video about this; I will put a link to the clip. But quickly, what can Canadians do in the meantime about the cyberattack?
RC: Well, Equifax is supposed to send letters to everybody who is affected. Now, they wont say when the letter is going out. I think what everybody should do regardless of whether you get the letter or not, is take a look at your credit file and see who has been looking at it. And, see what accounts there are under your name because mistakes are sometimes made and it is good to clear them up. You can get a free copy of your credit report by contacting Equifax or Transunion. That’s one way to do it and another thing, is that some financial companies have decided to make credit files available to people for free. So, if you have an online banking account with Royal bank, you can now look at your credit score and your credit file. There’s also a new company called Credit Karma. You can access your credit file for free with them as well.
(You can watch the video on what Canadians need to know about the Equifax breach here).
UK:I have your book – How Not To Move Back In With Your Parents on my desk right now. I will confess though I did not buy it. I borrowed it from TPL (Toronto Public Library – My fav place in Toronto).
RC: Good, that’s fine as long as you are learning.
UK: Anyways, do you recall what you wrote about on chapter 7?
RC: No, I don’t. You have to refresh my memory.
UK: You did publish the book almost 5 years ago in 2012. So, I understand. Chapter 7 was about buying a home.
RC: Oh okay. Yes, I am interested.
UK: Yes, how can someone tell if he/she is ready to buy a house?
RC: Well, I designed a calculator just for that purpose. I think there is a lot of stuff online that banks and mortgage brokers put out there to tell whether you could afford to buy a house or not. But, all it does is say whether – will you be spending a certain percentage of your income on mortgages and property taxes and heating? If you are under a certain level, you are fine. But, I mean the bigger question is can you afford to own a house? Can you afford to pay the mortgage? And, save for retirement and make car payments and make day care payments. It is important that you should be able to afford other things beside the mortgage. So, it’s called The Real Life Ratio calculator. Use that and that will tell you whether you can afford to own the house and the other expenses as well.
UK: There is this massive cultural pressure to own a house? Are you a failure if you are renting?
RC: No, I think you are a failure if you buy a house without thinking about the implications and the full cost and the risks of getting overwhelmed by those costs. Renting can be a smart use of money. People say – Oh, you are paying your landlord’s mortgage but they forget to mention that your landlord is also paying property taxes, your landlord is paying for insurance and maintenance and those are the costs of housing that no one ever talks about in the renting versus owning debate. So, if you are renting you should look at all the broad range of housing costs. You are paying a lot less and you have an opportunity to take that savings and invest it. If you do that very diligently, you will end up with a comfortable amount of wealth than the homeowner. And, in a way, its better wealth because it is more liquid. You can dip into that wealth anytime you want. The homeowner, even when you get access to the equity of the houses, you need to pay interest on that. Now, I think most people are probably best off owning a house and most people want to own a house. But the problems are, in certain places in the country, its flat out just not affordable. So, what are you going to do? We have to acknowledge that some people are just going to have to rent and that is okay.
UK: Let’s say a young couple wants to buy a house but they are not sure, they are in the mix. They are worried the market might crash. What do you suggest?
RC: That’s a really tough one. I mean, you can say wait around. But, I think the term for interest rate is moving higher and I am more worried about what higher interest rates are going to do to prices than. Let me put it this way, rising interest rates hurt affordability more than falling prices help affordability. Also, you have to be in a psychological place where you are not going to be tearing your hair off because your house is down 10 or 20 percent in value. It could happen. And, going back to our little chat about affordability, you have to able to afford. Basically, if you can say I can afford the house cleanly and I can also focus for retirement and day care costs are covered, it’s all good. Then, I would not worry too much about what prices do now or what the prices will be next year. You can flat out afford the house. That’s the most important thing, not the market price.
UK: What personal finance advice or investing advice would you give to your 25-year-old self?
RC: I would tell my 25 year old self to get more serious about long term saving and savings for retirement. At 25, I was not thinking about that at all.
UK: When did you start saving then?
RC: Oh probably a little bit later than that. Probably in my late 20’s or early 30’s. In that age, I was always good at not getting into debt. That was not a big issue but I drove nice cars and went for nice trips, you know.
UK: Haha nice. You have published five books now. Any plans to write a new one?
RC: No, I don’t. I think my time is pretty much maxed out with my globe columns and all the other things I am doing lately. There is so much information available online, et cetera. I don’t know how many people are getting their personal finance knowledge through books anymore.
UK: How many times do you write in a week?
RC: Let’s see. Two or three columns a week. Plus, two email newsletter, plus videos and other stuffs.
UK: What is your writing practice like? Do you prefer writing in the morning or nighttime?
RC: Oh day. I would say the morning and afternoon. I don’t do nights. Mostly, during regular work hours.
UK: Where do you get your ideas?
RC: A couple of different sources. One, from my personal experiences. If its time for my car insurance renewal and it’s way up. I am thinking what is going on with car insurance. Maybe, I will write something on that. I get readers asking me questions and telling me stuff about what is going on, have you heard that such and such banks are raising it’s fees. And, a lot of my columns are generated by what’s going on in the news. Interest rate going up, that sort of thing.
UK: Lastly, what’s next for Rob Carrick? Where do you see yourself in the next 5 years?
RC: I don’t really know. Doing what I am doing now and doing it better and smarter.
UK: Great answer. Thank you so much for your time, Rob.
RC: No problem, Urgen. Keep up your good work on the blog.
You can follow Rob on Twitter here.