feet) and the water speeds reach 9 metres per second (30 feet per second). The whirlpool is a basin formed where the river takes a sharp right turn. The actual whirlpool is created by the “reversal phenomenon.” Here, the water travels over the rapids and enters the pool, then travels counterclockwise past the natural outlet. When the exiting water tries to cut across itself to reach the outlet, pressure builds up and forces the water under the incoming stream. The swirling waters create a vortex or whirlpool.
Beyond the whirlpool is another set of rapids that drops approximately 12 metres (40 feet).
“Are you ready?” your advisor then asks. “Let’s jump into the boat then, shall we?”
Assume your journey to retirement is the 58-kilometre stretch from Lake Erie to Lake Ontario along the Niagara River. It would be an exciting trip, wouldn’t it? Some parts would be calm and slow, others bumpy and very fast. There would be smooth sections and jaw-dropping plunges. There would be parts where you’d feel like you were going nowhere – spinning in circles. There’d possibly even be some rocky sections. Doesn’t that sound like the typical trip to retirement using the stock market?
But is a trip down Niagara the only way to get to Lake Ontario? In personal finance terms, is trusting the stock market to carry our retirement nest egg to our destination the best way to go?
I don’t think so. Personally I’d rather avoid the jaw-dropping plunges. Decisions like whether to go over the Canadian Falls, or the smaller American Falls with the rock slope at the bottom, are decisions I don’t care to make!
I also don’t like the idea of spinning around a whirlpool at 50 kilometers an hour hoping I don’t drown. And I’d prefer a smooth ride to one that might throw me out of the boat.
Well, here’s what they don’t want you to know: you don’t need to use the Niagara River. You don’t need the stock market or mutual funds. You don’t need to risk your financial life going over spectacular plunges or stagnating for endless periods of time going around in circles hoping you won’t go under in the process.
You can take the guaranteed route – the safe road – and this book will show you how.
Part
The Antidote – A Six Point Plan for Financial Freedom
The Antidote is a simple plan. It’ll only take you a few minutes to read the six-point synopsis below.
But here is the best thing about it: You don’t need to follow it in order. You don’t even need to religiously follow each one of the six points. The fact of the matter is that if you stick to just one of the points, you’ll probably make a significant improvement in your personal finances.
Follow it all and you can rest easy knowing that your retirement nest egg will never decline, even if your bank goes out of business.
Here it is.
● Never touch anything that cannot be simply explained to you in plain English.
● Don’t invest in anything that is not guaranteed by the government.
● Never borrow to invest.
● Avoid complicated investment schemes. If it sounds too good to be true, it is.
● The truth is that you don’t need to risk your hard-earned money in the stock market and you don’t need mutual funds.
● You can use 100 % government-guaranteed investment certificates to achieve your goals without the risk of losing your shirt.
● If you want to take a chance, buy a lottery ticket.
● Decide if you can afford a house and, if you can, buy one.
● Do the calculation of how many years it will take to pay off the mortgage and do it before you retire.
● Never risk your home for any kind of investment idea, no matter what.
● Focus on two of your biggest expenses – income taxes and interest on your debt.
● Pay to have your family’s personal income tax returns prepared by a qualified expert.
● Pay extra to have that expert analyze your family situation to minimize your tax bill by income splitting, etc.
● Find out what your credit rating is and improve it.
● Get at least three quotes on any debt that you get into.
● Do not even think about saving for retirement until you have paid off student loans and bought a home.
● Pay off the mortgage before investing another dime in an RRSP.
● Never borrow to invest in an RRSP.
● If you’ve got a bad one, find a good one.
● If you can’t find a good one, simplify your finances so you don’t need one at all.
Chapter 1
Avoid Personal Financial Disasters
In the mid-eighties I took one of those personality tests that determine what type of person you are, what your strengths and weaknesses are and what type of career you’d be suited for. The results were not too surprising: I was basically a pretty normal person, pretty good at math, probably never going to be a great artist or preacher.
But then, at the end of the session, the person giving me the results told me something that has turned out to be one of the most important pieces of information that I have ever received in my life. It was this:
Dave, you can’t tell when people are lying to you.
What? You mean I can’t tell by looking directly into someone’s eyes and monitoring their body language whether they are telling me the truth? Exactly.
And you know what? Neither can you.
Think about it. Ever watched a great actor in a movie? There are great actors all around us each and every day. The problem is that some of them want to rip us off.
I was fortunate enough to learn this lesson in my twenties and it has stood me in good stead when it comes to investing, as well as life in general. I don’t assume everyone I meet is lying to me. For example, I have known my buddy Stu for over thirty years and I know I can trust him because he has never once lied to me.
On the other hand, I initially do not trust people I meet for the first time, even if they have been referred by a friend or client.
Unfortunately, many people did not take the personality test in their twenties that I did. They learned the hard way that many people can’t be trusted. One of the early examples when it
