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056 | Money Tricks and Treats · The Chiro Money Show

• Chris Scheele: Welcome back to the Chiro Money Show, where we're helping chiropractors make better financial decisions so they can build stability in their finances and a lifestyle that they love. We're your hosts Chris Scheele and Scott Campbell, financial planners with Align Wealth. Scott Campbell: Happy Halloween. I was ex Chris Scheele: Halloween is upon us. Scott Campbell: Halloween's upon us. I was wondering if you'd come to the show today dressed up. Chris Scheele: I have a pumpkin in my office. Scott Campbell: That's festive, great. Chris Scheele: Mostly just because my wife decided this was a place to store it. Scott Campbell: Fair enough. I bring out the pumpkin. Chris Scheele: Should I get it? Yeah. Scott Campbell: Probably worth considering. This is a this is just a pumpkin. Real pumpkin. Alright, everyone. Chris has a pumpkin. We're right on we're right on point for this Halloween episode today. I was considering getting Chris Scheele: That's right. Scott Campbell: I was considering getting dressed up, but my one costume is very obnoxious and it would just distract you from having a real conversation with me, so yeah. Chris Scheele: Luckily well, I don't know. The only feedback from listeners we have is like one and they don't watch on YouTube, so maybe no one would even see its cut. Scott Campbell: Maybe no one would see it. Anyways, let's let's talk about Halloween before we get into the to the the topic today. What what does Halloween look like in in the Scheele household? Do you get kids get pretty pumped up for Halloween? Chris Scheele: yeah, they've been talking about it for a while. Excited. Scott Campbell: Yeah. What what are we what are we dressing up as? Chris Scheele: We got a Mirabelle from Encanto Scott Campbell: Yep. Yep. Chris Scheele: and we've got a scary guy with a scream mask. Yeah, Scott Campbell: Cool. Nice. Chris Scheele: how 'bout your kids? Scott Campbell: We got a Rosalina from Mario Kart. And Chris Scheele: Nice. Scott Campbell: we have a zombie. Next question, Chris Scheele: Fun. Scott Campbell: how Halloween related. What do you guys do with all the candy? What does how does candy look in your household? Chris Scheele: Yeah. We basically pool it and mom and dad eat most of it. Scott Campbell: So I don't know if I told you this before, but we we have what's called the switch witch in our house. Have you heard of the switch witch idea? Chris Scheele: Never heard of that. Scott Campbell: I bet you there's gonna be some docs who do something similar to this in terms of just maybe monitoring how much candy is consumed in the month of November. So the kids come back with a lot of candy, way too much. Obviously mom and dad need their fair share fair share of that. And when I say mom and dad, just dad, really. But we'll get the kids to just put about, I don't know, maybe a 10% of that candy into a bucket that's gonna be for them to just enjoy as quickly as possible throughout the month of November. But I would say about 80 or 90% of it goes into a bigger bucket that they put it at the at the front door at the end of the night. And when they wake up in the in the morning, the switch witch has came to take the candy away and replace that with a toy. So they get a little bit of candy that's not gonna overdo it. And they get a cool toy out of it, brought from the Switch Witch. So yeah. And Chris Scheele: Hm. Interesting. Well. Scott Campbell: the rest of the candy usually finds a hiding spot in the basement for mom and dad, but like I said, more so dad than mom. Good endurance fuel. Really, really great endurance fuel. Yeah. Chris Scheele: Yeah. yeah. We need it. Scott Campbell: Yeah. Alright, so we got a cool theme today. Doing a little trick or treat. Chris Scheele: Keeping it keeping it on point for Halloween here. I have a feeling Scott Campbell: Yeah. So we've d Chris Scheele: our our answers are gonna be a little bit different here, but Scott Campbell: I hope so. I hope so. So we got a lot of good feedback from the last time we did a back and forth episode where we don't really know what the other person's going to say. So to set the stage here and what we're gonna do, trick, treat, we're both gonna come to to the table with one of each. Maybe a little horror story share at the end. That sound good to you? Okay. Chris Scheele: Yep. Yep. Scott Campbell: Let's start off with the tricks. Then we'll end on the sweet stuff, okay? Chris, why don't you hit us with the first trick? What do you got for us? I don't know. Again, we don't know each other's answers here, so I'm curious to ha hear what you have to say. Chris Scheele: Yeah, man. When I think about tricks in financial planning or finances, so many alarm bells go off because there are no tricks. Scott Campbell: we could we could have some we could talk about tricks for days. Chris Scheele: Totally. Scott Campbell: Yeah. Chris Scheele: But the one I the one I came up with is a great trick. And it it really is kind of like a trick 'cause it's really like a a a behavioral thing. And it's called pay yourself first. So Scott Campbell: Okay. All right. Chris Scheele: this trick works so well because it removes your willpower from all the decisions that you make around money and it just creates as default the system to, you know, execute. a plan and there's no yeah, there's no more willpower needed for it. Yeah, couple things that come up come to mind with this trick of pay yourself first. And l I guess let's start with like what it actually is. Right. So when we say when I say that word, those words pay yourself first, to me, all it is is when your money lands in your account from your pay, you give it a job and you like you take a certain portion of it and you put that towards future goals. So a lot of the times that's going towards saving and investing for retirement. Maybe it's going towards funding a down payment, something like that. but yeah, that's the the general premise is like differentiate it, like split it away, right? So $10,000 lands in your account, $500 is gone instantly to pay yourself first for your future self. The rest, you can do with that whatever, whatever you want with. Right, that's that's the the interesting thing. And there's been lots of studies on this, like It's really hard to spend money that isn't there. And Scott Campbell: Mm-hmm. Chris Scheele: I think this like trick of like mental accounting or like feeling like, you know, we'll save what's left at the end of the month. It it really it feels good and it it in theory it should work, but it really doesn't. And there's also, yeah, this law called Parkinson's Law of Spending that talks about like how our spending expands or contracts depending on how much we have available. So it's like Whatever's left, you find a way to spend it. So if you put that money aside, if you trick yourself and pay yourself first, you'll find a way to live on what's left. Scott Campbell: Feel like we were on each other's same wavelengths here this morning, Chris, because you're you're planning this topic for today in terms of this trick. You probably haven't seen my Instagram post that I put out today on on my feed, but this is exactly what I was talking about in my post. Not planned at all, right? Okay. Chris Scheele: I did not see it. Scott Campbell: But yeah, I was gonna be like, I hope you bring up Parkinson's la Parkinson's law, like To further this point and to it goes above and beyond investing, right? Like pay yourself first in terms of paying future you investing for the long term. That's that's kind of the first things that I usually think about when I think of pay yourself first, pay future you first. But then that's also paying yourself first in the form of building up your emergency fund, saving into a travel fund, paying down debt more aggressively if that's a a goal to you, and then live on what's left over. If you have a plan around that and it's automated, that's where what you brought up, Parkinson's law. Just you over time and it could be a fairly short period of time, you just adapt. All right, if I after I've set aside money automatically towards goals and future investing, maybe of that ten thousand that came has come in, I only have seven thousand of it to live off of. You'll adjust. If you were used to spending eight or nine thousand dollars previously, you'll probably over time over time get used to spending seven thousand dollars on general like month to month lifestyle spending, Chris Scheele: Yeah. unbelievable how many examples we have of like just human beings being able to adapt and adjust to to what we have available. And that is like in financial resources and other as well. so Scott Campbell: Yep, for sure. Chris Scheele: yeah, I do feel like this is a bit of a trick. Like I I preface that with saying there are no tricks in financial planning. But this is a bit of a trick because we're kind of tricking ourselves into doing something that's really great for our future selves. And it's really hard to think about your future self. that's also been studied a lot as well that we we don't we can't put ourselves in in the shoes of our future self very easily. So Scott Campbell: Yeah. Yeah. Chris Scheele: last point on this I'll say is automate this. That is also that also could be a trick of just make it happen. on the day your payroll is processed, make sure you have your automation set up so that you pay yourself for it first into the various accounts related to the goals that you're saving for. Scott Campbell: Love it. Chris Scheele: Yep. All right, what do you got for us, Scott? What's your trick? Scott Campbell: I went in a completely different direction than you. As no surprise there. Chris Scheele: No surprise. Scott Campbell: No surprise. Like when I'm thinking of a trick, when it comes to trick or treat, you know I'm thinking of of people or things that are happening in the financial industry trying to trick people into an outcome that they think is gonna be beneficial. So What I wanna dive into today before I get into my real trick, I wanna remind our listeners, when it comes to investing, this is all going to be towards my point in terms of a trick here, when it comes to investing, there's only three ways that you can really invest your money. Real estate. So maybe the home that you live in, a rental property that you might own, maybe the clinic building that you that you practice out of. Then the other two big ones would be public markets, so buying publicly listed stocks, bonds, ETFs, and mutual funds, right? And then there's this other area that you can invest as well into, and that's private markets. So private equity, private credit, even private real real estate, So the thing I want to bring into this conversation with chiropractors, and this is For across all professionals. Once you're a successful professional, you know, you've built up some wealth, people view you might might view you a little bit differently, and people's trying to sell to you, they're gonna tell you that you're not an average investor anymore, To get access to private markets, you're what's in some cases are referred to as an accredited investor. So you have to be making over $200,000 a year plus to be able to access this fund, or you need to have at least, say, a million dollars worth of financial assets to. invest into this fund. So where I want to go with this in terms of to bring a Halloween theme and a piece of candy into kind of a metaphor into private equity is I view private equity kind of like a kinder surprise. Okay. So what I mean by that, first of all, gram for gram, you buy like a just a basic Hershey's chocolate bar, right? Or you buy Kinder Surprise, they're about the same cost, right? But a kinder surprise, Chris Scheele: Okay. Scott Campbell: you're getting way less chocolate. you're not getting the same bang for your buck from a from a from an enjoyment standpoint out of out of the chocolate, In addition, so when we talk about cost, so you're paying more for less. There was a study done on in back in this year recently, a study done on kind of the biggest 15 private equity funds that are available to retail investors. Average fee on these private equity funds sometimes ranges from you know anywhere from three to upwards of four percent per year. So it comes with a big price tag to get access to whatever's in the kinder surprise. Okay. So you're first of all, you have to pay a lot more in fees than what you typically in terms of like if you're thinking about publicly sh publicly traded ETFs or mutual funds for that matter, t generally speaking, substantially less than what most private equity funds charge. Okay. The next part of a kinder surprise is that you don't know what's inside, right? You can't see. You don't know what that toy is going to be until you unwrap it and you you break into the shell and you open up that you don't know what's actually inside. And that's very similar to to private equity. when we think about publicly listed ETFs, stocks, bonds, mutual funds, you know what the price is of that fund or stock at any given in any given day, In the private equity markets. Sometimes you just don't know what the current value is of that of that of the underlying holdings or even what the underlying holdings are. It's a bit of a, in some cases, like a a black box mystery of what you're actually investing into and what the current returns are at any given time. Maybe you get a report from the fund manager, maybe on a quarterly basis in terms of what some of the performance has been, but you never truly know how your asset is performing. Chris Scheele: Yeah. For sure. Two things I want to point out here, on the private equity side, you th these companies are not held to the same level of standard of for financial reporting as publicly traded companies. So they're not required to disclose the financial information in a timely manner the same way that public companies are. Secondly, private equity is often treated I I I'm gonna draw parallel to real estate in a way. Right? If you own your own house or your own practice building, the price of that real estate is changing every single day. But you only see it once a year when you get your property assessment or you know, do an appraisal or whatever. Private equity is kind of the same. The the cost, the price of the of the the underlying holdings are changing every single day, every moment, just like public equities, but you don't see it 'cause it's not it's not showing on a ticker for you. Scott Campbell: That's right. Yeah. Chris Scheele: One other thing, I just want to back up a second and and just lay a bit of groundwork. What like a bit of context to private equity. So private equity most commonly is happening like what's happening is a firm, investment firm is pooling money from investors. So a whole bunch of investors are putting money in and they're buying whole companies, private companies, or taking big stakes in them. These are companies that are not traded publicly on the stock market. They're usually aiming to try to bring some efficiencies or improvements to those companies and make a huge profit and then sell them, likely, turn around and sell them. So unlike a public equity where your money is extremely liquid, it's really easy to find there's always a buyer and seller in every transaction with public equities. It happens almost like instantaneously with a lot of companies with private equity. It's actually the opposite. Your money can be locked up or restricted for many years. Scott Campbell: Yep. Yep. You're jumping ahead to my next points here, but the capsule inside these kinder surprises. Yeah. Chris Scheele: Yeah. Well do you know why I'm jumping ahead? 'Cause I'm excited, 'cause this is my scary story. Scott Campbell: Perfect. It's kind of my scary story too. All right. Good stuff. So to further analogy here, when you actually crack open Kinder Surprise, it's for the mo it's hollow, right? Like we're gonna get to the capsule inside and and the and the and the and the toy, that's usually a letdown. But once you actually get into the Kinder Surprise, it's hollow. And what I mean by this from an analogy standpoint and this metaphor of the Kinder Surprise is that there's been a lot of research done that over over time here, like this one study looks back till 2006, is that most of these private equity funds have res have returned about the same as publicly traded stocks. Like a especially especially once you factor in these fees that they're charging. You know, so when we really look down at what private equity is, like unclear of what you're actually investing into, unclear on performance, more than guaranteed, you're probably paying a very high fee. And then the R other part that you touched on here, Chris, is in terms of potentially being locked in or the illiquidity of a of being in these funds. Right. So I'm also almost almost thinking of that that capsule. I know as a kid, as a really little kid, when you're when you're not we don't have dad strength yet, to get get into that orange capsule, you almost couldn't get into You had to ask dad to to break in for you, right? Sometimes it's hard. Once you're in, you can't get out for a period of time. Right. So that comes with its challenges as well. If you need access to the funds, you might the there's there's certainly funds out there to say, hey, if you want into this private equity deal, like you you might have your capital tied up for 10 plus years. Or when you go to s go to sell, it's like, no, you know, there's a term referred to as gating where the where they basically close off the ability to sell and Go go to cash, right? I've never liked Chris Scheele: Yep. Yeah. Scott Campbell: kinda surprises. I've always thought they were s such a rubbish candy. Chris Scheele: I've never liked private equity. It's rubbish. Over overstated, Scott Campbell: It's rubbish. Yeah. Chris Scheele: over overpromise, underdeliver, high fees, and a lot of risk. Scott Campbell: Nie. Chris Scheele: If I had to sum it up. And I will just say one last thing. Yeah, you you just mentioned these funds being gated or restricted. So that means that essentially they're they're illiquid. your your investment, your dollars that have gone into these funds, you are unable to get those dollars returned to you for the time being. It doesn't mean the fund's bankrupt or whatever, but they're just restricting your withdrawal of your cash. And right now in Canada, based on the research I found, there's about $80 billion in private equity. And almost 40% of that, over 30 billion. Of that eighty billion is currently restricted. Scott Campbell: Can't get it out. Chris Scheele: Can you imagine? That's crazy. Why would you invest in something that has such a poor track record and so much restriction for the potential for matching the public market returns? I mean, not to mention Scott Campbell: Yeah. Chris Scheele: not to mention more of these private equity firms. Sure, there's some that that maybe do really great, but I think the the proportion of f of private equity funds or firms that actually don't make it is probably even higher than in the public equities. I don't have data for that. That's just my premise, my idea. Scott Campbell: Yeah. At the end of the day, I I I think we've we've touched on this in previous episodes. there's a reason why it's being sold. It they're they're targeting a particular type of investor to say, you can do better than what your buddy Joe down the street can can invest into. That's why that's why publicly or private equity is is is it's pitched. It's it's it makes people feel like, I'm getting into something that's special and I only have access to it because of the level of wealth or income that I'm at that I can that I can do that now. But we've asked a lot of people in terms of how they invest that are in our space of thinking, yeah, let's just invest in a global globally diversified, low cost fund and and set it and forget it and focus on the things that we can control. And that way of investing is the same when you say, All right, do you start there from ground zero? Yeah. What about when once we get to a million dollars? Same thing. All right, what if my wealth grows to a five million dollars in in investable assets? Not changing a thing. Same same same philosophy, right? Just because you're growing your wealth doesn't need mean you need to shift gears and try and chase something fancier or more exotic just because you have the wealth. Chris Scheele: Not not gonna help you. Yeah. Scott Campbell: Not gonna help you. All right, that's my trick. Let's go to treats. Chris Scheele: You wanna share your treat first? man, Scott Campbell: No, back to you. Back to you, my friend. Chris Scheele: okay. I'm not gonna draw any parallels to to Hershey's or Ginder Surprises here. When I think of treat, Scott Campbell: Yeah Chris Scheele: I was like, well, what is like a treat in the financial world? And like, what does that look like? And the first thing that came to mind i honestly, first thing that came to mind, like, man, it is such a treat when we work with aligned couples. It is so amazing that a couple can come into alignment with with what they're trying to achieve and work towards a shared goal and a shared vision together. It is so powerful. And that just is it's such a treat when we have relationships with clients like that. So to give some context here, yeah, we're not gonna agree on everything. Even with our with our spouse, right? we we're all unique individuals. We're all gonna have our own preferences and ideas about certain things. But if we can share and and be united on like even a fraction of of the things we're trying to achieve in life, it is just, yeah, so powerful. one thing that often like a thing that'll often come up when we're trying to get couples to to start working together a little bit better is like, wow, like I still want to do this, or I don't I don't like the way they spend their money on XYZ. And I don't wanna have pressure, I don't wanna not be allowed to spend my money on XYZ. And it's a great point. And it's totally, you know, a problem we can solve, right? We can Scott Campbell: For sure. Chris Scheele: c come up with a system and structure for handling your personal finances where you both have autonomy and you can both have that guilt-free spending while still working together towards your joint goals. Scott Campbell: sure. I 100% agree. It is such a treat when especially when it's like yeah a new a new client that we're bringing on and they're both both Both spouses are excited to be to get on the same page. Maybe there's a maybe they haven't been fully on the same page up until now, but they're ready to start working together. They have a shared vision. They have shared goals. They're excited to go through our discovery process and really be asked some some pretty deep questions that I don't think anyone has ever asked them before. And they probably each hear a lot of answers that they may have never heard those words come out of their partner's mouth before as it relates to some of these kind of deeper financial questions that we dig into. Hey. Yep. Chris Scheele: Mm. Yeah. That's definitely one of the most fun like meetings we have with our clients is that discovery meeting when we first get started. Scott Campbell: Yep, for sure. Chris Scheele: Yeah. Scott Campbell: Alright, as per usual, I went a completely different direction than than my and my old pal Christopher. when I think of treats, I'm I'm gonna talk about two different bags of candy here, okay? And this is directly tied to two particular investment accounts. One of them I'm gonna talk about when it comes to the kids, and the other one I'm gonna talk about for yourself. So let's start the conversation about bag number one, and that's the RESP. Okay. I truly don't see a whole lot of people that we come across where they're fully taking advantage of the RESP and the benefits of the RESP. And I think there's some real there's a real treat here. So metaphorically as I'd like to do here and and as it ties to Halloween, let's let's paint the example here. When when you go buy candy to deliver to hand out to kids, if you were to buy the max amount of candy that you could and each year into the RESP, that's equivalent to $2,500. That you can put into the RESP. If you buy the max amount of candy that you can to hand out for Halloween, it's like the neighbors coming over from next door and dumping in 20% more candy into the bucket. So what I mean by that is that if you put $2,500 a year into your child's RESP, the government's gonna match that up to 20%, up to $500 per year. So From a grant standpoint, lifetime, if you take full advantage of that, that's $7,200 for each child in government grants, And in addition to that, then your kid's going to, we're gonna can continue to contribute. It's gonna grow compounding over the years. And once it's time, once it's time for your child to pay for post-secondary, maybe pay for accommodations and textbooks and everything that's involved with going to post-secondary, then they get to take. those funds out and be and it's all taxed in their hands and when they're a student they're likely in a very, very small tax rate and they're paying little to no tax on taking that those funds out, including those grants, right? Plus all the growth. Yeah. Chris Scheele: And all the growth of it. And if you if you think of using an RESP for eighteen years potentially, you know, if you start out when they're when they're first born, that's eighteen years of adding twenty five hundred dollars per year, five hundred dollars of grant, all the way up until you've achieved seventy two hundred dollars of grants, and all of that is best invested in a balanced, diversified portfolio that's growing at seven, eight percent a year. It's like That's a huge opportunity. Scott Campbell: Mm-hmm. That's a treat in my opinion. Yeah. Yeah, tasty one. Take advantage of it. Chris Scheele: good treat. Yeah. The only the only other option I'll give for that treat is like if you're just if you really love Halloween and or or like you're big on yeah big on Halloween and you got lots of money sitting around and you're like I'm gonna go and buy all my treats for the next 10 years and like you know they're not gonna go bad because I'm I've I have planned to deal with that. That's another option with the RESP is you can totally front load that thing. Plug fifty thousand dollars into that the the day, the year your your child is born, that fifty thousand is gonna grow you know, tax deferred until they're eighteen and start to wanna use it. Another great option if cash is available. Scott Campbell: The only caveat to that though, correct me if I'm wrong though, Chris, is that you're giving up the the annual grants. You get the one time grant in that case, but yeah, for sure. Chris Scheele: Hundred percent. Right. But if we do the math on com on compounding returns, you're far, far, far ahead by getting your dollars into the market as soon as possible. Cause if we wait to Scott Campbell: Yeah. So what you're yeah. Chris Scheele: to get the annual grants, you're only getting five hundred dollars per year. So year one, we have three thousand dollars in the market. Year two, we have six thousand dollars Scott Campbell: Yeah. Chris Scheele: in the market. But year one, getting fifty thousand in, yeah, you're only gonna get five hundred dollars of grants, but That fifty thousand five hundred dollars is now working for you for the next eighteen years. Scott Campbell: Mm-hmm. Yep. Yeah. Obviously a very unique situation, but we've certainly come across that. Someone in a fortunate position where they say I I already have I have all the cash that I could fully put in the the fifty thousand dollar limit from a contribution standpoint. Do I do that now? Or should I just hold it in cash and then make the annual contributions at twenty five hundred p to get the grant? And we found with yeah, through the analysis that just front loading is the way to go. Yep. Chris Scheele: For sure. and we're only dealing with that in in like you said, in select cases. R Scott Campbell: For sure. Chris Scheele: personal RSPs and TFSAs are already maxed out. We have cash sitting idle or invested in a taxable account. In that unique situation, that's when you would look at frontloading the RESP. We're not never gonna advise to do that before taking care of your own retirement investments like the RSP and TFSA. Scott Campbell: Course. 100%. Last note, just as like a a little side note on RESPs. If you say have children that are, I don't know, it doesn't really matter how old they are. Maybe they're six or seven years old now and you've never contributed to their RESP, you can also catch up for previous years. You can catch up one year previous. So say you made a $25 contribution this year, or say you could theoretically make if it's the first time making a contribution to an RESP, you could theoretically put five thousand dollars into the RESP. in twenty twenty six and get a thousand dollars in grants. Right. And you could do that and catch up for previous years moving forward until you're until you're caught up. Chris Scheele: Yeah. You can catch up for one calendar year at a time. So a five thousand dollar contribution entitles you to two years of grants and that's the Scott Campbell: Yeah. Chris Scheele: max you can do on any given year. Scott Campbell: Yep. As long as you have room to catch up from prior years. Yep, for sure. All right, Chris Scheele: As long as you have missed years of grants. Yeah. Scott Campbell: can we talk about candy bag number two? Chris Scheele: Candy bag number two. Scott Campbell: All right. So now we're gonna talk about the TFSA. All right. The last one was for the kiddos, but the TFSA, all right, would let's I love these Halloween analogies here. So no neighbor coming into the picture here, dumping in twenty percent. But think about this. So when you are buying candy for Halloween, right? You're using after-tax dollars to buy that candy, Government's already taxed your money, you get your paycheck, and you have to go buy that candy. But then, I don't know, from my experience, anyways, then your kids go out into the neighborhood and do to this beautiful thing called compounding returns, just door after door, trick or treat after trick-or-treat. They come back with way more candy than what you initially purchased with after-tax dollars. That's like the TFSA growth. Over time it's gonna compound, right? But you don't have to pay any additional tax to eat that candy. You could take you can take that candy out tax-free, right? And the stats are overwhelming. I'm sure our audience w knows and understands how the TFSA worked, but it's a refresher, you're putting in dollars that have been taxed already. You have a limit of each year of $7,000, and that goes back. If you were, yeah, if you were what, I think it's It was two thousand and nine. If you were eighteen at that time, we're at a hundred and nine thousand in TFSA total contribution room. From our experience, there's a lot of people that still haven't fully utilized their TFSA contribution room. Or in in some cases, even where they've used their TFSA and they're kind of using it as a high interest savings account and just kind of just keeping cash in there. huge opportunity to leverage the power of a TFSA in terms of maxing that out if you have the ability to do so. Even if, for example, you're a situation where it's like, hey, should I pull seven thousand dollars out, of out of say my corporation, pay the tax to get that into the TFSA? Even in that case, to pay a bit of tax in 2026 to to net out the 7,000 to get into the TFSA. So then it can start going to work for you and compounding, start to compound tax free over the next 10, 20, 30 years. Huge benefit to the end to the investor at the end. Right? That's a treat. That's there's a reason why Chris Scheele: Yep, for sure. Scott Campbell: there, there's a reason why there's limits on it. Chris Scheele: Yeah, exactly. Yeah, if it was if it wasn't that good of a deal, they would let you do more. But the government is restricting it and says seven thousand per year. But it's only seven thousand per year once you've reached your lifetime limit. So that hundred and nine Scott Campbell: Correct. Chris Scheele: thousand dollar amount that you mentioned, if you haven't done that yet, you can at any time make up for your lifetime contribution limit. So if you've contributed fifty thousand so far in your lifetime and you have a hundred and two thousand, well, you can go and drop the next fifty-two thousand in at once. No, no restrictions there. Once you've hit that full amount, now you're restricted to the annual amount each year. And Scott Campbell: Right. Yeah. So long as you are eighteen in two thousand nine, if you are, only thirty years old, then you'd have a different contribution limit based on you'd start you started to accumulate a contribution room once you turned eighteen. Chris Scheele: You start accumulating, yeah. We all start accumulating when we turn 18. Yeah. Scott Campbell: Yep. Yep. Chris Scheele: and since you brought up the corp, just a great kind of analysis, like comparison there of like, okay, if you have corporate dollars that you keep invested in a corporate account, say, like that's that's also an option, and it's nice to have that option as as one of your options come retirement, but Every year there's going to be tax drag on that portfolio in the corp. There's going to be interest or dividends or capital gains with what you're invested in in the corp. So you're going to pay tax year over year. And then when you go to retire and you want to actually draw money out of that, you have to take it out of the corp and into your personal hands in some way. So there's also going to be a tax burden at that time. Versus if we get it out in a year where maybe we have you know limited income. or lower income and don't do it all at once with a big lump sum withdrawal. It's like maybe a reasonable amount, maybe 7,000 or 7500, whatever the TFSA amount is for that year. And you get that into the TFSA, now all that growth every year, tax-free. There's no tax bill coming. So you turn your 7,000 into 14,000, that's 14,000 of your real dollars after tax. You go in retirement to take that money out of your TFSA, there's no tax implications. That is the single biggest factor and like opportune missed opportunity that most people are are overlooking is like the power of using this to supplement your retirement income and provide flexibility in your retirement, where you don't have to consider the tax implications of making a a a draw out of that TFSA account. Scott Campbell: Yeah. How many times have we come across a new a new a new doc where it's like all all their wealth is built built up in inside the corporation and they haven't and they and they're sitting on a hundred and nine thousand or s or whatever the amount is of TFSA contribution room. It's a missed opportunity for sure. Nope. It's not, Chris Scheele: Is that your scary story? No. Scott Campbell: but gives me nightmares just thinking about it. Yep. Chris Scheele: Alright, well my scary story's already been discussed 'cause you you brought it up as a trick. Those dirty tricks of selling private equity. Scott Campbell: Well you can you can share the full story. Do you have a full story to Chris Scheele: Nah. Scott Campbell: share? Chris Scheele: Well, my story is just, yeah, an e an example of Yeah, misunderstanding the risks of private equity, I would say. a client that through a series of connections and, other colleagues, associates that they're they they do life with had had some investment deals presented and yeah. When we came on we identified it immediately as a risk. Said this is this is unnecessary. Like you don't need these dollars in in this private equity investment. you should look at selling them. Scott Campbell: And before you before you continue, probably although even in even in a vacuum, I don't think there's a whole lot of once you really break it down, we've we went through in terms of what private equity is and what it actually what the end result is, it's not necessarily it's not where I put my money necessarily. But f when we're thinking about Some of these docs that we're working with, they're already taking on other forms of risk, in the form of being a business owner, maybe owning the building that you're practicing out of. You maybe you o you own your home, maybe you have a rental property. You already taking on risk in other areas of maybe your portfolio. Why add on this unnecessary additional risk by getting into a a certain product or type of investment that has these other forms of risk associated with it that you just don't experience in? Yeah. Chris Scheele: Yeah. And I I think the reason is 'cause it it it's a tr it seems attractive, Scott. they Scott Campbell: Yeah. Chris Scheele: they paint it as such a great picture of well we'll we'll pay you, super great interest on a monthly basis, you can always count on that and it just it seems like you're gonna you're gonna have such a good outcome from from doing these private investments and Yeah, ultimately, as we've talked about, it's not the case. At at the end of the day, the net result is is no different than being th returns wise is is often no different than being in a, you know, public equities market. The risk or yeah. The risk is Scott Campbell: Yeah. Or worse. Yeah. Chris Scheele: you're yeah, you're you're not diversified. You're in, you know, a small company usually that, you know, is It's it's not like owning fifteen thousand different companies across the world in in multiple sectors and industries and with proven track records and you know, financial scrutiny and all those things. So Scott Campbell: Mm-hmm. Chris Scheele: to go back to the story, as soon as we, you know, the the client brought us on, we pointed it out as a as a concern. This is not something you need. It's you know, it it's not helping you and it's a big risk because it it could something could happen to it. And unfortunately, here we are, you know, twelve months later, and the the private equity investment has stopped paying its monthly monthly interest or or distributions and there's liquid liquidity is locked. un unf like even more unfortunate is like the client eventually came around to to see it our way and was trying to liquidate his position. Scott Campbell: Yeah, but couldn't. Yep. Chris Scheele: But couldn't and it just happened to time directly with you know, some financial troubles that the the company was having. So very unfortunate, very Scott Campbell: Mm-hmm. Yeah. Very important. For sure. Chris Scheele: scary story. Scott Campbell: For sure. not to make both of our horror stories about private equity, but here we are. I just thought about another client had that had came on board and when we brought over their funds from where they were previously, they had some private equity funds that we were able to transfer in and be essentially we were under now managing those private equity funds and the and the goal was to liquidate and go to our our typical investment philosophy of globally diversified, low-in-cost, et cetera, et cetera. However, when we went to actually place the trade to sell, gated could not could not exit those funds. And we're still gated, can't sell. Like they probably're falling into that 30, 40%, like you mentioned, that 30 billion of private equity that it's gated. You can't access it. You can't liquidate to cash. And for this particular client, like it's it's it's not a it's not a huge concern. I'm sure hopefully the time will come here in the near future where we can liquidate to cash. But I also now just think of that is that's a missed opportunity in terms of been able over the last year or two to get out of that private equity fund and into a more globally diversified portfolio and just thinking about what the markets have returned over the last couple of years. I hate to think about the kind of the missed opportunity there in terms of just basically nope, you can't access your can't access your cash. you've been told don't even know when the date will come of when you can access your cash. That's just an uncertainty that I would never want to have in my portfolio. Yeah. Yeah. Yeah, Chris Scheele: Yeah. Yeah, here we are going on almost two years waiting to liquidate those holdings, right? Scott Campbell: for sure. Yeah. Cool. Well, that's our trick or treat. Horror story Halloween edition of the Chiro Money Show. Hope you enjoyed. Maybe next year we'll wear some costumes. Yeah. Chris Scheele: maybe. Scott Campbell: Chris is not sold. Not sold. All right. Any closing Chris Scheele: Not sold. not sold. Scott Campbell: thoughts, Chris? Chris Scheele: Share the podcast with a friend. We Scott Campbell: Share the podcast with a friend, okay. Chris Scheele: we appreciate all of our listeners. And yeah, you were sharing with me, Scott, this week that our our audience is growing pretty consistently over the last few months, especially. And Scott Campbell: Mm-hmm. Chris Scheele: yeah, we're having fun doing it. We're glad that that you're listening. So if you've yeah, if you find find any of these episodes valuable, share them with a friend. Scott Campbell: Yep. Well said. All right. Thanks, Chris. And thank you all for being here. We'll see you again next week for another episode of the Chiro Money Show.