Have you decided what you are going to do about your kids' school in the coming weeks? If so, please reach out and let me know!

I know it is without question that you want what is best for your kids. You want to keep them safe, but also keep them growing and learning.

But there's a problem; your brain conspires against you to make bad decisions when it comes to your money.

Why this math is essential:

I want to be clear, whatever choice you make, I honour and support your choice. I'm sure you did not come to that decision lightly. I know my wife and I agonized over these decisions for months for our five and three-year-olds. I'm not here to judge your decisions, just to offer my experience and skills to help you through this decision. 

I've had conversations with brilliant people who are doing the math all wrong. As a Financial Planner, I help clients think through major financial decisions using math, evidence and data. I want you to make the right choice for your family; they deserve the best. And I want to equip you with the correct methodology to make that decision. 

The way I see it, there are four options:

1. Public school - we have one of the best public school systems in the world. I have brilliant teacher clients, and this is a fantastic option. We are all already paying for this through our taxes. But some schools and school boards will have a hard time keeping class sizes low and limiting a new outbreak.

2. Private school - whether it is a Montessori, Waldorf or other private school, your kids will be in smaller class sizes, which will hopefully be safer. Your kids will also get to socialize. But this is expensive, and there is no guarantee that an outbreak won't occur in a small school or class.

3. Remote learning with a nanny - you keep the kids home, but you hire a nanny to take care of your kids and keep them on task while you go to work. You get the safety of isolation and can still earn a regular income. But finding someone is challenging, and your kids' social development will be limited.

4. Remote learning with you - you keep the kids home to learn online, and you stay home to teach them. This option is likely the safest as you can isolate completely, but if your kids are like mine, the sibling rivalry can crank up to 11! Also, it might be the most expensive option of them all. More on that later.

There are no clear winners.

Every option has pros and cons. There is no obvious choice for everyone in every situation. You have to balance safety, cost, social/emotional impact, academic impact, and logistics for your family and business or practice. 

You can't easily sacrifice your career, because your family's financial future depends on it! 

It is a lot to consider. I can help you with the methodology and math behind the cost.

DIY vs. Hiring Help - *MOST PEOPLE GET THIS WRONG*

I've had two separate doctors tell me that they are going to work half-time because they thought hiring a nanny was too expensive. 

Their conclusion is so wrong and based on no math. But it is a common emotional bias called Loss Aversion.

People fear losing (i.e. writing a cheque to a nanny) more than they are elated at gaining (i.e. earning more by working full-time).

This bias is purely emotional, and it is financially destructive. 

In both cases, these physicians earned more than $250,000 when they are working full-time. They floated the idea to me that they would work half-time to stay home with the kids. They couldn't stomach the cost of a nanny between $35,000 - $40,000 for the year.

"People fear losing (i.e. writing a cheque to a nanny) more than they are elated at gaining (i.e. earning more by working full-time).

This bias is purely emotional, and it is financially destructive."

Here's the math:

Scenario 1: DIY and work half-time
Full-time earnings: $250,000
Work half-time so lose: $125,000
= $87,000 in after-tax income

Scenario 2: Hire help
Full-time earnings: $250,000
Pays a nanny to assist remote learning: $40,000
=$111,000 after tax and nanny cost + Childcare Tax Deductions

In this example, the additional cost of staying home half of the time to teach the kids is $24,000 a year after-tax, plus whatever the Childcare Tax Deductions saves them in taxes when paying someone else for childcare.

If you're a high-income earner, that equates to about your annual RRSP contribution to get the retirement of your dreams. Plus, you would get a further tax deduction for that RRSP contribution. You could fill your TFSAs and pay down your mortgage. You could take your family on vacation...wait... a staycation!

It's up to you and your spouse to decide if it's worth it. I wish I could help you weigh the benefit of this extra time teaching your kids against the impact of physically distant learning. But that is way outside my wheelhouse as a Portfolio Manager and Financial Planner.

What I know for sure is, it is objectively more expensive to take time off work for the majority of doctors, dentists and entrepreneurs whom I serve.

Conclusion: Most and Least Expensive

The least expensive option is to send the kids back to public school. We already pay for that in our taxes.

The most expensive option is to stay home if you are a high-income earner. If you would like me to help you with the math in your case, please let me know and we can schedule some time to go through it.

Key concept: Loss Aversion

People fear losing (i.e. writing a cheque to a nanny) more than they are elated at gaining (i.e. earning more by working full-time).

PS You can and should apply this principle to many other things in your life. I've had physicians say they will spend 20-30 hours learning to incorporate their practice rather than paying a lawyer $1500. This decision makes no sense because a doctor can earn many times the cost of hiring a professional if they chose to work those 20-30 hours instead. I don't think any of those doctors thought learning how to file incorporation paperwork was fun!

PSS For business owners and professionals on an inclining income trajectory (every year you earn more than your last), failing to follow this principle can have a negative compounding effect on your income. Successful business owners know how to leverage their time by hiring others to do the work that isn't their highest value. Do what you love, and pays you the most; hire others for the rest.

What did you decide to do about your kids' school? Hit 'reply' and let me know!

Btw, have you followed me on Facebook or Linked-in? Links below.

It has been a wild few weeks in the markets.

What's happening?

The doctors for who I work tell me that COVID-19 is not likely to cause a zombie apocalypse, it isn't the new bubonic plague, and isn't going to wipe out 1/3 of the global population. Whew!

However, it is a serious virus that global health officials are working hard to contain. The World Health Organization has labelled it a pandemic, but it is also turning into a panic.

Just like people are irrationally buying mountains of toilet paper from Costco, people are selling their shares in nearly all businesses at an irrational rate.

When markets go down, it is very tempting to sell—our brains like simple, black-and-white thinking, especially about things that we don't understand well.
 

Right now, the thinking is virus bad -> hoard toilet paper and sell everything.
 

But like anything else, there is far more nuance to this. Let's talk about this from the health perspective and the money perspective.

From the health perspective, the best thing we can do to slow the spread of the virus, according to Health Canada, is to limit physical contact, stay home if you're sick, and wash our hands thoroughly with soap and water. They also recommend having enough supplies to last you if you happen to contract the virus and, therefore, need to stay home.

No one is recommending to stock up two years of toilet paper, bathe in hand sanitizer, or live in an underground bunker for the next year. See? Nuance.

From a financial perspective, this is not entirely unprecedented. No two market corrections are precisely the same. But we have seen markets drop over 50% in the past. We have seen how past viral outbreaks have affected investments.

To slow the spread of the virus, people will stay home. That will affect many businesses like travel and the restaurant you usually go to for lunch at work.

But there will be companies who benefit from this, like toilet paper companies and the restaurant you usually go to for lunch at home.

In total, this will likely cause total demand, and therefore earnings go down while people are practicing social distancing. How much will be affected, and when will the rebound occur? The truth is, no one can reliably predict these things.

To be a successful investor, you do not need to predict what is going to happen to the economy and stock prices. Even if you invest at all the wrong times, you will still have a great return if you hang on. Stock price drops are part of investing. You need to have a plan for when that happens.

What can you do about it?
 

If you are years away from retiring here's the strategy:

1. Have a Financial Plan, so you know how much you should be investing toward your Big Dreams.

2. Use an evidence-based portfolio to eliminate unnecessary risks and costs.

3. Invest when you get paid. Don't hoard cash with the intent to buy during crashes like this. No one knows where the bottom of any crash lies. And even if you did, the benefit isn't as significant as you would think.

4. DON'T SELL. If you do, how will you know when to get back in? The rebound will likely happen well before all the facts about the virus and corporate earnings are known.

If you are retired or are retiring soon, here's the strategy:

1. Have a Financial Plan, so you know you can afford the lifestyle you want throughout your retirement.

2. Use an evidence-based portfolio to eliminate unnecessary risks and costs.

3. Have a Cash Wedge in your portfolio to draw from during market declines. That way, you don't need to sell something while it is down.

4. Have a portfolio that aligns with your risk tolerance and risk requirement. There is a reason we have lower returning, income bearing investments when you are close to your financial goals.

A good financial plan will have market corrections built into it. See? Nuance. If you're a client of mine and want to talk about your Financial Plan or learn how we are implementing these strategies, please hit 'reply' and let me know.

If you are not a client and want to learn how a Financial Plan and these strategies might help you, please book an Initial Dream Board call right here.

Please stay safe, follow the recommendations of Health Canada, and do not hesitate to reach out to me if you need some help. Together, we can pull through this and come out stronger.

While I loved the view from my old office near the airport, being close to an accounting firm has been a huge help to my clients in the past.

For that reason, I am happy to announce that on March 1st, 2020, I will be located at the address below in the same office space as SRJ Chartered Professional Accountants. After a couple of years apart, we've rejoined spaces in a brand new location. It is bright and beautiful, and SRJ deserves all the credit for making all of this happen. 

As always, we remain two independent companies serving our different client bases separately. But now, if you have a tax question that is out of my league, I can knock on the door of multiple Chartered Professional Accountants who are in the office. They specialize in working with small to medium-sized businesses, entrepreneurs, and professionals like doctors and dentists.

My phone number, email and everything else stays the same.

Our office couldn't be closer to the Hurontario exit off of the 403 in Mississauga, and there is plenty of parking. Oh, and don't worry, we are north of the 403 - the opposite direction of Square One traffic! 

I would be happy to host our next meeting in one of our beautiful new boardrooms. Although, these days, most client meetings are happening through a remote web conference. The choice of meeting in-person at my office or over web conference remains. 

Do you want a tour of the new place? Hit 'reply' and let me know!

PS To add my contact information to your phone, click here.