It’s March! We’re officially through the worst month of the year. Congratulations world. I always appreciate when I can put February in the rearview mirror.

March marks the unofficial beginning of Canadian personal tax season. Six years ago(!!), I put together a list of things you should prepare to have your personal tax return completed. The list is largely still correct today, with the addition of needing to provide documentation related to any real estate purchase or sale you’ve made during the year. If you’re looking for a relatively exhaustive list of the documentation you may need to prepare, see this link here.

I’m going to continue some financial writing momentum from last week. I had a few emails flow in from readers who sent some creative encouragement my way. To them, I say, “Thank you greatly!”. I’ll respond better in the coming week, but it does not go unappreciated to have readers reach out with words of encouragement. Hopefully, this week is just a little smoother as a result.

I mentioned Toonie, a newsletter I wrote for a few months a few years back, and it’s become a nice spot to rob and repurpose some financial topics. I may repurpose some of those topics over the coming weeks — the severity of tax season scheduling puts me on my heels sometimes, so I apologize if you’ve heard these stories before.

This week’s topic: My thoughts on the phrase “good debt” and “bad debt”.

Good Debt and Bad Debt

I constantly hear the phrase, “Well, at least a mortgage is good debt.” As in, buying real estate is an indicator of good debt, while purchasing anything else with debt is bad debt. I don’t agree entirely with this sentiment, especially since it’s such a common perception to have.

In theory, the only good debt is tax-deductible debt. Which means the debt needs to be tied to the purchase of an investment that earns you income in some shape or form. The interest you pay on the liability becomes deductible for tax if it currently or will likely result in interest, rent, royalties, business, or other forms of income to be paid to you now or in the future.

In a broader sense, though, good debt (in my opinion) is any debt that purchases an asset that yields a greater rate of return than the cost of that asset (including debt/interest costs). It doesn’t have to be just tax-deductible debt.

So, if you take your home equity line of credit (HELOC) (which carries a low interest rate like, say, 4.99%) and improve your home (which carries an average annual rate of return of 7.31%), then the home equity line of credit is good debt. The interest paid on the HELOC isn’t deductible for tax purposes if you improve your principal residence, but it still results in a greater long-term asset improvement than if the investment wasn’t incurred.

If you purchase a vehicle on debt, and that vehicle has a rate of return greater than the amounts paid out to operate the vehicle (including interest paid on the loan), then I think that debt is still “good”. It doesn’t matter how fast a vehicle depreciates. This could be the case if you use the vehicle to earn income, for instance.

There’s also the residual value of any asset you purchase with that debt, or the value of the asset once you’re done using it. In effect, if you borrow $5,000 to purchase an asset, and you can sell it for $2,000 once you’re finished with it, you only have to earn $3,000 (plus interest costs, which are very low these days) to ensure the debt is “good debt”.

Basically, if debt enables you to buy something that improves your net worth eventually, it probably meets my personal definition of “good debt”.

Let’s not kid ourselves: I do believe consumer debt is bad debt. "Consumer debt", something we'll touch on more in the future, could be considered "expenses", or the costs of running your everyday life. Paying interest on groceries or for the latest shopping spree is seldom wise (the only situation that comes to mind is if you happen to own a clothing store). "Expenses" should be paid for in cash or on a credit card and paid off in entirety each month.

There are also common scenarios which I’ve come to feel are bad debt when most people consider it good debt. A personal residence with lots of equity and a tiny mortgage is bad debt — the owner has lots of personal net worth thanks to the low mortgage, but there is a giant asset sitting there, idle, unable to build anything. You shouldn’t always have a mortgage, don’t get me wrong. But paying down your mortgage extra-fast and not reinvesting the unlocked equity generally results in less personal net worth growth in the long run.

Lastly, I believe there is “good debt”, “better debt”, and “even better debt”. Call it Debt Pro, Debt Max, and Debt Ultra (we’re on the eve of a major Apple product launch week, after all). And I'd attribute those characteristics solely based on the rate of return of the asset you purchase. Essentially, the more you earn with the asset you purchase with the debt, the better the debt. An example of each:

• Debt Pro — Purchasing a tool that enables you to casually earn income in the evenings over a few years.
• Debt Max — Purchasing a rental property using equity you own in your personal home.
• Debt Ultra — Hiring an employee, effectively billing out their time, and using the unlocked time you gain to reach new business success levels.

(These are examples I am coming up with on the spot. They won’t be perfect analogies. I’m attempting to move up the compounding and impact scale for each “type” of debt.)

Remember: Debt is a tool. It costs something, yes, but it provides access to assets faster than if you were to save to pay for them with cash.

If you can earn more than all the costs associated with the asset purchased with debt, then I think it’s good debt.

Debt makes the world go round.

The Second Cup

Scrybble

Scrybble is a monthly subscription to sync your reMarkable notes to Obsidian. It can find and extract highlights (remembering, of course, that highlights on a reMarkable are not actual annotations, which causes all sorts of hardship if you want to sync your highlights somewhere). You can also convert your reMarkable typed notes to Markdown. I still have to figure out how to move the Markdown highlights from ePubs I’ve read on the reMarkable into Readwise, but this at least seems promising.

Vernal Core3 L-Shaped Standing Desk

I discovered Vernal through a Workspaces.xyz interview in the last few weeks. This appears to be a totally price-accessible L-shaped standing desk option (which, I think, is basically a unicorn in the desk world). I’d be curious whether the Core3 is ultra-wobbly or relatively stable.

What is Trust?

Though Aly has directed his writing towards physicians, I’m finding it interesting how many nuggets can be transferred to other professions. I appreciate this close look at trust, and the subsequent brainstorming session on applying it to accountancy.

GMK MTNU Dasher Keycaps

I’m not into any Apple TV+ shows, but my understanding is this particular set of keycaps takes inspiration from an Apple TV+ show. These look excellent. Though, I’m unsure what kind of office decor would benefit from boldly blue keycaps.

Retro Future: The Mid-Century Modern Office Setup

Here’s another discovery I made thanks to Workspaces.xyz. There’s a lot to discover and enjoy on Spencer Scott Pugh’s blog.

Quote of the Week

“Civilization advances by extending the number of operations we can perform without thinking about them.”

— Alfred North Whitehead

A simple quote, but when thought of in depth, is impactful in so many ways. When was the last time you thought about what it takes to produce a hot shower?

Happy Sunday. I hope you have a wonderful week ahead.

P.S. — If you’d like to see this in your email inbox, please subscribe below. If you have trouble subscribing, shoot me an email, and I’ll get you on the list. Thanks for the consideration!

Time for some full disclosure: I’m spent. I’m absolutely spent. Creatively, at least. Maybe it’s not “spent”, but more “focused” on other things. All I know is that, sitting here, writing this weekly newsletter, it’s getting the best of me. It’s a hard reflection — I don’t remember this difficulty last year.

A quick comment or two on Hockey Canada’s loss in the gold medal final this morning: In many ways, this was the best way to lose a game. There is no sensible person on the planet who watched the game and came away thinking the USA “crushed” Canada, or was even the better team. Every single person on social media across all platforms have agreed that Canada was “goalied” this morning — stymied by the best goaltender on the planet. Canada played a fantastic hockey game, were clearly the superior team, and did it all without their trusted leader. Funny things happen in winner-take-all games.

And let’s not skip over the class shown by the American team after their victory. They acknowledged being outplayed. They have toned down all sorts of trash talk and rhetoric. They even brought this grown man to tears with the Gaudreau tribute. Truly, this was a classy team when it counted and a worthwhile victor.

Congratulations to the Americans. You won’t have any experience defending a title — it’s far harder than winning it the first time around. Good luck in the next Games!

I’m going to try talking about work this week instead. I promised a few weeks back I’d try to produce something you could learn, something of value you could take with you during the week. Way back, I wrote a very short-lived newsletter called “Toonie” that attempted to provide this sort of value. Maybe I should revive it. It was far, far more widely read than this Sunday Edition has ever been.

Where it fell short for me was in the weekly effort it took to put together that level of value for a reader. Financial writing is difficult — there are so many “it depends” and so many variables to work through, it takes considerable effort to be concise and accurate at the same time.

You Need Less Money in Retirement Than You Think

This point-of-view will probably run against prevailing advice. Delayed gratification is a good thing, they say. If you want to have fun, you’ll need to save at least, say, $1 million by the time you are 65 years of age. Because, of course, loaves of bread will be $20 when you ultimately decide to retire.

(For those who think $1 million is a lot, it’s really not. Approximately 40% of workers in Canada are funded through taxpayer dollars, and the majority of those have pension plans which hold large retirement assets. You may not be staring at $1 million in your online banking portal, but you certainly have access to healthy retirement income.)

But there’s more to the retirement income story which helps take some burden off today. You probably don’t need $1 million (or more) to retire. There are other sources of income to get you through.

The Canada Pension Plan is a very real savings asset. You can’t add it to your net worth statement, but a generally healthy retirement will yield $12,500-$20,000 a year (depending on when you started contributing and how much you contributed in your working life). When you turn 65 years of age, you also gain access to Old Age Security, or about $10,000 of additional income in the year. In total, most Canadians who worked and contributed CPP in their career, will receive upwards of $25,000-$30,000 per year. For a retired couple, you could potentially double it.

Then you can consider tax. The current basic personal amount (the amount of money you receive “tax-free”, for lack of a better term) is $16,000 federally. When you turn 65 years of age, you gain an additional $8,400 of “tax-free” income through the age amount. As a result, for many, many Canadians who receive CPP and OAS, a great deal of the income is tax-free.

So, backwards engineer the math — if a retired couple has about $50,000 (for round numbers) of tax-free income, they have $4,150 of tax-free money to spend on a monthly basis. Many don’t have a mortgage or rent. Many have lesser wants and desires. Many have a save-first attitude.

And this is the base for many Canadians. If you have any net worth of any kind, it adds to this amount. Tax becomes a consideration for all amounts above the basic and age amounts, but it’s not an unbearable amount of tax in the base brackets.

$4,150 per month is not a crazy amount of money per month, no. But it’s a strong start, and it eliminates some stress in your earning years to save for retirement.

Here’s my last comment on amounts of money you need in retirement: Remember the basic math that $1,000,000 of savings, with no rate of return at all, is withdrawn to nil at $40,000 per year for 25 years. This $40,000 adds to the $30,000 of CPP and OAS I discussed earlier. And in reality, an inflationary rate of 2% and a savings rate of 4% in a $1,000,000 savings account would require $50,000 per year in withdrawals to get it down to nil in 25 years. Now you’re at $80,000 a year in cash income (less some tax), which is more than the average Canadian salary right now.

All of this is to say: You need to save less for retirement than you think. Don’t use my words to go on a spending spree now — compounding is a very real thing when you mention retirement savings — but use it as a chance to reduce your stress and anxiety about the future.

The Second Cup

The Ultimate Color E-Ink Tablet Buying Guide

Chalid Raqami has the best e-reader and e-ink reviews on YouTube, bar none. This is an excellent comparison between the reMarkable Paper Pro, the Kindle Scribe Colorsoft, and Boox Note Air 5C. I thought the reMarkable would be blown out of the water, but appears to hold its own in certain categories.

Satchel & Page Executive Briefcase

I think I’ve found my desert island briefcase. I have likely written about it before, but there is something about the black leather option that has caught my eye.

Satchel & Page Carry On Pro Review

I’m clearly on a Satchel & Page kick. This review of the upcoming Carry On Proluggage option from Satchel & Page is splendid. I’ve saved more than a few videos from Desmond Wong to watch over the coming week.

Wes Huff on receiving the Gospel, rather than achieving the Gospel

Wes Huff continues to share the Good News in a wholly unique way.

Marcin Patrzałek Proves One-Guitar Masterpieces Are Real

This can’t be real. Seriously? I don’t think this video “proves” anything at all. But assuming it is real, this is some of the coolest music I’ve ever seen.

Current Reader

Here’s a unique new RSS app making the rounds this week. Side-note: I feel like serif fonts are making a comeback in apps these days (check out Acme Weather, a new weather app making the rounds as well). I’m here for it.

Highlight of the Week

“The best-educated and highest-earning Americans, who can have whatever they want, have chosen the office for the same reason that devout Christians attend church on Sundays: It’s where they feel most themselves. “For many of today’s rich there is no such thing as ‘leisure’; in the classic sense—work is their play,” the economist Robert Frank wrote in The Wall Street Journal. “Building wealth to them is a creative process, and the closest thing they have to fun.””

— Derek Thompson

This resonates. Seriously, seriously resonates.

Happy Sunday. I hope you have a wonderful week ahead.

P.S. — If you’d like to see this in your email inbox, please subscribe below. If you have trouble subscribing, shoot me an email, and I’ll get you on the list. Thanks for the consideration!