…and your loved ones
a very Merry Christmas!
Month: December 2021
Stick To Your Knitting!
This past year has cemented a long-held suspicion of mine when it comes to money. No one knows what the future will bring. People can prognosticate all they want, but that’s hardly a guarantee that their words are accurate.
For months, the Hair-and-Teeth set of the financial media have been talking about the impending crash. They keep saying that a bear market is around the corner. Their message has been consistent, yet… it’s also been wrong. I’ve no doubt that the market will crash at some point, but I’ve also no doubt that they have no idea when it will happen. From where I’m sitting, it’s safe to ignore the chinwag from the prognosticators.
Secondly, there’s been non-stop chatter about the impending increase in mortgage rates. Will rates stay low forever? Nope – they won’t. Has anyone said exactly when they’ll go up? Nope – nothing definite. The last I heard, mortgage rates will start going up at some point in the future. No one knows exactly when, nor does anyone know by exactly how much they will rise.
I understand that financial media outlets are businesses. They exist to make money. In order to do so, they sell financial news. The fact is that they won’t make a profit telling us to invest 20% of our income into equity-based exchange-traded funds. That’s not sexy. It certainly isn’t alarming. Such advice is so bland that it’s equivalent to unbuttered toast. There’s no sizzle so the Hair-and-Teeth set divert our attention and ruffle our feathers with the sexy stuff, the stuff that can be carefully crafted into a fear of what the future might bring.
My advice? Ignore the talk.
Here are a few good reasons why.
They’re not talking about your personal circumstances. Sure – maybe you have a mortgage. And it’s possible the rate is going up in 5 years. It’s equally possible that this is your last mortgage term and you’ll never have to make another mortgage payment again. If that’s your case, what do you care if mortgage rates are going to go up?
Secondly, the 30-second news blurbs are only presenting one perspective. The soundbites are never designed to present options and alternatives. If the market crashes, so what? It’ll go back up. And if you’ve diversified your portfolio through the appropriate mix of equities and bonds, or if you have a long enough time horizon, the next market crash will be an inconvenience. It won’t be a catastrophe. Yet, you’ll never hear the Hair-and-Teeth set discuss any one financial topic in-depth. They’ve got advertisers to whom they are beholden. They present one viewpoint, and that’s it… until they become beholden to another advertiser.
The best reason to ignore the chinwag is because you have a life to live. Take 30 minutes to set up an automatic transfer to your investment account. Spend another few minutes arranging for your investments to be purchased on a regular basis. Ensure your transfers are working as you wish, then go about pursuing your other life goals. You shouldn’t be worrying about your money all the time.
For my part, I’m a buy-and-hold investor. I have been for nearly 30 years. Last year, I tweaked my investment plan just slightly. I’d been a strict dividend investor for decades, which means I’ll earn just over $29,000 in dividends this year. Looking back, I think I erred in not investing my cash in equity ETFs. The stock market was in full growth mode from 2009 to the onset of the pandemic. I could’ve grown my portfolio a whole lot more…<sigh>… live and learn. I can’t complain too, too much. After all, nearly $30,000 per year from passive income is superb. My choices couldn’t have been too, too bad if they’re resulting in that many dividends every year.
My little tweak has been good for my portfolio. I’ll hang on to my dividend investments, unless someone presents a really good reason why I shouldn’t. Future monies will be invested into my equity-based ETFs. Those have done pretty well for me over the past year. Will they be impacted when the bear market eventually arrives? I’m sure they will be. At the same time, I’m equally certain that they will recover as the stock market does. In the meantime, I’ll be buying units each month with nary a regard to whether the market is up or down.
I’m going to suggest that you be like me. Invest your money and let it do its thing. You need not follow nor adhere to the words generated by the Hair-and-Teeth set of the financial world. Just like you, they can’t tell the future. No one can. So stick to your knitting. Create a plan. Execute the steps of your plan. Live your life. Everything else is noise.
Do What You Can to Achieve to Your Dreams!
The TFSA contribution amount for 2022 is $6,000. And the very best day to make that contribution is January 3, 2022, so that your money is invested as soon as possible. The sooner you contribute to your TFSA, the better since tax-free growth only starts once the money is deposited.
What’s that, you say? You don’t have $6,000 lying around, waiting to be invested? Your money tree isn’t casting off riches in the dead of winter?
No worries, my dear Reader. You start where you are and you do what you can. Right now, many of us are in the thick of holiday activities. After last year’s lockdown, there’s a good chance you’re itching to see family and friends in person. (And if you do, please be very, very careful and follow guidelines for not spreading COVID-19 as you go about your merry-making!) There might be some shopping or baking or carolling in your plans. Perhaps, you’re walking around to see the festive light displays of neighbours and town centres.
I can certainly understand that you probably have other things on your mind at this time of year. I myself still have a number of things to cross off my To-Do list before Santa Claus makes his appearance in two weeks. At the top of that list is remember to be nice instead of naughty… tough to do when we’re all a bit stressed and crazed by the madness that seems inherent in holiday preparations.
Be that as it may, believe me when I say the following. You still have to do what you can to achieve your dreams. Let’s be honest here – no one else cares about your dreams as much as you do. They’re too busy working on their own dreams, aren’t they? The reality is that you have to know yourself in order to prioritize that which is most important to you and to direct your money accordingly.
Dreams cost money. Coming up with $6,000 at the drop of a hat isn’t easy for the vast majority of us. No argument there! Yet, it’s likely that you could find $5 a week – maybe even $20? Start with that. Set up an automatic transfer from your chequing account to your TFSA and get in the habit of contributing regularly. As your budget allows, increase the transfer amount. Your goal is to stuff your TFSA without going over the current contribution limits. Unless you have a lot of disposable income, contributing the maximum amount will not be super-easy. Don’t feel bad that it might take you longer than someone else to get the money into your TFSA. At the end of the day, the most important element of this whole endeavour is to get the money into your TFSA. The speed with which you do so is secondary.
As you pay off debts, increase your contribution amount. Truthfully, $6,000 per year is $115 per week. That’s a good chunk of money, so work up to it. Did you get a raise? Great! Save half and spend the rest. Did you pay off your car loan? Awesome! Re-direct 75% of your former payment to your TFSA. Student loans finally gone? Let the good times roll… but first make sure that two-thirds of your former payment are re-directed to your TFSA. Money from Santa? I think you know what to do – save a good chunk and enjoy the rest!
Hey! I’m not going to quibble over the precise amount. You’re more familiar with your own numbers better than I am. My suggestion is based on personal observation. Money that isn’t immediately re-directed from a former payment to an investment of some sort inevitably get absorbed into the costs of daily living. I don’t always know how it happens, just that it does.
One of the best things about the TFSA is also one of its worst features. Your contribution room rolls over to the following year if you don’t use it. That means, if you don’t put money in today, then you can put it tomorrow. I strongly urge you to no delay your contributions. Money that isn’t invested will never benefit from tax-free growth!!!
Yes – that’s right. I said tax-free growth. TFSA is an acronym for Tax Free Savings Account. It still confounds me that the Powers That Be didn’t call it a Tax Free Investment Account. Your TFSA need not be limited to savings accounts. Considering that inflation is decimating the rate that you’re earning in a savings account, you need to have your TFSA invested in an equity ETF. Over the long term, equity investments outpace both savings accounts and inflation. It can be a bumpy ride but your odds of seeing growth in your portfolio go up tremendously with investments in equity.
The TFSA is too amazing of a tool for you to ignore. Find a way to get your money invested within your TFSA as soon as possible. If you can’t make the maximum annual contribution, don’t fret. Just do what you can!
Start today to make your dreams come true!
In 4 short weeks, the new year will have arrived. Hooray! Happy, happy, joy, joy! Kiss kiss to everyone!
I don’t know about you but I don’t believe in new year’s resolutions. If I think changes to my life are going to make it better, then I’m going to implement those changes as soon as possible instead of delaying them to some arbitrary day in the future.
That said, I do set financial goals each year. These goals help me to prioritize my sinking funds. Even though I might want all the things, my wallet only stretches so far so I can only get some of the things. Retirement is very, very important to me so I’ve got money set aside to fund my TFSA. And the plan is to start saving for 2023’s TFSA contribution with my very first paycheque of the new year. After all, next holiday season is hardly the time to start looking for $6500 – fingers crossed! – to contribute in January of 2023. Am I right?
Pre-pandemic, another huge financial goal of mine was paying for travel before going on any trips. I was very fortunate as I’d been able to take atleast one great trip every year before COVID-19 arrived. I’m fervently wishing that vaccination rates increase quickly around the globe so that I can get back into the routine of traveling.
Then there are the minor details of running a household and being a grown-up. You know, things like property taxes and insurance premiums. While not sexy, I do take pains to pay for these expenses in annual lump sums every year. I really hate automatic withdrawals, so I work hard to avoid them. My practice is to look at last year’s amount for these bills and then increase them by 10%. If I’m lucky, I’ll have saved a little bit over the prior year’s amount.
Don’t think I forget about fun! Not a chance! Pre-pandemic, it was easier to budget for my contributions to the arts. I love going to the theater. I’ve had a subscription to Broadway Across Canada for years. These past two seasons, I’ve sorely missed seeing my scheduled productions. I cannot stress this enough – vaccinations are the key to me being able to fully enjoy this aspect of my life.
Making my home a little cozier will take money. I plan to age in place, so I want make changes to my home that I’ll enjoy for a long time. The goal next year is to pay cash for new blinds in several rooms of my home. I might also have the frames around my windows replaced. Who knows? This might even be the year that I get my home repainted. I’ve never been a fan of the current wall colour, but I’ve also been so busy gallivanting that I haven’t had extra money to hire a painter. See what I did there? Travel was a bigger priority than paint colours, so the money went to travel and my walls stayed meh.
Now that I’m keeping travel on hiatus, money can go towards goals that used to be a bit lower on the priority list.
Is there any way that you would consider planning out your money on an annual basis? Obviously, your priorities are going to be very different than mine. In my very humble opinion, the very best way for you to maximize the odds of you achieving your priorities is to structure your money to pay for them. Maybe you want to adopt a pet? Start a business? Take some courses? Move to another city or country? Upgrade your Christmas tree decorations?
Okay… so maybe we do share that last goal. While decorating my Christmas tree this year, I decided that I’d like a few more blue ornaments. I’ve already started checking out the sale prices on ornaments at various stores. Since I’m a huge fan of buying Christmas decorations after the holidays, I’ve tucked away a little bit of money to do so. I’ve found what I want. It’s already 33% off. Now, I just have to decide if I want to gamble on the price dropping considerably more before the ornaments I want are all sold out.
The fact is that 52 weeks goes by very, very quickly. And there will be multiple opportunities for you to spend money that you might not have intended to spend. Having a plan in place, along with the automatic transfers and sinking funds, means that your most important priorities are funded first. Then you can spend the rest however you wish.
Maybe you’re the sort who needs to write down their goals? That’s okay. Today, I learned about the YearCompass. I’m going to try their system and see if it helps me to finesse my current process. One of the reasons I decided to try YearPass is that it helps people create goals in all areas of their life. This would be good for me. Check it out. Maybe it’s a tool that you would also find useful. Maybe, it’s not. You won’t know until you give it a look-see.
Again, there’s no need to wait until January 1 to craft your financial goals for 2022. I know that most of us want to visit with family and friends. Many of us lost the opportunity to do so last year, so we feel a need to make up for lost time. I’m urging you to take a few minutes to figure out what you want in the new year, and to think about how you’ll fund your goals. After all, the best use of your money is to spend it in ways to create the life that you truly want.
Start today!