Author: Blue Lobster

Is Your Spending Making You Happy?

There are lots of ways to find happiness. Playing with puppies. Mastering a difficult musical piece. Finally accomplishing a goal that means a lot to you personally. However, I like to talk about money in this space so I’m asking you to consider whether your spending is making you happy.

For the record, I want it said that I don’t believe that spending is the path to happiness. No, no, no… not at all! That way leads to madness. As Dr. Seuss has taught us every Christmas, happiness is not bought at the store.

What I’m suggesting is that since you work so hard for your money, you should only spend it on things that will generate happiness for you. That could be buying an experience that means something special to you. It could be donating money to a cause that you believe in very deeply. Maybe you want to gift something special to someone else, or create a celebration in honor of someone you love very much. True, these things all need to be purchased but they’re not the same quality of purchase as a consumer good that will likely just take up space. Will buying another pair of jeans bring you the same amount of happiness as paying the vet-bill to get your fur-baby the care that she or he needs to be healthy again?

Every penny should be driving your happiness quotient up. If your purchases aren’t doing that for you, then I have to ask you to consider why you’re making that purchase.

Novelty is part of the Happiness Quotient

Every fall, various coffee companies release their version of a pumpkin chai latte. I know that this is a seasonal drink. I also know that a great many people look forward to this time of year. (I’m not one of them, but to each their own.) I can only assume that lovers of the pumpkin chai latte are very happy to have the first one of the season. If they weren’t, they wouldn’t readily spend money on them as soon as the drink became available. However, I’m not as easily persuaded that they are as happy with subsequent pumpkin chai latte’s as they are with the first one.

Once the novelty wears off, is the burst of happiness at their seasonal arrival remain as intense on the last day as it was on the first day?

Personally, I think the novelty factor is one of the reasons why experiences bring more happiness than stuff. Attending a concert with friends – traveling – enjoying a great meal! Think about your most cherished memories where you had to open your wallet for whatever reason. Would you gladly pay the money again?

Of course, great experiences can also be had for free. However, I’m talking about the experiences that might have cost you a little bit of money. Unlike stuff that can disappear into the back of a closet, a storage locker, or the garage, we remember our experiences. They’re special because they are unique to us. They have a personal novelty that is unlikely to be purchased from a retail outlet. The ones we cherish most have that 7-star rating, which will last with us for a very long time. They’re not that seventh pair of jeans that we bought from our favorite store.

Maximize your Happiness Quotient

Since people have to trade their energy and time to acquire money, it seems to me that maximizing happiness from every purchase just makes sense. I’d like to suggest that one of your goals for 2022 is to only spend money if it will make you happy. You should aim to only make 5-star, or higher, purchases at every opportunity. If you don’t feel that the 17th pumpkin chai latte is going to make you happy, then don’t buy it. The beauty of the PCL-season is that it is coming back next year.

To be clear, I’m not talking about spending on survival expenses. Food, shelter, transportation all need to be acquired. Maybe you feel happiness that you have the money to pay for your survival expenses. If so, great! Generally speaking, I’m talking about the joy generated by your disposable income, the money that’s leftover after you’ve taken care of the absolute necessities. Do you feel happiness when you spend that money?

Start by tracking your expenditures, then rate how much happiness they generated for you. One-star for “Not happy at all”. Seven-stars for “Happier than I could’ve ever dreamed!” In my humble opinion, you should only spend money if the purchase will hit atleast 5-stars on this rating scale. Anything less is a waste of your money.

Now, I ask you. If your purchases aren’t making you happy, then why are you making them? Is it just habit? Do you spend to make someone else happy? Have you subconsciously bought into the marketers’ false promise that spending money is the same thing as acquiring happiness?

Sit with yourself for a bit. Figure out if your spending choices are worthy of 5-stars or more. If the answer is “No”, then I want you to think about why that is. Each day, you’re presented with so many opportunities to spend your money. Try this experiment. Before you open your wallet, ask yourself if the purchase is going to make you happy. Articulate what it is that you think the purchase will accomplish – create a forever-memory with a loved one? Fulfill some long-held heart’s desire? Put a smile on someone’s face?

Aim to have the rating last a long time.

This past summer, the gaggle of teenagers who lived next door moved away. I miss them. They were all good kids – friendly, responsible, polite. Also, they would shovel my driveway & sidewalk for money. They were the perfect young neighbours! Mid-November of last year, I went to one of my favourite stores and bought a snow-blower. Believe me when I tell that the purchase of a snow blower rated 6-stars on my happiness scale!

On a good day, my driveway will only take 45 minutes to shovel. Then add on another 10 minutes to do the sidewalk at the front of my house. My snow-blower has cut the total time down to 25 minutes… When I finally get the 100’ extension cord I need, I expect that it will take even less time to do this chore since I won’t have to do the sidewalk with the shovel. My driveway is longer than 50’ so I’m still using a shovel for the last 10’ and the sidewalks.

My snow blower makes me happy because it saves me time on a chore that I really dislike. When it’s -30C outside, yet I still need to clear my driveway, that machine moves snow way faster than I can with a shovel. I also don’t have to worry that I’m re-injuring my wrist or my shoulder. And I’m also making the walking surfaces around my house safer for everyone. The snow-blower has continued to maintain its 6-star rating!

You’re going to be spending money in 2022. You might as well be increasing your happiness quotient while you do so. Make this year the one where you strive to only spend your money in ways that only bring more happiness into your life.

Could you afford your life without credit?

I love reading about personal finance. It’s been a hobby of mine for the past 20+ years. I’ll even go so far as to admit that I’m also an avid snoop – I love hearing about how other people spend their money.

  • Are they investors?
  • Do they like to be spontaneous with their cash?
  • Maybe their parents or grandparents are helping them out?
  • Perchance they started a wildly successful business?
  • Are they just regular folk trying to survive and have a few creature comforts for themselves?

Want to know what I’ve learned after all my many years of reading about how other people spend their money? Here it is.

There’s a persistently growing group of people who need credit to survive. These are working folks whose paycheques don’t get them from one to the next. No matter how they crunch the numbers, economize, downsize, and sacrifice, they simply don’t take home enough income to pay their expenses.

Take a good look at your finances. There’s no need to share your answer with the class. Just be honest with yourself as you answer this question:

If you had to survive on cash, would your cash run out before you got to your next paycheque?

For Some, Credit is Optional

There’s a segment of the personal finance community that loves to talk about credit card hacking. I’m not an expert so forgive my less-than-accurate description of this financial method. In short, credit card hacking appears to be a process by which cardholders maximize their points for extremely discounted or free travel, hotels, car rentals, etc… These cardholders are diligent about how they use their credit cards each month to maximize these benefits. Most importantly, THEY NEVER, EVER CARRY A BALANCE ON THEIR CREDIT CARDS.

And while travel cards are not my preference, I can certainly see the advantages. I have two friends, each of whom has 4 children. Every so often, my friends like to travel by air for family vacations. Believe you me, they make extremely good use of their travel rewards credit cards. Flight expenses for a family of 6 are very expensive. It only makes sense to use a credit card that will result in one or two of those airline tickets being free or otherwise extremely discounted.

In the interests of transparency, I freely admit that I use a credit card that saves me money on groceries. I use the card – I earn points towards food – I pay off my credit card charges long before the due date. If I had to pay for a gaggle of airline flights, I’d probably use a different credit card.

For Another Group, Credit is a Requirement

There’s another group of people who use credit cards for reasons that aren’t driven by economizing on life’s little luxuries. These are people who need credit because their paycheques are insufficient. They don’t make enough money to pay for rent, food, utilities, and transportation. To be blunt, their paycheques do not cover the basics. It’s not a situation where people have to cut back on cable for a 3-4 months to pay off a debt. I’m talking about those who have already cut their expenses to the bone… and are now digging into the marrow. These are folks who are at the financial bottom, even though they’re employed.

For these people, access to credit gives them a way to survive from one paycheque to the next.

Do not misunderstand me. I am not for one second saying that this a good way to make ends meet. It is not. The rates of interest charged on credit cards should be criminal. However, using credit is the next best way to buy your necessities of living if you’re not able to further slash your expenses and your efforts to earn more money have failed.

I’m going to suggest that those who could live on cash have some empathy for those who can’t. Put yourself in the other’s shoes. Again, no need to share the answers with the class. Just be honest with yourself.

  • Let’s say you’re paid bi-weekly, i.e. every 14 days. Yet your paycheque only allows you to buy 12-days worth of food. What would you do? Would you willingly be hungry for 2 days or would you use credit to bridge the gap?
  • You need your car for work, and it breaks down. There’s no reliable public transportation near you, and your co-workers don’t live nearby. Do you look for another job near home? Or do you use credit to fix your vehicle so you can maintain your livelihood?

These aren’t terribly far-fetched scenarios. People find themselves in these situations every day. When they don’t have the cash to pay for the repair, or to feed themselves, they turn to credit.

Life Can Be Expensive When You Don’t Have Enough Money

Even if you had an emergency fund, there’s no universal rule that life won’t throw you another emergency before you’ve had a chance to rebuild your fund.

Credit provides a lifeline, an immediate solution to a financial problem. The real issue is that the cure is as bad as the disease. For those at the bottom of the economic ladder, relying on credit is just as bad as not having sufficient money to pay for their costs of living.

It’s not a situation of using credit and paying it off in full, while earning a low income. People in that situation could live on cash, but use credit for other reasons. Maybe they’re earning points. Or perhaps they’re building their credit score. At the end of the day, they set aside their cash to pay off their credit card balances in full. Their income may be low, but it’s enough to get them from one paycheque to another. They simply use credit in place of cash, but they never fall into the trap of carrying a credit card balance.

My concern is for those who need to use credit because their cash isn’t enough. Life isn’t getting any cheaper. A few weeks ago, we found out that inflation in Canada had hit 4%. That’s not great, especially when your income doesn’t grow in step with inflation. For those who have disposable income, now they have just a little bit less of it. The people who were just making it from one payday to the next… well, they may not be able to do it anymore. When gas, groceries, rent and utilities all increase, while income stays stagnant, doesn’t it make sense to rely on credit if you can? Even if it’s going to cause problems later on?

Again, I ask you…

…Could you afford your life without credit? Do you earn enough to live on cash?

There are no easy answers when the belt has been tightened as tight as it can go but there’s still not enough money. If I were wise enough to have the answers, I would share them with the world. Like most of the chinwag that emanates from personal financial bloggers, my suggestions and insights are for those who already have money. Solving the problem of people not having enough money to begin with is beyond me.

In a perfect world, incomes wouldn’t have to be supplemented with credit. Paycheques would be enough to cover the survival expenses, to invest, to save for emergencies, and to buy a few little extras. That isn’t the reality for everyone. So as we start 2022, I urge you to have some compassion and kindness towards those who aren’t fortunate enough to have to have extra. Please don’t judge them for the choices that they make. They’re doing the best they can.

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.

Emergency Funds have to keep up!

A few weeks ago, I wrote about how inflation is a money-eater. I stand by that statement. Inflation makes everything more expensive. My cost of living is going up but my salary is staying the same. In light of inflation’s impact, I’m tweaking my emergency fund to account for it. In short, my emergency fund needs to be bumped up by the rate of inflation.

Back in the day, I devoured the idea of having $1,000 set aside for emergencies while I paid off debt. It’s one of the Baby Steps espoused by Dave Ramsey in his book The Total Money Makeover. Twenty years ago, I had student loan and vehicle debt. Once those loans were paid, I worked hard to save up 6 months of money in an emergency account.

Eighteen years ago, when the book was first published, $1000 was sufficient to cover a month’s worth of my fixed expenses. Today, that same amount just barely covers my variable expenses. Today, I’d still have to find another $1000 – $1500 to cover my fixed monthly expenses. Keep in mind, that’s without the burden of a mortgage payment. In my circumstances, a $1000 starter emergency fund is certainly better than $0 but it’s definitely not enough to cover my bills for an entire month.

It strikes me that while the idea of having $1,000 on hand as a starter emergency fund is a good one, the amount is too bloody low. I paid off my debts 20 years ago. According to this handy-dandy inflation calculator, the same $1,000 from two decades ago is worth $1,503.76 today.

It’s no secret that I’m a fan of the emergency fund. In my opinion, it’s good to have money set aside for when the sh*t hits the fan. You owe it to yourself to make sure your emergency fund grows in lock-step with inflation. This particular pool of money won’t help you as much if it’s insufficient to cover your bills when faced with that inevitable emergency.

You know your own numbers far better than I ever could. And if you don’t know your numbers, then it’s time to start tracking them. Having a handle on your money is an integral part of self-care. When your fixed monthly expenses go up, then your emergency fund must be adjusted accordingly. Imagine that you’ve suddenly lost your source of income. The reality is that you’d still have to pay for your shelter, your transportation, your utilities, and your debts. This isn’t the time to rely on debt. Streaming services, wine subscriptions, cable, gym memberships! All of your variable costs should be on the chopping block. Reduce or eliminate these expenses until your income is solid again. They shouldn’t have too much impact on your emergency fund.

So when you hear that inflation is going up by 4% annually, do what it takes to boost your emergency fund! Even an few hundred dollars will help. I’m not saying that you have to bump it up all at once. What I am suggesting is that you squirrel away $5, $10, $20 into your emergency fund every chance you get. Those little dribs and drabs will add up over time. Trust me when I say that no one ever regrets having money set aside during an emergency.

Again, your emergency fund has to keep up with inflation. There’s no way around it. It’s your responsibility to make sure that emergency funds are in place when you need them. And if you’re going to have a starter emergency fund, please make sure that you set aside more than $1000. That amount was chosen nearly two decades ago! Believe me – it’s no longer enough to cover more than a moderately expensive car repair.

Spending Season is Back!

If my various timelines are to be believed, Black Friday is officially next week.

Retailers are running their marketing departments ragged, now that spending season is back. They want you online and in stores, wallets open! You are the prey and their inventory is the bait. They want your money and they want it bad. The question you have to ask yourself is: do you want your money more than they do?

You’ll note that there won’t be any Black Friday sales on your rent/mortgage, your transportation costs, your utilities, your credit card bills, or your other debts. Nope! Those expenses are fixed, and no one’s giving you a break on those.

However, the sales will be on the want-to-have’s, the nice-to-have’s, the things you think you need to Keep Up With the Joneses! And I’m not claiming to be a saint in this arena. For the past 2 weeks, I’ve been debating whether to buy myself a Danish dough whisk. I’d never heard of it until I saw it being used by someone on YouTube. I own a stand mixer, a hand mixer, several other whisks, and a dozen forks. On a scale of 1 to 10, my need for a Danish dough whisk falls at -2. Yet… if I get a good enough Black Friday “deal”, I just might buy myself one.

And the retailers are collectively betting that enough of us consumers will go wild next Friday because everything will be on sale, so why not?

It’s your money so you do whatever you think will make you happiest. I’m not here to stop you from spending your money. You earned it so you get to decide where it goes.

What I am going to do is ask you if you’ve really thought about why you’ll be spending money next Friday. Is it because you’ve waited all year and this is your treat to yourself? Maybe you’ve priced out everything for those one your Christmas list, the prices really will be cheaper next Friday, and you’ll save money? Or is it that shopping on Black Friday is a family-and-friends tradition that you missed out on in 2020 due to COVID-19? Could it be that you’re one of the very luck ones for whom money is no object so you’re free to spend with abandon?

In you’re inclined to start shopping, you should ask yourself if the shopping gets your closer to or further from your long-term financial goals. Will shopping next week help you make your dreams come true? You work so hard for your money that it would be a shame for you to fritter it away on stuff. Do not spend just for spending’s sake.

Way back in pre-pandemic times, the last 5 weeks of the year were a flurry of spending. There may have been travel, whether by plane, bus, car or train. Nearly always, there was entertaining – hosting parties or attending them. Delicious holiday food was everywhere! And the opportunities to shop were endless. After all, Black Friday was quickly followed by Cyber Monday – another day devoted to plucking the dollars from your wallet.

I anticipate that the last few weeks of 2021 are going to more closely resemble life before COVID-19. People want to get back to normal, and that’s understandable. This pandemic has been awful, for any number of reasons! We all want it in the rearview mirror as fast as possible. Personally, I don’t think it’s wise to revive bad spending habits that may have been curtailed in 2020.

Yet, I’m going to urge you to consider exercising a bit more restraint in respect of your spending this year. Do you really need to derail your long-term financial goals to show love to your family and friends? Might there be a way to enjoy the holidays without spending a ton of money? Will the few moments of novelty be worth the credit card bills that will inevitably arrive?

Spending season is back, but you need not be its victim. Determine how much you have to spend. Make a list of where you want to spend your money. Stick to you list. Enjoy your time with family and friends, but don’t undermine your life’s dreams to do so.

One Less Impediment!

For those about to invest, we salute you! There is now one less impediment between you and your financial goals.

Back in the dark ages, which is when I first started my investment portfolio, buying securities through a brokerage was expensive. For many years, I had automatic contributions withdrawn from my bank account by a private investment company. While I was busy learning about new products, individual investors were gaining the ability to access various products due to the rapid growth of technology. By the time I had learned about exchange traded funds and the importance of low management expense ratios, it was relatively cheap to do online transactions with my brokerage. It took some convincing but I finally moved my portfolio from the investment company to my brokerage. Regardless of who held my portfolio, I continued to dollar-cost average my way into the market each month.

Today, I’m happy to write that market competition has partnered with technology to make investing even easier for today’s investors.

As the number of financial services firms expands, the Big Banks are being forced to stay competitive with trading platforms that offer commission-free trades. This means that the banks’ brokerage arms allow customers to buy certain securities without paying a commission. In other words, it’s free to invest your money in more and more places!

This is is fantastic news. Why? It normally costs $9.95 to place a buy/sell order. For people who believe in dollar-cost averaging into the market, it costs roughly $10 each time a purchase is made. Long-time readers know that I divert a chunk of my paycheque to my investment portfolio every payday. Every 4 weeks, I buy more units in my chosen exchange-traded fund (VXC). I care not whether the market is up or whether it’s down. My plan is to buy and hold for the long-term. The execution of my investment plan is simply: buy more VXC units every 4 weeks and hold onto them.

So I was tickled pink when my brokerage*** announced that it would allow customers to purchase certain securities without paying a commission. My favourite dividend ETFs were both listed (XDV & VDY). Unfortunately, my happiness bubble was quickly pricked by reality. The fates have conspired to keep my equity ETF off the list of the commission-free securities!

This is great news!

Even though I’m still paying commissions, it’s fantastic that there are now so many commission-free options from which people can choose. The upshot is that there is one less impediment between people and their investment goals. Fees, MERs and commissions are all hurdles to clear on the journey to your investment goals.

Think about it. Any money that is not paying for commissions can be re-directed towards investing for your future. You and I both know that compound growth needs time to work. The sooner you start investing your dollars, the better.

Commission-free investing means that you can invest more frequently. Like I said, my dollar-cost averaging plan entails monthly purchases. I made 13 trades each year since I invest every 4 weeks. However, should there ever come a day that my ETF of choice makes it onto the commission-free list, I will be buying more units every two weeks.

Why increase the frequency of buying? Two simple reasons. It would be free to buy more frequently. Also, my money can’t grow unless it’s invested. I want to give compound growth as much time as possible to work its magic.

Do your due diligence.

My brokerage is with one of the Big Six banks. I’d be surprised if all of the big brokerages didn’t have their own list of securities that can be purchased commission-free. If you’re already investing, find out if you still need to pay commissions. And if your brokerage isn’t offering commission-free trades, ask yourself if its other benefits are worth paying commissions. If not, move your portfolio!

I spend a lot of time telling you to be cautious about the management expense ratios that you’re paying. (Again, any MER over 0.50% is way too high!) Commissions are another area where you should be paying close attention. Most big banks will charge you roughly $9.95 to make a trade through their online brokerage platform. It will cost even more if you make the trade over the phone with a human being, assuming that you can connect to real live person.

If you’ve already started to invest, then great – keep it up! Should your securities be on a commission-free list, even better. Now, you can bump up your contribution amount by whatever amount formerly went to paying commissions. Compound growth works faster if your money is invested now instead of later.

And if you’ve not yet begun investing for the Care and Feeding of Future You, what are you waiting for?

There is one less impediment to doing so. Start today!

*** Full disclosure – my investment accounts are with BMO Investorline. While I’d prefer to not pay a commission, I’m certainly not going to alter my investment plan due to this situation.

Buy and Hold Works!

As a non-expert financial person, my advice to nearly everyone is to adopt a buy and hold strategy because it works over the long-term.

When the pandemic was declared in March 2020, the stock market took a dive. And it wasn’t a sweet, gentle decrease either. It was a stomach-churning drop that saw me lose 1/3 of my portfolio’s value in the space of three weeks. At one point, I just stopped checking the value of my holdings. It was simply too painful!

Despite the drop and despite seeing years of growth wiped out in a matter of weeks, I continued to buy and hold. Every two weeks, a chuck of my paycheque went to my investment account. I stuck to my routine of buying units in my exchange-traded fund. In a world gone topsy-turvy due to a brand-new-to-humans virus, my investment schedule was the one constant that I could rely on.

Besides, I had learned my lesson from earlier market crashes. Back in 2011, the stock market crashed. I made a monumentally regrettable error when I stopped my contributions.

Wrong choices.

I was scared and naive, and I didn’t understand that the market crash was the very best time to be buying into the market. I wanted to wait for the market to recover a bit before adding new money to my portfolio. In reality, I should have been shovelling money into my investment account. Making hay while the sun rises and all that jazz.

Instead, I sat on cash in the bank for six months until I realized that I was being stupid. Who was I to know when the perfect time would be to re-start my contributions? I might be many things but a stock picking expert I was not!

So I picked a day and I just started investing again. And I haven’t stopped. As my income went up, I increased my bi-weekly contributions accordingly. A big chunk of each raise went to my investment account, while a little bit stayed in my pocket to increase my lifestyle. It’s the whole balancing act behind the principle of Save-Some-Spend-Some.

Instead of tying myself into knots trying to determine the very best time to invest my money, I simply invest my money every two weeks like clockwork.

COVID-19 didn’t matter

When the pandemic hit, and one third of my portfolio was obliterated in less than a month, I didn’t worry about my investment portfolio. I won’t say that I enjoyed seeing the daily decreases in my investment balances. What I will say is that I decided not to repeat the mistakes I made in 2011.

With age, comes wisdom… or so I’ve been told. In my case, there was truth to these words. Having missed an incredible investment opportunity 10 years prior, I vowed not to make the same mistake this time around. Even though the rollercoaster that is the stock market downward on one of its biggest descents, I continued to invest my money. I told myself that the losses would be short-lived and that my portfolio would recover.

My words proved prophetic. As anticipated, my portfolio has recovered quite nicely and I’m ahead of where I was just before COVID-19 became a permanent part of our world. I’m quite confident that the Care-And-Feeding-of-Blue-Lobster-Fund will be perfectly capable of replacing my income when the time comes that my employer and I part ways.

If nothing else, the pandemic has solidified my belief that buy and hold works. It’s a simple and straightforward strategy that works because you don’t have to tamper with it too much. The investor has two main hurdles. One, she has to open an account and start contributing. Two, she must continue to contribute while ignoring the talking heads, aka: financial experts who haven’t achieved notable wealth.

The investor doesn’t have to worry about timing the market. Buy and hold works because it puts the emphasis where it should be, on time in the market. It solves the problem of which stocks to buy. Purchasing units in a broad-based equity exchange traded fund means that the investor is buying into a diversified group of stocks. Stock picking is not involved. And that’s fantastic since analysis-paralysis is one of the biggest impediments to success in investing.

It makes sense, doesn’t it? If you happen to pick the wrong stock and lose money, then the odds are good that you won’t be overly eager to invest even more money into the stock market. You might even decide that you’ll never invest in the stock market again. To each their own… but that’s not a great response to having your butt kicked in the stock market.

My Next Steps…

The next move for me will be the same one I’ve been making for the past 10 years. When my paycheque hits my account, a big chunk of it will be automatically siphoned off and sent to my investment account. And on the appointed day, I will buy more units in my chosen investment vehicle. No muss, no fuss. There will be no worry about when to invest. And I won’t spend any of my precious, precious time on trying to find the next Tesla stock.

Instead, I will stick to what has worked in the past and what promises to work in the future. They say that there are no guarantees besides death and taxes. And they may very well be right. I’m going to propose that the buy and hold strategy ought to be viewed as guaranteed-adjacent.