Author: Blue Lobster

Three Simple Steps to Master Your Money.

At the time of publishing this post, there are less than 60 days left in 2024. You might want to start thinking about your dreams and goals for the new year. Whatever yours are, I’m going to suggest that learning to master your money should be one of your goals. After all, you’re the person earning the money and you should be firmly in control of what your money does. Trust me. Life is better is when your money works harder for you than you do for it.

There’s no need to wait until January 1 to make the following suggested changes. Believe me when I say that you’ll want to master your money sooner rather than later. Start today.

If you’re a person who likes to make resolutions, then you can implement these three steps on New Year’s Day. Everyone else, I would strongly encourage you to do start following these steps immediately.

Top Up Your Emergency Fund

The goal is to have one year’s worth of necessary expenses set aside. I know that most experts recommend 3-6 months’ worth of expenses. Personally, I don’t believe that this is enough. You’re free to disagree with me, of course. The reality is that it’s better to have a bigger emergency fund than you might need. When your income disappears, you’ll want to have as much set aside as possible to tide you over until you get another paycheque.

Your next job might pay you less than you were earning before. It might take you longer than 6 months to find your next position, or to start earning money from your own business. Being unemployed is a bad situation. Going into debt to pay for living expenses while unemployed makes the situation considerably worse.

Do yourself a favor and set aside more than you need. Your necessary expenses are your shelter costs, your basic utilities, your food, your transportation, your medications, and your phone. If you have pets, then you need to cover their costs too. Everything else should be put on hiatus until you get another source of income.

For most people, it will take some time to hit this target. Setting aside a year’s worth of expenses won’t be quick. There will be many, many temptations along the way to spend re-direct money away from the task of building your emergency fund. Do yourself a favor. Set up an automatic transfer from your chequing account to your emergency fund. This way, you don’t have to think about funding your future emergencies as it will happen automatically through the magic of technology.

Invest Your Money

First things first – track your expenses. Ideally, you’ll do this for a month. Write down what you spend. Figure out which expenses were necessary (see above) and which ones weren’t. Of the second group, identify the ones that don’t make you happy and promise yourself to eliminate those ones in the future.

Whatever money is cut needs to be re-directed towards your investment portfolio. Your investment portfolio consists of registered accounts and your brokerage account. Your registered accounts are your Tax Free Savings Account (TFSA) and your Registered Retirement Savings Plan (RRSP).

Fill your registered accounts before you start contributing to your brokerage account. The TFSA will not generate a tax deduction but the money will grow tax-free forever. You can also withdraw money from your TFSA without paying taxes. The RRSP money is tax-deductible, and money inside an RRSP will grow tax-free. Once you start to withdraw the money, you’ll pay taxes on it. Fill your TFSA to its limit, then focus on filling your RRSP.

Once you’ve filled your registered accounts, then you can open a brokerage account and re-direct your investment contribution. Money invested in your brokerage account is not tax-deductible, and you do have to pay taxes on it every year. Ideally, you’ll be investing in securities that generate dividends and capital gains for you. Dividends and capital gains are not taxed as heavily as interest earned in a bank account or from GICs.

Follow this order of investing every year: TFSA -> RRSP -> Brokerage Account.

If you’re starting from scratch, it might take you a few years to fill up the registered accounts. That doesn’t matter. You’re trying to build a nice, fat money cushion for Future You. Consistency is key, so don’t worry about how long it will take. Just start today and don’t stop.

Pay Off Debt

Ridding yourself of debt is just as important as long-term investing. I don’t want you sacrificing one for the other because you need time on your side. You need to have money invested so it can compound for as long as long possible. This is why you should be investing at the same time that you’re paying off debt.

After you’ve eliminated the debt, you will have a hard-working investment portfolio in place. This is a wonderful thing! It means you won’t be starting from $0 if your debts aren’t gone until you hit your 50s or 60s.

Tighten your belt and learn to say “No”. If you have debt, then I want you to do the following.

Take half of your contribution amount and direct it towards your debt. Allow me to be very clear. You’re already paying the minimums on your debts every month. Half of amount that would’ve otherwise gone to your investments will be added to the minimum payment of one of your debts. An increased payment dramatically shortens the time it will take to pay off a debt. Once debt #1 is gone, add that entire former payment from debt #1 to the minimum payment of debt #2. When debt #2 disappears, add the entire former payment that was going to debt #2 to the minimum payment for debt #3. Repeat this cycle until all of you’ve paid off all of your debts.

Do not get bogged down in deciding whether to use the Debt Snowball Method or Debt Avalanche Method. It truly doesn’t matter. The only thing that matters is your decision to start paying down your debt today.

Both methods will get your out of debt. Personally, I like the Snowball Method since it eliminates the smaller debts first. Paying down debt sucks, so seeing wins as soon as possible makes people feel good.

Once you’ve paid off your debts, take the former debt payments and re-direct them to your registered accounts and your brokerage account.

That’s It. That’s the Plan.

Once you’re out of debt, stay out. Save up for large purchases so that you don’t have to finance them. The one exception is your mortgage. Even I will admit that this is the one purchase where financing is nearly unavoidable without a lottery win, a big insurance settlement, or an inheritance.

Keep your emergency fund fully-funded. If you need to use it, then make it a priority to build it back up again. Life can be funny. There’s no rule saying that only one emergency is headed your way.

Invest for the long-term. Put your money into well-diversified, equity-based securities. Personally, I like exchange traded funds (ETFs) more than I like mutual funds. For nearly the same security, ETFs will cost you atleast 80% less. Read The Simple Path to Wealth by JL Collins. While it’s written for an American audience, the savings & investing principles are equally applicable to Canadians.

You’re already doing all of these things, you say? Fantastic! Use this time to tweak your system, if necessary. Consider increasing your emergency fund by 3%, just to keep up with inflation. It’s never a bad idea to increase your contributions to your brokerage account by an additional 1%. Taking this step every year will make a big difference in how much your accumulate. It bears repeating – once your debt is gone, keep it gone.

That’s it – that’s the plan to master your money. If you do these three things, then you’ll be setting yourself up for success.

Everything else is details.

Got a Pension? Ensure You’re Investing on the Side.

This post is about the importance of you investing for your future, regardless of whether you have a pension. At its heart, a pension is simply deferred compensation. Your employer is promising to pay you money when you presumably are no longer able to earn a living. In exchange, you give your loyalty and service for the best years of your life. Undoubtedly, your pension can be a very lucrative part of your compensation. That said, you need to understand that it’s not the be-all and end-all of your retirement planning.

My intention is to motivate you to think about how you’ll survive if your pension up and disappears and you can’t get the pension that was promised to you. I want you to think about this possibility today, not tomorrow. What would you do if that happened to you? You retire then find out that your pension is gone, or that your promised amount has been cut?

It’s never prudent to rely on someone else to secure your financial future. Ultimately, you’re the person responsible for your future financial comfort. While you’re earning a paycheque, it’s in your best interests to always pay yourself first. Having your own investments growing alongside your pension is never a bad idea. The truth? No one cares about your financial well-being as much as you do.

Do Your Own Investing Too.

There are 2 kinds of pensions. Both you and your employer make contributions to your pension. At its core, a defined benefit pension is one where the employer has full responsibility for ensuring that there is enough money to pay you a fixed amount every month once you’re retired. The other kind of pension is a defined contribution pension. This is the one where you have the responsibility for picking the correct investments so that there is money available for your employer to pay you when you retire. Under the DC pension, it’s up to you to decide how the money is invested.

Whichever pension you have, I’m here to tell you that you should always invest outside of your pension. Personal investments are your insurance in case your don’t get the money you were promised, for whatever reason. Pensions are promises to pay you in the future. Sometimes, pensions fail. Think of Sears. When that company went bankrupt, its pensioners – aka: retirees – lost 30% of their promised pension payments. You do not want to be a retiree who, through no fault of your own, loses 30% of your pension.

Your best protection against a possible pension cut is to have your own retirement money. This means that you should be maximizing your contributions to your RRSP and your TFSA. Doing so might take you a long time, but that doesn’t matter. Do it anyway. Once you’ve stuffed those registered accounts to the gills, then go and open a brokerage account so you can start investing in well-diversified, equity-based exchange-traded funds.***

Blue Lobster, I don’t understand. How does investing on the side prevent my employer from cutting or reducing to my pension payment after I’ve retired?

Your Investments Are Your Back-Up Plan.

Good question. Strictly speaking, your personal investments won’t prevent your employer from going bankrupt or from fraudulently raiding the pension funds. Instead, they are going function as the back-up plan in case something very bad happens to your pension. In the extremely unfortunate event that your pension is snatched away from you, your investment portfolio needs to take its place. Instead of a pension, it will be your investments paying you enough to live until your last breath.

Ideally, your standard of living will stay the same when you part ways with your employer. Once retired, you’ll still need to pay for your shelter, your food, your utilities, and all of your other expenses of life. It doesn’t matter if the money comes from your pension or your personal investments. Money is needed and it has to come from somewhere. Do yourself a huge favour and make sure that you have enough on the side just in case something happens to your pension.

Live below your means, regardless of whether you have a pension. The amount between what you spend and what you earn is the money that should be squirrelled away for Future You. Invest a portion of every paycheque you receive. Start where you are. Every year, try to increase that amount by atleast 1%. More is better, but do what you can. Set up an automatic contribution to your investment account. Make sure you have the dividend re-investment plan turned on to automatically re-invest the dividends and capital gains. When it’s time to retire, you can walk out of the workplace secure in the knowledge that your pension isn’t the only bulwark you have against the expenses of the future.

Your Pot of Gold May Be Even Bigger!

If all goes well, your personal investments will be a nice supplement to your pension. There’s also the chance that work become optional because those investments will be enough to sustain you, even without the pension. Early retirement generally means a reduction in your pension payment, but so what? You aren’t going to willingly retire early if you didn’t have money already socked away to cover your future expenses. If you’re very good at picking investments, there’s always the chance that your investment portfolio’s returns exceed your pension payment. If so, well done!

Think positive! If your pension doesn’t fail, then your retirement funds will be there to pay for all those extra luxuries in retirement. At the bare minimum, you’ll have a bigger income in retirement than you’d thought you would – a pension for life + investment cashflow. You’ll have the best of both worlds and there’s absolutely nothing wrong with that.

*** I’m a fan of investing in the stock market. Other people invest in real estate. They run the numbers, then by real estate to rent to others. Eventually, they pay off the mortgages and live off the rental income. Other people start their own businesses. Some people invest in gold or crypto. There’s no one right answer to everyone. Do your own research and figure out what works best for you.

My Lazy Journey to the Double Comma Club.

I took the lazy journey to wealth and it’s worked out well for me. Thanks to Younger Me, I’m financially comfortable and should be for the rest of my life. My parents gave me a good education, but no one would ever mistake me for a trust fund baby. They set a good example of how to live below one’s means, to save for the future, and to invest in the stock market. However, I never followed their path of stock-picking. That was a little too much work for me. So I took the lazy journey and it worked out for me.

When we were both still living at home, I watched my younger sibling read the stock pages in the newspaper each day. That never appealed to me. After all, what good could come from reading all those numbers? At the time, I didn’t have the brains to realize that my sibling was on to something major. Had I simply done what he had done, my financial situation would’ve been so much different. If he could learn it, so could I. Had I simply recognized that my attitude stemmed from an arrogance rooted in my status as the eldest, I would’ve made a different choice.

The fact is that I could’ve simply copied my sibling’s study of the stock pages and I would be in a completely different situation than I am today.

Dividends had me at “Hello”.

Instead, dividend investing turned my head. In the tiniest of nutshells, this is what I understood about dividends: Some companies pay dividends to investors who buy their shares.

All I had to do was buy shares in dividend-paying companies. I found this investing style incredibly attractive, and it didn’t require me to pour over the mouse-sized font that was printed in the newspaper every day. I wouldn’t have to pay attention to the daily stock prices. Instead, all I would have to do was continue to hold the stock and the companies would continue to send me money. The only thing I had to was invest some of my part-time paycheque and a company would send me money? Where do I sign up?

So I started investing for dividends many, many years ago. Every two weeks, my automatic transfer siphoned money from my chequing account and re-directed it to my investing account. Today, I’m comfortably earning a few thousand dollars every month. Thanks to automation, my monthly dividends payments are re-invested to maximize compound growth. My portfolio grows from both my paycheque and my dividends. It’s a beautiful system!

Younger Me made smart decisions.

Looking back now, I’m pleased that Younger Me took the initiative to start. Younger Me consistently invested every two weeks and allowed time to work its magic. This is called dollar-cost averaging. Regardless of the price, Younger Me bought as many units of the chosen security as possible and never sold them. More units meant more monthly dividends. Spending the dividends each month was never an option. Instead, Younger Me wisely relied on the dividend re-investment plan (DRIP) to ensure that every single dividend bought more of the underlying security. Younger Me switched from mutual funds to exchange-traded funds upon realizing that the same basket of stocks could be acquired more cheaply.

Each of these decisions required no more than 15 minutes of work to put in place. I had to fill out a few application forms and I entered some information into my computer. I only had to take each step one time and then I never had to think about it again. My system is well-established and it operates extremely smoothly. It requires very little attention from me. The end result? Today, I am a happy member of the Double Comma Club. I still enjoy seeing the dividends pouring into my portfolio every month. Knowing that I could live off my dividends if I absolutely had to gives me no small amount of comfort. It’s a wonderful feeling!

However, with age comes wisdom. As I reflect back on choices that Younger Me made, I recognize that…

Younger Me could’ve been smarter.

Had I been a little less lazy, I would’ve done a tad more research and invested in growth-oriented securities. After all, the stock market was on a tear from 2009 until March 2020. The returns from the growth in the stock market dwarfed the returns earned on my dividend ETFs. I should’ve invested more in the young and hungry companies by contributing my money into equity-based ETFs. That’s where the engine of portfolio growth really comes from. In other words, had I invested in equity-based ETFs, I would’ve had the natural growth of the stock market in addition to my contributions propelling my portfolio forwards. My returns from equities would’ve been much larger than they were from dividends.

By investing in dividend-paying companies through my dividend ETFs, I was essentially investing in the established, old-school companies that don’t really have room to grow. I had placed my bets on income-based securities rather than equity-based securities. From a certain perspective, this was a mistake.

The second way that my laziness cost me big time was in failing to appreciate that higher returns sooner would mean that I’d reach my current financial situation years earlier. I’ll retire early thanks to my wise choices, but I could’ve retired 5 years ago… and with a lot more money… had I done that little bit of extra research that I’d mentioned. One little tweak in my decision-making could have propelled my portfolio forward by leaps and bounds. Fully participating in the 11-year bull market would’ve done wonders for my portfolio.

Better late than never, right?

Alas, I didn’t start investing in equity-based ETFs until October of 2020. Even in 4 short years, I can see the difference that equity-based ETFs have had on my returns. Trust me. I won’t repeat Younger Me’s mistake. From this point forward, equity-based ETFs will have a prominent place in my portfolio. Accordingly, I anticipate that my portfolio will continue to benefit from my recently-acquired wisdom.

Today, I tell others who are starting their investing journey to invest in equity-based ETFs. I remind them that the potential returns are better because compounding works faster with higher returns. They need not make the same mistake that I did, i.e. failing to appreciate this lesson when I was younger.

Let my story & mistakes be your cautionary tale. When investing for the long-term, well-diversified equity-based ETFs are the securities that will deliver the best bang for your buck. It’s definitely a more volatile path, but it will get you the Double Comma Club faster than my journey took me. Had I invested in equities instead of in dividends, I would have been better off financially.

Let’s face facts. Time still would’ve passed. I still would’ve earned dividends and capital gains. However, my portfolio would be larger thanks to the higher returns of equity-focused securities. Oh well… I can’t win them all!

Do One Percent Better Whenever You Can

Start where you are, and go from there. This is the basic rule for anyone who’s beginning something new. There’s no way around it and investing is no different. If you want to achieve your financial dreams, then the onus is on you to take the steps to make those dreams a reality.

No one is saying that it will be easy. What I will say is that sticking to the plan puts the odds in your favor that you’ll achieve your goals.

This past week, I heard someone say that they achieved financial independence by always striving to do one percent better each month. That struck a chord with me. It’s an achievable goal for many people. Once you know what you want your money to do for you, your subconscious mind focuses on ways to make it happen.

If you’re ready to ensure that Tomorrow You is financially secure, then start today. Set up an automatic transfer from your paycheque in the amount of 10% (or 5% or 2%) of your net salary. If your budget allows, you’re always free to invest more than 10%. Just make sure it’s an amount that you’re able to stick with over the long-term.

Ensure that amount is sent to your brokerage so it can be invested in a diversified, equity-based exchange traded fund. Set a reminder on your phone to increase your contribution amount by 1% at the start of each new month, or every 90 days. Pick the interval you’re most comfortable with, but commit to increasing that percentage. The sooner you invest your money, the sooner it can compound and grow.

“That’s a a nice idea, Blue Lobster, but exactly how am I supposed to find the money to do this?”

Here’s a list of a few suggestions that come to mind. Not everyone can do these, but it’s a starting point. I have a feeling that if you really want to invest for your future, you’ll figure out where find money from your current spending. In no particular order, here are some ways to get the money for your investments.

  • As you pay off your debts, use a significant portion of your former debt payment to increase the amount you’re contributing to your investments. If you were paying $700 for your vehicle, re-direct atleast $350 of that to your investments and use the other $350 however you want.
  • Once your emergency fund is holding 9 months of expenses, stop funding it and re-direct that money to your investment account.
  • Track your expenses and see which ones can be eliminated. Use your kitchen more often so that you’re feeding yourself instead of paying someone else to do it.
  • Rotate your streaming services instead of paying for all of them all the time.
  • Go to the library more often than the book store.
  • When you get a raise, make sure that you re-direct atleast third of it to your investment account. Spend the remaining two thirds however you want.

By following any one of these suggestions, you will be able to increase your contribution amount by atleast 1% with ease. Some of these options might allow you to increase your target amount by 5% or more. You don’t even have to do all of them! Maybe your goal is to save only 20% of your net income, so you’ll hit that target faster than someone who wants to save 50% of her income.

Whatever amount you want to invest, you won’t hit your target unless you start. Today. As in, right now. Once you start, don’t stop. Keep paying off debt, padding your emergency fund, and investing for the future. When you’re finally out of debt, do your very best to stay out of it. Start sinking funds so you can save for your short-term and medium-term goals, then pay cash. Along the way, never stop investing and always re-invest your dividends. Do one percent better every month, every quarter, every year! At some point, you’ll look up and realize that you’re investing 25% or more of your income.

And you’ll be damn proud of yourself or having do so.

Investing Money? Never Pay More Than Necessary.

I’ve learned about a mutual fund that, in my mind, is specifically designed to extract money from naive and uninformed investors. It made me very mad. There have always been snake oil salesmen, and that’s unfortunate.

Writing this post is my way of helping you to avoid being a victim of such tomfoolery. I want you to be smarter about the financial products you buy, by knowing a little bit about how they’re priced. Learning never stops. It’s up to you to continue reading about money and ensuring that you do better once your know better. If you can commit to learning about personal finance, then you can take steps to avoid ever being fleeced by buying this kind of product. And if you still choose to buy this product, then atleast you’ll be aware that you’re paying more than necessary.

The product I’m referring to is a mutual fund that holds 10 exchange-traded funds (ETFs). For ease of reference, I will call this product “RIPOFF” because it boldly rips off investors under the guise of offering something valuable. RIPOFF charges you way more in fees than you need to pay. No one has provided any indication that RIPOFF generates better returns than the ETFS that it holds. In short, investors would be better off just buying the ETFs instead of buying RIPOFF. As far as I’m concerned, RIPOFF is simply a trap for the unwary. You need not count yourself among the unwary after reading this post.

First things first. ETFs have lower management expense ratios (MERs) than mutual funds. The MER is the fee that you pay to the financial institution for owning the investment product. It is a percentage of every dollar invested. Never forget this!

As an investor, you want to hold securities that have lower MERs because you will keep more money in your pocket. Over time, a higher MER permits the financial institutions to siphon more money out of your portfolio. In other words, less money stays with you because more money is going to them. Check out this MER calculator and play with the numbers. Change the expense ratio number and see for yourself how a higher MER over a long period of time means a lower portfolio balance for you. A higher MER can mean that over $100,000 is paid out in fees for no good reason.

RIPOFF charges an MER of 1.72%. This is a very high MER. Ideally, you will never pay more than 0.50% for your ETFs. (Some people say never pay an MER that’s higher than 0.10%, but I think that applies more to the US market.)

In doing my research, which consisted of a simple Google search, I learned that RIPOFF holds 10 ETFs. After another 10 minutes of research, I learned that none of those ETFs charges an MER as high as 1.72%. One of the 10 ETFs held within RIPOFF charges an MER of as low as 0.06% while he highest MER charged is 0.55%. You’ve no doubt noted that the individual MERs are far, far smaller than the 1.72% charged simply for bundling them together under the name RIPOFF.

Instead of buying RIPOFF and paying 1.72%, you should simply buy the underlying ETFs. Doing so means far less money paid out in fees. Even if you invested your money into the most expensive ETF at the MER of 0.55%, you’d be saving 1.17% on every dollar invested. That’s a difference that should not be ignored.

Assuming that your portfolio is $100,000, RIPOFF would charge you an MER of $1,720 every year! For those not good with math, you simply multiply the balance of your portfolio by the amount of the MER, i.e. $100,00 x 1.72% = $1,720. If you owned $100,000 of the most expensive ETF within RIPOFF, then you would only pay an MER of $550 (= $100,000 x 0.55%). In other words, owning the “expensive” ETF would cost you less than 1/3 of the cost of RIPOFF.

Now, look what happens if you owned $100,000 of the least expensive ETF contained within RIPOFF. You would only have to pay an MER of $60 every year, because $100,000 x 0.06% = $60. Buying RIPOFF is 28 times more expensive than the least expensive ETF!!!

Do yourself a favor. Go back to the calculator and calculate the difference in your future portfolio’s balance between paying an MER of 1.72% and paying an MER of 0.06% over a long period of time. The amount is staggering, and I’m quite certain that you would rather keep that amount in your pocket.

Again, I’m not telling you not to buy the more expensive product. Instead, I hope that I’m educating you. I want you to be aware of what you’re buying and how much it’s going to cost you. Maybe you have your own reasons for paying 28 times more than you have to in order to achieve your financial goals. I simply want you to be aware that you’re doing so. It’s your money to spend as you see fit. That said, you should always know when you’re paying more than necessary.

As you’ve no doubt surmised, my position is that no one should be investing in RIPOFF. There is no evidence that RIPOFF will earn you a return on investment that is 28x better – or even 3x better! – than buying the underlying ETFs. This is another reason why you should just buy the ETFs themselves. Make wise decisions with your hard-earned money. Invest in the ETF instead of the mutual fund. Future You will be very glad you did.

It’s Time to Assess Your Financial Progress.

Well, we’re already weeks into the final third of the year. Tempus fungit, which is why you should take 20 minutes or so to assess your financial progress. Is your debt decreasing or increasing? Have you added more money to your emergency fund? Did you set up an automatic transfer? Are your sinking funds in place for your short-term goals?

You’re the only person who can honestly say whether you’ve taken the actions needed to get you where you want to be. After all, you’re responsible for doing what’s necessary to make your dreams come true.

How many of the following actions have you taken so far this year?

  • tracked your expenditures each month
  • directed some portion of your paycheque to your emergency fund every month
  • created sinking funds for your short term goals
  • eliminated recurring subscriptions that no longer make your happy
  • ensured that your credit card is paid-in-full every single month
  • paid off your debt by making extra payments over and above the minimum payment amount
  • funded your RRSP and TFSA as much as you can
  • set up an automatic transfer from your chequing account to your investment account
  • opened a brokerage account so you can invest your money into ETFs
  • ensured that your securities in your investment account are set up on a dividend re-investment plan
  • started making financial plans for 2025

Ideally, you will have completed all of these tasks. It’s okay if you’ve only done a few or even only one of them. Getting good with your money takes time and practice. It’s about building habits, which will eventually become financial reflexes if given enough time. The sooner you start, the better for you.

If you haven’t done anything to progress financially, then chastise yourself for no more than 10 minutes then move forward to the next step. In case you had any doubt, the next step is to start. Yes – that’s right. Start by doing one thing. If you can find time to mindlessly scroll various apps on your phone, then you have time to start taking the steps to improve your financial future.

I promise that if you continue to do nothing about your money situation, then your financial circumstances will never improve. Believe me when I say that you’ll be in the same position tomorrow as you are today if you don’t make any moves to earn, save, and invest your money.

Start where you are today and go from there. Do not assume that you have to know everything about money before you begin. There is no perfect way to do money. Good money moves are unique to each person. That said, spending every penny you earn, going into debt, and living without an emergency fund is a recipe for financial strife. That particular course of action benefits no one. You have to start today. As you learn better, you will do better.

When I started my own financial journey, it was with $50 every two weeks for my part-time job in a grocery store. I would go to the automated teller to transfer $50 from my chequing account to my savings account. Eventually, I had $8,000 in my savings account. Like an idiot, I used half of it to buy my first car. Sigh…

The good news is that I learned from my mistake. As I earned more money, I started saving a bigger amount from my paycheque. Reading about personal finance became my hobby. That lead to me opening my RRSP at age 21. I managed to fully fund my RRSP every year that I had contribution room. In 2009, the TFSA was born and I started to fill that up too. Over time, I learned about exchange traded funds so I switched my investments from mutual funds with high MERs to ETFs with low MERs. As a result, more of my investment returns stayed in my pocket instead of going to the fund manager. (Check out this calculator to see the impact of MERs on a portfolio’s returns over time.)

It took a while but, I eventually paid off my student loans, a car loan for my second vehicle, my mortgage, and a car loan for my third vehicle. When I was finally out of debt, I made much better use of my investment account by using my former debt payments to buy more investment securities. Without debt, I finally had some extra money over and above what was required to fully fund my RRSP and my TFSA each year. Once I was investing a third of my take-home income, I established sinking funds for travel and renovations to my home. Future Blue Lobster would be provided for by my long-term investments so it was time for me to focus on some short-term and mid-term goals that would make my life’s journey a little more comfortable. In short, I wanted to add a few little luxuries to my life so I did.

For me, being debt free was a key element of making substantial financial progress towards achieving the things that I wanted from my life. One of the biggest things I’ve always wanted is financial independence. I desire to be in a position where my investment income can replace my entire salary if necessary. That day is very nearly here as I’ve finally reached what is called Lean FIRE. Personally, I’ve never been a huge fan of Lean FIRE, but I do see its utility for some folks who want to do something else with their time.

I don’t know how much debt you have, yet I’m pretty sure you’ll be better able to fund your heart’s desires when you aren’t sending so much of your money to your creditors. Figure out a way to eradicate your debts sooner rather than later. Avalanche method or snowball method isn’t terribly important. The most salient factor is getting rid of your debt. If you do nothing else financially for the rest of 2024, please work on eradicating your debt. The sooner it’s in your past, the sooner you will have the money to make your dreams come true.

While you’re paying off debt, don’t forget to invest some of your money. It can be $5 per week or $50 per month, or whatever amount above $0 that you choose. Just start investing! The more time your money has to compound, the bigger it will grow. You really can’t afford to wait until your debt is completely gone before you start investing for Tomorrow You.

No one is saying this will be easy, but it’s not impossible either. Depending on the size of your income, it may take a few months to achieve all of these goals or it may take several years. I can promise that none of these goals will be achieved if you’re not willing to take the steps to make them your reality. No one is perfect at money, and there is always more to learn. That shouldn’t impede you from trying. Start today, from where you are right now. If you invest nothing today, then you will have nothing tomorrow. It’s as simple as that. You and I both know that you want to be more financially secure tomorrow than you are today. What’s stopping you from moving towards that goal?

Let’s say that you’ve reached the point of being debt-free with a fully-funded TFSA and RRSP. You’ve also got atleast 6 months of income stashed away in your emergency fund and a nice chunk of each paycheque is being invested into ETFs. Your sinking funds are replenished every year so that you can pay for those large, irregular expenses that show up every year. Now what?

First, congratulate yourself on being very, very good with your money! So many people will read blog posts like these without taking any steps to implement the suggestions therein. By following these steps, you’ve set yourself up to be financially secure. Second, keep doing what you’re doing right now and continue to learn more. Stick to your knitting and watch the financial wins multiply in your favor.

And if you’re not yet at the top of your money game, then it’s time for you to start. Tomorrow You will be thankful that you did. Again, if you invest $0 today, then you will have $0 tomorrow. You need money until the end of this journey call life. Today is a great day to begin targeting some of your time and energy towards building a solid financial future for yourself.

Assess your financial progress and take the necessary steps to get yourself where you want to be with your money.

I Want You To Start Investing For Tomorrow’s Dreams.

Invest… even if you have no current plans for your money. I know that sounds a little crazy but please bear with me. At some point, you will know what you want from your life. The AdMan and his trusty sidekick, the Creditor, are working day and night to separate from your money. They will never stop working to pry all of your money – both current money and the money you haven’t yet earned – away from you.

If you let them do this, then there won’t be enough money to make your dreams come true.

Those of you who have been reading my words for a little while know that I’m always telling you to focus on your priorities and to spend in ways that turn your dreams into your reality. I encourage everyone to know what they want from their lives. It’s easier to give up the mindless spending when you’re focused on a goal that will bring you closer to what you want to have in your life.

However, I recognize that there are always some people who won’t know what their priorities are. This post is targeted at them. To put it bluntly, invest your money even if you don’t yet know your “why”. There is no time like the present to start investing for tomorrow’s dreams.

If you don’t know where you want to be in 5-15-25 years, then I want you to invest your money anyway. That’s right. You owe it to Future You to set up an automatic transfer and to invest in a broadly diversified equity-based exchange traded fund every single time you’re paid. I don’t care if you start with $5 from each paycheque, or if you’re able to invest 75% of your take-home pay. The only thing that really matters is that you’re invest part of every dollar that you earn. Invest and don’t stop.

Why is this so important?

Excellent question! It’s important because, at some point in the future, you’re going to face a very large expense to make your dream come true and you will need the money on hand to pay for it. To be very clear, I’m not talking about insurance premiums or property taxes, nor even emergency flights home to attend a funeral. Those kinds of expenses that can be easily handled setting up sinking funds.

No, I’m talking about expenses with six-digits after the dollar sign. Do you want to start your own bakery? Maybe you want to take an extended sabbatical after having spent decades working? Perhaps there’s a piece of land that you’ve had your eyes on for a little while?

These are the kinds of dreams that cost Big Bucks. You might not have fleshed out all the details just yet, or maybe the hasn’t yet been planted. It doesn’t matter. Today is the day that you start investing for tomorrow’s dreams.

About 4 weeks ago, I received some correspondence that made my heart drop. In order for me to realize one of my lifelong dreams, I need to come up with an amount that’s just shy of $300,000. That’s a huge amount of money for me! While I do well for a single person, I’m not ever going to be on the cover of a magazine due to any vast fortune in my possession. I’m a person who started with $0 and worked my way up. It took me quite a long time to get to where I am now. I followed my own advice and it worked. Save – invest – learn – repeat.

Yet that correspondence was a gut-punch. Where on earth was I going to come up with $300,000 to make my dream a reality?

And that’s when I looked to my investments. Guess what? I was able to find the money.

Thirty one years ago, I started my investment journey by opening an RRSP. In 2009, the TFSA came into existence and I started using that too. Once I’d maxed out my contributions to my RRSP and my TFSA, I opened a non-registered brokerage account and started investing there too. Along the way, I made extra payments on my mortgage to pay it off super early. I also paid off vehicle loans and student loans. Throughout all the debt payments, I consistently saved money from every paycheque and invested it for long-term growth. When one debt was paid off, that payment was rolled into another one. Eventually, all of my debts were gone. I increased my investment amounts until I was able to save $100 per day. Along the way, I made plenty of mistakes – some of which I regret to this day. It took a very long time, but the end result is completely worth it.

Even when I didn’t know exactly what my long-term dream would be, I made the smart decision to start investing. I lived below my means for years. There were many people in my life who told me that I should be spending my money and that I had plenty of time to invest. Had I listened to those people, I wouldn’t have the money to do what I want most. By saying no to the stuff that didn’t matter to me along the way, I saved a good chunk of money while investing for the future and doing the things that meant the most to me. The result is that I’m now in a spot where I can handle this highly unexpected expense so that my dream remains intact.

I want you to be able to do the same. So even if you don’t know exactly what you want from your life in the future, please start saving for Future You. Right now is the very best time for you to start investing for tomorrow’s dreams. When the moment comes wherein you know what you really and truly want, I promise that you will not regret having chosen to invest your money. The money will be waiting there for you but only if you chose to start today.

Dreams are Always Free, but Fulfilling Them Costs Money.

Dreaming is free. We all know this. You can have as many dreams as your imagination and desires will allow.

  • Home ownership?
  • Early retirement?
  • Volunteering at something full-time?
  • Running your own business?
  • Seeing the seven wonders of the world?
  • Visiting an animal sanctuary or ancestral homeland?
  • Participating in rebuilding efforts after a natural disaster?
  • Starting or finishing your education?
  • Publishing a book?
  • Taking over a farm and living off the grid?
  • Becoming a parent?
  • Breaking a world record?
  • Creating a garden oasis?
  • Supporting a loved one to achieve their goals?
  • Living a life filled with joy?

Whether big or small, everyone has dreams for their lives. We all desire to see, do, taste, touch, experience certain things in our lifetimes. It’s perfectly natural since each of us secretly or not-so-secretly wants to live our lives a certain way. The thing that few of like to admit outloud is that making those dreams a reality generally always involves finances.

I’ll be the first to say it. Whatever your dream is, attaining it has price tag. There’s always a financial cost to making dreams come true.

Our capitalist system runs on everyone spending money incessantly. Honestly, the system doesn’t much care where you spend your money, only that you spend it immediately or before you’ve actually received it. In other words, if you don’t have cash then credit will do. The AdMan and his trusty sidekick, the Creditor, are intimately aware that immediate consumption doesn’t happen when you’re saving up for a dream. Tough! That’s a capitalism-problem, not a you-problem.

Don’t let the AdMan and the Creditor get in your way! You have dreams and you want to see them made real. Never forget that you alone are responsible for directing where your money goes. You get to decide whether to go into debt or to go towards your heart’s deepest desire, whatever that may be.

Forgive me. I want to focus your attention on a harsh reality that few, if any, ever discuss in the personal finance sphere. Every single one of us has a limited amount of time, and none of us know when our time will run out. You owe it to yourself to use every moment of your precious, precious time to building the life that you really want to live. Dreams don’t fund themselves. The onus to fund your dreams rests on your shoulders, no one else’s. Make your dreams come true before it’s too late by getting good with your money.

I’ve always believed that debt is an anathema to making dreams a reality. The sad fact is that when you’re beholden to your creditors, then you’re legally bound to repay your debts. If you don’t, your creditors will eventually garnish your wages or your bank account. At some point, you might even be pushed into bankruptcy. That’s not a fun process and it will have severe consequences on your future.

You can only spend each dollar once. It should go without saying that money repaid to debt is money that cannot be directed towards dreams. If you’re in debt, you best bet is to figure out how to get out of it ASAP. Cut the fat from your budget. Get another job. Sell stuff you no longer need, want, or use. Only spend cold, hard cash. Whatever works for you is what you should be doing.

Train yourself to think about your dreams every single time you go to pay for something. Does paying for whatever-it-is get you closer to your dreams? If the answer is “yes”, then make the purchase. If the answer is “no”, then delay or forego the purchase. By delaying the purchase, you’re forced to figure out if staying away from realizing your dream is a price that you’re willing to pay.

Dreaming is always free, but turning dreams into reality costs money. Please don’t squander your limited resources on things that won’t bring your dreams to life. It’s on you to use your time and your money in ways that bring you closer to fulfilling your dreams. You can do this!

This is the Greatest Way to Use Credit Cards!

The greatest way to use credit cards comes down to 2 simple steps.

  1. Only credit cards when you have cash in the bank to pay the balance.
  2. Pay your credit card balance off in full every single month.

In the interests of transparency, I will admit that I use my credit card all the time. Gas? Groceries? Travel? Clothing? Repairs? Streaming services? Subscriptions? Theatre tickets? Birthday presents? Electronics?

Yes, yes, yes! I tap my credit card for all of it. I love earning points with my card because points translate into dollars at the grocery store. A few times a year, a big grocery haul can be purchased with points. This is a great thing for my cash flow. Other people I know prefer to swipe for travel rewards. They’ve got large families so travel rewards work to ensure no one family member need be left behind. And I know there are people who simply love getting cash-back. If I weren’t getting “free” groceries, I would definitely be using a cash-back card.

Also in the interest of transparency, I pay off my credit card balance every single month. I have a very simple method for doing so. After I make a purchase on my credit card, I go to my chequing account and send a payment equivalent the purchase amount to my credit card.

I rely on the pay-as-you-go method to keep my credit card balance at $0. Personally, I prefer to pay off the charges right away, instead of waiting to get my statement at the end of the billing period. Making multiple payments throughout the month ensures that I don’t “accidentally” spend the money in my chequing account on something else. By paying the charges as I incur them, I’m not under the gun to come up with a large amount once a month to pay off the full statement balance. Also, paying my credit charges as they arise is a pain the butt. If I don’t want to experience the pain, then I don’t spend.

For those larger-than-normal purchases that crop up in life, I rely on my sinking funds. I don’t swipe my card without having the money set aside already. For example, I replaced my computer this week. I knew a new computer would be a 4-figure hit to my wallet, so I’ve been saving for this purchase for the past 6 months. When I went to buy it, it was no big deal to use my credit card. The money for this expense is already sitting in the appropriate sinking fund. All I have to do now is simply transfer the money over to my chequing account and send a payment to my credit card. Easy-peasy-lemon-squeezy!

By following these two rules, I have discovered the greatest way to use credit cards. I never pay interest. My credit score remains high. I stay out of revolving debt since my credit card balance is always at $0. And I get to collect lots of points that can be used to buy anything I want at my preferred grocery store.

If there’s a better way to use credit cards, please do share with the class.

DreamChasers: Making Mistakes to Make Dreams Come True!

No one – and I mean no one – fulfills their dreams without making some mistakes along the way. Making mistakes is integral to the journey. After all, how are you expected to learn and grow if you don’t have mistakes from which to learn and grow?

You’ve heard me speak about my mistakes before. And they were doozies! If I had to choose, my biggest mistake of all was not investing in low-cost, well-diversified, equity-based exchange traded funds as soon as I possibly could. Instead, I stuck to dividend-generating ETFs for far, far too long. I didn’t correct this mistake until October of 2020… sigh… Some mistakes will bite you harder in the ass than others, and this one still stings.

My second biggest mistake was not appreciating that I had another 20 years of investing in my future after selling a couple of rental properties. Instead I took that money and I paid off my primary residence’s mortgage. That was a colossal error! When all was said and done, I had a nice six-figure cheque in my hand. I should’ve taken that money and invested it into an equity-based mutual fund. (I sold my rental properties right before ETFs started to become well-known in Canada. Before ETFs arrived, I invested into mutual funds.) Yes, I would’ve kept my mortgage longer. The flip side is that I also would’ve been fully participating in the bull market than ran at a steady clip between 2009 and 2020. There’s a good chance I would’ve been retired now had I simply kept my principal residence’s mortgage for a few extra years.

My third biggest mistake was listening to people who told me not to be too hard on myself. I’ve been investing since I was 21. I was fortunate enough to max out my RRSP early in my career, and I didn’t immediately know what to do with the extra money over and above my RRSP contributions. So I increased my mortgage payments each year instead of increasing my investment contributions. After I’d eliminated my mortgage, I took some time to treat myself to vacations and a few other luxuries. Given the benefit of hindsight, I can admit that I should’ve simply thrown a good chunk, if not all, of my former mortgage payment into my investment account. Listening to the advice to let up the gas on my investing was not in my best financial interest.

No sense crying over spilled milk, right? I eventually learned from my mistakes and I have since course-corrected. Despite some very big errors on my part, I’ll still be able to make my dreams come true.

Three instrumental decisions have led me to this place in my life. The catalyst for my current financial situation was the decision to start investing. I know that sounds trite, but you would be amazed at the number of people who never start. Those who invest $0 today will have $0 waiting for them tomorrow. It’s that simple. Maybe they get an inheritance, or win the lottery. But it’s more likely than not that neither of those things will happen. The vast majority of us have to invest our own money if we expect to have any in the future.

I made 2 more decisions that were instrumental in helping me get to this point with my money:

  1. Live below my means, aka: stay out of debt.
  2. Automatically invest a portion of my paycheque every time I got paid.

When I started my investment journey, I was in debt. I had student loans, vehicle loans, and a mortgage. I didn’t let debt stop me. Contrary to a lot of advice, I invested while I paid off my debts. Thanks to some bonuses at work, I was able to eliminate my student loans within a couple of years. Those former student loan payments were rolled into my car payment so that one disappeared fairly quickly too. And I was fortunate enough to pay off my mortgage in short order thanks to a couple of real estate investments that paid off due to an exceptionally hot real estate market.

Once I was out of debt, I stayed out. Was it easy? No. Did I have to delay gratification for a month or two? Yes. Was it worth the wait? Absolutely yes!

Staying out of debt hasn’t stopped me from doing any of the following things:

  • travelling to Europe 4 times in 8 years
  • going to concerts at home and abroad
  • maintaining my theatre subscription to Broadway Across Canada
  • updating my wardrobe as needed
  • taking road trips
  • dining out with friends and family
  • renovating my home
  • replacing my vehicles
  • making new friends
  • spending time with family and those I love best

In short, staying debt-free has allowed me to use my money to live life on my own terms. Since paying off my mortgage, I’ve never had to commit my future income to paying off debts. Big purchases are paid with a credit card and the credit card is paid off with savings. Yes – I’m old school that way. I save up for things first before I buy them. It’s old-fashioned but it works like a charm, every single time. I’ve yet to have a vendor say “No, sorry. We won’t take your money today because you didn’t give it to us yesterday.”

Vendors will be just as willing to accept your money after you’ve accumulated a pile of it to buy your preferred whatever-it-is.

When I switched jobs, I didn’t have to worry about missing any payments to creditors while I waited for my new paycheque to start. I had the luxury of having some money in the bank to pay for my life while I adjusted to a new pay schedule. There was no fear of what could happen to my credit score. As a matter of fact, I rarely ever think about my credit score because I don’t apply for new credit. I don’t need more credit. I have cash, which is superior to credit. Owing no one is a financial super-power, and it’s available to nearly everyone.

Automatically investing from every paycheque was the step that put the sizzle in my steak! It only took me a few minutes to set up the automatic transfers that I needed. As my income went up, I increased the size of my investment contribution proportionally. I started at $50 per paycheque and moved up from there. Never once have I regretted my choice to invest automatically. Truth be told, I’ve never even heard of anyone who has wished that they had saved less money for their future.

You know what I love best about automatic investing? I never have to think about it! Money is skimmed from my chequing account to my investment account every two weeks without any effort from me. I have enough other things on my plate to think about every week, so eliminating the bi-weekly task of transferring funds is wonderful. The money goes where it needs to and I can sleep peacefully, knowing that I’ve taken another step towards building Future Blue Lobster’s financial security.

The other benefit is that I can happily ignore the Talking Heads of the Financial Media. I don’t pay any attention to whether the stock market is up or down. Negative news doesn’t influence how or when I invest. My money is transferred and invested into broadly diversified, equity-based ETFs. There is little financial analysis on my part and I love it! I don’t want to spend hours studying the stock market to chase outsized returns. I’m quite happy earning the long-term average return and watching my money steadily grow over the long-term.

I have read The Simple Path to Wealth by JL Collins. It’s a great book! And the principles espoused in that book work, so that’s why I follow them. Consistent investing in the stock market over a long period of time is a highly effective strategy, regardless of how much money you invest. Obviously, investing more sooner means a higher final amount a few decades later. Don’t let the size of your contribution discourage you from investing as soon as possible. Remember, I started with $50 every two weeks. Had I known better earlier in my life, I would’ve started with $25 or even $10.

The most important thing is to start. The second most important thing is not stop. Making mistakes is part of the process. At the end of the day, your dreams will still come true.