Author: Blue Lobster

Some People Always Make Money

As I write this post, the world is facing the pandemic known as COVID-19. I’m not a scientist, nor am I a doctor. This post is going to be about how some people always make money, no matter what is going on in the world.

This pandemic is a prime example. Unless you’ve been living under a rock, you cannot help but have heard that the global stock markets have been a wee bit volatile as of late. Investors are losing money as the value of the equities in their portfolio drop in tune with the stock market drops.

Yet, some people will be making money right now. Why?

It’s simple, Gentle Reader. The stock market is on sale right now. Much like buying clothing in the off-season, or winter boots at the start of spring, people with money are buying stocks while the stock market is down. Stocks are on sale. This is the time to buy.

Stock Market is Drastically Down

If you have the money, then buy now. One of my favourite exchange traded funds – XDV by BlackRock – was down to $19.93/unit when I checked it at the time of writing this post. It had been near $30/unit a mere two weeks before this article was posted. The portion of my portfolio invested in XDV has dropped significantly, but guess what?

I’m a long-term investor who believes that the market will recover. Now is the time to buy more XDV shares because they’re on sale. Over time, this ETF’s value will go back up and, if I buy now, I will benefit from having bought additional shares when the price was lower than normal due to market turmoil. Do I like seeing the value of my portfolio go down? NO!!! Do I like buying dividend-paying investments when they’re on sale? YES!!!

Do you own research. Check out MorningStar. Visit the Motley Fool website and other websites that teach investors how to invest. Figure out which industries are hurting right now due to the pandemic, and determine if you believe that they will recover once a vaccine is found for COVID-19. When the panic has passed and life gets back to normal, which companies and industries will have the most ground to regain?

Keep Your Powder Dry

In the personal finance world, this phrase means having savings set aside for stock market circumstances like the ones we’re currently facing. It means having money available to invest when the stock market dips. This money is separate and apart from your emergency fund and the money you spend on the necessities of life. The reason you’ve set this money aside is so that you can take advantage of those times when the stock market goes on sale.

Full disclosure – I’m a buy-and-hold investor who believes in dollar-cost averaging. Money is skimmed off my paycheque and into my investment account so that I can buy units in my exchange-traded funds every month. I am not one of the people who has buckets of cash sitting around and waiting for buying opportunities like the ones that are on offer right now.

The people who are deploying their powder right now are, very likely, setting themselves up for some phenomenal returns over the next few years. They’re buying low because the stock market is down. So long as they hang on to their purchases through the recovery, they then have the option of selling high in a few years from now.

Successful Investors Do Not Panic

This is not the time to sell your investments! Even though they may be down, the stock market will not go to zero. The stock market will recover.

Selling now means locking in your losses. You will foreclose your ability to participate in the recovery, since your crystal ball will not tell you exactly when to buy back in.

Turn off your stock market notifications. Don’t look at your portfolio every day. Trust that the stock market will recover. The pandemic is going to cause turmoil, but the stock market has survived turmoil before. This time is not any different – the stock market will recover. You will want to be part of that recovery.

Buy low (which is right now) – hang on during the recovery (which could take a few years) – sell high (which is a few years from now).

Again, some people always make money. They do so because they invest in equities. They don’t panic when things turn volatile. They keep their powder dry. They’re around to participate in the recovery because they never sell. Be like those people.

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Weekly Tip: Wash your hands. Don’t hoard toilet paper and wipes. Stay informed and don’t panic. Don’t sell your portfolio.

Decide – Execute – Enjoy!

The first step to getting what you want is to prioritize your goals. You’re the only one who can decide what you need in order to live the life that you really want. The next step is to create and execute the plan to turn your dreams into your reality. The final step is to enjoy the reward of your efforts. Decide – execute – enjoy!

I’ve followed this three-step plan to achieve many goals in my life, both large and small, long-term and short-term. When I got tired of saying that I’d never been to Europe, I decided to go overseas. Between 2016 and 2019, I travelled to Europe three times. For each trip, I found a way to set aside the money from my paycheque so that I could visit Italy, Spain and Ireland. Getting to Europe was important to me so I found a way to make it happen.

The Claddagh Ring – Dublin, Ireland
The Sargrada Familia – Barcelona, Spain
Trevi Fountain – Rome, Italy

One of the keys to my success was using technology to remove the temptation to spend money on things that didn’t get me closer to this particular goal.

Automatic Transfers are Your Friends

I absolutely and completely love automatic transfers. They are reliable – they’re effective – they’re simple to understand. All a body has to do is decide how much money to put toward a particular goal, and then put an automatic transfer in place. For example, if you wanted to create an emergency fund of $3500, then you could automatically transfer a fixed amount from each paycheque into a separate emergency fund account until you’d saved $3500. Easy-peasy lemon-squeezy!

Once one goal is reached, you simply keep the transfer in place and use the money to go towards the next most important goal.

And you needn’t limit yourself to having one transfer. For my part, I have 4 automatic transfers in place. One is for my long-term goal of early retirement. Another is for short-term goals like travel, house repairs, birthday & holiday presents, theatre tickets, vehicle replacement, and the like. The third transfer is in place for my charitable donations. And finally, the last transfer is in place to cover the costs associated with being a home-owning adult who has bills to pay.

Once my automatic transfers go through, I can spend the rest of my paycheque however I want! My long-term goals are being funded. My short-terms goals are also getting a little love. The costs of running my house and various other bills all get paid on time. And I have money set aside for charity. The rest of the money can be squandered and I can still create the life I want for myself.

I enjoy the theatre and I go several times each year. When it’s time for me to renew my subscription to Broadway Across Canada, the money’s there. Holiday traditions are important to me since they mean time with my family and friends. Is it time to buy some Christmas presents? The money is already there. And let’s not forget those special occasions that aren’t always so predictable. Invitation to a wedding or a spa weekend with friends? The money’s waiting for me.

Sinking Funds are Key to Paying for It All

Automatic transfers are a magnificent way to build sinking funds for all of your anticipated expenses.

While we live in an instant gratification society, one of the realities of good financial stewardship is that we can’t always get what we want when we want it. Credit cards create the illusion that you’re living your best life. They allow users to buy whatever they want the very second that they want something. However, unless that person has the money sitting aside to pay the bill, credit cards burden people with exorbitant interest payments.

Credit cards don’t teach people about patience. Let’t be honest. Most credit card purchases aren’t for emergencies. For a great many people, credit is used because someone doesn’t want to wait a little bit long to buy!

If you’re serious about spending your money on the things that matter most, then take my advice. Siphon a portion of your income every time you’re paid into an account dedicated to your most important goals. Use automatic transfers and sinking funds to acquire the things that you really and truly want.

You work too hard for your money to waste it on purchases that you won’t remember 48 hours after you’ve made them. Create a financial plan for your money by telling it where to go instead of wondering where it went. Automatic transfers and sinking funds are financial tools that will help you to build the life you really and truly want for yourself. Start using them today and move that must closer to achieving your dreams.

Decide – execute – enjoy!

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Weekly Tip: Don’t let websites store your credit card information. Firstly, doing so makes it that much easier for you to indulge in instant gratification purchases. The few extra seconds of typing in your information might be all you need to make you reconsider whether the purchase is moving you closer to or further from your goals. Secondly, if the retailer’s website is hacked, then your information is at risk and your odds of being the victim of identity theft go up.

FOMO, YOLO, Priorities & Money

FOMO – Fear of Missing Out. YOLO – You only live once. These are the catchphrases that encapsulate our relentless demand for instant gratification. We want what we want when we want it…ideally sooner. And let’s face facts – it feels really great to have our desires satisfied. Who doesn’t like immediate gratification?

This week, I read something rather thought-provoking, an article about lifespans. The article focused on how our relationships with those most important to us are finite, no matter what we do. Every minutes you’re alive is leading towards the end, whether yours or that of someone you hold near and dear. The article challenges the reader to strive to allocate their time to those relationships and activities that are the priorities. This led me to think about how I spend my own time and whether my time is spent on my priorities.

I understand the twin phenomena of FOMO and YOLO – I really and truly do! No one wants to be left out of fantastic experiences – time with friends, exploring a new place, trying a new restaurant, being one of the Cool Kids Who Do Cool Things. These can be the stuff from which great memories are made. I totally get it.

Yet, I want you to ask yourself if all of those fantastic experiences reflect the priorities that are most important to you. Did you do them because you really wanted to or because you were experiencing FOMO and/or YOLO?

Looking back now, do your past choices still make you happy? Do you wish that you’d put your energy and efforts into something else?

What’s Done is Done!

No one can undo the past. Once spent, time is gone forever. This is why time is way, way, way more precious than money. Money is replaceable but time is finite.

I’m not trying to get you to regret anything that you’ve done up until this point. What I am trying to do is make you think about what it is that you want for your future. Once you’ve nailed that down, you can marshal your resources, focus your attention, and take the necessary steps to get what you want.

Are you trying to save for a house? Maybe you want to finish your degree one day? Is a self-funded sabbatical something that you really, really want? Do you want to start your own business?

Sometimes, priorities cannot be satisfied immediately. Long-term goals, by their very definition, are going to take some time. They will be no less pleasurable due to the time it takes to acquire them. From what I’ve observed, people who achieve what their hearts truly desire rarely ever regret saying no to early options for their time and money.

Hear me now! I am not suggesting that you say no to every invitation. That’s not a good way to live, nor will it improve or sustain the relationships that are most important to you. What I am proposing is that you clearly identify the priorities for your life and that you learn to balance them with all of the other options that are presented to you.

From this moment forward, strive to spend your time and money in ways that move you closer to the life you truly want.

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Weekly Tip: Pay your taxes on time. There’s no sense in borrowing trouble.

It’s Okay to Keep Your Money

If you’re not already aware, then let me be the first to say the following: it’s okay to keep your money! You don’t have to spend all of it.

Now, you probably shouldn’t keep all of it either. After all, doing so means you won’t eat, nor have a roof over your heard or clothes on your back. Keeping every single penny of what you earn causes just as many problems as spending it all! A balance should be found as soon as possible.

Today’s post is based on my observation that there’s a goodly number of people out there who appear to operate on the belief that they simply must ensure that their expenses are equal to their income. I’m here to tell that such a belief is simply not true. It’s a formula guaranteed to keep you running in a hamster wheel for your whole life. Without keeping a little bit of your own money, you’ll never have the option of quitting whatever it is you’re paid to do now so that you can do whatever it is that you really want to do with your time.

You’re More than a Conduit

From what I’ve seen on a daily basis, there are many people who are little more than conduits between their paycheques and various retailers. These are people who work hard for their money, possibly at jobs they love and possibly not. They leave the comfort of their homes when they’d rather not. Nearly all are giving up time otherwise spent doing what they truly enjoy so that they can go to work and earn a paycheque. They’re foregoing sleep and health and time with friends & family all so that they can meet work obligations!

And then they turn around and spend every cent they’ve earned with barely a thought about the effort expended to earn it. I find this behaviour utterly baffling!

My comments are directed at those of you whose income don’t keep you on the absolute edge of solvency. I’m targeting those of you who can live well away from the edge yet you choose to put yourselves there. You work so hard for your money and you choose to spend it all.

Has no one told you that you don’t need to spend your money this way?

Again, it’s perfectly okay to keep your money.

Contrary to what the AdMan and the Creditor tell you every waking moment of your day, you’re not obligated to spend everything you earn. I will admit that the advertisements are enticing. Beautiful people are selling me everything from toothpaste to Tesla’s. Their sparkling white teeth and full heads of shiny hair inspire confidence that the products they’re hawking will complete my life. All I have to do is hand over my money and my life will be perfect.

It’s a seductive message.

Sadly, it’s also completely false! If we learned one thing from the Grinch by way of Dr. Seuss, it is this: happiness doesn’t come from the store!

Your Dreams Won’t Fund Themselves

So I say it again – it’s okay to keep your money! Put a portion of it away in an investment account so you can fund those years when your paycheque goes away. Create a few dream accounts! These are the accounts where you save up for those things that make your heart dance with joy. Maybe that’s a fancy cooking class. Perhaps it’s a trip to Greece. It might even be a fancy cooking class in Greece! You alone know what your truest desires are.

Yet, you won’t be able to fund those dreams and desires if you consistently spend every penny as fast as you can. The Hair & Teeth of Marketing aren’t going to help you achieve your goals. Their only objective is to persuade you to open your wallet. You have to believe me when I tell you that it’s okay to save your money for the things that you really want.

To be very clear, I’m not talking about people who have to devote their entire paycheques to rent and food. If you’re keeping it all together on a shoestring, then more power to you! The ones I’m talking about are those who have disposable income. They have some slack. If they had to take a pay-cut at work, they’d be able to stay in their current home and eat what they currently eat. Maybe they’d have to give up a few subscriptions, annual travel, and their plans to replace a 3-year old vehicle. Bottom line is that they would still have enough money to meet the survival expenses of food, shelter, and basic clothing.

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Weekly Tip: The 2019 RRSP contribution deadline is March 2, 2020. Make sure that you contribute something to your RRSP so that you have some cushion for your retirement years. Do not get trapped in analysis-paralysis. Make an RRSP contribution, preferably in an exchange-traded fund. Then leave the money alone for a long-time. While your RRSP-money is growing & compounding, your duty to Future You is to continue learning about investment options by reading books, blogs, magazines, websites, forums, stickies, and post-it’s. Learn as much as you can about this because it’s very, very important. Save-invest-learn-repeat.

What If…

When I talk about financial independence and wanting to retire early, many people look at me as if I’d sprouted a second head right in front of them.

“I love my job!” they say. “I don’t want to retire!”

Great! Wonderful! You’re being paid to do what you love – that makes you one of the Lucky Ones!

Take a moment and consider what it’s like for those of us who aren’t so blessed as to love our livelihoods, those of us who dream of a day when we can do what we want with all of our precious, precious time. Most of us work because we have to, not because we love what we do. And a good number of workers don’t actively hate their jobs. They simply don’t love them and would rather be paid to do something that they enjoyed.

And if you’re wondering why we don’t just find jobs that we love and do those instead, please gently hit yourself in the head with a hammer. Take it on good authority that we have tried to find jobs that we love as much as you love yours. There just aren’t as many of those ideal positions going around so not all of us are going to get one.

Instead, I’m going to ask you Lucky Ones to put yourselves in the shoes of the rest of us. That way, you might gain some insight into why some of us are working so hard to achieve financial independence and, possibly, early retirement.

Lucky Ones, ask yourselves the following: What if you didn’t love your job? And what if the job you love today turns into one that you don’t love tomorrow?

What if any of the following things happen?

  • The boss you love retires…and the new boss isn’t to your liking.
  • Your best work buddies move away.
  • You have to take on duties that make you stressed and irritable.
  • You’re passed over for a promotion that you know you earned.
  • Others are laid off, which means your workload goes up.
  • Harassment, sexual or otherwise, creeps into your daily workday.

There are many, many things that can happen in one hot minute to turn a job-you-love into a job-you-hate. Spend an hour or two at Ask-A-Manager to see what I mean. If half of the people writing to Alison had built up enough money to leave their jobs when they wished, then she’d have so much less to write about!

Or maybe your job never causes you to shed a tear, yet you lose it anyway. For example, your company is bought by another one, or there’s some kind of re-organization. For whatever reason, your job is eliminated. It happens to a lot of people. Those who don’t have a financial cushion are the ones who will be stressed and desperate to find something else. People who’ve been working towards financial independence have the luxury of taking some time to figure out what the next steps are going to be.

What if you had enough money to walk away from your job when it stops making you happy? Or what if you had a great, big cushion of money to land on if you were kicked to the curb due to downsizing or ageism?

That’s the beauty and power of financial independence. When your job stops being one that brings you joy, being financially independent gives you the choice to walk away.

I want to be explicitly clear – you don’t have to retire early just because you’re financially independent. Money = choices. Having money doesn’t remove your choice to keep working. It simply gives you the choice to do something else when your current position stops bringing you happiness.

So make hay while the sun shines! Get in touch with your inner squirrel and start gathering that sweet, sweet cash for the day when you’ve simply had enough. You won’t regret having the options that only money can buy when the time comes.

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Weekly Tip: Pick one day a week to be the day that you don’t spend any money. Most of us spend a little something every single day. Did you know that it only takes $27.40 per day to spend $10,000 in one year? Challenge yourself to keep your money in your pocket atleast one day out of every 7.

In Sickness & In Health

Emergency funds… you need them in sickness and in health.

My workplace has been a hotbed of germs and colds and flu for the past few weeks. Even I had to take a day off to give myself some time to rest and recover from my head cold. And I started thinking about how fortunate I am to have sick leave banked for times like this. Staying home for the day won’t impact my salary. I can focus on feeling better without worrying that my paycheque will be less than normal.

Some people are not so fortunate. For many, many people, a day away from work means losing money. As we all know, bills don’t take a break. Whether you’re sick or healthy, the bills and expenses of life need to be paid. If missing work due to illness would negatively impact your paycheque, then you need to have emergency funds set aside somewhere.

It is absolutely imperative that you have some money stashed away to replace your income. You don’t know when you’re going to get sick. And you don’t want to be thinking about the damage to your monthly income when you’re dealing with a runny nose, body chills, and a hacking cough.

Emergency funds take time to build and, once used, time to replenish. They should be relatively easy to access, so I suggest putting this money into a high interest savings account. When you’re healthy, find a way to squirrel away some cash into this financial necessity. Challenge yourself to set aside a particular per diem until your emergency fund has hit six months worth of expenses. Maybe you’ll pay $5 per day, maybe $10 per day. Even $1 per day is a good goal if your budget is particularly tight. Trust me – you will never regret the small sacrifices that you had to make when you truly need to rely on your emergency funds.

Let’s say that you had a car loan or student loan that you’ve just finished paying off. After congratulating yourself for paying off a debt, re-direct that former payment to the care and feeding of your emergency fund. You were living without the money before so you can continue to live without it for a little while longer.

The last thing you need to do when your income drops is to go into more debt by borrowing money to make up the lost income. Emergency funds can drastically reduce the need for you to go into debt.

Finally, make sure to replenish your emergency funds after you’ve used them. Emergencies can strike at any time. The sooner you get yours back to full strength, the better prepared you will be for the next one.

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Weekly Tip: Cut back on how much TV you watch so you can get rid of cable. The added benefit of less viewing time is less exposure to marketing. You’ll be amazed by how a significant reduction in TV-watching dampens your desire to buy stuff.

Progress need not be Perfect!

When you know better, you do better…

from one wise soul to another, Maya Angelou to Oprah Winfrey

No one is born knowing how to invest. This is awesome news! It means that anyone can learn how to invest if they take the time to practice the skill. It also means that progress need not be perfect.

Much like walking, playing the piano, and mastering Candy Crush, the skills of investing must be practiced and honed before one becomes proficient at them.

I’m a huge fan of YouTube. As I was perusing the millions of videos on that platform, I came across one that was called “Vanguard or Fidelity – Which one is Better?”

And do you want to know something?

Yes, Blue Lobster. Please, tell us what you’re thinking.

My initial reaction to that post’s title was to scroll right past it. I’ve learned a little bit of wisdom on my relatively few revolutions around the sun. And one of those bits is that it’s best to just start investing, regardless of where you do so. Progress need not be perfect in order for you to achieve your dreams. Think of it this way – every journey starts with a single step but not every journey to the same destination requires the same number of steps. If a person needs to take a few extra steps to where she’s going, then she still gets there.

Focus on progress, not on perfection.

For example, we will look at the situation of an investor named One. Let’s say One decides to invest with Fidelity. (To be frank and open, I invest with Vanguard Canada. And no – I’m not being compensated for mentioning them in this blog post.) One sets up an account at Fidelity and creates an automatic transfer to have a fixed amount invested into an exchange traded fund every time One gets paid.

Superb! One has taken the very first steps towards investing for One’s own future.

Did One make the absolutely best choice for an investment account? It’s hard to say without knowing if One spent hours doing the research to determine the management expense ratios, various fees, product offerings, and account features from all of the investing companies that One could have chosen.

What we do know with certainty is that One did not delay her progress by staying in the quagmire created by analysis-paralysis. One made the smart choice by focusing on progress, rather than trying to achieve perfection. One is taking action by accepting the maxim that progress need not be perfect.

There’s no doubt in my mind that a perfect, best account does exist somewhere out there. I’m just not certain that it makes sense to waste more than 3-4 hours looking for it. The ultimate objective is to start investing your money; it’s not “to open the perfect, best investment account.” Keep your eyes on the prize! No one is going to pat you on the back for opening the absolute best and perfect investment account if it takes you 2 years to find it after sifting through all the options. The best and perfect account doesn’t actually help you if you never actually open it and make an investment.

Again, progress need not be perfect. I know a baby who has just started to walk. He’s only been doing it for a few weeks, but he’s focused on progress, not on perfection. At first, he could only stand and would fall down every time he moved his head. A week later, he could walk ten steps unaided. The next time I saw him, he would walk slowly…and drop down to crawl if he had to get somewhere quickly. (The kid’s got a great big brain and understands that sometimes speed is of the essence!) The last time I saw him, this kid was very nearly walking like a champ – moving his head, going further distances, turning around without falling down too much. In another six weeks, crawling will have long been forgotten as a preferred method of travel.

The first time you walked, you fell down after a few steps. You didn’t let that stop you, did you? No, you didn’t! Instead, you tried again and again and again and again until you could do it. Without knowing you personally, I’m willing to bet that you’re now quite a proficient walker. The same principle applies to investing.

Always be learning while making progress.

Be like a baby – save and invest your money with the perspective that progress need not be perfect!

You see, there’s nothing stopping you from continuing to research investment accounts once you’ve started investing. Save-invest-learn-repeat. You are free to keep learning after you’ve made an investment.

Again, full-disclosure, I invest with BMO Investorline. And, again, I’m not getting compensated for mentioning them. Yet just because I invest with BMO Investorline doesn’t mean that I haven’t also research Scotia I-Trade, Questrade, RBC Direct Investing, or any other investing platform/company. (I’m not being paid for mentioning these platforms.)

Further, I have no idea if BMO Investorline is the ultimate, best and perfect option for me. It doesn’t matter. What does matter is that I am automatically investing in very inexpensive exchange traded funds and earning big dividends every month. And even though I’ve been with BMO Investorline for years, I would switch my investment portfolio in a heartbeat if I found a platform that better suited my needs for a lower price.

If One discovers that Vanguard Canada offers a more suitable range of investments products than Fidelity, then One is not in any way prevented from moving One’s investment account from Fidelity to Vanguard Canada.

Procrastination is the enemy of progress.

When it comes to investing your money, procrastination is extremely detrimental to achieving your financial goals. The reason why it is so bad is because you have a finite amount of time in which to grow your money. Money needs to be invested so it can compound. And compounding is most effective over long periods of time. Ergo, start investing your money right now so that it has as long as possible to compound.

Don’t let analysis-paralysis stop you from taking action today!

Your progress need not be perfect in order for you to reach your goals. Lord knows that my investment path hasn’t been smooth, nor will it ever be exalted as the absolutely correct path to take. If anything, my investment story should be viewed as a cautionary tale for fellow investors. However imperfect my journey has been, the fact that I started when I was 21 and have consistently invested my money for the past 2.5 decades has been a key factor in me pursuing and achieving my goals.

Neither you nor I can get to where we want to go without making some kind of progress. So we have an obligation to ourselves to keep moving forwards. Whether that’s listening to a podcast, reading a book, following a blog, or using trial-and-error, doing any or all of these things will lead us closer to taking action. And taking action is how we will progress towards making our dreams come true.

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Weekly Tip: Don’t pay for memberships or subscriptions if they’re no longer making your happy. As much as we might like to believe it, peer pressure didn’t end when we graduated from high school. Review your monthly expenses. How many things are you paying for simply because your friends are paying for them? If those things are no longer bringing you joy, then stop paying for them.