Category: General Thoughts

Money – A New Normal

As we gradually move into a vaccinated post-COVID world, I wonder how many of us have discovered a new normal for our money. The lockdowns forced many of us to curtail our spending in many areas of our lives. Those lockdowns have all but disappeared in my corner of the world. However, there were some changes to my spending habits in the interim. How about you? Did you change the way you spent your money?

For my part, my social life took a beating! ZOOM calls simply don’t replace face-to-face meals in a nice restaurant. Virtual hugs aren’t the same as real ones! Where I used to share meals with friends 2-3 times a week, that was all but eliminated during the pandemic as I cooked most of my meals at home. There were those few brief months when I diligently participated in Take-Out Tuesday. It was my way of ensuring that local mom-and-pop restaurants stayed afloat. I didn’t want my post-pandemic restaurant options to consist solely of chain restaurants. The pandemic induced a second, major change in my annual spending. l stopped travelling. No more trips for work or leisure. All told, I haven’t left my home province in three years!

Believe me when I say that has never happened before. I’ve been travelling somewhere atleast once a year since the time I was 6 weeks old and my parents took me to the mountains. Travel used to be as familiar to me as brushing my teeth. I was the person who planned her next trip on the flight home from her last trip! Being grounded for the past few years hasn’t been fun. At the same time, I know it’s been a very small price to pay while living through a global pandemic. First world problem, right?

The World Health Organization declared the pandemic on March 11, 2020. Take a look at your expenses for the past two years. Where were you forced to cut back? What did you do with the money? Was it funnelled into savings? Did you pay off some debts? Perhaps you chose to simply spend more online?

The pandemic did not impact everyone in the same way. Some people lost their jobs and subsequently fell into debt & unemployment. Others transitioned to working from home, or otherwise continued to work in their essential jobs. The fortunate ones who continued to work had the opportunity to invest and pay down debt. They could do so because they were essentially stuck at home! Thousands of dollars were no longer going to sports activities, concerts, travel, eating out, gasoline, commuting, dry-cleaning, salon visits, etc… That money was now available to be spent paying down debts such as credit cards, auto loans, student loans, and other consumer debt. Alternatively, for the Debt-Free, those funds could be diverted to RRSPs, TFSAs, and non-registered investment accounts. The money could have also been used to bolster previously-anemic emergency funds!

Ask yourself if you’ve got a new normal for your money. You need not share your answer with the class. Instead, consider your spending choices during the height of the pandemic lockdowns. What were you forced to stop purchasing? And will you go back to making those same purchases now?

For my part, I look forward to socializing more with my friends and family outside of the house. Will I go back to the same frequency as before? That’s doubtful! These past two years have inspired me to try new dishes and to expand my culinary repertoire. The frequency of socializing will definitely go up, but I have a feeling that I will be doing more entertaining in my home.

As for my travel-habit, I suspect that my comfort level will not return to pre-pandemic levels for another few years yet. My annual international travels are still on hold for another year or two. Truthfully, it was an expensive habit. I wish I could say that all my travel funds have been piling up in my savings account. In reality, a lot of that money has been re-directed into my house. In 2021, I had to replace the sewer pipe that connects my house’s water to county’s water line. That particular project cost me as much as my 2016 trip to Italy!

Do you have a new normal for your money? Maybe take some time and think about whether you want to resume your pre-pandemic spending habits. If the lockdowns and restrictions forced you to curtail your spending, then maybe that’s a good thing. It’s your money and you’re the only one who can determine if you’ve found a new normal for how you manage it.

No Easy Answers

Forgive me in advance, as this post is going to touch on several things. I don’t have all the answers, but I have lots of questions.

Today, I watched a couple of YouTube videos about poverty in Europe. They could’ve just as easily been about North America, but The Algorithms suggested videos about Europe. It hardly matters what country I was viewing. The story is nearly universal. Once a person falls into debt and/or poverty, there are precious few ways out of it.

The first video involved young people who’ve graduated from university and cannot find a job. It’s not for lack of trying. The jobs simply aren’t there to be had. So young people who can do so are leaving their home countries to build lives everywhere. Why wouldn’t they leave? How do you create jobs that will motivate people to stay, to put down roots, to start families? What kind of a future does a country have when its young people have to move away in order to fulfill their dreams and ambitions? What has to happen to entice the young people to return? Will the country be around 100-200 years from now if their best, brightest and most talented leave to build satisfying lives elsewhere?

That same video also discussed how increasing interest rates skewered the incomes of those formerly in the “middle class”. Countries borrowed money and the terms of the loans required a decrease in labour costs. This is economist-speak for employers reducing salary costs. The good folk that believed they were solidly in the “middle class” saw the value of their paycheques plummet while their debt obligations remained the same. More than a few lost their homes and businesses. When incomes are slashed and debt stays in place, how are people supposed to recover from that particular double-whammy? What do you do when you realize that your economic status was tenuous at best? More myth than reality?

There are no easy answers to my questions. You can have the 12-month emergency fund to “tide you over”, but there has to be a job waiting for you at the end of those 12 months. If there’s no job, then you’ve simply exhausted your emergency fund. Without another job to go to, you’ve only delayed the inevitable results of being unemployed: homelessness, couch-surfing, losing friends, deteriorating networks, separation from family, etc… It’s grim.

Getting out and staying out of debt offers some protection from rising interest rates. Payments that used to go to creditors can stay in your bank account. You can use those funds to pay for the rising costs of food, housing, utilities, and any other price hikes associated with inflation’s impact on the economy. Yet if your paycheque doesn’t go far enough, what choice do you have other than credit to pay the minimum monthly bills? When your rent eats 75% of your paycheque, can you really be faulted for using credit to pay for the necessities that the remaining 25% doesn’t cover?

For most of us, the reality is that getting out of debt generally means having a steady income from which payments can be made. When it takes 25 years, or even 15 years, to pay off a mortgage, a borrower is making a huge bet that they will have income over that long period. In today’s world of contract workers and gig-workers, there’s a whole swath of people who might be better off not taking that bet. After all, a bank can just as easily foreclose for failure to pay at the 20 year mark as it can at the 2 year mark. Can you imagine how awful it would be to make 20 years of mortgage payments then lose your home if something permanently reduced your income?

Yet, at the same time, owning a home is still one of the few ways for a not-rich person to build wealth. Talk to the people who bought houses in Vancouver and Toronto as recently as 5 or 10 years ago. The values of their home have skyrocketed. Some lucky folk have houses that have earned more in equity growth than their owners have earned through a paycheque. Buying a home in a city with a strong economy and paying it off is still one of the ways to build wealth for your dotage.

And speaking of your retirement, what recourse is there if your retirement is adversely impacted by market forces beyond your control? If going back to work is not an option for you due to your health, age, or lack of job openings, what do you do?

These are the questions that keep me up at night. We always hear about the success stories, the people who’ve made it. They should be celebrated – they’ve overcome the odds and they can serve as a hopeful example of what’s possible. Yet there are countless others who did not achieve that same success. They worked hard. They saved. They followed the rules, yet they didn’t get their happily-ever-after on the financial front. What are the answers available to them?

Like I said at the start of this post, there are no easy answers. If there were, these problems would’ve been solved by now. All I know is that there are serious structural problems that are encouraging and reinforcing income inequality on a global scale.

A Primer on How Banks Make Themselves Rich

The first thing you should know is that I am not a banking expert. I worked in that industry on a part-time basis while going to university. That was 20+ years ago. Currently, I am what you would call “just” a customer. I don’t have access to private banking, nor is my business significant enough for the executives at the banks to care about me. This primer on how banks makes themselves rich is based entirely on my personal experiences as a customer and my part-time job at ATB before moving into my current career.

Savings Accounts

Customer A: “I should start saving some money.”

Banker: “Great idea! We can put you into our Never-Fail, Best-Option savings account. It pays you interest. The more you have in there, the more you earn.”

Customer A: “I like earning interests on my money. I’d like to open one of those accounts please.”

Banker: “Easy-peasy-lemon-squeezy.”

The account is opened. The customer goes away. The banker has the customer’s money and is wondering how to make it grow. After all, Customer A was promised that interest would be earned on her funds. The banker certainly wasn’t going to pay the customer with money from the bank’s own pockets! A lightbulb goes on as the banker realizes that money can be made from lending. An idea begins to germinate. If the Banker only had to pay out a fraction of the interest charged to lend, then the bank would make buckets of cash!

But how to make that happen?

Mortgages

Customer B: “I need to borrow some money to buy a property.”

Banker: “I can help you with that. The interest rate on our mortgages is very fair.”

Customer B: “That sounds good. Where do I sign?”

The banker is gleeful. Two customers! One brings in the money to be lent to the second. The bank only has to pay Customer A an interest rate that is a tiny portion of what’s being charged to Customer B. The difference between the two rates will be spent on administrative costs & other expenses, but any leftover is profit. How many other ways could the Banker come up with to make money?

Lines of Credit

Customer C: “I’d like to borrow money, but I’m not sure when or how much I’ll need.”

Banker: “Not a problem. We’ll set aside some money just for you. If you don’t use it, then there’s no charge. If you do use it, then the interest rate will be the prime rate + 3%. We’ll start charging you interest from the minute that you use your line of credit, but you only have to make the minimum monthly payment. You can pay it off whenever you want to.”

Customer C: “Awesome! Thank you!”

Auto Loans

Customer D: “I want to borrow money to buy a new vehicle.”

Banker: “I can help you with that. We’ll secure the loan with the vehicle. If you don’t pay the monthly note, we’ll repossess it.”

Customer D: “Sounds fair. Thanks!”

Credit Cards

Customer E: “I’d like a credit card please.”

Banker: “Done. Now, it charges a double-digit interest rate.”

Customer E: “Double-digits? That’s kind of expensive!”

Banker: “You know what? You’re right. So I’m going to do this for you. We won’t charge you any interest at all so long as you pay off the full balance when the statement is due. Think of it as a grace period. If you don’t pay it off in full, then I’ll charge you interest… and other assorted fees for late payment.”

Customer E: “Okay. Can I have my credit now please?”

Service Charges

The Banker wants to make even more money. The spread between interest paid on savings accounts and the interest earned on mortgages and other debt products is pretty good… However, the Banker is convinced that there is a way to increase its profits. Customers had always paid for drafts and certified cheques, but those instruments were often rare and not guaranteed income to the Banker. In a world of electronic transfers, fewer and fewer people need such services. Yet, everyone still needed to pay their bills, send electronic transfers to each other, make loan payments, and clear cheques.

Banker: “I could charge them just for having an account! Or I could offer them a so-called free account, but charge them by the transaction. People are inherently lazy about switching banks. I might lose a few customers but most of them will stay with me…and will pay me every single month to use their own money!”

The Banker add service fees to its bank accounts. Presumably, these are to cover the costs of providing services like utility payments. The Banker tell people they can pay per transaction, or they can pay a flat monthly fee for unlimited transactions. Better yet, customers can leave several thousand dollar in their account at all times in order to have the monthly fee waived completely.

Customers: “This sucks!”

Banker: “What are you going to do?”

If you’ve ever wondered…

…how banks make themselves rich, I hope this post gave you some insights. Banks make money because they have a vested interest in getting customers into debt. They profit when people borrow money. That’s the heart of their business. Everything else is a detail.

The vast majority of us will need to borrow money at some point. Assuming you’re interested in paying as little as possible to do so, here are some things to consider:

And should you be in a position where you cannot avoid owing money to the bank, then do yourself a small favour. Start buying shares in the banks! In Canada, banks pay out dividends every single quarter. Their profits are going up and their shareholders are benefiting. If you become a shareholder, then atleast some of the interest and fees that you pay is coming back to you every year. After sufficient period of time, all of the money that you’re paying to the bank will be returned to you in the form of annual dividends.

Now you know.

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.

Money Goals – Are you meeting yours?

How are you doing with your money goals?

At the time of this post, two-thirds of 2021 are in the rearview mirror. We’re heading into the final quarter of the year, so you should have a good handle on your progress. Have you been able to allocate your money towards your most important goals? If not, why not? And if your plans have been derailed, what are you doing to get them back on track before 2022 gets here?

Personally, I’m a big fan of writing things down. I love putting my goals on paper, then referring to that paper throughout the year. Of course, I’m not perfect… and some of my goals don’t get accomplished. It’s not unusual for me to look at my handwritten notes 13 weeks later and say something to myself like: “That’s odd. I don’t remember wanting to do this.”

This is not a good way to accomplish my goals. I’ve learned the following insight about myself – I have the memory of a fruit fly with Alzheimer’s.

And I’m not exaggerating by much. The major money goals are met every single year:

  • contribute the max to my TFSA in January? Check!
  • pay annual insurance premiums in one lump sum? Check!
  • invest a portion of every paycheque into my exchange-traded funds? Check!

And do you want to know why the major money goals get accomplished every year? It’s mainly due to the fact that I don’t have to think about doing anything. I’ve set up automatic transfers to take care of these goals. My paycheque is deposited to my bank account – my automatic transfers whisk money into various savings & investment accounts – my goals are met without any added effort on my part! It’s a magical, wonderful process.

Getting back to those handwritten goals that are forgotten, moments after I put down my pen…

Yes – those ones deserve a bit more attention. I haven’t come up with a perfect solution for those ones, but I’m working on it.

I’m a fan of Tangerine. This bank allows me to have 5 sub-accounts under one bank number. Each sub-account has a name. Tangerine also allows me to create Money Rules, which are fantastic! This week, I took another step towards meeting my goals. Each sub-account is named after my most important priority.

Every two weeks, a part of my paycheque is transferred into Sub-Account #1. My first sub-account is a slush fund for things that occur each year, but irregularly. Think unexpected car repairs or appliance replacement. These items have to be funded, and I would prefer not to use credit to pay for them. Also, I don’t want to deplete my emergency fund for car repair or a new fridge. My emergency fund is there to replace my income should I lose my job. Anyway, I keep a few thousand dollars in Sub-Account #1. Once I’ve hit my target, the first Money Rule kicks in.

Money Rule #1 says anything over-and-above the target amount for Sub-Account #1 is to be automatically transferred to Sub-Account #2. I use this second sub-account to accumulate money for my annual RRSP contribution, annual insurance premiums, and property taxes.

Once the target amount for Sub-Account #2 is met, Money Rule #2 kicks in. Anything over-and-above the second target amount is transferred to the sub-account of my next highest priority, until all 5 sub-accounts have been fully funded.

It’s a pretty good system. Its biggest drawback is that I didn’t put it into action until last year. Ah, well… no sense crying over spilled milk. The fact remains that I’m using it now and my handwritten goals are still being funded. Tangerine allows its customers to change the names of the sub-accounts. As one goal is met, i.e. renovating the bathroom, I usually change the sub-account’s name to the next thing I want to get done. This is why one of my sub-accounts is currently named “New Blinds”. It’s not a particularly sexy name, but it effectively reminds me of how the money will eventually be spent!

Pursue your best life!

Is anything stopping you from meeting your money goals?

Maybe your memory is like mine. If so, you have my sympathy! You have goals, but you’ve forgotten what they are. It happens. Protect yourself from your faulty memory by using automatic transfers to fund your goals.

It’s also possible that other priorities popped up and derailed your goals. You know your life better than I do, so I’m not here to judge the choices that you made. I’m simply going to nudge you towards reviewing your goals and what you need to do to meet them. And if you can’t meet them this year, that’s fine too. What isn’t fine is giving up on your goals. You’ll never meet them if you quit pursuing them. That’s just how life works.

Personal finance is personal for a reason. Everyone’s circumstances are different. If unexpected events knocked your money of the path you’d set at the start of the year, then so be it. I’m simply here to give you a nudge about not abandoning your goals, even if events of this year went in a direction you hadn’t expected. No – I can’t promise that it will be easy. All I can do is encourage you to not give up on the goals you set for yourself, since I believe that they will get closer to living the life you want to live. And if they won’t bring you closer to your dream life, then ask yourself why you created them in the first place?

Your money goals should be helping you build your very best life. At the end of the day, money is a tool. When spent in a way that brings your dreams to life, that maximizes your joy & happiness, you are putting your money to its very best use. Give me one good reason why you shouldn’t be putting your money to good use.

So if your goals have gone sideways, figure out what you most important next step needs to be. Evaluate your money goals and determine if they’re still important to you. If yes, then figure out what you need to do in the next 13 weeks to get closer to achieving them. And if the money goals of early 2021 are no longer important, then define new ones and create a plan for achieving them. You’re the only person who knows your heart’s deepest desire. The responsibility lies with you to determine the most effective way to make your dreams come true. Start right now because your best life awaits!

Boost Your Income!

I’m going to take a leap of faith and assume that, if you’re reading this, then you also wish that you made more money. You work hard – you’ve got bills – there are things you want to do with your money. However, it seems like there’s never enough money to go around. You’ve applied for promotions but they always seem to go to someone else.

What if I were to tell you that there is a way to boost your income without a promotion?

It’s called investing your money!

Speaking from experience, I can tell you that I’ve applied for promotions and not gotten them. While being passed over was a bruise to my ego, those missed promotions were never a blow to my finances. And you know why? It’s because my investment account does the heavy lifting of increasing my income each and every year.

What?!?!!

Yes – it’s true. While it wasn’t a fast process, investing a portion of my disposable income every single month has been very beneficial for me. I’m not a particularly savvy investor, so I invested the lion’s share of my money into two exchange traded funds that focus on dividends – VDY and XDV. I also took advantage of the dividend re-investment plan – aka: DRIP – to ensure that all of the dividends I earned were automatically re-invested.

I used to earn a few dividends each month. Now, I earn a few thousand. Yes – you read that right. My decades-long habit of investing a portion of my paycheque each month continues to reward me handsomely. Diligent investing has resulted in a situation where my annual income goes up every year… without me ever having to rely on my boss for a promotion. I won’t lie to you – it’s a pretty sweet situation!

Now, go back to where I said that I’m not a particularly savvy investor. If I were as smart then as I am now (or atleast as smart as I think I am now), then I would’ve invested in equity-based exchange traded funds. As you may or may not know, the stock market was on a complete tear from 2009 to March of 2020. People who had invested in equities made buckets & buckets of money so long as they stayed invested. My dividend ETFs have been good to me, but equity-based ETFs would’ve been so much better!

There’s atleast one investor out there who has absolutely no qualms about sticking to dividends throughout his career. I can certainly understand why – he and his spouse now earn $360,000 in dividends each year. (Part 1 and Part 2 – thank you to Tawcan for sharing this interview with the world!)

Can you imagine? You’re busily going about the daily business of living and your portfolio is kicking off $30,000 in dividends per month! Even before his retirement, I’m sure this couple was making a solid six-figure income off their dividend portfolio every year. And I’m equally sure that they didn’t worry about whether they got the next promotion in the pipeline.

The Career Funnel

Most organizations with employees have what I like to call a career funnel. There’s many people at the lowest levels, but fewer and fewer position for people as you move up the organizational chart. Managers have a set number of people reporting to them – so it goes, all the way up to the top. Naturally, as an employee moves up the career funnel, it gets harder and harder to obtain a coveted promotion. While many may try, only a very few will succeed. This is the way of the hiring pyramid.

It would behoove you to not be too, too dependent on getting a promotion in order to live the life you want. I’m certainly not discouraging you from pursuing promotional opportunities! Of course not! What I am suggesting is that you work on a Plan B, while you’re building your career.

And that Plan B is to ensure that you’re investing some portion of your paycheque for your future. I’ll tell you the same thing I would tell 18-year old Blue Lobster if I could travel back in time. Invest no less than 15% of your net income into an equity-based exchange traded fund every single time that you are paid. Leave the money alone for 30 years and let it do its things. At the 30 year mark, start adding some bonds to your portfolio to temper the volatility.

Again, I’m no expert in the area of investing so do your own research. Save as much as you can – invest it in ETFs – leave it alone to grow – ignore the talking heads on the media. Equities are volatile, but they’ve always gone up over the long-term. They will boost your income if given enough time. If you can’t stay invested for the long-term, then you’ll have to find some other way to increase your annual income. Maybe that means killing yourself at work so that you improve your odds of getting that promotion.

The Unappreciated Benefit of Boosting Your Income Through Investing

First off, I want to say that I’m very fortunate to work with smart, pleasant people who are helpful and considerate. My team has each other’s back. We share knowledge and insights with each other. And when we disagree on issues, the discussions are respectful and all parties try to see the other perspective. My work is challenging and my colleagues all contribute to an extremely good working environment. If I ever have any regrets about retiring from my current position, they will be that I will no longer have as much contact with these people as I do now.

That said…

I’ve heard from many in my circle that their work environments are what can only be described as toxic. Some of my dear friends work with or for horrible human beings. They’ve tried to find other positions but haven’t yet found better working conditions that will pay similar amounts of money. Like many people who have no choice about staying in their job for the foreseeable future, they have to eat sh*t and they can’t really complain about it.

If you’re able to boost your income via your investment portfolio, then you can drastically cut back on the amount of crap that you have to take from colleagues and bosses. Think about it. If your investment account could churn off enough for you to meet your survival needs, then wouldn’t it be possible for you to supplement that with a lower-paying job?

And you wouldn’t have to keep that lower-paying job forever. I’m not suggesting that in the least! What I’m trying to say is that your investment account could help you preserve your mental health. You could avoid very bad things like depression and burnout. Your investment account gives you a path out of a toxic work environment, without trying to get a promotion. And once you find a job that doesn’t make you feel dead inside, then you can go back to living on your salary, re-instating your DRIP, and continuing to contribute to your investment account.

If you’ve been reading my blog for a while, then you know that I harp on diligent investing & saving, month-in-month-out. This is an ideal to which everyone should aspire. However, I’ve been alive long enough to know that very few are able to do this. There are some things in life that are more important than saving and investing. In my view, preserving and protecting your joie de vivre is one of those things.

Next Steps…

So if you have the disposable income to do so, start investing today.

And if you’re one of the ones who’s already started, then pat yourself on the back and keep going.

It will take some time, but your investment account will eventually allow you to wean yourself off the need to get promotions to maintain your lifestyle. By all means, continue to apply for those promotions if you wish. If you get them, great. A higher salary means you have that much more to invest. After all, whatever increase you see in your take-home pay should be properly allocated between today and tomorrow.

If you don’t get the promise, then you need not fret. You can still be content in the knowledge that your investments are building your income without any influence from your employer. Even without the promotion, you’re increasing the likelihood that, financially, you’ll still be just fine.

Yesterday, Today, and Tomorrow

Today, I listened to a really good interview on YouTube with the fellow from Debt Ascent. He and his wife had over $500,000 in student loan debt. They paid it off in 5 years, while buying a house and also fully funding their registered retirement accounts. This was a great interview for two reasons.

Not everyone has fat to cut.

What I loved about this interview was that Mr. Ascent acknowledged that not everyone has the same ability to pay off debt as quickly and as easily as he and his wife. While both of them earned good six-figure incomes, they chose to live on one income while pursuing their financial goals. One of the things I loved best about this interview is that Mr. Ascent articulated that it is easier to meet your financial goals when you have a larger income.

Don’t misunderstand me. If you’re earning $300,000 per year and spending every penny, then you are in the exact same financial boat as the person who earns $35,000 per year and spends every penny. Both of you are living paycheque-to-paycheque. However, if both of you realize that you need to make financial changes, only one of you has the ability to make significant changes in a relatively short period of time.

Mr. Ascent acknowledges that there is a baseline of spending. In order to pay for the basics, everyone has to spend a certain amount of money. While it might fluctuate based on location, let’s say that the baseline is $35,000.

When you’re earning $300,000, you can choose to cut expenses. Doing so frees up a good chunk of money for you to fund your financial goals. Maybe you decide to pay off the auto loan in 18 months instead of 5 years. Perhaps you switch to cash instead of credit so that you can pay off your credit cards faster. Once your debts are gone, you have the ability to re-direct debt payments to funding your retirement accounts and paying off the mortgage.

At the other end of the spectrum, an income of $35,000 doesn’t allow you to make such big financial changes. At that salary, you’re going to need the vast majority of it just to pay for your life.

Unlike the vast majority of personal finance bloggers out there, Mr. Ascent expressly acknowledged that it’s easier to meet your financial goals when there is a lot of fat to cut from your budget.

Paying for yesterday, today, and tomorrow.

The other fantastic part of this interview was hearing Mr. Ascent talk about how he and his wife prioritized their money. In his words, they made choices to maximize every dollar. They were able to get a mortgage rate of 3%, and had a rate of 2.95% on their student loans. He disclosed that in order to get such a low rate on their student loans, they had to agree to pay $4,000/mth for 7 years. Further, they knew that they were responsible for funding their retirement so that was priority number one. And, of course, they had to pay the mortgage or else they’d lose their house. Every “extra dollar” was sent to their student loan debt rather than being funnelled into an investment account.

Why? Isn’t the common wisdom to invest while paying down debt? Don’t all the calculators show that doing both works out best over the long-term?

Perhaps… Yet, personal finance is personal for a reason. What works for one won’t necessarily work for all.

The Ascents took a different view. In Mr. Ascent’s words, they wanted to prioritize their money in order to maximize their cashflow. They realized that the sooner they rid themselves of that $4,000/mth minimum payment, the sooner they could earn and keep that money for themselves. In other words, eliminating that payment would mean an immediate increase in their household’s disposable income. The Ascents realized that they would be able to cut back to working 4 days a week if they chose. The former student loan payment could be re-directed towards their mortgage, resulting in even more disposable income sooner.

So that’s what they did. According to Mr. Ascent, registered retirement accounts were funded first as they were the highest priority. The next highest priority was paying the mortgage. Finally, the minimum student loan payment was made. And when there was extra money, it went to the student loans.

If I understood him correctly, they were completely debt-free within 7 years of finishing their respective graduate degrees. They paid off half a million dollars in student loans as well as a $200,000 mortgage. On top of that, their retirement accounts have hit the half million dollar mark. Their starting salaries after graduation were a combined $200,000 and they managed to double that in less than 10 years.

Again, Mr. Ascent was humble enough to recognize that he and his wife were in a very fortunate position to be able to do what they did. At not point did he ever try to make the argument that everyone could mimic their choices, no matter their income.

Well, anyone could do that…

… if they were earning that much money. That’s the common response upon learning that the Ascents earn big bucks as a dual-income professional couple.

I think that response is short-sighted. There are many people who earn high salaries, and are living paycheque-to-paycheque. Having a high income provides you with the opportunity to pay off debts fast, to fully fund your retirement, and to rid yourself of your mortgage. A high income is not a guarantee that any of those things will happen. The choice to spend money belongs to you. The Ascents are an example of a high income couple who chose to live below their considerable means in order to achieve the goals that they set for their money. Again, they chose to live on one salary while the other salary went to paying off debts and funding their retirement accounts. The choices they made after graduation paved the way for them to have full control over their entire paycheque.

There is absolutely no doubt that having a very high income was beneficial. That fact should in no way diminish the choice that they made to live on one income. They made the choice not to upgrade their lifestyle once they finished graduate school. Together, they decided to eschew the path of consumerism and to focus their energies on removing the shackles of debt from their lives.

Again, anyone could do that!

You’re right. Anyone who earns more than the baseline income needed to survive can make the same choice as the Ascents. To be clear, I absolutely understand that some incomes are just not large enough for more that subsistence living. This post is directed at those who do have the fat-to-cut in their budgets, yet choose not to align their spending with the dreams they have for their lives.

Just like the Ascents, you have the choice to prioritize your financial goals. Nothing is stopping you from living below your means in order to fund those goals. It might take you longer than 7 years, but so what? Would you rather spend every penny and not ever achieve your dreams? Or would rather work a little bit longer to see your long-term goals become a reality?

As soon as you decide what you want, you’ll be in a position to start figuring out ways to make it happen.

You’ve Got This!

It’s natural to doubt yourself when you first start something new. However, the great part is that those doubts diminish over time as you get better at doing the new thing. Gaining some experience goes a very long way towards quelling the nagging voice in your head that tells you that you’re out of your depth. If you do anything over and over and over again for a long enough period of time, eventually you’ll approach it by telling yourself that you’ve got this!

Personal finance is no different. No one starts off doing it perfectly from the very first time they do a budget, or save money, or pick an investment. If it were easy, then everyone would do it. We would all be rich – none of us would have consumer debt – we’d all be retired by 35 and spending our time doing what we love best.

That’s not the reality though, is it?

In the real world, it takes a bit of time to gain confidence with our money. And that’s perfectly fine! I started at age 16 with $50 from my part-time job at the grocery store. Every two weeks, I would manually transfer $50 from my chequing account to my savings account. At one point, I had $8,000 in my savings account. (There was a condo up the road from my house that was for sale for $40,000. I had the 20% down payment, but I was still in school and I knew my parents would never co-sign a mortgage for me… Sometimes, things don’t line up for you and investment opportunities are missed. That condo is now worth over $200,000!)

Back then, I was young and un-knowledgeable about personal finance. All I knew how to do was save a little bit of my paycheque while spending the rest of frou-frou stuff that has long been forgotten. I shouldn’t be too, too critical of Young Blue Lobster – atleast I had the brains to pay myself first. Saving $50 bi-weekly was a good start, but I hadn’t realized just how much was yet to be learned. A savings account is not the place to invest money. By the time I’d finished my undergrad, I’d learned about mutual funds… so I started investing my money with in a bank’s lineup of mutual funds.

Better than a savings account, but still not great. Bank products generally had very high management expense ratios. I eventually learned about MERs, and how higher MERs lower my overall return. Once I had that knowledge, I I learned about investment companies and how they have lower MERs. I moved my money. Anyone remember Altamira?

Though hardly glamorous, each time I learned more about some aspect personal finance, I adjusted course. When I paid off my student loans, I turned my focus to paying off my vehicle loan. Debt was bad so I had to get rid of it. Renting was bad – or so I thought at the time – so I bought my first residence, a condo in the university district that became my first rental property. When I started thinking about retirement, I funnelled money into my RRSP and then, when they were introduced in 2009, into my TFSA. In my 30s, I switched from mutual funds to exchange-traded funds. The more I learned, the more I refined my money management skills.

Am I an expert today? Gosh, no! There’s still so very much more for me to learn. However, I can tell you that I’m more confident today than I was decades ago. I’m not frozen by indecision anymore. My trial and error, and my past mistakes, have taught me to ask better questions. I don’t invest in products that I don’t understand. Today, I’m far more prepared to do my own research before investing my hard-earned money.

Create your own plan of action.

Figure out what you want. These are your priorities, aka: the things you want to do/be/have in order to live the life that you want. Money that’s not spent on your survival should be channeled towards funding your priorities. Don’t spend your money on things that don’t get you closer to your priorities. Studying abroad? Six weeks in the Riviera? Starting your own business? Taking a sabbatical from work? Creating a scholarship fund? You can have what you want if you can figure out a way to get it. This blog is about the financial aspect of your priorities. Figure out what you want, then spend your money in a way that helps you to get it.

Determine your savings per diem. This is the daily amount of money that you will set aside to turn your dreams into reality. I don’t care how much you start with. My $50 bi-weekly amount worked out to $3.57 per day. Maybe you can afford more, maybe you can afford less. It doesn’t really matter. If you save $0 per day, then you will have $0 to create the life you want. You must save something. When it comes to money, some is definitely better than none!

Find the balance between enjoying the present and planning for the future. It’s taken me a very long time to learn how to spend a little bit in the here-and-now. Some would say that I still invest too much of my money. And they’re entitled to their opinions. For my part, I know that I’ve found a balance that works for me. In the Before Times, I’d started travelling to Europe each year. It was important to me to see another part of the world while I was still young and energetic enough to do so. I bought coffee a little more often than most FIRE gurus would suggest. My last two vehicles were purchased brand-new rather than used. Oh, I’ve spent money in countless ways on today’s whims – there’s no doubt about that! However, those whims were only and always funded after I’d paid myself first.

Finally, don’t be too hard on yourself. Personal finance is personal because there’s no one exact right way for you to handle your money. Your priorities are different than mine, as are your responsibilities and risk tolerance. You may hate the stock market so you’re investing in real estate. Or maybe you’re into cryptocurrencies and are getting in sooner rather than later. Maybe you’re running your own business, or you have a side hustle on top of your regular job. However you choose to earn your money, you owe it to your self to save then invest your funds in a way that gets your closer to living your dreams.

Never, ever stop learning. Remember the wise words of Dr. Maya Angelou – when you know better, you do better.

It’s all good, because you’ve got this!

Err on the Side of Caution

There are few among us who really and truly find deep life satisfaction from our paid employment. If you are one of these Fortunate Few, then you are truly blessed. For the rest of the good people reading this little blurb, I would urge you to err on the side of caution.

Whatever do you mean, Blue Lobster?

Gentle Reader, do your Future Self a good turn. Even if you love your job today, always invest part of your paycheque for long-term growth. Start small if you must – $1/day – but just start. There’s no guarantee that you will still love working tomorrow. You may wake up one morning and want to do something else with your life. Yet, if your only source of cashflow is your job, then you’re a little bit stuck. Doing what you love may not pay the bills, and that can impede your ability to shelter, feed, and clothe yourself. No one wants to be impoverished.

Recently, I hit something of a milestone – 20 years with the same employer. Not many people can say that these days, so part of me is kind of impressed with this achievement. However, another part of me is counting down the days until retirement. While I’ve been at my job for a long time, I’m not as enthralled with it as I was when I first got here decades ago. Time has flown by in the blink of an eye! Had I known then what I know now, I would’ve made some different choices.

From my vantage point, the message of investing for the future is not sufficiently impressed upon the new or younger employees. Bright-eyed and bushy-tailed, clutching their newly-minted credentials, eager and excited – these newbies rush headlong into the new careers and probably enjoy the challenges and responsibilities that come with their first grown-up job. And that grown-up job probably comes with a grown-up paycheque, or atleast one that’s bigger than the part-time jobs they may have held up to this point.

Throw in a little pent-up demand and it’s the perfect recipe for the start of paycheque-to-paycheque living. It’s also a great way for employees to become beholden to their jobs. Monthly payments come in a wide variety of flavours: mortgage/rent, vehicle payments, student loans, streaming services, memberships, subscriptions, etc… What do they all have in common? They all take little bites of your paycheque. Each one allows you to make life a little more comfortable today. They very definitely prevent you from seeding your investments to ensure your future financial comforts. And they keep you tied to a job.

I’m lifting my voice and urging the young or new Eager Employees to just take a breath. Contrary to the “advice” of the Marketing Machine, there’s no requirement to commit every penny to spending. In other words, you need not spend it all now. I’m here to spread the message that it is perfectly okay for you to slice off some of that brand-new paycheque and invest it for the future.

Why consider doing this?

Take a look around. Are there any… ahem… senior employees lurking about? Do they seem filled to the brim with passion and energy about their current positions? Perhaps they are less enthused about devoting 2 or 3 decades of their lives to the workplace. Is there even the slightest possible chance that very deep down in their hearts they would leave their jobs if they had the money to do so?

If the answer might be yes, then ask yourself if you want to in their shoes when you hit your 20th year of working for someone else. Wouldn’t you rather have the option of working because you want to and not because you have to?

Err on the side of caution. Create a stream of cash flow from your investments. How? By buying investments that pay dividends and capital gains. Instead of spending those investment returns, re-invest them consistently. The more you invest today, the faster your investment returns will compound. If you want an excellent example of someone who has put together a solid investment plan by investing in dividend paying stocks, check out Bob Lai’s story at Tawcan. He regularly updates his investment portfolio returns and tracks his dividend growth. If I understand him correctly, he will be relying on a steady stream of dividends to fund his retirement. Another great blog to follow is that of Mark Seed at My Own Advisor. I’ve learned a lot from both sites, even though I may not have adopted and followed every single one of their recommendations.

Allow me to very clear – your investment portfolio should be working harder than you do. Invested money works 24 hours a day, 7 days a week. It doesn’t get sick, take vacations, or need time off to attend to personal matters. The sooner you put your money to work, the better. Investments can work magic for you but they do need time to grow.

And when the time comes when you no longer want to work for a paycheque, your investments should be able to fund your lifestyle.

Think about Future You and err on the side of caution. If you love your job in 20 years, then you’ll be happy at work with a generous cash cushion on the side. Nothing wrong with that! However … if there’s a chance that you won’t be so enamored with working every day, then you should be taking steps now to create the option of leaving if working become unbearable. I strongly urge you to do the following:

Your investments will give you options when you’re ready to part ways with your employer. You won’t have to worry about the axe falling, since you’ll have a nice, big cash cushion upon which to land. Your investments can be arranged so that they replace your paycheque. How nice is that?

And if you find yourself among the Fortunate Few who still love their employment after 20+ years, then so much the better. You’re doubly blessed – a job you love AND an investment portfolio that churns out dividends & capital gains. It’s the best of both worlds.