Category: Retirement

Commit to a Per Diem

Per Diem… it’s a phrase that means “an amount of money paid per day.” In the world of personal finance, it’s a phrase that is not used nearly enough. I want you to commit to a per diem.

That’s right. I want you to pay yourself some amount of money every single day.

I’ve written about per diems before, but this article is about creating a per diem that’s specifically designed to take care of Future You.

The Four Steps of the Per Diem Plan

  1. Pick a daily amount to save.
  2. Set short-term goals for your money.
  3. Invest that money.
  4. Don’t spend the money until you retire.

Step 1 – The Amount

If all you can afford is $1, that’s fine. When you have more, you can give yourself a raise. The important thing is to get into the habit. Start the habit today.

Think about it. How would you like to have more than $3500 by this time next year? All it takes is $10 per day. That’s not a whole lot of money in today’s world. If you have it to spare, then I’d like to see you put it to good use. And what better use is there for your money than ensuring that you’re comfortable, warm & fed in your dotage?

Maybe you’re fortunate enough to be able to put away $20 per day. Great! Do it! I’m not a stickler on the amount that you save each day. However, I am adamant that you save something. Start with whatever you can then increase your per diem as you’re able.

Step 2 – Set Short-Term Goals

Like I said above, this per diem is for Future You. When I talk about short-term goals in this context, I don’t mean saving for a vacation or new sports equipment, although you should never go into debt for those items either. You should definitely save first then pay cash at point of purchase.

No. In this case, your short-term goals are monetary targets. Let’s say you commit to a per diem of $10. Set a target amount of $500 or $1000. Then create an automatic transfer from your main day-to-day bank account to a separate savings account. When you hit $1000 in your savings account, then you invest that amount into an equity-based exchange traded fund or index fund.

You do not want to keep your money in a savings account. Why? I’ll tell you why – the rate of interest paid on savings accounts is less than inflation. You are losing money by keeping your money in savings accounts for long periods of time. Inflation is a fancy way of saying that the value of your money is decreasing over time. When $100 buys 5 bags of groceries in 2019, but only 4.5 bags of groceries in 2020, then you are seeing inflation at work. Inflation means your money purchases less today than it did yesterday.

Savings accounts are great to accumulate money that will be spent in the next few weeks or months. (They’re also a good spot for emergency funds, in my opinion. Others disagree with me.) Commit to a per diem going into your savings account. When it hits the target number, you invest the money then start working towards the target again.

Step 3 – Invest that Money

You’re free to pick whatever monetary target you want. I like $1,000. It’s a nice round number and it will take roughly 3 months, at $10/day, to achieve. If you can save $20/day, then you’ll be investing money every 8 weeks. Also, it feels good to tell yourself that you’ve just invested $1,000.

Again, you don’t want to let your per diem languish in a savings account. That money has to work as hard for you as you do for it. That means you simply must invest your per diem money in the an equity-based product.

I have no idea how young you are at the time you read this post. The bottom line is that the longer your money is invested in the stock market, the better your odds of watching it grow to a nice, big mountain of financial security. That mountain won’t be built until you commit to a per diem.

Step 4 – Mitts off until retirement

The money you save today is for Future You. Even though no one is promised tomorrow, it’s best to plan as though you’re going to be here for a long time. It’s very, very possible to find the balance between enjoying the present while saving for the future.

Wouldn’t it be awful to live to 92 yet you ran out of money at age 74? The social safety net isn’t designed to keep you comfortable. It’s designed to keep you at a level of not quite starving to death. That would be a terrible way to live during your retirement years.

Allow me to be clear. Your per diem money is not to be touched.

You’re still responsible for creating an emergency fund, and for replenishing it if you need to use it. Sadly, the rest of life’s expenses don’t disappear just because you’re saving for your future. You’ll be saving for tomorrow while paying for today. Commit to a per diem, then live the rest of your life on whatever’s left over.

And if you find that you have too much money waiting for you when you’ve finally retired, feel free to leave me a message. I’ll happily take whatever amount of money you don’t want.

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Weekly Tip: Never grocery shop when you’re hungry. You’ll likely make more impulse purchases and that can throw off your budget. Whenever possible, eat before you go to the grocery store. Make it easy for yourself to stick to your list!

Old-Fashioned Advice

It struck me recently that one of the reasons I’ve achieved some of my personal finance goals is that I’ve followed old-fashioned advice. These are the top three nuggets that come to mined.

  • Stay Out of Debt.

This particular pearl has served me well. I’ve had credit cards in my wallet for more than 25 years. I’ve paid interest once, and that was because I’d miscalculated when I made my payment. I don’t carry a balance on my credit cards.

The credit card companies would call me a deadbeat. I wear their moniker with pride.

One of the keys to becoming a deadbeat is to have an emergency fund and other accounts to fund short-term inconvenience. If you have a vehicle, then you know that you’re only one weird sound away from a mechanic’s bill. When my vehicle needed $600 of work, I had the money set aside in an account set up to field these kinds of expenses. Mary Hunt calls this a Freedom Account, and she describes it in her book Debt-Proof Living.

If my house burned down, or I lost my job for an extended period of time, then I’d go to my emergency fund in order to pay cash for my living expenses. I have insurance on my house but why should I pay the credit card companies interest while I’m waiting for my insurance money? And if I’m out of a job, that’s hardly the time to be incurring debt in the form of 19.9% interest payments to the banks. I have money set aside so that I don’t have to turn to credit cards during the bad times. You should too.

It takes as long as it takes to create a nice, fat cash cushion of emergency money. Start today.

  • Pay Cash.

The following method has worked for me. I suspect that it will work for you.

First, I identify what I want. Second, I look at my bank account to see if I have the money.

The third step goes one of two ways. If the money is already in my bank account, then I buy what I want. If the money is not in my bank account, then I don’t make the purchase.

Fourth, I get what I want… when I have the cash in hand to pay for it. The fancy term for this is delayed gratification. Call it what you want. The bottom line is that paying cash throughout my life has benefitted me far more than any inconvenience caused by waiting.

  • Pay Off Your Mortgage

I was lucky enough to get into the housing market with a modest, mid-sized mortgage under $70,000. When I moved from my first home into my next one, I bought a property that suited my life circumstances. I did not accept the bank’s gracious offer to lend me several times my annual income. My refusal of that gracious offer has meant that I live in an older home that’s roomy enough for a Single One. It also meant that I could pay off my mortgage in my mid-30’s. I’m happy to report that those former mortgage payment are now the foundation of my automatic investment plan.

I know that there is a lot of debate among very smart people about whether to invest or to pay off your mortgage. Today, we live in a world without pensions and $300,000+ mortgages. Essentially, these two facts combine to create circumstances where people can spend their entire working lives paying off a mortgage. They may not have any “extra” funds to put towards retirement. Every dollar is allocated to paying for the mortgage and for the costs of living. Most people enjoy the little luxuries – you know, food & transportation. Crazily enough, they’ll even prioritize those luxuries over saving for a retirement that’s decades away. Even I go back and forth on whether I should have taken 25 years to pay off my mortgage so I could have invested in the stock market for a longer period of time.

Since paying off my home 10+ years ago, I’ve never worried about having shelter. Rental increases haven’t impacted me, because I own my home free and clear. Mortgage rates no longer make me apprehensive, because I don’t have to worry that my budget will be impacted if those rates shoot up. (Of course, that’s a hollow argument in the mortgage market of 2020 – when 5-year rates can be had for less than 2.5%.) I no longer have to hope that absolutely nothing goes terribly awry with my paycheque for over two decades so that I can service a gigantic debt. This last benefit just might be my very favourite – sleep is easier without money worries.

I still think paying off your mortgage is a great course of action. At the same time, I’m realistic enough to recognize that it’s not always the best option.

Everyone’s situation is different so use these nuggets as you wish. Stay safe – wash your hands – be well.

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Weekly Tip: Ladies, you’re statistically more likely to outlive men so you should invest a greater percentage of your portfolio in equities to generate higher returns over your longer lifespan. Withdraw your age from 120 and allocate the number as the percentage of your investments to the equity portion. As you become a more sophisticated investor, you can change this percentage if you want.

Learn from Others!

If I can impart one nugget of wisdom to you today, it is this. You need not make every mistake yourself in order to learn a lesson. You’re always free to learn from others. I’m not promising that you’ll avoid making your own mistakes – that’s utterly impossible. What I am promising is that some of the biggest mistakes can be avoided if you’re willing to pay attention and think about the choices made by the people in your life.

These people won’t all be your family & friends – although it’s important to pay attention to the consequences of their choices too. Sometimes, the people who can teach you important lessons are only in your life for a few minutes.

When I was in high school, I had a part-time job as a cashier in a grocery store. Living at home, I had the luxury of having all of my paycheque go towards having fun with my friends since my parents paid for my shelter, my food, and the other important stuff. I was a very fortunate kid!

Anyway, two of my customers made indelible memories on me. One customer was an elderly lady who came through my till. I don’t recall how the topic of money came up but she very specifically told me to start saving for my retirement. I was a 16 or 17 years old at the time, but her words stuck with me. The second customer was also an elderly lady. I remember watching her compare two cans of cat food, and she was teary-eyed. When she came through my till, she confessed to me that she stocked up on cat food when it went on sale because she ate it herself. At the time, each can cost $0.59. She was tearful because the price had gone up from the last time she’d shopped.

Like my parents & teachers before them, these women provided me with a very important opportunity to learn from others. In their respective cases, the lesson was about money and retirement.

Those two anonymous customers forever changed my perspective on saving money for my future. Here were two seniors, who had very different options at the grocery store. I don’t know their back-stories. I can’t give you any details about their lives. Again, I was a teenager in a cashier’s uniform who rang through and bagged their orders before wishing them a nice day.

Yet, each of them taught me a valuable lesson her own way. From that day forward, I knew down to the marrow of my bones that I had to save a lot of money for my retirement.

When I was in my 20s, I worked part-time in a bank while going to school. One Saturday, a customer came in to pay $20,000 (maybe $25,000?) towards his mortgage. Those kinds of transactions were beyond my skillset as a customer service rep so the loans officer had to process it. After the customer left, I asked the loans officer why the customer had done that. The loans officer took the time to explain to me how the customer’s lump sum payment would knock years of payments and thousand of dollars of interest off his mortgage debt. That was the first time anyone had ever explained anything about mortgages to me.

Once again, I tucked that knowledge away for the future. I promised myself that, once I got a mortgage, I would pay it off as fast as possible by using these magical “prepayment options” that the loans officer had taught me.

Now, I still made mistakes. I didn’t learn about RRSPs until I was 21. So even though, I’d been working part-time since the age of 16 and saving $50 every two weeks in my savings account, I delayed starting my retirement savings program by 5 years. My parents ensured that I filed a tax return each year, so my RRSP room was accumulating every year. I could’ve made a contribution sooner but, alas, I did not.

So what happened at age 21? That’s easy. I read the book The Wealthy Barber by David Chilton. That book changed my life! In addition to starting my RRSP, I began to read more books about personal finance. When I graduated from school and started my career, I had a firmer foundation than I otherwise would have had. Though not perfect, I had a plan for my money.

Due to my choice to learn from others, I started contributing to my retirement accounts at age 21. I forced myself to start an automatic savings program at age 16. I’ve continued to live below my means. This choice has allowed me to always have money for investing. I chose to learn from others and I’ve avoided some of the very worst mistakes that I could have made with my finances.

Again, you need not make every mistake yourself. You have the option to learn from others. Use it!

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Weekly Tip: Set up an automatic savings plan. Part of your paycheque needs to be invested every time you are paid.

Tough Choices

Try as I might, I still haven’t figured out a way to get everything that I want. There are always tough choices to be made about money. I honestly believe that tough choices are the foundation of the non-financial side of personal finance.

While the Single Ones among us do not have to fight with anyone about money, it’s still incredibly important for us to identify our spending priorities. Being single does not eliminate the requirement to take responsibility for our money. Setting priorities helps us figure out what to do when tough choices have to be made about how to spend our dollars, and which goals to pursue.

Last weekend, I found a wonderful house. It’s a 1500sqft bungalow with main floor laundry, a double-car garage, and – wonder of wonders! – a large foyer that opens into a beautiful, bright living-space. Did I mention the large composite deck, the spacious & fully-furnished basement, and the fabulous ensuite off the master bedroom? It’s even in the neighbourhood that I’ve been watching for the past ten years!

So why didn’t I jump on the change to buy it?

Here’s why… Doing so jeopardizes my retirement plans.

The house is almost perfect for me. It’s main drawback is that it would require me to commit to working for at least another 5 years. Time is precious. I’m not one of the Very, Very Fortunate who loves their job and would do it for free. While my job has a great many benefits, I’ve long dreamed of the days when I can spend my time doing what I want and not what my employer pays me to do. I don’t want to sacrifice 5 years of my retirement for a house.

And it wouldn’t just be losing 5 years of retirement. Having a mortgage again would mean that I would lose the financial flexibility that I have right now. In pre-COVID times, it was so nice to be able to say yes to spontaneous invitations without worrying if my budget could handle the expense:

  • Dinner with friends to celebrate the warmer weather? Sure.
  • Can I afford the Rimrock to attend a good friend’s wedding? I’ll be there with bells on!
  • How about a last-minute theatre performance? Not a problem!
  • Why not pop over to the Emerald Isle in six weeks? I’m on my way!

Taking on a six-figure mortgage at this stage of my life would mean giving up the little extras that bring me joy. Those little extras are my reward for having been diligent and focused in my younger years, when I was paying off student loans, car loans, and the mortgage on my current house. Back then, I said “No” a lot more than I do today. Friends and family often chided me for the financial choices that I made, but I don’t regret following my plan. After all, I was the one who had to live with the consequences of my spending choices.

So as much as I wanted to buy the very awesome new house, I had to make a tough choice between two competing priorities. I could stay on track to retire, and continue to live in my current home which is perfectly suitable for me. Staying in place means that I don’t have to forego time in retirement. Alternatively, I could go back to having a mortgage and living on a tighter budget. In addition to all its lovely features, this new house’s property taxes are twice what I pay now. I’d have a higher heating bill each month, and I expect that the other costs of running a house would be higher too. Also, little renovations that I would want – a railing for the deck, new paint in the dining-room – would have to be put off. My budget wouldn’t handle renovations and mortgage payments at the same time.

At the end of the day, I chose to say “No” to the new house. The truth is that I’m not prepared to give up my goal of retiring when I want. I don’t hate my current house but I’m also not enamoured of the idea of never living anywhere else before my long dirt nap starts. Part of me is craving to be the Joneses, to buy another house, to set up a new little spot to call my own. It seems that everyone I know has bought a new house in the past 5 years – family, friends, colleagues, acquaintances. Why should I be the only one who doesn’t get to buy a new house?

The last question is a stupid one. I am not being deprived of a new house! I’m simply making a different choice. Those who have bought won’t have the option of retiring a wee bit sooner. They’re committed to repaying the bank or losing their home to foreclosure. The choice for them was to buy the house and to work longer than I’ll have to.

When it comes to money, tough choices have to be made sometimes. I’d already defined my priorities so it wasn’t too, too hard to walk away from the new house. I know what’s most important to me.

Ideally, you’ve also defined your priorities and you’ve figured out how to spend your money so that you can meet them. You’re the one who works hard for your money so make sure that you’re pursuing your priorities whenever you spend it. Whether you want a new vehicle, a new home, a new book, or new clothes, just make sure that your money is going towards the priorities you’ve set for your life.

The tough choices won’t go away completely. Knowing your priorities will better equip you to choose the alternative that gets you closer to the life you want to live.

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Weekly Tip: Update your net worth every month, or on a regular schedule that best suits you. Net worth is determined by adding up your assets and subtracting your debts. If you have a negative net worth, that means you’re in debt. If you have a positive net worth, then your assets exceed your debts. Your net worth is a snapshot of your finances at a given point in time. Knowing this number will help you to determine what your next steps need to be on your financial journey.

When Should I Start Saving?

In a perfect world, you would have started saving with the first dollar that you ever received, i.e. birthday money, paper route money, graduation money.

You would have gone to the bank – or your parent would have taken you – to the bank and you would have opened an account. Then you would have deposited that dollar before you’d had a chance to spend it. Everyone seems to know that the sooner you start saving, the better. However, there appears to be a disconnect between knowing and doing.

You’re the only person who can bridge the chasm between knowing what to do and then actually doing it. The truth is that it is quite simple to open a savings account in today’s world of online banking. It’s another very easy and straightforward matter to put an automatic transfer in place, thereby eliminating the need for you to manually transfer money into your savings account. The automatic transfer kicks in every time you’re paid – easy peasy lemon squeezy!

The very next best time to start saving money is immediately. I cannot stress this enough! Savings work best if you take steps to save money. Step one – save. Step two – don’t spend your savings. If you’re not yet accomplishing these two things, then you’re only dreaming about saving… which is all fine and good but it won’t help you very much since you can’t use dreams to acquire what you want. Dreaming about saving is not the same as actually starting to save.

I love dreams as much as the next lady, but dreams don’t put the cream in cupcake. You need to actually start saving – the sooner, the better. I speak from experience. One of the reasons that I’m able to seriously consider an early retirement is because I started saving a portion of my first paycheque when I was 15 years old. I’ve made many stupid decisions with my money over the years, but starting my savings plan in my teens is not one of them.

Now, let’s say there’s a good reason why you can’t start saving today. If this is your situation, then I want you to start saving money on any day that ends in the letter “y”. That leaves you with Monday, Tuesday, Wednesday, Thursday, Friday, Saturday, and Sunday. Each of these is a very fine day to start saving your money.

Whatever else you do, please don’t start saving tomorrow. First of all, tomorrow is promised to no one. Further, it is not a day ending in “y” so it’s not a suitable day on which to start saving. And while I hesitate to state the obvious, I feel that it’s best to articulate the fact that everyone eventually runs out of tomorrow’s. No one ever runs out of today’s – go back to my first point. Today is the very best time to start saving money.

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Weekly Tip: Practice delayed gratification. Wait a day or a week or a month before buying what you want. It gives you a chance to assess if you really want to make the purchase. It also gives the retailer a chance to put the item on sale. This is good because the whatever-it-is-that-you-want will be cheaper if you decide to make the purchase after a prescribed waiting period.

Budget? No, thank you.

I don’t use a budget. I’ve been in charge of my own money since I got my first part-time job, in a grocery store, at the age of 15. Not once since that time have I ever written out a budget in order to allocate a certain amount towards food, towards clothing, towards entertainment, towards X.

If you’ve been reading my blog for the past couple of years, you’ll know that I’m a huge fan of automatic transfers and sinking funds.

Very simply, my paycheque hits my bank account. My automatic transfers kick into high gear. Various amounts of money are dispersed among my many, many bank accounts. (Each account has a very specific purpose!) Then I spend whatever is left in my account.

For the cheap seats in the bank, I say again that I don’t use a budget.

If budgets work for you, then stop reading.

For my part, I’m not against budgets if they work for you. Everyone needs a good money-management system and budgets are one of the options available for controlling spending.

A budget simply doesn’t work for me.

See, if I’m at the grocery store and I see something that I want but which isn’t on my list, then I’m still going to buy it. I don’t want to walk past it solely because it’s not in the budget. (I might walk by it because I don’t need more calories/sodium in my diet, but that’s a different blog topic.) The same principle applies to clothing, shoes, gasoline, whatever isn’t already covered by my sinking funds.

And lest you think that money runs through my fingers like water, I promise you that there is a method to my budget-free madness.

The backbone of my money-management system lies in taking care of the Big, Important Priorities first. Once my priorities have been funded, then it doesn’t matter if I buy a couple of extra things at the grocery store or drive more than I’d intended in a given week. The most important elements of my financial life get funded first so that daily decisions don’t matter too, too much so long as I don’t go into debt. Rule number one of my system is always avoid debt!

Although I’m still fine-tuning it after all these years, the system I’ve developed for myself ensures that my medium-term and long-term priorities each get the lion’s share of my paycheque before I start doing my day-to-day spending. The impulse purchase of a pair of jeans while window-shopping at lunchtime is not going to derail my retirement dreams.

Automatic Transfers & Sinking Funds

The most important quivers in my money-management arsenal are automatic transfers and sinking funds. One of the most burdensome realities of adulting as a Single One is that all the expenses of my household are my responsibility. That means, I pay all the utilities and taxes and insurances. It also means that if I want to travel to Vancouver to enjoy the cherry blossoms in the spring, then I’m the one who has to scrounge up the money to do so.

In the pre-COVID19 days, I had a far more active social life that included concerts, travel, and meals with friends. Those activities have been curtailed for now, but I’m sure that I’ll get to enjoy most of them again.

My point is that I rely on automatic transfers and sinking funds to pay for the expenses of my life. For example, I pay my insurance premiums on a yearly basis. I have a sinking fund for that particular bill. I take the amount I paid last year, increase it by 10%, then divide that number by my annual number of paycheques. The final amount is then automatically sent to my sinking fund every time I get paid. When the premium due date rolls around, I’m not left wondering where to come up with several thousand dollars.

While I realize that some people pay their insurance monthly, I abhor the idea of anyone other than me withdrawing money form my account. I’d prefer not to grant access to my bank accounts to anyone else.

I have sinking funds for all of the following:

  • insurance premiums;
  • property taxes;
  • annual vacations;
  • birthday and celebration gifts;
  • Registered Retirement Savings Plan contributions;
  • Tax Free Savings Plan contributions;
  • renovations;
  • MISC.

Yes, I set aside a segment of my paycheque for miscellaneous stuff. I might decide to do something fun and unexpected, so I need to have a bit of money tucked aside for this unanticipated spending. Sometimes the MISC-money has to be spent on not-fun stuff, like a new pair of glasses – they’re quite necessary but they won’t be cheap.

Leftover money gets spent…

Yes, that’s right. Think of my automatic system as a blackjack dealer in a casino. My sinking funds are the players. The deck is my paycheque. Once the system has dealt money to each of my sinking funds, I’m free to spend whatever’s leftover however I want.

Again, I don’t use a budget. The leftover money is spent on groceries, clothes, gasoline, liquor, dining out, whatever I want. What I love best about my money-management system is that I can spend however I want in the very short-term because my medium-term and long-term goals are also being met. It’s the best of both worlds for me.

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Weekly Tip: Consider following the 50-30-20 rule for your money, which I first learned about in the book All Your Worth written by Elizabeth Warren and Amelia Warren Tyagi. In a nutshell, the rule says that 50% of your net income is spent on your necessities, otherwise known as MUST-HAVE’s. Then next 30% is spent on non-necessities, the Want-to-Have’s. The final 20% goes straight into Savings and Investing.

The Honest Truth

Roughly 20 years ago, I landed my first professional office job. It entailed monthly meetings with my manager, wherein I updated him on my current workload. He was an amiable man and most meetings were sprinkled with little nuggets of life advice.

One of the acorns of advice that has always stayed with me is the following. “Never believe that this place needs you. Always remember that you can be replaced.”

It sounds harsh, doesn’t it? As I look back on those words, I appreciate them because they are the honest truth.

My manager wasn’t being mean or obnoxious. He was being truthful. If I hadn’t been hired to do my job, then my organization would have hired someone else. And if I had chosen to walk out at that very minute, the organization would have tackled the task of finding my replacement.

That particular acorn took root.

For nearly two decades, those words have rolled around in my head. The honest truth they embodied has been one of the underlying reasons of why I save and invest. It is imperative that my money works as hard for me as I do for it. My money must insulate me to the greatest extent possible from the financial consequences should my organization decide that it’s time for me to be replaced, that it can survive without my contributions to its operations.

If you’re somewhat sentient when this post is published, then you can’t help but be aware that a great many people have lost their jobs through no fault of their own because of the COVID-19 pandemic. The news reports are rife with articles of the millions of people who have had no choice but to turn to the government for financial assistance to survive.

However, I suspect that there is a cohort of the Recently-Let-Go who haven’t had to ask for financial assistance. I’m willing to guess that this cohort is compromised of people who’ve worked for a couple of decades and who made the choice to live below their means throughout their working lives so that they could invest their money. I wouldn’t be surprised if this fortunate cohort has made the choice to stay out of debt no matter how often credit was offered to them. And I’ve assumed that this cohort is going to keep a tight, heavy lid on their status so that they can continue to live as they always have – social distancing & hand-washing as required – without drawing the ire of their family, friends, neighbours & former co-workers. Check out the comments on this article.

Continued employment isn’t guaranteed.

As a result of my manager’s words, I’ve always known that my employment was at the whim of someone else. Sure – I’d likely find another position somewhere else, but what if it took me a long time to do so? How would I pay for my life between one employer and the next? Even if I tried to become self-employed (something that has never held any appeal to me), how would I pay for my life before the money started rolling in?

Hearing the honest truth from my manager during a routine monthly meeting incentivized me to do all of the following things:

  • pay off my student loans as quickly as possible;
  • build my emergency fund through automatic transfers every payday;
  • re-pay the loan on my SUV in 6 months by making gargantuan payments every two weeks & by sacrificing a little bit of fun & frivolity;
  • invest a portion every paycheque in the stock market once the mortgage on my principle residence had been paid off;
  • move out of mutual funds and into exchange traded funds once I learned how deeply management expense ratios impacted my overall rate of return;
  • stay out of debt by paying off my credit cards every single month; and
  • pay cash for everything.

I know those last two bullet points sound contradictory, but they aren’t. If I don’t have cash, then I don’t use my credit cards. Once the cash is in my bank account, then out comes my credit card to make the purchase. This method means that I earn cash back or points towards groceries. The charge is applied to my account then I send a payment from my bank account to my credit card. Best of both worlds – I always pay cash while taking advantage of the perks of having my credit cards. If you can’t pay off your credit cards every month, then don’t do what I do. Only spend cash or use a debit card!

Motivation comes from unlikely sources.

It’s taken me a long time to see the link between words spoken nearly 20 years ago and the financial choices that I’ve made in my life. The honest truth from my manager’s lips motivated me to build as big a financial cushion as I could as fast as humanly possible. It didn’t happen overnight, and there were many mistakes made along the way. To this day, payday still means that a chunk of money is set aside for the future.

Another source of motivation for me comes from our current global pandemic. COVID-19 has me re-assessing whether my emergency fund is big enough. For record, I have made plans to increase it. It’s my firm belief that no one has ever regretted having “too much money” during an emergency.

In a similar vein, the money saved from staying home while most everything is closed has been re-directed into sinking funds. There are still big expenses on the horizon. Property taxes will still have to be paid at some point. My home and vehicle insurance premiums are still due in a few months. Birthdays and other celebrations might still require me to open my wallet, even if I can only visit with people via video and telephone. The annually recurring expenses of living will continue to come around, whether we’re still in a pandemic or not.

Do yourself a favour! Go back to my manager’s works and let them sink in. At the end of the day, your employer can always choose to replace you. Sooner or later, there is going to be a parting of the ways for reasons that may be beyond your control. Be proactive – take the steps today to ensure that you’ll be financially okay when that time comes.

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Weekly Tip: Live below your means so that you have money to invest. This is another way of saying pay yourself first. After you’ve paid yourself, then you can get down to the business of paying everyone else.

Book Review – Quit Like A Millionaire

Two people I’ve been following online for the past few years – Kristy Shen and Bryce Leung – wrote a fabulous book called Quit Like a Millionaire. You should read it sooner rather than later. (And let me be very clear, right up front – I am not being compensated by anyone for this review.)

Kristy and Bryce are also the masterminds behind the magnificent blog called Millennial-Revolution. And while some of the tidbits of the book have been disclosed on their blog, I can assure readers of MR that there’s so much more to their story that they haven’t already divulged online.

Their story is great for a variety of reasons. To start off, Kristy came from poverty. Her parents immigrated to Canada when she was young and she’s worked very hard to achieve her current success. I can’t tell her story as well as she can. However, this is a very accomplished woman whose initial idea of wealth was having a single can of Coca-Cola. Kristy has worked her ass off to earn her wealth!

Another thing I love about Kristy & Bryce’s story is that it’s a great example of how living below your means and wisely investing in the market can propel you to financial independence very early. Despite the volatility that they faced during their initial years, they stuck to their plan to invest in equities to achieve their goal of early retirement. Did I mention that they retired at age 31?

I’m not trying to blow smoke. Their means were more than adequate. Both of them graduated with engineering degrees and, together, they were earning a six-figure income within a year of graduating. Unlike the majority of people who start earning big-money after graduating, this dynamic financial duo chose to save very large chunks of their paycheque and to invest it in the stock market.

Show of hands – are you saving big chunks of your disposable income? Or have you made the choice to spend every penny you make?

Do what you want! It’s your money after all. I’m simply going to tune you out when you complain that you don’t earn enough to do what they did. You’ll need to show me your expenses and your income if you want to convince me that you can’t live below your means and invest for long-term growth. Knowing where your money goes is the first step towards controlling it.

That’s another beautiful element of Quit Like a Millionaire! Kristy and Bryce tracked their expenses for years, and then they disclosed them in the book. In other words, they laid bare the money choices they made each year to live the life they wanted while pursuing financial freedom. Not every blogger does this so I give them kudos for being so transparent. Even though they were making bank as DINKs, they never lived on more than $51,000. And you want to know what’s even crazier?

They spent $51,000 shortly after graduating from their engineering program. Every year after that, their annual spending went down while their incomes continued to go up!!! This is a couple who understood the perils of lifestyle inflation and fought against it, hard. They continued to live cheaply while still traveling, investing, and enjoying life with their friends. Kristy and Bryce didn’t become hermits or give up anything that really, really mattered to them. They prioritized their goals and made sure that their money was funding their dreams of attaining early retirement.

Kristy and Bryce also made the wise decision of finding a crusty but trustworthy financial advisor who helped them invest their money when they decided not to follow the herd’s example. Kristy and Bryce earned their early ticket to financial freedom, in part, by not yoking themselves to a huge mortgage. (Again, I’m not endorsing Garth Turner. No one is compensating me for mentioning him or his blog. I’m just stating the facts as I understand them. If you want to work with a financial investor, then I encourage you to do your due diligence to ensure that you pick the right person for the job.)

Another magnificent feature of this book lies in the appendices. Kristy & Bryce teach you the formula for creating a spreadsheet that tells you when you’ll reach your own Financial Independence number.

Oh, come, Blue Lobster! Everyone already knows how to do that!

Well, excuse me! I’ll be the first to say that I didn’t know how to create such a spreadsheet. However, I know now and that means a little bit more knowledge to help me reach my goals. I was contemplating using some of my savings to pay off my rental property, but thanks to Kristy and Bryce’s formula I now realize that doing so would set my retirement date back by a couple of years. As they do on their blog, Kristy and Bryce’s Quit Like a Millionaire will teach you stuff that you might not already know.

A new year starts in a few days. Much ado is being made about the fact that a new decade also starts in a few days. So, if you’re looking to make some changes in your financial life, then you should do yourself a solid. Take a few hours to read this book and figure out for yourself how to Quit Like a Millionaire.