Single Money - Millionaire on the Prairie

Making the Best Moves to Get Your Dream Life

Before you get too far into the craziness of the Spending Season, take a few minutes to reflect back on the past year.

The next 6 weeks will be filled with the AdMan’s best efforts to get you to part with your hard-earned money. His one and only goal is to make you spend. Cash or credit – either one will do so long as you’re opening your wallet as often and as fast as you possibly can.

Here’s a little tip from me to you. Don’t spend money on things that don’t matter to you. Seriously. It’s okay to say “No” and to keep your money in your wallet.

And this is why now is such a good time to assess if you’re moving closer towards your dream life and your heart’s desires. Only you know what your dream life looks like. And your best shot of getting it is to be laser-focused on the choices you make with your time, energy, and money.

My blog is about personal finance so I’ll focus on the money-stuff. There’s are a lot of other inputs and factors that go into our money choices. I realize this. The truth is that I can only speak about my personal experiences and my own observations of the world. I don’t claim to be an expert in psychology. What I do know is that the first step to getting what you want is knowing what it is that you really want. Without that information, you’re kind of flailing in the wind.

If not now, when?

This question should be the one you ask yourself every time you think about going after what you really want. Tomorrow is promised to no one. There are no guarantees about the future. An amazing opportunity might come around again…or it might not. You have to be prepared to pursue your dreams every single day. And that starts by knowing exactly what they are.

The next step is to start saving & investing for your dream life. Maybe you want to run a cafe in Paris one day. If that’s what you want, then that’s what you’ll start working towards. First things first, you open a dedicated bank account for that dream. And you set up an automatic transfer to start filling that bank account. It might take you a few years to save up a sizeable sum, but so what?

The time will pass anyway.

Read that again. The time will pass anyway.

So start your automatic transfer today, and stick with it. While you’re working and saving and investing, you’re also going to start researching the steps you’ll need to take to make your dream come true. You’ll go online and search “How to own a business in Paris”. Maybe you’ll plan a trip to Paris and see it with your own eyes for a week or two. You’ll take French lessons or figure out if there’s an ex-pat community where they speak your language already.

And while you’re fleshing out your dreams, your money will quietly and consistently accumulating. It will be working for you 24/7. Keep adding to the pot. Don’t make withdrawals – just leave it alone. When the time comes for you to bring your dream to life, the money will be waiting for you.

Make smart choices in the interim.

I’m not telling you to save every nickel. What I am telling you is to stop spending money on things that don’t matter to you. Is eating out for lunch every day more important that your dreams? Would you rather buy your 27th sweater or take a course that gets you closer to the life you really want? Is it better to impress family, friends, and strangers today instead of being proud of and satisfied with the accomplishments of Future You?

You’re the only one who can answer these questions for yourself. After all, you’re the one who is going to live with the consequences of your choices.

As I said earlier, we’re heading into the full court press of Spending Season. You will be subject to advertisements on every single platform and they will all be exhorting you to your spend money. The unspoken promise is that spending all of your money is the secret sauce to having a “perfect life”. Believe me when I tell you, there’s no such thing as a “perfect life”. And even if such a thing existed, I highly doubt that it could be purchased at the mall. Oodles of gifts ensconced in reams of wrapping paper beneath a beautifully-decorated tree make for a lovely advertisement. The harsh trust is that they don’t give you what you really want, which is more than likely connection and community with the people whom you love best. Strong relationships built on trust, love, respect, and admiration aren’t bought with cash or credit.

Keep that in mind as the Spending Season moves into full swing. Don’t let the endless encouragement to spend detract from pursuing your dream life.

Back to my original point… It’s time to figure out whether you’re any closer to the dream life that you really and truly want for yourself. If the answer is not to your liking, then figure out what you need to change to get what you really want. Then go make it happen.

If You Don’t Need It, Then Don’t Buy It!

A very popular shopping day will be arriving near the end of November. How do I know this? Rest assured – the Marketing Machine will not allow me to forget about it for one single instant! Everywhere I go online, there’s an ad about the “low, low prices!” I’m encouraged to “act now” so that I don’t miss out.

Look… I get it. Retailers want to make money. To do so, they need us to give our money to them. That’s how the game is played.

I want you to win the game. So here are my rules for surviving the Spending Season financially intact.

If you don’t need it, then don’t buy it.
If you do need it, then it’s okay to buy it.
If you do buy it, pay cash.
If you pay off your credit card bills in full every single month, then you can use your credit card.

Those are the 4 rules to getting through the upcoming Spending Season. If you follow them, then the odds are very good that you will not suffer from a debt-hangover come January of 2024… which is only 6 weeks away.

Rule 1: If you don’t need it, then don’t buy it.

This rule applies to everything on offer. Clothes. Televisions. Place settings. Bedding. Electronics. Subscriptions. Furniture. Large appliances. Liquor. Home decor. Gaming systems. Computers. Vehicles.***

If you don’t need the bright-and-shiny whatever-it-is that is being advertised to you, then keep your wallet closed. Retailers hire marketing teams that are extremely skilled at convincing you to buy things that you don’t necessarily need. Think about it… Until you saw the ad appear on your screen, you probably hadn’t even thought about getting the next whatever-it-is. You were perfectly content going about the business of living your life and enjoying your day, when the ad popped up and suddenly you were thinking…

“Maybe I do need <insert bright & shiny whatever-it-is> now that this marketer has put this ad in front of my face.”

Do yourself a favor. If you didn’t need it before you saw the ad, then you probably don’t need it after seeing the ad. Scroll past the ad. Choose the text-only option for your reading pleasure. Don’t buy something if you don’t need it.

Rule 2: If you do need it, then buy it.

Obviously, there are those of you who do need to buy certain items. And getting you needs met at 60% off is a very sweet deal. Let’s say your winter boots are 5 years old and basically held together with tape and prayer. It’s time to replace them. This is probably a very good time to do so since clothing retailers are putting things on sale.

You know your situation better than I do. If you truly need to buy whatever-it-is, then go ahead and do so. After all, getting a discount is always nice when you have to buy something that you need. Discounts help your money go just a bit farther.

Just make sure that you’re following rule 3 when you make that purchase.

Rule 3: If you buy it, then pay cash.

Yes. You read that right. If you have to buy something, that’s no reason to go into debt for it. Pay cash. I’m hoping that you had the good sense to save up for your desired item first before making a purchase, i.e. the money is sitting safe and sound in your sinking fund. After all, this very special shopping day isn’t a surprise. Everyone knows that it comes up at the same time every year.

If you’ve been waiting for the discount, then surely you were wise enough to create a sinking fund for this particular purchase. Ideally, you’ve been squirrelling a little bit from every paycheque into a dedicated sinking fund to pay for the things you want this Spending Season.

Again, do not go into debt to make this purchase. The next six weeks are going to be a blur of opportunities to spend money. Many celebrations are going to be taking place. If you’re the one hosting, you’re going to be paying a tad bit more to feed your guests. And if you’re lucky enough to be one those said guests, then I’m assuming that you’re gracious enough to bring some kind of gift for the host/hostess of the event you’re attending. As for all of the various celebrations, there’s a good chance that some of them will involve gifting of some sort.

I call this the Spending Season for a reason. Do not go into debt trying to make everyone’s memories perfect. Buy if you must but spend cash when doing so. The beauty of cash is this – once it’s gone, it’s gone. There’s no lingering debt for you to worry about or on which you will be charged interest.

Rule 4: If you’re have the cash to pay off your credit card bill in full, then you can use your credit card.

This rule is only for those who pay off their credit card bill in full every single month.

You alone know if you’re one of these people or not. Be completely honest with yourself. Failing to pay off your credit card bill every single month means that you’ll be paying up to 29.99% more for every single one of your purchase. That’s 30% more! After a couple of months of compounding at 29.99%, that 60%-discount on your bright-and-shiny whatever-it-is will have been re-directed towards the accruing interest on your credit card.

So, if your sinking funds are stuffed to the brim with sufficient cash to cover your credit card bill, then buy your whatever-it-is with your credit card. Then pay your balance in full when the bill comes due.

That’s it.

Those are the rules for getting through the Spending Season without doing too much financial damage to yourself. Despite what the Ad Man and trusty sidekick, the Creditor, will tell you, there’s absolutely no impediment to your happiness if you resist the urge to spend money on things you don’t need.

Again, if you truly need something, then this is probably a good time to buy it since the discounts are flowing hot and heavy. Just don’t go into debt to buy whatever-it-is. Things are tough enough with inflation still ravaging your dollar. You don’t need inflation working in tandem with sky-high credit card interest charges. That’s like sticking two forks in your own eye! Ouch!

Don’t spend if you don’t have to. If you must spend, pay cash. And if you always pay your credit card balance in full every month, then it just might be okay to use your credit card.

That’s it – those are the rules. Wishing a very joyous, merry, happy Spending Season to All!

*** Yes – that’s right… vehicles. Today, I received an email offering me a “loyalty discount” on a brand-new luxury SUV if I bought it before Black Friday. For those who are curious, my “loyalty” is worth up to 1.5%. I laughed and laughed and laughed, then sighed,… and then I deleted the email.

Your Tax Free Savings Account is for Investing!!!

Hear me now! Your TFSA should be for investing. Don’t use it as a savings account for your emergency fund or as a sinking fun for stuff.

In 2024, the contribution room for the TFSA will go up to $7,000. Please don’t tell me that you can’t afford to save $7,000. What can you afford to save? Whatever that amount is, that’s the amount I want you to contribute. Then I want you to squeeze your budget a wee bit more and add in a little extra. The more that’s invested, the happier you’ll be.

Let’s say you can afford to save $1,000 per year. That’s a little less than $20 per week. If you invest that $1,000 each year in your saving account, you might earn 3% each year on your money. After 30 years, you’ll have saved $30,000. At a return of 3% per year, this nifty little Future Value calculator says that you’ll have $49,002.68 in the bank. In other words, you’ll have gained $19,002.68 over 3 decades. This is a bad return on investment.

You could do way better.

If you invest that same $1,000 each year into the stock market and earn an average return of 8% over that time frame, you’ll have $122,345.87. Over the same 30 years, you’ll gain $92,2345.87 – more than 3 times what you invested.

Do you see why you should use your TFSA to hold the investments that are going to give you a bigger return over a long period of time? You’ll have way more money in your kitty at the end of your working life and that money will not be taxed once you start withdrawing it to fund your retirement.

Play around with the values in the calculator. If you can squirrel away $2000 every year – or $40/wk – so much the better. Don’t worry that you can only invest smaller amounts right now. Over time, you’ll be able to invest more. Also, your investments will be generating dividends and capital gains. Re-invest those and think of them as contributions to your future. Compounding is slow at first but it starts to get very sexy and very interesting once a few years have passed.

Do not take money out of your TFSA unless it is the direst of emergencies. You should have a separate emergency fund. Keep that money in the bank. You’re not trying to invest your emergency fund. It has to be there when you need it so accept the 3% return that your bank is offering you. The money that’s in your TFSA should be invested in a broadly-diversified, equity-based exchange traded fund. Or you can invest in a broadly-diversified, equity based index fund. These types of ETFs and index funds invest your money in the stock market.

Notice how I said that your investments in the stock market will likely earn an average of 8% over a 3-decade time span? It’s an average because the stock market is volatile. Some years, the stock market will be down but other years it will be up. However, over 3 decades, the stock market will definitely be higher than it is today.

So invest in the stock market and leave it alone. Set up an automatic transfer so that you’re investing from every paycheque. Once you’ve done that, you go about your merry way and let time in the market work its magic on your money.

There Are No Easy Answers

Today, I read a very sad story about a 76-year old man who sold his home when his mortgage payment went up. Presumably, the story was about the impact of rising mortgage rates and the lack of affordable housing in Calgary. In reality, what I took from the article was an appreciation of just how risky it is to have a mortgage when you’re on a fixed income.

Now, it should be noted that the article failed to explain why this 76-year old man still had a mortgage!!! To my mind, the journalist who wrote the story – or the editor who removed the relevant details – failed the reading public by leaving the financial questions unanswered. All we know from the article is that the man’s mortgage went from $1,000/mth to $2,600/mth and that he received $2,200/mth in social benefit payments.

Without any confirmation, I’ve tried to be generous and have assumed that he went through a grey divorce and he had to re-mortgage his home so that he could pay half of the home’s value to his ex-spouse. I could be completely wrong, but the bottom line is that his senior citizen has to move out of his home because he can’t afford to repay his mortgage.

When I was born, the mantra to all mortgage holders was to pay off the mortgage as fast as possible. Times have since changed. In the past 20 years, the message has gone out that it’s better to pay the minimum mortgage payment and to invest the difference in the stock market.

Sometimes, I think this is great advice. If you’ve got a 25-year runway ahead of you, then it’s less risky to invest your money for the long-term. You can have your mortgage paid by the time you’re in your 50s and you might still have a decade or more to invest if you retire at age 65. The dollars invested in your 20s might have 40+ years to compound if things go exactly according to plan. You’ll have a paid off home and a comfortable retirement waiting for you. Even if you make a few mistakes with your investing choices, the odds are still pretty good that you’ll retire comfortably.

The calculus changes considerably if you’re starting your mortgage in your 40s or 50s. Going into retirement on a fixed income while carrying a mortgage is like dancing on razerblades! You’re asking for trouble.

Mortgage rates started to skyrocket in 2022 from their historically un-characteristic lows of the previous decade. Rates haven’t stopped going up in 2023. When I worked as a cashier last millennium, any rate under 8% was cause for celebration. My first mortgage rate was 6.50%, and it steadily dropped over the next 20 years. The last mortgage I had in my name was for 2.79%… and I felt ripped off because one of my friends had a rate of 2.49%! I doubt I’ll ever see mortgage rates that low again in my lifetime.

These increased rates are the normal ones. It will take a long time for people to accept that but they are here to stay. The main problem with these rates is that people’s incomes haven’t kept pace with the impact the rates are having on their budgets. People who’ve had to renew their mortgages at rates 3%-4%-5% higher than what they were paying before are having to come up with several hundred dollars more each month to pay back their mortgages. And these are people who are working!

Imagine being a senior on a fixed income. The 76-year old doesn’t have as many options for increasing his income. In this case, he chose to sell his home and is looking for some place to rent. He’s having no luck. Again, the journalist/editor failed to tell us how much he received from the sale of his home and how much of that went to paying off his home equity line of credit. We have no way of knowing whether he’s in a position to buy himself something smaller than his former home. Presumably not since he’s decided to look for a roommate…

Anyway, my point is this. Stories like these should be a cautionary tale. Whatever your current circumstances, strive to stay employed until your debt is paid. Do not retire with debt!

Want to know one of the very worst elements of this story? All of the money that this man put into his house is gone! We don’t know how much of it was siphoned away via his HELOC. What we do know is that all of his payments went to the bank until he couldn’t afford them anymore and now he walks away without enough to buy himself another home. To add insult to injury, he doesn’t even have enough to easily rent another place. He could very well be homeless in a few weeks.

Do yourself a favor and learn from this man’s story. If you have debt, get out from under it. And if you’re out of debt, stay out. It’s so very easy to get into debt but it’s really, really, really hard to get it out of your life. You deserve to have the experience of being debt-free. Live below your means for life!

There are no easy answers. I don’t have any secrets that will make your debt magically go away. All I can tell you is this. If you’re fortunate enough to have some extra money in your budget, then use your good fortune to aggressively pay off your debt. When it’s gone, don’t spend the money on stupidities. Instead, invest it. Save up to pay cash for your next bright-and-shiny-whatever-it-is that you want. Just stay out of debt and don’t become the senior citizen who has to start job-hunting in his mid-seventies. Strive for a debt-free life.

Your Net Income is the Amount That Counts

People like to talk about their salary when asked about how much they earn. This is hardly surprising, since annual salary is nearly always a larger amount than what you take home. Net income is what you received after taxes and deductions have been subtracted from your gross salary. Whether you get direct deposit and receive a physical cheque, your net income is the number that you should have in mind.

What sounds better? Earning $100,000 per year (annual salary) or earning $68,572 (net income after taxes)?

It always sounds better to be earning the higher salary. This is because our society subtly and not-so-subtly teaches us that it’s always better to earn more. After all, that means you’re worth more… doesn’t it? So to admit to earning a lower amount is akin to telling the world that we are worth less. But I digress!

When it comes time to doing your budget, always work with your net income. Determine how much you take home from your job each month and subtract your expenses until you get to $0. Once you’ve spent all your money, stop spending until your next paycheque.

Don’t ever divide your annual salary by 12 and then subtract your expenses from that amount. Doing your budget this way is a recipe for disaster, an invitation to overspend. It’s the pathway towards a debt-spiral. You need not make your financial life any harder than it already is!

Pay Yourself First… doesn’t work for everyone, sadly.

If you were asking for my advice, then I would tell you to order your expenditures by priority. Personally, I think pay-yourself-first is a fantastic way to live… unless doing so means that shelter and food won’t get funded.

The unfortunate reality is that there are a good many people who barely have enough to pay for shelter and food before the money is gone. I don’t have any easy answers for those folks. They are the working poor. They live hand-to-mouth, not because they want to but because they don’t have enough money to live. They’re paid the lowest amounts permitted under the law. As prices go up and their wages stay the same, they don’t have enough money from one paycheque to the next. I’m going to give them a pass for not paying themselves first since I can understand why eating today might be viewed as more important than retirement tomorrow.

For everyone else, my suggestions are as follows.

Pay Yourself First

Take the first 15% of your net income and put it away for Future You. The money should go into your TFSA. Once you’ve maxed your TFSA, then put your money into your RRSP. Fill these accounts and choose equity investments. Don’t fiddle with this money. It is meant to take care of you in retirement. In other words, when you’re no longer able to go out to work, then you will be relying on this money to generate sufficient cashflow to pay for your expenses until you die.

Necessities Come Next

Next, pay for your necessities. You need shelter, so pay for your mortgage or rent. If you’re a homeowner, pay for the utilities that you need to keep your house running – power, water, heat. You should also pay your property taxes so that your municipality doesn’t take your home away from you. If you’re smart, you’re also setting aside atleast $100 from every paycheque for annual maintenance and unexpected “surprises” that come along with owning a home. Eavestroughs need to be cleared of leaves. Furnaces and hot water tanks need to be inspected, maintained, and replaced. Windows and roofs don’t last forever.

Have an emergency fund for your home and add to it on a regular basis.

Stick Some Money in Your Emergency Fund

There’s an emergency in your future. They are the very definition of spontaneity. You don’t know when one will arrive, but you can be guaranteed that it won’t show up at a convenient time. When it does land in your lap, you’d be best served to have some money in the bank to deal with it.

Whatever your emergency is, you will likely need money to deal with some aspect of it. A flight? A deposit? A hotel stay? New clothes? Repairs to something-or-other?

Just stick money into your emergency fund from every paycheque. Don’t spend this money! When you need it, you’ll be thanking yourself for having the foresight to set it aside in the first place.

Fill Your Belly

Do yourself a favor. Start preparing most of your meals at home. You’ll have more control over what goes into your body. It’s still cheaper to cook and bake for yourself than it is to have someone do it for you. The upside is that food that you prepare for yourself tastes better than whatever you can get at the drive-through window. And when you do go out for a meal, it become a special treat because it’s not something that you do everyday.

Fill Your Vehicle’s Belly

If you need to drive to work, then go and fill your tank. Throw $100 into a dedicated vehicle fund. At some point, your vehicle will need an oil change, new tires, or a tune-up. Whatever your vehicle will need, odds are good it won’t be cheap.

There will also come a day when you’ll need to replace your vehicle. If you can manage it, pay for your next vehicle with cash and bypass financing all-together.

Pay Off Your Debts

Maybe you didn’t find my blog until today so you weren’t aware of the debt trap until you were firmly caught in it. What’s done is done. Your task now is to get yourself out of debt.

Pay off your debts. Personally, I like the Baby Steps and the idea of getting rid of small debts in order to have a few quick wins. It feels good to pay off debts. Use a good chunk of whatever’s left over at this point to pay off your creditors. This might take you a few weeks, a few months, or a few years. No matter how long it takes, just do it.

Once you’re out of debt, don’t go back into it.

Spend What’s Left

Okay… do you have money left after savings, shelter, emergency fund, debt, food, and gas?

If the answer is no, then stop spending. Do not go into debt for non-necessities. That’s a stupid move and you’re not a stupid person. It sucks to not be able to spend your money the way you want to. Focus on what’s come next after your debt is gone. That money stays in your pocket; you don’t have to send it to your creditors anymore!!!

If the answer’s yes, then let’s keep going. My next suggestion to you is to build up your non-registered investment account. Your TFSA and RRSP are registered accounts, so the government limits how much you can contribute to them each year. There are no such limits on non-registered investment accounts. You can contribute as much as you want. I like the idea of contributing $100 per day to your investment account, but you can pick whatever amount you want.

Now, you can spend the remainder of your net income however you want on the luxuries. These are the non-necessities that you don’t strictly need for survival, yet they do make life a little easier. Very often, they can be categorized as entertainment, self-care, sports, gardening, travel, or whatever-it-is-that-makes-you-smile. Spend your money on these things however you see fit.

I’m a little bit cuckoo about plants. In the spring, I hit 3-5 greenhouses and buy too many annuals for the planters around my home. I’m constantly on the hunt for perennials that thrive on neglect, in poor soil, and in the hot sun on the southern wall of my house. Oh, and it has to have pretty flowers. I haven’t found it yet but I spend a good chunk of money looking for it.

Your whatever-it-is is likely not the same as mine yet we both derive pleasure from spending our money on it. There is nothing wrong with this. One of the purposes of money is bring joy to people.

Read a Couple of Books to Optimize Your Spending

If after your non-survival spending is done and you still have money leftover, then you should read Die With Zero and figure out what really, really, really matters to you. Then you should spend your money on that. After all, you only get one life. Whatever money you earn should be spent creating the life you want for yourself. For some people, you might still choose to spend your money in the same way that you would have if you hadn’t read the book. However, atleast you’ll be aware of another perspective before you do.

Actually, now that I think on it a little bit more… maybe you should read Die With Zero after you’ve paid for your survival expenses and before you start spending on the whatever-it-is-that-makes-you-smile. You might also want to consider the words of Ramit Sethi and learn how to build your rich life.

So there you have it. These are the ways that I think you should be spending your money. Whether you follow my suggestions or not is entirely up to you. After all, you know your money situation better than I do. And I fully admit that your priorities won’t be the same as mine. Take what you need and leave the rest.

When You Retire Depends on Money in the Bank

Many people think of retirement as a function of age. They think that it arrives at the age of 65 or 70, and that retiring sooner means an “early retirement”. To my mind, this is wrong. Your retirement date is a function of your money. If you don’t have enough money in the bank to retire at the age of 65 or 70, then you’re pretty much forced to keep working until you die. And if you’re fortunate enough to have buckets and buckets of money sitting in your cash-hoard right now, then you have the ability to retire this instant.

When you retire depends on money in the bank. When you have it, you can retire. When you don’t, you can’t. It’s really that simple.

Starting earlier is better.

If you’re in your 20s and 30s at the time of reading this post, don’t fall for the historical dogma that you’ll be working until you’re 70. There is no way for you to know every single detail of your future. Why not strive for optimism? Start saving as much of your paycheque as you can and investing it into well-diversified, broad-based ETFs. Ideally, start with 20% of your take-home pay and live on 80%. As you earn more, you save more.

Track your expenses. Live below your means so that you always have money to invest. Pay yourself first before you pay everyone else.

Set up an automatic transfer to your investment account. Ensure that your earned interest, dividends, and capital gains are all automatically re-invested. Do not spend what your portfolio earns! This money has to be re-invested until you retire because it will be the cashflow that you live on once you’re no longer receiving a paycheque. The sooner your gains are reinvested, the faster they will benefit from compound growth.

Even if you love your current job, or you stand to inheiret money from your family, do this for yourself. Inheiretances can disappear for a variety of reasons. And there’s always a slim chance that you might sour on your job at some point. In either eventuality, it’s best that you bake your own cake when it comes to funding your future.

Finally, it will take a few years to build up a nice little stash. Don’t undermine your efforts by taking money from your future. Prioritize your goals and spend your money accordingly. If it’s not important, then don’t spend money on it.

When you’re younger, time is on your side when it comes to building your retirement nest egg. Don’t waste it!

Middle aged already?

Should you happen to be in your 40s and 50s when you read this post, then continue saving and investing. I would suggest that you continue to invest in equities since you’ll need the money to continue working hard for you even after you’re retired. If you live another 20+ years beyond retirement, that’s still a long time horizon so there’s little need – in my mind – to have more than 35% of your investment portfolio in bonds. Start looking at dividend-paying investments to boost your cash flow once you part ways with your paycheque. Get out of debt and stay out of debt.

If you haven’t started yet, then what are you waiting for?

Don’t spend another second castigating yourself for not starting sooner. Start today. As you pay off your debts, do not incur new ones. Instead, put that former debt payment towards your retirement savings. Car payment gone? Great! Take 80% of it and put into your retirement savings. Mortgage payment gone? Excellent! Take 80% of it and pad your retirement account. Stuff your TFSA first – that money grows tax-free, which is the best-kind of growth to have. Next, fill up your RRSP. This money will grow tax-deferred, which means you’ll pay taxes when you take the money out of the RRSP. Finally, open a non-registered investment account and start filling that once your TFSA and RRSP room has been maxed out.

Earn – save – invest. This is the formula for funding Future You’s expenses. Don’t depend on anyone else to take care of this for you. The government will not provide for you nearly as well as you can provide for yourself. Waiting for an inheritance is a very iffy proposition. Winning the lottery isn’t a solid financial plan.

Your retirement is in your hands. Retirement is a function of money, not your age.

Regretting Financial Mistakes Is a Waste of Your Time

Regret has no place in your financial plan. You’re not perfect and you will make mistakes with your money. Once you’ve identified a money mistake, don’t spend your time regretting it. Simply make a course correction to stop making that mistake and move forward. The past cannot be changed so learn from your mistakes and resolve not to make the same ones in the future.

When I started investing, I picked a dividend investment strategy. I started by buying into dividend mutual funds. Eventually, I learned about management expense ratios (MERs) and discovered that I was making the mistake of paying 10x as much for mutual funds when I could acquire the same assets through exchange-traded funds (ETFs). There was no way to recoup my time or those MERs, so I simply moved my money to ETFs. I made a course correction and moved on.

What is the point of spending time regretting choices that were made when I didn’t have the best information available to me?

Once I learned better, I chose better.

Dividends vs. Growth

A doozy of an investing mistake still hurts. I can only blame myself for this one. My belief in the wisdom of my own choices meant that I didn’t properly consider what was going on around me. I wasn’t learning the lesson, no matter how many times it was hitting me in the face…sigh…

Remember that phenomenal bull-run that was experienced in the stock market between 2009 and the onset of the pandemic in 2020? The one where the S&P/TSX Compound Index grew by 125%? The one where the S&P500 increased by 378%?

Guess who was still investing in a dividend strategy instead of investing in US-growth equities?

That’s right. Me.

It was a huge mistake in my financial planning. I had so much faith in my own choices that I missed out on a fantastic opportunity to invest over the long-term. I made sub-optimal investing choices for 11 years!!! At any point, I could’ve realized how I was missing out on growing my portfolio much, much faster… but I didn’t.

Instead, it wasn’t until October of 2020 that I finally saw that I was again missing out. I was determined to benefit from recovery that followed the pandemic-induced stock market plunge. So I course-corrected. I started investing in an equity-based, well-diversified ETF and I haven’t looked back.

Regret has no place in my financial plan. Of course I wish I had made optimal choices at every single point throughout my investment life, but horses aren’t wishes so this beggar can’t ride. I’ve done what I’ve done and I get to live with the consequences.

And all told, my choices weren’t the absolute worst ones out there. To date, I’ve been investing for 3 decades. My dividend portfolio will ensure that my retirement is nice and comfy. I chose to start young, which is always preferable to starting when old. As far as mistakes go, I could’ve done far worse.

Now, all of my investment contributions are going into the equity-based growth ETF. Its performance is giving my portfolio higher returns, which is always appreciated. I have no plans to stop investing in my ETF, even after I retire. It will continue to mimic both the volatility and growth of the stock market, which is a good thing over the long-term.

Taking a Break vs. Riding the Rollercoaster

I made another huge mistake during the crash of 2009. Instead of continuously investing, I stopped my contributions. Thankfully, I didn’t make the mistake of selling anything while the price was down! Yet, it would’ve been smarter to ride the rollercoaster of volatility during that crash. I would’ve been buying into my dividend-paying companies when they were all on sale!

Woulda. Coulda. Shoulda.

No regrets, remember? Instead, I resolved to never stop investing. As we all remember, the stock market took a huge plunge when COVID-19 was declared a pandemic. Between you, me, and the fencepost, I lost a third of my portfolio’s value on paper. I know because I checked my brokerage account daily during those first few months.

Truth be told, I really don’t know how many paper losses I suffered because I stopped looking at the number after I’d lost that first third. It was too painful.

But you know what I didn’t do? I didn’t stop investing! Even though the market plunged steeply between February 21, 2020 to March 23, 2020, I continued to buy into my dividend-ETFs. And throughout the recovery between March and October of that year, I stuck to my investing schedule and bought many, many, many units in my ETFs-of-choice.

The mistake of 2009 was not to be repeated! Instead of taking a break from investing, I rode the rollercoaster of the stock market. It paid off. Buying those ETF-units when the market was down allowed me to accumulate way more units that I would have otherwise. Each of those units pays more dividends today than they did in 2020. The end result is that my monthly dividend payment is much higher than it was before the pandemic.

Secret Sauce

Like I’ve said before, the secret sauce isn’t being bright. Rather, it’s being persistent. The genius of the secret sauce is following 3 basic steps, over and over and over again.

Make the choice to invest. Then invest. And don’t stop investing.

Everything after that is simply a detail. You follow the steps, and you course-correct when you make your inevitable mistakes. Don’t waste your time on regret. There’s nothing to be gained from that activity. Instead, always remember that you’ll do better when you know better.

Easy Money Is My Very Favourite Kind!

I love money. I always have, mainly because it allows me to buy all sorts of things. Hard money is good too, but easy money is better.

Hard money is the kind you have to sweat for. It’s what shows up in your paycheque after you’ve traded away a portion of your very precious, very limited time here in this world. You’ve shuffled a little bit closer to the end of that mortal coil in exchange for some money.

Great! Fabulous! You made the deal, and you got what you were promised. Hard money is earned through hard work.

Yet… if you’re fortunate enough to learn about it before your days are done, there’s a way for you to also receive easy money. This is the money that you don’t have to work for. It just arrives in your bank account – easy peasy, lemon squeezy. Whether you show up at the office, whether you get out of bed, whether you’re at home, at the top of a mountain, on a beach, or at sea. This money flows into your coffers without you having to do a thing.

Is it obvious yet? Easy money is my very favourite kind.

Some of the people in my family have acquired $44,000 in less than 5 years. How did they do that? It’s quite simple, really. They invested under the following conditions:

when the stock market was doing well before COVID-19 arrived;
when the market plunged at the start of the pandemic;
during the tepid recovery between late 2020 and the end of 2021;
during the turbulence of 2022; and
they’re still investing in 2023.

My family members invested in the stock market without fail and turned contributions of $21,000 into $44,000 without batting an eye. A minimum of $3,000 per year was invested into broadly diversified equity ETFs in each of the past 5 years. In the past 2 years, the contribution amount increased to $6,000 per year.

The initial $21,000 contribution amount is broken down like this:

2019, 2020, 2021 = $9,000 invested ($3,000/yr into equity-based ETFs)
2022, 2023 = $12,000 invested ($6,000/yr into equity-based ETFs)

Despite the ups and downs in the stock market during those 5 years, the invested money has more than doubled. Not bad… not bad at all. Money went in and it didn’t come out. My family members left it alone to do its thing, and “its thing” was to grow quickly in a short period of time. That’s all, folks. It wasn’t more complicated than that.

Someone had to work to get the initial $21,000, right? That was the hard money that has since been turned into easy money… the additional $23,000 of value that no one had to sweat for.

You can do the same thing for yourself, if you’re so inclined. Can you find $100 per week? That’s $5200 per year. Maybe you can only find $25 per week? That’s $1300 per year.

Whatever you can find, then you start investing with that amount and you move up from there. Wiser minds that mine suggest investing in growth stocks. They have a track record of higher returns. For my part, dividends worked for me but it took a long time to get where I am right now. If I had to go back, I’m not so certain that I would make the same choices. My sack of gold is heavy, but it could’ve been much heavier had I been smarter sooner.

C’est la vie, right?

You’re quite lucky in that you get to decide for yourself whether you want to only earn hard money. If you can read this blog, then you can start to make easy money. Slice off some portion of your paycheque every time you’re paid and send it to your brokerage account. I’d suggest opening a brokerage account at a place that has a list of commission-free ETFs that you can buy. As soon as you can buy one unit of a commission-free ETF, do so. When the dividend or capital gains from that investment rolls in, re-invest it and do not spend it.

You’re building a cash-machine. It will take some time. The dividends and capital gains will be paltry at first. Given time, they will multiply. I’ll never forget the first time my cash-machine spit out $100 in a single month. That was awesome! You know what was even better? The first time it generated $1,000 in a single month! Believe you me, the first $5,000 dividend payment has been the nicest yet.

So start today. You too can earn easy money. And if you love your job, great! No one’s telling you to quit. You can do your job for as long as it makes you happy. Earning easy money in no way eliminates your choice to work. However, if there’s the slightest, tiniest possibility that you might not always enjoy working for hard money, then follow my advice. Take the steps now to earn some sweet, sweet easy money later.

Increasing my Passive Income in a Few Clicks

This week, I gave myself a $600 annual raise. No, I didn’t get a promotion or take a different job. Instead, I simply increased my passive income by buying some bank stock. As I’ve said before, salary and income need not be the same thing. There are always ways to increase your income even if your salary isn’t going up as fast as you want it to.

Normally, I’m not a stock-picker. I love my exchange-traded funds because they pay me dividends every month and I get the benefit of diversification. Another way of saying this is as follows. My ETFs generate passive income, which is my very favourite kind of income.

Allow me to be extremely clear. I bought shares in this bank solely because I’d received a stock tip from my sibling who is very wise and very methodical about certain things. Stock tips that come my way are generally disregarded instantly. Like I said, I’m a believer in ETFs and that’s where I’ve been investing my bi-weekly contributions to my investment portfolio since 2011. So why did I listen to my sibling this time around? Why did I act on this particular stock tip?

First, I understand what banks do. They make money, hand over fist, year-in-year-out. Some of that money is paid out to shareholders in the form of dividends. Given that I’m looking to retire within the next 10 years, I want to build a steady stream of reliable cash flow to fund my retirement. Dividends fit the bill. They also receive preferential tax treatment, which is a nice cherry on top of this tasty sundae!

Secondly, the bank I bought pays over $1/share in dividends 4 times each year. For every share I own, I’ll be making $4 per year. An extra $4/year? Big whoop! Remember that it’s an extra $4 per year per share. The more shares I have, the more dividends I earn. And I’m a huge believer in the dividend re-investment plan, which leads to my third point.

Thirdly, my brokerage will allow me to DRIP the quarterly dividends from this stock. I’ll “only” acquire 2-3 new shares every 90 days from this initial purchase, but each of those DRIP-stocks will also earn over $1 per quarter and will also lead to the purchase of even more bank stock. I’ll be benefiting from exponential growth in the number of shares that I’ll own, which means that my passive income will also be growing exponentially the longer I hold this stock.

Fourthly, the dividend payout of these shares is likely to go up. The bank stock I purchased this week has increased its dividend for the past 5 years, so it is considered a Canadian dividend aristocrat in some quarters. (Check out this article from Million about dividend aristocrats if you’re interested in learning more.) Increases in dividend payout are also known as organic dividend growth, a feature of dividends that I like very, very much.

Fifthly, I can keep earning these ever-increasing dividend amounts forever. I’ve created a beautiful money-making cycle that will continue as long as I’m alive. Unless I shuffle off quickly, this stock purchase should soon be paying me $1000 per year, then $2000, and so on and so on and so on. It’s the beauty of the DRIP meeting compound growth.

Finally, if there comes a time when I need to stop my DRIP and live off these dividends, then I can do so. While I’m always thinking of ways to increase my retirement income, I assure you that I don’t plan to live on the entirety of that income unless I have to. For my whole life, I’ve lived below my means. Presently, I don’t see any reason to stop doing so when I retire. The dividend income from my ETFs and my pension should be enough to cover my expenses when my employer and I part ways. If I don’t need the passive income from my bank stock to live, then I see no reason to stop the DRIP.

To recap, dividends generate passive income. Ergo, dividends are my favourite kind of income. This week, I had the opportunity to increase my passive income so I took it. The benefit is that I’ve increased my annual income and I’ve bought myself a little bit of insurance that I’ll have enough money to pay for things when I’m too old to return to the workforce. In the meantime, I’ll sit back and let the magic of compound growth do its thing via my DRIP. It’s all good!

You Will Either Be Rich or Poor

Future You is going to be rich or poor. The choice is yours.

This post is aimed at those folks who fall between the two ends of the financial spectrum. It’s not for those who are already uber-wealthy, nor is it for those who are living paycheque-to-paycheque. Rather, I’m aiming today’s words at the ones who still have to work to pay their bills, who have some fat to cut from their budgets if necessary. These are the people who still have financial options. Choices made today will determine if they are rich or poor in the future.

Inflation eats away at everyone’s spending power. It is imperative that you accept this concept when thinking about Future You’s finances. Prices go up over time. The 18 months prior to this post have been particularly challenging because inflation was nearing the double-digits. Everyone saw prices increase at a phenomenal rate, while their paycheques were not keeping pace. While a 4% raise is always nice, it can hardly compete with 8% inflation everywhere else.

So while inflation has “slowed” as the economists like to tell us, it’s still around. And it’s not going away. Prices are still going up but they’re simply going up more slowly.

The Book-Ends of the Money Spectrum

As I stated to at the beginning, this post is not for the uber-wealthy. They have lots and lots and lots of extra fat in their budgets. Increases in the prices for groceries, gas, utilities, and shelter will have no impact on their lives. No one will be crying the blues for the wealthy ones.

People at the other end of the spectrum are the ones who are living paycheque-to-paycheque. They work, and they earn, and their paycheques are gone in a heartbeat to pay for the cost of living as soon as they land in the bank. After shelter, food, gas, and bills, the P2P-group has very little, if anything, leftover. These good folks are in a legitimately terrible situation. They’ve already cut out the “little extras” and are still barely making it. I don’t have any good suggestions to easily fix their situations.

The rest of the folks land between these two ends of the spectrum. These are the ones who will either be rich or who will be poor. It all depends on whether they invest some of their disposable income into income-generating assets.

Financial Assets Move You Towards The Wealthy End

I’ve spent many decades reading financial articles, websites, and blogs. The one lesson I’ve learned over all this time is that successfully investing for cashflow takes some time but it pays off in the long-run. I chose dividends and I’ve stuck with dividend-investing since 2011. I’ve made plenty of mistakes and my choices were not perfect. That said, my army of money soldiers will help me to weather inflation’s impact on my future income. My employer is not interested in giving me 7% salary increases every year, no matter who hard I work. Yet, my costs of living will continue to rise as inflation inexorably moves forward. I could get another job, but I really don’t want to.

Instead, I’ll have my dividends do the heavy lifting for me.

Years ago, I set up an automatic dividend re-investment plan, aka: DRIP. As my dividends were paid out each month, I would DRIP them into more dividends. Between the DRIP amount and my regular monthly contributions, I was compounding the number of dividends that I was buying each month. Every dividend that I owned paid me a few cents each month. Naturally, I only earned a few dollars each month when I started in 2011. It was hardly enough to buy a cup of coffee. However, it only took a few years before my dividends were generating $1,000 per month for me. And a few years later, they were generating $2,000 each month.

Believe me when I say that an extra $24K per year is more than a 4% raise from my employer. Thankfully, I was one of the people who lived between the extreme ends of the spectrum. After food, shelter, transportation, and utilities, I had enough money leftover for investing and other things. My choice was to invest before paying for the others things, aka: travel, theatre subscriptions, and whatever other non-necessity happened to catch my eye.

Looking back now, I’m very happy that Young Blue Lobster understood that investing was the only way to stay ahead of inflation. Young Blue Lobster intuitively knew that it was perilous to count on an employer, and that increasing one’s income is the responsibility of the person earning it.

Inflation Will Move You Towards Poverty

If you have the means to do so and you choose not to invest, then you are making the choice to let inflation push you into poverty. What used to be affordable becomes less and less so over time. The fact that you can’t afford something is not going to motivate retailers to drop the price. Waiting for the government to “fix inflation” is not a great move either. It’s best that you assume prices will go up faster than your paycheque will increase. Once that first step has been taken, your next best move is to start investing part of every paycheque for long-term growth.

Your investment portfolio will eventually grow to a sizeable amount, and its annual increase in size will outpace your salary gains, whatever they are. The more you invest and the sooner you invest, the bigger and sooner those gains will be. Other than telling you to win a lottery jackpot, I have no feasible ideas on how to earn big money quickly. What I do know, from personal experience, is that buying into the stock market on a consistent basis for many years and always re-investing the dividends (and capital gains) has meant that my annual income has increased far beyond anything my employer has given me. And since I’m on a DRIP, those increases will continue for as long as I’m alive because of the power of compounding and organic dividend growth.

Never forget that there are many forms of income and your employer only controls your salary. Unless you’re already living paycheque-to-paycheque, you owe it to Future You to invest some of your money. Be proactive. Start slicing the fat from your budget today and investing it wisely so that you, not inflation, control when, where, and how to make adjustments to your budget.