Category: Single Money

30 Years of DIY-Investing Has Paid Off

When you know better, you do better.

Maya Angelou

This past weekend, I celebrated a rather significant birthday. It was also the 30-year anniversary of when I started my investing journey. As I’m wont to do on my birthday, I considered where I was when I started investing my money and just how far I’ve come on my own. I’m pretty proud of what I’ve accomplished. My parents were smart, but they weren’t rich and they couldn’t teach me what they didn’t know. I learned a lot from books and magazines, then from websites and blogs. As I graduated and earned more, I paid off my debt and invested in the stock market. I was even a landlord up until recently.

Did I do everything perfectly? Hell, no!

To be very clear, I am an amateur investor. That means I don’t have any kind of certification to underpin the choices I’ve made. My financial wisdom comes from lived experience and personal observations. I haven’t been qualified by any governing authority to hold myself out as an expert. I’m an amateur who is going to spout a few words at you.

Take what you need and leave the rest.

Best Moves I Ever Made!

One of the things that I did right was to rely on automation. When my paycheque hit my chequing account, my automatic transfer kicked in to whisk atleast $50 away and into my investment account. From there, I bought mutual funds. When I learned better, I started buying exchange traded funds. First, my contributions all went into filling my Registered Retirement Savings Plan. Then the government introduced the Tax Free Savings Account so my priority each year was to fill up my RRSP and my TFSA. Once I was in a position to fill those registered accounts each year, I turned my attention to investing in a non-registered investment account.

Each year, my employer gave me a slight raise. As my income increased, so did my contribution amount. What’s that old saying? Earn $3, invest $2? Maybe that’s just something I say to myself. In any event, my contribution amount increased each year. In other words, I continued to live below my means even as my means got smaller.

I also used automation to build my emergency fund. Even today, I still send a couple of hundred bucks to my Rainy Day Fund. When I was younger, I’d been told that $10,000 was enough. And then I learned that I should have 3-6 months of expenses tucked away. Today, I’m aiming for a year’s worth of expenses. If anything goes seriously wrong, I can live off my emergency fund for a full year before I have to stop my dividend re-investment plan in order to live off my dividends.

The second smartest thing I did after harnessing the power of automation was to get out of debt. I had about $15K in student loans when I graduated. By saying “No” to myself, a lot, I was able to knock that out in 2 years. Then I turned my attention to paying off my car loan within 3 years. I drove my little navy blue car for 8 years then bought my first SUV. I took out another loan, but sacrificed and lived very small so that I could pay that loan off in 6 months. It wasn’t fun, but it was short term pain for long-term gain.

For those keeping track, the third smart thing I did was to live most of my adult life without a car payment. In my circumstances, a vehicle is a means of transporting my body and my stuff from A to B. It’s only transportation and I see no reason to pay a loan to do so. When I had loans, I figured out ways to pay them off as fast as I could. My vehicles seem to ride better when they’re not weighing me down with debt.

By paying off my SUV in 6 months instead of 5 years, I have 13.5 years of living without a car payment. Yeah… I kept that SUV for 14 years. I would’ve kept it longer but it was a 5-speed manual and my left knee was starting to give me trouble. At the point when I felt I couldn’t safely drive my own SUV, I sold it and bought another one with cold, hard cash.

The fourth smartest move I’ve made is to buy-and-hold. Some of my stocks are the ones that my parents bought for me as a baby. I’ve had those for over half a century. They still pay me dividends every quarter. Maybe $500 per year? Again, my parents weren’t wealthy. The dividend payments aren’t enough to buy more shares, so I re-invest the money rather than spend it.

My other holdings are ones I’ve had for 10+ years. What used to be in a mutual fund with a management expense ratio of 1.76% is now in an ETF with an MER of 0.22%. After all, why would I pay the investment company 1.54% more than I have to for the same product?

In terms of category of investment, I’ve had some for 30 years. Like I said above, my dividend stream is finally enough to support me. That’s the result of my buy-and-hold philosophy.

My fifth best move was to hire an accountant. I’ve owned a few rental properties over the years. She knows tax stuff much better than I do. My accountant has made sure that I don’t get in trouble with Canada Revenue Agency. For that, she is worth every penny. She also answers questions about the tax implications of some of my investing ideas. That information has also saved me from making some big mistakes!

Mistakes? Yeah… I’ve Made A Few!

In terms of mistakes, I made a doozy. Early on, I fell in love with the idea of creating a cashflow of dividends to supplement my pension. Sears went into receivership early in my career and I heard the stories of retirees having their pensions cut. The mess at Nortel also shone a light on how pensioners are at the mercy of their employers’ continued corporate success. I wanted to minimize the chances of my retirement income being disturbed if my pension was cut. So I chose to invest in dividend-paying mutual funds and ETFs.

The smarter play would’ve been to invest in equity-based investment products. Between 2009 and 2022, the stock market was on a tear. That means it was growing and growing, year over year. My dividend products were growing too, but not at the rate of the growth products. I would’ve been far better off investing in equity-products. I finally got smart in October of 2020 and have been investing in VXC ever since.

I didn’t sell my dividend-payers!!! After 12 solid years of investing in dividend products, I’ve got a nice secondary cash flow and it’s growing nicely year over year thanks to my DRIP. It would make no sense to sell those investments just to start from scratch in VXC.

God-willing, I’ve got another 30+ years ahead of me. I’ll continue to invest in equity-based products until I don’t need to invest anymore. Presently, I’m considering the wisdom of using my monthly dividends to bolster my monthly contributions to VXC. I would have to give up the DRIP in order to do so but maybe that’s the smart thing to do since the market is currently low and starting to move back up. Buy low – hold forever. That’s kind of been my plan throughout this self-taught investing journey of mine.

My second biggest mistake with money was being too rigid. I know how that sounds. Sticking to my plan and investing consistently is what has helped me reach the Double Comma Club. That said, I was recently asked if I had any regrets about how I’ve handled money to date. For the most part, I’m good with the choices I’ve made. However, you can’t get to my age and not have atleast one or two regreats.

Looking back, I do miss that I didn’t go to a second cousin’s wedding in Paris. Truthfully, I’m not certain how I got invited since we hadn’t grown up together nor had spent much time together as adults. That said, I had just gotten home from Europe when the invitation arrived. I consulted my budget and there was no way to afford to travel to her wedding without going into debt, so I declined the invitation … (big sigh goes here) … Looking back now, I should’ve gone into debt and gone to the wedding. The debt would’ve been paid off within a few months and I would’ve met some interesting people at the wedding. Did I mention the wedding was in Paris? The City of Lights?

Since then, I’ve been thinking more about what I want my money to do for me today. My portfolio is humming along nicely. My total DRIP almost exceeds what I contribute from my paycheque. I can afford to indulge myself a little bit more when unexpected money shows up. I’m correcting the mistake of being too tight-fisted with my money. In the words of Ramit Sethi, I am learning to craft and build the rich life that I want for myself.

My third biggest mistake is thinking I know better. It’s the sin of hubris. I haven’t always listened when I should, and I certainly haven’t always applied all of the lessons correctly. However, I know this is one of my flaws and I’m working to correct it. No one makes the right choices every single time. That said, I can make better choices for myself if I’m willing to be a little more open-minded and consider viewpoints that are different from my own.

I should have spent less time on Netflix and more time learning from people who’ve done exceedingly well with their portfolios:

This is an error that has cost me dearly, but I’m aware of it now. I choose to do better.

My fourth biggest mistake was paying off my house early. When I sold my first two rental properties, I should have lump-sum invested the money into the market via ETFs. Instead, I chose to pay off my mortgage because I wanted to be debt-free as soon as possible.

I realize now that my mortgage would’ve been paid in due course. I got my first mortgage in 2001, and history instructs that mortgage rates continued to fall until 2022. Looking back, I should’ve renewed my mortgage every 5 years. I would’ve gotten a lower rate each time. I could’ve been paying a mortgage while investing, even though my contributions would’ve been smaller due to having to pay for my house.

Shoulda – coulda – woulda… Too late smart and all that jazz. I still did okay. Those former mortgage payments were re-directed to investing for my future. I had to choose between two sacks of gold, so I shouldn’t complain.

Finally, one of my biggest mistakes is thinking that I knew enough to be a successful landlord. If I had to do it all over again, I would’ve learned to crunch the numbers better before buying my rental properties. The first two properties were a cinch to sell – due to the market, not due to my acumen – and they netted me enough money to pay off the mortgage on my home. The third property was not a good investment for me, despite what I thought at the time. I relied on hope… and hope is not a plan. When I finally sold my last property, I did not make money. It wasn’t ideal, but it also wasn’t the end of the world.

And That’s It.

That’s my list of great moves and big mistakes which have gotten me to this point. If I could go back, I would invest in equity-based ETFs from the get-go. Further, I would’ve gone to see a fee-only financial adviser way sooner to set me up on a plan for my money. Having an objective voice and someone to check my progress along the way would’ve been a good idea. In terms of rental property, I would’ve done a lot more research and learned how to crunch the numbers.

Mistakes? Yes – I’ve made a few. They weren’t the end of the world, and my smart choices have balanced them out. Despite a few missteps here and there, I think I’m going to be just fine. Not bad for 30 years of DIY-investing.

Best Time to Invest in the Stock Market

Most investors are interested in a definitive answer to question of when is the best time to invest in the stock market. And for good reason. After all, no one – and I mean no one – ever wants to lose money. We work very hard for our paycheques. It stands to reason that you would want to buy at the very best time in order to ensure that your investment realizes the maximum return.

For my part, I’ve been investing in the stock market since I was 21. My method isn’t perfect, and I’m sure that there are other ways to do things. However, I’m going to share my 3-question strategy with you and let you decide for yourself if it will work.

Question 1 – Is the stock market heading down or dropping?

If the answer is yes, then I invest.

Here’s my reasoning. When the stock market is dropping, that means stocks are on sale. My exchange-traded funds are comprised of stocks, so my the price of each unit in my ETF is lower too. In other words, I can buy more units in my ETFs when the market is down than I can when the stock market is up.

It’s akin when my favourite coffee is on sale at the grocery store for $4.99 instead of its regular price of $8.49. I stock up when the price is lower because I know the price is going to go back up! I need my coffee and it’s best to buy it a lower price.

The same principle can be applied to investing in the stock market. I need the capital gains and dividends that my investments generate each year. Those returns are consistently re-invested for compound growth. When I retire, my portfolio will continue to generate capital gains and dividends. At that point, I can stop re-investing them and use the money to fund my retirement.

To re-cap, if the stock market is down, I invest and take advantage of the sale on stocks.

Question 2 – Is the stock market going up?

If the answer is yes, then I invest.

Let me explain why. Bear markets are when stock markets are going down. Bull markets are when stock markets are going up. If we’re entering a bull market, that means the value of my ETFs unit will be going up and it also means that the value of my overall portfolio is going up. Companies within my ETFs might decide to increase their dividend and capital gain payments, which means my ETFs will pay me more money each month.

In order for me to benefit from those increased dividend and capital gain payments, I will need to own as many units as I can in my ETFs. One of the only ways to own more is to buy more. The other way to own more is allow my dividend re-investment plan to buy more units each month. However, I think you’ll agree that buying more with my monthly contribution + relying on the DRIP-purchase means that I’ll acquire more units more quickly than by relying on the DRIP-purchase alone.

So when the market is on its way up, I want to invest so that the value of my portfolio also benefits from the increase in the stock market value.

Question 3 – Is the market going to go up or is it going to go down?

This is just a trick question. Whether the answer is “yes” or “no”, I invest.

See, I’m not a professional stock trader. I don’t spend my days staring at the stock market screens or doing in-depth stock analysis. I’m just a Blue Lobster who likes spending time in my flower garden, cooking tasty things, playing with my littlest family members, going to theatre & dinner with friends, traveling at home and abroad, reading good books, and getting enough sleep.

I have no inclination to learn about stock market fluctuations, nor to track them day-to-day. I would rather invest monthly into an equity-based, broadly diversified ETF and let time do the rest. (For the record, I still have my dividend ETFs, but I’ve been investing my monthly contributions into VXC since October of 2020.)

My strategy for finding the best time to invest in the stock market is very, very simple. I invest in the stock market every 4 weeks, which works out to 13 transactions in a year. My next step is not sell what I buy. It’s what’s called the buy-and-hold strategy. I buy – I hold – I re-invest – I repeat. This is how my strategy has resulted in very nice, very passive cash-flow that’s equivalent to an entry-level, full-time job. My dividend ETFs continue to pay me a 4-figure amount every single month, and that amount is continuously increasing. My equity-based ETF pays me a 4-figure amount each quarter. All of my ETFs pay me capital gains at the end of the year.

The way I see it, the best time to invest in the stock market is when I have the money in my bank account to do so. Up, down, or sideways – my portfolio is paying me cold, hard cash on a regular basis. When I automatically re-invest that cash and add it to my monthly purchases, I’m effectively giving myself a licence to print money. Each month, I earn a few more dollars in dividends than I earned the month before. It’s a wonderfully passive way to grow my portfolio, without having to worry about picking the “best time to invest”.

There You Have It

This is my 3-step strategy for picking the best time to invest in the stock market. Your mileage may vary. I’m humble enough to admit that there may be better ways than mine to decide when to invest. What I can tell you from personal experience is that my method works. I’m a self-taught amateur investor who has managed to create a portfolio that will comfortably support Future Blue Lobster. I continue to read and learn. Some tips I like. Some, I don’t. The one constant theme in everything that I learn about investing is that you have to invest your money. It’s the absolutely most important step you simply must make to successfully grow your investments.

When someone asks if this is best time to invest in the stock market, the answer is “Yes!”

Start Planting Your Money Tree

Everyone wants their very own money tree. Financial problems would be so much easier to solve if you could just pick money off a tree and pay whatever needs to be paid. Well, I’m here to tell you that you do have the power to do this. All it takes is a little bit of disposable income, a plan, and time.

By keeping such a magnificent type of fauna alive and at your disposal, you’ll reap the rewards of the harvest for a good long time. The key is to plant the moeny-seeds. In layman’s terms, you have to start investing your money. Then you have to consistently continue to invest your money. The sooner your money-seeds are planted, the sooner they will grow into an orchard of money trees. And who wouldn’t like an orchard filled with money trees?

Planting Seeds Leads to an Orchard

Each time I invest a portion of my paycheque, I’m planting seeds. They’re simply money-seeds, or atleast that’s how I like to think of them. They’re deposited to my portfolio account so that I can buy more units in my exchange-traded funds. Those ETFs are on the dividend re-investment plan. When the ETFs pay me dividends and capital gains, those monies are automatically re-invested into more units of the same ETFs. This creates a perpetually growing dividend-and-capital-gains-paying cycle.

I liken this cycle to the growth of the tree. In other words, my money tree gets bigger and bigger each month as my dividends and capital gains are re-invested.

When I retire, I can let the cycle continue to grow month-in-month-out, or I can stop the cycle by cancelling the DRIP. The dividends and capital gains will still be paid out every single month. Instead of being re-invested, they’ll go towards making my retirement just a wee bit more comfortable. You know – flying first/business class on my travels, monthly massages, grocery-shopping without scrutinizing the prices, whatever little extras my heart desires…

Money I Didn’t Have to Sweat For

Planting money-seeds leads me to earning money that I didn’t have to work for. Dividends and capital gains are passive income. Once I’ve laboured to earn the money-seeds, my labour stops once I’ve invested them. Thirty years ago, I opened my first RRSP and invested my contribution. That investment is still generating money for me… and I haven’t had to lift a finger.

Most of us work hard for our money. In colloquial terms, we have to sweat for it. Some of us have to bleed for it. Wouldn’t it be nice to earn money the easiest, legal way possible? Can you imagine having money just flow to you every single month?

There is a way to do it, and it’s called investing. You put in the work up-front and invest part of every paycheque that you earn. The third step is to sit back and watch the money roll in.

I will be very honest with you. Dividend investing takes a very long time, unless you have 5-figure sums to invest every month. If you do it long enough, you’ll be earning amounts every month like this Anonymous Fellow. In the interests of transparency, I’m willing to admit that it’s taken me 12 years to get to an annual dividend amount that would sustain my current lifestyle. However, I’m an amateur dividend investor. Had I made smarter choices way back when, then I would be in a much better situations. No sense dwelling on it now because I cannot go back and change things.

What I can do is give you some suggestions of people to learn from if you have any interest in learning how to plant a money tree for yourself:

Tawcan

Dividend Dream

My Own Advisor

And I’m sure there are many others out there. These are just the people whose stories I’ve followed for the past few years. They’re teachers. They’re transparent. They’re honest about the challenges they’ve faced and the mistakes they’ve made. I’ve learned a lot from them and I wish they’d bee around when I started my own investment journey. But since I’m almost older than the internet, I won’t blame myself too, too much for not having found them sooner.

Choices Have Consequences

We’re all old enough to know that there are consequences for everything we do… and don’t do. It’s no different with investing. If you invest consistently & profitably, for a decent period of time, you’ll have a nice cushion of cash waiting for you in the future. Planting your money tree today is one of the very best things you can do for Future You.

It’s always a good idea to choose yourself. Unless you’re a child, you’re the only one responsible for identifying what you want from you life and how to make your dreams a reality. Doing so will take some planning, a fair amount of time, and definitely a little bit of money. And as one dream made real, you’ll be able to set your sights on make another one come true. In the words of Ramit Sethi, you need to know how to build your Rich Life.

And if you choose not to invest, well… then you’ll have to depend on the kindness of strangers, your family & friends, or a job for the rest of your life. You’ll need money until the day you die. Pretending otherwise is foolish and short-sighted. At the end of the day, it’s better to take control now and take the steps necessary to build up a cash cushion that will keep Future You fed, warm, and happy. And don’t you want that for Future You?

One Day At A Time

There’s no doubt about it. Anyone who’s slightly aware of the news is hearing that things aren’t good, that we’re heading into a recession, that inflation is climbing, and all other manner of negative stuff about personal finance.

You know what I want you to do about it? I want you to take things one day at a time.

If I’ve learned anything during my few decades on this little blue ball we call home, it is this. No one knows what tomorrow will bring. People will guess and predict and estimate and prognosticate. They will do all kinds of worrying about all kinds of stuff. And you know what?

The future unfolds one date at a time, for everyone. There is no way to be 100% certain about what will and what won’t happen at any given moment. So do yourself a favour and don’t even try.

Instead, focus on what you can control. Do what you can then go about the business of living your life.

Top Up the Emergency Fund

At the very absolute least, have $100 in your emergency fund. It’s certainly not enough but it’s better than nothing. Squirrel away every extra nickel you have into your emergency fund until you have one month’s worth of expenses in there.

Oh, you have that much already? Okay – then your goal is to get yourself to two months’ worth of expenses. I want you to increase your emergency fund until you have one year’s worth of expenses ready to be deployed in the event of a true emergency.

When the emergency hits, you will be very pleased that Yesterday You had the foresight and brains to set something aside. Whatever your emergency winds up being, adding debt to the situation will likely not make it better.

Don’t Stop Investing

If you’ve been following my advice for any length of time, then you have an automatic transfer in place to whisk part of your paycheque from your chequing account to your investment account. You then invest that money into an equity-based exchange-traded fund for long-term growth. You’re doing this month-in-and-month-out, while ignoring the Talking Heads of the Media.

I want you to continue doing this. Look. The economic cycle has its ups and downs. Right now, we’re in – or heading towards – a bottom. For you and me, that means everything is on sale. It’s good to buy things when they are on sale. And due to very fact that the economic cycle is a cycle, the value of the equities – aka: the stock market – is going to go back up.

For those of you who haven’t started investing, start today. Set up your automatic transfer. Pick an ETF or index fund that invests in equities. Invest your money on a consistent basis. Set up a dividend re-investment plan – aka: DRIP – so that your dividends and capital gains are automatically re-invested. Ignore the Talking Heads and go about the business of living your life in the way that makes you happiest.

Spend Consciously

It’s your money so you get to spend it however you want.

That said, might I suggest that you only spend on things that bring you the most joy?

I’ll use myself as an example. At one point, I had 4 streaming services. I was considering adding a fifth when I stopped to ask myself if I was really loving having the initial four. The answer was “No”. Sure, I watched all of them at random times but I could go weeks without watching atleast one. So I cancelled the one that brought me the least amount of quality entertainment.

You see – I was spending to spend and not because that fourth streaming service adding something extra special to my life.

Look at where you’re spending your money. Unless every nickel spent is making your life better, consider cutting some expenses and seeing how it goes. After all, the beauty of our capitalist system is that they will always take your money at some point if you decide to give it to them again. By “them”, I do specifically mean anyone who is currently taking your hard-earned money and giving you a product or service.

Live in the Present

Like I said at the beginning, no one knows what the future will bring. The economy will recover, but I can’t tell you exactly when. Neither can anyone else. And I’m fairly certain that you will sleep easier knowing there’s a cushion of cash waiting for you in case you need it.

Do what you can do then live your life. Spend time with those who renew your soul. Do something creative. Read a book – better yet, write a book! Do your hobby, or start a new one. Talk to someone new. Visit a park or a garden to spend time in nature. Put down your phone & shut off the computer or tablet. Sit quietly for 10 minutes. Take a nap.

Listening to the Talking Heads will not calm your nerves. Their job is to get ratings, not to be right. If you can, rerun the tapes from 6 months ago and see who – if anyone – had correctly predicted every single thing that’s happening today. None of them accomplished this impossible feat! If they couldn’t do it 6 months ago, then it’s highly likely that they still can’t do it today.

There’s no benefit to worrying, or fretting, or considering endless what-if scenarios. Worrying and fretting changes nothing. There will always be a what-if that you didn’t contemplate. Taking the actions that I’ve articulated above will put you in the best position to survive – financially – whatever tomorrow will bring.

At most, you control your choice to live below your means and to invest for the future. Once you’ve chosen to do so, then your next best step is to take things one day at a time.

Retirement Is Not An Age. It’s A Bank Balance.

Truth be told, retirement is a bank balance. People commonly think that of retirement in terms of an age. Traditionally, it’s been age 65 and lately it’s been cropping up to age 70. For a little while in the 90s, age 55 was the catchy second half of a very successful marketing campaign called Freedom 55.

I’m here to tell you that age doesn’t determine when you retire. Your bank balance does that. Think about it for a minute? If you hit age 55, 65 or 70 with $17.89 to your name, can you really consider yourself retired? Is there even the slightest possibility that you’ll have to keep working because you won’t have enough money to live?

On the other hand, if you have $23,000,000 in your bank account by the time you’re 30, 35 or 42, then it’s quite like that you have the option to retire. Whether or not you do so is entirely up to you. The fact is that it is the amount of money in your bank account that determines when you’re financially able to retire.

Age has little to do with when you can retire. The more you invest, and the sooner you invest, the faster your net worth will hit an amount that will allow you to retire. This is the premise behind the hard-core-retire-as-soon-as-humanly-possible articles from FIRE people who are willing to live on the absolutely least amount of money. Some people are willing to save 70%, or more, of their incomes so that they can live off their dividends and capital gains without working for someone else. More power to them!

Myself, I choose not to save quite that much. Make no mistake. I do want to retire early, but I don’t want my life’s journey to be miserable. Living on 30% or less of my take-home pay would make me miserable. You might be able to do it with ease, but maybe not. You’re the only one who can make that call.

But back to my main point…

Spending Every Penny

If you spend every penny throughout your life, and borrow to spend more, then you get to retire never. It’s a harsh truth. You need to have extra money available to divert from today’s spending.***

That money has to be invested for long-term growth. This is why I repeatedly suggest that you invest a portion of every paycheque into equities and to re-invest whatever dividends and capital gains your investments generate. Unless you’re saving huge amounts of money, it’s going to take a long time to build the cash cushion that will fund your retirement.

Again, there’s no magic to the age 45 or 50 or 65 or 70. You can retire as soon as your portfolio generates enough money to replace the money from your paycheque. You’re also going to want your portolio’s annual growth to outpace inflation. No one aims to dust off their resume at age 90! You need your money to grow faster than inflation so that your purchasing power isn’t eroded over time.

In other words, retirement is a bank balance. Once you have enough money in the bank, you can retire. Live below your means so that you always have money for investing. Stay of out debt too. Money spent on repaying your creditors is money that cannot be invested for your desired retirement.

Semi-Retirement

If you need more motivation to save and invest for your future, always remember the following. Employment options widen considerably once your portfolio generates enough to cover the living expenses that won’t be covered by a potentially lower salary. Happiness – and semi-retirement – might be just one employment move away if you have enough money stacked to pay your bills.

The principles of saving for retirement apply equally as well to semi-retirement. Maybe you hate your current job with an unholy passion, but all the jobs you truly want to be doing will pay you less. You earn $75,000, your annual expenses are $60,000 and you invest $15,000. The job you really want to do only pays a salary of $40,000 and your portfolio generates $30,000 per year. (These are net income numbers, not gross.)

Since your portfolio covers half of your $60,000 expenses, then you can take the lower paid, but soul-enriching job. And in this example, you will still have $10,000 each year to invest into your portfolio (= $40,000 – $30,000), so your portfolio would still be growing. Admittedly, you’re saving $5000 less per year and you may have to work longer. Yet, you wouldn’t hate your job and you wouldn’t be miserable while working. Only you can decide if you hate your job enough to take a pay-cut.

No Downside to Saving & Investing

If there’s even the slightest chance that you don’t want to work until the last breath leaves your body, you should be saving and investing as much as you can.

Absolutely spend on what brings you joy, but ruthlessly cut out everything else. When you spend your money, I want you to be getting maximum utility and joy out of that purchase. Your money shouldn’t be wasted on that which adds nothing to your lived experience. What sense does it make to spend your money on things that don’t bring you joy?

Again, retirement is a bank balance. It is not an age. If you start today, then you can reduce the risk of having to work into your dotage. If you’re still working at age 70, 80, or 90, then make sure that doing so is a choice and not a requirement.

Do what you need to do to increase the odds of having the retirement you want when you want it.

*** Our economic system is designed so that people at its bottom live hand-to-mouth for their entire lives. These are the folks who legitimately have nothing to save because they are just barely surviving from one paycheque to the next. This article – and most retirement advice – is not for them. People in financially-precarious situations are forgiven for focusing all of their energy on surviving from one day to the next. Everyone else has no excuse. If you’ve got some fat to trim in your budget, then you’ve got the money for saving and investing. You’re simply choosing not to.

My Rambling Thoughts on the Empty-Home Tax

For the past 2 years, I’ve been reading articles the lack of housing affordability and the impact of an empty-house tax. In short, fewer and fewer people can afford to rent property at current prices. This is troubling for a lot of reasons. Allow me to say that I’m not an expert in this area. I’m not giving you advice about what I think you should do. This article is just a few of my rambling thoughts about the proposed solutions that I’ve heard thrown around.

A Couple of Basic Premises

Renters have seen rental rates skyrocket since the end of the pandemic. As I understand what’s being reported in the media, it’s becoming increasingly common for people to face rent increases of hundreds of dollars if they want to renew their leases. Moving to a new place is also a shock to the system. The next place is not going to be any cheaper than the current one, and is likely to be even more expensive. Some renters would prefer to buy, if they could.

The law of supply and demand is also at work. When there are insufficient rental homes to satisfy rental demand, then the cost of rent goes up. Conversely, when there are more rental properties than there are renters looking for a home, then the cost of rent goes down.

If the empty-house tax doesn’t increase the supply of rental accommodations, then it similarly will not decrease the cost of rent. I’m happy to be proven wrong on this point.

Empty-House Tax

One of the proposed solutions is to force owners of to pay an empty-home tax if they own more than one property. I think the idea behind this proposal is that the owners will rent their empty homes to someone in order to avoid the tax. Personally, I don’t think that will happen on a grand scale. (And if I’m proven wrong, then I’ll say that I was wrong.) What I think will happen is this.

The Very Rich who don’t want anyone else using their pied-a-terre while they are living elsewhere will view the tax as a nuisance and pay it. The same applies to the Somewhat Rich and the Barely Rich. Those who have the money and don’t want others living in their property will simply pay the tax. This means the home stays empty and doesn’t go on the rental market. Renters will not have access to those homes, just as they don’t have access to them now.

The Very Rich, the Somewhat Rich, and the Barely Rich who don’t want to rent their properties will be motivated to sell their properties to someone else. Such an action means that the houses will not be sitting empty. There is no guarantee that the next buyers will add those houses to the rental market. The next buyers might actually want to live in those homes. In such a situation, renters are no better off. Some of them might be able to buy a few of the empty-homes. After all, an influx of homes for sale means an increase supply so the price of homes should fall. This doesn’t help renters though. It helps buyers.

At the end of the day, it would be dumb to believe that homes sold to avoid the empty-homes tax will become part of the rental pool. They won’t, which means that they will not help to drive down the price of rental accommodations.

The Very Rich, the Somewhat Rich, and the Barely Rich who want to keep their property and avoid the empty-home tax will add their properties to the rental market. However, I’ve yet to hear from anyone who has the hard data of whether there will be enough new homes on the rental market for everyone who wants one to get one.

Remember, real estate investors who want to rent their properties are already doing so!!! The empty-homes tax is targeted at people who can afford to have one home sit empty for considerable periods of time. I would venture to guess that this a much a smaller pool of property owners. They’ve already signalled that they don’t want to be landlords. For whatever reason, their properties sit empty. Owners of these properties know that money could be earned yet they choose not to become landlords.

Even if every single one of them rented out their empty-home to avoid the tax, I’m doubtful there would be enough new rental properties to satisfy the current demand or to appreciably drive down the price of rental accommodations. In other words, only a few renters would benefit and the problem of unaffordable rents would remain.

Increasing the number of rental properties

In my humble opinion, the empty-home tax does not appreciably increase the number of rental properties available to renters. Similarly, it doesn’t decrease the cost of rent.

I don’t have any good answers. Truly, I wish I did. Renters deserve to have homes, just like owners. Having a safe, clean, and comfortable place to live is something that everyone should have. Again, this is just my opinion. The empty-home tax does little, if anything, to ensure that renters have greater access to the kind of living conditions that they want. I’m willing to be persuaded otherwise. It strikes me that the empty-home tax might increase the number of homes available to buy. I’ve yet to be convinced that it will increase the number of homes available to rent. The empty-home tax does not help renters in any appreciable way.

Simple Ways to Save Money

I have learned that there are 3 foolproof and simple ways to save money. These methods work for me. I’m going to share them with you. If you want to use them, great. If they work for you, also great! And if you think that they don’t work for you, then so be it.

  1. Stay at home.
  2. Stay off the internet
  3. Use the word “No”… a lot.

Stay At Home

When I’m at home, there are precious few ways for me to spend my money. At home, I have many free things to do. I can read books. My garden and yard always need attention – watering, fertilizing, trimming, picking up litter, weeding, transplanting. Being outside in my yard offers the triple benefit of fresh air, free exercise, and no opportunity to spend money.

As soon as I leave my home, it’s a completely different story. Sit back and let me spin you a tale…

I needed gas for my vehicle, so I went to Costco. My goal was to spend no more than $40. (To preserve my sanity from the exceedingly high price of gas, I fill up when my vehicle is down to half a tank. The price is less palatable, even though I might be going more often. We do what we need to in order to protect our mental health, right?)

While standing at the pump, I remembered that I needed to buy some bread. Costco sells the bread I like in a 3-pack, which means I can stash a couple of loaves in the freezer until I need them. So I went inside the Costco store. And on my way to bread section, I remembered that I was running low on fish and that I’d been hankering for some fish. So I stopped at the meat section. I grabbed my chicken – a package each of thighs and breasts – then grabbed one package of salmon. My planned spend of $40 turned into $119 in the blink of an eye.

How did it happen so fast?

Easy! I left my house. And while I was ought spending as planned, I remembered other things that I needed. Since I was already there, didn’t it make sense to spend my money right then and there on the things that I needed instead of making a second trip another day? Did it really matter that I hadn’t planned to spend an extra $79 that?

When I want to save money, I just stay home on most days of the week. This way, I know in advance that I’m going to be spending money on those days that I do leave the house and I can plan for it.

Stay Off the Internet

At home and outside is a highly effective situation in which I don’t spend money. Indoors, there’s a lot more advertising coming at me. I gave up cable in 2015 and switched to streaming services. Cutting the cord eased the pressure on my wallet, and streaming services deliver the same quality of TV as cable. Sometimes it’s even better. I’m always a year behind on Grey’s Anatomy, but that’s okay. It’s just TV – it won’t go bad if it’s not consumed right away. As a result of my choice to cut the cord, the only advertising I see comes in the form of embedded marketing. Heaven help me if I go anywhere else online!

Nearly every website has some kind of advertising! This shocks absolutely no one. However, what I’m finding is that the advertising is getting to me. I used to be able to block it out, but now… not so much. Thanks to the ads on multiple pages that I visit, I’ve come to discover that my life simply won’t be complete until I have a pergola & composite deck installed at my house and buy some brand-new patio furniture. Can you believe that I’ve lived this long without these things?

I’d thought my sense of apprehension about the future was due to climate change, severe income inequality, and deeply embedded social problems. Turns out, those slight yet ever-present bad feelings in my tummy were due to the fact that I don’t have a backyard worthy of a magazine cover on Home and Garden. If I just spend some money to make my backyard look great, then I will be happy.

Thank Deity-of-Your-Choice for the advertisers who planted this idea in my head! <sarcasm off!>

If I want to save money, it’s best if I just stay off in the internet and avoid the ads.

Use the word “no”… a lot!

I’ve spoken before about the importance of prioritizing what you want from your life. This way, hopefully, you spend your money on the things that matter most to you. After all, you work hard for your money. When you spend it, that money should be working hard for you too.

The only reason that I haven’t run out and bought myself an even prettier backyard is because I know that there are more important things for my money to do. I still plan to travel. That’s a little luxury that’s going to cost me more than it did pre-pandemic. Flights, hotels, food, souvenirs – I want these things more than I want a pretty place to sit while mosquitoes eat me alive.

The word “no” is tiny but tough. It’s a powerful little thing! I say it to myself when I want to stop at the drive-through instead of eating the food in my own fridge. That little trip to Costco I mentioned before? It could’ve been a $200 wallop to the wallet, instead of only $119. My store still has some lovely gardening planters that I’ve had my eyes on for a little while. And there were so many lovely, delicious things in the bakery. I told myself “No!” instead of filling up my cart.

Keeping focused on my priorities makes it a lot easier to say “no” when it’s required.

Looking back over my life, there is only one time that I regret that I said “no” to myself. My second cousin had invited me to her wedding in Paris. I didn’t know her very well and accepting the invitation would’ve meant travelling to Europe twice in the span of 4 months. My budget simply couldn’t swing that kind of travel, so I had to decline the invitation. After seeing the wedding photos and how stunningly beautiful everything was… <big sigh goes here>… Well, everyone has a regret or two, right?

For the most part, I use the word “no” a lot when I want to save money.

So that’s it. Those are my simple ways to save money. Take what you need from this post, leave the rest. The choice is always yours. If these rules don’t work for you, that’s okay. I’m sharing my bits of wisdom in the hopes that they help. You may just need to come up with your own rules, habits, mantras, incantations, spells, whatever in order to save your money.

People Should Always Have Atleast Two Bank Accounts

Today, I was reminded of why it is essential for people to always have atleast two bank accounts. It’s to protect your money from a bank’s right of offset.

What is “offset”?

Very simply, it is the power of the bank to raid your accounts in order to satisfy a debt that you own to the bank. You might now realize that you agreed to allow them to do this… but, rest assured, you did. Read the terms of your banking agreement and you’ll learn that you’ve given them pre-authorization to take your money if you can’t pay your debts.

If you always pay your loans on time, then this article isn’t for you. Similarly, if you know without a shadow of a bout that you’ll always be able to pay your loans on time, then this article probably isn’t for you. These words are for everyone else.

Let’s say you have a mortgage, a line of credit, a credit card, a chequing account, and a savings account with Bank X. Without fail, you’ve paid your loans (mortgage, LOC & CC) from your chequing account. However, something happens and you can’t pay your bills. Maybe you lost your job, or you’re too sick to work. Whatever it is, you’re not in a position to pay so you don’t.

Your bank gets concerned. After all, they lent you the money and you promised to pay them back. Now, you’re not paying back your loan. Your bank may or may not understand why you can’t repay the loan, but they can’t make profits off of understandings. They make money from loan repayments. So the bank starts eyeing your savings account. Maybe this is your emergency money, or travel money, or stash to move across the country. Whatever the money’s for, the bank sees that it’s there and they decide to take what they need to satisfy the loan that you took from them.

See? They used the right of offset to take money from your savings to pay the debt that you owe them.

How can you thwart a bank’s right of offset?

It’s very easy. Get two bank accounts at two different banks. Bank X can only use the right of offset for accounts held at their bank. If Bank X wants to get their fingers on your money at Bank Q, then they have to go to court and get an order to do so. It’s a far more expensive and lengthy process to get money out of an account at a different bank.

My advice to you is simple. Always have atleast two bank accounts. Keep them at different banks. You can still set up an automatic transfer of funds. The transfer will just be from one bank to another. This allows you to build your emergency money, or short-term goal money, without fear that the bank holding your loan will raid your funds.

Ideally, you will borrow money and pay it off as fast as you possibly can. Debt is still bad, but sometimes you have to use it. When you take out debt, do not forget that the banks can take money from any of your accounts with them to repay that loan. If you have money that you absolutely do not want your lending bank to access, then put that money into an account at a bank that hasn’t given you a loan.

To be clear, I am not telling you to avoid repayment. You borrowed the money so you owe a debt. Not paying your mortgage is a financially destructive choice, which only hurts you. I would strongly urge you to avoid that course of action causes because it will cause significant problems in many other areas of your life. If you take out a loan, then pay it back as fast as you can!!!

What I’m telling you is to keep all of your money safe from lenders for as long as you can. Put it somewhere that your lending bank cannot touch without a court order. Normally, that safe place is found at another bank. You should always have atleast two bank accounts, and they should be at two different banks. Be honest with yourself. Don’t you work too hard for your money to lose control over how it’s used? I think we both know that the answer to that question is “YES!”

Not all advice is for all people

As I’ve gotten older, I’ve had to realize that some of the nuggets of wisdom that I hold dear won’t work for everyone. Even my cherished belief that everyone should live below their means is flawed. It is literally impossible to follow the LBYM edict if you most basic needs – food & shelter – outstrip your take-home income. Advising everyone to “live below your means!” is tone-deaf to the reality that not everyone has sufficient means to survive.

Another bit of wisdom that I’ve always questioned comes from the blogger behind GreaterFool. Prior to the pandemic, this blogger encouraged everyone to sell their home, invest the proceeds in the market, and live off the dividends and capital gains. Quite wisely, he took the position that cash flow is more important than net worth. Beneficiaries of outsized tax-free capital gains on their home would be smart to sell it and invest the proceeds in a diversified stock-and-bond portfolio. In turn, the portfolio would churn off enough money to pay rent to a landlord somewhere.

The blogger explained how landlords were effectively subsidizing their tenants. In his view, home prices were going to drop drastically so homeowners would be better off selling their home at high price points and becoming tenants. Before the pandemic, market rental rates were less than the landlord’s expenses to own and operate rental units. The landlord couldn’t increase the rent too much or the tenant would walk away and find somewhere else to live. At the higher end of the rental market, this was a serious concern.

So if a homeowner could sell their home, and their proceeds could cover the rent of a comparable rental property, then it would make sense to sell. The homeowner-turned-renter would realize the tax-free capital gains of their home and move into a landlord’s property. According to the blogger, their invested proceeds would generate enough dividends and capital gains to cover the cost of market rent. The landlord would cover the difference between the rent received and the costs of owning the unit. The homeowner-turned-renter could then cover the rest of their expenses with income from their employment.

The first time I heard this financial advice, I was really impressed. It sounded like a very good thing, but then I started asking questions:

  • what if there was a dividend cut or the capital gains dropped?
  • what if rents went up faster than growth on the invested portfolio?
  • what if the portfolio was compromised somehow?
  • what if the portfolio’s generated returns weren’t enough to rent in the first place?

These are the questions that would keep me from sleeping well at night. Never worrying about how I’m going to pay for my shelter is one of the very best benefits of having a mortgage-free home. Others may feel differently.

I’ve no doubt that the blogger’s proposed financial path would work for some people. After much careful reflection, I realized that I wasn’t one of them.

This advice never sat well with me, even though I own a mortgage-free home. Yes, selling my own home would give me a six-figure sum to invest. In my case, the resulting dividends and capital gains wouldn’t be enough to cover rent for a comparable property in my city. I would have to keep working way beyond my intended retirement date. It would be years and years and years before my portfolio would be generating enough money to cover all of my expenses.

Once again, I’d be sharing walls with strangers and living without those little extras a house brings to one’s life: added privacy, extra room, green space. Undoubtedly, my rent would increase every year and I’d be without any guarantee that my investments would churn out enough money to cover those rising costs. Finally, if I was living off my dividends and capital gains, then I wouldn’t be able to have them automatically re-invested. In short, I’d lose the benefit of compound growth.

Nope. This blogger’s advice was not for me. There were too many drawbacks and too few benefits given my preferences and how I want to live my life.

That said, I could certainly see this advice working for people whose homes were worth over $3,000,000. At a conservative 5% return, there would be $150,000 of favourably-taxed income to spend every year. With that many millions to invest, there might even be enough money to cover inflationary pressures and rising rents.

In my humble opinion, an investment portfolio of less than $3,000,000 wouldn’t work for me. That’s not to say it wouldn’t work for someone else. Again, not all advice is for all people. In my head, going into my dotage while still paying rent to a landlord is rarely a wise course of action. Rents tend to go up. Without the benefit of compound growth over the long term, my dividends and capital gains would eventually become insufficient to cover rising rental rates.

For the record, my house is not worth an amount anywhere close to seven-figures. Investing its proceeds might generate $1000 per month. In my city, that’s currently not enough for the average 2-bedroom apartment. Why would I move from a comfortable-for-me-sized house to an apartment with half as much space, no yard, and less privacy?

With my own paid-off house, I benefit from compound growth of my dividends and capital gains while I’m still working. Yes – I still pay property taxes, insurance and repairs for my home. However, those aggregate costs are far less than what I would pay in rent to a landlord, year-in-year-out. When I eventually stop working, I don’t have to worry about rental increases because I own my home.

The only benefit I see to the blogger’s proposed course of action is immediate lump-sum investing. Someone following his advice would be able to invest a big chunk of money today and benefit from long-term growth. The stock-and-bond portfolio would grow over time and possibly make the homeowner-turned-renter wealthier that someone like me. I rely on consistent bi-weekly contributions from my paycheque to dollar-cost my way into the market. In short, my chosen path was to pay off my mortgage in under 5 years then build an equity-based, buy-and-hold investment portfolio. I’m making contributions but I’m not going to receive the benefits that come from investing a huge lump-sum immediately. This is because it’s always better to invest as much as you can, as soon as you.

The blogger in question is writing for a wealthier audience. I’ll still visit his blog to learn things and to get a perspective on how some of the Wealthy handle their money. I’m seasoned enough to know that I won’t agree with everything this blogger writes. Those best-served by his views are those who have a considerably higher level of wealth than I do.

As you continue to learn about personal finance, you’ll come across many suggestions about what to do with your money. Think carefully! Every money mistake can be undone, given enough time. Yet, wouldn’t it be nice to avoid those mistakes in the first place? Just because something is a good idea or it’s works fabulously for someone else doesn’t mean that it’s the right move for you. It never hurts to remind yourself that not all advice is for all people.

Pessimism & F.I.R.E. – A Little Goes A Long Way

I have a secret to share with you… I think that a little bit of pessimism goes a long way towards achieving financial independence. When most of us start working, we’re chipper and happy and excited to be getting a paycheque. It’s lovely to have some spending power! And most of us use that power as quickly as we can. Sometimes, that results in huge debts that chain us to a paycheque. By the time many of us have lost faith that we will one day work at something we love, the financial obligations that were picked up along the way keep us tethered to employment. Without another source of money to replace our paycheque, we’re essentially stuck.

No one ever talks about this aspect of adulting in their graduation speeches… Those speeches are flowery and encouraging, and urge graduates to pursue their dreams. That’s fine and good and great if you can do it. However, I do wish someone could work in a nugget or two about building up some money on the side… just in case you’re among the unfortunate multitudes who won’t have the opportunity to do what you love and receive a handsomely large paycheque for doing it. But I digress…

Take some time to seriously ponder how much life-satisfaction you anticipate receiving from paid employment. Doing so is a powerful catalyst. I can almost guarantee that you will be motivated to pursue financial independence sooner rather than later. It takes a few years, but we all eventually realize that not everyone who works hard gets rewarded. There are those who aren’t good at office politics, and have no desire to expand their skill set in that area. Unfortunately, some people are the victims of harassment and bullying in the office. These are the main reasons why it’s a seriously good idea to add a drop of pessimism to your views on saving for the future.

It won’t hurt to consider what your options will be if you decide that you hate working and that you want to stop doing whatever it is that you’re paid to do. How will you pay for your life without an employer giving you a paycheque? Do you want to work even harder than you do now by starting your own business? Or would you prefer enough passive income to fully fund you the life you dream of? Maybe you’d enjoy the combination of a lower-paying-yet-absolutely-enjoyable job that’s bolstered by passive income from your investments?

Now, there’s always the possibility that you’re like a couple of my friends who absolutely love their careers. Like everyone, they have bad days at work but, for the most part, they love going to work. Read that again – they love going to work. They would do their jobs for free – that’s how much they love going to work!

It’s mind-boggling to me. Even when I loved my job, I never loved it that much. And over time, my like for my job has dwindled considerably. Many accolades and much credit should be given to Young Blue Lobster. Twenty year ago, YBL knew that working to 65 wasn’t a prominent dream for our life. YBL quickly paid off student loans, a car loan, and a mortgage. YBL stayed out of debt and re-directed those former debt payments to savings that were eventually invested in our TFSA, our RRSP, and our non-registered investments. Even before locating the F.I.R.E. corner of the internet, YBL was pursuing financial independence and funding our dream of retiring early.

At the time, YBL had an inkling that having a salary-replacing cashflow on the side would be a very good thing just in case anything went wrong with the regular paycheque. Looking back, I have to say that YBL was 100% correct. Our little army of money soldiers bolsters my investment contributions every month. In a year or two, those monthly dividend payments will exceed the contributions from my paycheque. That’s not too shabby as far as financial achievements go. Without that little sliver of pessimism fuelling my decisions way back when, my current side income would be meagre.

I want you to pursue your dreams. You’ve got one life and it should be the best one that you can achieve. At the same time, a touch of pessimism can help you to focus on how you can best make those dreams come true. Pessimism… a little goes a long way.