Millionaire on the Prairie - Personal finance for singles looking to finance their dreams.

Time for a Mid-Year Check-up!

Tempus fungit. It’s a Latin phrase that means “time flies”. Truer words have never been spoken, in any language. It’s already the middle of 2022. How is your money doing? Are you on track to meet your financial goals? If you don’t know the answers to these questions, then it’s time for a mid-year check-up.

Emergency Fund

You need not share your answer with the class. However, you definitely have to be honest with yourself. Have you had to dip into your emergency fund this year?

If yes, then I hope you’re taking steps to refill it. Trust me when I say you’ll have another emergency at some point in the future. Emergencies don’t do your the courtesy of giving you fair warning. They happen unpredictably so you need to replace any monies that you’ve used from your emergency fund this year. Make it simple on yourself. Set up an automatic transfer so that you’re sending $50 or $100 (or whatever your budget will allow) to your emergency fund every time you get paid. If you already have an automatic transfer in place, increase it by $50-$100, or by whatever amount your budget will allow.

If no, then add another $1000-$3000 to your emergency fund. In case you’ve been living on another planet for the past few months, allow me to be the first to say “Welcome back! We missed you! Oh, and you should know that inflation is up 7%-8%. This means that your emergency fund needs to be a little bigger since paying for your emergency just got a little bit more expensive.”

Achieving Your Goals

Cast your mind back 5.5 months to early January. What were your financial goals for 2022? Are you on track to achieving them?

Assess your spending for the past 6 months and determine if your money choices got you closer to, or further from, meeting those goals. Congratulate yourself if you’ve met some or all of those goals already. You did the work so you deserve some recognition of your efforts.

On the other hand, maybe you haven’t been able to meet your financial goals. Do you have any idea why? To answer this question, you must assess your spending to date. The most efficient way to complete this assessment is to review your expenses.

I hope you’ve been tracking your money, whether on a spreadsheet, via an app, or with a pen & paper. Myself? I’m a spreadsheet person. The method really doesn’t matter. Tracking your expenses clarifies whether your spending habits are aligned with your priorities.

And if you haven’t been tracking your expenditures until now, then you should start. Every time a nickel leaves your wallet, record its destination. No one has ever been harmed by knowing where their money goes. Information is power. Seeing a written record of where you’ve spent your money will assist you to align your money with your most important objectives. At the very least, you’ll be able to determine if you’re sacrificing your goals by spending money on that which you’ve decided is less important to you.

You can only spend each dollar once – either it goes to your goals or it goes to your not-goals. The choice is yours.

Check your subscriptions

Summer is here. And it will be gone far too soon. Maybe you’re spending more time outside. If that’s the case, maybe you want to eliminate some of your subscriptions for the next few months. I cut the cord several years ago, but I continue to use other streaming services. Now that I’ve got my garden going, and have many little chores to attend to after work, I could probably cut those services from my budget for a few weeks. It wouldn’t hurt me. I’m very, very, very confident that the service providers will happily take my money in the fall when I move back inside.

You know yourself better than I do. Could you live without some of your subscriptions for a few weeks? No one is telling you to give them up forever. I’m simply suggesting that you live your life without them for a few weeks while you’re doing other things that don’t involve staring at a screen and scrolling endlessly for something to watch. Again, it’s your money so you get to decide how to spend it. I’m simply nudging you to consider whether it’s a waste of money to pay for those subscriptions during the summer if you’re going to be outside soaking up the nice weather while it’s here.

Cut yourself some slack.

No one is perfect. And this goes doubly so for money decisions. You’re doing the best you can with what you know. There are other things going on in your life and they’re probably taking up a lot of your time, energy, and attention. It’s not always easy to pay attention to your money, even though you know it’s important. I get it. I’ve been there too. However, I promise you this – when you know better, you do better.

This mid-year check-up is meant for you to identify any areas that might need some effort. If you’ve veered off-path, then you can course-correct sooner rather than later. Make tweaks as needed, then go back to the business of building the life that you truly want for yourself.

Invest your money bit by bit until you’re rich.

Look… I’m not an expert on the economy. I don’t have crystal ball, nor can I tell the future. I’m in the same boat that you are – inflation is way up, house prices are crashing, mortgage rates are increasing, stock markets are wildly volatile.

What does all this mean from one day to the next?

I don’t know. And neither does anyone else.

During these economic challenges, my financial goal is to stay on track. I can’t control the stock market, but I can control whether I continue to invest. For a very long while, I’ve shaved off a good chunk of my paycheque and have automatically invested it into my various exchange-traded funds. When the market was going up, I was investing. And when the market was going down, I was still investing. Right now, the market is correcting. Guess what? I’m still investing my money, bit by bit.

My advice to you is that you should be investing too. Start where you are right now. Pick a broad-based equity fund and automatically have some of your money invested into it every time you get paid. Start with $1/day. When you’re able, increase that amount to $5/day – then $10/day – then $20/day. And if you want to invest even more than that, be my guest. The more money you invest, the better.

You start where you are, and you do what you can. I’m not going to promise that it will be fast or easy, but I can assure you that the formula is quite simple. Consistently investing some of your money on a regular basis will work.

The Talking Heads of the Financial Media should be ignored. They cannot tell you your future because telling the future accurately is an impossible thing to do. Their job is simply to talk about what might happen. Listening to them will not calm you down. I would even venture to say that one part of their job duties is to increase ratings & views. Right now, there are enough economic shocks and global catastrophes to keep their doom-and-gloom chinwag flowing for a very long time.

Again, you should ignore them. Concentrate on your own goals.

You need to focus on that which is in your control. Despite how it may seem, you have more power than you may think where it comes to your money. Firstly, you can control how much you choose to invest from your disposable income. If you invest $0 today, then you’ll have $0 tomorrow. The more you invest and the longer you leave it to grow, then the more money you will have. It’s that simple.

Secondly, you get to control whether to listen to the Talking Heads. Go back and re-read what I just wrote. They are to be ignored while you stick to your knitting. Quick refresher! Your “knitting” equates to consistent investment in equity-based ETFs or index funds over a long period of time, regardless of whether the market is up or down.

Thirdly, you are in control of ensuring that you choose to re-invest the dividends and capital gains to increase the power of compounding your returns. Dividends and capital gains are money that you didn’t have to sweat for. You lived without them before you earned them. Continue to live without them and just re-invest them. At first, they’ll be worth pennies and maybe a few dollars. After a few years, you’ll be earning thousands. They will continue to get larger so long as you re-invest them for further growth.

Finally, you and only you control whether you start today or whether you allow procrastination to flourish. It should be obvious by now that I want you to stop procrastinating. Do not let analysis paralysis stop you. Start investing today. You won’t make a “perfect” decision, and that’s okay. Nobody else is making “perfect” investing decisions either. Just start today.

From here on out, I want you to be investing bit by bit until you achieve your financial goals. Start today. Keep going when it’s hard. Don’t stop until you’re rich. That’s it – that’s the plan. Implement it.

Money well-spent is never wasted!

I am an amateur gardener. Essentially, this means that I don’t know what I’m doing but I do it with enthusiasm. Each year, I pick my tried and true favourite annual – petunias – and then I buy new plants that I want to try. My winters are spent watching various gardening channels on YouTube and making lists of what I think will grow well for me.

Last year, I tried coleus for the first time… and I completely fell in love with this gorgeous, vigorous plant. It’s the only thing I’ve ever paired with petunias that could match the petunias’ growth habit. Take a look at this container. There are only 3 coleus plants, and three petunia plants. Those little splotches of pink and orange near the edges are flower from two of the four begonias that I planted with the coleus and the petunias. A little tip from me to you – begonias cannot keep up with petunias and coleus.

Coleus side vs. Petunia side of same planter!

This year, the “new” annual is verbena. So far, I’m very happy with my 2 verbena plants. If they can handle the hot, hot summer sun that’s due to arrive in July and August, then I will be adding verbena to my yearly list of favorites. Take a peek at these little beauties.

In addition to coleus, petunias, and verbena, I also selected geraniums, marigolds, sweet potato vine and begonias to fill up my planters. It’s been a week and, so far, everything is still a live. My goal is to keep it that way!

And while I’m not an expert, I’ve learned a few things over the years. Firstly, it’s much cheaper to plant perennials in the ground and save the annuals for my containers. While they might cost more at the front end, a healthy perennial will come back year after year. They’ll flower beautifully, though for a shorter period of time. I enjoy feeling accomplished when they come back each year. It means that I managed to properly care for them – not too much fertilizer the year before, the right amount of water, a perfectly selected spot with light they found most pleasing.

Perennials make for good investments. I’ve learned this with my hostas. I transplanted three last year, but only two came back. I’m not sure what I did wrong with third one but something clearly went awry. No matter – I’ve already replaced the dead one. Next year, I expect all three of them to come back and fill in a very awkward little spot I have near my garage door.

This year, my shed came down. There’s now a 6′ x 6′ patch of dirt in my yard that’s in desperate need of something green. As I already have a very large yard, I refuse to plant anymore grass. I have too much as it is. Again, this nearly cleared patch of land is in a strange spot. The shed was nestled under two healthy, large lilac trees. As a result, this spot sits in shade except for roughly 3-4 hours in the afternoon. So I think it will be a shade garden… once I figure out what can live in the shade and survive the hottest sun of the day.

Ahem… Blue Lobster, this isn’t a gardening blog. Yes, Gentle Reader, you’re right – it’s not. This is a place where I share my thoughts about money and encourage you to spend yours in a way that will make your dreams come true.

I’m talking about plants today because they take my mind off of my money. Yes – I said it. Sometimes, it’s good to not think about money. Obviously, I need money to buy my plants. I needed money to buy the worm castings and potting soil. Money definitely facilitated the purchase of my new containers this spring. There’s a good chance I’ll need money to pay for the water that’s used between rainfalls to keep my plants alive and happy.

Coleus, sweet potato vine, begonias, geraniums… love them all!

Yet, when I look at my wee little plants, I don’t see money. Instead, I see pretty flowers. One of my annuals was planted as a Hail Mary. I don’t know what happened but this little petunia was lying on its side, unlike the other plants in the six-pack, and refused to remain upright. It wasn’t dead though, and the roots were still attached to the crown. I had a small spot in my self-watering container so I dug a hole, carefully inserted Little Floppy, and watered gently. That was a week ago. Today, I discovered that Little Floppy has doubled in size and is already pushing buds. I expect to see a flower by this time next week.

My plants calm me. There’s nothing I can do about inflation. Volatility in the stock market will rock the value of my portfolio. More often than not, world events make me sad. So I turn to my plants. They offer me respite from an irrational amount of worry about things that are out of my control. Every day, I can step outside for some fresh air and watch the magic of nature up close.

And since this is a blog about money, here are some numbers. So far, I’ve spent about $250 on my plants this year. Most of it went to annuals, but some of it went to perennials too. Specifically, this year I’ve purchased a new hydrangea bush, my replacement hosta, and a second hosta for a different location. The shed-spot needs more plants, so I expect to be spending another $100-$200 to get sufficient plants to create the shade garden I want.

The few hundred dollars that I’ve spent, and will spend shortly, on my plants will make me happy for a very long time. All things considered, I view it as money well-spent.

Like I’ve said before, not every expenditure is going to put a smile on your face. I don’t know anyone who’s excited to pay for parking tickets or property taxes. Nonetheless, you should be spending atleast some of your money in ways that make your heart sing. For me, it’s plants. What is it for you?

Slow and Steady – My Dividend Story

Way back in 2011, I started to invest in dividend funds. I started with a bank’s mutual fund, then moved my money into an index fund with an investment company, and I’ve now finally settled on a couple of exchange traded funds.*** I had a goal of creating a steady stream of passive income. What could be more passive than dividends? I work once. Then I invest my money into dividend-paying investments. Those investments pay me dividends for as long as they live in my portfolio. It was a simple and brilliant plan!

So I stuck to my slow and steady method of building my dividend portfolio. I’d paid off my mortgage very, very early so I used my former mortgage payments to invest. And there was nothing wrong with my vehicle so I didn’t buy a new one. Instead, I invested my former car payments. My career was still young, which meant I was getting salary increases over the years. I used half of each increase to improve my day-to-day life, but the other half went to invest in my portfolio.

The plan was very simple. Buy dividend-paying investments for a very long time then use the dividends to pay for life’s expenses in retirement. I wanted my dividends to be a reliable source of cash flow when my paycheque disappeared.

Was my plan perfect? No! Have I always made the correct choices when writing my dividend story? Again, no!

There are so many things that were wrong with my plan. One, I didn’t start early enough. You see, I paid off my mortgage in 2006 but I didn’t start investing beyond my RRSP and TFSA until 2011. That was 5 years of simply living. I travelled and renovated to my home. My RRPS and TFSA were stuffed to their limits, but it took me a little while to realize that I could be investing in my non-registered portfolio.

Secondly, I failed to appreciate how long it would take. Dividends are wonderful, and I love each of mine equally! However they don’t grow very fast without exceedingly huge up-front investments. Remember, I was investing both my former mortgage payment and my former vehicle payment. That was not a small amount of money. Even with a dividend re-investment plan, it took many years before I saw note-worthy effects of compounding. Earning four figures in dividends each month did not happen overnight. Today, I’m consistently earning over $2,000/mth in dividends… yet it’s still not enough for me to retire comfortably. I’d been hoping that my dividends would exceed my contributions by now, but that’s yet to happen. I’m close but not quite there. All in good time…

With the benefit of hindsight, I see that my portfolio would have grown much faster and been much larger had I invested the exact same amount into an equity-based, growth product. Between 2009 and 2020, the stock market was on a bull run. My portfolio would’ve grown exponentially larger had I invested differently. Growth ETFs and index funds generated much better returns that my dividend products. Growth products were a lot more volatile, and their distributions were not as frequent. At the time, I didn’t know as much as I do now so I saw those factors as deterrents. I chose dividend products, but I would have had more money in my kitty today had I chosen equity products.

Thirdly, I didn’t take the time to find other dividend investors and learn from their experience. Several years after starting my dividend story, I found Tawcan’s website and truly started to learn about how to invest in dividend-paying stocks. His system is more sophisticated than mine, but my armamentarium has benefitted from his lessons. I’ve often wished that his website had been around when I was in high school. I could’ve started down this investment journey from my first job as a grocery store clerk! If wishes were horses, then beggars would ride.

I’m sharing my dividend story with you because it’s important that you know that you don’t have to be perfect when it comes to investing. For all my mistakes, and they weren’t small ones, I’ve met my goal of building a passive stream of income to help pay for my living expenses in retirement. The effects of compounding are noticeable now, as my annual dividend payment is increasing thanks to the DRIP feature.

There were a few things that I did perfectly.

First, I chose to live below my means. Once the necessities were paid, I didn’t spend every other nickel on my wants. Some of those nickels were diverted to investing. This is key. A portion of every raise was re-directed towards my investment goals. I’ve travelled and attended concerts and spent weekends in the mountains and bought gifts and contributed to charity and bought garden supplies and worked on craft projects and bought furniture and paid for parking and etc, etc, etc… However, I have always made sure to pay myself first from every paycheque.

Second, I picked a path and stuck to it. There is no one perfect path for everyone. My imperfect path works for me and it will get me where I want to be. I’m a huge proponent of buy-and-hold. It’s an investing philosophy that has worked for me over the years. I don’t watch the stock market ticker. And I have little faith in my ability to time the market. How can I possibly know in advance which stocks will take off and which ones will fail? Buying into ETFs means I don’t have to do all of the rigorous financial analysis myself.

Third, I stayed out of debt. This can be tough, but it’s doable. I had to say “No” to myself, a lot. I didn’t want debt payments to creditors. Instead, I wanted contribution payments to my future. Please don’t think I deprived myself. When I wanted something badly enough, I found a way to get it. I simply chose not to want everything that the AdMan told me I should want.

Fourth, I ignored the incessant chin-wag of the Talking Heads of the Media. I learned early on that they couldn’t predict my future. They didn’t know the particulars of my circumstances. I had a very healthy skepticism about whether their “advice” and “insights” would be useful for me. Instead, I stuck to what I understood.

In my humble opinion, dividends are an excellent source of passive income. All things considered, I can’t say that I regret making the choice to invest in them more than a decade ago. While I may never reach the dividend income of this particular individual who earns $360,000 per year in dividends, Part 1 and Part 2, I’m satisfied with what I’ve been able to accomplish on my own. My dividend story is not too shabby, if I do say so myself!

*** The reason for so many switches? Each move from one product to the next meant that my management expense ratio decreased. First, I was paying over 1.76% of whatever amount I was investing when I was in the bank’s mutual fund. When I learned about index funds, I transferred my money from the bank to the private investment company, where I started paying an MER of 0.75%. Along came exchange-traded funds and I reduced my MERs even more, so that I paid 0.55%. Today, I’m paying 0.22%. My thinking is simple. Why should I pay higher MERs for the exact same investment product?

Sinking Funds – Key to Winning With Money!

Spring has finally sprung! We are nearly halfway through 2022, so it’s time to start doing some financial forecasting for 2023. What big expenses do you have to pay for in first six months of next year? And have you set up your sinking funds to pay for them?

While it’s important to live in the present, it’s also prudent to plan for the future. How you’ll spend your money is definitely one of the things that you should be planning well in advance. After all, there’s a fairly good chance that your dreams and goals for your life have some kind of financial component. If you’re frittering your money away on stuff that doesn’t matter to you, then where will you find the money to pay for the things that you really & truly want?

My financial life got immeasurably better when I started using sinking funds, aka: planned spending. Doing so meant that I was saving money for the most important stuff first. When I was younger, I decided that I wanted to have money already set aside for the big, major expenses that come up every year. In my case, those expenses included property taxes and insurance premiums. I had to pay for these necessities even though I didn’t particularly enjoy them. And they were very expensive – several thousand dollars a year. By having sinking funds in place, I didn’t have to scramble to pay my taxes or go into debt to make sure I was covered in case something happened to my car or property.

Please don’t misunderstand me. There are other major expenses that definitely fall into life’s goals and dreams category. For me, travel is a huge spending category. One of my dreams is to visit as many places as I can while it’s still physically comfortable for me to do so. In the Before Times, I was fortunate enough to visit Europe several times and had been planning my first trip to Asia. Then the pandemic hit and my travel plans went on hiatus. That doesn’t mean that I don’t have a sinking fund in place for travel. Au contraire! When I feel comfortable doing so, I’m heading back to the airport and going somewhere. Flights and travel haven’t gotten any cheaper in the last 12 months. Demand for travel is high right now thanks to all the pent-up demand. I’m confident that it will settle again. At that point, I’ll be roaming the world on the money that’s been set aside in my travel account.

How to Start a Sinking Fund

My first step to starting a sinking fund was to track my expenses. I wanted to know where every nickel was going so I could project how much I’d need the following year to cover big annual expenses. My next step was to divided next year’s anticipated expense by the number of paycheques until that expense would be due. The resulting amount was the amount that would go to my sinking fund.

For example, if my insurance premiums are $2600 per year, then I save $100 per paycheque for the following year’s premium payment. (I’m not a fan of monthly debits and prefer to pay my premium in one lump-sum.) When the following year rolls around, I’ll have $2600 waiting to pay the invoice.

It’s no secret that I’m a huge proponent of automatic transfers. I rely on them to put money into my sinking funds and to re-fill the funds as necessary. Over the years, I’ve learned the following tidbit about myself. If the money is available to me, then I will spend it… and generally on things that aren’t that important to me. However, sinking funds remove this option from me. I can only spend what’s leftover after the automatic transfers have gone through!

Another little tidbit I’ve learned about myself is that it’s best if my sinking funds are in another banking institution. While I use my chequing account daily, I access the sinking funds way less often. There’s no need for me to see those dollars just sitting there. It’s best for me that they be squirrelled away so that I’m not tempted to spend them.

Goals, Dreams & Fun Stuff!

Winning with money also means that you have sinking funds in place for your wants too! After I’d successfully set up sinking funds for the un-sexy stuff, I created a few for the non-necessities of life. The things that normally threw a wrench in my budget involved fun: birthday parties, holidays, anniversaries, invitations to concerts, etc…. I want to participate in these things with my family and friends. Money is sometimes a part of those celebrations, whether it involves a present, travel, tickets, contribution to a group gift or whatever. Sometimes fun is free. Other times, it involves money. When it does, I need to have some on hand so I can say “Yes, I’ll be there!” without worrying about cost.

When you have the money, make sure that some of it is going towards your goals and dreams. You shouldn’t feel bad for wanting to achieving what your heart really wants. Maybe it’s a weekend at a creative writing workshop. Perhaps you’ve always wanted to take horseback riding lessons. Some of you might want to take culinary courses in various cuisines. Whatever it is, it’s important to you and you should try to make it your reality. You know best what would make your heart sing. I’m just here to encourage-prod-nudge you into creating a sinking fund so that you improve your odds of making those goals and dreams come true!

Getting Good Advice

When it comes to your money, you want to get good advice. The problem is that it’s very hard to know if you’re getting good advice, or whether you’re being scammed.

For my part, I’ve built my portfolio by myself and I started when I was a young adult. All told, it took me more than 25 years before I went to see a fee-only financial planner. He took my information – he crunched my numbers – he told me that I could retire 2 years earlier than I’d planned. His fee was worth every penny!

Bank Advisors

Reader of Long Association know that I’m not terribly fond of banks. I hate paying bank fees. For the most part, I think lines of credit are poisonous. Debt is not something I encourage people to have. If you take away debt & fees, banks have precious little to offer their clients. My impression of bank advisors is similarly dim.

Banks offer mutual funds to their clients. However, the bank’s offerings are generally more costly than what can be purchased elsewhere. Advisors from Bank A will sell you mutual funds with management expense ratios of 1%-2%. They will not tell you about nearly identical products that can be purchased for 0.35% or less, i.e. exchange traded funds (ETFs).

The advisors who work for banks are not bad people, necessarily. They’s simply employees. Part of their job is to sell their employers’ products to the bank’s customers. They are trained and are knowledgeable about financial products. However, the terms of their employment are such that they will never advise customers to check out the competition’s investment products. Advisors working for banks will never encourage customers – you – to go and see if the same product can be obtained for a lower price. This is just a simply fact. Advisors at Bank A receive their paycheques from Bank A, not from you. Since you’re not paying them, the advisors’ interests are more aligned with their employer’s than with yours.

I went to a Bank near the start of my investment journey. It was a less than great experience.

Was I getting good advice? No.

Did the bank charge me a high management expense ratio? Yes.

As I learned better, I did better. Time to move on.

Investment Companies

After my experience with buying mutual funds from the Bank in my early twenties, I decided to invest with one particular investment company. They had a slick marketing folder, an office in the mall near my job downtown, and I liked their website. What other criteria could I have possibly needed to choose an investment company?

I have no idea if that company is still around. What I do remember is that they charged atleast 1% for their mutual funds. The management expense ratios (MERs) were the same as, or a touch lower than, the Bank’s.

Was I getting good advice? No… but atleast more of my money was directed into my investments and not being paid out in MERs.

As time passed, I moved my money to a different investment company that had far lower MERs for their products. While this second company did not have an office in the mall, they did have a much better website and a wider array of products. (Throughout my whole investment journey, I never stopped reading about money and investing. As I learned more, I made better choices. Like they say – when you know better, you do better.)

I improved my portfolio mix by moving to the second investment company and I saved money on the MERs I was paying. Further, the second company was easily able to set up an automatic transfer from my chequing account to my investment account. Each time my paycheque landed in my bank account, the investment company would scoop out a portion of it to be added to my investment portfolio. This was a free service! Once I’d set it up, I never had to think about it again. I could go about my daily life knowing that my money was being investing for the Care and Feeding of Future Blue Lobster. All was well… for a time.

Bear in mind that I never stopped learning. I continued to read more books from the library and I delved into online articles about money & investing. That’s how I came to learn about ETFs and index funds, investment products that mirrored mutual funds for a much lower price. In other words, I could re-create the same portfolio by replacing expensive mutual funds with cheaper ETFs and pay even lower MERs. Eventually, I had to accept the fact that my second investment company’s MERs were too high when I could get the nearly-identical portfolio elsewhere for less money. Though I really enjoyed the convenience of my second investment company, that convenience wasn’t worth paying higher MERs. Whatever wasn’t diverted to paying MERs would instead be invested for long-term growth. I realized that I could improve my returns by investing my money into ETFs so that’s why I did.

Self-Directed Learning and Investing

At some point in my investment journey, I had opened a self-directed brokerage. When it was time, I moved my portfolio from my second investment company to my brokerage account. In a few simple keystrokes, I sold the mutual fund products and bought ETFs from BlackRock (aka: iShares). Unlike my last investment company, this one did not make withdrawals from my bank account. I had to set up my own automatic transfer so that I could buy units every month. And since I was using my brokerage account, I had to pay a commission.

Big deal! The money I was saving on my MERs was more than sufficient to cover the monthly commission fee. My twin goals were being met: consistently investing every month and saving money on my MERs.

What could be better?

Vanguard Canada was better. By the time Vanguard came to Canada, my self-directed investment education had already led me to its US counterpart. I was ready for their Canadian arrival. Now, I didn’t sell anything from my BlackRock holdings. For the most part, I’m a buy-and-hold investor. The exceptions I can remember were moving from the Bank to the investment company, between my investment companies, and then from my last investment company to my brokerage account.

Instead of selling investments, I simply re-directed future investment dollars to Vanguard’s products instead of BlackRock’s. Again, Vanguard’s offerings were nearly identical to BlackRock’s and Vanguard’s cost less. There was no good reason to pay more money for the same damn thing.

My Fee-Only Advisor

Despite the pride I felt in building my investment portfolio, I wanted an objective review of what I had done. My goal was to retire early on a certain income. Despite my years of self-tutelage, I’d never discovered the formula that could give me a straight answer. Could I retire when I wanted? Or was I looking at another 15 years of work?

So after 25+ years of investing on my own, I went to a fee-only financial planner to get the answers to my questions…. The news was good. It was better good – it was great! He told me that I was on track and that I could retire two years earlier than I’d planned. Woohoo!

For the first time in my investing life, I was getting good advice. The financial planner pointed out a few weaknesses in my investment strategy. He offered me a tentative, new plan and explained how it could improve my returns going forward. However, he also assured me that I had done a very good job by myself and that my goals would be met whether I followed his suggestions or not.

When it comes to getting good advice, I’m a fan of fee-only financial planners. They work for the customer, who is you. They make recommendations, but they don’t sell investment products. That means that they don’t get a commission from someone else for making certain recommendations or pushing the investment-product-of-the-month. You’ll pay a fee for them to analyze your current situation and to create a plan whereby you will meet your financial goals. They will give you advice and it’s up to you whether to follow it.

Have I made mistakes? Yes – many mistakes. I didn’t get great advice to start. The only rule that I’ve always followed was to live below my means. (Even when I was stupid in 2008/2009 and stopped investing when the market crashed, I just piled up money in my savings account until it was “safe” to start investing again.) I saved and invested and switched my investments and kept learning-learning-learning … then more than 25 years later, I finally went to a professional advisor.

Getting good advice is worth the effort. It allows you to reach your goals faster and more efficiently. Though I am self-taught, I have benefitted from many resources over the years. I’m confident that I have the knowledge to separate the good advice from the bad as I continue to fulfill my financial goals. You can do it too. Start today. Save – invest – learn – repeat. When you know better, you’ll do better. I promise.

Power thru the volatility & stick to your knitting

There’s no doubt about it. We’re in a period of volatility in the stock market. For the first time, in a long time, there’s been a run of “down” days. The stock market has been in the red and the market has closed lower than the day before. I do not claim to be any kind of expert on such things, but even I can see that the value of my portfolio is dropping too. This is entirely due to the fact that I’m invested in the stock market.

So what’s my next move? What steps should I take to make my portfolio go up?

Short answer: it’s time for me to stick to my knitting!

I can’t do anything to move the stock market the way I want it to go, which is up. The factors I control are how much I contribute, how often, and into which investment. Everything else is out of my hands. Over the long term, the stock market goes up. This has been proven repeatedly in the past. I have no reason to think it won’t go up again in the future. So I’m going to power thru the volatility.

And you should power thru the volatility too.

I view what we’re experiencing now as a correction. It’s happened before, and it will happen again. Corrections are completely normal! Do the Talking Heads of economic media generate a lot of jibber-jabber about them? Yes, they do…. because that’s their job. The jibber-jabber results in viewers, which translate into ratings, which translate into money.

Pay them no mind. Stick to you knitting.

When the 2009 correction rolled around, I made one of my biggest ever investing mistakes. I stopped making regular contributions into the market. In other words, I halted my dollar-cost averaging system of investing. I froze like a deer in the headlights because I focused on the jibber-jabber. I stopped my contributions for 3 months. Yikes! Huge mistake! Doing so meant that I wasn’t investing at the bottom, when the market was at its cheapest. I waited until the recovery and then I re-started my investment system. This was one of the stupidest moves I have ever made, and I promised myself that I would never make that particular mistake again!

Learn from mistakes wherever you find them.

You need not make this mistake yourself. Don’t stop contributing to your investments just because we’re in a period of volatility. Trust in your plan. You’re investing for the long-term, remember?

There have been subsequent corrections, and I’m happy to say that I’ve kept my promise. No matter what, my automatic transfer funnels money from my chequing account to my investment account and I buy units in my ETFs on the appointed day. My investment strategy has remained consistent ever since 2009.

These past two weeks haven’t been fun. No one likes to see the value of their portfolio decrease, including me. I’ve decided to stop checking the value of my portfolio for a little while. Before this correction started, I would check the value each day and smile to myself. Lately, my smile’s been turned upside-down. I’ve chosen not to torment myself. My transfer will remain in place, and I will continue to invest in my selected ETFs. However, I’ll check my portfolio’s value less frequently.

This is the lesson I learned from the 2009 correction. The stock market will never go to 0. It will go up and down, but it will never go all the way down to 0. I’m investing for the long haul. Even after retirement, there’s a good chance I’ll be around for another 20-30 years. This means I still have decades of investment ahead of me. (Whether I’ll be investing as much during retirement as I do now remains to be determined.) There is no point in worrying about the day-to-day gyrations of the stock market when I’m still invested for the long-term.

Allow me to very clear on this next point – I am not an expert. My wisdom, such as it is, comes from years of personal experience. I cannot predict the future, and I don’t know your particular circumstances. I am not qualified by anyone to give you expert advice. What I say is based on what has worked for me & for those in my circle who discuss such things. I fully admit that my experience is not going to be the same as yours.

That said, I want you improve your odds of ensuring that Future You is financially secure. Continue to invest in the stock market. Take a long-term view. Keep atleast 60% of your portfolios in equities. Invest on a regular basis. Stick to your knitting and ignore the jibber-jabber. Save – invest – learn – repeat. Power thru the volatility and enjoy the rewards on the other side of this correction.

Living Underwater is Fantastic for Fish & Bad for People!

When it comes to mortgages, you never want to be underwater. Repeat after me – living underwater is for fish, not people!

A person is underwater on their mortgage when the mortgage amount owing is higher than the value of the house. For example, if you have a $450,000 mortgage but you would only be able to sell your house for $395,000, then you are underwater on our mortgage.

This is a not a desirable situation because it means you cannot sell your house without taking the deficiency to the bank in order to pay off the bank. In the above example, the deficiency is $55,000 (=$450,000 – $395,000). The mortgage debt to the bank can only satisfied by a payment of $450,000. This is known as discharging the debt.

Unfortunately for you, potential buyers of your home are only willing to give you $395,000. In order for the bank to discharge your mortgage debt, you would need to take the $395,000 from the buyers of your home and another $55,000 from your own pocket to the bank.

Just out of curiosity, do you have an extra $55,000 lying around? No? Then you, my friend, are trapped in your house.

The Downsides of Being Trapped in a House

If you’ve got no reasons to leave the house you’re in, then living underwater on your mortgage is an academic problem. Since you’re not going anywhere, there’s no issue about having to pay any sort of deficiency to the bank. You can continue to pay your mortgage and wait for the real estate market to recover. Even if recovery takes a decade, you don’t need to care since you won’t be trying to discharge the mortgage on your house.

The situation is quite different if you want to move across the country for a new job, or your health status changes and your home is no longer suitable for you. There are any number of reasons why you might choose to move your current abode to another one. None of them change the fact that being underwater on your mortgage means you can’t sell your place without satisfying your full debt to the bank.

I ask you again, do you have enough money in your wallet to satisfy the deficiency and get the mortgage discharge you need?

Mortgage Rates are Rising

Those without a mortgage can be forgiven for not realizing that the cost of mortgages is increasing. For the rest of you, it’s imperative that you start thinking ahead. When it comes time to renew your mortgage, will your budget accommodate a 1%-2% increase in your current rate?

If the answer is “No”, or “I don’t know”, then you should be making extra payments to your mortgage. Make extra payments as often as you can. And make those payments are large as you can! This will ensure that, at renewal time, your mortgage is as small as it can be. This means that your new payment at the higher rate will be lower than it would be otherwise.

You can use an online calculator to estimate the size of your next mortgage payment. Whatever rate you’re paying now, add 2%. Assuming you’ll be renewing a mortgage of $350,000 and the anticipated 5-year rate at renewal time will be 5%, here are the mortgage payments generated by this online calculator.

If you’re renewing with a $350,000 balance at 5%, then your bi-weekly mortgage payment is $1,017.81 or $2,025.62 monthly.
If you’re renewing with a $325,000 balance at 5%, then your bi-weekly mortgage payment is $945.11 or $1890.22 each month.

How to Stop Being Underwater

There are a few ways to stop being underwater. Some are harder than others. The most effective way to cease living underwater is next to impossible – you can change market conditions so that the value of your house rises above the balance on your mortgage. See what I mean? That method is next to impossible. Manipulating market conditions likely isn’t within your particular skillset.

Your best bet is to find a way to make extra payments on your mortgage until the balance equals, or is less than, your mortgage’s balance. At that point, the trap is sprung! In other words, what you get from a potential buyer is enough to satisfy you debt to the bank.

Paying extra on your mortgage is a simple plan. Note that I said “simple”, not “easy”. Depending on your other financial obligations, it might not be easy to find the extra money to throw at your mortgage. You might take on another job or start a business. Maybe you’ll sell you no longer need or take in a roommate.

Ridding yourself of non-mortgage debt facilitates another way to make extra payments. Maybe you owe money on student loans, credit cards, vehicle loans, or other consumer loans. As you pay off other debts, re-direct that former payment to your mortgage. Think about it. You were already sending that money to a creditor, so you’ll keep doing so. Your lifestyle won’t change since you were living without that money anyway. All that will change is the name of the creditor.

However you choose to do it, the goal is to stop living underwater on your mortgage.

Spend Your Money on What You Love!

Today, I’m encouraging you to spend your money on what you love. The beauty of personal finance is that it is uniquely specific to what each individual needs and wants. There are general, overarching financial needs that everyone has – think emergency funds, retirement accounts, and just-for-fun money. Everyone who is alive needs to have these in one form or another.

However, my just-for-fun money will be spent very differently than how my family & friends spend their just-for-fun money. This is why I want you to pay very close to attention to what makes you happiest, and then I want you to spend your money on what you love.

Not so fun fact – inflation in Canada is up 6.7% from where it was last year. Boo!!!

A very fun fact – spring has sprung in my corner of the world. Yay!!!! In a few short weeks, I’ll be shopping at a number of greenhouses, picking up various annuals and containers and fertilizers and stakes and nozzles and potting soil… You get the idea. I’m an amateur gardener, and I love the anticipation that comes with the start of the gardening season. One of my favourite ways to spend my money is on flowers. As a matter of fact, I’m taking a container gardening course tomorrow at a local greenhouse.

When I’m feeling a little blue, I visit another greenhouse and tour their gardens and stroll their aisles. Of all the greenhouses I’ve visited, this is the one where I’m most like to find all of the plants I want in one place. One of my favourite greenhouses isn’t particularly large but they have the most spectacular geranium selection I have ever seen in my life. And it was the only place where I found sweet potato vine when I needed it. It is one of my happy places!

My garden is a work in progress.

For me, it is very easy to spend my money on my flowers. I’m trying my hand at planting perennials, since that’s the frugal way of doing things. Last year’s tulips are emerging and I hope to see some blooms very soon. It took some doing but I finally found some hollyhocks for the south wall along my garage. My fingers are crossed that they come back this year. Due to some landscaping work, I had to transplant several established perennials – hostas, balloon flowers, peonies – last year. I’m holding my breath that I didn’t kill them in the process!

Perennials are a frugal gardener’s friend. A one-time investment can yield years of enjoyment. There are spots in my garden where I dislike trying to plant new annuals every year. If I can get my perennials well-established in those spots, my knees and lower back will thank me…. and I’ll have something beautiful to look at instead of just dirt.

However, I’m becoming a huge fan of container gardening too. Elevated planters have been a game-changer for me. Waist-high and arm-length wide, these wonderful creations allow me to comfortably plant, fertilize and water my wee baby plants while standing. I’m in a zone 3, so I can only plant annuals in these planters but that’s okay by me. While I’m a big fan of perennials, I’m an even bigger fan of annuals – petunias, coleus, begonias, geraniums, zinnias! These are my darlings. They’re so colourful! If I don’t particularly enjoy a colour one year, then I simply don’t buy it the next year. Annuals flower for the whole season, while perennials only flower once. They’re all beautiful but there is nothing more satisfying to me than to watch my annuals bloom continuously all summer.

Indulge me for a moment…

These are my beloved ballon flowers. I started with 2 blue plants, and the white ones came up a few years later. Fingers crossed that they survived my transplanting efforts!

Back to spending your money on what you love

So I’ve been in my current home for 18 years… wow! That seems like a long time, but I swear I just moved in a few days ago. Anyway, ever since my first summer here, I’ve been tinkering with a few new flowers each season. Though I still don’t have a formal gardening plan, I’ve enjoyed the show each year. There are so many beautiful and varied things to try. I’m like a kid in the candy store when I visit my greenhouses!

Today, I’m at the point of seriously considering the benefits of hiring a landscape designer and a crew to build some flowerbeds for even more perennials and some raised beds for my annuals. The only drawback I see to this option is the cost. It won’t be cheap. Yet… the fact remains that I likely won’t regret spending my money on this particular want. I have a great big backyard, that’s currently just grass. Gardening is a great hobby, one I can enjoy for the next 20+ years barring any physical limitations. It’s a way for me to get outside and enjoy all the spots of my property. I’m thrilled to see things bloom, and I like the idea of helping pollinators get what they need to stay alive.

One of the reasons that I sacrificed a few experiences when I was younger was so that I could fully fund my RRSP and my TFSA. I’d also wanted to have my non-registered account well-funded long before retirement. My financial dream had been to create a cash flow that I could live on when I stopped working. Lately, I’ve been crunching my numbers with a fee-only financial planner, and various internet calculators. They’re all telling me the same thing – that I will be okay. I’m starting to believe them!

So now it’s time for me to loosen the purse strings a little bit. I’ve enjoyed the journey up to now, but it’s okay for me to enjoy it a little bit more. So kindly wish me the best as I head to the greenhouses with the hordes of other gardeners. There are wee baby plants in my future and it’s almost time for me to get my hands back in the dirt.

So this is my non-professional and completely non-binding advice to you. Do what you need to do to ruthlessly cut out all spending that doesn’t bring you joy. Get out of debt. Fund your emergency, retirement, and investment accounts to the best of your ability. Spend some fun-money along the way, but not too much! When you’ve identified what brings you the most joy, spend your money freely. Do so with a smile on your face and joy in your heart as you spend your money on what you love!

F.I.R.E. – A Refreshing New Perspective

For those who don’t know, F.I.R.E. is the acronym for Financial Independence, Retire Early. It’s a financial point of view that has gained traction in the past 10-15 years. People live significantly below their means in order to grow their money as fast as possible until they no longer need to work. Once they hit that point, they are considered financially independent. If they wish, they can choose to retire early at that point. There are a multitude of websites and blogs devoted to the F.I.R.E. way of life. I will admit that my personal finance coming-of-age was heavily influenced by the initial hardcore tenets of FIRE.

For a long time, I easily adopted the face-punching viewpoint of Pete who runs Mr. Money Mustache even though I was not going to give up some of things that he clearly eschewed. For a little while, I was also enamored with the draconian thriftiness espoused by Jacob’s on his website, Early Retirement Extreme, even though I would never choose to live that way. I was constantly searching for stories of people who lived well-below their means because I wanted to see how far I was willing to go to have money for my investments. When I found a poster on YouTube who only ate once a day in order to save money for investing, I realized that I had limits. Starving when you don’t have enough money is one thing. Purposely starving yourself in order to invest money is offensive to me. I decided to stop seeking the extremes.

Lately, a refreshingly new perspective has emerged. In my view, it is healthier and more welcoming than what I learned. The concept is an homage to living your best life while investing your money. Your money should be used to make your life as good as possible. This doesn’t mean going into debt. It doesn’t mean working forever. It does mean being laser-focused on that which is most important to you. Debts eventually get paid. Salaries increase, one way or another. Consistent contributions to investments will churn out capital gains and dividends. At some point, the gap between the cost of your monthly necessities and the cash flow coming to you will widen to an appreciable amount. This is called your disposable income. The new perspective is about figuring out how to spend that disposable income in a way to brings the most joy and happiness into your life.

I find the new perspective more persuasive than I would have even 5 years ago. One of my biggest challenges is finding balance between living today to the fullest while saving and investing just enough for tomorrow. Two authors come to mind. They’ve articulated ideas about living each day to the fullest, without ignoring the onus to take care of Future You. Specifically, I’m thinking about Ramit Sethi of I Will Teach You To Be Rich and his exhortation to live your rich life now. The other author is Bill Perkins, who has encapsulated the essence of the new perspective in his book book, Die With Zero.

What I like most about the new perspective is that it offers a sense of balance. It gives people permission to enjoy the present, and to enjoy spending a little bit of money today. The new perspective recognizes that time is fungible – once gone, it can never be reclaimed. Accordingly, everyone should figure out what is most important to them and spend their money accordingly in order to maximize the utility of their money while securing their financial future.

Ramit Sethi encourages people to pursue their rich life today. As I understand his message, he doesn’t want you to wait 10-15-20 years to start living well. He wants you to determine what you want and to figure out if you can incorporate it into your life today. Mr. Sethi advises people to ruthlessly cut out the stuff that doesn’t matter so that they can focus their money on the things that do.

I love this idea! For my part, cable TV is unimportant. I cut it out of my life 8 years ago, and I don’t really miss it too much. I can’t host Grey Cup or Super Bowl parties, but that’s the extent of the drawbacks to not have cable in my home. What I do love is traveling to new countries. Before the pandemic, I was able to fund 3 trips to Europe in the space of 4 years. For me, that was a huge accomplishment. My rich life definitely includes travel!

In Die With Zero, the author’s position is that dying with too much money means that you have deprived yourself of experiences that could have enriched your life. This book really challenged my views about spending, saving, and investing my money. Truth be told, my mind was blown! First of all, how could a person die with too much money? Was that even a thing? I really had to slow down and contemplate what the author was saying.

Speaking only for myself, this book forced me to consider whether I was spending money in ways that made me happiest. I’ve been saving consistently since age 21. I’d finally visited a fee-only financial planner to get an objective opinion on whether I could hit my financial goals. (The answer was a resounding “Yes!”) By the time I read Die With Zero, I was comfortably past the Coast F.I.R.E. point in my money journey. I was ready to contemplate the idea that I might not have been using my money in the best way possible. After reading this book, dying with un-spent millions no longer seemed like the wisest choice.

It’s truly not my intention to be the richest person in the graveyard. There are experiences that I’d like to have which will require me to open my wallet. Though I’m not entirely convinced that I should die just as my net worth hits $5.47, I appreciate the ridiculousness of dying with millions of dollars to my name. That money will only benefit my heirs. The opportunity for me to benefit from the money dies the moment that I do. While I intend to leave something to my heirs, I want to help and not hinder. There is an intrinsic value in attaining your own personal goals. I won’t deprive them of the chance to experience the pride of accomplishment.

Right now, I’m still searching for the sweet spot. In my humble opinion, the new perspective is going to gain traction. There are those who hate their jobs and want to leave as soon as humanly possible. To those unfortunate masses, I encourage you to change jobs or find a new career. Life is too short to be miserable at work. If changing jobs isn’t an option, then know that I completely understand why you’re willing to sacrifice time today and gamble that you’ll have the time tomorrow to enjoy your money when you eventually do quit.

There will always be hardcore adherents to the “sacrifice everything in the short-term to retire ASAP” view of F.I.R.E. However, that path to financial independence and early retirement is not palatable to everyone. As with most lessons to be learned in life, it is up to each of us to take what we need and to leave the rest. We alone are the ones who know best what we truly desire from our precious time here on Earth. We owe it to ourselves to learn new ideas, try them out, see if they work, keep them if they do, discard them if they don’t, and to do it all over again.