Tag: Financial Independence

Do Your Parents Have a Pension?

Most of the time, I talk to you as though you’re the only person you have to support with your income. The reality is that many people support their parents to some degree. If your parents are still working, then you should find out if your parents have a pension. Will it be enough to support them through the final chapter of their lives? Or will they be looking at you to supplement or support them until the end?

I’m not an expert on family dynamics. All I know for sure is that every family is different, and each family has its own set of rules. My blog is about my views on personal finance. And one of my views is that you should ask yourself the following question: do your parents have a pension?

Whatever the answer, the next question to ask yourself is: Am I going to give them financial help once they stop working?

You need not share your answer with the class, but you should definitely keep it in mind as you do your own financial planning.

For my part, my father is deceased. My mom benefits from a spousal pension, her own pension, and various government supports. She’s been retired for over a decade now. Thankfully, she’s in her own home and she can pay her own bills. That said… I still watch for signs that she might be struggling on the financial end. I have to face the facts. Her pension payments are not keeping up with inflation. Even though inflation has been low until 2022, what few increases she’s had over the past 10+ years have been effectively wiped out by the roaring inflation we’ve seen in the past 12 months. Prices are not going to drop back to where they were a few years ago. This means that my mom’s fixed income is going to continue to buy her less and less as time goes on.

In my case, my remaining parent has a steady, reliable income that currently covers all of her expenses. And so far, I haven’t had to give her financial help during her retirement. During the time that she’s been retired, I’ve been saving and investing and building my non-employment cash flow. I really hope that I will be able to continue doing so until my own retirement, but… what if my mom needs financial help?

Like I said, she’s currently in her own home. That’s great! If she has to move into assisted care, her home can be sold to pay for it. That’s also great! If she lives long enough to exhaust the sale proceeds, then what? Am I going to move her into my home and hire caregivers? Where will the funds come from to pay for that kind of care? And how much money will be needed?

These are some of the things that I think about when planning for my own retirement.

Do your parents have a pension?

In my opinion, you should know the answer to this question. It should be factored in when you’re setting your own priorities. Whether you get along with your parents or not, you should have some idea of how much you’re willing to give to your parents if and when the time comes.

No One Talks About This!

It’s an unfortunate reality that this aspect of personal finance is rarely, if ever, discussed in the mainstream. Even in the personal finance sphere, I can only think of a few bloggers who ever discuss it openly. Journey to Launch and Rich&Regular are two who readily come to mind. The first time I heard the term “the Black Tax“, my curiosity was piqued. After learning more about it, I’m convinced that many families face this burden regardless of race. I also believe that the issue of pensionless parents is routinely ignored by the broader personal finance media.

There are countless stories about wealthy parents supplementing the salaries and down payments of adult children:

On the other side, there’s a dearth of reporting about adult children having to support their pensionless and/or low-income parents. There’s a deafening silence about how this type of financial obligation limits the opportunities for the next generation to build wealth and create financial security.

To be clear, I’m not telling anyone to abandon their parent(s) in order to be financially comfortable.

Unless the relationship is bad, (however you define that term), it’s assumed that children will do what what they can to alleviate a parent’s suffering. This is normal. It’s a sign of love. The other reality is that we live in a society where having money means having options and opportunities. If your money is spent today to care for your parents, then that money is not available for saving and investing. You may find yourself in the same situation as your parents in 20/30/40 years’ time because you chose not to invest for your own senior years.

My purpose with this blog post is to put these facts on the table for consideration. I’m simply urging you to consciously recognize that this is the choice that is being made. Ultimately, you’re the one who gets to make the choice, no matter how easy or difficult that choice may be. Do you want to spend the money today? Or do you want to invest it for tomorrow?

And if you want to do both, then what are your options for doing so?

  • You could go back to living with you parent(s). This isn’t feasible for everyone. However, it will work for some. Think about it.
  • You could get a second source of income and direct all of that income into your investments. Keep your expenses the same as they are now. Let that second income fund your future.
  • Help your parents downsize into a home that better fits their empty-nest status.

When it comes to making plans for your future, the first step is figuring out your priorities. For some of you, financially supporting your parents is or will be one of your highest priorities. Maybe you’re already helping your parents by sending them a few hundred or a few thousand dollars each month. If so, you should be planning on how to sustain those payments as you also try to save for your own future. It’s absolutely necessary that you understand how the decisions you make today will impact your ability to save for tomorrow.

Money Should Work Harder Than You Do

One of things that I’ve always understood about investing is that money works harder than people are able to. Money never gets tired, sick, distracted, or unmotivated. It literally works around the clock once it has been invested. People can’t do that. People need food, rejuvenation, sleep and time with loved ones. Those items are vitally important to being a healthy person and to living a good life. They also take people away from doing their jobs.

The trick to being healthy, living a good life and earning lots of money is to send your money out to work. Go back to the title of this post and believe what it says. Money should work harder than you do.

There are a few ways around this particular fact, but most of us have to do the initial work to get money. We exchange our labour (aka: life energy) for a paycheque. The paycheque may be from an employer, from our clients, or from our own business. It doesn’t really matter. We give away our life energy and receive money for our efforts.

The purpose of this post is to remind you that you can work towards a situation where you still earn an income to support your lifestyle without having to earn a paycheque. I’ve written before about how your income and your salary are not the same thing. Your salary is part of your income, but it’s not the only element. There are ways to fund your lifestyle without having to earn a paycheque. One of the ways to do this is by increasing your dividend and capital gains income. Dividend income and capital gains income are what I like to call passive income. As far as I’m concerned, passive income is wonderful.

Dividends and capital gains are monies paid to shareholders when companies make a profit. Your goal, should you wish to increase your income, is to invest in companies that pay dividends and capital gains. There are a number of ways to do so, but I strongly recommend exchange-traded funds and index funds. If you want to do individual stock-picking, then more power to you. That’s not my cup of tea because I don’t know how to do it.

Sadly, there is no way around the fact that you likely won’t earn life-changing amounts of dividends and capital gains at the start of your investment journey. Let me be clear. Your invested money will earn passive income. However, it will take some time before your passive income is enough for you to live on. This is one of the reasons why it’s important that you consistently invest each and every time you get paid. Secondly, you should aim to increase the amount you invest. Start with whatever amount you can commit and increase that amount over time.

You have to invest your money in order for it to work for you. The simple idea of investing has never generated a single nickel for anyone. Ask me how I know this. One of my biggest money mistakes was to not start investing my former mortgage payments as soon as that particular debt was gone. Instead, I spent years thinking about starting a dividend-heavy portfolio. I earned nothing while I was, in effect, procrastinating. The month after I stopped thinking and actually started doing, I earned my first dividend. I haven’t looked back since.

Remember how I said that your money should work around the clock? I wasn’t kidding. I set up a dividend re-investment plan, often called a DRIP. This way, my dividends are automatically re-invested into more units of my chosen ETFs and index funds. The dividends don’t sit in my bank account, and I’m not tempted to spend them. They are immediately put to work for the sole purpose of making even more passive income for me. It’s a highly lucrative feedback loop.

If you wanted, you could do the same thing.

Now, even though I’m a big fan of the Financial Independence Retire Early (F.I.R.E.) movement, I’m a super-huge fan of the FI part. I firmly believe that everyone who earns a paycheque should be working towards financial independence. If you part ways from your employer, or are otherwise unable to earn your keep, having a cushion of cash that’s funded by passive income is your safety net. The passive income can replace your earned income, if you choose to go back to work, or it can fund your retirement if you decide that working for a living no longer turns your crank.

Early retirement is not everyone’s goal. Some people love their jobs. There is no reason why they should stop doing what they love. The same cannot be said for financial independence. The best of both worlds is loving what you do and having financial independence. Most of us won’t have the former but all of us can work towards achieving the latter.

However, the money won’t start working for you, nor be there when you need it, unless you start investing part of your paycheque today. So start today – stay consistent – increase the amount you invest as you’re able to – achieve financial independence – live life & be happy!

One Less Impediment!

For those about to invest, we salute you! There is now one less impediment between you and your financial goals.

Back in the dark ages, which is when I first started my investment portfolio, buying securities through a brokerage was expensive. For many years, I had automatic contributions withdrawn from my bank account by a private investment company. While I was busy learning about new products, individual investors were gaining the ability to access various products due to the rapid growth of technology. By the time I had learned about exchange traded funds and the importance of low management expense ratios, it was relatively cheap to do online transactions with my brokerage. It took some convincing but I finally moved my portfolio from the investment company to my brokerage. Regardless of who held my portfolio, I continued to dollar-cost average my way into the market each month.

Today, I’m happy to write that market competition has partnered with technology to make investing even easier for today’s investors.

As the number of financial services firms expands, the Big Banks are being forced to stay competitive with trading platforms that offer commission-free trades. This means that the banks’ brokerage arms allow customers to buy certain securities without paying a commission. In other words, it’s free to invest your money in more and more places!

This is is fantastic news. Why? It normally costs $9.95 to place a buy/sell order. For people who believe in dollar-cost averaging into the market, it costs roughly $10 each time a purchase is made. Long-time readers know that I divert a chunk of my paycheque to my investment portfolio every payday. Every 4 weeks, I buy more units in my chosen exchange-traded fund (VXC). I care not whether the market is up or whether it’s down. My plan is to buy and hold for the long-term. The execution of my investment plan is simply: buy more VXC units every 4 weeks and hold onto them.

So I was tickled pink when my brokerage*** announced that it would allow customers to purchase certain securities without paying a commission. My favourite dividend ETFs were both listed (XDV & VDY). Unfortunately, my happiness bubble was quickly pricked by reality. The fates have conspired to keep my equity ETF off the list of the commission-free securities!

This is great news!

Even though I’m still paying commissions, it’s fantastic that there are now so many commission-free options from which people can choose. The upshot is that there is one less impediment between people and their investment goals. Fees, MERs and commissions are all hurdles to clear on the journey to your investment goals.

Think about it. Any money that is not paying for commissions can be re-directed towards investing for your future. You and I both know that compound growth needs time to work. The sooner you start investing your dollars, the better.

Commission-free investing means that you can invest more frequently. Like I said, my dollar-cost averaging plan entails monthly purchases. I made 13 trades each year since I invest every 4 weeks. However, should there ever come a day that my ETF of choice makes it onto the commission-free list, I will be buying more units every two weeks.

Why increase the frequency of buying? Two simple reasons. It would be free to buy more frequently. Also, my money can’t grow unless it’s invested. I want to give compound growth as much time as possible to work its magic.

Do your due diligence.

My brokerage is with one of the Big Six banks. I’d be surprised if all of the big brokerages didn’t have their own list of securities that can be purchased commission-free. If you’re already investing, find out if you still need to pay commissions. And if your brokerage isn’t offering commission-free trades, ask yourself if its other benefits are worth paying commissions. If not, move your portfolio!

I spend a lot of time telling you to be cautious about the management expense ratios that you’re paying. (Again, any MER over 0.50% is way too high!) Commissions are another area where you should be paying close attention. Most big banks will charge you roughly $9.95 to make a trade through their online brokerage platform. It will cost even more if you make the trade over the phone with a human being, assuming that you can connect to real live person.

If you’ve already started to invest, then great – keep it up! Should your securities be on a commission-free list, even better. Now, you can bump up your contribution amount by whatever amount formerly went to paying commissions. Compound growth works faster if your money is invested now instead of later.

And if you’ve not yet begun investing for the Care and Feeding of Future You, what are you waiting for?

There is one less impediment to doing so. Start today!

*** Full disclosure – my investment accounts are with BMO Investorline. While I’d prefer to not pay a commission, I’m certainly not going to alter my investment plan due to this situation.

Another Little Criticism

Learning about personal finance and investing has been a hobby of mine for the better part of 30 years… wow – that’s a long time! No wonder I make those odd noises when I get up from the couch…

Anyway, one of the first books that set me on my successful path was The Total Money Makeover by Dave Ramsey. I loved this book! I was in undergrad when I read it, and I promised myself that I would follow its tenets once I had graduated and was earning real money.

I’m not sad to say that this is one promise to myself that I’m glad I broke. See, while I still think that the debt snowball is a brilliant strategy for getting out of debt, I’m not so sure about the other steps.

In particular, I take strong issue with the step about only investing 15% of your income after you’ve gotten yourself out of debt.

What’s wrong with 15%?

On the fact of it, saving 15% is a great goal to strive for. My question for other personal financial afficianados is why stop at 15%? If you can comfortably save 20% or 30%, or even 50%, then why not do so?

See, somewhere along the line, I discovered FIRE. It’s an acronym for Financial Independence, Retire Early. Thanks to the vastness that is the Internet, I went deep down the rabbit hole of FIRE. I learned about people who saved 70% of what they earned, who’d lived on $7,000 for an entire year, who’d retired in their 30s! Eventually, I discovered Mr. Money Mustache – a fellow Canadian, whose face-punch imagery caught my attention from the word go.

The FIRE community is varied, like any other community. However, the one thing that they do seem to share is the belief that you need to save more than 15% to become financially independent anytime soon. There’s even this handy-dandy retirement calculator floating out in the world. (Plug in your own numbers – see if you like the answer!)

FIRE and Dave Ramsey seemed to have a lot in common. Both financial perspectives eschewed debt. They both emphasized having an emergency fund and saving for retirement. There are even many in the FIRE community who think Dave Ramsey is great, and happily pay homage to him.

Yet Dave Ramsey… is remarkably quiet on his thoughts about the FIRE movement.

Why is that?

Look. I can’t speak for Dave Ramsey or his organization. Maybe he’s a huge fan of FIRE, but it’s not part of his company’s mission statement. Or maybe he hasn’t heard of FIRE yet. There are a million reasons why he sticks to advising people to only save 15% of their after-tax income.

My theory is that FIRE is an anathema to employers, and Dave Ramsey is a businessperson who needs employees to work for him. As an employer, it makes no sense to encourage the pool of talent from which one draws to become financially independent. Employers have the advantage when employees are dependent on a paycheque. I think that this was most beautifully illustrated in the blog post of other fellow Canadians over at Millennial Revolution.

Allow me to be clear. I’m not for one minute suggesting that Dave Ramsey speaks for all employers. Of course, he doesn’t!

What I am saying is that it would not be in Dave’ Ramsey’s best interest as an employer to encourage the pool of potential employees to strive for financial independence. Think about it. Being FI gives jobs candidates more negotiating power since they don’t need the job to survive. The beauty of the FIRE philosophy is that it gives people choices, including the choice to work for personal satisfaction without consideration of the paycheque. After all, just because one is FI does not meant that one has to RE. If your job brings you joy and you’re also FI, then your are truly and wonderfully blessed. No need to retire early if you don’t want to.

Think about how terrifying that must be for an employer. If money is the primary tool to control the workforce, then what weapon is left when money is not effective? A financially independent pool of employees means the employers have to find another tactic to persuade people to work for them.

In my very humble opinion, 15% isn’t enough.

If you’ve paid off your debts and your budget has breathing room again, I don’t see why you should be implicitly encouraged to spend 85% of your money. Spending at that rate keeps you tethered to your paycheque longer than you may like.

Until recently, I didn’t really consider why Dave Ramsey doesn’t encourage people to pursue financial independence. Yes – some people won’t be able to save more than 15% of their income, even if they’re out of debt. I get that. If you don’t have it, then you can’t save it. However, those aren’t the only people who listen to him.

My question is more about why those who can save more are not being encouraged to do so.

Again, the only theory that makes sense to me is that he doesn’t want to use his platform to encourage financial independence. I find it odd. Firstly, I don’t believe that everyone who calls his show for help loves their job so much that they want to stay for as long as possible. Secondly, one of the very best things that money buys is freedom from doing what you don’t want to do. Thirdly, financial independence doesn’t mean that people become lazy and idle. Instead, it gives them the time to work on what truly makes them happy.

Currently, I believe the following. Pursuing FIRE status will always be an employee-driven social movement. Given its nature, it has to be. After all, as a group, employers cannot maintain their vice-like grasp on power where there is a financial balance in the employment relationship. When employees have the ability to walk away without negative financial consequences, employers run the real risk of losing employees’ labour. A vision remains a vision unless there are minds and bodies that can bring it to life.

The concept of financially independent employees is adverse to the employer’s interests. It’s hardly surprising that employers are not advocating that their employees put some of their focus on saving and investing.

Getting back to Dave Ramsey. His book was written long before the FIRE movement hit the mainstream. I do not believe that he suggested a 15% savings rate in an attempt to maintain the imbalance of power between employers and employees. That’s a pretty broad stroke, and it’s not one I’m intending to make.

What I am willing to say is that the practical effect of his advice to only save & invest 15% works to give employers the upper hand. I’ve had many good jobs in my lifetime, yet none of my employers has encouraged me to save and invest for my future. There’s never been any kind of nudge towards financial independence.

Think long and hard.

The sooner you invest your money, the sooner you can hit the target of being financially independent. There may come a day when you no longer love your job, for whatever reason. When that day comes, you’re going to need to have money in place to pay for those pesky expenses of living like food, shelter, clothing, etc…

I’m not telling you to not follow the Baby Steps. What I am telling you is to think about their practical effect on your personal finances. Take what works… leave the rest.

Finding the Balance

One of the biggest downfalls of the online personal finance community is the lack of balance. I suppose that’s partly due to the fact that we’re all competing for eyeballs on the screen, and extreme headlines garner more attention. It’s unfortunate though. I think more people would be willing to consider pursuing FIRE if they understood that an important element is finding the balance.

God bless him, but Jacob Fisker’s desire to live on $7,000 per year is not one that holds any appeal to me. That level of frugality makes me a little ill. Even the idea of being “face-punched” – popularized by a grand-daddy of FIRE, Mr. Money Mustache – isn’t particularly enticing. Fret not – I do understand the phrase is a metaphor. It’s meant to remind you that stupid decisions with money are just as painful as being hit in the face.

To each their own, right?

Well… maybe. Personally, I think that pursuing financial independence would benefit many people. In a society that abhors unionized labor, pursuing financial independence is the only way for employees to gain some measure of power in the workforce. At the end of the day, business owners need employees. It’s a power-dynamic that is ripe for abuse and exploitation when one party desperately needs money. You – or any employee – can minimize the risk of experiencing such exploitation by pursuing financial independence. When you have the financial resources to walk away from your job, you’re tilting the power dynamic back in your favour. I think that this is a good thing.

At a bare minimum, financial independence gives you choices. In our capitalistic society, financial independence is as much a status symbol as anything else. It’s a signal that someone has enough resources to spend their time how they wish. And isn’t that one of the biggest draws of being rich? Not having to do what someone else tells us to do?

The reality for all of us is this. We each only get one life and finding the balance is key to living a good one. That’s why it’s important to spend some of your money today.

Look, I know that I spend a lot of time telling you to save and invest your money for the long-term. There’s no denying that I think you owe it to Future You to create a sizeable investment portfolio. At the same time, I don’t ascribe to the belief that investing money should be a goal unto itself. Money is pointless if you’re not going to spend it.

Furthermore, no one is promised tomorrow. You have no guarantee that you will be alive in 5-10-25 years to enjoy all the money that you accumulate in the interim. By finding the balance, you’ll be able to spend some of your dollars today on the things that make you smile.

Of course, you should always invest part of your paycheque for the future. I’ll never change my mind about that. What I also want you to do is shave a little bit from each paycheque to spend today. Make no mistake! I don’t want you spending money needlessly. Rather, I’m suggesting that you spend on things that truly make you happy.

Consider taking the advice of Ramit Sethi – ruthlessly cull expenses from your life that don’t bring you joy and spend freely on the ones that do. To me, finding the balance means diligently adhering to my mother’s advice to spend some, save some.

It’s taken me a long time to learn that there has to be a balance. Like I mentioned above, each of us gets one life. We owe it to ourselves to make it as good as we possibly can. It’s important to find ways to enjoy the journey while planning for the future.

The balance is different for each of us. What brings you joy might generate indifference in someone else. No matter. Do what you must to find the balance in your own life.

*** My comments are not meant for those living on low incomes. Obviously, those on low incomes are doing what they can to survive. I don’t have the answer to the plight of the working poor. Telling low income workers to simply “earn more money” isn’t effective. It’s insulting. If they could, they would.

Choices have consequences

This week, I had a conversation with a dear friend of mine about spending money. She made the observation that if she spends money today, then there’s that much money less to pay for her retirement. I couldn’t argue with her. In fact, I was happy that someone else in my circle of loved ones was thinking about their senior years. Sometimes, I feel like an outcast when I talk about money. It’s one of the reasons I like to chat about it online. It does me good to know that people in my real world are considering how to accumulate the gold for their golden years.

We live in a capitalist culture where we’re exhorted to spend every penny that we earn. Should our earnings not be enough, we’re strongly encourage to borrow money to spend beyond our means. Look around! Outside of the personal finance corner of the internet, there’s almost no discussion about saving money for emergencies, building up a retirement fund, and creating cashflow to replace your income. Instead the overwhelming message is to work hard, spend money, wake up, repeat.

I think this is a terrible way for people to live.

We were not given life just to work and spend money. Our lives should be about time spent with those we love best. We should be striving to spend as much time as possible engaged in the activities that bring us joy. I’m not convinced that we need to live on a never-ending work-spend-sleep treadmill to be happy. The beauty of financial freedom is that it’s a situation where work becomes optional. Being FI means spending your time as you see fit.

One of the universal truths is that choices have consequences.

I want you to think about what you want from your life. Now, ask yourself if your spending choices are getting you closer to or further from that life. If your choices aren’t getting you closer to the life you want to live, then explain to yourself why that is.

Vicki Robin and Joe Dominguez of Your Money Or Your Life have taught us that money is the manifestation of your life’s energy. In short, you trade your life energy for money. It seems only logical that you spend your energy in ways that create the life that you want to live.

From what I’ve observed, people base their spending decisions on short-term thinking. They’re concerned with today, and possibly next week. They don’t really start to consider the long-term until they hit their late 40s, 50s, and sometimes 60s.

I get it. When I was a teenager, I brought home roughly $108 every two weeks from my part-time cashier job. My money went to dinners at Red Robins with my friends, followed by a movie. It was a simple life, and I never thought beyond my next paycheque. Long-time readers know that I had an automatic transfer in place so that $50 was squirrelled away to my savings account. If I could go back in time, I’d tell Young Blue Lobster to just put that money into a broad-based equity index fund (or exchange-traded fund), and then never look at it. The past 30 years have flown by! Had I started investing at 16 instead of 21, I’d probably be retired by now. I would certainly be financially independent.

However, that didn’t happen and I have to live with the consequences of my teen-aged choices. I’ve spend the last few decades teaching myself about investing. When necessary, I’ve tweaked my investment strategy. I’m forcing myself to ask harder questions, to analyze information more critically. I’ve finessed my money-management strategy to the point where it’s on auto-pilot and needs very little attention from me on payday. My choices from yesterday have resulted in both good and bad consequences for me. Had I made different choices, I would be living with different consequences.

Take some time to assess your money choices. Are the consequences of yesterday’s choices bringing you joy or misery? Maybe neither? Are you committed to making more informed choices in the future? What will you do today to get the consequences you want tomorrow?

The choice is yours.

Super Powers

FU Money and being FI are super powers…

Dave from www.accidentalfire.com

I’ve written about FU Money before. It’s the money that you have set aside for those instances when you need to tell someone to “make love and go”. It’s not your emergency fund money. It’s not your retirement money. It’s not even your car replacement fund. Nope. Your FU Money consists of those funds set aside for giving you options when you don’t want to work anymore, when you just can’t handle another pointless meeting, nor one more inquiry from your micro-managing boss. It’s the money that will tide you over while you re-group and figure out the next step after you’ve left a situation that was driving you mad.

And long-time readers know that I encourage everyone to become FI, aka: financially independent. Being FI is great because it gives you even more options than FU money. Once your portfolio is kicking off enough capital gains & dividends to pay for your life as you’re currently living it, then you’re financially independent. And you want to know a secret? You don’t have to give up working just because you’re FI!

One of the options is to keep working, if you want to. You need not give up your employment just because your money is making more money for you. Once you’re FI, you no longer need to work but there’s also no need for you to quit your employment either. Again, for the cheap seats in the back, being financially independent gives you the option to work without needing the job. How cool is that?

I’d love to quit. As I’ve mentioned before, I have a great job. I work with very smart people on interesting problems that are mentally challenging. Before the pandemic, I travelled for work. My employer invests in training and I have opportunities to advance my career. I’m good at my job. There are many, many good things about my current position… Yet, it’s not what I want to do for the rest of my life. I want to quit.

So I’m working on developing my superpowers. Do I have enough FU money? Probably. Will I pull the trigger and use it? Probably not. Re-read my last paragraph. My position is pretty good so I don’t foresee a situation where I will be so incensed with my employer that I just walk out the door while giving someone the finger. Unless something changes drastically, I expect my departure to be mutual, respectful, and drama-free.

Still… I have my FU money in place, just in case I’m wrong.

I’ve spent the last 10 years working on developing the second super-power, i.e. becoming FI. It hasn’t always been easy and I’ve made my share of mistakes. However, I’ve learned from them and corrected them when needed. I’ve always believed that it’s okay to make a mistake. What’s not okay is making the same mistake more than once.

Do I still have learning to do? Of course I do! There’s this new thing called Bitcoin that everyone seems to be chattering about incessantly. I owe it to myself to figure out what that’s all about so that I can make an informed decision about whether to invest in it or not.

Despite my mistakes in investing over the years, I have to say that I’m far closer to being FI than I would have been had I not started. Investing money from every paycheque for the past 10 years has done wonders for getting me so much closer to my goal.

Maybe you wish you’d started 10 years ago too. It doesn’t matter. Start today. The time will pass anyway, so you might as well take the steps to build your own super powers. Don’t dwell on what you haven’t done yet. Make a plan to actively put a plan in motion to achieve your dreams. You get one life and you deserve to live the best life possible. If that means having a buffer between you and the Edge should you need to part company with your paycheque, then create that buffer. No one else is going to do it for you. And if you want to remove the golden handcuffs, then build a portfolio whose cash flow can replace your employment income. That way, if you decide to stay at your job, it’s because you want to be there. You won’t be shackled to the paycheque.

Super powers won’t solve all your problems. Life doesn’t work that way. What they will do is give you a financial cushion when you need one the most. They can alleviate the fear of not knowing how you’ll feed/shelter/clothe yourself without your employer’s money. The super powers will give you the confidence and comfort of knowing that you can survive even if you must part ways with your employer, for whatever reason.

Err on the Side of Caution

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

Whatever do you mean, Blue Lobster?

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

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

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

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

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

Why consider doing this?

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

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

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

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

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

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

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

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

The Wisdom of my Folks

When I was growing up, my parents always encouraged to be a professional. I was told to aim for dentistry, medicine, and law. My parents wanted me to be a professional so that I could always create a job for myself. They knew, and wanted me to understand, that working for someone else meant that my financial security would be subject to my employer’s whim. They wanted me to have the security that comes from having the power to earn my own income.

This post is about reminding you that your wage is a burden your employer tolerates until such time as it can be eliminated. It’s not personal – it’s just business. The goal of a business is to maximize profits. This goal is met by lowering a business’ expenses. Your salary is an expense that your employer is always looking to trim and/or eliminate.

One of your goals should be to start, maintain, and grow a financial foundation. You shouldn’t be at the mercy of an employer forever. There should come a point in your life where you’re working because you want to, not because you have to.

Not everyone can be a professional, Blue Lobster!

I hear you, and I agree with that sentiment. Fortunately for you, there is one proven way for you to protect your financial health from the risk of losing your paycheque.

That method is called planting your money tree and making it grow. Not everyone can be a professional – this is true. But nearly everyone has the ability to set some money aside to create an investment portfolio.

Protect your financial health by having a stream of income that’s independent from your paycheque. Work on increasing that money stream until it’s big enough for you to survive on just in case your paycheque disappears at an inconvenient moment. Dividends, capital gains, interest on savings accounts – these are all forms of income that, if sufficient in quantity, can be used to replace your paycheque should the need arise.

You have an obligation to Future You to construct a solid financial foundation. Building your investment portfolio will create a waterfall of income that will eventually replace your paycheque. Investing your money for long-term growth today will allow you to substitute your paycheque with investment income tomorrow.

Nothing lasts forever.

Make no mistake – your paycheque will eventually disappear for one reason or another. You’ll get fired. Or maybe you’ll get too sick to work. Maybe your employer’s business will fail. Hopefully, you’ll retire on your own terms. Only the poorest among us are required to work until the day they die because of their finances. If you choose to work until your dying breath, make sure that you’re doing so because you want to and not because you have to.

The wisdom of my folks boils down to the following. A professional has more control over their income stream than an employee. If you’re a professional working for yourself, then there’s no conflict of interest because you’re both the boss and the employee. In both roles, your goal is to increase your profit because it is your income. When you work for someone else, they will increase their profit by reducing your income if they can. And if your salary can’t be reduced, then there’s always the option of simply not increasing it. This is a situation where the interests of the employer and the employee are at odds. As a professional, working for yourself puts the interests of the employer (you) and the employee (also you) in alignment.

I remember working in a grocery store when I was in high school and undergrad. I started at $6/hr. My salary went up every six months until I hit $9/hr. My boss told me that was the top range for a cashier. At the time, I just accepted it because what choice did I have? Well, I had a lot of choices but was not knowledgeable about them. I could’ve found another part-time job. I could’ve moved to the competitor, who was paying more. However, I didn’t know any better so I stayed. My point is that my employer imposed a limit on how much I could earn. I couldn’t do anything about that situation since I wasn’t my own boss. I wasn’t a professional.

It’s your choice.

Always remember that you have choices about where to put your disposable income. By my definition, disposable income is what is spent on the wants and not on the needs. If you’re already tucking a good chunk of your disposable income into your investment portfolio, then good on you. For the rest of you, what are you waiting for?

Having disposable income allows you to increase the odds that you will have a stream of income when your paycheque eventually goes away. Invest your money for long-term growth so that it’s working as hard as you do. Consistently invest from every paycheque you receive. People will tell you not to invest until all your other debt is gone. I no longer agree with that view. To my mind, time is too precious a resource. You need your investments to bake for as long as possible, even as you’re working hard to eliminate your debts.

Similarly, there’s a lot of debate about how much to save. Some argue for a bare minimum of 10%. Others push for 15%. My personal view is that you should save as much as you can, as soon as you can. Building an investment portfolio whose income stream will eventually replace your paycheque will take a long time for most of us. The sooner you start, the better.

We can’t all be professionals working for ourselves. Yet, it is still possible for the majority of us to reduce the fear of losing our paycheques. All that needs to be done is to start, build, and maintain an investment portfolio of our very own. It’s a very big goal and it might take decades to achieve. That doesn’t matter and you shouldn’t let it deter you. Future You needs to be fed, clothed, housed, and nurtured. Start taking care of Future You today.

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Weekly Tip: Cut back on how much TV you watch so you can get rid of cable. And you need not subscribe to every streaming service out there. Doing so means that eventually, your subscriptions will cost just as much as cable and you will be no further ahead.

Scratching my Head!

I’m fascinated by people who oppose the idea of becoming financially independent.

Personally, I think that this opposition is borne of the acronym FIRE. Most of us in the personal finance echo chamber know that this is an acronym for Financial Independence, Retire Early. It’s rather unfortunate that so many have twinned the two concepts together. They are not the same thing. A person can pursue one aspect of FIRE while completely eschewing the other.

A large cohort of people think that both elements must be pursued with equal vigour. I’d like to take a few minutes to tackle this misunderstanding into the ground.

Financial Independence =/= Retiring Early

Becoming financially independent can be a goal that is completely separate and apart from retiring early. Everyone should strive to become financially independent because it maximizes the options that one has for living the life that they truly want. Volunteering to build houses for six months after a hurricane? Travelling for 18 months just because you can? Taking a job that requires you to only work 3 days a week instead of five so that you have more time for doing what you love? When you’re financially independent, you can do all of these things without worrying about how to maintain your employment.

If you love your job, great! No one is saying that you have to quit the job you love simply because you have enough money to live without receiving a paycheque from paid employment. One of the side benefits of being financially independent is that you can continue to go to work if that is what makes your stomach do little flip-flops!

I’m always left scratching my head when people ask me why I would ever want to retire early. Sadly, I’m not one of those people – think professional athletes or celebrity entertainers – who is paid to do what they love. If anyone is looking to pay me cold hard cash to read books while enjoying a nice glass of wine, please speak up.

No one will stop you from working!

Allow me to be exceptionally clear on the following point. Being financially independent is not an obstacle to working. If anything, it gives you the power to work on what really matters most to you. When your stash of cash can pay for your bare necessities, then you’re free to take a paycut – if necessary – in order to do work that you find fulfilling. Rent – food – utilities can all be paid for by your Stash’O’Cash while your newly-reduced paycheque can be stretched to cover everything else. In the meantime, you have the pleasure of knowing that your life’s energy and your precious time are being applied to your true calling.

When you’re not financially independent, there’s a good chance that you are somehow being prevented from pursuing your dreams and living the life you want. It could be that you have debt that eats up a good chunk of your take-home pay. Maybe you’re caring for a parent or grandparent. Perhaps it’s just that you weren’t fortunate enough to have a job that pays more than ‘just enough’ to make it from one paycheque to the next. Whatever the reason, the lack of financial independence means that you cannot spend your time doing what you truly want with your time.

No one should be ashamed to pursue financial independence. It is not synonymous with greed or selfishness. Instead, it is a recognition that each of us has been granted one life. We only have so many tomorrows. Achieving financial independence allows us to spend our days doing what is most important to us. We are not shackled to someone else’s goals in exchange for a paycheque.

Save, invest, learn, repeat. Do this until you’ve become financially independent. At that point, take stock of how you spend your time. If you want to keep working, trust me when I say that no one will stop you. You can continue to collect a paycheque, content in the knowledge that you’re doing so because you truly want to and not because you have to.

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Weekly Tip: Keep your emergency funds separate from your other savings accounts. When the money is all co-mingled, it’s too easy to forget that the emergency money should NEVER be spent unless there is a true emergency that threatens your financial security. At the time of this post, millions of Canadians have lost their jobs due to the COVID19 pandemic. They’re facing a true financial crisis. Another scenario where an emergency fund is imminently reasonable is if your home burns down. An emergency fund comes in very handy if your town catches on fire and you have to relocate quickly. I’m looking at you Fort McMurray.