Tag: Investing

Housing Prices & Interest Rates

When I was a kid, one of the things I learned from my mother was that interest rates are inversely correlated to housing prices. If interest rates are going down, then housing prices are going up.

Over the last 12 months, I’ve seen this lesson play out in real life. By the time this blog post goes live, we will have passed the one-year anniversary of the COVID-19 pandemic. Yet, there are cities in this country where the housing market is red-hot. People are tripping over themselves to buy homes and they’re “winning” bidding wars to do so.

Five-year mortgage rates in my corner of the world had been on offer for as low as 1.84% up until just recently. At the time of writing this article, they’re slowly creeping up but a few can still be found at just around 2%. The Talking Heads in the media are predicting that 5-year rates will increase steadily over the next year. They say that this will be due to the economy fully re-opening as everyone gets their vaccine.

Who am I to argue with the Talking Heads?

The corollary to my mother’s great insight is that house prices drop as interest rates rise. This is due to the fact that fewer people can afford house payments when the cost of borrowing increases. Fewer people buying is a fancy way of saying lower demand. Less demand for something forces sellers to drop prices in order to sell their goods. In the housing market, rising interest rates are very strongly linked to decreasing housing prices.

For the past 10 years or so, the interest rates for mortgages have been less than 4%. I can tell you that my very first mortgage – taken out nearly 20 years ago – was for 6.5%. That seems astronomically high by today’s standards! When I was teenager and working part time as a grocery store cashier, I worked with folks who were thrilled to get a mortgage at 8%. The super-low mortgage rates of the past decade have been normalized, and I worry that people forget that rates can also move in the other direction.

Two Minds

I’m of two minds when it comes to housing. Buying a house was a very smart move for me. I was fortunate enough to buy what I needed at a price that was less than 3 times my gross income. The mortgage payments were less than 30% of my take-home pay. I could afford the repairs and maintenance that come with a house. Taxes and insurance weren’t an onerous burden on top of these other costs. The monthly nut associated with my shelter did not inhibit my ability to invest for retirement, travel, and have a bit of fun with my family and friends.

In short, buying a house was a good move for me… 20 years ago.

Today, twenty years later, I’m not so sure that buying a house would be a good financial move for me. For starters, I would have to choose between servicing the monthly nut of homeownership and every other financial goal. My mortgage, property taxes, insurance, repairs & maintenance would render me house-poor for a very long time. There wouldn’t be room in my budget for things like retirement savings, travel, entertainment, vehicle replacement, or those little luxuries that make like easier. My financial life would revolve entirely around paying for my housing, and there would be no room for my other money priorities.

I used to think that renting was a bad idea. However, my perspective has become more nuanced. If renting allows one to have a balanced life, then I think it might be a good idea. Of course, that balance has to include maxing out all retirement savings and building an investing portfolio. Those investments need to be big enough to pay for rental accommodations when the paycheques stop arriving. Whether you own a house or rent your space, you need to pay for shelter one way or another.

Cheap rates aren’t here to stay.

Today’s very low 5-year mortgage rates will go up. Securing a mortgage at 1.84% is wonderful, but that rate is likely only going to be locked in for 5 years. (And only for those who were lucky enough to grab it!) At renewal, the rate might be 3.5% or higher. Can your crystal ball predict the future perfectly? Will your budget be able to survive the mortgage payment increase that will come with a higher mortgage rate? Are you positive that you’ll still have the same income that you have now?

Even if your job’s salary stays the same, will your other expenses do the same? I’ve noticed that the cost of my streaming service goes up every 18 months or so. The price of food hasn’t gone down, ever. Taxes seem to only ever move in one direction. The list goes on. Life gets more expensive every year, yet salaries and wages don’t always go up in tandem with the increased expenses of every day life.

So even if you were only of the lucky ones to grab a super-cheap mortgage rate for a five-year portion of your mortgage, I strongly urge you to calculate how much your mortgage payment will increase when you renew. It’s not too, too crazy to believe that the bond market will push the five year rate up by 50 basis points each year for the next five years. Add 2.5% to your current rate and see what your new payment will be. Can you handle it?

Alternatives

Your first option is to pick rich parents. It’s been my observation that some parents with an excess of money are willing to help their offspring purchase a home. Financially speaking, it’s wonderful to have that kind of help to get onto the property ladder.

Not all of us can pick our parents, so that means being a little more creative.

If I were starting out today, I’d be looking at becoming a landlord. Either I’d try to buy a house with a rental suite or I would have roommates. There would have to be someone else around to contribute to the mortgage payments. If my salary paid for the minimum monthly mortgage payment, then the tenant’s rent would be what I would use for the extra payments to principle.

Would it be ideal? No. Would it have to last forever? Also, no.

A third alternative would be waiting to buy. Like I said earlier, house prices will come down as mortgage rates go up. Figure out how much of a mortgage you can afford. This number will be different than what the bank says you can afford. After all, you’re the one who’ll be responsible for the payments so look at your budget and be realistic.

Once you know how much mortgage you can comfortably carry, open an account at EQ Bank and start salting that mortgage payment away. This benefits you two ways. First, you’ll get used to having a mortgage payment since you’ll have to make that payment once you’ve signed the mortgage documents. Second, this money will help you make as large a down payment as possible.

I’m not trying to dissuade you from buying a house. Truly, I’m not. I just want you to think long and hard about the financial commitment that owning your own home will entail.

In a world without pensions, I am not persuaded that it’s a good idea for a person to spend 25-30 years paying off a mortgage without the ability to save for retirement. A mortgage debt that leads to an extended hand-to-mouth lifestyle is rarely a good thing. It limits options and inhibits one’s ability to pursue their true dreams, goals, and desires.

Student Loans are an Anchor

When I was younger, I was convinced that student loans are an anchor. I believed that the best course of action was to eliminate them as soon as humanly possible. Full stop – no further discussion needed. Paying off student loans ASAP was a sign of being a mature adult. One did not carry debt if one could pay it off early. Being debt-free was the Holy Grail!

Suffice it to say that my views on student loans have become more nuanced as I’ve aged.

Full disclosure. When I graduated from post-secondary, I had student loans of just under $15K. My salary was paid bi-weekly, so I made extra student loan payments from every paycheque. These were on top of my regular monthly payment. I was fortunate enough to receive bonuses at work, so my first two years’ worth of bonuses went towards my student loans. Within 2 years, those loans were gone!

For the most part, I still believe that student loans are an anchor for many folks. If you’ve got a $200, $400, $700 student loan payment every month, that’s a big chunk of money that isn’t being used to build a better future for yourself. It’s not going towards a down payment. The money isn’t being set aside for your “thirsty underwear” years. (Hat tip to Garth Turner at Greater Fool for that descriptive phrase!) Those funds aren’t seed money being deployed in your own business. Depending on your circumstances, it could take you a very long time to pay off your student loan debts. Time that can never be recovered.

Truth be told, I still encourage people to focus on paying off their student loans. After all, it’s good to have less debt. Do what you can to make extra payments. Set up a per diem and have that money sent to your student loans every week. Do it via automatic transfer. If it’s $1/day, then send make an extra payment of $7/week. If you can afford $5/day, then that’s an extra $35/week. And if you can swing $10/day, then you’re looking at extra payments of $70/week… which is a very sweet $3,650 per year. The higher your per diem, the faster the debt goes away. Make this extra weekly payment on top of your regular minimum monthly payment. If you’re fortunate enough to get a raise or income from a side hustle, then use some of that money to pay off your student loans even faster.

When my student loans were gone, I felt very proud of myself. A debt obligation had been lifted from my shoulders! I was one step closer towards being debt-free. Yay, me!

Nuance…

It’s been over 15 years since I paid off my student loans. And I’ve learned a lot about investing in the stock market. Had I paid the minimum monthly payments on my student loans and invested in equities… <sigh> … Well, I’d be the Retired Blue Lobster by now, and my student loans would also be completely paid off. All else being equal, my loans would have been paid off in 9 years and I would have an even larger investment portfolio. My money would have had an extra two years to grow and all those extra payments would’ve been invested for growth.

Make no mistake! I still believe that student loans are an anchor. Yet, I’ve also come to believe that investing the stock market for the long-term is slightly more important than paying off student loan debt ASAP. This is because the weight of that debt burden, i.e. anchor, is reduced in two ways. Firstly, the debt gets smaller each time you make your minimum monthly payment. Secondly, the debt becomes a smaller portion of your net worth as your investments grow over time. Eventually, the debt will be gone and you’ll have a nice cushion of cash in the form of your investments.

If you go hard on your student loans to the exclusion of investing, you’ll be debt-free sooner but there’s no cash-cushion at the end. If you’re fortunate enough, you’ll be able to immediately re-direct your former student loan payments to investing. It seems trite to say this but I will anyways. Focusing solely on paying down debt robs you of the time that your money could have been working hard for you in your investments.

Investing early is a key to building wealth.

I’m not talking about investing money in a single stock and hoping that you’ve managed to get in on the ground floor of the Next Big Thing. From my perspective, that path is simply gambling. If you want to gamble, save your money and go to Vegas – it’s a lot more fun to gamble in Vegas!

The kind of investing that I’m referring to involves holding a broad-based equity exchange-traded fund (ETF) over a very long period time. Regular, consistent contributions to this kind of product gives investors access to the entire stock market and removes the temptation to jump from one promising stock to another.

An ETF offers you the chance to invest in a lot of companies at once. While they’re hardly exciting, ETFs offer regular people the opportunity to invest in some of the biggest companies in the world. You don’t have to be a genius, nor do you have to be lucky. The Next Big Thing will eventually become part of the ETF’s holdings, so you’ll still wind up own a sliver of it. And you’ll have avoided the risk of investing all of your money in one single company.

You should definitely read The Simple Path to Wealth by J.L. Collins. He does an excellent job of explaining why and how this works. Rest assured that I am not being paid for mentioning this book.

Real estate is another way to make long-term investments for the future. To be explicitly clear, this is not my preferred method. I am not an expert in real estate investing. If this interests you, then check out Bigger Pockets. I follow this account on social media and I’ve learned a lot. Again, I’m not being paid for mentioning them.

Some people can’t do both.

Fair enough.

I appreciate that not everyone has this option of to investing while paying down debt. Maybe you don’t have the money to do both. Reality being what it is, money only stretches so far. Or maybe the thought of debt causes you psychological distress. If that’s the case, then pay off your student loans as fast as you can. They are an anchor on your wallet. They prevent you from investing in your future because they force you to pay for your past.

You’ll make the best choices that you can with the information and money that you have available.

However, there are those in my audience who have enough to pay off the minimum student loan bill while also investing. If you’re fortunate enough to be in these circumstances, then I strongly urge you to do both. It may take you years to pay off your student loans. That is time that you can never get back. It makes the most sense to be investing in the stock market or in real estate while also paying down your debts. Your investments should be growing while your debts are decreasing.

Student loans are an anchor. There’s no doubt about it. However, how your handle those student loans will drastically impact your wealth-building goals. I don’t have all the answers because everyone’s situation is different. I just want you to think long and hard about what will work best for you.

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Weekly Tip: If you must finance a car, follow the 20-4-10 rule. Always put down 20% of the car’s purchase price. Make sure the loan is for a maximum of 4 years. Do not let the car loan be more than 10% of your annual salary. When your loan is paid off, keep making the payment to your Next Vehicle Fund so that you can pay cash the next time around.

Invest Your Money or Pay Down Debt?

The question often arises about whether it’s better to invest your money or to pay down debt.

My position is that you should do both. The reality is that the younger you are, the more time your money has to compound if invested. From the tiniest acorn did the mighty oak grow, and all that. So if you’re younger, you have time on your side. More time means a longer investment horizon, which means larger returns by the time you retire.

On the other hand, debt inhibits the growth of your net worth. The longer it takes you to pay off your debt, the more interest you pay to your creditors. This is not an ideal situation. Instead of paying interest to your creditors, you should be earning a return on your investment. However, you can’t earn any returns if you don’t have the money to invest.

So here’s my proposal – invest while you pay off debt. Why can’t you do both? If the interest rates on your debt are lower than what you can achieve over the long term in the stock market, then pay the minimum on your debts in order to maximize your investment returns.

Mortgages

At the time of this post, 5-year mortgages in Canada can be had for 2.5% and lower. These are lifetime lows, which will likely be around for the next 2 or 3 years. If you’re in a position to lock in one of these ridiculously low rates, then you should seriously consider doing so.

If you have a mortgage and you’re paying the bank 2.5%, then I don’t want you to make extra payments on the mortgage. I want you to invest in the stock market for the long term. Over the long term, the stock market has returned an average of 7% to investors. I want you to learn about investing in index funds. Then I want you to pick one and to start automatically investing your money.

When mortgage rates are at historical lows like they are at the time of this post, there’s no sense in repaying your mortgage faster. So long as you can earn the long-term average stock market return, you’ll be earning 3 times the amount you’re paying on your mortgage. It would be stupid not to do so while you can.

Vehicle Loans

The same rule applies if you have a car loan at a reasonable interest rate. My definition of reasonable is that it is less than 6%. If you’re paying a higher rate, then you can split your investment money in half. One half will still be automatically invested. The other half will be sent to your vehicle loan so that it is paid off faster. When the vehicle loan is gone, then you can put the money back towards your investment. You’re also free to use your regular car loan payment for investing or for something else.

Let’s say you have a monthly car loan of $750 and you’ve got a 60-month loan at 6% (or higher). And you also have $500 per month that you’re investing for long-term growth. Divide the $500 in half, so that you’re now paying $1000/month on the car payment and directing $250/month into your investments. When the loan is paid off, you can go back to investing $500/month. You’ll also have $750 in your budget that no longer has to be sent to someone else. You can keep the $750 in your own pocket.

Oh, and the next time you want to buy a car? Save up for it first! If you can find the way to pay a loan of $750, then you’re just as capable of squirrelling $750 away every month until you can pay for your next vehicle with cold, hard cash.

Student Loans

By now, you should be picking up what I’m laying down.

In the interest of transparency, I will tell you that I graduated with $15,000 of student loans. I made it my mission to repay those loans within 2 years of graduating. With the benefit of hindsight, I have to say that my net worth would be higher today if I’d invested my money in the stock market and stuck to the 9-year loan repayment plan that I’d been on. My shaky memory suggests that my monthly payment had been something like $150. If I’d known then what I know now, I would not have made double and triple monthly payments to pay that loan off so damn fast.

Today, people are graduating with six-figure debts. And the word on the street is that they are not all finding high-paying employment with their very expensive educations.

I still maintain that if you’re in your 20s and 30s with a large student loan, it makes sense to pay the minimum on those loans and invest in the stock market. When you’re in your 20s and 30s, you still have 3-4 decades for the money to compound if you’re not planning on early retirement. Your income will go up as you expand your skillset, refine your expertise, and gain useful experience. Use 25% of your increased income to bump up your student loan repayment. Take another 30% to inflate your lifestyle just a little bit! Make sure the remaining 45% of your increase is invested.

The analysis has to be a lot more nuanced if you’re still paying off a six-figure debt in your 40s and 50s. The question of whether to invest your money or pay down debt isn’t as crystal clear. What I do know for sure is that it’s almost always a bad idea to retire with debt.

If you have student loans in your 40s and 50s, then you need to divide your investment amount between your portfolio and your student loans. Pay those loans off before you retire! Once they’re gone, go back to ploughing as much money into your investment portfolio as you possibly can. Your investment window is going to be smaller due to age. However, that doesn’t lessen the onus you have to yourself to fund your retirement.

Without a solid investment portfolio whose returns outpace inflation, a person on a fixed income is going to have to pay for everything with dollars that are always losing value. Believe me when I say that you don’t want to be paying off debt in retirement.

I’m telling you right now that you need to have a portfolio that can support you when you no longer have employment income. As I’ve said before, pensions are disappearing. It’s on you to set aside enough money for your golden years. Unless you remain healthy, getting older is going to suck enough on its own. You need not make things worse for yourself by being old and burdened by student loans debt.

The Exception!

If you’re carrying credit card debt, forget about investing until that debt has been eradicated. Credit cards carry double-digit interest rates. The chances of your investments giving you a return higher than the interest charged on credit cards are exceedingly slim.

Focus on getting out of credit card debt, then you can start investing your money. Here are the steps to getting out of credit card debt.

  1. Stop using your credit cards to buy things.
  2. Make extra payments to your credit cards until each card is paid off.
  3. As each card is paid off, do not use it again.
  4. When all cards are paid, take your former credit card payments and invest them for the long term in an equity-oriented index fund.
  5. Do not use your credit card without first saving up the cash in your bank account to pay for the eventual monthly bill.

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Weekly Tip: One thing to keep in mind that your portfolio doesn’t stop working just because you do. When you stop working, you won’t simply cash in your portfolio. Rather, you’ll structure your portfolio so that it’s continuously invested in manner that creates a cash flow for you until the day you die. This means that equities will continue to be a steadfast workhouse, ensuring that your portfolio lasts as long as you do.

When Should I Start Saving?

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

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

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

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

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

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

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

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

Surprise Money!

Raise your hand if you’ve found some surprise money in your bank account this past month!

While a great many people have lost their jobs, those who haven’t might have noticed that there’s definitely extra money in their bank accounts. This is called surprise money because most people are surprised by how much they normally spend. Despite the wisdom in doing so, great numbers of folks simply do not track their spending. Staying home to avoid the coronavirus has resulted in far less money trickling out of people’s wallets. When people finally do look at their bank accounts, some are surprised by how much money is still in there!

For my part, I haven’t had to buy a bus pass since February. When I check my bank account, there’s an extra $200 sitting there. Is it a life-changing amount of cash? Not by a long shot. Will it be shuffled into my emergency fund? That’s a big 10-4!

Another of my dear friends confessed to me that an extra $2500 has remained in the household budget because so many things have been cancelled. That’s not an insignificant amount of money!

If you’re among the fortunate ones whose income has not been negatively affected by COVID-19, what are you doing with your extra cash?

  • Have you just transferred your spending to online purchases?
  • Are you paying down debt?
  • Have you directed some love to your emergency account?
  • Is the extra money being diverted into your investment portfolio?

The pandemic is causing many problems for many people – no doubt about it! Through no fault of their own, too many people have lost jobs and are facing extreme levels of financial stress as they figure out how to pay for their lives.

Yet, there are still many who have extra money during this pandemic. No salons – no concerts – no sports eventing – no retail therapy at the mall! So many of the quotidian opportunities to spend money have been curtailed. Wallets are staying closed simply because people haven’t found replacements for the places where the money used to go.

When the pandemic is over, will you go back to the way you used to spend?

This is a question I’ve been discussing with my friends. Some of my dear ones believe that people will change their behaviour for a little while, and then gradually return to old spending patters. Others are convinced that the pandemic will make an indelible imprint on this generation – much in the same way that the Great Depression shaped the money habits of today’s oldest citizens.

Personally, my position is that people are going to go back to their old spending patterns. It might take some time but it will happen eventually. Generation X grew up with credit cards. We’re also very comfortable with the monthly payment plan. For my parents’ generation, one saved up for years to afford to buy a car. Today, it’s about affording the car payment. I don’t see that one little pandemic is going to change decades of spending behaviour too, too much.

We might spend on different things once the pandemic is over, but we will keep spending. Once people feel safe enough to venture out of their homes and back into business establishments, they will return to their ingrained spending patterns. Those patterns are comfortable and familiar. Plus, the Ad Man and his trusty sidekick, the Creditor, will be back up and running, full steam ahead.

Right now, I’m urging those of you with extra money to not squander this opportunity. If you’re able to squirrel away an extra $1,000, then do so. And if it’s less, squirrel that away too. The pandemic won’t last forever. Chances are you will be very strongly tempted to return to your regular spending patterns. After all, you spent your money to enjoy your life before. Why wouldn’t you want to spend money to enjoy your life once COVID-19 is no more than a bad memory?

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Weekly Tip: Build your emergency fund in a high interest savings account. Online bank accounts generally pay more than what you can get from a brick-and-mortar bank. Compare rates online, then open an account. Set up an automatic transfer so that a portion of every paycheque goes into your emergency fund until you have 9-12 months of living expenses set aside for emergencies. Unless you’ve got a very big paycheque, it’s going to take you some time to save up this amount of money. I think you’ll agree that should you lose your job, you won’t regret having taken the time to fully fund your emergency fund.

“Gee! I wish I didn’t have all this money set aside to help me get through this emergency!” said No One Ever.

Progress need not be Perfect!

When you know better, you do better…

from one wise soul to another, Maya Angelou to Oprah Winfrey

No one is born knowing how to invest. This is awesome news! It means that anyone can learn how to invest if they take the time to practice the skill. It also means that progress need not be perfect.

Much like walking, playing the piano, and mastering Candy Crush, the skills of investing must be practiced and honed before one becomes proficient at them.

I’m a huge fan of YouTube. As I was perusing the millions of videos on that platform, I came across one that was called “Vanguard or Fidelity – Which one is Better?”

And do you want to know something?

Yes, Blue Lobster. Please, tell us what you’re thinking.

My initial reaction to that post’s title was to scroll right past it. I’ve learned a little bit of wisdom on my relatively few revolutions around the sun. And one of those bits is that it’s best to just start investing, regardless of where you do so. Progress need not be perfect in order for you to achieve your dreams. Think of it this way – every journey starts with a single step but not every journey to the same destination requires the same number of steps. If a person needs to take a few extra steps to where she’s going, then she still gets there.

Focus on progress, not on perfection.

For example, we will look at the situation of an investor named One. Let’s say One decides to invest with Fidelity. (To be frank and open, I invest with Vanguard Canada. And no – I’m not being compensated for mentioning them in this blog post.) One sets up an account at Fidelity and creates an automatic transfer to have a fixed amount invested into an exchange traded fund every time One gets paid.

Superb! One has taken the very first steps towards investing for One’s own future.

Did One make the absolutely best choice for an investment account? It’s hard to say without knowing if One spent hours doing the research to determine the management expense ratios, various fees, product offerings, and account features from all of the investing companies that One could have chosen.

What we do know with certainty is that One did not delay her progress by staying in the quagmire created by analysis-paralysis. One made the smart choice by focusing on progress, rather than trying to achieve perfection. One is taking action by accepting the maxim that progress need not be perfect.

There’s no doubt in my mind that a perfect, best account does exist somewhere out there. I’m just not certain that it makes sense to waste more than 3-4 hours looking for it. The ultimate objective is to start investing your money; it’s not “to open the perfect, best investment account.” Keep your eyes on the prize! No one is going to pat you on the back for opening the absolute best and perfect investment account if it takes you 2 years to find it after sifting through all the options. The best and perfect account doesn’t actually help you if you never actually open it and make an investment.

Again, progress need not be perfect. I know a baby who has just started to walk. He’s only been doing it for a few weeks, but he’s focused on progress, not on perfection. At first, he could only stand and would fall down every time he moved his head. A week later, he could walk ten steps unaided. The next time I saw him, he would walk slowly…and drop down to crawl if he had to get somewhere quickly. (The kid’s got a great big brain and understands that sometimes speed is of the essence!) The last time I saw him, this kid was very nearly walking like a champ – moving his head, going further distances, turning around without falling down too much. In another six weeks, crawling will have long been forgotten as a preferred method of travel.

The first time you walked, you fell down after a few steps. You didn’t let that stop you, did you? No, you didn’t! Instead, you tried again and again and again and again until you could do it. Without knowing you personally, I’m willing to bet that you’re now quite a proficient walker. The same principle applies to investing.

Always be learning while making progress.

Be like a baby – save and invest your money with the perspective that progress need not be perfect!

You see, there’s nothing stopping you from continuing to research investment accounts once you’ve started investing. Save-invest-learn-repeat. You are free to keep learning after you’ve made an investment.

Again, full-disclosure, I invest with BMO Investorline. And, again, I’m not getting compensated for mentioning them. Yet just because I invest with BMO Investorline doesn’t mean that I haven’t also research Scotia I-Trade, Questrade, RBC Direct Investing, or any other investing platform/company. (I’m not being paid for mentioning these platforms.)

Further, I have no idea if BMO Investorline is the ultimate, best and perfect option for me. It doesn’t matter. What does matter is that I am automatically investing in very inexpensive exchange traded funds and earning big dividends every month. And even though I’ve been with BMO Investorline for years, I would switch my investment portfolio in a heartbeat if I found a platform that better suited my needs for a lower price.

If One discovers that Vanguard Canada offers a more suitable range of investments products than Fidelity, then One is not in any way prevented from moving One’s investment account from Fidelity to Vanguard Canada.

Procrastination is the enemy of progress.

When it comes to investing your money, procrastination is extremely detrimental to achieving your financial goals. The reason why it is so bad is because you have a finite amount of time in which to grow your money. Money needs to be invested so it can compound. And compounding is most effective over long periods of time. Ergo, start investing your money right now so that it has as long as possible to compound.

Don’t let analysis-paralysis stop you from taking action today!

Your progress need not be perfect in order for you to reach your goals. Lord knows that my investment path hasn’t been smooth, nor will it ever be exalted as the absolutely correct path to take. If anything, my investment story should be viewed as a cautionary tale for fellow investors. However imperfect my journey has been, the fact that I started when I was 21 and have consistently invested my money for the past 2.5 decades has been a key factor in me pursuing and achieving my goals.

Neither you nor I can get to where we want to go without making some kind of progress. So we have an obligation to ourselves to keep moving forwards. Whether that’s listening to a podcast, reading a book, following a blog, or using trial-and-error, doing any or all of these things will lead us closer to taking action. And taking action is how we will progress towards making our dreams come true.

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Weekly Tip: Don’t pay for memberships or subscriptions if they’re no longer making your happy. As much as we might like to believe it, peer pressure didn’t end when we graduated from high school. Review your monthly expenses. How many things are you paying for simply because your friends are paying for them? If those things are no longer bringing you joy, then stop paying for them.

Book Review – Quit Like A Millionaire

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

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

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

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

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

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

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

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

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

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

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

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

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

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