Tag: Retirement

No One Said It Would Be Easy.

Getting what you really, really want is hardly every easy. It can be a grind. There are going to be days when you don’t want to work for it. Chances are you shed a tear or two along the way. It might take you much longer than you’d anticipated, and there are no guarantees the path will be a smooth one.

So what!

Accept the fact that the life you really want and that the dreams that you want to see come true are not going to fall into your hands like snow on a winter’s day. The reality is that you are going to have to put in some serious effort then reap the rewards later. If it’s worth having, then it’s worth fighting for. Never forget that!

Since this is a personal finance blog, I can help you with the money part of building the life you honestly and truly desire. There are some very basic guidelines that will get you 97% of the way there. If you follow these, then you’re set. The other 3% won’t make or break you either way. The more of these rules you fail to follow, the harder you’ll make it on yourself.

Choose wisely.

First things first… commit to living below your means.

There’s no way around this fact. If you spend every nickel you earn, then you will not have money leftover to put towards your dreams and the life you really want.

You need to save some of the money you earn. I used to think that 10% was enough. Now, I’ve matured and I see that 20% should be the bare minimum.

Maybe you can’t start at 20% right now. Fine – 20% is out of the question for right now. I refuse to be persuaded that you can’t work your way up to 20% over time. Start where you are right now, then increase your savings rate by 1% every single year. If you can increase your savings rate at a faster pace, then so much the better.

People get raises, start side hustles, create content, teach skills, etc… There are many ways to earn additional money. Find one that works for your life and do it. Whatever money you earn can be applied to building the life you want and to turning your dreams into your reality.

Next, work on getting out of debt.

This might take a minute. Getting into debt is usually fun, but getting out is a tedious task. Unless you come into a windfall, it’s going to take you some time to pay off your creditors. If you can, make extra payments to pay off your debt faster.

And for the love of all that you hold holy, stay out of debt. If you want something, set up a sinking fund then use cash to buy it. As a matter of fact, set up a sinking fund even if there’s nothing in particular that you want. Set up an automatic transfer in the amount all of your former debt payments and send that money to your sinking fund. You’re already accustomed to making those payments, but this time they’ll be going into your pocket instead of someone else’s.

When you finally decide what you want, the money will be there waiting for you. No debt needed!

Invest for your long-term future.

While paying down your debt, cinch your belt a little tighter and set some money aside for Future You.

Debt payments are about paying for past decisions. Investing for your future is about self-care. You’re going to need food, shelter, transportation, heat, and a few other basic necessities every single day until the day you die. This is why you absolutely must set aside some of today’s money for tomorrow’s expenses. You won’t always be physically and mentally capable of going to work. There’s also a decent chance that you simply won’t want to leave the comfort of your home to do tasks for someone else. Or maybe you’ll no longer love running your own business.

Whatever the case, you don’t want to be forced to keep working when you’d rather stop.

When that time comes, you’ll be very happy to have cashflow from investments to replace the cashflow from your salary. Start today. Invest for the long-term. Re-invest all your dividends and capital gains. Set up an automatic transfer to invest a portion of every dollar that crosses your palm. When you stop sending your body out to work, there will be a pot of gold waiting for you. Future You will be very glad that Today You made good choices.

Build your emergency fund.

Much like paying off debt, it’s going to take a minute or two to build up atleast six months’ worth of expenses. I’m not adverse to seeing people with one year’s worth of expenses set aside, but I appreciate that six months’ worth will do in a pinch. Emergencies always have a financial component, so kindly make hay while the sun shines. Believe me when I say that an emergency is never made better by the addition of debt.

The last thing you want is the burden of paying for an emergency for months, if not years, after it’s happened. To avoid this depressing situation, make sure that you’re adding to your emergency fund on a regular basis. Every time you’re paid, send some money to your emergency fund and leave it alone.

No one has ever complained about having too much money during an emergency.

And if you have to use your emergency fund at some point, make sure that you re-build it as fast as possible. There is no way of knowing when your next emergency is going to land so it’s best to be prepared as soon as possible.

Finally, stop getting in your own way.

By this, I mean do not take on financial burdens unless absolutely necessary. More monthly subscriptions won’t get your closer to your dream life unless you’re the one selling to subscribers. Any dollar that is spent on something other than what you want most is a dollar that is not bringing you closer to your dreams.

Remember that there is always someone out there who is goading you to spend your money in ways that aren’t getting you closer to the life you want. You’re the best person to know what your heart really desires. And you need not sacrifice your priorities just because the AdMan and the Creditor request that of you. They’re your dreams so it’s your responsibility to protect them, to nurture them, and to pay for them.

Again… No one said it would be easy. I’m here to tell you that it will be worth it.

No Good Reason to Save & Invest? Do It Anyway!

Roughly 11 months ago, someone asked me to share my best tip for success with money. It took me less than a minute to say “automatic transfers”. Honestly, I really think that automating your finances is the cornerstone of mastering your personal finances.

Automation is beautiful because it removes the decision from your hands. More importantly, an automatic transfer removes the temptation to spend the money. If you’re paid bi-weekly like I am, you don’t have to waste time every fortnight asking yourself if you should set aside money, how much money should be set aside, whether to send that money to your emergency fund, etc… Each of those questions is an opportunity for you to spend instead of save, or to save less than you should, or to neglect one of the most important tools in your personal finance arsenal.

The automatic transfer saves you from yourself. Once it’s in place, you don’t have to think about it again.

I spend a lot of time here telling you to pursue your dreams and to determine your priorities so you can make those dreams come true.

Some of you might not know what your dreams are just yet, or you’re still trying to figure out your priorities. That’s fine. As a matter of fact, that’s more than fine. It’s completely normal. Life changes, so your priorities will change too.

Those changes don’t really matter when it comes to whether or not to automate your money. See, when you do figure out what you want from your life, you’re going to be very happy that there’s already some money set aside somewhere. Set up your automatic transfer today and just let the money accumulate while you’re figuring out what you want.

If you can, start with 20% of your take-home pay. That’s a decent chunk. If it’s just being wasted on frivolities and feckidoos, then it’ll serve you better in an emergency account, a sinking fund, an investment account, or a retirement account. I would suggest dividing your chosen amount into thirds:

  • one third to your emergency fund until you have 6 months of income set aside;
  • one third to your retirement account until you’ve maxed out your TFSA and your RRSP; and
  • one third to short-term goals like a course you want to take, or some travel, or a hobby that you love.

Portion #1 – Your Emergency Fund

It’s going to take a minute or two to build up your emergency fund. That’s okay. Just start! When the emergency comes, whatever amount you have will help. Trust me when I say that no one in the history of the world has ever regretted having money set aside during an emergency.

Remember what the emergency fund is for. It’s money meant for your survival. If you lose your job, then the emergency fund has to pay for your shelter, your food, your medications, and your other necessities until you get another source of income. If you have debt, your emergency fund should also be able to cover those payments. After all, one does not need to have a vehicle repossessed nor dings to one’s credit rating while one is hunting for a job. (Some jobs care about your credit rating.)

It should be obvious but I’ll say it anyway. The fewer things that your emergency fund has to cover, the smaller it can be. Get out of debt and you won’t have to worry about how your creditors will be paid should you become temporarily parted from an income.

When money goes into your emergency fund, leave it alone. This is the money that is meant to replace your income should you lose your job. It’s not meant to pay for anything else.

While this blog is targeted at single people, I know that there’s more than a slim chance some of you will find partners and enter relationships. Relationships are another reason why everyone should have a big, juicy emergency fund. Not every relationship is meant to last. By having your own emergency fund, money will never be the reason that you stay in a relationship that is no longer good for you. Having your own money is insurance against financial abuse.

Portion #2 – The Care & Feeding of Future You

Next, you’re going to get old unless you die first. That means, there will come a point when you can’t work anymore. Before that day comes, you’ll probably reach a point where you won’t want to work anymore. You will want to have a nice, ginormous pile of retirement cash waiting for you. And if you can’t have a ginormous pile, then I’m pretty certain you’ll settle for a comfortable pile. Whatever amount you wind up with is up to you. If you save and invest $0 towards retirement, then that’s how much you’ll have at the end of your working life.

Start today. Fill your TFSA first, then your RRSP. Once those are filled, start investing in a non-registered investment account. As with your emergency fund, it’s going to take some time to maximize your contribution room unless you come into a lottery win, an insurance payout, an inheritance, or some other kind of windfall that you don’t spend on something else.

Always remember that the money in your TFSA, your RRSP, and your investment accounts must be invested for long-term growth. Yes – they’re called a Tax Free Savings Plan and a Registered Retirement Savings Plan. I get it, but I don’t care what they’re called. These accounts protect your money from being taxed, so go for growth. Invest in broadly-diversified, equity-based exchange traded funds so your money can grow exponentially through the magic of compounding.

Mutual funds are more expensive than exchange-traded funds, so try to invest in ETFs. Once you buy your ETF, don’t fiddle with it. Equity-based investments are meant to be held for a long period of time. If you think you’ll need money in the next 3 years, then set up a sinking fund to pay for whatever-it-is-you-plan-to-buy.

Portion #3 – Enjoying the Journey

Finally, you’re going to use sinking funds to pay for the things that bring you joy along your journey. Whatever extracurricular activity floats your boat probably comes with a price tag. Have a sinking fund so that you can indulge yourself. I worked with a woman who was very frugal in most areas of her life. However, she and her partner loved concerts. You better believe they had a sinking fund to pay for front row seats of their favourite performers. A young family member of mine discovered a love of travel. He just got back from his first cruise and is already saving up for his second trip to Japan. Another friend of mine attends writing retreats – money is needed for accommodation, travel, food, supplies, instructors’ fees, etc…

Life goes by very, very fast. And we spend so much of it at work, doing stuff for someone else that we probably don’t care about very much. The reality is that our society is designed to keep up endlessly stimulated. There’s very little encouragement to sit quietly and to contemplate what it is that you want, to plan for that, to save money towards making it a reality. Instead, we’re fed an endless stream of advertisements which exhort us to spend and spend and spend some more on the doodads and feckidoos that don’t exactly bring us long-lasting joy.

Part of every paycheque you earn should be spent on those things that make you happiest. Even if you don’t know what that is just yet, start saving for it. One day, you’re going to figure out what speaks to your soul and you’ll be so very happy that you have the money in place to acquire it. Maybe you want to take a culinary tour in Italy? Perhaps you like to make pottery? Maybe your sports club competes internationally and you need the funds to travel?

Whatever it is that satisfies your soul, make sure that you’re setting some money aside to do some of the things that make your life what you want it to be.

So that’s it. Even if you think that you have no reason to save and invest right now, I want you to know that you’re wrong. The fact is that you simply haven’t figure out the reason. You might not know what your priorities are, but you will one day. The fact that you haven’t fully fleshed out your dreams shouldn’t mean that you delay accumulating the money needed to make them come true. Set up your automatic transfer today then work on getting everything else sorted out.

Future You will thank you.

Got a Pension? Ensure You’re Investing on the Side.

This post is about the importance of you investing for your future, regardless of whether you have a pension. At its heart, a pension is simply deferred compensation. Your employer is promising to pay you money when you presumably are no longer able to earn a living. In exchange, you give your loyalty and service for the best years of your life. Undoubtedly, your pension can be a very lucrative part of your compensation. That said, you need to understand that it’s not the be-all and end-all of your retirement planning.

My intention is to motivate you to think about how you’ll survive if your pension up and disappears and you can’t get the pension that was promised to you. I want you to think about this possibility today, not tomorrow. What would you do if that happened to you? You retire then find out that your pension is gone, or that your promised amount has been cut?

It’s never prudent to rely on someone else to secure your financial future. Ultimately, you’re the person responsible for your future financial comfort. While you’re earning a paycheque, it’s in your best interests to always pay yourself first. Having your own investments growing alongside your pension is never a bad idea. The truth? No one cares about your financial well-being as much as you do.

Do Your Own Investing Too.

There are 2 kinds of pensions. Both you and your employer make contributions to your pension. At its core, a defined benefit pension is one where the employer has full responsibility for ensuring that there is enough money to pay you a fixed amount every month once you’re retired. The other kind of pension is a defined contribution pension. This is the one where you have the responsibility for picking the correct investments so that there is money available for your employer to pay you when you retire. Under the DC pension, it’s up to you to decide how the money is invested.

Whichever pension you have, I’m here to tell you that you should always invest outside of your pension. Personal investments are your insurance in case your don’t get the money you were promised, for whatever reason. Pensions are promises to pay you in the future. Sometimes, pensions fail. Think of Sears. When that company went bankrupt, its pensioners – aka: retirees – lost 30% of their promised pension payments. You do not want to be a retiree who, through no fault of your own, loses 30% of your pension.

Your best protection against a possible pension cut is to have your own retirement money. This means that you should be maximizing your contributions to your RRSP and your TFSA. Doing so might take you a long time, but that doesn’t matter. Do it anyway. Once you’ve stuffed those registered accounts to the gills, then go and open a brokerage account so you can start investing in well-diversified, equity-based exchange-traded funds.***

Blue Lobster, I don’t understand. How does investing on the side prevent my employer from cutting or reducing to my pension payment after I’ve retired?

Your Investments Are Your Back-Up Plan.

Good question. Strictly speaking, your personal investments won’t prevent your employer from going bankrupt or from fraudulently raiding the pension funds. Instead, they are going function as the back-up plan in case something very bad happens to your pension. In the extremely unfortunate event that your pension is snatched away from you, your investment portfolio needs to take its place. Instead of a pension, it will be your investments paying you enough to live until your last breath.

Ideally, your standard of living will stay the same when you part ways with your employer. Once retired, you’ll still need to pay for your shelter, your food, your utilities, and all of your other expenses of life. It doesn’t matter if the money comes from your pension or your personal investments. Money is needed and it has to come from somewhere. Do yourself a huge favour and make sure that you have enough on the side just in case something happens to your pension.

Live below your means, regardless of whether you have a pension. The amount between what you spend and what you earn is the money that should be squirrelled away for Future You. Invest a portion of every paycheque you receive. Start where you are. Every year, try to increase that amount by atleast 1%. More is better, but do what you can. Set up an automatic contribution to your investment account. Make sure you have the dividend re-investment plan turned on to automatically re-invest the dividends and capital gains. When it’s time to retire, you can walk out of the workplace secure in the knowledge that your pension isn’t the only bulwark you have against the expenses of the future.

Your Pot of Gold May Be Even Bigger!

If all goes well, your personal investments will be a nice supplement to your pension. There’s also the chance that work become optional because those investments will be enough to sustain you, even without the pension. Early retirement generally means a reduction in your pension payment, but so what? You aren’t going to willingly retire early if you didn’t have money already socked away to cover your future expenses. If you’re very good at picking investments, there’s always the chance that your investment portfolio’s returns exceed your pension payment. If so, well done!

Think positive! If your pension doesn’t fail, then your retirement funds will be there to pay for all those extra luxuries in retirement. At the bare minimum, you’ll have a bigger income in retirement than you’d thought you would – a pension for life + investment cashflow. You’ll have the best of both worlds and there’s absolutely nothing wrong with that.

*** I’m a fan of investing in the stock market. Other people invest in real estate. They run the numbers, then by real estate to rent to others. Eventually, they pay off the mortgages and live off the rental income. Other people start their own businesses. Some people invest in gold or crypto. There’s no one right answer to everyone. Do your own research and figure out what works best for you.

Increasing my Passive Income in a Few Clicks

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

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

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

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

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

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

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

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

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

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

30 Years of DIY-Investing Has Paid Off

When you know better, you do better.

Maya Angelou

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

Did I do everything perfectly? Hell, no!

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

Take what you need and leave the rest.

Best Moves I Ever Made!

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

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

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

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

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

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

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

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

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

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

Mistakes? Yeah… I’ve Made A Few!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And That’s It.

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

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

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

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

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

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

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

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

But back to my main point…

Spending Every Penny

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

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

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

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

Semi-Retirement

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

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

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

No Downside to Saving & Investing

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

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

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

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

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

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.

Depending on the Kindness of Strangers is Risky

Have you seen the article about the 82-year old Walmart employee who received over $100,000 from strangers so that he could retire?

This story makes me very, very sad.

I’m not sad because people reached out to help this senior citizen , nor am I sad that he retired. No, I feel despondent and a little discouraged because he’s also in a system where working to death is the only option for so many. Had he not been “lucky” enough to be cashiering for a TikTok influencer, then it’s doubtful he would’ve benefitted from the kindness of strangers. He would still be working, just like countless other elderly people whose personal stories go untold online.

Truth be told, I’m not convinced that he was working because that’s what he wanted to be doing at age 82. If that had been the case, then I doubt that he would’ve retired upon receiving the six-figure cheque. He would’ve banked the money and gone back to work – just like all those other people who work because they love their jobs! He wasn’t the CEO of a successful company that he had built from scratch. There was nothing in the story to suggest that working as a cashier fulfilled his most cherished dreams and desires. None of the details of this story indicate that his employment brought him a sense of fulfillment or a belief that he was pursuing his life’s purpose.

Instead, the story was about a senior citizen who was toiling away with no end in sight. I can only assume that he earned just enough to not starve to death but nowhere near enough to ever stop working.

Think about your own circumstances. When will work become optional for you? Do you want to be forced by your personal finances to work at age 82? Or would you prefer that working at that age be a choice based on your passion for what you do?

If it’s the latter, then make sure that you’re building your financial cushion today. The sooner you start, the better. Invested money needs time in the stock market to grow. I’m not in any way suggesting that you sacrifice every single joy that you have in order to save for the future. That’s an awful way to live!

Sixty of seventy years ago, the internet didn’t exist. I cannot blame that 82-year old Walmart employee for not knowing about mutual funds, exchange-traded funds, and other investment products. The information wasn’t as readily available at one fingertips, not like it is today. The search engines, online classes, blogs, robo-advisors, self-directed brokerages, and podcasts from which to learn were not there for him until well into his late 50s and 60s.

The same isn’t true for you. If you can find this blog, then you can find anything you need to know about investing. The information is there. You need only go and find it. Do yourself a huge favour! Make the effort to maximize the odds that working in your dotage is a choice and not a requirement.

Invest some of your disposable income for long-term growth. Spend the rest of your money however you want. Just make sure that you never touch your long-term-growth money. A slice of every paycheque should be invested every time you’re paid. The capital gains and dividends should be automatically re-invested. It won’t happen overnight, and it will likely take years, but you’ll eventually have a stream of cashflow from your investments that can be used to replace your paycheque. Once that happens, then you will truly be working because you want to and not because you have to.

Take steps today so you’re not in the same position as this 82-year old cashier. Depending on the kindness of strangers to fund your retirement is risky. While this man was “fortunate” enough to be helped by a group of online strangers, there are countless others who need the same help but will not get it. This is how our system is designed. There is no onus on anyone to give you the retirement that you prefer. Our legislation provides you a financial floor. You can rest assured that it will not be enough for you to live the way you want in your dotage. Thankfully, there are steps that you can take to minimize the odds of an impoverished old age. It’s up to you whether to follow them.

Take Action Today – Don’t Wait for New Year’s Eve!

As you may know, I’m not a fan of New Year’s resolutions. To my mind, if something is good for me, I should start doing it today if it’s in my power to do so. Waiting for some arbitrary date on which to implement something beneficial seems a little… stupid. Delaying means that I’m continuing with something not-good instead of making my life better as soon as possible.

But that’s just me. You do you as you see fit.

There are exactly 6 weeks left in 2022. You might to cast a thought or two towards the status of your money and how it’s done in the past 10.5 months. Are you happy with how you handle money? Do you think that there are areas where your habits & choices could be tweaked? If you could go back in time, would you make the same choices?

Most importantly, what have you learned about yourself from the way you use your money?

Emergency Fund

How’s your emergency fund? You really should be plumping it up. Inflation is still a bear and interest rates are going up. When the emergency lands, you’ll be grateful that your emergency fund is on the larger side. Make sure you’re adding a few dollars to your emergency fund every time you’re paid. It takes quite a while to get it to a five-figure size. Even if it’s only $5, start there and work your way up. More is usually better when it comes to having money in your emergency fund.

I have yet to hear anyone complain about having “too much money” when they’ve lost their job, or had to repair the vehicle they need for work, or had to wait for their sick leave benefits to kick in. An emergency fund is supposed to replace your income for a short-term period until you’re working again. No one really ever knows how long they’ll be out of work, so more is better when it comes to having money set aside.

And since no one ever knows when something will happen that will threaten their income, it’s best that you take action today. Do not wait for the next calamity to arrive before you start funding your emergency fund. Think of the people who lost their jobs when COVID-19 arrived in 2020. Want to bet that many of them wished they’d had an emergency fund in place to cover their bills while they were unable to earn their income?

Funding your retirement – TFSA and RRSP accounts

Maybe you’ve got a pension. Maybe you don’t. Either way, you should be saving for your own retirement. After all, a pension is simply a promise. Sadly, promises get broken. Just ask the pensioners who worked for Sears and Nortel. Those retirees did not get the money that they were promised. In short, these workers held up their end of the bargain by working for their employers for decades with the understanding that they would be paid a pension amount every month. To put it mildly, the employer did not come through on that promise.

Don’t let this happen to you! Start saving money for your own retirement, over and above whatever your employer has promised you. Every time you’re paid, shuffle a little bit of money into your personal retirement account. If you’re fortunate enough to have money for both, start with your Tax Free Savings Account and fill it up before you move on to contributing to your Registered Retirement Savings Plan. Despite their names, do not leave money in your TFSA and your RRSP in savings accounts. Invest your money in the stock market by using exchange-traded funds or index funds that are equity-based.

The sooner you invest, the sooner your money can start to grow. Take action today.

Once you’ve invested your money, leave it alone. If you’re more than 5 years away from retirement, then you’re investing for the long-term and you can safely ignore the Talking Heads of the Financial Media. The THFM are there to generate ratings for their media platform, not to give you a personalized assessment of your current financial situation. If you want that kind of attention, then hire a fee-only financial planner. You’ll pay the bill and you’ll have the assurance that her or his opinion is about your money circumstances. Again, hire a fee-only financial planner. Anyone else is probably just a salesperson who get a commission when you buy a recommended product.

Track Your Expenses

Where does your money go? How many automatic expenses go through your bank account or your credit card? How much do you spend with cash?

It’s my belief that knowledge is power. In order for you to be powerful with your money, you need to know how you spend it. Start tracking your money. Use an app. Fill out a spreadsheet. Pick up a pen and put it to paper. I don’t care what method you choose. The bottom line is that you need to know where all of your money is going.

Armed with that information, you’ll be able to figure out if your spending choices align with your life’s priorities. In other words, are you spending your money in the best way possible to get what’s most important to you?

Right now, we’re in an inflationary period. Everything is more expensive!!! The same dollar buys less today than it did last year. Given that reality, it’s vitally important that you’re satisfied that you’re spending choices reflect your goals. Unless you get a raise, it’s not like you have more money available for daily life. Winning the lottery, inheriting lots of money, and getting an insurance payout are not reliable or predictable ways to obtain more money. For most of us, we work – we get paid – we spend-and-invest our paycheques. Unless our paycheques increase, there’s precious little flexibility to get more money.

You give up time doing whatever-you’d-rather-be-doing to work and earn money. Respect your efforts enough to know where that money is going. Take action today and become intimately familiar with how, when and why you’re parting with your hard-earned money.

Slay the Debt Monster

We all know that it’s incredibly easy to get in to debt. Credit is everywhere! A few clicks on your phone, tablet, or computer and some creditor will be sending you a credit card in moments. Credit and debt are two sides of the same coin. You cannot go into debt unless someone has extended you credit. Alternatively, you can’t be in debt if you don’t use credit. See how that works?

If you have debt, then do what you can to get out. Maybe you take a second job and the paycheque from that job goes straight to your debts. Perhaps you start selling things that you don’t need or use anymore. Money from those sales goes straight to your debt. Do some batch cooking so you can cut back on eating out. There’s always the option of giving up subscriptions for a few months. Do you need all of your streaming services right now? Could you live with one of them for 2-3 months, then switch to a different one later? While they’re still only less than $20 each, if you have more than 5 streaming services then you’re spending close to $100 per month.

Take that $100 per month and throw it at your debts. Pick the smallest debt – pay it off first by adding the $100 to your minimum payment on that debt. Take that former payment and add it to the $100. Apply that payment amount to the minimum payment on the next smallest debt and pay it off. Now two debts are gone. Take those two former minimum payments and add them to the $100. Apply that amount to the minimum payment on the third smallest debt and pay it off.

This method works. You’re making minimum payments on all of your debts, except for the one that’s getting the extra money.

That’s it – that’s the post.

Hopefully, you’re doing okay. No one can predict the future, but I can promise you that tomorrow’s challenges will be easier to handle with money in the bank. Take action today and make the money moves that will help you to make your dreams come true.