Tag: RRSP

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.

Some Random Thoughts About Money

Never let it be said that I’ve ever held myself out as a money expert. Truth be told, I have no formal training in financial planning. I’ve read lot of books and lots of blogs, but I’ve never been certified to give financial advice to anyone.

With that said, I’d like to share some random thoughts I’ve had about money over the years. It’s been my observation that there are general principles about money that will work for most people. Here are the ones that I want to share with you. And if you don’t agree with me, that’s fine. I’m not arrogant enough to think I know all the answers or that my way is the only one that works. Take what you need and leave leave the rest.

Take care of your emergency fund

First of all, it’s always a good idea to have an emergency fund. Larger is better, but any amount is better than nothing when the emergency hits. There will be an emergency at some point – it’s not a matter of “if”. It’s a matter of “when”. Do yourself a favor. If you haven’t started an emergency fund, start one today. And if you do have an emergency fund, try to bump it up by 10%. Inflation has been on a tear so whatever emergency you have in your future, it’s going to cost you 6%-8% more due to inflation.

By its very definition, an emergency will not give you a heads-up. It’s on you to prepare for its arrival by setting some money aside for the financial aspects of whatever emergency is headed your way.

No new debt

The next thing you’re going to want to do is avoid going into more debt. If you’re not in debt, then great. Keep it that way. However, if you have debt, then seriously consider working your way out of it. Cook at home more to save money. Eliminate a streaming service or two for a few months and re-direct that money to your creditors. The fact is we’re heading into – or are already in – a recession. Not everyone is going to keep their job, or have an easy time finding one should the need arise. If that might be you, it would be very, very smart of you to minimize the strain that debt payments put on your paycheque.

After all, any money that doesn’t have to go to your creditors is money that stays in your pocket.

Invest for the long-term

Third thing – don’t stop your investment program. If you’ve been here for awhile, you know that I strongly suggest that everyone invest in the stock market. My non-expert recommendation is that you invest for the long-term in a diversified, equity-based exchange traded fund. For the past year, the stock market has been trending down and it’s been extremely volatile. Big deal! The long-term trajectory of the stock market is up and to the right. Over time, the stock market make money for investors. You need not concern yourself with daily movements.

If you’re investing in diversified, equity-based ETFs, don’t stop. Keep investing! However, if you’re investing in individual stocks, then God be with you. I have no idea how to pick winners and wish you the best of luck in your efforts to do so! If you’re not investing in anything, it’s time to start. You cannot participate in the stock market’s recovery if you’re not investing in the first place.

Use your tax shelters first. This means, put your ETFs in your TFSA first then into your RRSPs. Once you’ve filled up those tax shelters, you can invest in a brokerage account. Since TFSA and RRSPs are tax-shelters, the money will grown inside them tax-free. When the money comes out of your RRSP, you’ll pay taxes on the withdrawal. When money comes out of your TFSA, you will not pay any taxes on the withdrawal. Got it? Good. Don’t believe me? Talk to an accountant.

Once your tax shelters are maxed out, then continue to invest via ETFs in a brokerage account. The capital gains and dividends earned will be taxed each yet, but at a preferential rate. This means that they will be taxed at a lower rate than that tax rate you’ll pay on your earned income.

Again, talk to an accountant for professional tax advice.

Quick review:

  • Emergency fund? Check!
  • Debt paydown? Check!
  • Investing for the future? Check!

Now what?

Well, if you’re fortunate enough to still have money leftover, you’ve got many good options.

Might I suggest some sinking funds? The new year is less than 10 weeks away. If there are any particular dreams you want to realize in 2023, then now is as good a time as any to start planning on how to pay for them.

  • Do you want to travel in 2023?
  • Will you be taking some new course(s)?
  • Is it time for that home renovation you want?
  • Do you want to make more or bigger donations next year?
  • Are there any big celebrations or anniversaries that will happen in 2023?
  • Is there a chance you’ll be taking a sabbatical?
  • Will you need to purchase or replace any equipment for your business or side hustle?

Creating sinking funds and filling them up via automatic transfers is a good way to ensure that your priorities are funded. It’s been my experience that my money is frittered away when I don’t have a plan for it. Sinking funds have been a godsend for me since they ensure that money is in place when I need it. Chances are, they’ll serve the same purpose for you if you decided to use them.

And finally…

Remember to enjoy today. So much of financial planning and money management is about the future. While it’s good to take care of Future You, it’s just as important to live in the present. Wishing away your life is no way to live it. Count your blessings and enjoy them while you can. Today won’t ever come again, and tomorrow is promised to no one.

My 5 Most Successful Steps to Retiring As I Wish

Ever since I started working, I’ve been thinking about the day that I can stop – for good. Thankfully, I’ve had very good jobs and worked with amazing people. My work has been challenging and my tasks have been interesting. All that said, work is not my passion in life. I’m not one of those people who bounds out of bed every morning because I’m excited to get to the office. Nope. I’m willing to admit that I’m happier with life when I’m not at work. Whether it’s two weeks away on my annual vacation, two days away on a weekend, or a day off during the week for whatever reason. I’m always happier with my life when I’m not at work.

Thankfully, I learned this truth about myself when I was quite young. As a result, I started my retirement planning when I was 21 years old. Here are the most successful steps that I’ve taken over the years to maximize the odds that I can retire as I wish.

Contributing the Maximum to my RRSP

In hindsight, maybe it wasn’t the best decision to start investing in my Registered Retirement Savings Plan at age 21. I still remember my parents’ accountant telling me that taking the tax deduction while I was a student wasn’t the best idea. He didn’t have any qualms with me contributing to my RRSP but he thought I should wait to claim the deduction in the future when I’d graduated and was working in my chosen profession.

Looking back, I can see that his advice was very good. Admittedly, I didn’t really understand it. My lifelong love of learning about all things personal finance was nascent so I didn’t appreciate the wisdom of his words. At 21, I happily claimed the deduction and spent it on some item whose memory thereof has been lost to the mists of time.

Stupid decision or not, the RRSP-habit was formed. I have contributed the maximum allowable amount to my RRSP every single year since age 21. The money first went into GICs, then into mutual funds, and finally it is now all invested in exchange traded funds. As I learned better, I did better. Over the years, my MERs have dropped and my returns have skyrocketed.

Contributing the Maximum to my TFSA

In 2009, the federal government introduced the Tax Free Savings Account. I can still recall sitting at my computer desk and hearing the words come out of the Minister of Finance’s mouth as I listened to the recap of the federal budget. My head whipped around and I immediately started paying attention. What had he just said? There was going to be a new way for me to save money without paying taxes? Tell me more!

My wise younger sibling then said the following to me:

“Blue Lobster, for you, the TFSA is just another retirement savings vehicle.”

Lightbulb on!

Ever since it’s been available, I have been making the maximum contributions to my TFSA. These contributions have never been sullied by interest rates incapable of matching inflation, as are offered by GICs, nor have they been brutalized by the higher-than-necessary MERs of mutual funds. Nope. I immediately put my TFSA money to work in dividend-paying ETFs.

After another discussion with my accountant, I decided that my TFSA could be used to create a tax-free stream of income in retirement. If I invested in dividend-paying ETFs, then I could withdraw the monthly dividends from my TFSA in retirement. It would be tax-free cash flow. Cha-ching! There was also the tiny little benefit that money from my TFSA wouldn’t impinge my ability to get OAS payments.

Was this the smartest use of my investment? Probably not. I now listen to the wisdom of Bridget Casey of Money After Graduation, and she’s convinced me that I should’ve gone for growth by investing in different equity ETFs. She’s probably right. There was a bull run in the stock market from 2009 to 2020. My TFSA would be bigger had I made different investment choices.

Contributing a Good-Sized Chunk of my Paycheque to my Brokerage Account

This is where the rubber really hits the road. Once I’d paid off my mortgage, I had a good bit of money remaining in my bank account every two weeks. (For the record, I’m a big believer in accelerated bi-weekly mortgage payments.)

Instead of spending that money on this-and-that, I put it to work in my non-registered investment account at my brokerage. My former mortgage payments went straight into ETFs. As with my RRSP & TFSA investments, I put everything on the dividend re-investment plan. When I got raises, I diverted some of the newly-earned money to my investment portfolio and some of it went to increasing my standard of living. As time passed, I was able to get to the point where I’m investing 1/3 of my net pay into my brokerage account and living on the rest.

Staying Away from Debt

In today’s world, it is very hard to avoid all debt. I understand that. I don’t like it, but I understand it.

For my part, I’ve had student loans, vehicle loans and a mortgage. Thankfully, I’ve never had revolving credit card debt. In the interests of transparency, I’ll admit that I do use my credit card but I pay the balance in full every single month.

However, I don’t have debt. The last time I bought a vehicle was in 2008. I used my line of credit and I did everything possible to pay off that LOC-debt within 6 months. It sucked but I didn’t care. I knew that having a car loan for 5 years would’ve sucked too. In my mind, 6 months of short-term sacrifice was well-worth the extra 4.5 years of car-loan freedom. And, yes – my former car loan payments were re-directed to my investments once that debt was gone.

My house has been paid off for 15+ years. While the property taxes, utilities and insurance aren’t cheap, my housing costs are far less than they’d be if I still had a mortgage to pay on top of everything else.

Life without debt is generally better. Instead of money going to your creditors, it can be re-directed to paying for your life’s dreams. It’s best avoided altogether. And if you can’t avoid debt, then minimize it to the greatest extent possible. While it’s in your life, do whatever you can to get rid of it as soon as possible.

Playing the Lottery

Bet you weren’t expecting that one, were you?

It’s true. I play the lottery every week – to the tune of about $20/wk. Even though it hasn’t yet paid off, I consider this one of my most successful steps.

I’ve heard that the lottery is a tax on the stupid, and that those who can’t do math are the ones who play the lottery. I don’t care. The fact of the matter is that I can’t win if I don’t play. Someone has to win and it might as well be me.

Let’s face facts. I’m contributing the max to my RRSP and my TFSA. One third of my paycheque is going into my investment portfolio. I don’t have any debt. Spending $1040 per year on lottery tickets is not going to make or break me. My retirement plans are still on track. If I win the lottery, they’ll just get a fantastically, awesome boost and I can retirement today instead of tomorrow.

Playing the lottery is my indulgence and I’m not giving it up. Other people will spend their disposable income as they wish. I will too. No judgment.

Final Thoughts on Why I Save So Much

I’ve been working in my current position for a long time now. Believe me when I say that my feelings towards working haven’t changed. I’m still happier when I’m not at the office. And I say this despite the fact that I have mentally challenging work. I’m rarely ever bored by my work. My colleagues are truly wonderful people who carry their weight and are always there for me when I need guidance, advice, or mentorship. My bosses are all fairly good people. And while I would never turn my nose up at a raise, the truth is that my compensation allows me to live the life I want. Even my benefits are not too shabby. All in all, I have a working situation that many others can only dream of yet I’m still far happier when I’m at home or with family or on vacation.

I have no illusions that my feelings are unique or that others prefer working to spending time doing what they love with those whom they love. The difference between me and them is that I’ve created a financial foundation for myself where work is becoming optional. This blog post is about the most successful steps I’ve relied on during my working life. Thanks to them, I’ve put myself in a position where I don’t have to allow my paycheque to be the overriding factor in decisions about my life. If my paycheque were to disappear, I wouldn’t have to find another one immediately… or at all. I have the comfort of knowing that my investments – and hopefully a newspaper-worthy lottery win! – will replace my paycheque when I’m ready to part ways with my employer.

Start Today

When I started investing, I had no idea what I was doing. It’s true.

I was in my early 20s, and my local newspaper had a column about personal finance. I’m older than the internet, so I grew up reading newspapers. I’ll never forget a column about David Chilton’s book The Wealthy Barber. That book changed my life. I bought it, read it from cover to cover, and decided that I knew enough to start investing. So I promptly took myself to the bank and I opened my RRSP when I was 21 years old.

I had the right idea, but I certainly had more confidence than knowledge at that point. After opening my RRSP, I went on with the rest of my life. Every year, I dutifully contributed to my RRSP… which my parents’ accountant told me wasn’t particularly smart since I was a student and my tax rate was super-low. However, he did tell me that I could eventually take advantage of the the RRSP Home Buyer’s Plan so I kept investing. I didn’t know what I didn’t know, so I didn’t ask the right questions in my 20s.

I got a little bit smarter in my late 20s. By then, I knew enough to stop buying GICs. Rates were no longer super high as central banks got a hold of inflation. And there’d been some chatter in the system about something called mutual funds. Great! That was where I’d put my money. So I did. I opened an investing account at one of the Big Banks and dutifully contributed money into it from every paycheque. I even met with the same banking officer each time, thinking that I was “building a relationship” with a financial advisor. After our third meeting, she told me that I didn’t have to personally make deposits with her each time.

Message received! Obviously, I was wasting that bank’s time so I opened an account at Phillips, Hager & North, now known as PHN. They helped me arrange for an automatic transfer of funds that coincided with my paycheque. I picked a few funds and barely thought about my investments unless I received a statement in the mail. I loved PHN! And would have little hesitation in going back to them if I had to leave my current brokerage.

The only reason I moved is because, sometime in my early 30s, I learned about exchanged traded funds and how they have way cheaper management expense ratios. The MERs at Vanguard Canada were much lower than the MERs I was paying on my mutual funds at PHN… so I moved my money again. Similar investment products for a lower price made more sense to me. Why pay more if I didn’t have to?

By the time I’d hit my mid-30s, my house’s mortgage was paid off and I’d heard of something called the FIRE movement. There were tales of people who pursued something called Finance Independence, Retire Early. It was an idea that spoke to my heart. Several years of working had disabused me of the belief that everyone grows up and is lucky enough to work at careers they love. Early retirement sounded like a brilliant idea!

Some how, some way, I stumbled across Mr. Money Mustache and I fell into a deep, multi-year dive into the world of personal finance blogs. It was intoxicating! So many people who had transformed their dreams into reality. Some of them were a decade or more younger than me, but so what? They had the knowledge that I wanted to have so I absorbed as much of their message as I could.

And I learned so very much! My perspective changed from wanting early retirement to wanting financial independence. In my mind, being financially independent is necessary. Being FI is a way to control your time, your autonomy over your life. It gives you the power to say “No!” to whatever it is that you don’t want in your life – atleast the things that can be controlled with money. Early retirement is still something I want, but it’s an option that becomes available to me (and to anyone else) as a result of financial independence. So many of the bloggers I followed used their FI-status to start working at things that they loved. They still made money, but they did so via endeavours that meant something to them. Unlike working for a boss, they were no longer fulfilling someone else’s dream but were busily and happily fulfilling their own.

Eventually, my self-tutelage led me to the sad realization that my dutiful bi-weekly investment contributions were going into the wrong type of investment. I love dividends! Passive income makes me dreamy. So a steady 4-figure monthly cashflow seemed like a marvelous thing…until I realized that I hadn’t taken proper advantage of the bull-run that existed between 2009 and March 2020. I would have seen much higher returns if my money had been going into equity ETFs instead of dividend ETFs! Had I been investing “properly”, I could have retired by now.

(Big sigh goes here.) There’s no sense crying over spilled milk. Once I realized the error of my ways, I corrected my path. All new contributions are going into equity investments. The longevity charts tell me that I have another 40-50 years***, so I still have a fairly long investment horizon. My course correction cannot change the past, but it can certainly prevent me from continuing what I perceive to be a big mistake.

Why am I telling you all of this?

Simply because I want you to start where you are and build from there. Would it have been better to have started 20 years ago? Sure, but you didn’t so stop dwelling on it. You have today so start today. The information is out there. And, no, you won’t understand all of it at first. So what? No one understands all of anything at first. Have you ever watched a baby learning to walk. Poor little buggers can’t figure out that they can’t move both legs at the same time. The slightest twitch of their heads means they topple over. And the first few steps are always quite wobbly. You know what happens? They always figure it out.

It’s the same with money. Start with setting aside some of your money in a savings account. Then move it to an investment account. Pick a product that has a low MER and invest in it for the long term. Don’t be afraid of the stock market’s daily volatility. You’re investing for years, and the market has always gone up over the long term. Keep learning about investing. Tweak your investing strategy if you have to, but try to keep those tweaks to a minimum. Save – invest – learn – repeat. Start today.

*** Never forget that you need your money to work hard for you, even after you retire. Don’t believe that you can stop investing in equities just because your old age security payments have started hitting your checking account.

Retirement is coming, one way or another.

What the eyes don’t see, the heart won’t grieve…

Anonymous Online Poster

No matter how you look at it, retirement is coming.

And if you’re fortunate, you’ll get to pick when you retire. Should Life have other plans for you, then retirement may arrive unexpectedly. Either way, retirement is in your future. One of the best things you can do for Future You is to start saving today.

This year, the contribution deadline for the Registered Retirement Savings Plan is March 1, 2021. In other words, if you put money into your RRSP on or before March 1, 2021, then you will get a tax deduction that can be used against any taxes that you owe for the 2020 tax year.

Here’s a handy-dandy little chart to show you the maximum amount of money that you can put into your RRSP this year.

What’s that? You say that you don’t have $27,830 lying around to make this year’s contribution?

Do you have $1?

Fear not, Gentle Reader. The numbers listed on the chart are the maximum contribution limits. In an ideal world, you would have no trouble at all socking away this much money.

If you’re not one of the Very Fortunate Ones who can easily plunk $27,830 into your RRSP without batting an eye, then fret not. You will do what you can until you can do better. It’s really not more complicated than that.

If you can afford $1 per day, that’s $365 per year. It’s not a lot but it’s a whole lot more than nothing. If you don’t start saving this tiny daily amount, then I can assure you that you’ll regret your decision. Retiring solely on social benefits will not be comfortable.

At $5 per day, you’re looking at $1,825 per year. That’s not too shabby, but it’s also not the cat’s pyjamas. It means one less snack per day, or one less fancy coffee. (Hat tip to David Bach, who is the author of The Automatic Millionaire. This is one the first books that put yours truly on my current financial path.) Save a few calories – use your kitchen to save some money – throw that money into your RRSP and let it grow over the years.

Kick it up to $10 per day and wow! Now, you’re contributing several thousand dollars in a year. In a lot of places, $10 each day is less than you’d spend on parking your car at work. It’s less than getting a burger, fries and a drink at a fast food place. It’s not a whole lot of money, but it can certainly get you to the retirement you want if you consistently put it to good use. If you don’t believe me, check out what Mr. Money Mustache has to say about the $10 bill.

Pick your per diem.

I trust you see a pattern. By implementing a per diem for your RRSP, and setting up an automatic money transfer, you’ll be improving the chances that you’ll have a financially comfortable retirement.

Whatever amount works for your budget, that’s the amount that you should be sending to your RRSP. Before you even ask, $0 per day is not at all an appropriate amount to be saving.

Once siphoned from your daily chequing account and into your RRSP, your money will grow tax-free until withdrawn. How large will it grow? That’s up to you and/or your financial advisor.

In the interests of transparency, I will tell you that my portfolio is invested in exchange-traded funds with Vanguard Canada and iShares. I’ve gone to a fee only advisor for advice, but I do my own research and make my own investment decisions. I’m currently putting my money into equity products, after having spent 9.5 years investing solely in dividend ETFs. I’m a staunch buy-and-hold investor. That means I don’t sell after I buy. I buy what I believe to be good investments and then I just leave them alone for years and years and years. I still have the bank stocks that my parents bought for me when I was a baby…and I haven’t been a baby for a very long time!

You owe it to yourself to spend some time learning about investing your money. Save your money via automatic money transfers. Invest your money in equity products. Learn, learn, learn – as much as you can! There are books, blogs, YouTube, and people who all have information to share. Then repeat the process. Save – invest – learn – repeat!

Do not procrastinate.

Every day that you don’t open your RRSP and invest your money is a missed opportunity to grow your money in a tax-free environment. This is important because money grows faster when it is not taxed. To be very clear, money grows on a tax-deferred basis in an RRSP and you will pay taxes on the money when your withdraw it. However, if all goes well, retirement is a long way away and your money will grow into a giant pile. While you won’t be happy to pay taxes, regard that tax debt as evidence that you’re not going to be poor in your retirement. Poor people don’t pay taxes. You don’t want to be poor in your retirement.

I digress. Retirement is coming, one way or another. If you’re procrastinating about opening and/or funding your RRSP, then stop! Today’s technology means you can open and fund your RRSP from your hand-computer. You no longer need to go to a branch or talk to a human to complete these functions.

Time waits for no one. Take the steps you need to take so that you can put as much as you possibly can into your RRSP. This is a fundament step that you need to take to better your chances of having a financially comfortable dotage and being able to handle whatever financial challenges come your way when you and your income part ways.

Never Stop Reading!

Learning doesn’t stop with graduation. You should never stop reading. Read everything that you can get your hands on. Reading opens your mind to new ideas & perspectives. No one says you have to agree with everything that you read, but you owe it to yourself to learn as much as you can in the time you have left.

Since this is personal finance blog, I’m going to talk about the personal finance books that have shaped my financial life.

The Automatic Millionaire by David Bach

I loved this read for its simplicity and ease of implementation. After reading it, I didn’t have to spend too much time setting up my automatic transfers. 20 minutes? Maybe 30 minutes? In less than an hour, I’d created a system whereby a portion of my money went to my long-term goals, another portion went to my short-term goals, and the rest stayed in my chequing account to get me from one day to the next. Easy-peasy-lemon-squeasy!

I’ve been using automatic transfers for more than 2 decades. They eliminate the need for me to remember to transfer money from my chequing account to my investment account. The money is magically in place when it’s time to make an RRSP or TFSA contribution. There’s money waiting to be deployed to pay my monthly utility bills. Learning how to automate my money at a young age set me on a good path when it came to personal finance.

The Wealthy Barber by David Chilton

There’s something special about your first. I was 21 years old when I read this book. I was naive and very un-sophisticated when it came to money matters. However, this book impressed upon me the important of starting my Registered Retirement Savings Plan as soon as possible so I did. I was a student who paid nothing in taxes, hence I got a full tax refund back every year. Still, those little contributions to my RRSP have since grown into a nice six-figure income. What I took from this book is that investing is best started as soon as humanly possible.

The Two-Income Trap by Elizabeth Warren and Amelia Warren Tyagi

Senator Warren’s book was my first foray into the political implications of personal finance, and the risks that are associated with dual income families spending both of those incomes. I promised myself that if I ever married, I would make sure that my partner believed in living below our means just as much as I did. That way, we could live for today while still saving and investing.

While I’ve never married, I still set aside a good chunk of my salary for investing purposes. Mental gymnastics allows me to split my household income into two! Sometimes I pretend that the monthly dividends generated by my portfolio are the take-home pay of my imaginary spouse. It’s the best of both worlds – a second income without any money fights about how it will be spent!

Debt-Proof Living by Mary Hunt

This book was fantastic. I loved it because it gave me an infrastructure for how to set up my short-term money. One of the best ideas I’ve ever come across is the Freedom Account. Its purpose is to cover the irregular expenses that come up every year, but aren’t emergency expenditures. Think of things like oil changes, clothes purchases, pet expense, vacations. These are the expenses that do not occur regularly but still have to be covered. You don’t know exactly when you’ll have to pay for them but you know it’s going to cost some money.

I’ve had my Freedom Account for decades, and it’s been my safety net more than once. If you don’t have one, I suggest that you get one.

The Richest Man in Babylon by George S. Clason

It’s a parable that’s also a quick read. I loved this book! The financial principles about savings and investing have been around for centuries. And so have the mistakes that people make with their money. This parable touches upon the difficulties of not spending every nickel earned, finding good mentors, investing properly, and repaying debts. It’s also about the fact that get rich quick ideas are scams, more often that not. Building wealth takes time and consistency, but almost anyone can do it by following the right principles.

Quit Like A Millionaire by Kristy Shen & Bryce Leung

This inspirational story of retiring in one’s early 30s will stick with me for a long time. I learned about the challenges and strategies for early retirement. This book opened my eyes to idea of living outside of North America in order to save money. I learned about how to segment my money so that I wouldn’t have to sell from my portfolio during a market downturn.

Kristy and Bryce are the brains behind the Investment Workshop, one of the best free sources I have ever found for learning about how to create, maintain and re-balance your portfolio. Take advantage of their lessons to set yourself on a path for a comfortable retirement, early or otherwise.

Again, never stop reading!

As I’ve said before, you need not make every mistake yourself – you can learn from the mistakes of others. Books are a source of knowledge. They’re free from the library. Even in our COVID-19 circumstances, you can still access library books – you simply need to go online instead of into a building. Never stop reading!

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Weekly Tip: Create you own pension by investing your money towards your retirement. Fewer and fewer employers are offering pensions to their employees. This means that you have to save for your own retirement. If you don’t save the money for Future You, then no one will. Start today by squirrelling away a little bit of money, invest it for the long-term, learn a little bit more about investing, then start over. Save, invest, learn, repeat!

Taking it Day By Day

It’s been 4.5 months since the World Health Organization declared that the globe was in the grips of a pandemic. Since then, there has been much upheaval in people’s lives due in no small part to the financial impacts of lost jobs, the inability to travel, and social isolation. What are we supposed to do when going outside means taking the risk that we’ll contract a disease about which so much is still unknown?

We have to take things day by day.

By nature, I’m a planner. For example, I enjoy planning my travel. It’s fun to peruse all the websites, read up on the various sites, figure out where I want to go. In 2018, I went to Ireland for the first time. I crossed an item off my Bucket List – booking my time off then looking for a good travel deal. My biggest regret about that trip was that it was somewhat last-minute, in that I booked it only 6 weeks before getting on a plane. In the deep recesses of my travel-planner heart, I hadn’t given myself enough anticipation-time. Six weeks wasn’t enough time to dream about my upcoming trip and to imagine all the cool things I’d be seeing & doing.

Of course, in hindsight, I should have taken more time off and visited Northern Ireland and Scotland while I was over there. Who knew that a global pandemic would crush the airline & travel industries?

COVID-19 has changed things…

Today, I’m not doing as much travel planning. As you can well imagine, it’s difficult to get excited about flying anywhere when my personal view is that airplanes are the petri dishes of the sky. Similarly, long road trips are in the not-just-yet category since I’m not keen on staying in a hotel or going to restaurants.

Right now, I’m taking things day by day. My natural urge to plan has been channeled into cooking and baking. I’m already at home. My kitchen is right there. I have the ingredients and the tools to cook and bake delicious things for myself. Meal-planning is finally receiving the attention that it’s due. Trips to the grocery store are less frequent, but I do buy a lot more when I go. Once home, I start figuring out what to eat right away and how to meal-prep for the upcoming week.

As for investing, I have no choice but to take things day by day. The last time there was a big drop in the stock market was in 2008-2009. I made a huge mistake by stopping my contributions to my investment account!!! Thankfully, I was smart enough not to sell anything but I wasn’t smart enough to keep investing on the way down.

To date, the highest point of the Toronto Stock Exchange was reached on February 21, 2020. Then the market plunged, and kept plunging until March 23, 2020. The TSX has been slowly re-gaining ground since then. (Man oh man was I glad that I didn’t have access to cable TV during this time. I would’ve been a basket case listening to all the “experts” talking about investing.)

Sticking to the Plan

This time around, I stuck to my saving and investing plan. I ignored the headlines. I trusted the example set by history that the stock market will recover. No one knows precisely how, nor can anyone guarantee when the recovery will happen. This time, I decided to take things day by day and to continue to save & invest for my future.

I had a few things going for me. Firstly, I’m still fortunate enough to have my job. There are millions of people who aren’t in the same boat so they’ve had to decide whether to eat today or eat tomorrow. Secondly, I was already debt-free before the pandemic hit. I don’t have to worry about creditors or missing my mortgage payments. My financial foundation is firm. Thirdly, I don’t have cable so I missed a great many of the interviews with the people who predicted that “this time would be different.” I didn’t hear the stories from people who believe that the market could not possibly recover from COVID19.

Finally, I’m older and wiser today than I was in 2008-2009. I’ve learned from my mistakes. Had I continued to invest back then, I’d be so much closer to my retirement goals. My inexperience and fear caused me to sit on the sidelines while the market recovered. In other words, I wasn’t investing when the stock market was on sale. When I finally did re-start my investment program, I’d promised myself that I would continue to invest during the next downturn.

So when COVID19 came long and took a great big bite out of the stock market, I kept my promise. Money earned – money saved – money invested – repeat!

My portfolio still hasn’t recovered completely but I’m much farther along than I would have been had I stopped investing. I’ve been able to my more units in my dividend exchange traded funds. As a results, my monthly dividend payment has gone up considerably. This is a very good thing. I was fortunate enough to be able to make a contribution to my Registered Retirement Savings Plan. As per the advice of an independent financial planner, I invested those funds into a global equity ETF. Boom! I firmly believe that my choice to follow his advise will add a nice little kick to my RRSP in the coming years.

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Weekly Tip: Allocate your money in a way that allows you to invest in the stock market for atleast 15 years. Use broad-based ETFs to invest your money in equities. ETFs move in the same direction as the stock market. They simultaneously eliminate the risks of trying to cherry pick the next Apple/Tesla/Facebook stock. If you absolutely cannot stop yourself from stock picking, then please limit this hobby to only 5% of the equity portion of your portfolio. The other 95% of your equity investments should be allowed to chug along in a broad-based ETF for a long period of time.

Learn from Others!

If I can impart one nugget of wisdom to you today, it is this. You need not make every mistake yourself in order to learn a lesson. You’re always free to learn from others. I’m not promising that you’ll avoid making your own mistakes – that’s utterly impossible. What I am promising is that some of the biggest mistakes can be avoided if you’re willing to pay attention and think about the choices made by the people in your life.

These people won’t all be your family & friends – although it’s important to pay attention to the consequences of their choices too. Sometimes, the people who can teach you important lessons are only in your life for a few minutes.

When I was in high school, I had a part-time job as a cashier in a grocery store. Living at home, I had the luxury of having all of my paycheque go towards having fun with my friends since my parents paid for my shelter, my food, and the other important stuff. I was a very fortunate kid!

Anyway, two of my customers made indelible memories on me. One customer was an elderly lady who came through my till. I don’t recall how the topic of money came up but she very specifically told me to start saving for my retirement. I was a 16 or 17 years old at the time, but her words stuck with me. The second customer was also an elderly lady. I remember watching her compare two cans of cat food, and she was teary-eyed. When she came through my till, she confessed to me that she stocked up on cat food when it went on sale because she ate it herself. At the time, each can cost $0.59. She was tearful because the price had gone up from the last time she’d shopped.

Like my parents & teachers before them, these women provided me with a very important opportunity to learn from others. In their respective cases, the lesson was about money and retirement.

Those two anonymous customers forever changed my perspective on saving money for my future. Here were two seniors, who had very different options at the grocery store. I don’t know their back-stories. I can’t give you any details about their lives. Again, I was a teenager in a cashier’s uniform who rang through and bagged their orders before wishing them a nice day.

Yet, each of them taught me a valuable lesson her own way. From that day forward, I knew down to the marrow of my bones that I had to save a lot of money for my retirement.

When I was in my 20s, I worked part-time in a bank while going to school. One Saturday, a customer came in to pay $20,000 (maybe $25,000?) towards his mortgage. Those kinds of transactions were beyond my skillset as a customer service rep so the loans officer had to process it. After the customer left, I asked the loans officer why the customer had done that. The loans officer took the time to explain to me how the customer’s lump sum payment would knock years of payments and thousand of dollars of interest off his mortgage debt. That was the first time anyone had ever explained anything about mortgages to me.

Once again, I tucked that knowledge away for the future. I promised myself that, once I got a mortgage, I would pay it off as fast as possible by using these magical “prepayment options” that the loans officer had taught me.

Now, I still made mistakes. I didn’t learn about RRSPs until I was 21. So even though, I’d been working part-time since the age of 16 and saving $50 every two weeks in my savings account, I delayed starting my retirement savings program by 5 years. My parents ensured that I filed a tax return each year, so my RRSP room was accumulating every year. I could’ve made a contribution sooner but, alas, I did not.

So what happened at age 21? That’s easy. I read the book The Wealthy Barber by David Chilton. That book changed my life! In addition to starting my RRSP, I began to read more books about personal finance. When I graduated from school and started my career, I had a firmer foundation than I otherwise would have had. Though not perfect, I had a plan for my money.

Due to my choice to learn from others, I started contributing to my retirement accounts at age 21. I forced myself to start an automatic savings program at age 16. I’ve continued to live below my means. This choice has allowed me to always have money for investing. I chose to learn from others and I’ve avoided some of the very worst mistakes that I could have made with my finances.

Again, you need not make every mistake yourself. You have the option to learn from others. Use it!

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Weekly Tip: Set up an automatic savings plan. Part of your paycheque needs to be invested every time you are paid.