Tag: Wealth Creation

Start Planting Your Money Tree

Everyone wants their very own money tree. Financial problems would be so much easier to solve if you could just pick money off a tree and pay whatever needs to be paid. Well, I’m here to tell you that you do have the power to do this. All it takes is a little bit of disposable income, a plan, and time.

By keeping such a magnificent type of fauna alive and at your disposal, you’ll reap the rewards of the harvest for a good long time. The key is to plant the moeny-seeds. In layman’s terms, you have to start investing your money. Then you have to consistently continue to invest your money. The sooner your money-seeds are planted, the sooner they will grow into an orchard of money trees. And who wouldn’t like an orchard filled with money trees?

Planting Seeds Leads to an Orchard

Each time I invest a portion of my paycheque, I’m planting seeds. They’re simply money-seeds, or atleast that’s how I like to think of them. They’re deposited to my portfolio account so that I can buy more units in my exchange-traded funds. Those ETFs are on the dividend re-investment plan. When the ETFs pay me dividends and capital gains, those monies are automatically re-invested into more units of the same ETFs. This creates a perpetually growing dividend-and-capital-gains-paying cycle.

I liken this cycle to the growth of the tree. In other words, my money tree gets bigger and bigger each month as my dividends and capital gains are re-invested.

When I retire, I can let the cycle continue to grow month-in-month-out, or I can stop the cycle by cancelling the DRIP. The dividends and capital gains will still be paid out every single month. Instead of being re-invested, they’ll go towards making my retirement just a wee bit more comfortable. You know – flying first/business class on my travels, monthly massages, grocery-shopping without scrutinizing the prices, whatever little extras my heart desires…

Money I Didn’t Have to Sweat For

Planting money-seeds leads me to earning money that I didn’t have to work for. Dividends and capital gains are passive income. Once I’ve laboured to earn the money-seeds, my labour stops once I’ve invested them. Thirty years ago, I opened my first RRSP and invested my contribution. That investment is still generating money for me… and I haven’t had to lift a finger.

Most of us work hard for our money. In colloquial terms, we have to sweat for it. Some of us have to bleed for it. Wouldn’t it be nice to earn money the easiest, legal way possible? Can you imagine having money just flow to you every single month?

There is a way to do it, and it’s called investing. You put in the work up-front and invest part of every paycheque that you earn. The third step is to sit back and watch the money roll in.

I will be very honest with you. Dividend investing takes a very long time, unless you have 5-figure sums to invest every month. If you do it long enough, you’ll be earning amounts every month like this Anonymous Fellow. In the interests of transparency, I’m willing to admit that it’s taken me 12 years to get to an annual dividend amount that would sustain my current lifestyle. However, I’m an amateur dividend investor. Had I made smarter choices way back when, then I would be in a much better situations. No sense dwelling on it now because I cannot go back and change things.

What I can do is give you some suggestions of people to learn from if you have any interest in learning how to plant a money tree for yourself:

Tawcan

Dividend Dream

My Own Advisor

And I’m sure there are many others out there. These are just the people whose stories I’ve followed for the past few years. They’re teachers. They’re transparent. They’re honest about the challenges they’ve faced and the mistakes they’ve made. I’ve learned a lot from them and I wish they’d bee around when I started my own investment journey. But since I’m almost older than the internet, I won’t blame myself too, too much for not having found them sooner.

Choices Have Consequences

We’re all old enough to know that there are consequences for everything we do… and don’t do. It’s no different with investing. If you invest consistently & profitably, for a decent period of time, you’ll have a nice cushion of cash waiting for you in the future. Planting your money tree today is one of the very best things you can do for Future You.

It’s always a good idea to choose yourself. Unless you’re a child, you’re the only one responsible for identifying what you want from you life and how to make your dreams a reality. Doing so will take some planning, a fair amount of time, and definitely a little bit of money. And as one dream made real, you’ll be able to set your sights on make another one come true. In the words of Ramit Sethi, you need to know how to build your Rich Life.

And if you choose not to invest, well… then you’ll have to depend on the kindness of strangers, your family & friends, or a job for the rest of your life. You’ll need money until the day you die. Pretending otherwise is foolish and short-sighted. At the end of the day, it’s better to take control now and take the steps necessary to build up a cash cushion that will keep Future You fed, warm, and happy. And don’t you want that for Future You?

Making Easy Money With Dairy Cows and Steers

Yay! The time has finally come. You’ve opened your brokerage account and you’re ready to start filling it with money-makers. It’s time to ask yourself if you want dairy cows or beef cattle?

Steers are grown to become beef. You buy the calves, grow them up, then send them to slaughter. If you’re very lucky they grow nice and big while you own them, then return a good price to you once sold. Of course, between buying the calf and selling the steer, you’re going to have to hope that it doesn’t get sick or getting into any kind of accident that damages its value. You’ll have to wonder about the kind of feed its getting and whether the rancher is taking good care of it on your behalf. And you most definitely don’t want the animal to die, since that means you’ve as good as burned your money in a pyre. Raising a calf to a full grown steer entails a lot of hope that nothing goes too terribly wrong between buying and selling.

On the other had, dairy cows produce milk. Good ones produces 9 gallons each day! Such a cow is never sold, just the milk that’s produced. So long as you own healthy and productive dairy cows, you’ll get paid when the milk gets sold. It’s reliable, steady income – all you had to do was buy the cow. Easy peasy, lemon squeezy.

So which one do you think you’d prefer to own in your brokerage account?

Blue Lobster… what’s wrong with you? Why are you talking to me about cows?

For some newbie investors, thinking about cows is easier than thinking about financial products.

Since this blog is simply a collection of my rambling thoughts about money, I’m using an analogy that I heard this week. Investments that produce dividends are like dairy cows that produce milk. However, growth stocks are like beef cattle. You want to buy these stocks when they’re cheap (young & small) and sell them when they’re expensive (big & strong) so that you can reap the increased value.

For my part, I was a staunch believer in dividend-paying exchange-traded funds, i.e. the dairy cows. I still love watching dividends pour into my brokerage account every month.*** Every month, a modest 4-figure amount of money flows into my account and is automatically re-invested into more ETF units. It’s a wonderful self-perpetuating cycle that generates more and more dividends every month.

That said, I’m learning more and more about growth ETFs and mutual funds. They might pay dividends or capital gains, but they might now. These are products that are focused on growth companies. Generally speaking, they are way more volatile than my dividend-paying products. Their returns are higher and their losses are deeper, but over the long run they are probably the better bet for long-term investors. Again, I’m suggesting – not guaranteeing – that investing in a broadly-diversified, equity-based ETF will give you higher returns over 10+ years. If you’ve got a long investing horizon, then that’s where you should put your money.

I want to make another thing very, very clear.

I do not invest in individual stocks.

Before continuing, please go back and re-read the last two sentences. I don’t want there to be any confusion whatsoever. I do not invest in individual stocks.

I’m not interested in learning how to master that art, but I can see the benefits for those who do. If learning how to buy individual stocks is something you’re interested in, then visit Tawcan’s blog. He buy individual dividend-paying stocks and is earning a very impressive amount of dividends each year. Let’s just say that his herd of dairy cows is sizeable! I’m pretty sure the same analytical principles can be applied to buying growth stocks too, but that’s not my field of expertise or interest so enjoy yourself. I’ll stay here and stick to ETFs since they’re cheaper than mutual funds and easier for me to understand. Also, I’m a bit lazy and don’t mind paying minuscule MERs to someone who’s already done the work for me.

Finally, there’s no rule saying that you can only have one and not the other. Maybe you want a bit of both. For my part, all of my new money is going into VXC with Vanguard Canada. I switched to buying steers when the market was on the upswing in 2020. Had I been paying attention, I would’ve started buying steers in March of 2020 when the market was at its bottom. Oh, well – better late than never! I wised up and switched my investments to growth-oriented ETFs. It was the right move for me.

Keep in mind, I didn’t sell my dairy cows. In other words, I kept my dividend-paying ETFs. After nearly 10 years of faithfully investing part of my paycheque, the dividends from those ETFs are going to comfortably support me in my retirement.

So nearly 3 years after the stock market was pummelled at the start of the pandemic, my portfolio is the healthiest its ever been. You have the power to do the same thing with your portfolio. Despite the doom and gloom of the headlines, you’re in this for the long haul. Like investors who came before you and who didn’t sell at the bottom, you can make money over the long haul. All you need to do is add some dairy cows, or some steers, or a little bit of both, to your portfolio. Invest a little bit of every paycheque you earn and do so no matter what. Don’t spend your dividends and capital gains. Instead, re-invest them every year and let time do the rest while you go about building the life that you want for yourself.

It may not always be easy, but it really is just that simple.

*** For the very first time ever, I’m on track to receive enough total annual dividends to cover all of expenses for the year barring any big financial emergencies! It’s a very good feeling.

Pessimism & F.I.R.E. – A Little Goes A Long Way

I have a secret to share with you… I think that a little bit of pessimism goes a long way towards achieving financial independence. When most of us start working, we’re chipper and happy and excited to be getting a paycheque. It’s lovely to have some spending power! And most of us use that power as quickly as we can. Sometimes, that results in huge debts that chain us to a paycheque. By the time many of us have lost faith that we will one day work at something we love, the financial obligations that were picked up along the way keep us tethered to employment. Without another source of money to replace our paycheque, we’re essentially stuck.

No one ever talks about this aspect of adulting in their graduation speeches… Those speeches are flowery and encouraging, and urge graduates to pursue their dreams. That’s fine and good and great if you can do it. However, I do wish someone could work in a nugget or two about building up some money on the side… just in case you’re among the unfortunate multitudes who won’t have the opportunity to do what you love and receive a handsomely large paycheque for doing it. But I digress…

Take some time to seriously ponder how much life-satisfaction you anticipate receiving from paid employment. Doing so is a powerful catalyst. I can almost guarantee that you will be motivated to pursue financial independence sooner rather than later. It takes a few years, but we all eventually realize that not everyone who works hard gets rewarded. There are those who aren’t good at office politics, and have no desire to expand their skill set in that area. Unfortunately, some people are the victims of harassment and bullying in the office. These are the main reasons why it’s a seriously good idea to add a drop of pessimism to your views on saving for the future.

It won’t hurt to consider what your options will be if you decide that you hate working and that you want to stop doing whatever it is that you’re paid to do. How will you pay for your life without an employer giving you a paycheque? Do you want to work even harder than you do now by starting your own business? Or would you prefer enough passive income to fully fund you the life you dream of? Maybe you’d enjoy the combination of a lower-paying-yet-absolutely-enjoyable job that’s bolstered by passive income from your investments?

Now, there’s always the possibility that you’re like a couple of my friends who absolutely love their careers. Like everyone, they have bad days at work but, for the most part, they love going to work. Read that again – they love going to work. They would do their jobs for free – that’s how much they love going to work!

It’s mind-boggling to me. Even when I loved my job, I never loved it that much. And over time, my like for my job has dwindled considerably. Many accolades and much credit should be given to Young Blue Lobster. Twenty year ago, YBL knew that working to 65 wasn’t a prominent dream for our life. YBL quickly paid off student loans, a car loan, and a mortgage. YBL stayed out of debt and re-directed those former debt payments to savings that were eventually invested in our TFSA, our RRSP, and our non-registered investments. Even before locating the F.I.R.E. corner of the internet, YBL was pursuing financial independence and funding our dream of retiring early.

At the time, YBL had an inkling that having a salary-replacing cashflow on the side would be a very good thing just in case anything went wrong with the regular paycheque. Looking back, I have to say that YBL was 100% correct. Our little army of money soldiers bolsters my investment contributions every month. In a year or two, those monthly dividend payments will exceed the contributions from my paycheque. That’s not too shabby as far as financial achievements go. Without that little sliver of pessimism fuelling my decisions way back when, my current side income would be meagre.

I want you to pursue your dreams. You’ve got one life and it should be the best one that you can achieve. At the same time, a touch of pessimism can help you to focus on how you can best make those dreams come true. Pessimism… a little goes a long way.

Attaining Your Money Milestones Feels Awesome!

I think it’s important for you to have money milestones, some kind of target that you want to achieve with your money. Maybe it’s getting the first $100 into your emergency fund. Maybe it’s paying off your debt or getting to positive net worth. Perhaps you want to ensure that your portfolio kicks off enough money to pay for your current standard of living. They can be things you want to accomplish in the next six weeks or they can be priorities that will take you years to fulfill. However long it takes you to attain your milestones should not dissuade you from pursuing them. Like they say, from the smallest little seed did the mighty oak grow. Start today.

Whatever your milestones are, it’s a good idea to pat yourself on the back once you’ve achieved them. After all, you worked hard to achieve a goal and attention should be paid. You should thank yourself for the effort and discipline it took for you to achieve your financial goals. If you hadn’t committed, then it’s pretty likely that you wouldn’t have met your money milestones.

Back when I was a kid, I bought myself a reference book about money called Personal Finance For Canadians by Kathleen H. Brown. This 552-page book was one of my very first personal finance books and it led me down the rabbit hole of financial planning. Next up – The Complete Idiot’s Guide to Getting Rich by Larry Waschka. This is one my very favourite money books. The latter had a section about the 5 levels of wealth. You attain Wealth Level Two when your portfolio’s returns matched your contributions. In other words, if you’re contributing $1000 to your portfolio every year, then WL2 starts when your portfolio generates an annual return of $1000.

As I was updating my spreadsheets*** this week, I realized that I’m now at Wealth Level Two. I’ve hit one of my money milestones. My portfolio’s return is more than my contribution. Hooray for me! It took me a blood long time to hit this stage, but I’m very proud of myself right now. To quote one of my favourite little people, “I did it!”

I’ve made money mistakes over the years – see here, here, and here. Due to my many money mistakes over the years, it’s taken me since 2011 to achieve this particular milestone. That’s 12 years! Had I been smarter or more insightful, I don’t think it would’ve taken me this long. I can’t bear to think about how much further along I would be if I’d started investing when I bought the book…last millennium! That said, I’m still pretty proud of myself. I took the initiative to get started and to commit to bi-weekly contributions to my non-registered investment account, no matter what. Whether the market was going up, going down, or going crazy, I stuck to investing a chunk of my paycheque every two weeks. As my salary went up, so did the investment amount. I continued to live below my means. Most importantly of all, I never pulled my money out of the market, even when we experience that gut-churning stock market plunge in 2020 and the more recent volatility of 2022.

Please do not think that I didn’t face temptations to spend my investment contributions on today’s wants instead of my long-term goals. I did, but I know myself. I knew that if I didn’t rely on automatic transfers, then I’d likely spend the money on stupidities. Instead, I put technology to work and lived on whatever was left. Automation is my friend. Once I had an automatic transfer is place, it would take a serious threat to my survival and/or livelihood to persuade me to halt the automatic contributions to my future. Concert tickets, travel, a newer vehicle – all of these could be paid for with whatever was leftover after my long-term goals were funded. The Fear of Missing Out and You Only Live Once philosophies did not guide my investing decisions.

When I first read those two reference books, I was a young adult who didn’t come from money. My parents worked hard, but they were not rich. They taught me how to save money in a savings account and how to buy Canada Savings Bonds. They invested in a few stocks so that I learned a little bit about the stock market and how to earn dividends. The rest of it mutual funds? Exchange-traded funds? Real estate investment trusts? Tax Free Savings Accounts? Canadian Deposit Insurance Corporation? Other investment vehicles? Real estate investing? My parents definitely lit the fuse when it came to investing for my future. However, it was up to me to learn about the other stuff on my own.

It took quite a long time, but so what? The time was going to pass anyway. Today, I’m seeing the results of my discipline. It’s paying off. I’m hitting my money milestones, and that makes me smile with happiness and joy. My life is good. I have everything I need and most of what I want. A few smart choices in my past has allowed me to create a good financial life for myself. I’m attaining my money milestones, and there’s a good chance that I’ll attain the rest of them too.

You can do this. First, identify your money milestones. Secondly, pick an amount of money to direct towards achieving them. Thirdly, set up an automatic transfer so that your money is whisked away before you get a chance to spend it on not-your-money-milestones. Fourth, never stop reading about money. Learn, learn, and learn some more. Fifth, congratulate yourself for starting your financial journal then do so again each time you attain your money milestones.

Will it be easy? Probably not. There’s an entire industry captained by the AdMan and his trusty sidekick, the Creditor, which exists solely to part you from your cash. Even without AdMan and Creditor, inflation is currently kicking everyone in the soft bits so income doesn’t go as far as it used to. Here’s a little tip from me to you. It’s never easy to save and invest. There’s always a reason to put it off.

Don’t let that stop you. If you can only start with $1, then start with $1. Work your way up from there. Get in the habit of saving and investing your money. Once it’s investing, leave it alone to compound. Save – invest – learn – repeat. Time will take care of the rest. Your first money milestone is to start.

*** By the by, I have to admit that I love spreadsheets. They’re rewarding, a visual reminder of how far I’ve come by investing consistently. One of my spreadsheets tracks all the dividend payments that I receive. As you know, I’m a big fan of dividend-paying exchange-traded funds. I’ve invested a good chunk of my portfolio in VDY and XDV. I have other dividend-payers as well, individual stocks mostly, but these two ETFs are the powerhouses of my portfolio.

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.

Doing Your Best Is the Best You Can Do

This year, I will have been engaged in DIY-investing for 3 full decades. Wow! It sounds like a long time, doesn’t it? Believe me when I say it went by quicker than two shakes of a lamb’s tail.

Have I made mistakes? Plenty! Did I have too much hubris along the way? Probably. Could I have made better choices if I’d had more information earlier? Absolutely.

Lesson learned – downturns are a fantastic time to be investing in the stock market.

Looking back, I see now that I could’ve made better choices. During the 2008 financial crisis, I stopped contributing to my investment accounts for 6 months. The stock market was extremely volatile, and the value of my investments was decreasing on a weekly basis. I hit “pause” on my bi-weekly contributions to my non-registered investment account. Doing so was a huge mistake!!! This was the best time to be investing my money since the stock market was on sale.

As the pandemic took hold in 2020, my investments plunged. I stopped myself from checking my balances every day once my losses hit a quarter million. To this day, I still have no idea how low my investment portfolio sank because it was too stressful for me check the number. That said, I never stopped investing. Thankfully, my employment was secure so I continued to divert money from every paycheque to my investment account.

And I stuck to my investment plan in 2022, despite the market dropping and dropping and dropping some more. Last year was definitely not an easy ride in the stock market. All the gains I’d earned in 2021 were essentially erased!!! No matter – I did not repeat the mistake of Younger Blue Lobster. I did not “hit pause” on investing this time around. This is what I’ve learned: regardless of whether the market is up or down, investing in well-diversified, equity based ETFs for long-term growth is a good thing, .

Lesson learned – start today. Procrastination simply means that your money isn’t working for you.

Procrastination hurt my financial goals. After paying off my mortgage, I waited roughly 5 years before I started to invest in my non-registered investment account. I’d been very diligent about putting money away in my RRSP every single year, so I can pat myself on the back for that choice. However, I spent too many years thinking about starting an investment portfolio instead of just starting it.

In other words, I knew what to do… but I just didn’t do it.

Please do not make this mistake. Open the account today. Set up the automatic transfer today. The sooner your money is invested, the sooner it will start producing returns for you. Believe me when I say that 30 years goes by way faster than you think it will. You don’t want Future You to live with the regret that you didn’t start as soon as possible.

Lesson learned – invest in equities while you’re young.

When I started my non-registered investment account, I chose to invest in dividend-paying mutual funds. Eventually, I switched to dividend-paying exchange traded funds because ETFs are cheaper than mutual funds. Even today, it makes no sense to me to pay more money for essentially the same product.

I was quite proud of myself! Turns out, I should have been investing in equity-based ETFs like VCN or VXC or VUN. (Yes – I’m a fan of Vanguard Canada. No – I’m not being paid for mentioning them in this post.) Investing in equities means investing for long-term growth. And long-term means 10 years or longer. Hindsight is 20/20 as my father used to say. The stock market experienced very good returns 2009 and 2020. Had I invested for growth instead of for dividend income, I would be so much closer to my financial goals by now.

In the interests of transparency, I have since adjusted my investment plan. Since October 2020, I’ve been investing in VXC. I didn’t sell my dividend ETFs – they throw off a nice annual stream of income. I allow my dividends to compound via the magic of the DRIP, aka: a dividend re-investment plan. New money goes into my equity-based ETF. God-willing, I have atleast another 10+ years to live so I’m expecting to see good returns from my equity investment.

Lesson learned – get help as soon as you can afford it.

Remember when I said that I started my investing journey 30 years ago?

Well, I didn’t see a financial planner until 2020. First of all, I wanted to see someone who wasn’t paid by the investment industry. As far as I’m concerned, there’s a conflict of interest if the person giving me advice is paid by the people whose products are being sold to me. That person’s paycheque is dependent on selling products, and is not dependent on giving me the best advice for my particular circumstances. I wanted a someone who adhered to the fee-for-service model of delivering financial planning advice. Others may feel differently, and that’s their prerogative. I would only be satisfied if I could find someone who I knew was working for me alone.

In 2019, I obtained the name of an independent financial planner. His time and advice cost me a four-figure amount, so not exactly cheap but still a very good use of my hard-earned money. The financial planner did a full review of my finances and investments. He prepared a detailed binder filled with information and projections of how long my money would last. He told me that I could retire 2-3 years earlier than I’d planned. And he didn’t try to sell me anything. In short, he didn’t have any conflict of interest because he was working for me – not for an investment company.

Should I have hired a financial planner earlier in my investing journey? Yes – probably. If I’d had the same information at the 10-year or 15-year point in my journey, then I could have course-corrected earlier.

Had I met with him at the start of my investing journey, I probably would’ve gone off-course at some point. Remember that hubris I was talking about? Well, I had it in spades! I’ve still got quite a bit but I’ve also gained the wisdom to know that there’s still a vast amount of knowledge for me to acquire. Independent financial advice at the very start of my journey might have been wasted.

Lesson learned – I need not make every mistake myself.

Mistakes are learning opportunities. No one likes to make them. For many of use, mistakes have meant that we’ve been chastised, mocked, or otherwise bullied by others for making them. As a result, we’ve learned to shy away from these teachable moments.

The possibility of making a money mistake paralyzes a lot people. As a result, they don’t ever start saving or investing. It looks like procrastination, but it’s really just good, old eternal fear. Here’s a little tip from me to you. Not every mistake has to be mine in order for me to learn from it. I’m perfectly capable of learning from other people’s mistakes… and so are you.

Look around and ask yourself if you want to make the same mistakes that you see other people making. If the answer is “No”, then make the changes you need to make so you can do better. No one can guarantee that making those changes will be easy. As a matter of fact, I’m quite certain that it will be somewhat challenging depending on how much change you decide to make. Do it in bite-size chunks. Break the task down into manageable pieces, and do one task every time you get paid or on whatever schedule you choose.

The level of difficulty associated with change you want to make should never be a reason to deter you from making it. Do not continue to make mistakes simply because it’s the easier path. That route leads to disappointment and regret. You have one life so prioritize what you want out of it. Your dreams are important to you, so you should be doing what needs to be done in order to bring them to life.

Life Gets in the Way

I’ve enough life experience to know that life gets in the way of the best laid plans. And since this is a personal finance blog, I’m going to try and expound on this idea as it impacts your money decisions.

It’s easy to tell people to invest consistently. Showing others how to set up automatic transfers to a brokerage account is a matter of a few graphs and maybe some one-on-one coaching. Reminding people of the importance of always living below their means is a simple task. Wanting to do those things is as easy as falling off a log!

The reality is that doing those things is NOT EASY. Ideally, everyone would be able to invest money from every single paycheque, without fail. Being able to do so for years and years requires that a lot of things go very right for a very long time.

First of all, you need to earn an income that has room for saving. If every penny you earn is spent on shelter, food, transportation and utilities, then where is the “investing-money” going to come from? Are you willing to cut back to only eating twice a day? Maybe you won’t bother paying for electricity during the summer months? Maybe you wouldn’t mind only showering once a week to save on water?

My point is that there is an income level at which it is unrealistic to expect someone to save. They would be living a life of deprivation, such that their basic needs are not being met. It would be cruel and perverse to expect that they would deprive themselves even more.

So let’s say someone is making enough to cover all of their needs and most of their wants. They might even have enough for a luxury or two. These are the people with “investing-money”. They can live below their means and still live a comfortable life.

However, life can get in the way of their investing plans too. What if a family member needs financial help? Or what if a vehicle needed to commute to work is totaled and the insurance payout isn’t enough to buy a replacement in cash? Maybe the parents’ retirement income isn’t enough to keep the lights on so they need a few hundred dollars every month to keep from being hungry? What if an employer goes bankrupt and another position isn’t to be found for another 8 months? What if illness prevents one from ever working again?

My point is that you can only invest month-in-month-out if everything goes well all the time.

This isn’t the reality for most. For the majority of us, there are always expenses that crop up and demand that we make a choice. You can personally make all the right personal finance moves then have your life upended by a motor vehicle or workplace accident that requires months, maybe years of rehabilitation. No one chooses to be hurt in this fashion. Being a great employee won’t save you if your employer goes bankrupt during a recession and no one else is hiring. Similarly, that status won’t help you if the only jobs you can find are minimum wage or just above that level. Let’s be honest. You cannot invest what you don’t have.

Even if you have an emergency fund, there’s no universal law stating that your emergency will cost as much as or less than what you’ve socked away. Similarly, there’s no prohibition against you experiencing more than one serious emergency at a time. And if you are “lucky enough” to have an emergency that falls within the capacity of your fund to handle, then you’re in the position of having to replenish your emergency fund.

So unless you’re income has increased, you’re faced with the choice of using your money to invest or to replenish your emergency fund. After all, you only have a finite amount of money. You owe it to yourself to make the best use of it. Having an emergency fund is a cornerstone to taking care of your financial needs. Yet, investing for the Care and Comfort of Future You is also extremely important.

It’s called personal finance because it’s personal. There is no one right answer for everyone. With each passing day, I am convinced that it’s a rare few who can invest without fail over a lifetime. While many have the intention, the vagaries of life can sometimes impede the implementation of such a plan.

Do me a quick, free favor. If you’re doing your best to save for your future, then pat yourself on the back. You still have to survive today. And if that means lowering your investment contribution to $10 per month, then so be it. I am not going to suggest that you starve today so that you can eat tomorrow. If you’ve used your emergency fund, replenish it. If you don’t have an emergency fund, start one. If you’ve lost your income, then preserve your money until you’ve secured another source of income. If your family needs help to avoid ending up on the street, then make the decision that lets you sleep well at night.

Life gets in the ways of the best laid plans. That doesn’t mean you stop planning. It means that you adjust and tweak your investment plan as necessary, without abandoning it completely.

Money Should Work Harder Than You Do

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

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

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

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

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

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

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

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

If you wanted, you could do the same thing.

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

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

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

Taking Stock & Making Tweaks As Necessary

One of the ways to ensure that you meet your goals is to review your progress along the way. Doing so involves taking stock and making tweaks as necessary. No journey is perfect for all people in all circumstances. That’s simply not possible. As a matter of fact, there is no such thing as a perfect journey for anyone. There will always be challenges along the way.

That said, I’m equally convinced that there are some universal mistakes. These mistakes have the power to derail everyone’s path for a very long time if not rectified as soon as possible.

Atleast once a year, you should be assessing your progress. The gyrations of the stock market are out of your control so don’t worry about them. Continue to invest into the market through dollar-cost averaging (my personal preference) or through lump-sum investing. However, you should be taking stock of the things that are in your control and tweaking them as necessary.

  • Have you increased the amount you’re investing from your paycheque?
  • Did you set up an automatic transfer from your paycheque to your investment account?
  • Are you eliminating subscriptions that you never use so that you stop wasting money?
  • Do you track your expenses so that you know exactly where all your money is going?
  • Have you ensured that the MERs you’re paying are all under 0.5%?
  • Are you using a no-fee online bank account so that you don’t have to pay service charges?

In addition to controlling what you can, you should also assess whether you are making any of the following mistakes. And if you are making them, then take the necessary steps to stop. Eliminating these mistakes from your life will allow your money to grow faster so that you can live the life you want.

Again, this is a personal finance space so I try to stick to personal finance topics. Here we go.

Mistake #1 – Never Getting Started

It’s hard to build wealth if every nickel is spent. In order to invest, you need to live below your means and send a portion of your paycheque to your investment account. You can start low and work your way up.

When I was still living in the bosom of the family home, I was able to send $50 to my savings account every 2 weeks. My parents were paying for the big stuff, so I had a leg up on that front. Once I moved out and started working, it was far harder to save that $50 every two weeks. However, I was used to it so I kept doing it even though all of my expenses were on my shoulders at that point. The savings habit had been ingrained.

Start today, where you are. If you can only set aside $5 for investing, that’s better than $0. You’ll increase the amount as you’re able. When a debt payment is finally gone, direct 80% of it to your remaining debts and send the other 20% to your investment accounts. There will come a day when all your debts are gone. Those former debt payments are yours to invest and spend as you see fit.

Mistake #2 – Paying Higher MERs Than You Should

Should is one of those words that invokes judgment. Good. You should be ashamed of yourself for paying more then necessary for your financial products. If there’s a mutual fund that charges a 2% MER and an ETF that charges 0.35%, and they’re both invested in the same things, then use the ETF to build your investment portfolio. Paying an extra 1.65% seems unimportant but it’s a serious blow to your ability to build wealth for Future You. Higher MERs compounded over long periods of time result in the eventual loss of hundreds of thousands of dollars from your portfolio. Money that could have been left to compound over decades was instead paid to someone else via MERs.

Mistake 3# – Failing to Master Your Credit

This one is tricky. Everyone needs credit at some point, but staying out of debt is extremely important if you want to build wealth. It’s extremely hard to invest money if those same dollars have to be sent to a creditor for a past purchase. Maybe you have student loans, credit card debt, veterinary debt, car loans, personal loans to family & friends. It doesn’t matter.

You need to get rid of it. Credit is a tool. It’s also the only way to go into serious, crippling debt if it’s not used properly. Always be very, very cautious about using credit. Pay the bill in full every month. If you can’t do that, then don’t use credit. Get a promotion to increase your income. Find a second job. Start a side hustle. Sell your stuff. Eliminate the fat from your budget and only spend on needs. Do what you have to do to pay cash.

Getting into serious debt is very easy. Getting out of it is very, very hard.

Mistake #4 – Ignoring Your Priorities

Just like the rest of us, you have one precious life. How do you want to spend it? Is there something that’s very important to you? What do you want to accomplish, experience, see & do before you shuffle off this mortal coil? How do you want to spend your time?

Once you have answers to these questions, you’re better able to plan how to spend your money.

Here’s the thing. It won’t always be easy to stick to your plan due to the influence of others. You have family and friends. They love you and they want to spend time with you. So they invite you to do stuff with them – concerts, travel, sporting events, poker night, whatever. And you love your family and friends so you want to be there with them too.

I’m not suggesting that you always say no to invitations, but I am warning you that it won’t always be easy to stick to your priorities. If you’re trying to get out of debt, others in your life might not understand why that’s important to you. Maybe you’re saving to pay cash for a used car. Others might try to persuade you that “everyone” has a car loan so why are you trying to be different?

Now You Know

When you know better, you do better. If you see yourself making mistakes, stop making them. They’re only harmful or fatal to your financial goals if you allow them to continue. Once you’ve rectified them, then you’re moving closer and closer to the life you want for yourself.

You’ve got nothing to lose by spending a few minutes each year taking stock and making tweaks as necessary.