Wednesday, October 19, 2011

Net Worth Update: October 15, 2011

So, this month, I did sell (*gasp*) some of my investments that had become overpriced. I then bought them back a few days later, after they dropped again, all without missing a dividend. Ha.

My goal progress increased by about .45%  (from .739% to .784% of my goal of $1,000,000 dollars net worth).


(This post summarized my current net worth in an easy to read table - It's a snapshot, so as unforeseen expenses or windfalls accrue in the month, this will become less relevant.)


Net Assets Sept-30-11 Oct-15-11 Change %
Emergency Fund
$ 1,000.00 $ 1,000.00
$ -
0.00%
Taxable Accounts
$ -
$ - $ -
0.00%
Taxable Brokerage $ - $ - $
0.00%
TFSA Brokerage (Book) 6872.44 $ 7277.36 $ 404.92  6%
RRSP Accounts $ 565.00
$ 565.00 $ - 0.00%
Stock Options $ - $ - $ - 0.00%
ESPP $ - $ - $ - 0.00%
House $ - $ - $ - 0.00%
Receivable (Payable) $ - $ - $ - 0.00%
Other Assets $ - $ - $ - 0.00%
Total Assets 8437.44 $ 8842.36 $ 404.92  5%
Liabilities











Credit Cards
$ - $ - $ - 0.00%
Mortgage $ - $ - $ - 0.00%
Tax Liabilities $ - $ - $ - 0.00%
Other Liabilities $ - $ - $ - 0.00%
Total Liabilities $ - $ - $ - 0.00%
Goal Progress ($1,000,000 CAD)
(Investments + House - Liabilities)
$ 7392.44 $ 7842.36 $ 409.92 .784% 
(Total)
Net Worth 8392.44 $ 8842.36 $ 409.92  5%


(This chart is a modified version of Brien's 'Net Worth' chart from www.2millionblog.com. It is used with permission.)

Friday, October 14, 2011

Giving a Friend Permission to Spend


I have a friend at work who fulfills any and all of his wants, on a whim.
Whenever he has more then a $100 in his chequeing account, he immediately liquidates it on a want.
If there isn't quite enough to cover the want, then it goes on a credit card.

This would be a decent, if future-less life strategy, if he paid off his credit card every month, and had no debt.
The problem is, he has nearly $30,000 of debt in a line of credit.

He will come to me asking for advice on his most recent want.
I tell him the same thing every time.
  1. Make an emergency fund of $1000.
  2. Set a small monthly amount (~$100) for discretionary spending.
  3. Pay off the debt with everything left over after necessities.
He does not follow this advice.
Instead, he will come back to me for more advice.
Then I realized something.


He is asking for permission to spend!


I  I think this is why we have such a strained friendship at timesonly give him permission to spend a the small discretionary budget, and. Personally, I don't feel a need to spend money all the time; I am usually happy with inexpensive or free diversions.

It has gotten to the point where I can't even bear to speak to him about money anymore.
Everytime I tell him to save money and pay off his debt, he will leave depressed.
Worse yet, he will come back to see me again with a new toy in hand, happy as a clam.

He knows that this is not a healthy pattern of behavior, but he continues never-the-less.




What can we do to help this wild spendthrift?

There isn't much we can do directly.

But, we can make our frugal lifestyle seem better and better every time we see them.

We can also show them a calendar that states exactly when you're planning to retire, and how it is many years (maybe decades!) before they even thought possible.

Then, explain that the date keeps inching earlier and earlier due to our good habits, and putting windfalls towards it.

Leading by example, we can help those without the natural willpower to save and invest.



EJ

Thursday, October 13, 2011

Planning Ahead - How to make goals for your future - Pt 2.

Yesterday, I talked about the levels of goals I use.
Today, I'll talk about how to use those levels to speed your progress to making your dreams come true!



Jack, Dreams are silly. 
Dreamers are lazy and always fail.

This is incorrect.
Dreamers are the visionaries of the future.

Many of the most successful (and famous) people in the world are dreamers.
CEO's, actors, inventors, pilots, astronauts, scientists, etc.

These people use their passion to do something that isn't commonly thought possible, and make that dream come true by following through.

I believe passion for dreams is at the heart of every goal (and success).

If you can't feel a warmth in your heart for a goal (or the payoff of that goal), then I believe it's nearly impossible to achieve it.



Take your big goal and make it smaller.

No, I don't mean moving to Idaho instead of Australia.

I mean you should break down your big goal into smaller, and more easily accomplished 'pieces'.

If you try to 'move to Australia on only $380.50' then you will be sorely disappointed when you fail to succeed on that goal.

But if you put that $380.50 a week into your 'move to Australia' fund, then you have accomplished a 'piece' of that larger goal. You can feel proud of that. You will be moving towards meeting your goal. And every time you do it, and see the balance increase, you will feel empowered and accomplished.

This sense of accomplishment helps drives us to our goals!



Build 'sub-goals' from the pieces of larger goals.

Take all of those large goal 'pieces', and make them into small 'sub-goals'. Smaller goals are easier to follow through on, and still give you a sense of accomplishment.

Plus, many small efforts will nearly always provide a better result then one large effort.

This is true in goals, and also in investment.



Putting it all together.

Let's run with the example about the person that wants to move to Australia.
Imagine that the person created sub-goals when she:
  • Broke down the saving into a weekly amount.
  • Concentrated on searching for good, discounted housing in Australia, instead of moving into a more popular, expensive area.
  • Worked hard to lineup a job for her when she gets there.
All of these smaller 'sub-goal's have a positive effect on her chances of success.

Immediately
Cost to move to Australia immediately (housing, travel costs, no job): $ 200,000
Cash in pocket this week: $380.50
Immediate goal success rate: 0%

3 year deferral
Cost effect of deferring move 3 years: $120,000
(hunting for discounted housing, travel, and lining up a job in Australia)
Cash in hand from saving $380.50 a week (@ 1.5%) for 3 years: ~$60,780
Goal success rate: ~50% - She is short by approximately half. She may be able to make it, but maybe not.

5 year deferral
Cost of deferring move 5 years: $110,000
(hunting for discounted housing, travel, and lining up a job in Australia +1)
Cash in hand from saving $380.50 a week (@ 1.5%) for 3 years: $102,945
Goal success rate: ~92% - She has almost the entire amount in full, and has and excellent chance of making a good life in Australia.

By saving up, and achieving sub-goals, she has changed her chances of success from 0% to over 90%.

It's very similar if you have any sort of 'overwhelming' large goal, like paying off a house, or investing for passive income.



Moral
If your goal is overwhelming, break it up into smaller pieces that are easier to accomplish. 

Then get out there, and Start Accomplishing!



EJ

Wednesday, October 12, 2011

Planning Ahead - How to make goals for your future - Pt 1.


Jack, I'm trying to get my life in order, but I'm not making any progress!
How do you get to your dreams?

I'm not very good at planning, but I am quite good at making (and reaching) goals.


Goals.

Take a long look at that word - It's going to give you bulls-eyes on the wall to aim for. Without these targets, much of your efforts will simply not move you any closer to where you want to be (your 'dreams').

I personally imagine 5 main levels of goals:



Daily Goals.

These goals are very simply, easily attainable goals that you can accomplish in about a day.
Examples would be:
  • Cutting the lawn.
  • Browsing over your investments.
  • Rolling some coins to deposit in the bank.
  • Reading a self-help book.
  • Learn a basic part of a new skill.
  • Clean the house.
  • Write a few pages for a book


Short-Term Goals

These goals are a little more involved, as you have to start to apply some concerted effort to complete them. They should span about one week.

  • Get through the work-week.
  • Search for & research a new car.
  • Clean up a storage unit & dispose/donate old items.
  • Prepare for a large social gathering.
  • Research and Invest some money in an equity.


Medium-Term Goals

These goals are those that you will have to revisit quite a bit over a longer period of time to complete. These will generally take you approximately one to three months.

  • Search for / inspect a new home.
  • Earn a paycheque.
  • Write a few chapters for a book.
  • Pay off a small portion of debt.
  • Teach someone else one of your skills.


Long-Term Goals

These are goals that will need to have a large amount of additional effort put towards them for a long time in order to be fulfilled. This group is where you place any goals that you have a decent idea of the completion time, but will take over three months.

  • Paying off a house.
  • Paying off a large debt.
  • Living off passive income


Lifetime Goals

This is where goals that are not 'explicitly plan-able' go. That is, you are not able to make an decent, short-term estimate about how this is going to happen yet. When you do have the means to make a fairly accurate estimate of when this goal will be fulfilled, then move it into the 'long-term' goals.

  • Live off passive income.
  • Find a life-long partner & raise a family.
  • Travel or move someplace far away.
  • Purchase a large piece of property in the country.


But Jack, all of my goals will take over a year to complete!
I don't have any shorter term goals at all!

Make some.

By not having any easily attainable goals, you miss out on feeling the rush of accomplishment that comes with meeting and exceeding those goals!

Next day, I'll talk about some strategies for breaking down your larger goal into smaller goals that are more easily accomplished.



EJ

Tuesday, October 11, 2011

Being Addicted to Investing

Now that I have started investing in companies through the Toronto Stock Exchange (The TSX), I have begun to constantly wish that I had more to invest.

If I only had more, I would be able to take advantage of the growth and passive income opportunities of the market!

But then again, I have to live my life, pay my rent, buy groceries, pay bills, and all the other 'fun' things that people do these days.



How do you know you're investing too much, let alone too much in a single company?

I believe that if you put more then 50% of your income into stocks, you are either crazy, or absolutely driven. Both of these states are very risky, and you can lose control very easily.
I'd like to make it clear that I am currently one of these 'crazy or driven' people.

Some of the things that 'driven' investors may do:
  • Take a loan to invest.
  • Sell low value objects to secure funds for investment.
  • Bypass low-cost opportunities that may enrich their lives in non-financial ways.
  • Lower their cost of living to sub-poverty levels to free up funds.
  • Take a second job for that 'little bit extra'.

All of these habits are similar to what someone with a substance abuse problem would do to secure funds for their next 'fix'.

Investing is a positive thing. Taking a Tylenol for pain occasionally is also a positive thing. They both improve quality of life.

But if you need to invest, and it drives you like a burning craving in your soul, perhaps it is time to step back and take a look at your plan. Does it really make a difference if you sell the $10 coffee gift card you received for your birthday just to buy one more share of EXE.UN ?

I guarantee you there are a few investors who would say yes.

And I would like to say right now, that there are more important things then having that one more share.

  • Go outside.
  • Walk to the library, and read a novel.
  • Meet for coffee with an old friend.
  • Paint a picture.
  • Have a family member over for dinner.


Make the most of your life, and enjoy the low-cost activities that are available to you.

After all, that share may eventually help pay for your work-free lifestyle, but it will never bring back the people, places, and experiences that you are able to have today.



EJ

Monday, October 10, 2011

Happy Thanksgiving!

Happy Thanksgiving, everyone!


I hope that all of you are enjoying the warm company of familiar faces, friends and family. Perhaps there is a bird in the oven, and the small is already making your mouth water.

Take this time to remember all that you are blessed to have, and that as long as you plan to succeed, you will only come closer and closer to your dreams :).

Know that you have my warmest wishes, and that I hope you have a very Happy Thanksgiving!

I'm going to go help prepare our dinner feast!

Friday, October 7, 2011

Taking loans from family members

I'd like to talk today about a topic that I've often had come up from my friends (and even some of my relatives).



Should I take a loan from a family member, Jack? They really want to help me, and I really need the money!

There are a few questions we have to ask ourselves:

1) How badly do you need the money?

Are you so broke you can't buy food, or are you just paying off your credit card enough to let you get another double-fudge mocha-chino?

2) How long until you will be able to pay back the loan?

If you have no idea when you will be able to pay the person back, then you should seriously review your reasoning behind considering this a loan, and not a forced 'gift' from a relative.

3) What is the money for?

Do you need the money to purchase something you don't need, like a new TV, or a high-end coffee-maker? Then you don't need that money, you need to grow some will-power.

4) Does the person you are taking the loan from need the money more then you?

I have seen people take a 'loan' from a parent that didn't have two pennies to rub together, and was hair-deep in debt. The person taking the loan didn't even flinch when they spent the considerable wad of loaned cash at the bar, treating all her friends to cocktails and martinis.



But Jack! I really want the new (Consumer garbage) now! It's only (Inflated price), and I can't live without it! Daddy will pay for it from his RRSP!

Grow the hell up.

You are an adult now, or soon will be. You've got to belly-up to the reality that you're rarely going to be able to afford everything you want.

You've also got to accept that by being so spineless, you're influencing people to be just like you.

Your relatives don't need to lose more money. They likely had to endure some sort of hardship for it, whether it was working for 20 years straight, or inheriting it from a loved one.

And just think, if your children grow up to be just like you, eventually, you'll be on the receiving end of these same pathetic cries for money.

Key Points:
- Be responsible.
- Don't pull others down into your pit of debt.
- Consider other people's situations.
- Don't spend money when it's not nessicary.
- Grow some willpower.

Thursday, October 6, 2011

Watching my investments (and the market) fall


Well, with the recent downturn, I've been watching nearly every one of me investments tank.



Well, Jack, I bet you're feeling like a big fat fool now; all that money down the drain!

Not so fast.

My investments were all into decently strong dividend stocks. The fact is, the investment I've put the most into pays a healthy monthly dividend. At these current prices, my Synthetic DRIP (Dividend Re-Invesment Plan) will buy two whole shares instead of one.

Which means that these low prices have actually ACCELERATED my plans, not caused them any lasting harm.

In fact you could say that with this downturn, my investments are worth MORE to me then before!

They will purchase a nice boost of shares, and I win. My dividend income goes up, because more shares are purchased.

So, Am I throughly stressed by the market's fall? No.
Am I somewhat nervous? Yes, of course.

Remember, I've only been invested in the market for just over a month.

I don't have the personal experience of long-term investment woes.

But at the current state of the markets, am I running for the hills? No.
I'm going to sit here at my desk at work, and write posts, and read non-market news, and try to relax, and think about having a nice fat passive income stream to look forward to in the future.

Wednesday, October 5, 2011

Rent or Buy in Vancouver, BC

I received a comment on my previous post, and I wanted to write a bit on it today.

Anna said...

I am currently renting and want to buy a home of my own. The housing market where I live is very expensive - Vancouver, B.C. Would I be better off investing my money and waiting longer or should I save as much as I can and jumping into the real estate game as soon as possible?? Thanks. Anna.



Should I Rent and Invest, or Buy in Vancouver B.C, Jack?

This is a bit of a loaded question because I don't have the whole picture. There are quite a few questions that would be needed to be answered for me to make any sort of recommendation.

How much does she make in a year?
Is she in a sustainable industry?
Does she have any dependents?
Does she have to remain in Vancouver for her job?
How much does she have saved up for a down-payment?

I'm going to dig deep and make up some numbers here.



Anna Version 1
Age: 25
Annual Income: $42000 (Gross)
Job Industry: Stable
Job requires remaining in city: Yes
Dependents: None
Down-payment Saved: $32000

For this Anna, she could survive by renting a postage stamp apartment, without much room, and have still have a bit left over at the end of the month. If she expects to be able to live in style, she is sorely mistaken.

In my search for rental apartments in Vancouver I was unable to find hardly anything to rent for less then $1500 a month. And that is a small, 1 bedroom apartment in the rougher part of town.

To purchase, the costs are in the range of ~$200000 for a 'dumpy', old apartment on the wrong side of town. She would be able to swing this, and maybe even ~$225000, and still be under the ~38% maximum percentage of income mortgage payment.

What would she have in the ~20-25 years it takes her to pay off the mortgage?

A dumpy, old, smelly apartment on the wrong side of town.

I would rent for the moment, invest any largely spare money into stable, long term, passive income investments, and try to go for a promotion. If she purchases in Vancouver's core, in a few years, I don't believe she'll be happy with the results.

After she has some more saved up, and perhaps a small passive income stream to help her along, I would move out of the city, and secure a house at a fraction of the cost. She could get a part time job, and start enjoying her life instead of living a hand-to-mouth existence in the city.



Anna Version 2
Age:31
Annual Income: $75000 (Gross)
Job Industry:Unstable
Job requires remaining in city: No
Dependents: 1 Child, Single Parent

Down-payment Saved: $12000

This Anna was blessed with a child earlier in her life, at 23. She had finished school, and now works as a sales rep for a pharmaceutical company that sells a newer, untested drug for good profit. She will be the first to get fired if the profits stop flowing, but she makes good money at the moment.

She doesn't have enough money saved up to even think about buying in the city.

She needs a little more space, and would prefer to be nearer schools for her child.

The 'husband' disappeared a long time ago.

I believe that she should consider moving out of the city. I feel this way because I don't believe that the city is the best place to raise a child, especially when you work full-time and don't have any help from a spouse.

She may even be able to work out a tele-commuting agreement with her current employer, and the locational-leeway would allow her to pick a place that has some space for her child,  as well be nearer to schools and other family oriented activities (parks, playgrounds, cinemas, etc).



Anna Version 3
Age: 27
Annual Income: $38000 (Gross)
Job Industry: Stable
Job requires remaining in city: Yes
Dependents: None

Down-payment Saved: $52000

This Anna has a sizable down-payment saved. Perhaps it was inherited, because her job certainly doesn't allow for that amount of savings.

She could get a mortgage for a place up to around ~$250000, but that still isn't much better then a slummy apartment.

She has to stay in the city for her job, but her job is pretty poor income for a city-living person. It's likely that she could move out of the city, and put that down payment to far better use on a house outside of the city.

There are even tracks of land in the 'boonies' that are less then ~$100000. She could own a few acres on the outskirts of civilization in a few years, take a few more to set up a long-term passive income stream, and raise her child in the peace and quiet of the country.

Maybe she would even have the time to teach her child the value of hard work and having a good savings and investing plan.



Jack, you obviously don't like the city! What if I want to live in the city, and buy a scummy apartment for a small fortune?

All the more power to you.

Just don't say I didn't warn you when you're gaining on 45 and you don't have anything to your name but a mortgage for a scummy apartment on the wrong side of the tracks, with a gorgeous view of a brick wall and the cringe-worthy stench of the docks.

Tuesday, October 4, 2011

Hate working? Invest in passive income!

I'd like to talk about why I put nearly 85% of my income into passive income investments.

The fact of that matter is: I hate working.

I dislike the idea of being under someones thumb so much, that I will suffer in a dead-end, decent wage job for a long time, if it means I wont have to work for someone else ever again.

Every time I plunk down some of my paycheque on a passive investment, I feel like a little piece of me has ascended away from the daily 'rat race' toil, and if I just sock a little more away, I just might be able to get away from the god-forsaken hell that is full-time work.

So, I watch my investments, I view the market as a key to a problem that I have never been able to solve - Living without having to work for that living.

Will my $19.74 this October allow me to live without a care? No.

But it will make a small difference, and if enough of those small differences stack up, it just might allow me to live the way I've always wanted:

Professionally Unemployed.

Monday, October 3, 2011

Dividend Income Update - October 2011

This month, I jumped in on some more SLF (Sunlife Financial) because I believe them to be a bargain price for such a well-run financial firm.

I purchased 45 units at $24, which makes the $.36 quarterly dividend approximately a 6% yield. I believe this to be excellent for a company that has never dropped it's dividends.

This month is probably going to be one of my slowest months ever for dividends. Add that to the fact that the weather is pretty rainy and depressing makes for more of a slog then a slide into dividend-funded happiness.

I'm going to add an additional Dividend Income Update for the end of October, and show what I truly received as opposed to what I'm estimating to receive this month like I am here.

Here's hoping that I'm able to add another great position this month! :-D


Equity (Stock, Bond, ETF, etc) Amount (In Shares) Dividends Paid This Month
Artis REIT (AX.UN) 200 $18
Canadian REIT(REF.UN) 1 $.12
Bank of Montreal (BMO) 1 $.70
Bank of Nova Scotia (BNS) 1 $.52
Emera Inc. (EMA) 1 $.33
Pengrowth Energy (PGF) 1 $.7


Total Dividends for month of October: $19.74