Saving almost 50% of his Gross Income is no longer a dream

gross income(1)

YES THAT’S BEFORE TAXES   In my February 2015 net worth update post I mentioned I was saving approximately 50% of my gross income – my goal for 2015 is 45%. The reason I set this goal is my expenses in life right now are likely the lowest they will ever be for the rest of my life (not married, no kids, modest house), so it’s important to focus on savings while the going is good. I suspect that my salary will increase at a modest rate for the next few decades; however, my expenses will increase at a higher rate. The key thing about my savings rate is a lot of it is a result of preemptive planning. Below I’ll tackle each piece of my expenses and discuss tips and ideas on how you can trim these down in your own budget.   Government deductions   The government seems to always have his hand in our pocket. This expense is without question my largest, which requires some careful planning to ensure I’m not needlessly paying too much. The main focus of any budget conscious taxpayer should be to legally minimize taxes in a cost-effective manner. As a chartered accountant […]

Statistics and Traps Every Investor Needs to Know

statistics investing

Statistics and Pitfalls for Investors   In the second part of this two-part post on independent investing, we will look at 3 critical investment statistics and the 3 biggest pitfalls to individual investing. If you haven’t had a chance to read it yet, jump back to post one to learn about what investing on your own can do for you. When selecting between the various investment options there are a few key metrics or statistics that are important to keep in mind. These form the foundation for any good comparison between investment assets. Personally, I like to use the filter tool available through my online trading platform to sort by the statistics below. Doing so helps me gauge what appropriate values are and to immediately weed out the less attractive options. Metric #1 – Expenses & the Expense Ratio (Mutual Funds and ETFs)   Possibly the most important investment metric or statistic is the expense ratio. Expenses directly eat into your return each and every year. The expense ratio is the easiest way to determine how much extra you are paying to own an investment.  Any mutual fund or ETF will have a specific expense ratio that shows how much […]

Great investors know the best financial advisor is YOU

Investors

A Beginning Investors’ Story   Investing on your own can seem scary. The world of finance appears to be, at least in the beginning, a complex maze of numbers and movements, leaving new investors wary of going at it alone. I used to think of the finance world as a bunch of slick-haired Pat Riley types yelling ‘buy’ and ‘sell’ across a crowded room. Heck, even a stock ticker bar has confusing hints of the matrix if you don’t know what you are looking for. The good news is, becoming an investor isn’t half as scary as it seems with a bit of education and a splash of gumption. The really good news is that investing on your own can save you a ton of money over the course of your lifetime without adding additional risk. In a post-pension world there may not be anything more worthy of your time. So in this two-part series we will cover what investors need to know before they start, the 3 most important investment statistics, and 3 critical pitfalls to avoid, but first a quick story. When I began investing on my own I was only 13 and had yet to develop that […]

How I plan to retire at 28 using dividend income

dividend income retire early

RETIRE ON DIVIDEND INCOME   I’m Mr. Captain Cash and yes I have this absurd, unrealistic, or impossible dream by conventional standards of retiring before my 28th birthday on my dividend income.   How do I plan to retire so early?   To retire before my 28th birthday I intend on creating an investment portfolio that will generate $20,000 in annual dividend income covering my annual expenses. Once my annual dividend income exceeds my annual expenses it will mean I’m financially independent and able to “retire.” I used quotations around the word retire because I will not retire by conventional standards. To me the word retire or becoming financial independent means I will be able to spend the majority of my time the way I intend to as I am no longer reliant upon my work pay cheque to cover my expenses. For myself this means not working or only working a couple of days a week when I have kids to watch them grow up or the flexibility to travel for six months. In a nut shell it is to have the freedom to do whatever I want to do each morning I wake up. I always like to […]

How To Escape A Financial Mistake Without Selling Your Soul

Financial mistake bomb

 LIFE IS FULL OF FINANCIAL LESSONS   I’ve made a ton of financial mistakes over the years from buying a timeshare, to making bad investment choices, to refinancing to a bad mortgage. The reality is we all make bad choices with our finances at one point or another. My worst financial mistake came when I bought a $4500 timeshare on my honeymoon of all places because I thought it would be a great to force us to take a vacation every year. This lead into other financial issues when we decided we wanted to sell our timeshare and found out it’s next to impossible to sell them. We tried for over 2 years to sell our timeshare with literally no luck at all. Our lowest point came when we decide to sign up for a couple of timeshare resale companies and this only lead sticking $1100 into a losing battle. Finally, after 6 long years of owning this timeshare, paying maintenance fees, and losing our money to the timeshare resale companies, I was able to contact my resort and get a buyback option that allowed me to get out from under this black hole that had done nothing more than […]

Saving for retirement on a lower-income

saving for retirement lower-income

EVERY DOLLAR COUNTS   Let’s face it, saving for retirement is tough work. I mean, the concept is not difficult for us to wrap our heads around but finding the money, putting it away consistently and not spending it is challenging stuff. I suspect this is the case because money is an emotional subject and it’s easy to become attached to it; we work hard for it and want to reward ourselves with it. Saving for retirement takes discipline. When you’re not relying on paycheque to paycheque for living expenses, saving some money should be easy enough. You also have options on where to put your money for retirement, into Registered Retirement Savings Plans (RRSPs), real estate properties, Tax-Free Savings Accounts (TFSAs), non-registered brokerage accounts and more. High-income earners are often advised to contribute to their RRSPs in their highest-income earning years, and rightly so. This RRSP account is optimized when you contribute money when your income taxes are the highest, so monies can be withdrawn in the future when you’re in the lowest (or lower) income tax bracket, presumably in retirement. Low-income earners probably shouldn’t follow this advice, and they probably need different financial advice altogether. Today’s post will […]

To Take Or Not Take Early CPP

Happy Non-Retirement

CANADA PENSION PLAN DILEMMA   My husband just turned 62 and we’ve been in a quandary about whether he should take his Canadian Pension Plan (CPP) early (before 65) with penalty or not. We’re both still working and plan to be for the next 4 years while we pay off a whack of debt. Because of penalties introduced in 2012, the amount you receive by taking your CPP early is less than before this legislation was introduced. Let me try to walk through the peculiarities of our situation and how we reached our final decision.   The CPP Rules   While I can’t walk you through all the rules, I will highlight the key ones or ones that were relevant for us but refer you to the CPP website which is actually pretty clear.  I just want to point out that the Quebec Pension Plan (QPP) has a different set of rules, up front. Normally CPP was collected at 65, with penalties and premiums if you elected to take it anytime from age 60 to 65, or from age 65 to 70. Contrary to popular belief, with the new rules introduced in 2012, the age for CPP has not changed […]

Is there truth to less stress with financial freedom?

financial freedom

FREEDOM IS DEFINED BY YOU   Financial freedom means lots of things to many people and although everyone has their thoughts on what life is like without any debt for some it’s not all that it’s cracked up to be. What would it take in order for you to take your stress financially from one level to the next? Would you have to pay off your credit cards, all of your debt, your mortgage or simply just be able to live a comfortable life while paying off your debts? In a conversation with a colleague the other day he brought up a friend of his who just built a new house that he paid cash for, his wife doesn’t work and they have no debt. Top that off with a well-paying job so that must mean his life is all roses, right? Wrong. We don’t know that. He seemed jealous to be honest especially when he said “it must be nice to live a stress free life” which made me wonder why people think that debt=stress. I’ve had people we know think that I must make lots of money with the careers I hold but what they don’t know is […]

Parents tell son he will create credit card debt with rewards cards

credit card debt

CREDIT CARD BUDGET SAVINGS   I talk about credit card debt on CBB once in a while and I also talk about how credit cards can easily be your friend if you use them properly. Many people use credit cards today rather than carrying cash with them. It’s simple to tap, swipe or insert and enter a pin to pay for a purchase and in most cases it gets you through the checkout faster. We carry credit cards because of ease of use and of course there are perks to using Canadian Credit Cards if you use them wisely. Credit cards have helped many people get back on their feet because they knew money was on the way. One friend of ours was in between jobs and used the credit card to get grocery rewards which helped them to buy more groceries for the family every month. One of our current rewards cards the SDM Optimum has almost 500,000 rewards points which is equal to about $1000 worth of free product. We don’t own the Optimum credit card but if you did you could get even more Optimum points faster.   Credit card debt   How to pay off credit […]

Work more to work less with a compressed work week

compressed work week

DEPENDS ON THE PERSON…   Many of you might agree working a compressed work week would make your life easier but for others it’s not a perk they care too much about. Factor in the possibility that you might have to retire later in life because you aren’t working the amount of hours you are used to and it might deter you further. If you can picture yourself living the retired life how old are you when that happens? Getting up and going to work for everyone around the globe is a part of life as is earning an honest living. We all have employers with different missions and values and even some who look after their staff with such care that they worry about how their days outside of work will impact their productivity when they come back to work. Sounds too good to be true but some employers want their staff to come back to work refreshed and able to give them 110% rather than 50%. I know that what happens behind closed doors no one may ever know but if your employer takes extra steps to ensure they make your working days easier they may see a […]