Jun 152018
 

Lifestyle inflation is when we spend more money when our income increases. This can feel natural because the more we earn the more we can afford to spend. But this can make it very difficult to save for retirement or meet other financial goals. Lifestyle inflation is what causes many folks to get stuck in the rat race instead of being able to retire sooner. Here are some ideas to help curb lifestyle inflation when we get that big raise next time. 🙂

  1. Visualize the net amount of a raise after paying payroll and income tax.
  2. We don’t necessarily deserve nice things. But we deserve to be happy – which can be jeopardized if we overspend on nice things by sacrificing financial security.
  3. Hang out with friends who have similar spending habits to ourselves.
  4. Pay ourselves first. Set up an automatic transfer for a fixed amount of money from our bank account to an investment account every month.
  5. Define our goals and only spend new money if it will get us closer to those goals.
  6. Have inexpensive hobbies such as reading, blogging, hiking, playing music, and cooking.
  7. Realize that success doesn’t equate to material possessions. Better indicators of success are health, love, friends, family, and experiences. We should be happy with our quality of life without feeling the need to prove it to others.

Reaching a good balance of spending and saving is a personal journey for everyone. There are some people who save too much without enjoying life as it comes. There are others who impetuously spend too much without thinking of their future. Finding the sweet spot between the two extremes will bring us financial happiness. 🙂 Happiness is like peeing our pants. People around us can see it, but only we can truly feel the warmth of it. 😀 Live for today but don’t forget to plan for tomorrow.

 

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Random Useless Fact:

QiZai is the only giant brown panda in the world left. He is literally one of a kind.

Jun 052018
 

May was another spectacular month for the stock market! I managed to earn money from 6 different sources over the month, combined to make over $10,000 in after tax income. Most of this income came from my farmland and cryptocurrency investment. More on this further in the post. I didn’t invest in new stocks in May. But my portfolio continues to climb thanks to my position in high quality stocks. 🙂

I also successfully renewed my mortgage in May with a different lender. I have combined my old mortgage and home equity LOC into a single mortgage balance with an overall cheaper rate. It pays to shop around.

Liquid’s Financial Update

*Total Income: = $14,900

  • Full time job = $4,000
  • Part time job = $700
  • Sold Cryptocurrencies = $4,200
  • Dividends = $700
  • Interest = $600
  • Rent = $4,700
*Total Spending: = $4,600
  • Food = $300
  • Housing = $1100
  • Utilities = $100
  • Miscellaneous = $700
  • Auto Insurance = $1,500
  • Additional Debt Interest = $900

*Net Worth: (ΔMoM)

  • Assets: = $1,205,000 total (+18,400)
  • Cash = $12,500 (+4800)
  • Canadian stocks = $175,100 (+4900)
  • U.S. stocks = $119,500 (+5700)
  • U.K. stocks = $22,400 (+400)
  • Retirement = $91,300 (+2200)
  • Mortgage Funds = $32,600 (+100)
  • P2P Lending = $31,600 (+300)
  • Home = $275,000
  • Farms = $445,000
  • Debts: = $435,900 total (-8,300)
  • Mortgage = $192,500 (+13500)
  • Farm Loans = $183,400 (-500)
  • Margin Loans = $51,000 (-1000)
  • TD Line of Credit = $3,000 (-1000)
  • CIBC Line of Credit = $6,000 (-4500)
  • HELOC = $0 (-14800)

*Total Net Worth = $769,100 (+$26,700 / +3.6%)
All numbers above are in $CDN. 

 

Cryptocurrency Update

I have decided the sell the remaining cryptocurrency I have with QuadrigaCX. The reason is because the crypto market is not as exciting as it once was. Last month Bitcoin’s price dropped below $8,000 hitting a 35 day low. The mainstream isn’t talking about it anymore. I’ve made some decent profit from getting into Bitcoin and Ethereum about a year ago, but I don’t want to push my luck. So I have sold all of my holdings. Here’s what my account balance looks like today. Only trace amounts remain.

I didn’t make a large fortune in the crypto market like some other people, but I’m happy with my gains. 🙂 Maybe I will return to cryptocurrencies in the future so I will not close my QCX account. But for now I’d like to use my resources to invest in other asset types.

 

 

 

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Random Useless Fact:

Jun 012018
 

Next week is Tax Freedom Day! This is the first day of the year in which Canada has earned enough income to pay its taxes. Every payment to the government of all levels that is officially considered a tax is counted. The purpose of having a tax free day is to provide tax paying citizens with a metric with which to estimate their “total tax bill.” 🙂

Tax freedom day is unique to every country. For example, it’s June 7th in Canada because 43% of all income earned by Canadians goes to tax collectively. But in the United States, it falls on April 24th because of a lower 31% tax burden.

How to calculate your personal tax freedom day

To determine our own tax freedom day we need to calculate our tax burden percentage. This can be done by adding up all the tax we pay to cities, provinces, and the federal government. Some forms of tax like tariffs are out of our control. But here’s a list of typical taxes I pay every year, and how much I pay into them relative to my gross income.

  • Income tax – 14% (Federal + provincial)
  • Payroll tax – 4% (employment insurance, state pension premiums)
  • Sales tax – 2% (GST/PST, consumption tax)
  • Property tax – 3% (apartment and farmland)
  • Other surcharges, excise tax, environmental levies, and duties – 5% (tax on alcohol, electronics, gasoline, etc)

So as it turns out my tax burden percentage is about 29%. This is just a rough estimate. But it means in a 365 day year, my tax freedom day would be around mid April. 🙂 It used to be in May, but I’ve managed to lower my tax burden over the years. Despite earning a high income, I’ve learned to pay relatively low taxes. My goal is to eventually drop my tax burden to 25% of my total income. 😀

Here are some strategies I’m using to keep more money in my own pocket.

  • Max out my retirement contribution (RRSP) every year. In 2017, I effectively lowered my taxable income by $12,000 this way, saving me over $3K of income tax.
  • Earn business income. Instead of accepting income as an individual, I use a small business when conducting freelance work. This way I can spend money on business related expenses first, and then pay taxes on whatever profit is remaining.
  • Learn to cook. Prepared meals either from the supermarket or restaurant are marked up with a sales tax. Basic groceries, meat, and produce are exempt from tax.
  • Efficient commute. My city has the most expensive gasoline in North America. It broke records a month ago at CAD $1.62/Litre, (USD $4.72 per gallon.) A big reason for this is taxation. There’s carbon tax, motor fuel tax, and public transportation tax all built into the price of gas at the pump. I recommend either live closer to work, or take public transit. My car only gets driven about 5,000 Km per year.

Taxation is a major living expense for everyone. But luckily there are aspects of it that we can control and reduce. 🙂

 

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Random Useless Fact:

May 212018
 

Schedule the Life You Want

Without focus and direction, it’s easy to get lost. Imagine we are sailors looking for a remote island to retire on. We could sail aimlessly in the open waters for 40 days before finally finding something we like. But if we plan and pick a destination beforehand, then we can arrive there much sooner. Most people work 40 years before retiring. But what if they planned ahead? The famous psychologist Dr. Jordan Peterson argues that “planning is unbelievably useful. You need to figure what it is you’re aiming towards, and why.” His calendar is fully booked, often weeks in advance. I’m a planner as well. I find it boosts my productivity by at least 2x and really puts my goals into perspective. 🙂

Millennials are the first generation in history who can anticipate reaching the age of 90 in large numbers. This means we will spend about one-third of our lives as what we now refer to as “old people” lol. Planning for how we want to spend those last decades is pretty important. It doesn’t have to be detailed, but having a rough schedule for the next 60 years of our lives would provide us with some direction that matches our goals and values. Most millennials don’t do this. And as a result, they will likely have the following life broken down into 3 stages.

But our bodies and minds won’t be the same when we’re older. So by the time most people retire in their 60s they are no longer able to fully take advantage of their leisure time. Jordan Peterson said he enjoys giving himself a limited time to finish complicated tasks. It’s fun to see if you can achieve something far more than you thought, in far less time. This is why I plan to retire by age 40 at the latest. Here is what my life will look like.

Continue reading »

May 172018
 

It’s natural to be upset about losing one’s job. But sometimes being laid off is not so bad. When my company unexpectedly downsized in February I became unemployed for the first time in 10 years. Actually I was still working part time, so technically I was just under-employed. I didn’t have any other jobs lined up at the time. But instead of feeling worried or sad I was happy. That’s partly because I have the resources to last me years before having to work full time again. But I also had a pretty good feeling that this change in my career was for the better. That’s why I was optimistic in my earlier post about losing my job.

I received a big payout worth more than 3 months of my salary. But I managed to find permanent full time work before 3 months. So from a financial point of view I didn’t lose any money. In fact, my income situation has actually improved because my new job pays more than my old job. Hurray! I can become financially independent a little sooner now. 🙂 Furthermore the job I’m currently at is more fun and rewarding than my old job. I also had fun working temporary at Amazon for awhile. But what I enjoyed the most about this whole situation is taking some time off to relax and experience a small taste of early retirement. 😀

And to add icing on the cake I recently received a letter in the mail from Great West Life, an insurance company, asking what I want to do with my previous job’s matching RRSP fund. I’ve been paying into this retirement program for the last 7 years. I couldn’t access it or use the money in any way while I was employed. Since I couldn’t touch the money, I didn’t think it was worth including in my net worth statements. But now that I’m no longer working there, they have to give me my money, lol. It’s a typical 4% employer matching plan so the sum is not that much compared to the 25% or more I typically save and invest personally, but it’s another benefit to look forward to.

 

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Random Useless Fact:

You know your country is in trouble when the national currency is worth less than the paper it’s printed on.