Mar 202018

Most stock market investors will find it nerve-racking to see their portfolios drop by 50% or more. But a large stock market crash is usually beneficial for our long term finances and we should welcome a bear market sooner rather than later or even not at all. ๐Ÿ˜€

How an early stock market crash creates more wealth

During a stock market correction, all the new money we invest will be used to purchase assets at cheaper levels. ๐Ÿ™‚ These investments can have more time to compound and grow.

Even if we somehow could avoid a bear market for the next 30 years, [our] retirement wealth would likely be substantially better if we instead experienced an immediate bear market. ~Mark Hulbert

Most people my age will probably retire around 60 years old. That gives us about 30 more years to save for retirement. I found a chart below, courtesy of Mark Hulbert from MarketWatchย that shows how the timing of a stock market crash affects the value of a retirement portfolio. It assumes a constant annual rate of return for 30 years, except a brief period where the stock market crashes similar to what happened in the 2007/2008 global financial crisis.

The red bar at the far left of the graph represents the portfolio’s value at the end of 30 years if a stock market crash happens right now in 2018. The far right is when it happens near the end of the 30 year period. In all cases plotted on the graph, the average annualized return for the 30 year period is the same, which is 5.9%. The only difference is when that market correction occurred along the way. ๐Ÿ˜‰

As we can clearly see, our portfolio’s value 30 years from now will be highest ($4.3 million) if a downturn happens immediately, and lowest ($1.9 million) if it happens right before we retire. Wow! We will have $2.4 million more if a major bear market breaks out now, rather than later, even when the overall annualized investment return is the same. That’s a huge difference. ๐Ÿ™‚

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Mar 142018

A revolving line of credit is a very useful tool. It can be used to pay down higher interest credit card debts, cover business expenses, or pay regular household bills. To use a line of credit (LOC) properly we should understand how it works, and how the interest is calculated.

At the time of set up a new LOC account will start with a balance of $0. Unlike a mortgage, car loan, or other amortized loan, the interest cost on a LOC is only calculated based on the amount of outstanding balance we use. This means if we don’t use the LOC we don’t pay any interest. ๐Ÿ™‚

Interest Calculation

The interest rate on a LOC will typically range from 3% to 12% depending on the borrower’s credit history and their relationship with their banks. Interest is calculated on a daily basis on the amount of principal balance. For example, let’s say we borrow $1,000 on March 1st. Then on March 10th we pay down half of the debt, $500, and don’t do anything else for the rest of the month. In this case interest will be charged on the $1,000 for 10 days, and on $500 for the remaining 21 days of March.ย The interest amount will be accumulated and charged at the end of every month.

Using 5% interest rate as an example, we can calculate the cost of borrowing in the example above.

Interest cost from March 1st to March 10th = 0.05 x ($1000)*(10/365) = $1.37
Interest cost from March 11th to March 31st =ย 0.05 x ($500)*(21/365) = $1.44

We add the two amounts together to get $2.81. This is how much interest will be charged for the month of March. If we pay down the remaining $500 principal, and $2.81 interest balance on March 31st and do not borrow anymore, then there will be no interest charges in April.

Different Ways to Use LOCs

Since LOCs often have lower interest rates than credit cards we can transfer balance from a LOC to a credit card to save on interest costs. I also like to use my LOCs for emergency liquidity to pounce on a time sensitive investment opportunity or to cover a major car repair. I have also used a LOC in the past to pay down my student loans which was at a higher interest rate.

LOCs can be accessed through online banking. We can use it pay bills online, or send Interac e-Transfers. We can even order cheque books for our LOC accounts so we can write cheques to anyone. My regular chequing account only allows up to 10 free withdrawals every month. So sometimes I would use my LOC to cover some bill payments if I don’t want to exceed my chequing account limit. ๐Ÿ˜€

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Mar 052018

Changing Employment Situation

I got laid off from my full time job in early February. I received a severance package worth several months of my regular pay. So yay! #freemoney. I was starting to get complacent at my old job and could use a fresh start somewhere else. ๐Ÿ™‚ The best way to leave a company, financially speaking, is to be terminated without cause. So I’m pretty fortunate.

The added benefit is because I no longer have coworkers who know about my blog I can be more transparent about my total monthly income starting in next month’s fiscal update post. This means I’ll reveal both income and expenses so everyone will see my complete budget. I don’t have to be concerned anymore about office politics and coworkers getting jealous of my salary.

It took me awhile to deposit the severance package, so the payment amount will not be reflected in today’s post. But it will be represented in my balance sheet in next month’s update. ๐Ÿ™‚ Luckily I have 5 other incomes (rent, dividends, interest, part-time teaching, and freelancing.) The net sum of these other incomes vary, but works out to roughly $3,000 to $4,000 per month. Thank goodness I took the time toย build up these side incomes over the past years. Otherwise I would be very stressed if I lose my only source of income, lol. Much like working at a mattress store, it’s nice to have things to fall back on. ๐Ÿ˜€

Fortunately I managed to find another job last week so I’m now full time employed again. ๐Ÿ™‚ I find that self reflection is very important when job searching. It’s all about having a good innerview. ๐Ÿ˜Ž My new job is very different from my old one. For privacy reasons I will not disclose my new employer’s name. I’m still in Vancouver, Canada. But let’s just say I’m working for a giant internet retailer based in the United States. ๐Ÿ˜€

Due to the lay off my income was dramatically reduced in February. I had to dig deep into my cash reserves to continue paying down my debts. The stock market also fell slightly. But on a positive note, the growing strength of the U.S. dollar thanks to better than expected economic data increased the value of my U.S. stock portfolio. So overall my net worth eked out a tiny increase. It’s the smallest gain in many months, but any gain is better than a loss.

Liquidโ€™s Financialย Update

*Side Incomes:

  • Part-Time =ย $1,100
  • Freelance = $700
  • Dividends =ย $700
  • Interest = $400
*Discretionary Spending:
  • Fun =ย $600
  • Debt Interest = $1400

*Net Worth: (ฮ”MoM)

  • Assets:ย = $1,168,800 totalย (-3,100)
  • Cash = $800ย (-2100)
  • Canadianย stocksย = $168,000 (-2500)
  • U.S. stocks = $115,600ย (+2900)
  • U.K. stocks = $21,100ย (-1100)
  • Retirement = $89,200ย (-800)
  • Mortgage Funds = $32,400 (+200)
  • P2P Lending = $30,700ย (+300)
  • Home = $275,000
  • Farms = $436,000
  • Debts: =ย $453,500 totalย (-4,300)
  • Mortgage = $179,800ย (-400)
  • Farm Loans = $184,800ย (-500)
  • Margin Loans = $55,200ย (-1300)
  • TD Line of Credit = $4,000 ย (-500)
  • CIBC Line of Credit = $15,000ย (-1500)
  • HELOC = $14,700ย (-100)

*Total Net Worth = $715,300ย (+$1,200 / +0.2%)
All numbers above are inย $CDN.ย 

It’s kind of early to say how the recent employment change will affect my freedom 35 goal. But for now I don’t expect too much deviation from my plan. I will also be contacting Great West Life insurance company to transfer out the money in my defined contribution pension plan. It will be rewarding to finally have direct control over those funds. ๐Ÿ™‚



Random Useless Fact

Feb 262018

Eating restaurant food doesn’t have to be expensive. Follow these simple steps to save 30% or more on your next restaurant meal. ๐Ÿ™‚

  1. Pick a restaurant that offers a 10% discount if you pick up your take out order.
  2. Contact the restaurant and tell them what you want to eat.
  3. Go retrieve your food and bring it back to your home.
  4. Enjoy your meal. ๐Ÿ˜€

That’s it. You can experience authentic restaurant cuisine, while being comfortable in your own dwelling. You don’t have to dress nice or wear pants that feel tight after you eat. You can eat in your underwear if you want. Nobody will judge you. ๐Ÿ˜‰

Let’s compare the costs of eating in a restaurant to eating at home using an example. Imagine we want to order $40 worth of food for 2 people from this Thai restaurant in Vancouver. #notasponsorย 

Cost if we sit in at the restaurant:

  • Menu item = $40.00
  • 5% sales tax = $2.00
  • 15% tip = $6.00
  • Total Cost = $48

Cost if we pick up the food and go home to eat:

  • Menu item = $40.00
  • 10% discount = (-$4.00)
  • 5% sales tax = $1.80
  • Total Cost = $37.80

(Note: Fixed sales tax amount. Previously calculation was incorrect)

As we can see, taking out the food saves us $10.20. So if we eat inside the restaurant we’ll have to pay 27% more, orย 30%ย if we tip 18% instead of 15%. The total cost of take out is even lower than the initial $40 figure presented on the restaurant menu. That’s a good deal! ๐Ÿ™‚ If we go to a restaurant in Ontario we can replace the 5% GST with a 13% HST. Most establishments that offer the pick up discount will advertise it on their website.ย Usually there is a minimum order amount of $30 or so. This is perfect if you’re ordering for 2 or more people, and if you have access to a vehicle.

Here are a couple more restaurant examples.

If ambiance and being pampered to is important then maybe the 30% premium to eat on location is worth it. But personally the value of ordering restaurant food to me comes from not having to cook, not having to clean, and the social element of enjoying a meal together with friends or a partner. So if I receive the same economic utility by eating at home as eating out, then I’ll choose the cheaper option. In fact, eating out comes with additional potential stress factors such as rowdy restaurant patrons, paying for parking, uncomfortable seats, feeling rushed, etc. Also, my home wasn’t cheap. I paid $230,000 for it. So I should make good use of the space, especially when it can save me money by not being somewhere else. #opportunitycost.


Whenever I hear about a new restaurant that I want to try the first thing I do is find out if they offer a discount for pickups. ๐Ÿ™‚


Random Useless Fact:

Feb 192018

A few years ago I bought 50ย shares ofย Avigilon Corp (TSE:AVO) at a price of $25 per share. Avigilon is a surveillance and security company based in Vancouver. The idea for the trade was to ride the momentum up and then sell it for a profit. Soon after however, instead of continuing to climb, the stock price dropped. ๐Ÿ™ “Oh no”, I thought. But rather than admitting defeat and selling my shares at a loss I decided to buy even more at $14 per share. ๐Ÿ˜ฎย This is a fairly risky move. I would only double down on a stock if I was really confident about its long term profitability. Doing this averaged down my cost per share.

Because I bought 100 more AVO shares when it was cheaper, my average cost dropped from $25 to $18 per share on 150 shares total.

Well this swing trade had gone on for long enough. I recently decided to get out of this trade and take my profit. ๐Ÿ™‚

Overall this has been a successful trade. My cost was about $2,600 including fees and interest charges. I used a small amount of margin to leverage my gains. I was able to sell all 150 shares last week at roughly $27 each with a total proceeds of $4,026.

That’s a decent 55% return on investment over the past 3.5 years, or annalized to 13% per year. ๐Ÿ˜€ Not too shabby, considering the broad market TSX composite index returned 2% per year over the same time.

Earlier this month AVO announced that it has a definitive agreement to be acquired by Motorola Solutions Inc. The takeover would value the company at $27 per share. This represents a generous premium for AVO and the stock price rose 17% immediately following the news. There doesn’t appear to be another company interested in making a better offer. This is probably the best price I’m ever going to get for this trade, which prompted my decision to sell last week. ๐Ÿ™‚

AVO doesn’t pay a dividend so now I can use the cash proceeds from selling the stock to either pay down debt, or invest in some dividend stocks to buy and hold. I haven’t decided what I’ll do with the extra money yet.


Random Useless Fact:

In a study by Psychology Today, about 80% of people who have received mental health treatment say it was effective for them.