Liquid Independence

Liquid is the main editor of the Freedom 35 Blog.

Jul 312015
 

Oil Producers Languish as Airlines Fly High ✈️

Oil executives sometimes use crude language, especially to describe their disappointment of low oil prices. With the WTI price at around $48 a barrel it’s very difficult for North American oil producers to make a profit. ⛽ The 50% decline in crude price over the last year forced Husky Energy (HSE) to trim capital spending by $400 million earlier this year. Husky’s 2nd quarter profit in 2015 fell to just $120 million, compared to $628 million from the same quarter last year. The entire oil and gas industry is in quite a shemozzle right now.

But not everyone is complaining. The cheap cost of oil has actually provided a lift for airlines. 😀 Companies like Westjet (WJA) use a lot of fuel. In fact about 33% of Westjet’s operating cost is aviation fuel for its planes. In the 2nd quarter Westjet announced its profit was 19% higher than the same quarter in 2014.

Over the long run airlines usually underperform oil companies. However in the last 5 years Westjet shares have increased by about 85%, while Husky shares have been pretty much flat. Does this mean we should dump oil stocks and buy airlines? I think the best plan right now is to continue investing in growing companies and wait it out. That’s pretty much what I’ve done this past month. My biggest winner in July was Amazon. $AMZN shares rose 22% over the past 31 days due to higher than expected earnings, and my net worth increased $1,000 via this one company alone. :)

*Side Income:

  • Part-Time Work = $1100
  • Dividends = $500
  • Interest = $200
*Discretionary Spending:
  • Fun = $100
  • Debt Interest = $1500

*Net Worth: (MoM)chart_15july

  • Assets: = $903,600 total (+6200)
  • Cash = $3,500 (+1000)
  • Stocks CDN =$92,500 (-1100)
  • Stocks US = $70,800 (+5700)
  • RRSP = $51,800 (+600)
  • MICs = $15,000
  • Home = $259,000
  • Farms = $411,000
  • Debts: = $507,100 total (-1000)
  • Mortgage = $193,000 (-500)
  • Farm Loans = $200,200 (-500)
  • Margin Loan CDN = $29,900 (+300)
  • Margin Loan US = $26,700 (+900)
  • TD Line of Credit = $25,500  (-500)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,200
  • RRSP Loans = $3,600 (-700)

*Total Net Worth = $395,600 (+$7,200 / +1.85%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.77 USD

The best cure for low oil prices, is low oil prices. Energy companies have already pulled back capital investments in further oil production due to the diminishing profitability of selling oil right now. This will ultimately lead to a shortage of supply as demand catches up some time in the future. And when that happens crude price will go back up and oil companies like Husky will once again experience high earnings, and Westjet will once again feel the pinch of high fuel costs.

——————————————————————–
Random Useless Fact

Last year a programmer spend 2 years worth of his salary to buy 99 iPhone 6s. He arranged them in the shape of a heart and proposed to his girlfriend in the middle of it.

15-07-iphone-proposal-she-said-no

She said no.

Jul 282015
 

Insolvencies by Age and Province

A lot of money is tainted. It taint yours, and it taint mine. 😀 That’s why it’s important to make the most of the money we do have and spend it responsibly. But sometimes if we don’t have enough money to buy what we want, we’ll need to use debt.

There’s nothing inherently wrong about borrowing money, but we have to be careful to not overextend ourselves. When we are no longer able to service our debt payments we are considered to be insolvent. The insolvency rate for Canadian consumers is only 4.2% and has been steadily declining since 2010. Here’s an interesting chart via the Government of Canada showing the distribution of insolvency by age groups.

15-07-consumer-debt-by-age-Insolvencies by Age and Location

According to the graph adults between 25 to 29 years old such as myself only represent 7.1% of all insolvency cases. This is lower than most other age groups. On the other hand, Canadians between the ages of 40 and 44 are most likely to become insolvent.

Younger adults are generally still building up their financial stories. It’s easier for younger workers to change careers. And they’re also more likely to live with their parents. Meanwhile, middle-aged folks have fewer financial options. It appears after we turn 40 we’re likely busy raising families. Salary increases are not as generous as earlier in our careers. And some of us will need to start taking care of our aging parents. This sounds like the worst time to be worrying about debt problems, yet the evidence shows this is exactly when we’re most likely to struggle staying solvent.

How can we prepare for this mid-life financial risk?

Allow me to present a brief case about debt and age groups. 😀

15-07-about-debt-and-age-groups

Continue reading »

Jul 252015
 

As a blogger, I sometimes feel cold, probably because I’m surrounded by so many drafts. 😀 One draft I’ve been meaning to publish is today’s post, which is about my blogging income. I like to be upfront about the money I make from side hustles. Regular readers will know I earn about $10K a year from rent, $6K from dividends, etc. Recently my online income has grown to the point where I feel like I should address it. So in the interest of transparency I’d like to share a bit about my online income. The tl;dr version is that I make about $500 a year blogging. Details below.

I started monetizing Freedom 35 about 3 years ago. Prior to that the blog didn’t make any money. I usually spend around 5 hours a week blogging, generally writing 2 posts per week. So in terms of hourly rate it appears my writing efforts make a jaw-dropping $1.92 per hour, haha. :) Just to be clear this post is not about how to make money online, or how to monetize a website. There’s no shortage of experts out there who claim to have the secret sauce to build a successful online empire. But the main purpose of this post is to provide disclosure to readers.

15-07 what do personal finance bloggers do and what people think they do

My blog’s main source of revenue comes from Google Adsense. It allows me to place ads like the ones on the right side of this page. These ads earn about $20 to $25 a month. :) Due to the Terms of Service agreement with Adsense I can’t show all the details of my earnings. But here’s a quick peek at my performance from a screenshot I took last month.

Continue reading »

Jul 222015
 

It’s time again to learn about you, the readers. :D Are you a breadwinner? Last year Freedom 35 Blog visitors were asked who the primary income earner is in their households. Here are the results. Thanks to everyone who voted (^_^)

15-07-poll-results-primary-income-earner

I think what the poll results show is that people who read personal finance blogs tend to make more money than his or her spouse. :) Out of the 67 voters who live with other people, 42 (63% of them) claim to be the main person to bring home the bacon. I don’t think it’s a coincidence. Those who have a higher affinity for making money will probably be drawn to reading blogs about how to make more money. Even people who don’t have high paying jobs can still become the breadwinner of a family through other means. For example, with my recent acquisitions that I wrote about earlier this week, I’m now making about $17,000 a year from investment income alone.

The nice thing about investment income is it gives us a lot of control over our household finances. For example I could sustainably increase my investment income to $30,000 per year if necessary. But doing that would slow down my portfolio’s long term growth so I’m choosing not to do that since I don’t need the extra money right now.

Investment income is less risky than a salary or wage as long as our investments are properly diversified. A well balanced portfolio should continue working for us even while we sleep. Furthermore, capital gains and dividend income is tax less than earned income so even the tax agency wants to reward investors. :)

——————————————————————–
Random Useless Fact

We tend to be very good lawyers for our own mistakes, but very good judges for the mistakes of others.

 

Jul 202015
 

Experts worry that the recent interest rate cut in Canada will lure people to rack up even more debt. Bankruptcy trustee Doug Hoyes warns, “the more debt you have, the greater your chances of going bankrupt. It’s simple math.” He predicts bankruptcy numbers will “skyrocket when interest rates rise and people are saddled with ballooning debt payments.” Yikes. That doesn’t sound good. 😐

Anyway, last week I borrowed $1,420 from the bank to purchase 100 shares of Corus Entertainment (CJR.B) for $14.20/ share in my non-registered account. Normally I wouldn’t buy a stock with 100% borrowed money but with credit this cheap how can I say no? 😀 Besides, the dividend from CJR.B is twice as much as the interest I pay on the margin loan so it’s totally sustainable as long as the dividend doesn’t get cut, lol. :)

CJR.B Dividend Payout History

15-07-corus-dividend-payment-history

Corus is a large media company in Canada that operates both TV networks and radio stations. It owns brands including YTV, Treehouse, Nickelodeon Canada, W Network, OWN Canada, and Movie Central (including HBO Canada and Encore Avenue.)

Continue reading »