Liquid Independence

Liquid is the main editor of the Freedom 35 Blog.

Jun 222017
 

The Largest Name in Retail Continues to Grow

Amazon.com (AMZN) recently announced it’s taking over the trendy supermarket chain, Whole Foods. At the beginning of this year I wrote an article which included a prediction that this would happen. Maybe Amazon’s CEO Jeff Bezos got the idea from reading my blog. 🙂

Whole Foods sells healthy, organic products. Most items in the stores can be expensive, but  if you want to grab a quick and healthy lunch, you can buy half a pizza for $7 CAD, which isn’t bad. I remember my first time visiting Whole Foods. I didn’t really know what it was so I had no idea what’s in store. 😉 But after going in I quickly understood why the retailer attracts so many yuppies and hipsters like myself. Shopping there is an experience. 😀

This acquisition is a very good deal for both companies. Whole Foods Market Inc has been suffering from declining same-store sales year after year. Whole Foods stock (WFM) peaked in 2013 and has been falling every year since. 🙁 So it needs a larger company to help turn things around. Amazon has already been experimenting with grocery stores since last year with its Amazon Go project. The idea is consumers can walk into a store, buy the food they want, and leave without lining up or checking out. The in-store scanners do everything automatically so people can just walk out of the store and get charged the correct amount. It’s a really neat concept, but the service is only in the U.S. for now. By merging with a grocery chain, Amazon can expand its grocery business, and can also transform unused Whole Foods real estate into Amazon warehouses. 🙂

Whole Foods stock is up about 25% in the last 5 trading days and now sits at $43. Amazon stock is now at $1,002 per share. I like shopping with both retailers, and I look forward to see how they collaborate.

Disclaimer: I own 10 shares of AMZN, and no shares of WFM.

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Random Useless Fact:

 

Jun 152017
 

We’re Living Longer

I don’t know how the term “aging gracefully” can be a compliment. To me it just sounds like a nicer way of saying you’re slowly looking worse. 😛 When the government pension (CPP) was first introduced in the 1960s, the average life expectancy was about 71 years old. The idea was that most workers would retire at around 65 years old, and receive 5 to 10 years of CPP benefits in retirement. And that was the case for awhile. 🙂 But today, the average life expectancy in Canada is over 80 years old which puts more pressure on the CPP investment board to perform well. It’s not unreasonable to assume that my generation of workers (millennials) could have a life expectancy on average of 90 years or older.

According to a Telegraph article, we could witness in our lifetime a world where most babies will have a life expectancy of 100 years or longer! 😀 It’s nice that people are living longer than previous generations. But it’s also kind of sad to think about getting old. Can you imagine having sex when you’re 90? It’ll probably be like trying to shoot pool with a rope. 😕

Young adults are also starting careers later today than in the 60s. So with relatively less money going into the sovereign wealth fund, and more people withdrawing, many economists are worried about the future sustainability of government benefits on the local, provincial, and national level – not just in this country, but all around the world.

If generation Y folks are likely to live to 90 years old, then planning to retire at 65 may not be financially feasible unless a large amount of wealth is saved up first. For those who are planning to retire early like myself, it is even more difficult. Assuming I reach financial freedom by 35, I will have 55 years of living in retirement if I choose to. That sounds great. But the reality is I will most likely be working on and off, or on a part-time capacity throughout my 40s and 50s because there are only so many non-productive activities I can do before I get bored and start working on something economically productive again. 🙂

So instead of planning to live until 80 years old, most healthy people my age should be aiming for 90 as the starting point. And with that it means accumulating more personal savings for retirement. But also keeping in mind that there is no set retirement age anymore, so plan to be flexible with work schedules to accommodate a balanced lifestyle.

 

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Random Useless Fact:

Jun 052017
 

U.S. Unemployment Rate Drops to 4.3%

U.S. job growth slowed in May, which suggests the labor market was losing momentum despite the unemployment rate falling to a 16-year low of 4.3%. The problem with the unemployment number is that it doesn’t account for people who are out of the workforce because they gave up trying to find a job. Finding work usually isn’t very difficult, especially if one has some marketable skills. But finding the right one can often be difficult. In Canada for example, many have chosen to not accept a job that pays minimum wage because they think their time is worth more. Here’s a breakdown of minimum wage across the country.

  • Alberta ‑ Currently, the minimum wage is $12.20 an hour, but it rises to $13.60 this year and $15 Oct. 1, 2018.
  • B.C. – $10.85 now and $11.25 or more later this year.
  • Manitoba – $11, with plans to raise it every year along with the rate of inflation.
  • New Brunswick – $11. Adjusted annually relative to the consumer price index.
  • Newfoundland & Labrador – $10.75 rising to $11 on Oct. 1, 2017.
  • Northwest Territories – $12.50
  • Nova Scotia – $10.85. Adjusted annually April 1 based on the consumer price index.
  • Nunavut – $13. Adjusted annually April 1.
  • Ontario – $11.40.
  • Prince Edward Island – $11.25.
  • Quebec – $10.75, rising to $11.25 per hour May 1.
  • Saskatchewan – $10.72. Adjusted annually Oct. 1 relative to the consumer price index and average hourly wage.
  • Yukon – $11.32. Adjusted annually April 1 based on the consumer price index.

May was an average month. Stock market went up a little. I’m still waiting for the crash that some people have been talking about for years, but hasn’t happened yet.

Liquid’s Financial Update

*Side Incomes:

  • Part-Time = $600
  • Freelance = $700
  • Dividends = $700
  • Interest = $400
*Discretionary Spending:
  • Fun = $300
  • Debt Interest = $1100

*Net Worth: (ΔMoM)

  • Assets: = $1,120,000 total (+7,200)
  • Cash = $3,200 (-1000) 
  • Canadian stocks = $146,600 (-200)
  • U.S. stocks = $96,200 (+900) 
  • U.K. stocks = $21,400 (+700)
  • RRSP = $85,400 (+6500)  ~ purchased 200 units of BMO high yield bond fund (ZHY)
  • Mortgage Funds = $30,700 (+100) 
  • Peer-to-Peer Lending = $20,700 (+200)
  • SolarShare Bonds = $9,800
  • Home = $270,000
  • Farms = $436,000
  • Debts: = $491,500 total (-3,300)
  • Mortgage = $183,400 (-400)
  • Farm Loans = $189,300 (-500)
  • Margin Loans = $63,500 (-1100)
  • TD Line of Credit = $13,600  (-600)
  • CIBC Line of Credit = $25,500 (-500)
  • HELOC = $16,200 (-200)

*Total Net Worth = $628,500 (+$10,500 / +1.75%)
All numbers above are in $CDN. 

 

 

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Random Useless Fact:

Just because something is legal doesn’t mean it’s ethical.

Jun 012017
 

Dating can be expensive. All those dinners and movies can add up over time. According to a Match.com survey of 5,500 singles in the U.S., the average unmarried American spent about $1,600 on their dating life in 2016. That’s about $133 per month. When broken down by gender, men spent $150 per month on average, while women spent $120 per month.

I recently dated a girl who expected me to spend $400 a month on her. That’s a bit much for me, and is part of the reason we are no longer seeing each other. I didn’t know if an appropriate dating budget exists, so I decided to create a poll on Twitter. Here is what I found out. 🙂

It appears 8 out of 16 people think $100 is a good monthly amount to spend on dating. 4 out of 16 thought $250 is appropriate, and the remaining 4 voters thought $400 is the right amount. Overall my poll seems to more or less reflect the results of the Match survey.

But instead of using dollar a figure, maybe a better way to determine a dating budget is to use a person’s income. For example, 5% of take home income should go towards dating. So if someone makes $3,000 a month, his dating budget would be $150/month. Or maybe each relationship is different. If we really connect with someone special then perhaps we are more willing to shower them with money, time, attention, and other resources because they are worth it.

There are no universal rules when it comes to money and dating. But it’s probably a good idea to keep your standards reasonable. According to a Chase Blueprint Valentine’s Day survey, men on average expect $230 worth of Valentine’s day presents. But women are less greedy, only expecting to receive $196 worth of gifts. However, everyone is bound to be disappointed, because on average women only plan to spend $71 and men $98 on their Valentine’s day date, lol. 🙂

If you’re single, how much do you spend on dating? What about if you’re in a relationship; how much do you spend on dates per month with your significant other?

 

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Random Useless Fact:

The division symbol (÷) is just a blank fraction. You replace the dots with the actual numbers.

May 222017
 

Some people are so debt averse they even refuse to borrow money when interest rates are at rock bottom. They save up for a 30% down payment for a home instead of 20% because they want to save on interest costs. This is despite the fact that Canadian mortgages only cost about 2.5% currently, or sometimes lower like in my case. These people also refuse to invest on margin. I’ve explained in the past how anyone with at least $10,000 can open an account with Interactive Brokers, put in some money, and safely borrow modest amounts of money at just 2% interest rate, with practically no risk of getting a margin call.

Can’t have it both ways

Yet, many people who are debt averse and won’t borrow money under any circumstances also believe in the 4% rule of investing. But this kind of thinking is contradictory. It’s silly to make the argument that paying down their mortgage is a guaranteed rate of return, but investing is uncertain and they can’t be sure they’ll make more than 2.5% return in the markets. While at the same time, also claim that the 4% rule is valid.

The four percent rule is a widely accepted rule of thumb used by many investors and financial experts. There are slightly varying definitions of it, but for the purpose of today’s post we’ll define it as the maximum sustainable rate of withdrawal from a retirement account each year without depleting the account itself. This is because 4% is considered a “safe” rate of withdrawal over the long run for a balanced and diversified portfolio.

So if a person really believes in the 4% rule and uses it as part of his retirement planning, then it would only be rational to consider borrowing money to invest if the cost to borrow is lower. The 4% rule says that this person will make at least 4% return on his investments per year on average. So if he always borrow money at less than 4%, then he is virtually guaranteed to profit in the long run! assuming the 4% rule holds true.

This is why I always buy properties using very low down payments, and use controlled margin borrowing to invest. Since I believe in the 4% rule, it would be illogical if I didn’t try to take advantage of low interest rates. If my margin or mortgage interest rate were to increase to 5% or 6% some day, then of course I would no longer take out new loans to invest. At that point it wouldn’t make sense to use leverage anymore. Sometimes it may seem like being debt free is more safe. But there is risk in being overly debt averse, the risk of not seeing perfectly good opportunities to earn higher investment returns.

Obviously just because a rule has held up in the past doesn’t mean it will continue to hold true in the future. Whether or not you think the 4% rule is valid is up to you. 🙂 But this principal can work with any other withdrawal rate. If you believe you can safely and sustainably withdrawal 3% a year, then you must also accept that your portfolio will return 3% a year minimum on average. You can then use this number as your reference point when deciding when to use leverage and how much.

 

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Random Useless Fact:

Some grocery stores have an aisle dedicated to strong, independent women. 😄