Liquid Independence

Liquid is the main editor of the Freedom 35 Blog.

Apr 222014
 

As a teenager I couldn’t fathom the universal significance of money. But over the past 6 or so years I’ve learned a lot about personal finance and now I view money completely different than before. I guess it’s all part of growing up :D

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To me money is not simply a medium of exchange that can buy stuff anymore. When I look at money today I see power.  When I think about my net worth I feel potential. When I save money I insure my future security. When I spend money I’m buying influence. When I read about money I gain knowledge and understanding about society. When I invest money I facilitate jobs, wealth, hope for others, and create meaning to this world. When I waste money I squander my liberty and independence. When I blog about money I share and disseminate confidence. And when I eventually reach financial independence I will experience freedom. Money gives me perspective and context. By associating money with these powerful words it’s easy to understand the importance of financial literacy, not just from a materialistic point of view, but also in terms of reconciling our emotional and personal well being with the modern world we all live in. The more we understand how money works the more control we’ll have over our own lives. Through managing our money we can control our fate! ;)

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Apr 192014
 
Neurological studies have found that people experienced pleasure when they saw money go to charity. When people donate to charity, they receive an emotional boost that is often more rewarding than actually spending money on themselves :)
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Shoppers who are easily stressed out during the holiday shopping season should try giving instead of buying, because charitable giving boosts happiness and reduces stress. So the next time we feel down in the dumps, maybe we can turn to giving instead of retail therapy ;)
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The short video below is an interesting social experiment that was done by a non-profit organization. It’s a bit ballsy but I like its revealing message. Warning: Video contains strong language. #nsfw

It speaks a lot aboot society doesn’t it :? It’s almost like people don’t really care for the poor. They just want everyone else to think that they care. There will always be hypocrites and posers in the world, but what does it say about our society when the richest among us could easily also be the most empathetic towards the poor? I think it means the world needs more rich people :P

According to StatCan, Canadians gave $10.6 billion to charitable or non-profit organizations in 2010. Most Canadians do give to charity at least once a year, and women are more likely to make financial donations than men. Western provinces in Canada seem to be the most generous with Alberta, Saskatchewan, and B.C. giving the most per average household. Canadian’s generosity is probably part of the reason that we’re the 6ths happiest nation in the world out of all the OECD countries :D So if we want to live a happier life, we should try to be more charitable with our money, time, books, clothing, or anything else really :)

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Random Useless Fact: The term “cowlick” was invented in the late 16th century.

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Apr 162014
 

In 2012 I found a farm I liked on the MLS website, and bought it for $150,000 :) I was so happy with my purchase I bought another farm in 2013 for $172,500 at an auction. This one is a 150 acre, class F, grain farm. It’s located adjacent to my first farm, and both properties are rented to the same farmer :)

But you know what? My second Saskatchewan farm is even more cash flow negative than my first. I’m currently losing money on both properties. But it’s no big deal. I don’t really mind :D

I’ve already broken down the numbers of my first farm in a previous post. So today I will share the financial details of my latest purchase.

Breakdown of purchase price.

  • $10,000 Personal savings
  • $10,000 Proceeds from selling stocks
  • $17,500 TD Line of Credit
  • $5,000 CIBC Line of Credit
  • $20,000 HELOC
  • $5,000 Margin account
  • $5,000 Credit Card
  • $100,000 Long term farm loan, amortized over 25 years

Total amount = $172,500

To be honest it was a bit challenging to procure all the financing I needed, but luckily everything worked out. Just like the first farm, I raised $20,000 in cash from savings and selling stocks. The remaining balance of the purchase ($152,500)  was all thanks to using other people’s money as listed in detail above :)

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Apr 142014
 

What is a credit score? It’s a number typically ranging from 300 (low) to 850 (high) that represents the likelihood of someone paying back a loan on time, based on that person’s past credit history.

Why is it important? Banks use credit scores to determine a lender’s credit worthiness. If someone has a low score because he’s been late on his payments before, then lenders will either refuse to give him a new loan, or agree to lend him money at a higher interest rate, to compensate for the extra risk.

How is the credit score calculated? Broadly speaking, it’s based on 5 factors with different weighting. See breakdown below.

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How do you increase your credit score? Improve the 5 variables that make up the credit score.

  • Credit Searches: Everyone is entitled to one free credit report per year. Hard pulling your credit history too often could raise red flags and decrease your score.
  • Types of Credit: Have a wide range of different types of debt. Types include mortgage, car loan, credit card, line of credit, student loan, etc.
  • Length of Credit Accounts: The older your credit accounts are, the higher your score will be.
  • Credit/Debt Ratio: Try to keep this ratio below 50%. But ideally it should be under 25% for the best possible score. For example, don’t keep a balance higher than $2,500 on a credit card with a $10,000 maximum credit limit.
  • Payment History: Always pay the bills on time and always pay at least the minimum amount.

Where to find your score. You can request it from any of the three large credit bureaus:  Experian, Equifax, and TransUnion. Credit reports are generally free and can be obtained either through the credit bureau’s website or by letter request, but you may have to pay a fee for the score itself. Alternatively if your bank recently pulled your credit history you can ask your financial advisor or another banking representative. They will have your full credit report on file, including the score ;)

What’s the typical credit score? In the United States, the median score was 711 in 2011. The proverbial “subprime mortgage crisis” in 2007 got its name because banks were lending to borrowers with credit scores below 640, which is seen as the dividing number between prime and subprime. Typically individuals with subprime status, or credit scores below 640, have trouble meeting their debt obligations.

This means you should keep your own credit score above 640 at the minimum. A score between 700 and 750 would put you in the same boat as most other people. And a score over 750 would give you the lowest interest rates on the market for your next mortgage or auto loan :)

Do companies have credit scores too? Yes, but they’re referred to as credit ratings. And instead of a number, companies receive letter grades such as AA, or AA+ for prime and credit worthy businesses, to C or D for more risky borrowers. Credit rating agencies who grade businesses include Moody’s, S&P, and Fitch. Entire countries can be graded as well. According to S&P Canada has the highest possible sovereign credit rating of AAA :D

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Random Useless Fact: Computer programs can be so inconsiderate sometimes.

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dat frown :(

Apr 122014
 
        Knowledge is power, but just knowing alone cannot lead us to victory. We must also take action if we are to succeed :) I’ve presented dozens of financial strategies here over the years, such as my investment last week in Dollarama. Many readers have told me they appreciate all the tips I share. But one thing that I can never give to my readers is the confidence to take that knowledge, and turn it into something real for themselves.
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        This is because the only person who can give you confidence is yourself :D This is why financial literacy is so important for every individual. It gives you the confidence you need to make wise judgements and take control of your finances.
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        If someone proved to me that they have consistently made huge profits from trading copper futures, will I jump in head first? Probably not. That’s because I haven’t done enough research on the futures market yet to build up the confidence I need to decide whether or not that’s a good idea for me.