Mar 102014

Some people look at savings as money they can spend. But I like to think of my savings as perpetual future income. When I save $1,000 today, I don’t consider that money spendable anymore. In my mind that $1,000 of savings has been changed into $40/year of income (or 4% of that savings) for the rest of my life :D

Many actuaries and financial experts like to use the 4% rule because it represents a sustainable draw down rate over a long period of time. Since I rarely have any cash savings I make sure that any new savings I bank is always working hard for me :) When I occasionally sell my investments to pay for large purchases, I also think of it as taking future income from myself.

If one manages to save $1,000 a month and make 4% return every year, then after 32 years of working, he or she will have about $750,000 of investable assets, which that person can draw from at 4% a year, or $30,000 of spending money forever (^-^)

14-03-savings, savings are future income

With $30,000 of income every year coming from our nest egg, plus maybe $20,000 from government assistance/pension programs, and/or private pensions, we can expect to live quite comfortably on $50,000 a year :) (before accounting for inflation.) Not everyone is able to save $1,000 a month, but statistics show that men who live in B.C. like myself plan to save on average about $15,000 this year. So for most people, this level of savings, if not more, is to be expected. One way I like to save is to cook my own meals most of the time because eating out can be quite costly.

14-03-expensive-food, savings are future income

Personally my savings rate is about $1,500 to $2,000 a month thanks to my side hustles. So I plan to retire quite a bit earlier than 55 :D In fact, according to my latest net worth update, I already have over $750,000 of financial assets ;)

But wait a tick. That can’t be right :? I’m not making $30,000/yr from my investments just yet. The reality is that I only have about $175,000 of investable, liquid assets. The remaining $575,000 is locked up for the long term. But building up $175,000 of stocks and bonds over a 5 year period still sounds pretty far-fetched. Luckily there’s a wonderful tool called leverage! Instead of buying stocks in a regular trading account, I have a margin account to borrow money to purchase new investments with.

So my net liquid portfolio (total stocks/bonds minus margin loan) is worth about $125,000 today, which at 4% means I can easily convert that into $5,000 of income per year for the rest of my life. Every $1,000 dollar I continue to save will add another $40 of perpetual revenue because savings are future income!

We should be able to sustain a 4% withdrawal rate by investing 60% of our money in equities, and 40% in fixed income, all via indexed funds. In terms of geographical allocation we can go with a 50/50 Canadian and international split. We then rebalance our portfolio to meet these ratios once a year :)

Random Useless Fact: What is a 4 letter word, yet is made up of 3. Rarely consists 6 letters, and never is written with 5.

Hint for the riddle above: Think about why it’s under the Random Useless Fact section ;)

Jan 242014

According to a new study by BMO, it appears that men are better savers, on average, than females. Last year each Canadian guy saved $10.5K on average, while the ladies saved about $7K each. That’s a difference of 50% yo 8O These results are interesting because last year another study showed that young men are more likely to stay at home with their folks, but young women move out sooner and are more independent. Maybe guys can save more money because we tend to mooch off our parents more :P But on a more serious note I believe the income gender gap has something to do with this. Women are still making less than men in many profession and the less you make the less you have to save :(

The good news is both genders in the study say they plan to save more this year in 2014 :) $11.2K for the men and $8K says the women. Good luck everyone :D The report also revealed saving differences across different regions in Canada :)

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Some what we can learn from this information.

  1. It’s easier to reach our goals if we are around like minded people, so if you are young and looking for work consider moving to Alberta or B.C. if you aren’t already here :) We have low unemployment, financially responsible government, and high wages – what’s not to like :)
  2. Try to save at least the 2014 amount for the province that you live in. This is because money is relative and in order to get ahead we must be better than average :D Even if we managed to save $100,000 this year our lives would actually degrade when compared to our friends and neighbors if everyone else except us managed to save $1,000,000 during the same time. I happen to live in B.C. so I will personally aim to save at least $15,117 this year to make sure I don’t get left behind :)
  3. Invest our savings with tax efficiency in mind. For most people this means maxing out the contribution room for our TFSAs and RRSPs, etc. before investing in a non-registered account.

Random useless fact: The RCMP was formed in 1920 but it wasn’t until 1974 that women were allowed to become members.

14-01-police brutality, men are better savers


Nov 152013

The following is a guest post by Jacob, a PhD student in financial planning.

crazy dudHave you ever noticed that the way you “should” do things, according to societal norms, is often the most screwed up backwards way to find success at anything?

Consumerism is especially bad in our first world environment. Society encourages you to buy things you can’t afford. It’s cool to buy the latest, the greatest, and everything in between. The media outlets all promise eternal happiness if you’ll just keep up with the Joneses.

Here is some common financial advice that blows my mind:

  • A new car is a good investment to avoid repair costs. Financing one at 0% interest every 2-4 years actually saves money in the long run.
  • Clothing prices are representative of quality. If you pay more, you’ll look better and they clothes will last longer!
  • You have to buy nice things to get ahead in a career, and generally in life. If you don’t spend money, you’ll fail to impress potential employers, clients, and everyone else who is constantly scrutinizing your lifestyle choices.
  • Eating out is a way of life. Everyone does it. The whole experience is worth more on a dollar per hour basis than the required cleanup/cooking time of a home cooked meal.
  • The stock market is a complete mystery. The individual investor has no way of competing with those big hedge funds and money managers. Consequently, the individual is far better off leaving his money with a mutual fund manager.
  • The stock market is wildly inefficient and professionals who pick stocks often do far better than the individual. The PhDs running the research and stats have a huge advantage.

Is anyone else blown away by the madness of these ideas? Follow them and you’ll be a poor slave your whole life. A slave to credit cards and paychecks and stress.

You’ll be one of the 95% who just can’t seem to get ahead in life. Retirement at 65 might even seem difficult, despite a huge paycheck in a country with unlimited amounts of waste that can be leveraged by the savvy individual to spend even less.

What I’m trying to say is this. Blaze your own path in this life. Learn to be resourceful. Embrace all of the opportunities available that enable you to live much more of life on far less money.

To begin with, make it your life’s mission to avoid popular media folk tales and the INSANE financial habits that consume most Americans. Forget about the Joneses. Forget about name brand nonsense. Forget about instant gratification. Forget about your pride and just starting doing life in a way that makes financial SENSE.

It’s not a one size fits all sort of proposition. But the common denominator is always related to spending less. Once you realize the power of saving first and consuming second, life starts to get a little easier.

First, the debt disappears, then the opportunities start rising. We knocked out $19,000 of debt in our first 9 months of marriage and still found a way to sock away enough to max our Roth IRAs and the required amount for a 401k employer match.

Now, we’re swimming in the positive cash flow of our middle America jobs, and trying to figure out the next steps of our plan.

If you’d like to know our secrets, start with this list of ways to avoid winding up broke and miserable:

  1. Never purchase anything that can’t be paid for in full (except a house)
    • Use cash back credit cards and pay them in full each month
  2. Never buy new items if they can be found in good condition on Craigslist
    • Sell the crap you don’t use on Craigslist
  3. Never pay retail for clothes
    • Look at thrift stores and garage sales
  4. Cook homemade meals with ingredients that you purchased on sale
    • Learn the art of price matching each week
  5. Never eat out to fit in or because “you deserve it”
    • Eat out to celebrate (very occasionally)
  6. Never allow peer pressure to influence a financial decision
    • Always try to influence peers to become better savers
  7. Never buy something out of compulsion
    • Always buy out of necessity
  8. Never buy something without doing research on the price of viable alternatives
    • Spend the time and find the deals
  9. Never buy something to impress someone else
    • You’re the one who has to pay for it
  10. Never buy an item that won’t be used
    • Always sell what you haven’t used in the last year
  11. Never buy a new car or take out a loan for a car
    • Cash, always. Let someone else eat the bulk of the depreciation
  12. Never buy Cable TV
    • Cut the Cable Cord and watch shows online for free
  13. Avoid financing an undergraduate or graduate degree with student loans (Yes, some professional degrees are exempt from this rule)
    • Work hard in high school and undergrad,  find scholarships, and live at home if you can
  14. Never take financial advice from someone who makes a living selling loaded mutual funds
  15. Never stop tracking your financial situation, portfolio, and spending habits
    1. Get a free account at Personal Capital

Now keep in mind, this is my list. I could go on and on, but I would rather you make your own set of financial rules! Please let me know what you come up with in the comments section!

Author Bio: I’m Jacob, one half of the Cash Cow Couple. My wife and I enjoy teaching others how to live an abundant life on a very modest salary. We are attempting to spend less than $12,000 in our first year of marriage because we enjoy a good challenge!

Jul 292013

Canadians have been told by pension experts that we are not saving enough for our retirement. Since we’re all living longer, we’ll also need more money than our parents did by the time we’re ready to quit our jobs. But one silver lining that people often overlook is that we’ll also be getting more inheritance than in any previous generation.2013_07_boomers2

The average net worth for people usually peak when they’re around the age between 50 and 65. This group of people today are known as the baby boomers :) It is estimated that boomers in the United States will receive $8.4 trillion in inheritances according to the Center for Retirement Research at Boston College. That’s an average of $300,000 per inheriting household. That could mean the difference between retiring at 55 or 65. In last week’s post I mentioned that Canadians have a higher net worth than Americans, so good for us :) Plus Canada doesn’t have any estate tax so that’s even better. Most Canadians (68%) own our own homes, and the average price of a home is $386,000. Even if boomers don’t receive any cash from their parents there’s a good chance they’ll inherit some real estate.2013_07_boomers3

Not everyone is lucky enough to receive an inheritance, but more often than not people do so it should be worked into a financial plan. It might be uncomfortable speaking about inheritance with an elderly parent but estate planning is important for the whole family. More people today will receive an inheritance than a company pension, yet lots of people don’t address inheritance as part of their retirement planning. There has never been a better time to be a baby boomer :)  The kids have moved out of the house. The government sends you cheques if you qualify for OAS or CPP/SSI. You have more free time than you know what to do with. And most likely there will be some windfall coming your way :) Almost makes me wish I was a boomer. Okay, maybe not :P 2013_07_boomers1

Random Useless Fact: It takes 2400 liters of water to produce 1 hamburger from scratch

Jun 192013

This is a guest post by Jon Haver, a recent father trying to make sense of the Canadian Insurance landscape, he writes at

From British Columbia to Prince Edward Island auto insurance can cost a surprisingly different amount! Travel from one end of Canada to the other and other than a lot of boring stuff in the middle you will find the average car insurance premium can vary greatly from one province to another if you ask.

You can be in Ontario and pay on the highest end with an average premium per year of $1,878. But just over in Québec you will pay only $863 per year – but if you slip the Mayor of Montreal $100 you don’t have to pay. Prince Edward Island is the place with the cheapest insurance at $649, but New Brunswick tops out at $1123 and it is right beside it. Continue reading »