Jan 272020
 

Why it’s hard to replicate success

After celebrating my millionaire status last year I reflected on my past and examined what factors contributed to my financial growth. I’ve realized that a big part of my wealth comes from simply being in the right place at the right time. 🙂 Sometimes good things just happen to me for no apparent reason. In order to make better decisions going forward I believe I need to understand what my undeserved privileges are, and not take them for granted.

Here are 5 advantages that I had no control over, yet have helped me grow my net worth. 😀 And due to the serendipitous nature of these advantages, it’s not likely for others to make use of them all.

  1. I’m a millennial.
    Fund manager Peter Lynch says regular retail investors have an advantage over professional stock pickers. We can identify opportunities in our areas of expertise. What has been the best performing stock sector over the last 10 years? Technology. 🙂 Which investor age group is the most familiar with technology? Millennials. 🙂 This inherent advantage has made me so much money as I followed Peter Lynch’s advice: Know what you’re buying. And know why you’re buying it. Millennials are better educated about stocks than any prior generations. We have so much information at our disposal. And we know how to use it. We grew up with Google, Apple, Amazon, Netflix, Tesla, and other tech companies. We know these brands intimately because we use their products and services religiously, and have a better sense of which brand will become the next big thing. This gives us a unique advantage over older generations. If something attracts you as a consumer, it should also interest you as a potential investment. 🙂
  2. I started my career in 2008.
    Lots of companies were restructuring in 2008 and didn’t have the budget to hire expensive senior workers. They could however afford to bring in juniors at that time. As someone who just finished school I was cheap, available, and eager to prove myself. Since most unemployed people were looking for jobs that required experience, I didn’t have much competition at my salary level. It didn’t take long before I landed my first job in the graphic design industry.
  3. I was given a large severance.
    My employment abruptly ended a couple of years ago. But I already had a contingency plan prepared. So I got back on my feet pretty fast. I actually started to make more money than before. 🙂 Plus I received a five figure severance package from my old employer since it was a no-fault termination. Things couldn’t have turned out better for me. 😀
  4. I’m not American.
    Several years ago I tried get into a venture capital deal in the U.S. I asked the company if they accept Canadian investors and they said yes. So I wired them $55,000 to put into a startup business which delivers online music streaming, and some other companies. I imagined my seed money was going to turn into $500,000 when the company eventually goes public. 😀 But a few months later they refunded my $55,000. It turns out they can’t accept my money after all because I’m not American. Thankfully my investment didn’t go through – I just found out that the music streaming company ceased operations last month. Its user base has been shrinking and it ran out of operating money. So I definitely dodged a bullet there. Phew. 🙂 I clearly didn’t know what I was doing. But something beyond my power saved me from making a huge mistake.
  5. I grew up in Vancouver.
    Vancouverites talk about real estate more than we talk about the weather. Most already own their homes, and the rest are just waiting for the right entry point. So growing up in this environment has made me naturally biased towards favouring home ownership. I purchased a condo in 2009. Property prices here have doubled since then. But the same can’t be said about other Canadian cities like Calgary or Ottawa where price growth is slower. A big part of my net worth today comes directly from the tremendous growth in the local real estate market. So where you live can have a big impact on your finances. And I just happened to be lucky enough to live in a city with a strong real estate market.

Making smart financial choices obviously helps. But not everyone can save and invest their way to wealth. Some are just born with certain privileges. Even Warren Buffett admits that luck is important to success.

Buffett said he is lucky to be born in America. If he had started his life in Africa he would have become some animal’s lunch because he can’t climb trees very well, lol.

We all have different stories, different beginnings. There are many things that we cannot change. But it’s important to develop a positive, growing mindset to face the world. The more we concern ourselves with the things we can’t control, the less we can affect the things we can control. 🙂

I believe everyone has innate advantages that aren’t shared by most people. 🙂 Let’s all keep our eyes open for opportunities that are unique to ourselves – or else they will pass us by and we will have squandered our privilege.

 

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Random Useless Fact:

Actor Leonardo DiCaprio has never been married before.

Apr 252018
 

My experience working under Jeff Bezos, indirectly.

As many of you know I held a full time job for a month after my layoff in February. This company is the online retailer, Amazon. 🙂 I was a warehouse associate at an Amazon Fulfillment Center. It was a lot of fun! And I’ll never forget the lessons I learned there.

But I quit after a month because I wanted to spend more time pursuing other job opportunities. Besides, I was feeling a lot of pressure because my company’s CEO is literally the wealthiest man on the planet, and I didn’t want to risk disappointing him. Amazon founder Jeff Bezos is currently worth about $115,000,000,000 – give or take a few billion dollars! 😮 Wow that’s a big number. And for a brief moment of my humble existence I was granted the privilege of working indirectly with him. 😀

Although I didn’t work directly under him, he was only 7 management levels above me. So if I had kept working and be promoted just 7 times I would have easily taken his job as CEO. 😉

What Jeff Bezos taught me about business

During my short tenure with Amazon it was clear that Jeff’s influential principles and management style trickled all the way down the corporate ladder to the employees working on the ground floor.

I believe Amazon’s Prime 😎 reason for success is Jeff’s unique management style. He operates the leanest company I have ever seen. Any workplace inefficiency or redundancy, no matter how insignificant, will be eliminated as soon as it is found. From the workers picking and packing to the automated labeling machines and conveyor belts, everything in the warehouse operates like clockwork. 🙂 The impressive logistics system has to manage over 100 workers, moving and sorting 50,000+ items every day.

Consistency is important. All the managers at Amazon have to mimic the same disciplined style of leadership as set by Jeff. This is apparent across all levels of the company. That’s not to say Amazon is all work and no play. They have a well stocked break room, as well as a leisure area with video games, table tennis, and comic books. Amazon’s workplace policies are firm, but fair.

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Dec 222016
 

Outgrowing The “Middle Class” Label 

Hello high-income earning friends! It’s been a few years since I’ve written about my income from a holistic point of view. So for the sake of transparency I thought I would give everyone an update on my income situation.

My salary is currently closer to $60,000 than it is to $50,000. I won’t disclose the exact figure because I work with people who read this blog. As for my side incomes, they have gone up as well. 🙂 I’m leaving out rental income below because I use the rent to pay my farmland mortgage so it’s basically a wash.

Gross side incomes per year.

  • Part time job – $10,000
  • Dividends – $8,000
  • Interest – $3,000
  • Freelance – $10,000

Total side incomes = $31,000/year

If we put all the numbers together we see that I am making in the rough range of $90,000. Sweet sassy molassy! I believe this means my income is no longer considered middle class anymore. I am now part of the trendy upper middle class. 😉

In any case, I’m earning more than $75K/yr, which is a very important psychological hurdle. According to the Wall Street Journal, the magic income level for maximum satisfaction is $75,000 a year. “As people earn more money, their day-to-day happiness rises. Until [they] hit $75,000. After that, it is just more stuff, with no gain in happiness.”

Retiring Early on a Modest Salary

It’s rare for graphic designers such as myself to ever earn a six figure salary. What this means is that I have to implement a different strategy for FI/RE than someone else who’s a doctor or engineer. To make up for a lower salary, I boost my earnings by moonlighting, and also by increasing my investment returns by taking on more calculated risks. The extra income streams essentially increase my income by $31,000 a year right now and should continue to grow over time. They should also make the eventual transition to retirement easier. And by using leverage to invest in growing companies and other profitable assets like farmland and high yield bonds, my total portfolio has continuously brought high returns since 2009.

This method of choosing individual investments is admittedly more risky than the passive, Boglehead market indexing strategy. But I’ve also been compensated with higher returns, at least so far. I can’t say this plan is guaranteed to work for everyone or that it’s sustainable long term. But I started investing in my early 20s. Today I’m almost 30 years old, and my passive income is about $1500 per month, while my expenses are about $3000. So it’s working out for me. The only issue is I don’t know how my leveraged portfolio will perform in a bear market or recession, which hasn’t been tested yet.

I believe in the next 12 to 24 months it’s very likely that I will be making $100,000 per year including all my income sources. Wow. Never in my wildest childhood dreams did I expect to earn so much. I know six figures isn’t what it used to be but it still feels like a huge amount of money to me.

Many other high income earners claim that they don’t feel $90K or $100K is a lot of money. I don’t know if they’re just being modest, but I certainly do feel much more privileged and happier now than many years ago when I earned only $40K.

16-12-liquid-income-update

I used to believe that you have to be smart to make a lot of money. But apparently I’m living proof that someone with an average intellect can do so as well. I modelled my financial plan based on the brilliant minds that have already figured out the formula for success. All of my investment ideas and strategies can be boiled down to one simple philosophy; Do what other successful people do. 🙂 That’s it!

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Mar 142016
 

I think believing in superstitions is bad luck. But bad things can happen to anyone. So one way to deal with unexpected situations is to be like Batman and have a contingency plan for everything. 🙂 I’ve recently updated my stress test page to reflect my current financial situation, which has improved since last year. A stress test removes uncertainty and doubt about our finances so we can sleep better at night. 😉

A Worst Case Scenario

Just for fun I have created a hypothetical worst case scenario to see if my finances could survive it. Consider the following events.

The economy contracts. People panic. The Canadian real estate bubble bursts and prices drop by 40%. Stock markets also fall 40%. Jobless claims skyrocket. I get laid off from both my jobs on the same day without notice. On my way to the employment insurance office I get T-boned by a distracted driver and my car is written off. The next day a devastating 7.5 magnitude earthquake hits Vancouver hard. My apartment building suffers heavy structural damage and is deemed unsafe to live in.

16-03-vancouver-earthquake-damage

Okay, so things may look bad on the surface. But it’s actually fine, because the whole point of creating a stress test is to protect ourselves against these unlikely what if scenarios. I may be frustrated after all the unfortunate events, but at least I’ll still be okay financially. 🙂 Here’s how things would play out:

  • My combined severance package would be about $10,000 of after-tax income, enough for 3 months of living expenses.
  • I would qualify for employment insurance benefits.
  • My dividend stocks would continue to pay out regular distributions like they did during the last recession.
  • I have a stash of gold and silver in case I need emergency cash.
  • Auto insurance will cover the car accident.
  • Earthquake insurance would cover the damage to my apartment. Strata owners would hold meetings with the property manager to discuss how to move forward using 3/4 votes as per the bylaws. The insurance company would pay our housing costs if we have to relocate somewhere else temporarily.

Luckily my finances would appear to still hold up through all the turmoil. I would have plenty of time and liquidity to get back on my feet.

How to Stress Test your Finances

Step 1: Make a list of all the risks, uncertainties, or potential issues that could effect your money or financial lifestyle.

For example:
Job loss, flooding, rising interest rates, upcoming major purchases, etc

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Aug 302015
 

Sunshine Blogger Award Nomination

I’ve been recently nominated for a blogging award by roadmap2retire. Thanks R2R. 🙂 The person being tagged has to share some information about themselves, based on the questions posed by the person nominating. Let’s begin.

1. Name the top three experiences from your past, that help form who you are today. 

  • In the past I’ve played a handful of online role-playing games like Runescape. You earn money by doing jobs and spend money on food, and weapons to make your character stronger. It taught me the basic principles of economics and the importance of saving up to buy expensive things – useful skills I still use today. 😀 I don’t play them anymore because they are a huge time sink, lol.
  • I started investing in 2009, when the markets were on sale. The S&P 500 stock market index is 140% higher now than in 2009 so it’s hard to lose money investing over this period. I’ve never experienced a bear market before and have no idea how I would react in the middle of one. My lucky timing has given me an unrealistic expectation towards long-term investing.
  • I worked at Safeway making $8.50/hr when I was a teenager. My boss at the time told me he was once in my shoes and worked his way up to become the manager. I learned that it doesn’t matter who you are or where you start from. Anyone can become successful if they try hard enough. This belief gave me the confidence to pursue early retirement and start this blog. If I had continued to work at Safeway I’d probably be a mid-level manager today and earn $60,000 a year.

2. If you have one piece of advice for investors starting out, what would it be?

  1. Have a purpose for your investments so you can find the appropriate assets to put into your portfolio. Investing isn’t scary if you understand what you own, and know why you own it.

3. What was your worst investment so far in your life? How do you avoid making the same mistakes?

I spent $7,000 on university tuition and never even graduated. I enrolled because it’s the socially acceptable thing to do for young adults. I enjoyed the university experience, but the applied sciences program I was in has nothing to do with my career now. Today I practice purposeful financial management. I only spend or invest money if I believe there is a good reason for me to do so, not because everyone else is doing it. 😛

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