Oct 252017

Canada’s trade deficit rose to a disappointing $3.4 billion in August, one of the highest ever recorded. Economists had predicted $2.6 billion, lol. They were way off. Both imports and exports were down, which suggests the entire economy may be in trouble.

It doesn’t help either that Canada’s currency has advanced 7% over the past 6 months, largely due to the 2 interest rate hikes earlier this year. According to insolvency firm MNP, 40% of CanadiansΒ fear they will be in financial trouble if rates increase again.Β And 42% say they are only “$200 or less away from financial insolvency, with little cushion to pay unexpected bills or expenses at the end of the month.” This is troubling news. πŸ˜”Β Consumers will have to be more careful about how they spend their money going into 2018.

With domestic spending expected to fall, and an extended period of large trade deficits, a slowdown in our growth domestic product (GDP) is inevitable. Canada is essentially buying more stuff than we’re selling, which basically means we’re spending beyond our means and going into debt. Due to these factors, we can expect negative repercussions in the financial markets as well. Slower domestic spending means lower sales for domestic producers and their stock prices.

“Given enough time, investors will realize fewer investment opportunities domestically and begin to invest in foreign stock markets, as prospects in these markets will be much better. This will lower demand in the domestic stock market and cause that market to decline.” ~Investopedia

Economists are anticipating annualized GDP growth of about 2.5% for the third quarter. That sounds too optimistic to me. Given the numbers we have today I would expect a more modest growth rate of 1.6% annualized for Q3, 2017. I guess we shall wait and find out later this year.

It can be difficult to find investments in a slow growing environment. But we can always look for opportunities outside of Canada. πŸ™‚ Afterall, if we search globally, we will likely find more bargains, and probably better bargains, than in any single country. This is why I invested in Germany through Dream Global (DRG.UN) a couple of years ago. Canada’s real estate prices were too expensive, so I looked elsewhere for a bargain, and I found one! Dream Global is a Canadian REIT but conducts most of its business in Germany. Hurra! πŸ˜€ If we use the iShares S&P/TSX Capped REIT Index ETF (XRE) as a benchmark for Canadian REITs, then since my purchase in 2015, DRG.UN has outperformed XREΒ by over 30%. Yay! Property prices in developed countries around the world, including in Germany, have risen a lot over the past 2 year and are no longer cheap. But I believe there are still other undervalued sectors around the world today. πŸ™‚


Random Useless Fact

Muhammad Ali reportedly went 2 months without sex before a big fight, claiming it made him stronger in the ring.



Sep 152017

Median Income Grows to $70,336

The results from last year’s national census about family incomes have been released. Below is a table showing how much we all made in 2015. Overall the median national income was $70,336. This means half of Canadian households made more than this number, and the other half made less.

Atlantic provinces and Quebec saw the lowest median incomes for some reason. There seems to be a trend for younger people to leave Newfoundland and Labrador in search of better job opportunities in other provinces. I often hear people complain that jobs pay less in B.C. than in other provinces. According to the data above, it appears B.C. is right in the middle with a rank of 7 out of 13 for household incomes. Not too bad. πŸ™‚


Comparing 2015 Incomes to 2005

Keep in mind that inflation (as measured by CPI) has eroded about 19% of our money during the 10 year span between 2005 and 2015. But the data is inflation adjusted to 2015 constant dollars as a commentator pointed out below.

However income is just one aspect of personal finance and doesn’t necessary determine how well off households are. For example just about anyone who held real estate in Canada between 2005 and 2015 would have experienced tremendous growth to their home equity. This wealth could be used to either create passive income or lower their housing costs through gradually reducing the cost of their mortgage over time.

  • To be in the top 10% of all income earners in Canada you would have to make over $93,390.
  • To be in the top 5%, you’d have to earn at least $120,219
  • To be in the top 1%, you’d require an income of $234,129 or higher.

If you want to know exactly how you compare to other people of your demographic, you can plot your income on this fun interactive chart released by Statscan. πŸ™‚ This is for individual incomes. For example, I learned that for my ripe-old-age of 30, my earnings are in the top 10% of my cohort. Not too shabby.


Additional key findings from the Census

  • Ontario had the slowest growth in median income since 2005.
  • Fewer children living in low income. But there are more low income seniors.
  • The incomes of 32.0% of couples were fairly equal (both earning from 40% to 60% of the couple’s total income).
  • Same-sex couples have higher incomes. For example, over 12% of male same-sex couples had household incomes over $200,000, compared with 8.4% of opposite-sex couples. (Time to find me a boyfriend, lol. Just kidding.)
  • 67% of the population aged 15 and over reported income taxes. This means about 1/3rd of Canadians didn’t pay income tax in 2015.
  • Of 14 million households, 65% are saving for retirement.

Overall this was a pretty cool look at recent Canadian household incomes. πŸ™‚



Random Useless Fact

Aug 172017

Holding some cash for emergencies or opportunities is a sound idea. But having too much cash sitting around instead of putting the money into investments can be financially unwise.

Like most things in life, there is a cost component to cash – which is that cash usually produces lower returns than other asset classes such as stocks or bonds. One advantage of holding cash is to deflect volatility in a portfolio. But with a longer time horizon investors can manage volatility by using fixed income vehicles instead of cash. Long term corporate bonds from large, stable companies such as Enbridge pay 3.5% or higher annual returns, easily beating the interest earned in a savings account. πŸ™‚

According to investment management company, BlackRock, people who have allocated their money towards cash or cash equivalent assets actually lost purchasing power in the past. The value of their savings slowly whittled away at 0.8% per year on average between 1926 and 2014. This gives a whole new meaning to cash poor.

Holding cash for one or two years isn’t a big deal because the loss is very small. But over time it can build up to significant loss of buying power. The longer the investment time horizon, the less cash investors should consider holding. For a multi-decade horizon and high return objectives, which is the strategy I’m personally using, having excess cash savings would be a liability because it produces negative real returns. Sometimes the risk is not being aggressive enough with our investment plan and losing out on easy gains.

According to a survey by State Street’s Center for Applied Research, globally retail investors are holding 40% of their assets in cash. Uh oh. If someone has 60% of their portfolio in bonds, and the rest in cash then they could be making zero progress with their portfolio after inflation and tax.

If I’m sure I won’t touch my money until I retire, then I should take advantage of my long time horizon. This is why I don’t keep more than 1% of my net worth in cash, unless I’ve earmarked savings for a large, specific purchase. πŸ™‚


Random Useless Fact

Aug 092017

It was a slow month in July. But Β at least I’m back in the black. πŸ™‚ Household expenses were pretty normal, but incomes were above average; I received $800 of interest payments from a variety of loans such as P2P lending contracts and mortgage investment corporation funds. Yay!

Liquid’s FinancialΒ Update

*Side Incomes:

  • Part-Time =Β $1100
  • Freelance = $700
  • Dividends =Β $800
  • Interest = $800
*Discretionary Spending:
  • Fun =Β $300
  • Debt Interest = $1100

*Net Worth: (Ξ”MoM)

  • Assets:Β = $1,111,700 totalΒ (-2,000)
  • Cash = $2,500Β (-2800)
  • CanadianΒ stocksΒ = $146,400 (Unch)
  • U.S. stocks = $91,400Β (-200)
  • U.K. stocks = $19,900Β (-200)
  • RRSP = $83,100 (+500)
  • Mortgage Funds = $31,500Β (+500)
  • Peer-to-Peer Lending = $21,100Β (+200)
  • SolarShare Bonds = $9,800
  • Home = $270,000
  • Farms = $436,000
  • Debts: =Β $481,600 totalΒ (-4,400)
  • Mortgage = $182,500Β (-400)
  • Farm Loans = $188,300Β (-500)
  • Margin Loans = $57,900Β (-2400)
  • TD Line of Credit = $12,400 Β (-600)
  • CIBC Line of Credit = $24,500 (-500)
  • HELOC = $16,000 (unch)

*Total Net Worth = $630,100Β (+$2,400 / +0.4%)Β 
All numbers above are inΒ $CDN.Β 

I took some savings in July and paid down some of my higher interest debts. Now that the cost to borrow is 0.25% higher I have to lower my overall debt to not become overwhelmed by interest payments.


Random Useless Fact

Sometimes tough love is the best way to learn.

Jul 312017

One of the best thing we can do with our incomes is to deploy it as efficiently as possible. This means spending money on the highest priorities before paying for less important things.Β In 2015 I created aΒ priorities list detailing how to spend one’s income to maximize financial success. The last time I updated that was chart was last year.

I recently came across another flowchart on the internet created by Reddit user u/atlasvoid. It has a lot more information than mine and is worth a read because there might be something in there that we didn’t think of before. Of course since everyone has different values and priorities, there can never be a once-size-fits-all income allocation flowchart. πŸ™‚ They are only a reference point at best, based on people’s average financial situation. Feel free to move around certain nodes in the flowchart to better suit your own individual circumstances.

Here is the Canadian version. Click the flowchart to make bigger.


Click here to download the income flowchart for Americans, created by the same Reddit user.


Random Useless Fact

Some bartender added 1 cent to this customer’s bill in order to make the total come to $69.69