I don’t know how much the world will change 5 years from now. After all, I don’t have 2020 vision. 😀
The future is always uncertain. But we can increase our probability for financial success by learning a wide variety of financial knowledge to become a well rounded investor. Being really knowledgeable or talented in one particular skill can also be useful in life. Many professionals rely on their unique trades to earn a living. However when it comes to managing our money I think studying a wider range of topics is more beneficial because money affects almost all aspects of our lives.
Novice investors are often taught that a diversified nest egg will minimize risk. There is nothing wrong with this advice. But before we can diversify our investment funds we should probably diversify our investment knowledge. Everybody knows how to invest in index funds, but understanding how they work will allow us to actually decide if they’re the right investments for us, which is way more important. 😉
Rich people dream of the future. They prioritize setting goals and planning ahead. Meanwhile the poor and middle class often dwell on the past, which holds them back and prevents them from being happy and productive. The wealthy are financially successful because they spend more time thinking about their future than their past. They believe their circumstances are not a matter of chance, but a matter of choice. Their future is not something they wait for. It’s something they plan for.
We can’t turn back time or change the past, but we can all fight for a better future. Our past provides the foundation for our future, and our present defines what kind of future we want to build on that foundation. Every waking moment in the present is an opportunity for us to make better decisions that will help our future selves. Wallowing in regret or past mistakes will not help us in this respect. Whenever we become woeful we should try to acknowledge our emotional state, and then ultimately realize that our despairs or recollections about what happened in the past are simply ephemeral memories.
The past can be useful, but only if we learn from it. If we failed a driving test, told an inappropriate joke, or didn’t get that promotion we wanted, we should absolutely think back and learn from our experiences, but more importantly strive to do better in the future. Instead of puzzling over what we could have done differently, we should instead be asking how can we do better next time. This shifts the focus from the past – a fleeting memory – to the future, where we’ll actually have an opportunity to do something about it.
Professional football players are able to make oodles of money because they always have a goal in mind. 😀 But only 65% of Canadians feel confident they will achieve their financial goals in 2015, according to a recent CIBC poll. This is down from 76% in 2014. It appears we’re entering the New Year with a less optimistic financial outlook than last. Nevertheless it is still important to set those goals.
When we have goals to guide us, we’re happier and achieve more than we would without having them. It’s a psychological thing. But it’s not always easy to come up with goals for yourself. That’s why I have asked some other personal finance enthusiasts from around the web to share their goals for the New Year and I have compiled the list below. So if you are having trouble coming up with your own goals, here are some ideas to consider. My own goals are listed at the bottom.
Financially speaking this has been the best year for me so far. Here’s a 2014 year end review and some updates about what’s been going on in my personal life.
Earlier this year I decided to get braces for financial reasons. According to my research people with very straight teeth make more money than the average person. The total cost was $2,000 but I think this will turn out to be a great investment in the long run. So here’s an update. A couple of weeks ago I got them removed!
My teeth look great and I’m more confident about my smile 😀 which, according to science, should help me earn more money. 😉 The only issue now is I have to wear a retainer pretty much all the time which makes me sound kind of funny when I talk lol.
Stock Markets Climb
Last year in 2013 the U.S. stock markets gained 30% so many investors decided to sit out in 2014 because they thought stock prices were overvalued. But the Dow in the U.S. gained 9% this year, and up here in Canada the TSX gained about 7%. These 2014 gains are on par with average historical stock market returns. This just goes to show that we should not try to predict future market performance using information from the previous year.
Buy stocks for the profitable companies they represent. For example, I posted my analysis for Dollarama, and explained with logical reasoning why this recession-proof business should outperform going forward. I also blogged about investing in Time Warner, and 21st Century Fox and discussed why these are excellent long term investments.
Today, Dollarama shares are up 34% from when I bought them. Both Time Warner and Fox shares have also returned double digits from my purchase price. No wonder my net worth has been growing like a weed. It’s no big deal really. I’m not a stock picking wiz or anything. Investing simply works for anyone who follows the basic principles of buying great companies at decent valuations! 😀
Oil Price Slump
Unfortunately, not everything is up this year. The one area of my portfolio that suffered lower prices was oil companies. Luckily I’m well diversified so the impact wasn’t that bad. The important thing is to hold onto large cap energy producers like Suncor and Canadian Natural Resources. Despite the oversupply of oil in the world Suncor shares are still worth more today, $37/share, than when I purchased it last year at $28/share. Large companies don’t get hurt as much when the sector in general underperforms.
Tim Hortons Resolution
Many of you have asked me what I plan to do with my 20 shares of Tim Hortons now that Burger King is buying them. There are usually a few options for shareholders when their company is being taken over. My 3 options, specifically in this case, are:
Cash Tender – To receive $88.50 CAD for each common share of Tim Horton Incorporated tendered.
Stock Tender – To receive approximately 3.0879 common shares of Holdings (to be renamed later) for each common share of Tim Horton Incorporated tendered.
Cash & Stock Tender (Default Option) – To receive $65.50 CAD plus approximately 0.8025 of a common share of Holdings (to be renamed later) for each common share of Tim Hortons Incorporated tendered.
I am going with the default option number 3. I purchased Tim Hortons share for about $50 each back in 2013. Option 3 basically gives me an immediate 30% return on my investment, plus I’ll receive shares in the new holding company, which is a nice bonus. I also don’t have to worry about taxes because the transition will take place in my Tax Free Savings Account.
In January of this year I wrote down 3 goals for myself to accomplish this year. Here’s a recap of those 2014 financial goals.
1) Increase net worth by $55,000 Pass! From the end of December 2013 to now my net worth has increased by more than $110,000. I never expected to exceed my target by twice as much, so that’s a pleasant surprise. Here’s a rough breakdown of the $110,000 gain.
Another $15K is simply due to debt reduction. Every time I make a mortgage payment, for example, my total debt amount shrinks and my wealth increases! Hurray for easy forced savings.
Another $30K comes from stock portfolio appreciation, dividends, interest, and rent. The U.S. stock markets are up double-digits year to date. Hurray for loose monetary policy! My $50K+ margin loan at 4.25% interest rate is kind of a drag though. Oh well, gotta spend money to make money right? 😉
And the remaining amount of my net worth increase this year comes from good old fashioned savings.