Aug 102020
 

I have achieved financial freedoooom!

Freedom 35 has become financially independent

After 12 years of saving and investing I have finally reached financial independence! This means the passive income generated from my investment portfolio is enough to pay for all my current and future living expenses. It’s not about spending more money on things. It’s about spending more time on the things that money can’t buy!

In my first ever blog post I questioned if freedom 35 was even possible for me. After 851 more posts I now know!

Financial independence triumph

Wow. This is unreal. I would like to thank everyone who has taken the time to read my blog, especially those who have been following me since the early days. You know who you are. 😉 I certainly wouldn’t be here today without all your support and encouragement. You guys rock! You have all done plenty. It means a lot. 😎

 

What’s my secret to financial independence?

Everyone’s path to financial freedom is unique. In my case I have to give credit to these 5 key reasons.

  1. Adopt an abundance mindset instead of a scarcity mindset.

    I learned this from reading lots of self development books & watching motivational and introspective YouTube videos. I cannot emphasize enough how important it is to have a positive outlook and growth mentality. There are no problems in life. Only possibilities for growth.

    Rather than sitting on the sidelines because the markets may crash, I choose to invest anyway despite the risks because I focus on the potential gains rather than the losses.

  2. Low interest rates.

    Nearly all of my financial strategies have thrived on cheap money. Low interest rates boost stock and real estate prices. Thank you, Bank of Canada! 🍁 Policy makers would rather devalue the currency than let financial markets crash. That’s why real interest rates are negative right now. This trend has created a great deal of moral hazard and social divide. And it appears interest rates will continue to stay low for a very long time.

  3. Understand how to value investments.

    As an opponent of the Efficient Market Hypothesis I prefer to buy underpriced individual stocks rather than the entire market.

    Diversification is great for protecting wealth. But concentration is more effective for building wealth. 😉 By finding and buying undervalued assets I have made tremendous gains in stocks, farmland, and urban real estate.

  4. Invest with other people’s money.

    Without borrowing any money to invest it would probably take me 36 years or longer to become financially independent. But leverage has allowed me to cut that time down to 12 years. Assets produce wealth. Leverage gives me the ability to grow my assets and multiply my wealth. As long as interest rates stay low leverage will continue to be instrumental in my financial plans. 🙂

  5. Copy the best of what others have already figured out. 

    Financial success depends more on the methods and principles you practice than how hard you try. Good strategies create wealth. Great strategies create even more wealth. All the strategies I use have already been vetted and proven to work by highly successful people. I have gained invaluable knowledge by learning from these experts in their specific realms of the financial world:

    •Real estate (Graham Stephan)
    •Leverage (Robert Kiyosaki)
    •Risk management (Ray Dalio, James Rickards)
    •Macro economic trends (Peter Schiff, Raoul Pal)
    •Farmland (Jim Rogers)
    •Financial markets (Warren Buffett, Peter Lynch, Jeffrey Gundlach.)

    I’ve been shadowing these experts and others like them for years – reading their books, studying their next moves, watching their interviews. There’s no reason for me to reinvent the wheel. These smart individuals have already written the indispensable playbook to prosperity. They have generously shared their abundant wisdom with the world. I simply copied their mental models and behaviors.

 

Jump directly to….

 

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Financial independence 2 years ahead of schedule

I was initially aiming to reach FI in 2022 when I turn 35. I was on track to realize this blog’s ultimate raison d’etre. But then something unexpected happened which forced me to change my plan. 😮

As you know earlier this year the stock market experienced a big sell-off, which gave me a major case of FOMO.😖 Not wanting to miss out on bargain prices I purchase over $100,000 worth of dividend stocks in March. My dividend yield on cost was over 6% on these new purchases. I still remember the excitement of buying TD Bank shares and see it jump nearly 18% the very next day.

Warren Buffett famously suggested to be “greedy when others are fearful.” So I followed his advice. I bought when others were selling, and I held when others were buying. As a result my passive income in 2020 soared by over $7,000/year – fast tracking my progress.

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Net worth update as of August 2020

Assets:
Cash = $21,000
Non-registered accounts:
↳ Canadian stocks & bonds = $267,000
.U.S. stocks = $159,000
.European stocks = $19,000
Retirement (RRSP) = $166,000
Tax free savings account (TFSA) = $135,000
Peer-2-peer Lending = $36,000
Principal residence = $331,000 (assessed land value)
Rental property = $450,000 (2020 purchase price)
Total = $1,584,000

Liabilities:
Home mortgage = $181,000
Rental property mortgage = $312,000
Margin loan = $22,000
Total = $515,000

Net Worth:
Assets – Liabilities = $1,069,000

tracking net worth over time

 

Here is a snapshot of all my stocks and bonds on August 10, 2020.

TFSA                                RRSP                                 Margin                              Cash

                       

Altogether I have about $800,000 of liquid financial assets generating $30,380 of passive income. This represents a 3.8% annual rate of return in cash. The typical Canadian requires $756,000 to retire on, according to the Financial Post.

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Continue reading »

Dec 162019
 

I attempted to join Mensa. What happened next wont surprise you.

So I ran a Twitter poll asking what topic people would like me to write about. The top 2 picks were my Mensa test results and financial plans for next year. 🙂

In today’s post I will discuss all 4 topics from the poll, but focus primarily on the 2 that got the most votes.

Mensa: The smart people club

So out of vanity I decided to take the Mensa exam earlier in the fall. 😎 Mensa is a non-profit international organization for the intellectually gifted. Only the top 2% smartest people in the world can be accepted into this private club. In Vancouver there are only about 200 Mensa members. There are other high IQ societies out there, but Mensa is the oldest, and most well known with over 130,000 members worldwide. Mensa members can attend local meetups and enjoy exclusive intellectually stimulating social events. I decided to join this club because I wanted to feel special. 🙂 So I handed over the $90 to take the formal Mensa exam.

There were 4 other applicants that day. We had a chance to make some small talk. They all seemed to be smarter than me. I felt like a Morty in a room full of Ricks. The test was 50 questions, and we only had 12 minutes. In the end I managed to answer 30 questions correct. Not bad. But unfortunately I needed 35/50 to pass.

How it feels to fail the Mensa exam.

So I failed to get into Mensa. 🙁 Oh well. I guess I’m just an ordinary peasant after all. Apparently I can re-take the test after a year. But I don’t think I can handle the rejection a second time. 💔

 

The Real Estate Market

Sales is a leading indicator for price. Both Vancouver and Toronto saw strong sales in the last couple of months, signalling potential higher real estate prices in the new year. In a typical cycle the market goes through 3 stages: from boom, to slump, to recovery, and then repeats.

In Vancouver I believe we are currently in a real estate slump. However we are either nearing the bottom of this slump, or have already hit the bottom and are now transitioning into the recovery stage where prices will start to climb again. If you plan to buy property around the Greater Vancouver area, the latest data from the Real Estate Board suggests the window to get in at the lowest point of this real estate cycle is closing fast.

Finding Neverland real estate meme

Toronto is a bit of a different story. The low point was already hit last year in 2018. The recovery has been strong, and average prices now rival the 2017 peak. I anticipate interest rates will fall early next year. If that happens, property prices in major Canadian cities will become more expensive by the summer of 2020.

Continue reading »

Apr 172017
 

A Present To Yourself

If you like to receive presents, and let’s be honest – who doesn’t? then consider giving yourself the gift of long term planning. That simply means making a plan today that will pay off dividends for you later on. Your future self will thank you for this priceless gift that you have given him or her. And best of all, making this gift doesn’t cost you any money today. 🙂

Last month, Amazon.com founder Jeff Bezos surpassed Warren Buffett to become the 2nd richest person in the world! How did he do it? Maybe a letter he wrote to shareholders in 1997 can reveal some secrets. 😀 In it Jeff writes that we can’t realize our true potential as people or as companies unless we plan for the long term. “If everything you do needs to work on a 3-year time horizon, then you’re competing against a lot of people,” Bezos told Wired in 2011. “But if you’re willing to invest on a 7-year time horizon, you’re now competing against a fraction of those people, because very few are willing to do that.”

Year 7 of the 12 Year Journey

I started this blog in 2010 with a 12 year plan to reach financial independence. It’s now been 7 years and things are progressing very well. 🙂 Back in 2013, my net worth was only $200K. And my financial details looked like the following.

Assets:
Home = $252K
Farms = $325K
Liquid investments (Including Retirement Accounts) = $161K

Liabilities
Total debts = $535K

At that time I wrote about my plans and my course of action to reach financial freedom. Without a solid plan back then, I wouldn’t be where I am today. Developing a strategy years ago was the best present I could have given my current self.

Speaking of the present, we are now only 5 years away from 2022. My net worth is currently about $610K, and here is an update of my financial details today.

Assets: 
Home = $270K
Farms = $436K
Liquid investments (Including Retirement Accounts) = $400K

Liabilities
Total debts = $495K

It appears I’m farther ahead that I initially planned for. This means I have to adjust my original plan made a few years ago. Not that I’m complaining. 😀 So here is my new revised plan for Freedom 35:

Step 1: Pay down $18K of debt per year. After 5 years my total debt should be $400K.
Step 2: Sell all farmland in 2022 for $436K. After agent fees and tax, I would keep $400K in my pocket.
Step 3: Use the $400K from selling farmland to pay off my $400K of debt. This would make me debt free.
Step 4: Re-balance my $400K liquid portfolio to earn $15,000 per year of dividend income.
Step 5: Live on passive income for the foreseeable future.

That’s pretty much it. 🙂 A $15,000 income from a $400,000 portfolio represents a sustainable 3.75% withdrawal rate.

Here is a look at my projected monthly expenses after I reach financial independence in 2022, assuming 2% annual inflation rate from today.

  • 300 – strata fee
  • 30 – gasoline for car
  • 100 – car insurance
  • 30 – home insurance
  • 100 – property tax
  • 70 – internet
  • 40 – cell phone
  • 300 – food
  • 30 – electricity
  • 250 – discretionary

Total monthly spending = $1,250

Discretionary spending will be clothing, entertainment, and other things like that. I won’t have to pay into the MSP healthcare system anymore because I wouldn’t be making enough income to be charged the monthly insurance premium. I also don’t have to move to a small city or change my lifestyle. I can stay in YVR. 🙂

Continue reading »

Jan 122017
 

What’s 6 inches long and gets Kim Kardashian excited? That’s right. It’s money. 😀 Especially the one with Benjamin’s face on it. There is certainly no shortage of liquidity in the world today thanks to central banks. As investors, our priority is to increase our expected returns while reducing our anticipated risks. A good way to go about doing this is by setting goals. Making smart decisions and taking appropriate action is easier if we have defined a target to aspire to. 🙂 If we don’t take control of our money, then someone else will inevitably try to use money to control us.

Here are my financial goals for 2017.

  • Grow my TFSA to $80,000.
    I currently hold $72,000 across all my tax free savings accounts. I have $3,000 contribution room remaining for the year. All the investments inside my TFSAs have performed well, except Bombardier stocks BBD.B. Overall I’ve been quite lucky with my stock picks. 🙂
  • Grow my RRSP to $100,000.
    I currently hold $86,000 in my RRSP. I have $10,000 contribution room remaining for 2017.
  • Grow my net worth to $750,000.
    I hope to grow my wealth by $180,000 this year. $60,000 of this increase could come from savings and debt reduction. The remaining $120,000 would ideally come from investment returns. 🙂 This isn’t an unreasonable expectation considering last year’s market performance, and I currently have over $1 million worth of assets.
  • Increase my passive income rate by $2,000/year.
    I plan to invest at least $35,000 into a mix of fixed income securities and dividend stocks. The average yield on new investments would be 4% to create $1,400 of new passive income per year. The remaining $600 growth should come from dividend increases from investments that I already have in my current portfolio.

That’s pretty much it. As usual, the likelihood for me to reach my goals will depend on many factors, including how the financial markets perform which is largely out of my control. We’ve had a great Q4 in 2016 to finish the year on a high note. But who knows how this year will turn out. Setting goals is important because it gives us something to focus on and look forward to. It guides our behavior so we feel a sense of purpose when making financial decisions. 🙂

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Random Useless Fact:

There’s a man in east India who has 39 wives, 94 children, and 33 grandchildren so far. They all live in a 100 room mansion. It takes 30 whole chickens, 132lb of potatoes, and 200lb of rice just to make a family dinner.

 

Sep 262016
 

When Average Isn’t Enough

Everyone knows that exotic dancers are bad at investing. After all, they always end up losing their shirts. 😆 But they are not alone. Most people in general are simply not very successful at investing.

According to BlackRock, the largest financial management company in the world with nearly $5 trillion of AUM, the average American investor managed to make only 2.11% return per year over the past 2 decades. 😱

16-09-investor-emotion-returns-lower-index

The saddest part is how this number is even lower than inflation, lol. So in terms of real returns people actually lost money. 🙁 There are many reasons for this low performance. Investors’ sentiments, emotions, and personal goals are all factors. But the reason I want to discuss today is the improper use of investment tools.

Why People Are Generally Bad at Investing

Reason 1 – Not using tax sheltered vehicles

The Roth IRA is a great example of a tax savings vehicle that many American investors have overlooked. In Canada we have the Tax Free Savings Account (TFSA) which has similar benefits; Any investment gains realized within this account is tax free. 🙂

The first problem is that most people don’t use it. According to the CRA, in 2013 only 38% of eligible Canadians have opened TFSAs. The second issue is those who do have this account aren’t making the most of the tax savings. Data from RBC Royal Bank suggests that its clients tend to play it safe when it comes to their TFSA with 44% of holdings in high interest savings accounts. *Yawn* Another 21% is invested in GICs which are also producing rock bottom returns right now. This means only the remaining 35% of the money in TFSAs are actually used for proper investments that hold stocks, bonds, and other asset classes that have a decent chance at beating inflation.

This essentially means that only about 13% of TFSA eligible Canadians are using the investment vehicle correctly. But even less have taken maximum advantage of it because only 7% have fully maxed out their contributions. Of course everyone has different financials goals, which alludes to my post about the debt spectrum. So it may be perfectly suitable for a retiree to put all of his savings into a GIC if it suits his investment objectives. But in general 2.11% should not be the target most investors should aim for. 😉

Taxation is one of the costliest expense on investment returns. If more investors make better use of tax advantaged accounts they can leave more money in their own pockets. 🙂

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Random Useless Fact:

33% of Harvard University students get the following question wrong.

16-09-harvard-baseball-bat-ball-question