Jan 262015
 
15-01-dream-of-the-futureRich 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. :)
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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.
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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.

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Jan 082015
 

Professional football players are able to make oodles of money because they always have a goal in mind. :D 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.

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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.

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Dec 302014
 

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.

Braces Removed

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!

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My teeth look great and I’m more confident about my smile :D 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. :roll: Investing simply works for anyone who follows the basic principles of buying great companies at decent valuations! :D

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:

  1. Cash Tender – To receive $88.50 CAD for each common share of Tim Horton Incorporated tendered.
  2. Stock Tender – To receive approximately 3.0879 common shares of Holdings (to be renamed later) for each common share of Tim Horton Incorporated tendered.
  3. 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.

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Dec 232014
 

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.

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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.

  • About $50K is from property appreciation. Hurray for Vancouver real estate and Saskatchewan farmland! :)
  • 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.

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Oct 282014
 

Retirement Number and The Rule of 300

The common question that comes up when people think about retirement is how much money do you need to retire comfortably? This is sometimes known as the retirement number. It’s a dollar figure that essentially represents financial freedom. :) It’s important to realize that there isn’t a precise answer to this question because the retirement number is a moving target that changes all the time. However there is a general guideline that many financial experts use. It’s called the rule of 300.

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The rule works like this. Imagine how much your average monthly expenses would cost if you retired. Then multiply that number by 300. The answer represents how big your retirement nest egg should be before you retire. This idea works because it’s the inverse of the 4% rule. Retirement Number = Monthly Expense x 300

Yay! Now you know how to calculate your retirement number. :) But it’s important to realize this number only points you in the general direction of your investment target. It may be even way off from how much you actually need to quit your job. But at least it gives you a starting point to knowing how much to stash away into a RRSP or 401(K).

Why is the Retirement Number important?

By having a rough estimate of your retirement number you can gauge how much longer you still need to save for retirement. There are plenty of retirement calculators on the internet that you can Google. Most of them require you to input some probable assumptions and then they give you a result. But the 3 main factors that determine when you will retire are…

  • Your current retirement savings (including all RRSP accounts and defined contribution pension balances.)
  • Your rate of savings per year.
  • Your expected rate of return on your investments (after inflation.)

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