Apr 252016
 

How to Think About Retirement Planning

Some people are reluctant to accept change, especially cashiers because nobody likes to count nickels and dimes. But the world is constantly changing and the retirements of generation Y will look very different than generation X. The trend towards a gig economy has only just begun. In the private sector less people are working 40 years at one company, and more are doing contract work, starting side hustles, and becoming self employed. According to Intuit, in just 4 years from now up to 40% of American workers could be independent contractors. Wow, what other changes will we see in 4 years? I don’t know, because I don’t have 2020 vision. XD

So as we adapt to changing economic strategies, by growing our income streams for example, our retirement plans must also reflect this new world of mobile apps, and short-term work that is long on flexibility, but short on benefits. When it comes to making smart retirement decisions today we should separate the things we can control, from the things we cannot.

16-04-retirement-planning

We start by thinking about the factors that we have full control over, such as how much we need to save (and therefore, spend) in order to meet our long term goals. For example, I want to reach financial independence by age 35, which means I need to save about 1/3rd of my income right now. Although diet and exercise habits aren’t directly related to personal finance, they’re extremely relevant in the big picture because healthcare can be a major cost, especially for Americans, when we reach retirement age.

According to the National Council on Aging, about 92% of older adults have at least one chronic disease. Jeez Louise! Chronic diseases account for 75% of the money America spends on health care. Diabetes alone affects 23% of Americans over the age of 60. According to Statistics Canada, more than half of all Canadian adults are overweight or obese. 🙁 Although certain aspects of our health revolves around genetics, we also rely heavily on epigenetics, and the idiosyncratic personal choices we make today to determine how we live our golden years. Just like with a motor vehicle, proper maintenance can extend our life expectancy, and keep the repair costs down in the long run. This way we can save our money and spend it on meaningful experiences rather than on medication and treatments. 🙂

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Feb 182016
 

Expensive Diamond Sells for Record Price

In 2014 Hong Kong real estate mogul Joseph Lau bought his daughter, Zoe, a rare 10 carat blue diamond for $32.6 million! But when his other daughter, Josephine, found out she understandably became jealous and asked him for an expensive diamond too. He couldn’t help but feel guilty and obliged to buy her something special as well. But Zoe’s diamond is one of a kind. So he planned to buy Josephine an even bigger and more expensive diamond.

In late 2015 at a Sotheby’s auction, Mr. Lau was the top bidder on an insanely rare 12 carat “blue moon” diamond. He paid in Swiss francs equivalent to US $48.4 million, which set a new record for the world’s most expensive diamond ever sold! And he bought it for his little princess. Maybe it’s just me but I think somebody is trying a little too hard to win the world’s greatest dad award. 😛

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Some people are not convinced that spoiling his daughter with a fancy vivid blue diamond ring is the best parenting move he could have made, especially considering that Josephine is only 7 years old. 😀 But next to sound judgment, diamonds are the rarest things in the world, at least according to De Beers. 😛 Since Mr. Lau has an estimated net worth of $10 billion, I can’t blame him for wanting to splurge on his family once in awhile.

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Jul 042015
 

Greece is holding a referendum tomorrow, Sunday, on whether or not they want to accept the bailout terms from their creditors. I’m not great at economic forecasts but I feel like the majority will vote yes for better or for worse.

[Edit] The result is out. Greeks voted No, lol. This is why I’m not an economist. [/Edit]

In other news it hasn’t been a very good month for global markets. Both the U.K. FTSE 100 and the French CAC 40 indices are down about 4% for the month of June. But China experienced the most dramatic loss. The Shanghai Stock Exchange Composite Index fell by 25%. Sufferin succotash! ? A whole bunch of millionaires in China just lost 1/4 of their wealth in the span of 30 days.

Here in Canada our stock market index dropped 3.5%, not as bad as other countries, but still enough to wipe out any gains it’s accumulated so far in 2015. As a result my net worth is down for the first time in years, lol. This means my portfolio is finally large enough that my change in wealth is determined more by the fluctuations in the market than by my savings rate.

*Side Income:

  • Part-Time Work = $600
  • Dividends = $500
  • Interest = $0
*Discretionary Spending:
  • Fun = $100
  • Debt Interest = $1500

*Net Worth: (MoM)15-06-networthiq_chart

  • Assets: = $897,400 total (-5000)
  • Cash = $2,500 (-2000)
  • Stocks CDN =$93,600 (-1300)
  • Stocks US = $65,100 (-200)
  • RRSP = $51,200 (-1500)
  • MICs = $15,000
  • Home = $259,000
  • Farms = $411,000
  • Debts: = $508,100 total (-4300)
  • Mortgage = $193,500 (-400)
  • Farm Loans = $200,700 (-500)
  • Margin Loan CDN = $29,600 (-1900)
  • Margin Loan US = $25,800 (+100)
  • TD Line of Credit = $26,000  (-1000)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,200
  • RRSP Loans = $4,300 (-600)

*Total Net Worth = $389,300 (-$700 / -0.2%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.80 USD

This is why it’s important to understand our financial decisions. Warren Buffett said “if you understood a business perfectly and the future of the business, you need very little in the way of a margin of safety.”

For example, when I look at my assets listed above I know what purpose each line item plays in my financial plan to reach early retirement. I know why I have $2,500 in cash right now, not more, not less. When I look at any of my investments I know why it’s in my portfolio. As another famous investor Peter Lynch once said, “know what you own, and know why you own it.” 😀

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Mar 102015
 

Some say the real test of success is whether or not a man can earn more money than his sister-in-law’s husband, LOL. 😀 It’s funny because there’s some truth to that statement. It’s human nature to be jealous of others.

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But at the end of the day envy has no upside. Being resentful of someone else is a waste of time. If we can learn to curb our jealousy then our lives will become so much better. 🙂 We will become more happy, less stressed out, and can make better decisions. Famous investor Warren Buffett once said, “As an investor, you get something out of all the deadly sins—except for envy. Being envious of someone else is pretty stupid. Wishing them badly…- All it does is ruin your day. Doesn’t hurt them at all, and there’s zero upside to it. If you’re going to pick a sin, go with something like lust or gluttony. That way at least you’ll have something to remember the weekend for.

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Sep 242012
 

A recent study about individual debt has made me reflect on the question of whether people are too smug about their debt situations. The poll seem to suggest that even though our debt levels are at an all time high, most Canadians are quite comfortable with using debt as a financial strategy. 9 out of 10 respondents would consider borrowing money to cover an unexpected cost. In an awkward way, I am really glad to read that because my personal strategy has always been to use my line of credit for emergencies and unexpected expenses. It appears now that other Canadians are also replacing saving for a rainy day with accessing debt to deal with financial problems. Glad to see I’m not the only one.

The average person in Canada has about $1.50 of debt for every $1 of income they make per year. Despite this, 62% of those surveyed said they are comfortable with their financial situation. Are you comfortable with your financial situation? I sure am! But this kind of debt to income ratio is around where the US economy was right before the housing crisis and then the rest of the recession. So there is certainly the possibility that we are underestimating how much risk we’re really putting ourselves into.

It’s frightening to see that Canadians have become totally blasé about debt – it’s becoming their new ‘normal’ and they’re numb to this dangerous trend,
~Hoyes, Michalos & Associates Inc.

I wonder if people will be as “blasé” about debt if interest rates were 3-5% higher like normal economic times? 😀

The survey interviewed 1,010 Canadians between Aug. 15 and 23. The survey has a margin of error of plus or minus 3.1 per cent, 19 times out of 20.

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Random Useless Fact:  Over 86,000 Americans each year have to visit the emergency room because they trip over their own pet. (source: nytimes.com)