Jan 162017

There is a lot of misinformation online about personal finance, especially from all those amateur blogs. This is why you should read everything on the internet like you would drink a shot of tequila – with a pinch of salt. 😀 Today I will try to debunk some of the most common financial myths out there.

Myth #1. Credit cards are bad.

Credit cards can make you a lot of money. Fellow blogger Tawcan generates thousands of dollars in passive income through the use of his credit cards. My no annual fee Tangerine Mastercard gives me 2% cash back on most of my credit card purchases. Promotional credit card rates can be used to pay down higher interest debt. There are so many benefits to using credit cards. 🙂


Myth #2. Renting gives you more freedom than owning.

One argument renters use to justify their decision to not buy property is that they can move around more freely. But don’t be fooled by this appeal to popular opinion. Throughout human history, power and financial freedom actually went to those who owned the most resources and assets. Modern day real estate is no different.

Sure, a renter in Vancouver can move to Toronto. But as homeowner, so can I. A renter has to give notice before moving out. But I can move any time I want. I can choose between selling my existing property, or rent it out to make extra income. There are even professional property management services to help me find a suitable tenant. I received this ad in my mailbox the other day.

Everyone has to live somewhere. Being a homeowner simply gives you dominion and veto power over a real piece of land. This gives you more opportunities in life, not less. Anyone who can afford a security deposit can be a renter, including me. So a homeowner has all the same freedoms as a renter. But not vice versa.

Homeowners are generally more financially free. Most can use their properties to secure a low cost loan (HELOC) for major purchases or other liquidity needs. Over 90% of millionaires own their own homes. Meanwhile, not many renters have become millionaires by investing the difference they’ve saved over the years in the financial markets.


Myth #3. You need an emergency fund.

An emergency fund is like an insurance policy. It insures against unexpected financial emergencies. But like any other insurance plan, there’s a cost to having one. In this case it’s the opportunity cost of not doing something more productive with your pile of money. Unless you live in a third world country, consider the probability that you don’t actually need an emergency fund (EF.) I have never created an EF for myself, and I have never run into a financial emergency in my entire life. Most western societies already have generous social safety nets. Frankly, I  can’t think of anything that could possibly happen to me right now that would require me to have 3 to 6 months of expenses saved up.

If we already have proper insurance for ourselves, and stress test our finances, then having a rainy day fund is nothing more than holding a redundant insurance policy. Oh, but wait. I actually do have something prepared for a rainy day!

It’s called an umbrella. 😄


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Dec 162013

An online study by Ipsos Reid for Sun Life Financial interviewed 1,239 Canadians last month about their financial situation this year.

The survey found that overall 57% of Canadians felt they were not any better off than they were a year ago. A disproportionate amount of women and those aged 55 and older (61%) felt this way. Only 28% of those surveyed however did say their finances had improved compared to last year 🙂

Across the country Albertans were not surprisingly most likely to have improved their financial situation, followed by those in Saskatchewan and Manitoba. People in Quebec were least likely, with 63% saying their financial position was no better than a year ago.

“It’s concerning that a majority of Canadians aren’t feeling better off financially than they were last year as we head into a holiday season where we tend to spend more and save less. Canadians can take steps toward feeling better by putting a financial plan in writing and perhaps consider it as a new year’s resolution.” -Sun Life president Kevin Dougherty.

It appears that most Canadians need to take their personal finances more seriously 😕 The survey found that only 36% of Canadians contribute to an RRSP, but for those who felt their financial situation had improved, the RRSP participation rate jumps to 50%.

Tip of the day: To better your chances of improving your financial situation, buy contribute to RRSPs 🙂 Also, TFSAs are really good too, often better than RRSPs actually.

Nov 252011

Happy Black Friday. And hello to friends from Victoria. I’ve only visited once but had a great time. Butchart Gardens was my favorite part.

Image source from www.canada.com

New payroll and employment numbers just came out. On average Canadians make $873 per week, up 1.1% from last year. While that’s better than no growth at all, the inflation rate has been about 3% so in real terms, we are actually losing purchasing power, despite having a bigger paycheck. Trying to beat inflation with wage hikes is not easy, that’s why we need a hedging strategy, which will match the inflation rate, if not surpass it. But not all jobs are created equal. There will always be opportunity out there for those who know where to look.

Growing industries with demand for new workers and increasing wages:
Forestry, logging and support. – Pay = 22% above national average, 10% yearly wage growth
(the world wants our lumber)
Construction  – Pay = 28% above average, 5.2% wage growth
(more buildings for our growing population)
Professional and technical services – Pay =29% above average, 4.6% growth
(lawyers, engineers, accountants, modern society cannot function without these people)

Weaker industries (at least for now):
Manufacturing – Pay = 12% above average, 0.1% yearly wage growth
(many of these jobs are going off shore to cheaper labor)
Finance and insurance – Pay = 12% above average, -5.2% yearly wage contraction
(low interest rates + clients switching from high fee mutual funds to etfs = less revenue)
Educational services – Pay = 5% above average, -2.7% wage contraction
(tighter gov’t budgets)

Wages are based on what companies can afford to pay their employees, so it’s mostly about supply and demand. And when you think about why some industries are strong and others are weak, it should all make sense. You don’t need to study or work harder to get ahead. Just work smarter. Enter a field with less competition. Learn to market yourself. Invest your savings, and you’ll do great.