May 172018
 

It’s natural to be upset about losing one’s job. But sometimes being laid off is not so bad. When my company unexpectedly downsized in February I became unemployed for the first time in 10 years. Actually I was still working part time, so technically I was just under-employed. I didn’t have any other jobs lined up at the time. But instead of feeling worried or sad I was happy. That’s partly because I have the resources to last me years before having to work full time again. But I also had a pretty good feeling that this change in my career was for the better. That’s why I was optimistic in my earlier post about losing my job.

I received a big payout worth more than 3 months of my salary. But I managed to find permanent full time work before 3 months. So from a financial point of view I didn’t lose any money. In fact, my income situation has actually improved because my new job pays more than my old job. Hurray! I can become financially independent a little sooner now. ūüôā Furthermore the job I’m currently at is more fun and rewarding than my old job. I also had fun working temporary at Amazon for awhile. But what I enjoyed the most about this whole situation is taking some time off to relax and experience a small taste of early retirement. ūüėÄ

And to add icing on the cake I recently received a letter in the mail from Great West Life, an insurance company, asking what I want to do with my previous job’s matching RRSP fund. I’ve been paying into this retirement program for the last 7 years. I couldn’t access it or use the money in any way while I was employed. Since I couldn’t touch the money, I didn’t think it was worth including in my net worth statements. But now that I’m no longer working there, they have to give me my money, lol. It’s a typical 4% employer matching plan so the sum is not that much compared to the 25% or more I typically save and invest personally, but it’s another benefit to look forward to.

 

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Random Useless Fact:

You know your country is in trouble when the national currency is worth less than the paper it’s printed on.

 

Dec 052016
 

Finding the Appropriate Work-Life Balance

Benjamin Franklin once said that “time is money.” I think he was being metaphorical. Otherwise ATMs would also¬†be called time machines.¬†ūüėĄ¬†But time is certainly like money in many ways. When we have it, we don’t know what to do with it all.¬†And when we don’t, there’s a million things we need it for. ¬†ūüėÄ

In the corporate world we certainly treat time as money, which is why overtime means more money. ūüôā But finding the proper work/life balance can be challenging for many people. If a new mother wants to stay home to look after her baby for 3 years then she could potentially leave $500,000 or more on the table.

Consider an American who starts working at age 22 and then takes a 3 year break from her career, where her salary is¬†$50,000. According to this marketwatch article, “that 3 year break would cost her roughly $506,000 due to a combination of lost wages ($150,000 over those three years), lost retirement and Social Security contributions ($158,000 over the life of her career, assuming she retires at 66) and lost future wage growth ($198,000).”

Studies show a household with at least 1 stay-at-home parent is the ideal environment to raise children in. Many parents also feel their kids¬†are better off if their first 5 years are spent close to their mothers. But on the other hand, $500,000 is a lot of money to pass up. ūüėē Often people face the difficult decision between making more money or spending more time with their children.

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May 162016
 

The Enemy of Success is Delusion

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Author and public speaker Steve Siebold has helped many people with their careers. His clients include Fortune 500 companies and his books are considered by many to be the gold standard in the field of psychological performance training. One important distinction that Steve notices between the middle class and the wealthy is in how they think.

“The average person believes they are far more competent at what they do for a living than they actually are. Many people believe they are overworked and underpaid, but this is rarely true. In a free market economy we are normally getting paid very close to what we’re worth.” ~Steve

I happen to agree. An employer probably¬†wont pay someone $30/hour if the labor is only worth $20/hour.¬†Workers are¬†replaceable. If a company consistently overpays its employees then it won’t stay in business for very long, assuming all other market conditions being equal. The employee can make the same choice. If a pharmacist¬†is being paid $20/hour but believes he is worth $30/hour then he is free to offer his professional services to another company. Since the labor market is based on supply and demand, it’s important to consider both sides when thinking about compensation.

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Apr 012016
 

Quitting my Job

There comes a day in everyone’s life where they have to throw in the towel. After holding down¬†2 jobs for the past 8 years I felt it was time for me to quit. I’m simply getting too old for the workplace. And¬†after¬†analyzing my financial situation I realized¬†that I do indeed¬†have the means right now to leave the rat race and live solely off my investments forever!

So I quit my part-time job in early March. And then a couple weeks ago I handed in my letter of resignation to my full-time employer. The company tried to keep me because I’m rather good at my job. Much like a carpenter, I’m always able to nail my work. My manager even offered me a 30% raise¬†if I stay, but I¬†politely declined.

Yesterday was officially my last day at work so I’m finally free from the grind!¬†From now on I¬†can¬†enjoy life to the fullest on my own terms. ūüôā Woot!

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Enjoy unlimited free time for the rest of my life? Yeah, I think I could get use to this.

But one obstacle that can stand¬†in the way of true freedom is¬†debt. ūüôĀ To obtain real¬†financial security I knew I had to get rid of all my¬†debt. So I decided to make some major¬†changes¬†to my balance sheet.

Selling the Farmland

I bought a farm in 2012 for $150,000. And then bought another farm for $172,500 in the following year, for a combined purchase price of $322,500.

Well I recently sold both my farms for $550,000 to a single buyer. Yay! This $200,000+ capital appreciation is due to the strong demand in this area. According to an official Farm Credit Canada report, farmland values in Saskatchewan have increased 83% on average from the beginning of 2012 to the end of 2014. Amazeballs!

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We don’t have the official numbers¬†for 2015 yet. But according to another¬†FCC report, “increases could be as high as 9%,¬†with some upside to reach higher.”

Although I was able to sell my farms for a total price of $550,000, I had to pay $20,000 in agent and legal fees, pay off the remaining $195,000 of farm loans to the bank, and set aside another $35,000 for capital gains tax.

So in the end I only ended up with $300,000. But hey, I’ll take what I can get.¬†ūüėČ

No More Debt

As shown in my¬†most recent net worth update¬†I had roughly $300K of non-farm debt last month,¬†including¬†a mortgage, LOCs, etc. Well over the last week I used the net proceeds from selling the farmland to pay off the balance of all my remaining loans so now I’m completely debt free! ūüėÄ

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New Balance Sheet

So with the farmland and debts gone, here’s what my¬†new net worth looks like.

Assets: Total = $530,000
Cash: $7,000
Primary Residence: $263,000
Non Registered Investments: $200,000
RRSP/RRIF: $60,000

Liabilities:¬†None ūüôā

Net Worth = $530,000

It’s such a relief to finally be debt free! ūüėÄ My balance sheet looks a lot cleaner without all those pesky liabilities. Debt is evil. I will never go into¬†debt ever again! Debtors are losers.

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Mar 142016
 

I think believing in superstitions is bad luck. But bad things can happen to anyone. So one way to deal with unexpected situations is to be like Batman and have a contingency plan for everything. ūüôā I’ve recently updated my stress test page to reflect my current financial situation, which¬†has improved since last year. A¬†stress test removes uncertainty and doubt about our finances¬†so we can sleep better at night. ūüėČ

A Worst Case Scenario

Just for fun I have created a hypothetical worst case scenario to see if my finances could survive it. Consider the following events.

The economy contracts. People panic. The Canadian real estate bubble bursts and prices drop by 40%. Stock markets also fall 40%. Jobless claims skyrocket. I get laid off from both my jobs on the same day without notice. On my way to the employment insurance office I get T-boned by a distracted driver and my car is written off. The next day a devastating 7.5 magnitude earthquake hits Vancouver hard. My apartment building suffers heavy structural damage and is deemed unsafe to live in.

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Okay, so things may look bad on the surface. But it’s actually fine, because the whole point of creating a stress test is to protect ourselves against these unlikely what if scenarios.¬†I may be frustrated¬†after all the unfortunate events, but at least I’ll still be okay financially. ūüôā Here’s how things would play out:

  • My¬†combined severance package would be about $10,000 of after-tax income, enough¬†for 3 months of living expenses.
  • I would qualify for employment insurance benefits.
  • My dividend stocks would¬†continue to pay out regular distributions like they did during¬†the last recession.
  • I have a stash of gold and silver in case I need emergency cash.
  • Auto insurance will cover the¬†car accident.
  • Earthquake insurance would cover the damage to my apartment. Strata owners¬†would¬†hold meetings with the property manager to discuss how to move forward using 3/4 votes as per the bylaws. The insurance company would pay¬†our housing costs if we have to relocate somewhere else temporarily.

Luckily my finances would appear to still hold up through all the turmoil. I would have plenty of time and liquidity to get back on my feet.

How to Stress Test your Finances

Step 1: Make a list of all the risks, uncertainties, or potential issues that could effect your money or financial lifestyle.

For example:
Job loss, flooding, rising interest rates, upcoming major purchases, etc

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