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 »

Jul 062020
 

Growing passive income

Thanks to some recent stock purchases I’m now making about $20K a year in total dividend income. 🙂 I also earn $9K a year from interest through my fixed income portfolio. And my rental property cash flows $700 a year after mortgage payments and other costs. So altogether my forward annual passive income is expected to be $29,700.

My current personal expenses adds up to roughly $30,000 a year. This means I am really close to being financially free. Hurray! 🤗 Investment income tends to be fairly stable despite volatility in the underlying assets. So unless there’s some kind of black swan event I will probably achieve financial independence within the next couple of months!

I didn’t expect to hit my goal this soon. My initial plan was to be FI in 2022 – when I turn 35 years old. But now it appears financial freedom could be just around the corner! 😀

This came as a surprise to me. I didn’t expect the stock market would go on sale earlier this year. But it did. 😁 As a result I was able to buy more shares than initially planned, leading to a higher yield on cost.

Since I’m further ahead on my financial journey than planned I have decided to reduce my financial efforts by quitting all freelance work. This means going forward I will be working only 45 hours a week instead of 50 hours a week. This will give me more free time on the weekends. But I will keep both my full-time and part-time jobs for now. 😬

Liquid’s Financial Update June 2020

*Side Incomes: = $4,600

  • Part time job =$800
  • Dividends =$1300
  • Interest = $600
  • Rent = $1,800

*Discretionary Spending: = $1,800

  • Food = $400
  • Miscellaneous = $500
  • Interest expense = $900

*Net Worth: (ΔMoM)

  • Total Assets: = $1,540,400 (+$10,200) 
  • Cash = $20,800 (-32,500)
  • Canadian stocks = $336,900 (+35,700)
  • U.S. stocks = $153,700 (+3800)
  • U.K. stocks = $19,600 (+700)
  • Retirement = $152,200 (-900)
  • Mortgage Funds = $39,300 (+3100)
  • P2P Lending = $36,900 (+300)
  • Home = $331,000 (assessed land value)
  • Rental Unit = $450,000 (2020 purchase price)
  • Total Debts: = $518,500 (-3,300)
  • Home Mortgage = $181,300 (-500)
  • Rental Property Mortgage = $312,000 (-800)
  • Margin Loans = $25,200 (-2,000)

*Total Net Worth = $1,021,900 (+$13,500 / +1.3%)
All numbers are in $CDN at 0.73/USD

 

It was another positive month for the financial markets as stocks continue to recover. I filed my income tax in June. I have to pay about $2.5K in tax adjustment to the Canada Revenue Agency (CRA) this year because I didn’t use all of my RRSP deduction room. The good news is I don’t have to pay this tax bill until September. 🙂

I’m planning to use all of my saved RRSP deduction for next year’s tax season when I have to offset the huge capital gain I triggered this year from selling the farmland – which unlocked about $250,000 of equity that was just sitting there doing nothing.

2020 has been a wild ride so far. But we are officially half way through. How are your finances doing so far this year?

 

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Random Useless Fact:

Jun 012020
 

Energy sector bounces back

The human brain can often exaggerate negative emotions in the midst of uncertainty. It’s why otherwise calm drivers are susceptible to road rage behavior. Similarly, a stock market crash can cause investors to fixate on the bad news, lose perspective, and extrapolate recent trends into a dreadful future. Here’s a business headline from mid March.

But this type of thinking, although understandable, can lead to some costly mistakes. That’s why I suggest a more rational approach to managing money. First, we should realize that this time is not different. This isn’t the first worldwide economic shock. And it won’t be the last. Given the assumption that things will go back to normal we next have to look for opportunities in financial markets – where we can find mispriced, long term assets. So when stocks fell 30% earlier this year I suggested it was a time to buy, not sell.

A couple of months ago oil fell to $20/barrel. In the past 70 years this has only happened one other time so it’s a very rare phenomenon. I blogged about investing while the price of oil was unsustainably low. And in March I disclosed buying 1300 shares of Suncor (SU), and 500 shares of Canadian Natural Rss (CNQ) – two of the largest Canadian energy companies.

Today oil has climbed back up to $35/barrel and my combined ROI on those two stocks is 37.3%. That’s a gain of roughly $12,000 in two months. Bear markets don’t happen every year. That’s why when opportunities like this arise, it’s important to pay attention and take action. 😉 I haven’t sold these oil stocks so there’s no realized profit yet. But it’s still nice to see a climbing net worth.

 

Liquid’s Financial Update May 2020

*Side Incomes: = $4,600

  • Part time job =$800
  • Freelance = $100
  • Dividends =$1300
  • Interest = $600
  • Rent = $1,800

*Discretionary Spending: = $1,800

  • Food = $300
  • Miscellaneous = $600
  • Interest expense = $900

*Net Worth: (ΔMoM)

  • Total Assets: = $1,530,200 (+$19,400) 
  • Cash = $53,300 (+5400)
  • Canadian stocks = $301,200 (+7,200)
  • U.S. stocks = $149,900 (+4300)
  • U.K. stocks = $18,900 (+200)
  • Retirement = $153,100 (+1000)
  • Mortgage Funds = $36,200 (+1100)
  • P2P Lending = $36,600 (+200)
  • Home = $331,000 (assessed land value)
  • Rental Unit = $450,000 (2020 purchase price)
  • Total Debts: = $521,800 (-4,000)
  • Home Mortgage = $181,800 (-400)
  • Rental Property Mortgage = $312,800 (-700)
  • Margin Loans = $27,200 (-2900)

*Total Net Worth = $1,008,400 ($20,400 / +2.1%)
All numbers are in $CDN at 0.73/USD

 

Getting back to normal

Unfortunately Suncor has cut its dividends by 55% since my last purchase. But both SU and CNQ are profitable long term so I will continue to hold these names in my portfolio.

We still don’t know the final outcome and repercussions of this pandemic. The economy is slowly starting to open up again. But life for average folks will lag significantly behind the financial markets. According to the CFIB, half of all small businesses cannot pay their June rent unless the government steps in with more financial aid.

Europe is starting to remove some lockdown measures. Japan lifted all of its national emergency controls last week. As the world cautiously returns to normal there will probably be more unexpected news and economic hiccups. But volatility is part of the process, and the world will get through this one way or another. All we can do as individuals is to manage our own personal finances so that we’ll have a healthy, robust investment portfolio on the other side of this. 🙂

 

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Random Useless Fact:

Dogs are often good judges of character.

May 042020
 

Road to Recovery

The S&P 500 climbed 13% in April, gaining back most of the losses from March. I picked up some new stocks during the low points in the first quarter so the V-shaped recovery is nice to see. 🙂  Leading the bounce back are technology stocks. Amazon just announced it made $75 billion in Q1 revenue, beating expectations as more consumers are shopping from home. AMZN shares hit an all time high recently. I’m brushing up against the elusive $1 million net worth once again. 🙂 Things are looking up. But is it too soon to celebrate?

The market is getting back to a balanced state as volatility subsides. But it’s hard to say if the bottom of the bear market is already behind us. I’m concerned that this quick rebound in April could be a false signal and we are actually headed for a double dip correction in the months to come. So my current strategy is to buy only defensive stocks with a strong balance sheet. If sentiment continues to improve then I won’t miss out on the rally. If markets drop back down then my portfolio should hold up better than the general index. 🙂

My earlier stock purchases from February and March are starting to pay off. For example, Telus Corp (TSE:T) paid me nearly $300 in April. That payment was used to purchase another 13 shares of Telus thanks to the DRIP program. Maybe next time I’ll receive 14 shares.

This is the best kind of passive income. It makes you money using the money it already made you. 😀 I’m now consistently earning over $1,000 a month in dividend income. This is the first year this has ever happened to me. Interest income from bonds, REITs, and other funds are growing as well. It’s exciting to watch my trading account get bigger by itself over time. 🙂

 

Liquid’s Financial Update April 2020

*Side Incomes: = $4,600

  • Part time job =$500
  • Freelance = $100
  • Dividends =$1300
  • Interest = $900
  • Rent = $1,800

*Discretionary Spending: = $1,600

  • Food = $300
  • Miscellaneous = $400
  • Interest expense = $900

*Net Worth: (ΔMoM)

  • Total Assets: = $1,510,800 (+$55,100) 
  • Cash = $47,900 (+5400)
  • Canadian stocks = $294,000 (+28,000)
  • U.S. stocks = $145,600 (+17,300)
  • U.K. stocks = $18,700 (+900)
  • Retirement = $152,100 (+2000)
  • Mortgage Funds = $35,100 (+1200)
  • P2P Lending = $36,400 (+300)
  • Home = $331,000 (assessed land value)
  • Rental Unit = $450,000 (2020 purchase price)
  • Total Debts: = $525,800 (-3,600)
  • Home Mortgage = $182,200 (-700)
  • Rental Property Mortgage = $313,500 (-800)
  • Margin Loans = $30,100 (-2100)

*Total Net Worth = $985,000 ($58,700 / +6.3%)
All numbers are in $CDN at 0.72/USD

 

Stick to the plan

In March I wrote about waiting awhile before I buy any new investments. I wanted to wait for a clearer market direction. Well now there is. 🙂 Last week the 10 day simple moving average (SMA) of the S&P 500 crossed back up above the 50 day SMA. This is a technical indicator which signals strength in the stock market. And we haven’t seen a circuit breaker halt trading activity in several weeks now – meaning the market has somewhat stabilized.

Some readers have asked me for stock tips. I don’t give specific financial advice. But recently while shopping I came across this stock on sale below. What a great deal. 😎

I didn’t buy any new financial assets in April. But going forward I will be looking to purchase new stocks in the energy and financial sectors. 🙂 I still think dividend growth stocks are worth considering even though valuations are not as cheap as last month.

 

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Random Useless Fact:

In April, Toronto police issued fines ($750 each) to more than 470 people over social distancing rules.

Mar 022020
 

Panic in the Streets

The global stock market fell more than 10% recently. Over five trillion dollars ($5,000,000,000,000) of value was wiped out. And just like that – I have lost my seven figure net worth. I’m now a commoner once again, lol. It was fun while it lasted. 😛 But I am not disheartened – because my mind these days is focused on more exciting things! 🙂

New Real Estate Investment

The truth is, I’ve actually had a great start to the year so far. After selling my farmland in January I purchased a new residential property. I have been talking about wanting to do this since late last year. But now I have finally closed on a one bedroom rental condo in the Greater Vancouver area. I paid a 30% down payment (about $135,000) and financed the rest with a mortgage at 2.44%. 🙂 Buying real estate isn’t easy. I kept myself motivated by listening to house music.

Anyway, my balance sheet will look a little different going forward. On the asset side I have welcomed a new line item worth $450,000 – the property purchase price. Meanwhile the liabilities side will now include a brand new $315,000 mortgage. Yay, more good debt. 🙂 I’ll post more details about this over the next couple of week.

I also made new plans to buy some stocks soon to take advantage of this recent market correction so there will be lots to write about over the next little while.

Liquid’s Financial Update February 2020

*Side Incomes: = $2,500

  • Part time job =$900
  • Freelance = $200
  • Dividends =$1000
  • Interest = $400

*Discretionary Spending: = $1,800

  • Food = $400
  • Miscellaneous = $400
  • Interest expense = $1000

*Net Worth: (ΔMoM)

  • Total Assets: = $1,511,100 (-$290,100
  • Cash = $153,500 (-130,000)
  • Canadian stocks = $209,300 (-8,400)
  • U.S. stocks = $133,500 (-11,700)
  • U.K. stocks = $20,700 (-2300)
  • Retirement = $139,600 (-7000)
  • Mortgage Funds = $37,700 (-800)
  • P2P Lending = $35,800 (+300)
  • Home = $331,000 (assessed land value)
  • Rental Unit = $450,000 (purchase price) NEW
  • Total Debts: = $533,200 (+314,400)
  • Home Mortgage = $184,400 (-400)
  • Rental Property Mortgage = $315,000 NEW
  • Margin Loans = $33,800 (-200)

*Total Net Worth = $977,900 (-$24,300 / -2.4%)
All numbers are in $CDN at 0.75/USD

new asset

I haven’t been in this much debt since 2013 after I bought those farms. Finally I’m back to having more than $500,000 of debt. It’s a familiar and comforting feeling to borrow so much money again – using new money that I don’t have to leverage my financial gains. Yay. 😀 Using other people’s money to get rich saves me so much time.

Here’s why I’m excited about this. Thanks to my new mortgage, I was able to buy a new property that pushed the total value of my assets to $1.5 million for the first time. 🙂 If my assets can earn a mere 5% average return per year then my investments will gain an expected $75,000/year. Wow. How great is that? 😀

Of course borrowing money is not free. I’m currently paying about $14,000 a year of interest on my total debt. But that’s just a fraction of what I expect my investments to earn over the long run. 🙂 This is essentially passive wealth creation – build up a large, diversified portfolio, even if you have to use some debt, and then simply be patient.

 

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Random Useless Fact:

The French sweet roll pain au chocolat can be served hot or cold.