May 132019
 



Step 1 – Open Account

Ready to buy ETFs? Great! First you’ll need a brokerage account. I recommend Questrade. Any brokerage will do but a low cost online brokerage is going to be the easiest and cheapest for most people. Go ahead and open that account now and come back when you’re done.

Step 2 – Fund Account

Your account is open now? Good. Time to deposit some money, or transfer your account from another financial institution. Did you know that you can have multiple TFSAs and RRSPs? As long as you don’t go over your total contribution limit between all your accounts you’re good. If you’re transferring your registered account (i.e. TFSA, RRSP, RESP etc.) make sure you first contact your NEW brokerage(like Questrade). They will send a form to your old brokerage to transfer your funds.

DO NOT withdraw money from your RRSP to your bank account and redeposit it. If you do you’ll pay taxes and early withdrawal fees. If you withdraw money from your TFSA you’ll have to wait till next year to get that contribution room back (i.e. maxed out TFSA, withdraw $50k on January 2nd 2019, you can’t redeposit that till January 1st 2020 and it just sits). Not as bad as the RRSP fees and taxes but still a problem for you money bags with your maxed out TFSAs.

Does your account have money yet? No? Don’t worry it takes a few days for a deposit and a few weeks for a transfer. Come back when you’re ready.

Step 3 – Invest

Ok your account is finally funded! You’re ready to buy! But wow this interface is a lot more confusing than you thought….

Continue reading »

Apr 062019
 



There are too many bills. It’s time to eliminate one of them. If you are savvy with dividends you know what I’m about to go over:

What’s a dividend?

A dividend is an cash payout to all shareholders. The money for dividends comes from company profit. Thus Bell will pay you some of their profits. As long as Bell exists and offers the dividend they’ll keep paying. Theoretically you could get lifetime payments from Bell (or any other company that offers dividends).

The actual payments will seem small – a good dividend is typically 4% of the share price. On an investment of $1000 you’ll get $40 per year. But keep in mind you’ll get that 4% every year for your entire life (potentially). And the more shares you own, the higher your payout will be. 4% of $10,000 is a lot more than 4% of $100.

Make Bell Work For You

Lets say your cell phone bill is $50/month ($600/year). Bell currently pays a dividend of $0.7925/share/quarter (or $3.17/year, or $0.264/month).

-Only a quarter per month???-

Yea a quarter per month is not much but bear with me. If one share will pay 25 cents per month, how many shares are needed for a payment of $50/month?

$50/$0.264 = 189.39 (round up to 190)

You need to own 190 shares to earn $50/month. Okay….. how much is one share? $59.34 (as of this writing). Thus 190 shares will cost:

$59.34 x 190 = $11,274.60

Thus for the small investment of $11k Bell will pay you $150.58 every three months!

Geez $11,274 is a lot

Yes.

But keep in mind that unlike your bill payment you don’t LOSE the $11k. You can sell your shares at any time and get some amount back. Bell has been around for a while. And people like cell phones. A lot. And there’s no reason to believe Bell won’t continue to be around for a long while. Here’s the chart of their stock since 1996:

Should've bought in the 90s

Should’ve bought in the 90s

Even during the dot com crash and the 2008 crash they maintained a considerable amount of value. I’m sure in the upcoming crash (date TBD) they’ll drop 20-30% but recover the value within 1-2 years. They probably won’t even cut the dividend!

But I could just pay the $50 bill for 225 years with that $11,274!

Well yes, but again, in that scenario you’ll LOSE the money. If you buy the stock instead your $11k will (probably) increase with time. I get that not many people have $11k lying around, but even a small contribution of say $2000 could get you about $10/month in dividends. That’s enough for Bell to buy you a sandwich every month!

 

 

For nerds – Other factors to consider

TAX – Dividends are taxable income. If you hold Bell stock in a TFSA there’s no problem, but in a taxable account you’ll be paying. Luckily dividend tax is cheap. Especially when it comes from qualified Canadian companies like Bell.

The actual dividend tax rate depends on your total income for the year. Let’s assume you make less than $95,259, that means your federal dividend tax is 7.56%. Less than 8%!!

Let’s make Bell pay your tax bill as well. To make up for that 7.56% tax you’ll need to own an additional 15 shares, or 205 shares total which will cost you roughly $12,164.70.

In summary if you want to hold your Bell stock in a taxable account you’ll need to pony up an additional $891 to cover the dividend tax bill (assuming you earn less than $95k/year)

TRANSACTION FEES – Most brokerages charge a commission to buy and sell stock. There’s no fee for collecting dividends though. So if you’re with Questrade budget an extra $5 to buy all these shares and another $5 to sell. Other brokerages might charge you upwards of $10 or $20.

LOGISTICS – Bell pays a quarterly dividend (i.e. you’ll get paid on the 15th of January, April, July, and October). Your cell phone bill is due every month. You’ll want to withdraw the dividend as you get it and use it to pay the next 3 months of bills. WARNING – Depending on your brokerage they may charge a withdrawal fee…….. hmmmm…… The big banks make it hard to find their withdrawal fees. Some offer free withdrawals but it looks like TD charges $1.50 for withdrawals from TFSAs and non-registered accounts. Questrade offers free withdrawals from all their accounts as long as you use an EFT to your bank account and not a cheque or wire transfer.

Let’s say you have to pay $5 to withdraw your quarterly dividend. That’s another $20 per year, or two sandwiches!

SEEMS LIKE GAMBLING – No it’s not, I go into that here. But yes there is a risk the stock will permanently go down or they’ll cut the dividend. But it’s a risk you’ll have to accept. Bell has been around for a long time and there’s nothing to suggest they will be going away soon. Nothing ventured, nothing gained!

Conclusion

You can apply this principle to any bill and any company. Why not get Fortis to pay your power bill? or TD to pay your car insurance? or Canadian tire to pay for your BBQ and propane? Why not get the stock market to pay all your bills? If your annual spending is around $40,000 and your average dividend rate is 4% you’ll be covered with $1,000,000 invested. Seems like a lot but it’s entirely possible with a lifetime of contributions. – Isn’t that just retirement? – Sort of. If you amassed $1 million and only lived off the dividends you’d still have the $1 million when you die. With a typical retirement you’d be withdrawing from the $1 million over the years.

Anywho… Dividends seem to be the next step on the investment ladder when you want to move past index funds. If this post confused you stick with the index funds and you’ll do fine.



Dec 022018
 



I’ve been know to stray from the index path. When you are in full control of your investments it’s tough to resist that sweet siren call of the Netflix and Amazon stocks of the world. What normally happens when I pick stocks? This image sums it up nicely:

Credit: Carl Richards - The Behavior Gap

Credit: Carl Richards – The Behavior Gap

Maybe I don’t have the will power to hold on when I’m down 30%. And sometimes unforeseen external circumstances forced me to sell (Moving to USA). But at one point I realized:

I’ve made more money at the casino than I have picking “risky” stocks

Okay I’ve profited maybe $200 between all my visits to the blackjack table. It’s not much but I’ve lost more gambling with stocks. Luckily my solid foundation of index funds have completely insulated me from any big losses. I have healthy ETF gains over the past few years. And these risky picks are less than 5% of my total portfolio value.

If you truly want to gamble with your investments I’d recommend using no more than 10% of your total portfolio value. Or whatever you’re willing to lose.

Continue reading »

Oct 212018
 

 

Perhaps you’ve heard about the Canadian Pension Plan, but have you also heard about Old Age Security and the Guaranteed Income Supplement? The average Canadian probably doesn’t know what they are, how they works, and what else is available. Some people assume the government will cover them, and often these people don’t bother with retirement savings. Is this a good idea? Lets dig in and investigate:

Continue reading »

Jul 212018
 

So you’ve just finished reading The Four Hour Workweek (or any entrepreneurial self help book) and you’re all amped up to quit your job and automate your own business. Except you don’t have a business. And you don’t have the guts to quit your job. And the other suggestions in the book, like hiring an online assistant, are a frivolous use of your meager savings.

What If You Can Almost Retire?

Let’s entertain an exotic thought. Say you’re doing pretty well financially. You have a ton of money saved, and you want to retire. But you don’t have enough to cover all your expenses passively (i.e. earning 3-4% investment interest will not cover your yearly expenses).

As you may know I find reducing expenses more effective than attempting to earn more money(link, link, link). But what if you’re at your expense-cutting limit? Cutting any more expenses would force you onto the street, or stop you from eating.

The answer is creative and extreme savings ideas!

Using Inequality to Your Advantage

Taking a note from The Four Hour Workweek, you can stretch your money significantly if you earn in Dollars but spend in Pesos. Moving to a low cost of living country could enable you to retire years earlier. And lets face it. Your life in a foreign country is likely to be way more interesting than staying at home.

The cheapest countries tend to be equatorial countries for some reason. Maybe nice weather isn’t good for the economy because people are too hot to work. But that’s a good thing for retirement! Think about the benefits:

  • Good weather year round (assuming you like it stupid hot)
  • Delicious food (assuming you like it spicy and flavorful)
  • Nature (assuming you like beaches, mountains, and jungles)
  • History (assuming you like imperialism and genocide)

Central and South American countries will keep you close to the same time zone as Canada. They are friendly with delicious food and incredible nature. Southeast Asian countries are further away, but have similar benefits. Especially if you prefer fried rice to refried beans.

So how much cheaper are these places? And how can one decide where to go? Well let’s compare some typical expenses for a typical retiree lifestyle in some typical and non-typical destinations. For more detailed comparisons there are websites like Expatistan and Numbeo

CANADA, Penticton MEXICO, Cuernavaca COLOMBIA, Medellin
2 bdrm apartment $1,500 $900 $650
Food (Restaurant per person) $15-$25 $8-$12 $5-$10
Domestic Beer (store bought) $2.70 $1.70 $1.15
Transportation (public) $45 $30 $36
Transportation (gas price) $1.21/L $1.14/L $1.06/L

Now before you start yelling at me, I know there are other things to consider besides money. Language for one, if you don’t speak Spanish you’ll be restricted to English expat communities which typically are more expensive. But come on. Learning a second (or third) language is an excellent way to spend your free time.

And I know you have friends and family back in Canada. And I know you might have Canadian real estate, and gym memberships, and library cards. Well how about becoming a snow bird? Make a cheap country your wintertime destination. You can reap all the benefits of a cheaper lifestyle for half the year, and still maintain a lifestyle in Canada during the best months.

If you want to stay in your new country longer, many countries have retiree visas. Just prove that you have retirement income, no criminal record, and provide a health check. Speaking of health care, bring your medical records, and get health insurance, it’ll probably be $100/month.

Find more detailed info at Wikitravel and check out my post on how to leave Canada financially



Jun 032018
 



KramerBank

I’ve been banking with BMO for nearly a decade now. I opened a BMO bank account because my PC Financial bank wasn’t able to process an international cheque (Australia). When I moved to the USA I was forced to close my PC Financial account because they didn’t support non-residents of Canada. Luckily I never closed that BMO account and they do support non-residents. I’ve also had a BMO credit card for over a decade (but I’m replacing it soon)

Me trying to deposit an Australian cheque

Now that I’m back in Canada I’ve been exclusively using my BMO bank account. In the USA I banked with Chase. After using and American bank I am completely shocked at the state of Canadian banking today. I’m speaking primarily as a BMO customer but my understanding is most of the big banks are similar. Let’s go into some of the reasons I’m done with BMO:

Continue reading »

May 242018
 

Starting with the goods if you want to skip the article: Use the promo code below with Questrade to get your first $50 in trades for free after opening an account:

PROMO CODE: jqzswtbb

 

So you are ready to start investing in Exchange Traded Funds (ETFs). You understand how mutual funds are costing you tens of thousands of dollars and it’s time to take control of your own future. Or maybe you are a crazy gambler and want to try your hand in the stock market. Either way it’s time to actually open an account. But where should you start?

Continue reading »

Apr 072018
 

Everyone has encountered blogs, or web-logs, at some point. And everyone has written blogs whether they realized it or not. At the core, a blog is just writing. If you’ve written a little as an email you can write a blog.

Why tho

If you are reading this I assume you are interested in blogging. Well. Unless you read everything I write regardless of the content. In which case you obviously have excellent taste.

Blogging has hidden benefits. And even if no one ever reads what you write you’ll get these benefits:

  1. Improved Communication Skills – Nearly everyone communicates through writing. Therefore by practicing writing you can improve your written communication. If your blog is public you’ll be especially critical of your own writing. I often update my old articles with better writing. Rereading your old work you’ll realize just how terrible your writing used to be. The only solution is more practice.
  2. Improved Understanding and Memory – Good writing is only possible if you know your topic in depth. Research is essential. Even if you’re a veteran of your topic you’ll need to keep up to date with the latest happenings. As a result your knowledge and memory of the topic will greatly increase.
  3. Self-confidence Boost – Knowledge is power. The more knowledge you have about your topic the more confident you’ll be discussing it in the real world. Especially if it’s a controversial topic like climate change or veganism.
  4. Credentials – A personal website is a great way to advertise yourself. A personal blog lets prospective clients/customers/employers know what you’re all about. Assuming that’s what you want…
  5. A Clear Mind – Journaling has been shown to improve well-being. Regurgitating your thoughts onto paper (or in this case, the internet) will let your mind relax as you’ve “exported” your ideas to the cloud. Your mind no longer need to juggle as many thoughts and ideas. I know blogging and journaling are different, but if you start a personal blog to summarize your ideas it’ll have a similar effect.

Continue reading »

Mar 202018
 



I’m always on the lookout for interesting ways to save money. Unfortunately giving up luxuries like lattes or alcohol is normally the only way. Typically there is a linear relationship between money saved and quality of life. Meaning quality of life increases as spending increases. Buy the nicer car and be more comfortable, go to the more expensive restaurant and eat better.

Fortunately the world is not so predictable, or fair. There are numerous exceptions to the spend-more-get-more trend. You simply need to re-frame money saving opportunities to highlight their benefits. For example, take alcohol (and recreational drugs in general). For the low price of $9/drink you get reduced inhibitions and a generally fun time. But what if you ordered water instead? Well, aside from being that jerk at the bar who doesn’t spend money, you’re likely to have a similar amount of fun. People who have fun tend to make those around them have fun.

Beyond fun I like to focus on health. Alcohol is not healthy (Wow great insight I know). Even one drink per day has been linked to increased cancer risk, especially in women. Also vomiting, stomach aches, and hangovers are good enough reason for me to reduce alcohol consumption.

For me, the financial and health benefits of abstaining outweigh the fun of consumption. This attitude has the added benefit of sounding morally superior to all my alcoholic friends!

Remember when I took that wine making class and forgot how to drive? That's because you were drunk!

Continue reading »