DIY Money

I helped one of my friends doing her taxes this week. The past few years she just brought her stuff into H & R Block and had them do it. This year, rather than paying them, she asked if I could do them. There wasn’t anything complex to do with her income earned or expenses incurred during 2014, so the whole file completion process took $20 (the cost of using Ufile) and about 20 minutes to complete. I saved my friend a good chunk of money, all for the amount of time it takes to set up a CRA account (so that she could have a direct deposit on the calculated refund).

I started doing my own taxes when I was 18 and found out it actually cost quite a bit of money to get my own money back as a tax refund. I read the information package that came with the (then paper) tax package and filled out the forms necessary to get my information filed. At the time (1999), filing online wasn’t an option available to me, so I painstakingly entered my tax return into the CRA database over my touch-tone phone (I’m impressed that this technology existed at the time). A few weeks later, a cheque showed up for my return.

There’s always a bit of fear when you hit the “Submit” button on the CRA site, due to the risk of audit. I’ve been audited once, and mailed in the receipts requested with no issues identified. An audit is like most things – as long as you aren’t doing anything “sketchy” with your taxes or income, you’re probably not going to have much trouble with the tax collectors.

Much like doing taxes, most people (including half of my two-person family) would rather just dump off the responsibility of investing onto someone else. A lot of people spend quite a bit of money to other people to invest on their behalf. While I can understand the intimidation factor of the marketplace may be a bit of a barrier to entry, there is more than a little bit of information out there (books, classes, internet sites, blogs) for anyone out could learn.

It is scary to invest by yourself. If you make a poor investment, there’s nobody to blame but yourself. If the entire market collapses like in 2008, it takes a bit of courage to continue buying shares in stocks. It is much easier to just send money to someone else to invest on your behalf, even though it may cost you considerable amounts of commission dollars over time, compared to doing it yourself.

Money “stuff” is more important than most things going on in people’s lives. Not many people want to work until they can’t work anymore. Knowledge in investing and retirement planning, as well as taking an interest in what could be done with the money people spend all of their free time making shouldn’t be as much of a bother as people make it out to be.

Patience While Investing is Hard

Investing is the worst for someone who likes instant gratification. You put money into a company, and hope that something positive happens and the money invested grows over time. I personally hate the waiting – waiting to see if my master plan pre-investment holds up over time.

Even the Index Funds I have invested in take a lot of patience. Buying in over time, I’m basically making a bet that capitalism prevails and that companies continue to increase over time. There is a chance when I’m putting money into the market, that it’s in the middle of a downturn and I won’t see a return on the shares I purchased until the early part of the next decade.

I play a game of “watchful forgetfulness” with most of the stocks I have purchased over the last year, when my investing “career” started. I do my initial research, put together a hypothesis of what I think the stock will do, purchase the shares, then try to forget about owning it for the most part. I set a Google alert that I get sent to me once every two weeks to learn of any big news that would change my initial views that I have on the stock, but otherwise try not to focus on tracking the price each day.

Whether it’s a “boring” Index Fund, or an individual stock investment, if the investment is going down, I’m going to second guess myself on an almost daily basis, constantly checking to see how my investments are doing. I do much better just leaving the investments alone – believing that the research I did, the opinions I read about the stock and the hypothesis I came up with that made me buy it is going to work. This works better for me than having immediate doubts after a 5% decline in the investment.

It works the other way for me too – if an investment I’m involved with has increased in value, I am always questioning myself whether I should sell and buy something else, in order to lock in the profits (before anything goes wrong). As you can see, it’s just better that I don’t pay close attention to my investments, or my portfolio would be in shambles. I’m not a patient person, and seeing the possibility of profits being lost on an “up” stock or capital losses taking place on a “down” stock would stress me out on a daily basis.

How closely do you watch your investments – daily? monthly? annually?

Not Part of That Club

I really like the site – I like the fairly simple idea of lending money to a pool of people who need it, who may not otherwise be able to get loans from the financial system. While the rates are higher on people borrowing money, the rate of return for lenders is attractive, along with the ability to diversify the risk across a bunch of individuals, so that if one person defaults, you’re not out the entirety of your investment.

I couldn’t find whether or not I was able to invest in Prosper, but a quick search of “Peer to Peer Lending in Canada” lead me to a site that is relatively new called Grouplend. Grouplend is similar to Prosper and other peer to peer lending sites, only it’s Canadian-based. My thinking was, “this is perfect, I don’t have to worry about foreign income, and can easily get into this peer to peer lending thing” (10 years after everyone else). The problem was, when I clicked on “Investors” I read the following:

*In order to comply with relevant regulatory and securities issuance requirements in Canada, we are only accepting Accredited Investors at this time. To find out if you qualify as an Accredited Investor, please contact your provincial securities commission to find out more information.

I’d heard of “Accredited Investors” before, but hadn’t really looked them up. Here is what makes someone an Accredited Investor:

You have to be RICH. Rich like either net income > $200,000 in each of the last 2 calendar years; or financial assets > $1,000,000; or total assets > $5,000,000. I’m not sure how many people that removes from investing in this type of thing, but I don’t think that’s exactly what’s meant by “Peer to Peer” lending.

I lean somewhat Libertarian in most things, and the sort of “nanny-state” smell that comes off
this kind of rule makes me pretty grumpy. If I as an investor want to bet my entire (small) net worth on a bet that some guy from New Brunswick that I’ve never met is going to pay back his 8% loan that he received after filling out an online questionnaire, I think I should be able to do it if I want to. When you look at it, this is an Ontario government that oversees casinos and liquor stores, but for some reason, allows a crown agency to essentially split investors into “have” and “have nots”.

I’m not a “99%” vs. “The 1%” kind of person, but rules like this, that make for an unlevel playing field just don’t seem fair, especially when it appears that these rules are being set up with the goal of protecting people from themselves.

Have you ever come across an investment like this? Are you an Accredited Investor?

Sunk Costs

My wife and I both took yesterday off in order to recover from any St. Patrick’s Day shenanigans we may have gotten involved in on Tuesday. It turned out to be a pretty tame night – just a dinner date for the two of us with some green beer and an early cab ride home, which is nothing like some of my previous St. Patrick’s Day celebrations have gone, but it makes for a more pleasant day off.

Rather than sit around doing nothing (like we wanted to) on our day off, we spent a good chunk of yesterday cleaning out our basement. Our basement accumulates significant amounts of junk over time. Our “adult” method of cleaning the house if we are having guests over for dinner and board games is to shift all of the stuff that is currently cluttering things up from where it’s currently sitting to somewhere in the basement. The problem isn’t the shifting of “stuff”, the problem is that we don’t go looking for all of those accumulated items later, which creates a scary sort of chaos down there.

Both my wife and I have a bit of the “hoarder” spirit – we have great difficulty in tossing out anything, even if we have no real attachment to it. It’s the thought of “But I might use this someday” (even though we haven’t used it in the 6 years we’ve lived our house) that causes most of the clutter. As an example, we found an original X-Box that we moved from our apartment and stored away in a cupboard and haven’t played in almost 8 years – there is no reason to keep stuff like this, but it has unknowingly been taking up space in our relatively small space.

After one car-load of junk taken to the dump, and a carload donated to a local charity, we’re actually able to move around down there. We made the decision before we started cleaning to get rid of anything that we haven’t used or touched in over a year. If there was any chance the thing could be used by anyone, it was donated for resale, otherwise it was junked.

Our system of cleaning was that we deemed everything a “Sunk Cost”. All of the things we threw out probably seemed like an excellent idea when we accumulated them, but at a certain point all that stuff became more of a liability than anything. It was costing us a limited resource (space in our house) to store things that we have a value of almost zero dollars for the most part – it just didn’t make sense, and it was really wearing on us.

Now that things are tidier, our next challenge is to keep the stuff out of our house in the first place – allowing us to hopefully have more resources to put towards our retirement savings, in addition to maintaining our sanity.

Maintaining Effectiveness at Work

I have many different interests, which are almost constantly butting heads with each other, due to a lack of time. I think that no matter how much time I had in a day, it would always seem that I wasn’t getting done as many things as I wanted to – there are always more things to get to – books to read, hobbies to do, games to play or naps to be had. Adding in the 8 to 10 hours a day where work takes me away from these interests forces me to try to be more effective with the free time I have available.

The issue that I think I may have as I get closer than the approximate 3,600 days until my goal retirement date is that my interest in my job may wain, while the other things I like to do will have much more appeal to me. This kind of pull towards other things wouldn’t be fair to my workplace, or me and at that point may cause an early exit from the world of the working to either a semi-retired or retired state.

Currently, I am lucky because I find my job important enough that it keeps me fairly engaged on a week to week basis. I get to travel a bit with it around the province, which gives me a break from tedium sometimes, and I also have over 4 weeks of vacation per year, which does allow me to get some decent breaks from the job and allow me to pursue some of my other interests. Between the decent pay and vacations I get, as well as the fact that I’m earning very little money currently from my investments, I have some incentive to maintain my current levels of production (such as it is).

As investment income increases, my opportunity cost of working is going to increase. At that point, my level of interest in work will probably depend on how rewarding the job will be at that point in my life compared to playing hooky and doing exactly what I want to do all of the time. As long as my employer continues to employ me (the alternative being them firing me because I tend to “toe” the line with people in my company due to my extreme dislike of government bureaucracy.

I say it all the time when days at my job aren’t going well – there are significantly less desirable jobs out there than I have. My entire work revolves around me crunching numbers and telling people what I find out from them. I can compare this job to my first real job, which was gathering eggs in a VERY smelly chicken barn – sitting in an office and drinking coffee for the day isn’t that bad. The job just isn’t as much fun as reading the book I’m interested in, or going for a 2 or 3 hour walk.

My hope is that my last year doesn’t turn into a work-day before extended vacation starts, when my mind is no longer on the work I should be doing at all.

How do you stay motivated?


Rejecting Fear

“I must not fear. Fear is the mind-killer. Fear is the little-death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain.”

― Frank Herbert, Dune

I’ve always really liked that quotation, and have probably read the Dune books where it came from too many times in my life. Over the past few days, I’ve been listening to Timothy Ferris’ “Four Hour Work Week”. I had to stop about halfway through, because the book had turned into a lengthy sales pitch reasons why the reader needed to have an army of virtual assistants from India working for them in order to make life significantly easier and more productive. I’ll probably finish the book someday, but the lifestyle that was being promoted by the book wasn’t all that interesting to me. One part of the book that I really enjoyed was in the initial portion, where Tim talked about fear, specifically fear and finances.

The question he asked, which made me think, was if you took a significant risk right now and lost, what would it take to get you back to the point you were at before taking the risk (I’m paraphrasing, and hope I have given the sentiment he was trying to get across justice)?

I, like most fiscally conservative people, live with a little bit of constant fear that “it will all get taken away”. I’m not exactly paralyzed, but I don’t take significant financial chances in my life, given the chance that things would go totally wrong. As an example, I stay with a job that I like to do most of the time, instead of finding something that I might enjoy going to everyday. The known is much more enticing to me than making a leap of faith into something that may be more rewarding.

The problem is, intuitively, I know if I “lost” on one of my financial bets, such as making a risky choice in career, or investment, or anything else financially, it wouldn’t take a lot to get back to where I am right now. My monthly expenses are fairly low, and I don’t really have any super expensive habits that I wouldn’t give up in lieu of a cheaper hobby, if I had to. The gamble wouldn’t be too risky.

I think as I get closer to my retirement goals, I will probably feel more and more hesitant about making a final exit. I will initially be very concerned with the lack of cushion from losing a consistent paycheque. To combat this, I think I need to have faith in the financial plan I’ve set out which will be based on (by then) almost two decades of spending information. I need to know that unless something unknown happens that I haven’t experienced expense-wise, I will probably be fine and the free time will allow me to do more of what I want to do.

What’s your biggest fear when it comes to your finances?

Two Ways to do Dinner

Over the winter, my wife and I hibernate. Driving anywhere is treacherous, and we don’t do any outdoor activities because being cold is stupid. Most of my evenings start with a trip to the gym, involve some Netflix and finish with me watching a basketball game before passing out at 10 or so. It was a big change for us this past weekend, when we were actually sociable – we went out for dinner with friends on Friday evening, and then had people over to our house on Saturday.

The dinner out was an unplanned last-minute thing with another couple, at a reasonably priced Greek restaurant. For the two of us to eat and have a drink each, it cost us about $30. Because we hadn’t been out in a while, it was a nice change to a winter evening that usually would have ended early after binge-watching something until Netflix puts up their “shame message” asking if we’re still watching.

Saturday was a little more complex, I cooked dinner for 6 people – pulled pork and pulled chicken, along with homemade taco shells (which are much better than store-bought). My wife and I wanted to play the new board game we bought a few weeks ago – Lords of Waterdeep, and it’s much more fun to play with other people, so we bribed them with food. I like cooking, and it gives me an excuse to cook enough food to last my wife and I for a week or two (we like having ALL of the food around).

I had fun doing both social events, which is rare, because I mostly just like doing nothing. From a financial standpoint, it worked out that both of the social things cost about the same to do. The difference between the two was that having a bunch of people over allowed for a much longer visit, which hopefully our guests enjoyed, and was much cheaper for everyone involved. The difference between the two meals, was that we were able to cook enough food for 12-15 lunches and dinners during the week at home, while I was still a little hungry after the restaurant.

I’m never not going to go out with friends – it’s one of the things in my life that I “splurge” on more than I should, because I like to eat different foods and try different beer at restaurants. I just realize that sometimes it’s more fun to just hang out and play weird nerdy board games, even if that everyone just kind of looks frightened of when my wife and I set up the dozens of pieces to the game, before we start the 5 minute explanation that sound like a different language to the people playing with us.

Do you go out a lot, or stay in? Do you hibernate in the winter?

It Only Hurts a Bit

This year, for the first time since I was paying for University tuition, I will be in receipt of a sizeable tax refund, due to the amount of RRSP contributions made over the last calendar year. What I would like to do with my large refund is to go on a super fun trip to get as far away from the -20 celsius winter that we are experiencing. What I’m actually going to do is immediately forget that the government paid me a bunch of money and roll the dollars into my RRSP to compound into my retirement fund.

I’m doing the same thing with my RRSP as I do with my paycheque. On payday, by the time I shuffle money into retirement savings, pay my part of the household bills, and set aside a bit of money for my main summer habit (golfing), I’m left with almost nothing. I find it’s better to remove all of the money decisions I have available to myself, otherwise I’ll look at the money left and wonder why I’m not doing something fun right then.

One of the first personal finance books I read in my early 20’s was “The Wealthy Barber” and I think one of the only things that really stuck with me after reading the book was the “Pay Yourself First” lesson that was taught. As a debt-riddled guy in my early twenties, this lesson probably shaped my personal finances more than anything I’ve done since. By prioritizing items that are most important in my financial plan, I make sure I don’t forget about them (or run out of money by the time they need to be dealt with).

I think anyone who uses this method with their personal finances would agree – it’s effective, but it really sucks to basically be out of money all of the time. My chequing account balance at PC Financial is constantly sitting at almost $0, mainly because I have ensured that all of my other future plans have been dealt with, in lieu of having a bunch of money now . I know myself well enough to know that if I had extra money, I’d find lots of stuff sitting around. Over the 5 years of my mortgage, I made extra payments every payday, rather than saving up for a large lump-sum payment – it was just “easier” than having spare money to tempt myself.

Are you a lump sum saver, or are you “responsible” enough to save money in bulk?

Lifestyle Expectations

At the 2015 World Economic Forum in Davos, it was reported that billionaire Jeff Greene stated “America’s lifestyle expectations are far too high and need to be adjusted so we have less things and a smaller, better existence. We need to reinvent our whole system of life”. While the guy has since refuted he ever said that AND was met with some criticism after it was discovered he had flown his wife children and two nannies in a private plane (maybe the plane was chartered and not owned, and that was his idea of “less”). Whether the guy actually said that or not, the sentiment of the message is something that I agree with. Everyone (including myself) has bought into the cult of consumerism and it causes more than a few issues.

Beyond making conscious spending decisions, I’m not all that sure how to combat my own consumerist desires. Samsung just announced and demonstrated their new fancy Galaxy S6, which looks considerably more amazing than my 3-year-old Galaxy S3. There are about a dozen ways I could justify the approximate $1,000 new phone, but I don’t really need it. Realistically, I don’t even need the size of house I have right now. It’s hard to justify 1,100 square feet plus a basement when my wife and I basically only use half that space. In the city we live in, there just weren’t any smaller / less expensive choices than the one we made (if we wanted to buy a house).

My wife and I have done our best to break away from the “living large” lifestyle, which has allowed us to save a significant portion of our incomes for retirement income purposes. As I wrote about last week, there is still a significant amount of waste that would allow us to have either more money available for savings, or alternatively, have to work fewer hours to maintain ourselves.

What most people (I include myself) expect and demand as necessary to live now, in comparison to even 75 years ago is very different. While most consumer goods are relatively cheaper in comparison to decades ago, we always want more of it, and are constantly looking out for the next new thing, which really wasn’t even an option in 1940. The more cool stuff that comes out, the harder it is to say no to 100% of all of the options. Even if I were to only to buy 5% of the cool stuff that I want, compared to things I actually need, that’s still a lot of resources to allocate to probably useless items.

As the world keeps speeding up, I keep trying to remain cognizant that most of what I buy is probably not going to make me happy beyond the initial rush of the purchase. I will continue to hesitate before making purchases, hoping to stave off significant lifestyle inflation – and live a “smaller” (and hopefully less cluttered) lifestyle.