Last year I was very goal oriented, and it got all fucked up. I did a massive dose of mushrooms and broke my own mind, then sabotaged my business.
After that I got really sad for several months and had no money. I felt like a failure as a dad, a husband, and I even questioned why my friends would want to play sports with me.
I learned as much as I could about stoicism and it changed how I think. Less “woe is me” more “I’m so lucky it isn’t way worse than it is.”
Music is very meaningful when you’re super depressed, and this was my song:
Somewhere along the way I caught a few really good bounces and business sling shotted around the black hole it had been heading for.
When it’s your birthday people ask if you feel different. This is the first time I would say “yes” and really mean it.
I just feel way luckier to be who I am and to have the life I have.
I’m more astonished than ever at how awesome my friends are. The 6 of you reading this right now, I love you so much it hurts.
Also I’m going to die sooner than I thought. Because before I half assumed I wasn’t going to die. Nope. Gonna die. Hopefully not soon, but it’ll happen. I want to do a good job of being alive while I’ve got a shot at it.
That’s about it. I have it in my calendar to read this on my next birthday. My “theme” for the year is “freedom” whatever that means.
Lately it’s meant: freedom from being so damned self-concerned. The less I focus on me (and yes I realize the irony and hypocracy of writing that in this of all articles) – the better life gets.
Still can’t dunk, but working on it.
Haven’t jerked off since November. Sorry Mom if you’re reading this.
Loving being a dad.
Probably loving winter more than I have since childhood.
More in love with Lia than ever.
Trying to learn how to lucid dream. No real progress there as of yet.
Probably a good time to stop writing. Happy 35th birthday me!
The cheapest way I’m aware of (and the way I do it) is to get a “self-directed investing account” at TD Canada Trust, with Web Broker enabled. This can be a bitch to set up in person at a branch, but once it’s done it’s done and you can enjoy a lifetime of investing without paying some banker thousands of dollars to click a mouse for you. Because that’s what’s happening if you don’t do this yourself. A banker will charge 1-2% annually whether you make money or not. Bankers get away with this because it doesn’t sound like much and what they’re doing seems mystical.
It’s not magic. And it’s not difficult.
And when your balance is only earning 2% in interest annually, that means you’re losing all of your interest in fees if you have someone manage your account. FUCK that. YOU manage your account and keep those thousands so they can compound.
Once you have the Web Broker enabled TFSA account open, you add your TFSA as a bill payment from whatever other bank you normally bank with, and that’s how you get cash into the account.
Once cash is in there, you can buy whatever you want but I’d argue violently for choosing indexed mutual funds with the lowest Management Expense Ratio (MER) possible. As linked to above, my trio of death include TDB900, TDB905, and TDB902. This covers the entire Canadian, US, and International markets. It’s as diversified as you can get (aka lowest risk), with the lowest management fees, and gets you that juicy 7% average annual return over the long term.
There is no transaction fee when buying or selling mutual funds (as there are with stocks, which is about $10 each time you buy or sell). MER is what you pay the person who manages the entire mutual fund (this is not your local branch banker, this is some superstar way high up the TD foodchain).
As far as I can tell, this MER fee is unavoidable, so the best we can do is to minimize its damage as much as possible. AND THE DAMAGE CAN BE SIGNIFICANT. If you currently own mutual funds, find out what the MER is on the funds. It should be easy to look up online. Lia and I are paying between 0.33% and 0.51% MER rates on the TDB900, TDB905, and TDB902 mutual funds we own.
So if you’re paying 2% or 3% MER, that’s between 5 and 10 times more than you could be paying with TD’s E-Series funds. From what I’ve been able to find online, these are the least expensive indexed mutual funds available.
This year’s investing efforts got off to a depressing start. I had set a goal of investing $30,000 this year, which breaks down to $2,500 per month. To keep myself (painfully) aware of my (lack of) progress, I had a running tally on the whiteboard in my office.
After the first 3 months of 2018, Lia and I had only managed to invest $600 and so we were $6,900 below where we’d hoped to be at that point in the year (as seen in the image below, photographed in April):
You will also notice that I delayed publishing the last Retirement progress report because I was embarrassed at how little we’d invested. I also started reporting market value to avoid having to talk about the actual dollar amount contributed this year. I was working flat out, and I just couldn’t make enough to invest after monthly living expenses took their toll.
Lake also arrived in March, so there’s that.
Then, a few months ago, I stopped tracking the deficit and simply kept track of the positive number. I was just tired of feeling shitty about myself, and obviously looking at that red number grow negatively wasn’t having the desired effect on my behaviour. I erased the red and just tracked the green. I buckled down and worked a bit harder too.
Since then, things have improved.
I’m not entirely sure what happened, but keep in mind there’s a significant chunk of HST in that figure which we will have to make up for in the beginning of 2019. So that’s probably why our investing pattern is so end-of-year heavy: I spend the beginning of the year trying to build up money again to pay taxes owed for the prior year – because we’d already invested that HST / income tax (instead of setting it aside and having it earn nothing all year).
My TFSA has dropped 14% in the last quarter and now sits at $55,542.05. It’s down $6,094.70 in 3 months. This is actually a good thing because this is the lowest I’ve seen these indexed mutual funds in like 3 years, and we just bought a heap of them at this lower rate.
Lia’s TFSA is on the radar now, clocking in at $28.645.18 market value (it’s dropped 2.5% since we bought our first chunk of mutual funds like 2 weeks ago, indexes are plummeting).
It does not feel good at seeing our TFSAs drop like this. But on a conceptual level I understand that this is a great time to buy mutual funds. So in the long run we should do better because we bought during this slump, and have sold nothing. But still – nobody likes looking at their accounts when they’re low.
Our mortgage is sitting at $158,666.20 (down $1,301.95 since my last report).
Up to this point, my math has been a bit wonky in predicting future values for these retirement reports. I was calculating the total value of our investments compounding at 7% annually but really they compound at about 2.17% and are supposed to appreciate at 7% on average over the long term. I think the two are different but I struggle to know why.
I also don’t quite know how to create projections of future value based on these conditions of separate appreciation and compounding percentages. But I’ll try walking through it slowly and try to get close.
Say we contribute $30,000 per year, we can look at it like this:
We have an $84,187 balance going into year 3, 2019.
We hope to add another $30,000 in year 3, which will bring the balance to $114,187. The value of these mutual funds should grow by 7% annually, so by the end of year 3 we can expect it to have appreciated in value to $122,180.
Our mutual funds pay annual distributions (basically, this is an interest payment) at some point in mid-December. The distribution yield percentage for each fund is a little different, and I’m not sure if it’s fixed or if it changes year to year. At present, distribution yield is 3.04% for the International Index (TDB905), 2.3% for the Canadian Index (TDB900), and 1.16% for the US Index (TDB902). So at the moment, these distribution yields average to 2.17%.
I’ve selected the “re-invest dividends” option, so that dividend/annual distribution buys more shares of the same mutual funds already sitting in the TFSAs. As far as I can tell, this is what is meant by “compound interest”.
In the chart below of my TFSA’s performance, I’ve restricted the time period to the past 3 months, and you can see that things are tanking hard except the “Interests and Dividends” which have increased by $1,284.96. That’s the annual distribution which was just paid out on Dec 17th.
Wow that rabbit hole got deep. I totally forgot what I was doing there for a good hour while I looked all of that up. So we’ll take our future value $122,180 amount in December of 2019 and collect 2.17% in distributions, which comes to $2,651. Add that to the pile and we’re going into year 4 with $124,831.
Keeping with this pattern, here is my best shot at illustrating future years:
If someone who knows math or money or both wants to vet this that would be awesome. At this point it’s feeling a lot like a shot in the dark.
Based on the most recent MMM article, Lia and I will likely be aiming for between $1 and $1.4 million to consider ourselves financially independent / retired. This is way higher than my first guess that we’d be able to retire on $800,000. So at this rate it looks more like we’ll become financially independent at some time in our early 50s.
But the good news is that once we reach the latter years of our investing career, we’ll be covering ground exponentially faster than we had been in the beginning.
Investing seems to be like a train; it takes forever to even begin to get rolling, but once it does the sheer momentum becomes a force unto itself.
If you’d like to get your own war chest going, I’ve written a much shorter post called Simple Investing 101 so check that out.
Finally, if you want to stay up to date with these blog articles, please subscribe using the email opt in box somewhere on this page…
I missed last quarter’s report so here it is up to today, and I’ll post another one for year’s end.
It’s up $24,807.38 since April… but it’s not actually that great. This is pretty blown out of proportion because we’re holding HST in there until it’s due, so that number is way higher than it should be. Another factor that makes that leap seem huge is I’m now just reporting the current market value of the TFSA because it’s gotten too confusing for me to figure out what I was doing before (which was something like tracking the book value of only the money contributed, ignoring changes in market value, which was useful to see how many net dollars were making their way into the account, but it also painted an unrealistic picture of the real-world value of the holdings and accounts for that past number being lower than it should have been).
SO from now on, market value is what you get!
I’m also happy to announce that my TFSA is now maxed out, and we’re stuffing Lia’s next. Why not have started with Lia’s, you’re wondering? It’s because we’re also rebuilding her SDRRSP from having demolished it to buy our house, so it seemed right to have some assets under my name. Not that it matters. We’re each other’s beneficiaries anyway.
I spoke to someone at TD to figure out where that TFSA limit was, and it’s actually on your most recent CRA Notice of Assessment (I think it says how much you’re still allowed to contribute to your TFSA). Because mine has also earned distributions (paid out in Dec) and appreciated in value, that explains why the value of my TFSA exceeds the 2018 contribution limit (of $57,500 if you were to start today).
The best thing to do with a TFSA is max it out, then leave it full so it can:
Appreciate in market value at an average rate of 7% over the long haul.
Earn roughly 2% in annual distributions in December, tax free. So at some point in late December, something like $1,200 in mutual funds will automatically be added to my holdings. Compound interest baby!
So at some point in 2019 I’ll put $6,000 into my TFSA.
Debt / Mortgage: $159,968.15
Down $3607.19 since last report. I love seeing the 5 in there where the 6 was now that it’s below $160,000. The iceberg is melting.
Leave the world a little better than it was when I arrived.
In reviewing my bucket list, I’ve realized that I’ve been holding back on going for the big goals. The most pronounced one is dunking a basketball. I initially didn’t put it on the is the list, then had to incrementally increase the goal from tennis ball to volleyball, and only now am I accepting the reality that I will one day dunk a basketball. IF I train!!
This acceptance is big. Overcoming my internal resistance to one of my biggest dreams represents a significant change in my forward progress. I’ve been static on that for a long time. Now I’m moving. Move on one formerly impossible big goal, and then move on the next.
I’ve been static on that for a long time. Now I’m moving. Move on one formerly impossible big goal, and then move on the next.
I’ve also been going through a restructuring of my time to forcefully prioritize time with my wife and daughters at the expense of time doing work for other people.
This has made me very happy. It has compounded the love I have for my girls, most potently with Isla. I have historically shut her out the most in order to work, and giving her my full attention has felt really good.
It is becoming clearer and clearer that earning Isla’s love is the most important thing to me, because I can see how it’s possible to miss out, even a bit, and not do as good a job as I could have, and fucking regret that.
Same goes for Lia and Lake. But right now Isla, at the stage she’s at, seems most urgent.
Following my bucket list goals to their ultimate conclusions, yes grossing $200K would feel amazing. As would attaining financial independence. But those without making an absolute success of my family would be damn near fucking meaningless.
Looking at it the other way around, I wouldn’t care much if I never grossed over $200K, it would be harder not to ever feel what financial independence feels like… but I’d be happy. I’d be SO happy. Like I am now.
This report is going to be a little wild again. Leading up to tax season we’d stopped investing the HST we had collected, and starting withholding income for tax payment to compensate for the HST we had invested over the majority of the tax year.
This effort was in hopes that we could avoid selling any of our mutual funds to pay our taxes, and instead replace the HST we’d invested earlier in the year with out-of-pocket income.
It seems to have worked. We were able to cover the HST we’d invested, successfully exposing those funds to market appreciation over the majority of the tax year. That said, appreciation currently lags at +1.61%, which is actually great (I think). It means we’re buying below normal (7%ish) growth. Just as long as the market picks up again at some point in the next 10-20 years before we need to sell!!!
One solid decision was made regarding whether to pay off the mortgage more aggressively – which was not to do it. The main reason we’d relied upon in our past deliberation over this idea is our mortgage rate of 2.92% shouldunderperform index funds on average (7%). But this choice is vulnerable to instances like this past quarter where our portfolio lagged brutally at 1.61%… though really that doesn’t matter until we sell… I think. We’re still good as long as we never sell at 1.61%!
But the decisive reason for not paying back our mortgage more aggressively is this: we have mortgage life insurance. I think we pay a combined $12/month for this insurance, so if either of us die, the mortgage is paid off.
It would suck to pay the mortgage aggressively only for one of us to die and have the remaining (much smaller mortgage balance) forgiven, AND have no other investments. Better to sock our money into indexed mutual funds and pay the mortgage at our normal rate for the time being.
If we max out our TFSAs, and/or we renew for a higher than 7% mortgage rate… we’d probably switch tactics… and we’d likely keep the mortgage life insurance anyway.
Another trap people fall into with paying the mortgage off early is this (thanks Kyle Collins for pointing this out!): once they no longer have a mortgage to pay each month, that “extra” money starts to feel disposable. Hedonic adaptation kicks in, and most people (and I would probably do this too) simply end up spending the extra cash on silly shit every month.
Winter-long trip to Costa Rica? Fuck it! Our mortgage is paid off!
This extra cash is only useful to our long-term financial stability if invested. For this reason, in comparisons between people who invest early in mutual funds versus people who pay off their mortgage early, the investors generally end up way ahead come retirement.
It just requires too much discipline to take all the money you would normally put toward a mortgage and immediately transition into socking that cash right into index funds… especially after the marathon of paying off a house!
After all that rambling, here are our retirement figures for the quarter:
TFSA: $36,829.37 (up $12,459.54 from last report… again this is a bit blown out of proportion because we’d been sandbagging leading up to tax season)
Mortgage: $163,575.34 (down $1,782.65 from last report)
Net worth shift: + $14,242.19
I’m going to attempt some forecasting here. I want to bake two new and exciting metrics into these quarterly retirement reports.
Metric 1 is a percentage representing our progress toward the $800,000 retirement goal.
According to the Mr. Money Moustache equation of “multiply your annual spending by 25 to see how much you need to have invested in order to retire”, my family would be comfortable retiring on $800,000.
MMM’s “safe withdrawal rate” of 4% works out to $32,000 – which would cover our annual spending. Assuming our mortgage is paid off, we can retire once we’ve invested $800,000.
Metric 2 is the number of years remaining until we can retire, calculated based upon a $30,000/year rate of investment.
Here we go.
To make things easier, I’ve added our mortgage onto the $800,000 to represent the total amount of money yet to be invested/put toward the house. That leaves us with a target asset value of $963,575.34.
Retirement Progress = $36,829.37 / $963,575.34 = 3.8% of the way there! Pretty fucking low, but far better than 0% haha. The early years are the hardest.
I missed getting this out at the end of December, so here it is a wee bit late!
TFSA: $24,369.83 (up $1,896.91 from last report).
Mortgage: $165,357.99 (down $1,264.85 from last report).
Net worth shift: +$3,161.76
Progress was modest these past couple months. The holiday season came with higher spending than normal, which (for us) meant less surplus made it into our investments. This is when the $200/month automatic deposits really help keep morale going. Even seeing that, between our investments and lowered mortgage debt, our net worth increased by $3,161.76 from two months ago is very encouraging. Even in slow times, we’re headed in the right direction.
Another extremely fucking cool thing happened in on the 15th of December which was that our mutual funds bought $746.91 more of themselves (in the form of “annual distributions” (mutual fund equivalent to stock dividends)). This is the mind-melting miracle of compounding played out in real fucking LIFE. To clarify, this is not a change in market value. The funds mutual funds we hold appreciated by $1,914.74 in the past 2 months, independent of the distributions paid out. The distributions are roughly 2% annually on top of any gains or losses in market value.
I’m still baffled at the reality that I have no intrinsic sense of any of this until I put one of these reports together. It helps to talk to someone and ask dumb questions until you get the comprehension you’re after. My TD lady was trying to get me to “just Google it” for most of the phone call but I persisted until I had a concrete answer. Spending 2 hours on the phone to discover that my mutual funds pay roughly 2% distributions annually mid-December as long as I’ve purchased them in time to qualify for those distributions (this period was about a day, the lady thought) is knowledge well worth the cost to obtain it.
Two big things happened this quarter for our financial game. The first is we met our annual goal of investing $20,000. The second is our rate of investing crossed over the 50% threshold, meaning that we are investing more than we’re spending.
I don’t know how these good things happened because it certainly didn’t feel like we did very well over the past 3 months. This goes to show that how I feel about our performance and how we’re actually doing aren’t very closely aligned. I simply don’t really know what’s going on. But our finances are more automatic now, and in a good way. There is less personal willpower needed – we just have systems that ensure we’re being smart over the long term. Lia and I have continued to do a little better with our unnecessary spending and these new habits have plugged some of the holes in our bank account. There is still a lot of room for improvement, but behavioural change is a very slow process and there’s solace in knowing we’re moving in the right direction. Lia’s also bringing home the bacon as a yoga instructor, which is certainly helping.
Of course, there were hiccups in the last few months. We drove a lot, and spent lots of money on gas. But we drive a civic, so “lots of money” is probably laughable to anyone with a more serious vehicle. We compare ourselves to Mr. Money Moustache though, and that guy limits himself to one tank of gas per month!
One of the larger hiccups came in the form of a being bad and buying a fancy cordless vacuum for $300. My mind has a tendency to drift into thoughts of doom and gloom whenever we make big purchases. I don’t enjoy spending money nearly as much as I enjoy seeing this retirement account grow, so anytime we buy something (even something quite necessary/useful) I feel a great deal of buyer’s remorse. It’s a hell of a vacuum though. Before, Lia was using a god damn massive shop vac to do the stairs, the bedrooms, everything. So I suppose the frustration and rage saved in upgrading to something much more civilized is going to more than compensate for the minor retirement setback.
TFSA: $22,472.92 (up $7,278.46 from last quarter).
Mortgage: $166,622.84 (down $1759.03 from last quarter).
We’ve made our $20k goal for the year and we still have 3 months to go! So we’ve upped our target to $30k for 2018. I find it very helpful and encouraging to see our investing progress laid out in smaller, monthly increments. I keep a piece of paper on the fridge with the projected TFSA balance listed beside the month by which we need to hit each amount.
The position of the magnet represents the current total value of our investments. Seeing the steps broken into smaller fragments, and that we’re a few months ahead of our goal helps me not get too stressed out about the otherwise daunting idea of investing $50,000. After 3/4 of a year of doing this, and saving $20,000 already, $50,000 feels very doable.
Then things get a little more exciting. $50,000 is a 20% downpayment on a $250,000 house or property. Within the next couple years, we will have more interesting investing options available to us than simply plowing money into mutual funds. Lia and I will be able to cruise realtor.ca with the knowledge that we have the cash to move on a property if the right one comes along. We may be on the verge of being able to do that sooner if we pull equity out of our current home and remortgage, but I hate that idea. I don’t like being in debt. Nobody does. And while doubling our debt is certainly one way of doubling our exposure to real estate appreciation, it also doubles our property related expenditures and vulnerability to things like mortgage interest rates. Things will happen faster in either direction. Either we’ll get richer faster, or we’ll get into financial trouble faster. I like the idea of a conservative and highly attainable approach over riskier maneuvers when the stakes are this high. Factoring in peace-of-mind, a slow approach seems like the way to go for me.
The next report is in my calendar for December 31st, which is only a couple months away but it will be more comprehensive moving forward to align these posts with the actual calendar year (instead of doing it on the 18th every few months from whatever month happened to be the first post).
I hope reading this has inspired you to invest! I know at least one friend has taken shit into his own hands and is now on track to retiring in his 40s. I’ll extend the same offer here as I extended to him: if you want my personal help in getting set up with the same investment strategy I employ, just ask and I’ll help you. It’s straightforward once you have the accounts set up and you’ve bought your first mutual funds.
So things have changed quite a bit since we last looked at the Lowe family retirement strategy. They’ve simplified. Mainly, I realized that it made very little sense to have such a big “Rainy Day” fund ($20k) and not have that money invested and compounding. So now we have $5k ready for emergencies and the rest gets invested.
The last few months we’ve worked hard to spend less frivolously, and to invest more aggressively.
This is our main investing account comprised of 3 low MER TD E-Series mutual funds (TDB900, TBD905, TDB902). We’re 1 month ahead of schedule for our goal of $20k invested for the year, averaging $3,042.49 invested every month.
This quarter we invested 42% of our net income. To help free up money for investing, we’ve also been selling thousands of dollars worth of shit we no longer use via Kijiji. Guitars, a motorcycle, electronics, old paintball guns, roller blades, it adds up!
Mortgage: $168,381.87 ($1,496.13 lower than last report)
We haven’t paid down our mortgage any quicker than we had been prior to the last report. Our current interest rate of 2.92% is below what is expected to be earned investing in indexed mutual funds (8%). If we renew in a couple years with a significantly higher interest rate (anything over 8%) it will make far more sense to pay down the mortgage more aggressively and stop purchasing mutual funds altogether.
If you haven’t called your various providers (cell/insurance) lately and harangued them into lowering your bills, you are probably in position to save hundreds of dollars by doing so.
This morning it took me 1 hour and 8 minutes over 3 phone calls to save $293.94. Below I outline the methods used to get my home/auto insurance and phone bill lowered.
Tires and Phones Save $
My car insurance just renewed with a $1089 annual premium.
I called TD Meloche Monnex and reminded them that I’m a loyal client with no claims and home insurance with them, then asked what they could do for me.
Turns out I qualified for a discount for using winter tires, and was instantly credited 5% for agreeing to participate in their TD MyAdvantage program. This involves downloading an app which tracks my driving behaviour. The app runs in the background and automatically detects driving patterns using GPS and the accelerometer in my phone. I only stand to gain because poor driving won’t increase my premium. However, perfect driving can lower my premium by up to 25% annually (~$250). Both Lia and I need to install the app (since we’re both insured under our policy) for maximum discounts.
All told, this 13 minute phone call resulted in an improved plan (now including 1 at-fault accident forgiven), an instant decrease in premiums by $59 and a potential 20% discount for excellent driving being tracked on the TD MyAdvantage app.
“Times are Tough” at the Client Retention Dept
Every 6 months I call my mobile provider (Wind/Freedom) and immediately ask to be forwarded to the client retention department because I’m thinking of cancelling my cell service.
The line I keep repeating all the way to client retention: “Times are tough, my wife and I simply can’t afford to be paying this much on our phone bills.” I also have a quick peek at other providers to see if there are super cheap signup promos happening. If there are, I’ll refer to these during my call with client retention, just to make them see I’m not fucking around.
Lia and I were paying $84.33/month for our two plans. Freedom agreed to help me out by temporarily reducing my bill to $62.84 for 6 months. That’s $128.94 saved (I’ve done this twice now so it’s $257.88 for the year)
Typical time on the phone is 30 minutes per call, which I make every 6 months. It’s in my calendar.
Home Insurance with TD Meloche Monnex
Lia and I were paying $623/year for home insurance. A 25 minute phone call revealed that I was eligible for a 15% loyalty discount. I also lowered my premiums by asking to increase my deductible from $1000 to $2000.
Once the mortgage is paid, we need to tell TD so our insurance drops by an additional 20% – 30%.
There’s also a Security System Discount of $21/year which we don’t qualify for, but you may.
Total call time = 25 mins
Money saved = $106/year
Go Get Some
Do some calling around and get better rates. To inspire yourself and others, please share your successes in the comments at the bottom.