Trevor Abes: Writer

February 2, 2021

How To Do the Hard Thing

I’ve honed my approach to difficult situations by a mix of willingly diving into them and running away from them enough to realize I should have just dove in. 

I think it’s a good skill to have, not fearing extremes of feeling, and adopting a curious attitude toward how they mess with your mind. 

This is especially true when you’re young and have to put up with situations and people besides yourself you have no choice but to be in/around to avoid poverty or preserve your independence.

The way I see it, it comes down to fending off your anxieties, limitations, and bs from others for as long as it takes to get yourself to a place where you can choose to do what you want.

Your choices will ideally be ones that don’t trigger your anxieties, allow you to sidestep or comfortably overcome your limitations, and include only people you are compelled and motivated by.

When it comes to anxieties and limitations before you have options, fostering a fondness for yourself, however hard a balm that is for you to apply, is the only thing that can claim any kind of long-term reliability. One way this could manifest is by unlearning what you were raised to think you couldn’t do, then proceeding to try your hand at a multitude of projects tied to these things and failing your way until something sticks. 

You’re probably busy doing that already. The failure here a badge of honor you’re too proud to have to let talking down to yourself become a thing, even though it will occasionally rear its head. 

A big part of the unlearning for me is looking fears and anxieties in their faces and getting comfortable with them as tenants in the borrowed space of my mind as I proceed to do what I want. There’s a difference between running away from something, which implies you should have stayed put, and walking away from something that isn’t for you. The ultimate arbiter of what that difference entails is you.

If you don’t have the option to work in your chosen field, selectivity where possible will help ensure a sustainable work environment: small intimate team instead of having 100 co-workers; customer service or its absence; that kind of thing. This year is my year to be more mindful in this area, as I finally have a little buffer to prioritize my mental health in professional settings instead of taking the job because I need the money.

When it comes to bs from other people, I favour the realization that we were all thrown into this world without a choice and left to make our own sense of it. Make no mistake, my skin wasn’t always thick enough to follow through on opening my mind to the many ways people make life sustainable. I’ve quit on great people and professional prospects on principle because I was uncomfortable with one specific person. It felt right in the moment, but I now feel differently about how much extra time this strategy tacks on to financial independence and being the sole owner of your time.

The sooner you foster empathy for people you vehemently disagree with, the faster you’ll get to a point where you can reliably avoid them. And perhaps only seek out their company to be ideologically prudent and steer clear of echo chambers. Not so much when you resist every instance of discomfort along the way, lengthening your path to living as you see fit. I believe this the most when I let myself see that we’re all acting in our own self-interest while trying to be as nice as we can to everyone that joins us for the ride. Most of the time, it’s better to have been a part of someone’s plan than to have missed the dance completely. 

February 2, 2021

Young Canadian Investor #26 — When You Shouldn’t Invest

Yes, investing your money in stocks and bonds is a no-brainer most of the time. Why? Because the money you invest will grow over the long-term into a nest egg that you wouldn’t have otherwise had, and you, just like the rest of us, have dreams that require ample funding. Let’s put the breaks on that for a second, though, to consider a handful of situations where investing isn’t the best idea if you’re looking to live your best life.

Busy living.

When you’re in debt. This isn’t to say that you shouldn’t invest if you’re currently paying off debt, just that you need to have a handle on the debt payments first. If you can’t project into the future and tell me more or less when you’ll have paid off what you owe, you probably shouldn’t be investing. There’s no point in stacking money up for your future when the interest rate on your student loans or credit card is cutting into your bottom line. To put some numbers on it, it’s reasonable to expect a diversified stock portfolio to earn you around 7% per year over a few decades, while most credit cards charge you somewhere around 20% in interest. No matter how hard you try, 7 in the black will never make up for being 20 in the red.

When you’re lacking in human capital. Your human capital is the sum of skills you possess that allows you to go out into the world and have a professional life. I write a lot and have some investing knowledge, so that’s the wheelhouse in which I look for work. Your own areas of expertise will differ, but are no less important to how you’re going to use your time. When you break it down, there’s really no comparison between investing $1000 at a long-term 7% yearly return and using that money to learn a new skill that will up your income by 10 or 20k per year. Thanks to the Internet, you may not even have to spend any money. Places like YouTube, LinkedIn Learning, and Skillshare offer plenty of free content to feed your mind.

When you’re bored. So you’re looking for some entertainment and the thought of buying Bitcoin or a few shares of Tesla sounds like just the remedy. This isn’t necessarily a bad thing if you do your due diligence, decide the investment is promising, and limit it to an appropriate percentage of your portfolio. The problem is that kind of work isn’t everybody’s idea of fun. Most people usually just want to drop the money casino-style and see what happens; not exactly a sound investing strategy to get you to a financially secure place. If you want to have fun, have fun, just don’t confuse investing with gambling.

When the chance at living is too sweet to pass up. Last but not least, you already know that life is short and that, to look back fondly on it, you need to go forth and take risks and pursue whatever you heart impels you to. What is right in the eyes of society may not sit well with you and the memories you’d like to accumulate. Does it make financial sense to drop five grand on a trip with the right person or to pursue your far-fetched dream of becoming a full-time poet? How about turning down a decent job in exchange for a day-to-day environment that will stretch your pockets thinner but will get you considerably closer to happy? Perhaps not because your portfolio will be worse off for it. That doesn’t matter at all, of course, so long as the experiences make it easier for you to accept and love yourself when you’re alone with your thoughts.

While we’ve learned about a few reasons why you shouldn’t invest, chances are it should still be a regular part of your life. You’re young, after all, and have the decades in front of you that you need for stocks to appreciate in value. When you’re ready to get started, you can give my short investing guide a read. It’ll run you through the investing process in plain language, step by step, so you can check this major part of adulthood off your list.

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January 30, 2021

Young Canadian Investor #25 — Why You Can and Should Invest on Your Own

As you’ve learned over the last 24 articles, there’s a lot to absorb before you can invest your money comfortably and confidently into the world’s stock and bond markets. You need to make decisions about which financial goals to pursue, for example, as well as how long you have to save before those goals can hopefully be met. That means taking a stand about how your future’s gonna look a few decades down the line and committing to it, even though you’ll likely be slapped around by life enough to periodically reconsider your priorities.

Then there’s the whole technical side of things where you get a grasp on what stocks, bonds, and index funds are, and how the different investment accounts on offer may or may not suit your situation.

It adds up and I get how the overwhelm can start to creep in. That’s why I understand if, after all this reading, you’re still feeling hesitant about opening your account and investing. Even though you know how fortunate we are as Canadians to have access to TFSAs and RRSPs, and you can see the benefits of saving money that’ll grow on its own over time, such as fulfilling dreams of all sizes, it’s still somehow not as easy as just doing it.

To that end, I came up with a list of aspects of the investing process that might cause newbies to give up or lose confidence + my own two cents as to possible solutions.

  1. The mechanics of inputting buy and sell orders for your investment funds is not everyday knowledge. You need to type numbers in that represent real money and you don’t want to make a costly mistake. That’s a normal feeling. Thankfully, portfolio manager Justin Bender has got you covered with his instructional videos on that exact subject. He has videos for pretty much every major brokerage in Canada and you’ll benefit from his approachable explanatory style.
  2. It can be a tall order to demystify how the stock market actually works. All those stock tickers, performance metrics, and constantly changing prices can be hard to crack. You should always seek out educational help tailored to how you learn. If you absorb knowledge more efficiently by reading, you can take a look at my investing guide for young Canadians. If you’re more of a visual learner, this TED video might help to fill in some gaps.
  3. Another scary part of tackling the craft of investing on your own is not having an expert check over your work and give you the go-ahead. If you can’t seem to get past this barrier and take the plunge, set up an appointment with a financial advisor in person to open your account when covid allows and have them run you through the investing process. If you’re a customer with their bank, it’s their job to help you. Just be wary of any sales pitches and stick to your plan, whether that’s engaging in active investing or setting up your portfolio of diversified index funds.

Forever is quite the stretch and the prospect of having to tend to your investments on your own for that long can seem daunting. But I know you can do it. You know why? Because you’re taking time out of your day to read an article about investing. That means you’re already part of the chosen few who are capable of investing for themselves. You wouldn’t be here otherwise. So long as you take your time and give yourself room to learn, you will prevail.

As always, if you have any questions at all, fell free to drop them in the comments.

I’m also available to teach you 1-on-1 over Zoom if you prefer.

Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.

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January 26, 2021

Young Canadian Investor #24 — What Are Your Major Life Goals?

As a youngin’, you may have not extended your life far enough into the future to think about stuff you’d want to buy then you need to save for now. You’re already familiar with what’s on most people’s lists.

  • A house
  • A university degree
  • A car
  • Starting a business

You could also buy yourself the ability to start a family, retire at 50 years old, or live in a different country every six months. The dream is yours and there are no limitations on it beyond the confines of your imagination.

The point of this post is simply to get a ballpark number in your head so you know what you’re aiming for.

  • According to Zoocasa, the average house price in Toronto was $1022138 as of June 2020.
  • A university degree will run you anywhere from a few thousand to $15000 per year depending on where your passion lies. There’s a list of University of Toronto tuition fees here on page 10.
  • A new car will run you, say, $20000, with a decent used one costing you half that or less depending on what it’s been through.
  • You could start a business for no money if you have the skills and a free way to share them. But if you need things like a physical location, inventory, or a paid marketing campaign, the number could easily reach tens of thousands of dollars.
  • When it comes to raising a family, you’re looking at about a quarter million per kid for the first 18 years.
  • If you want to retire at 50, suppose you’re going to live until you’re 100 to be conservative and multiply your current income by 50. If you multiply 50 by $20000 you get one million dollars.
  • Last but not least, country-hopping every six months in on a whole other level of living your best life. You could probably reduce expenses to the cost of travel and renting a place to live with the right logistical prowess.

Ok, so now that you’ve put numbers on your goals, how can you help yourself reach them?

Number one is maximizing your human capital, or your ability to learn new skills and thus increase your potential earning power. As a young person, you have the time to learn, consolidate your passions with educational credentials, and set yourself up for a financially stable rest of your life.

Number two is investing for the long term in a portfolio of stocks and bonds, which will grow your money for you on its own, without you having to work for it, and basically act as an additional source of income. The world of investments can be a scary place to make sense of, but it certainly does not have to be. If you’ve been looking for a nudge to get yourself started and saving for the major goals in your life, check out my new investing guide for young Canadians.

I’m also available to teach you 1-on-1 over Zoom if you prefer.

Feel free to start this Young Canadian Investor series from #1 and see if it has anything to offer you.

Feel free to drop any questions in the comments!

Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.

 

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January 23, 2021

Young Canadian Investor #23 — Common Investing Mistakes

Just like the practitioners of any other discipline, investors have to deal with a set of common mistakes the avoidance of which separates the average from the exemplar. You don’t need specialized knowledge to avoid them, just the ability to keep your emotions in check and the willingness to read a book or two to learn how stock markets work. Being a successful investor is within anybody’s grasp. Let’s discuss why by exploring some of those common mistakes below.

  1. First thing most investors fail to consider is the appropriateness of the fees they pay. If you’re invested in funds that charge you 1-2% of whatever money you have invested every year, are the funds’ portfolio managers earning you enough money to justify those fees? Seeing as owning the global stock market through index funds has historically made you about 5% per year after inflation on average, that means a 2% fee fund needs to earn you about 9% per year, supposing 2% inflation, just to keep up.
  2. With so much praise showered on Buffett, Lynch, Templeton, and other legendary investors, too many people believe in the promise of stock-picking expertise. Truth is, though, these individuals are outliers, and research-based stock picking is just as much an art as it is a science. Over the long-term, the vast majority of practitioners will underperform those who simply buy the entire global stock market through a diversified portfolio of index funds.
  3. Unless you know what you’re walking into, it’s very easy to let your emotions get the best of you as a new investor. On any given year a stock fund can fluctuate in price, sometimes by half or more, on its way to making you money over 10 or 15 years. Investing is a long-term practice, one where businesses need to be allowed to innovate, grow, and create lasting value; to be successful, you just need to live your life and stay out of their way. That means ignoring your urge to sell an investment simply because other investors are overreacting and causing its price to drop, even though the quality of the business hasn’t changed.
  4. Many young investors think you need lots of money to participate in the world’s stock and bond markets. Thankfully, this is no longer true. Wealthsimple, for example, allows you to open an RRSP or TFSA and buy as little as one share of the investment fund of your choice without having to pay a commission. If you have a spare $50, you can start investing today.
  5. It’s a widely-held misconception that investing in the stock market is basically gambling. You can definitely use stocks to gamble by, say, buying some shares in a company your coworker gave you a tip on, or a company that makes products you’re deeply familiar with even though its business prospects may not be all that bright. Whenever you invest hastily, you’re taking a flyer and could lose money. And you already read numeral 2. If you take a more measured approach, though, and invest prudently through index funds, which offer you a long-term positive expected return—5% per year or so after inflation—you’re golden.
  6. The key to investing is staying invested long enough so that compound interest can work its magic. That means you need to buy more shares of your stock and bond funds at every paycheck over a handful of decades for satisfactory results to show. Making the rash decision to give up on funds after a few short years is always a mistake.
  7. You may also be thinking that all this investing stuff is too complicated for you to handle it yourself, meaning you need to resort to a financial advisor to put your money to work. Not the case at all, if you ask me. As someone who put the reading in, learned about which investment accounts to open, and has been building his investment portfolio over the last two years, I can tell you with absolute certainty that you are more than capable of doing the same.

If you’re interested in a short and digestible investing guide to get you going, consider my new book, Nine Steps to Successful Investing: A Guide for Young Canadians. I designed it to cut through how financial literacy is one of the most boring things you can learn. You’ll get nothing but the essentials, expressed in plain language, with extra resources only if you’re interested in learning more. Whatever you decide, don’t hold off on building your nest egg. Your future self will love you dearly for it.

I’m also available to teach you 1-on-1 over Zoom if you prefer.

Feel free to drop any questions in the comments!

Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.

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January 19, 2021

Young Canadian Investor #22 — Ten Financial Concepts They Should Teach You in School

We’d all be a little better off if Canada’s basic education system included a thorough run through of basic finance. Such a course would allow young people to make better decisions with their money and ultimately keep more of it in their pockets. Nowadays, making mistakes with money is almost normalized as part of the journey toward managing it well, and there’s really no reason that should be the case with the right financial foundation.

Here are ten concepts that might serve as the base of that foundation.

Inflation is the sustained rise in the prices of goods and services people use in their everyday lives. A pack of bacon twenty years ago was a lot cheaper than a pack of bacon today because of inflation. The same can be said for orange juice, cars, houses, bathroom tissue, and pretty much anything else you need to live your life. We invest money in stocks because they offer a return that has beaten inflation over time. While you can buy approximately 3.3% less with a Canadian dollar with each passing year, a diversified stock portfolio would have earned you an average yearly return in the high single digits over the past few decades.

Debt is what you take on when you borrow money. Usually the agreement is that you have to pay your lender back the full borrowed amount, aka the principal, after a certain period, plus periodic interest payments along the way. These interest payments tend to be expressed as a percentage of the total borrowed amount payable in monthly, annual, or biannual installments depending on the arrangement. One well-known example is credit card debt, which is some of the highest-interest debt you can incur at about 20% or so per year. On the flipside, no pun intended, taking out debt, aka a mortgage, to buy a house could be financed at only 3 or 4% because of Covid-19’s obliteration of housing demand.

Financial Independence means having enough money to finance your life’s expenses such that working becomes optional for you. We’re not talking about being rich here, just being able to support yourself and live with decency. The earlier kids know about this concept, the more years they’ll be able to save and invest and take advantage of compound interest.

Compound Interest is the process by which an investment grows in value. When an investment earns you interest, which is synonymous with a return, over one year, it’s added to the original amount you invested such that your $1000 is now $1200 for example. The $200 you earned in interest now has the opportunity to let the following year’s interest grow on top of it, essentially earning you interest on your interest as they compound into a higher amount.

Opportunity Cost is a perspective you can take when it comes to spending money. It consists of looking at what you’re about to spend, say $15 on a burger and fries, and considering what you’ll no longer be able to buy once you place your order. If you’re saving for a car, you won’t be able to put that money toward to car anymore. If you’re hoping to take a certain course to add depth to your skills, that $15 will no longer help you enroll. You get the idea. When you actually manage to hold off on dropping your cash on something in favor of a future desire, it’s called delayed gratification; not the easiest ask for young people looking to have a good time, but certainly a rewarding one in terms of making larger-scale dreams come true.

Investing is using money with the intention of making more of it. You invest in assets.

Assets are things you can own that make money. These include stocks, which rise in value and can pay you a bit of cash every month or quarter called a dividend. Bonds, which basically work the same as the lender-borrower relationship we delineated above, where the lender, or holder of the bond, receives regular interest payments and the return of principal at the end of the bond’s life. Real estate, which pays you monthly when you rent it out to people. Businesses that hopefully produce profits that line your pockets in proportion to the percentages of the businesses you own. Patents, which generally entitle you to a royalty for every time your patent is put to use. Guaranteed investment certificates, which, like bonds, function as debt. And so on. Think of how motivating it might be to have a working list of these in your head walking around as a daydreaming sixteen-year-old.

Retirement Planning is the last thing you want to talk to a high school kid about at length because it’s so far away and you gotta learn to live before worrying about the logistics of the end of it. I’d limit the spiel to saying that it’s a good idea to think about how much money you need to live on a yearly basis. Multiply that number by however many years between your age and 90, to be conservative, and that gives you a rough idea about how much money you would need until you croak. It can feel grim to think about death. I get it. Just wanted to acknowledge that.

Insurance is money you pay someone else to financially have your back in case something catastrophic happens to you, like croaking, getting seriously injured, losing your job, getting into a car accident, or having to deal with damage to your home. You get insurance for peace of mind. Your payments for it, called premiums, are ones you hope to make without ever having to file a claim due to this or that disaster. Knowing about insurance as a kid is important to instill the idea that certain things are worth protecting more than others, modified of course by each person’s individual values.

Taxes can be defined as money you pay the government to run the country you live in. The earlier little Timmy can develop a sense of what this means in hard numbers, the less of a surprise it’ll be compared to when those dollars have a tangible effect on his quality of life.

Feel free to drop a question or a comment.

I’m also offering investing 101 chats 1-on-1  over Zoom, Facebook, Skype, or Google Meet!

Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.

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January 16, 2021

Young Canadian Investor #21 — What It Costs To Invest

While investing is an essential part of being financially responsible, it’s important to know that it isn’t something you can do for free. There are costs associated with acquiring and owning stocks and bonds to save for your future, so you might as well learn about them now instead of being startled by them on a monthly statement years down the line. Let’s get going.

First off, anyone who buys or sells shares of stock has to pay a commission to the brokerage house facilitating the transaction. Usually that’s between $5-$10—if you do business with Questrade or one of the big banks—but Wealthsimple recently became the first financial institution in Canada to let you trade stocks for free.

If you own shares of a mutual fund or ETF that owns numerous stocks, bonds, or both, you’re going to pay something called a Management Expense Ratio (MER). The MER includes the salaries of investment professionals in charge of overseeing the fund, as well as any associated legal and administrative costs. What you’re charged is a percentage of the money you have invested on a yearly basis. Ex: suppose your fund’s MER is 0.5% per year. That means 0.5% of your investment will be taken by the fund to keep the lights on, usually calculated daily and withdrawn monthly from your balance.

Funds will also charge you a Trading Expense Ratio (TER), which is simply the amount of brokerage commissions the fund incurs to implement its investment strategy. The more stocks and bonds the strategy dictates that they buy and sell, the higher the TER will be.

If your fund engages in active management, that means its portfolio managers try to pick what they consider to be the stocks and bonds with the highest potential return. This tends to entail a hefty research budget to figure out what investment to pick, as well as a higher TER that reflects the buying and selling of these investments as they fall in and out of the research results. In Canada, an active fund will generally cost you 1%-2% of your investment per year all things considered.

If your fund engages in passive management, that means its portfolio managers don’t go to the trouble of trying to make predictions about the best investments to own. They opt instead for owning every stock, bond, or both in the markets they cover, or at the very least a sample or index of them that’s representative of the whole. The managers take this route because they believe that human progress will continue indefinitely, which will be reflected in the long-term rise in value of their stocks and bonds. A passive or index fund in Canada will cost you 0.1%-0.3% per year depending on what parts of the world it covers.

Which style has made investors the most money dependably over time? The evidence is squarely in passive investing’s corner.

Then there’s always the option of hiring a financial advisor to make all of your investment decisions for you. If you truly feel that you don’t have the time or patience to learn by yourself, this is the way to go. An advisor will probably cost you about 1%-1.5% of the value of your investments per year—and that’s on top of any fund MERs and TERs—but the fee is worth it if it frees up your time to do more of the things you love.

Now you have a good working sense of what it costs to invest, making you better prepared to make informed financial decisions.

Feel free to ask any questions in the comments!

If you are ready to learn how to invest on your own, have a look at my new investing guide for young Canadians. It’ll give you the tools you need to put your money to work in index funds in no more than an afternoon.

I’m also available to teach you 1-on-1 over Zoom if you prefer.

Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.

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January 14, 2021

The Breakup Suite

It’s common sense writerly wisdom that one’s best work comes from the darkest places. It’s easier to believe in, of course, when everything is fine. When life sticks its foot out and makes you fall on your face, good literature or whichever artistic pursuits get you going don’t seem that important.

So when the love of my life walked out on the world we’d built over the last five years, unannounced, as these things happen, having decided on her own that our ways of being in the world were too different to stay, I was well aware as the darkness crept in and I started to lose my bearings.

Beyond doing everything I could to keep depression and anxiety at bay—reaching out to friends and loved ones, meditating, reading, sleeping and eating well, rediscovering self-worth and self-love as a newly single person—there was still an excess of grief in my chest, enough to not want to accept that an open mind, a shared home, a half decade of shared experiences, a whole lotta love, and an undying willingness to work things out are not enough to salvage things with someone who found a way to be happier and decided they were no longer willing to meet you halfway. 

As the days crawled on, and I learned the feelings wouldn’t so much leave as evolve into something bearable, I stopped beating myself up and ugly crying enough to assemble into my office chair to see what words came out.

The Breakup Suite is a breakup album in book of poetry form. 

It’s poetry for the dumped, or anyone drawn to that wallowing headspace.

It’s also my best effort at letting my former partner go, and unlearning the plans I had to never leave, by channeling leftover sweetness and unwanted nastiness into art that does justice to our time together.

I share it because my deal is creating things, putting them out into the world, and hoping they make at least one person who isn’t me feel less alone. Beyond that, I have no other expectations.

Available now in Print, PDF, and Kindle.

Read some sample poems here, here, and here.

Your copy is complimentary if you’re committed to reviewing the book for your website or any other publication. Use my contact form to let me know if you’re interested.

From the introduction,

“There is only one way to describe this tiny but mighty book of poems: the messy reassembling of a broken heart. If you’re reeling from grief after losing your beloved, and are looking for a little help unleashing pent up emotions, this one’s for you.

Does that mean the poems are merely weepy therapy and free of artistic merit? That’s not for me to decide. All I know is that the vast majority of these lines are about a psyche-crushing breakup, the painfully sudden occurrence and aftermath of which I am better able to live with simply because I have written it all down. My hope is that this reaction from extreme distress to moving on without being haunted by a partner’s memory is somehow transferrable through the poems here contained.

Listen, I know this might sound overly sentimental to anyone who isn’t currently consumed by post-separation emptiness, which is why I’m happy to say that this book isn’t for you. And I hope the time never comes when you need it to help you let the ugly feelings out and let a partner go. What follows is the saddest, angriest, achiest, all-up-in-my-feelingsest set of poems I have ever put together, every one of them dedicated to the romantic who mistook someone for their person only to watch that person leave all of a sudden after years without a chance for negotiation having come to the decision slowly and deliberately on their own weeks or months ago.”

 

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January 9, 2021

Young Canadian Investor #20 — The Pros of Financial Independence

Achieving financial independence means having enough money to do whatever you want with your time. In other words, your investment portfolio and cash reserves cover your food, housing, medical, and other basics expenses without you having to put in any more work, unless you want to. The result is that every day becomes an opportunity to tackle a new project your 9-5 job simply doesn’t allow.

The journey toward this independence and actually being able to experience it can be a fine way to spend your working years. Let’s explore why in a little more depth to help you determine whether or not it’s your deal.

  1. If you have a very specific vision about how you want to live your life, and that vision doesn’t match with holding down a job because it feels like you’re working toward someone else’s dream, financial independence is probably for you. You may want to start a business and be your own boss, do charity work overseas, or pursue art projects that may only provide you with satisfactory mental and emotional as opposed to financial returns. Whatever it is, you can’t ignore what you know will make you happy.
  2. The act of saving enough money to buy your freedom can be one of immense purpose. Picture yourself investing half or more of your monthly income, pinching pennies where you can, spurred on by the rush of your account balance climbing and climbing. There’s a lot of motivation to be had here that can make the less savory parts of a working life a little more palatable. Truth is, many of us don’t have a choice except to work, but long hours and annoying bosses and coworkers don’t matter as much when doing whatever you want is just over the horizon.
  3. At a very basic level, enjoying some degree of financial independence is key to minimizing day-to-day stress. If we were to establish a hierarchy, we could say that the bottom end of it includes an emergency fund, a few months expenses to give you the space to handle a home repair or loss of employment without having to max out the credit card. One level up might be a year’s worth of expenses to tackle a heavy-duty catastrophe like an injury or a death in the family. Any money you invest from that point on gets you closer to being able to accept only the work you want.

If the idea of reclaiming your time as soon as possible lights a fire in you somewhere deep inside, you need to learn how to invest your money so it can grow beyond your biweekly paycheck. It’s reasonable to expect that a balanced portfolio of stocks and bonds will earn you about 5 percent per year over a few decades. That can add up to tens or hundreds of thousands of dollars to support yourself as you practice your passion.

To get yourself started, check out my new book, Nine Steps to Successful Investing: A Guide for Young Canadians. In no more than an afternoon, it’ll give you the tools you need to invest prudently in the world’s stock and bond markets through index funds and fulfill your long-term life goals.

I’m also available to teach you 1-on-1 over Zoom if you prefer.

Feel free to drop your questions in the comments!

Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.

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January 4, 2021

Young Canadian Investor #19 — The Cons of Financial Independence

For the purposes of this article, I’ll say you reach financial independence when you have enough money and/or investments to cover your expenses without ever having to work again.

It’s an important goal for a lot of 9-5ers who work decently-paying jobs that don’t mesh with how they’d like to spend their time. Maybe they want to be with family 24/7, maybe they want to travel all the time, maybe they want to write short stories all day and submit them to literary journals. It’s whatever makes you feel like you’re living the life you want, with the caveat that you should be realistic and thoroughly assess how close you can get to it. Here’s why.

  1.  Financial independence can become an overwhelming, all-or-nothing proposition. One where you give up a disposable income and with it any prospect of having fun for its own sake so long as you can save more money. And maybe you’re genuinely interested in travelling down this frugal road, exchanging nights out for pasta and cheap wine at home because you know that in 5-10 years you’ll have saved enough to free yourself from the daily grind. You should know, though, that there’s no point in saving half or more of your income if you’ll have to do it for decades to reach financial independence. In this case, there’s something to be said for investing less and living a little now instead of waiting until you’re 50.
  2. You need to have a clear sense of what to do with your hard-earned independence. Once you hit your magic number and have enough to support yourself forever more, how are you going to spend your time? It’s easy to get caught up the the thrill of the journey without giving due consideration to what you need to do to look back proudly on your life. Would you paint a new canvas every day? Dive into research projects that’ve been on the backburner for too long? Would you open up a coffee shop, source all your ingredients in ethical ways, and serve your community in a way you can be proud of? Your answer can change, and often, you just need to get a handle on what gets you out of bed in the morning.
  3. It’s not impossible to be fulfilled while holding down a 9-to-5. This entails finding a job you don’t hate or merely tolerate, one where you still have energy at the end of the day to go out, see people, and live a well-rounded life. There is nothing wrong with working for the next 40 years so long as it adds value to your waking hours, so long as it gives you a sense of purpose that makes you feel alive. Under this scenario, investing your money is still a must, but you can feel free to put less of your paycheck away knowing you’re comfortable working into old age. What would this ideal job be for you?

In the end, financial independence is a lifestyle choice, one that mostly appeals to people who value the freedom to do as they please day to day. If you’ve been searching for a short book to help you invest your money so you can get closer to tasting that freedom, my new effort is for you. It’s called Nine Steps to Successful Investing: A Guide for Young Canadians. In no more than an afternoon, it’ll give you the tools you need to invest prudently in the world’s stock and bond markets through index funds and fulfill your long-term financial goals.

I’m also available to teach you 1-on-1 over Zoom if you prefer.

Feel free to drop your questions in the comments!

Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.

Leave a comment
December 30, 2020

Little Warm Glow

I don’t want to ask you for anything

I just want to sit here and think about your pouty face

When rain ruined our walks

How you’d nuzzle into my chest and urge

That we go back home in a faux-apocalyptic tone

Let me just keep that image in suspension for a second

And not feel like I need you to be in love with me

To appreciate it for what it was

A delightful 45 minutes in the middle of a Saturday

With someone I used to be partners with

Our lives intertwined like a money tree

Like our cat’s hair and every surface in our apartment

As if life’s knack for cutting you down to size

Was no match against our willingness to talk

Problems into submission

 

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December 28, 2020

Young Canadian Investor #18 — Investment Safety Versus Investment Return

It can be tempting to think that the investment that offers you the highest potential return is where you always want to be. If you have enough time for the investment to realize its value, what’s the problem? Well, it really depends on your particular financial situation.

If you’re 65 and have a million and a half dollars sitting in the bank, putting 20% of your net worth in the hottest publicly-traded cryptocurrency mining company because it might grow 100X wouldn’t make much sense. That’s because you need that money to fund your retirement, you might live until you’re 100, and the price of bitcoin is incredibly volatile and may go to zero.

If you’re 27, healthy, and working a somewhat entry-level job that allows you to save a little bit of money, the whole bitcoin thing might work for you. Supposing you have an emergency fund in place, diversify your investments into stocks and bonds, and are well-read enough to feel comfortable about bitcoin’s future, there’s no reason not to go crypto with a small but significant percentage of your portfolio. Why? Because you understand the risks and believe in the prospects anyway. If bitcoin goes to zero, you like the story enough to follow it all the way down.

The takeaway here is that investors should aim for the return they need to fulfill their financial goals. At minimum, the 65-year-old needs to meet their yearly expenses until they pass away. Fulfilling that goal with 1.5 mil to draw on is really about preserving that money and growing it conservatively so it lasts for the next 40 years. Crypto is way too risky in this case. Even too high of a percentage in stocks may expose this retiree to a double-digit drawdown in the price of their shares from which they may not recover. Something like a 50/50 split between stocks and bonds would be a good starting point.

Now, consider the 27-year-old’s aspirations. While they may and probably should be putting some money away for retirement and investing it in the riskiest (aka highest-returning) assets they can stomach, they may have shorter-term goals they want to get to first. If you’re saving for a car, for example, it’s no good to put the money in stocks and experience a 25% drawdown the year you planned on making the purchase. Bonds, which give you a shot at keeping up with inflation, are more appropriate instruments here. While they may experience single-digit drawdowns year to year, bonds will do a much better job at preserving your capital over 3-5 years so it’s there when you need it. Any savings term shorter than that limits your investment options to cash and GICs, which won’t really grow much at all but they won’t lose anything either.

If you’ve been looking for a nudge to get invested in line with your personal needs, check out my new investing guide for young Canadians.

I’m also available to teach you 1-on-1 over Zoom if you prefer.

Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.

Leave a comment