Posted by Robert on December 20, 2010
This is a guest post by Robert, who lives in Calgary and works as a financial adviser. He is married, has three kids and plans to retire at age 35. Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.
Learning to invest takes time and experience. When I started investing in stocks, I felt like a kid in a candy shop. Actually, for that analogy to work, it would have to be a candy shop where some of the candy is spicy, some is sour, some explodes and only the remainder is any good. I was faced with thousands of stocks I could buy, but how to decide? So I chose a strategy at random (momentum), mis-applied it, and had mixed results. As I read about and practiced investing, I realized that there are many strategies that can all be successful. How could I choose one, or could I combine various strategies?
There was still one element missing. Underlying my choice of strategy lay my purpose for investing. Early on, I had very little idea of my purpose. I am a financial advisor, and that’s what we do: we invest. Obviously, I wanted gains, but results were hit-and-miss as I varied my approach and invested only haphazardly. When I determined that I was investing for early retirement, in order to leave my job and become a teacher in Hong Kong, my purpose became clear and the most effective strategy for my situation became obvious. Having and keeping in mind a purpose made me a much more successful investor.
Saving and investing has never felt like a sacrifice to me. I’ve never had to give up buying something I wanted so that I could invest. The purpose behind my investments, my goal to retire at age 35, informs each decision. I could go skiing, or I could retire earlier; I could buy a new car, or I could buy a used car and move to Hong Kong sooner; I could buy a flat-screen TV, or I could start teacher training sooner. As Roy Disney, Walt’s brother, said: “When your values are clear, decisions become simple.”
As I hinted earlier, decisions about potential investments are almost limitless. Not only are there thousands of common stocks, there are also preferred shares, bonds, real estate and others. Given that I want to replace my earned income with passive income, any investment that doesn’t produce cash flow is unsuitable for my situation. That filters out a majority of the options and simplifies my decisions greatly. I don’t need to know everything about every type of investment, and I don’t need to be informed about the prospects of every sector of the economy. I can focus my time and attention on a couple dozen companies at a time, looking to invest in the most promising, while ignoring everything else.
Autumn 2008 was a shock to me. I had never experienced a market crash before, and I was shaken by it. I was fortunate to have someone older and wiser, my father, to put things in perspective and show me the benefit of remaining optimistic. I realized that, despite the drop in market value of my shares, the dividends continued to be paid. Because I was so focused on my goal of accumulating dividend income, I didn’t panic. I found opportunities (high yields due to irrationally low share prices) to take advantage of in this difficult time. In hindsight, I still can’t tell if I was smart or lucky, but I was able to act because of the grounding provided by my purpose.
Having a clear goal keeps me motivated, focused and disciplined. The purpose behind my investment strategy increases my likelihood of success, just as straying from it has usually been a mistake. Are you clear about your purpose? How does your purpose influence your choices?
Posted by Canadian Dream on December 17, 2010
So despite this being a blog about early retirement you might be interested to know I’ve recently realized ‘retirement’ is a lousy damn word for what I’m trying to do. Even financial independence doesn’t cover the entire concept all that well. Freedom as a word is close, but almost too vague. Yet yesterday I had an idea on what it could be called: Life Version 2.0.
I’m interested in creating a new life; reboot the old version into something else. In the beginning I wasn’t even sure exactly what I wanted, but it wasn’t what I had. Now after some years of trying things out I’m well on my to shifting over what I do with my time and how I earn my money. Yet what is interesting about Life 2.0 is you can’t just upgrade instantly from version 1.0. You have to do it in small steps so it is rather like being the ‘beta tester’ for your new life and you upgrading in steps like version 1.1, then 1.2, 1.3 and so on until you hit 2.0.
I can’t stress enough how important it is to do this in little steps that add up over time. We often have vague ideas of what life 2.0 should look like, but when testing things in real life we find what doesn’t work for us or perhaps something that does work. For example, I would have never guessed how much I like being a school board trustee. Had a tried to jump from version 1.0 right to 1.5 I would have missed out in finding this out about myself. Or you might discover something you thought you would like is actually a quite a bit different to do full time. Getting there is all about trying things out in baby steps and altering your plan as you go based on what you learn.
I’ve never really realized until recently how utter great it is to work on something you love to do. You can literally do it almost all the time and not really get sick of it. You only really stop because you know you need to balance off the rest of your life (for example the wife gives you that look and you know your latest project will have to wait another day or week). For years I didn’t know that was really possible to do. I at most ‘liked’ my jobs but I’ve never loved them. Now that I’ve had a taste of that I really do get these people that go on and on about it isn’t work if you love it.
So where am I in my journey to life version 2.0? I would guess I’m around version 1.5. The versions so far go something like this:
- 1.0: Realize your life isn’t what you want.
- 1.1: Start cutting excess stuff and spending to free up savings cash flow.
- 1.2: Brainstorm dreams to try out and work on the free list of dreams like writing more.
- 1.3: Commit some cash to working on a dream or trying something new. Like running in an election or starting a small business.
- 1.4: Drop off some of your previous life that you didn’t like. Either activities or work related.
- 1.5: Start to envision life version 2.0 in more detail and lay the ground work for larger scale changes by paying off your mortgage.
I’m not really sure exactly what the rest of the life versions are going to look like since I have yet to pass through them but it should still be an interesting ride. You might notice those versions don’t have a lot to do with amounts of money. That is because the amount of money will change entirely on what you are trying to do. For some folks life 2.0 will have a million dollar price tag. For others they might be able to do it with just $200,000. It all depends on the life you are trying to build and where you are now.
So how about you? Are you after retirement or life version 2.0? What steps have you taken to get where you are?
Posted by Canadian Dream on December 16, 2010
How many days is it to Christmas? How many the social events are on your calendar? Are you getting stressed? If so, how do you manage to actually stay on budget? It’s hard to do at times, but this is what I’ve found that works for us since we been under every single year that I’ve been tracking our holiday spending.
- Have a Budget: This might seem obvious, but if you don’t have a total dollar amount you want to stay under how can you ever keep under it. Also make sure to define a list of people to buy for and estimate what you can spend per person. Don’t forget to include shipping costs and mailing all those cards.
- Don’t Expand Your Shopping List: Do not fall prey to buying gifts for extra people when you start shopping. If you forgot someone on your list, you will have to make do with buying them out of your left over money once you have finished your original list.
- Aim Lower: If you have a $50/person limit, don’t aim to spend $50 or with tax you will end up over. Instead aim for $40 to $45.
- Low Cost Isn’t Bad: It’s ok to find the perfect gift for someone that only costs half their budget amount. You don’t have to spend the rest on that person just because you hit up a great sale. Love doesn’t require you to spend your entire budget because…
- You Can Spend More on Some: It’s also ok to over spend on some people as long as the rest are under budget enough to make up the difference. So have a spreadsheet of your spending and update daily to keep track.
So that’s our short list of ways to help keep on budget. How about you? What do you do to stay under your holiday budget?
