The Money Machine

“Have I got a deal for you?” He said with a glint in his eye. “This little machine will change your life.”  It was a small machine just bigger than his hand covered in gold paint with lots of gears.

“What is it?”

“Why it’s s money machine? It will produce a new dollar every three months forever.”

“Oh, that sound cool.  How much?”

“It’s only $100.”

“Pardon?  You want me to pay $100 for something that makes only $4 a year.  Why that would take like 25 years for me to get my money back.  Are you crazy?”

He frowns, “No, but with enough of these machines you won’t have to work.”

I frown and do the math in my head “Ya, if I buy like 10,000 of them. That would take like forever. No thanks.”

While the above story is a complete fabrication, it does point out something very key about people: they don’t like to wait.  Of course the real irony of it all is the money machine is real.  It just goes by another name called “investing.”

I suppose that is why so few people actively try to reach an early retirement, they aren’t willing to put in the effort into buying their money machines and keep them running.  Or they do buy one and then freak out when it fails for some reason and assume all other money machines are bad and should be avoided.  Goodness knows that I’ve had a few failures myself, but I keep buying.  Actually, most of them run just fine with little work required by yourself.

My personal money machines comes in two types: index funds and dividend paying stocks.  Neither takes that much time after I got them up and running.   The index funds are in our RRSP accounts in index exchange traded funds (ETF) take 15 minutes a year of work to keep up.

The dividend paying stocks are mostly in our TFSA accounts and after the initial research to buy the stock it really only takes me a few hours a year to skim the annual reports and do the occasionally adjustment (like sell one of my bad picks and buy something else).

Yet in the end, our investing has paid off.  It does take a LONG time and it will feel like you are going no where until you break the $100,000 barrier in investments but then it all gets better.  The compounding starts to work for you and you realize that after you have 100 money machines, it will buy the next one for you with no further money required from you.  So hence my point early, if you can wait a bit and get the ball rolling with compounding buying money machines (or investing) can pay off.

So what’s your favorite type of money machine?  Real estate, stocks, bonds….really they do come in a rainbow of colour options? 😉

Construction Zone

Good day,

This is a warning that I’m going to be upgrading the site’s theme right away.  So if things look funny or out of place, please be patient as I get around to fixing everything.

If you notice a problem, please leave  a comment on this post and I’ll add it to my list of items to deal with.

Thanks,

Tim

Book Review: Burn Your Mortgage

Unless your have been living under a rock you likely heard the story of the guy that paid off his mortgage in three years at the age of 30.  His name is Sean Cooper and he then proceeded to write a book on personal finance called Burn Your Mortgage.  So when he contacted me about doing a review of his book of course I agreed to read a copy.

The book is broken up into three main sections the first covers the basics of personal finance, while the second is a detailed look at buying a house and the third is about dealing with home ownership.  I honestly was a bit concerned about having to read the first section.  I’ve read SO MANY personal finance books over the years that I generally don’t learn much reading them anymore.  But Sean did a solid job on this part of the book, he outlines the basics well and even gave me a few ideas on things to look into for cost savings.

The second section is where I think the book really shines.  He does a great job of walking a novice through the process of buying a house.  While of course he can’t cover every detail depending on you live he does a great job of process from dealing with house inspections, making a offer and even some tips on how to deal with a hot housing market when you decision window is a lot smaller.  If you have never bought a house before you really should read this book so you know what to expect.

Then finally the last section is a good summary of what a home owner is now responsible for and things you will need like house insurance.  If you have been a lifelong renter the transition could be a shock so I thought this was an excellent idea to include.  Then the last chapter is some general advice on renting out your home if you wanted to go down that path.

Perhaps the only thing that generally I disagreed with was his advise for when living in an expensive housing market increasing what you are willing to spend to get a house.  I fundamentally don’t agree.  If you can’t afford the house at a reasonable ratio of the house price to your income, I personally don’t think you should buy.  But that is the function of my experience, I don’t live in Toronto where house prices are literally climbing the ceiling.  So I understand the context of his advice even if I won’t follow it myself.

But overall it was a solid book and well done.  I gave it 4 out of 5 stars on Goodreads.

Now the fun part.  I was also given a few extra copies of the book to giveaway.  So yes, you can now win your own copy of the book.  To enter leave a comment on this post with a valid email address by May 12, 2017 at midnight CST.  I will randomly pick two entries to win a copy of the book which I will mail to you.  Winners will be contacted by email.  Good luck to everyone.

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Update: Winners are Olivier and Theo…please check your email accounts for an email from me.  It may have gone into your spam filter.

A blog about early retirement and happiness