Sunday, April 20, 2008

Dividend Dollar Daily Round Up

The Round Up

Middle Class Millionaire tells us the secret to financial success.

Financial planning with the Globe and Mail.

Buy the fund companies not their products.

Friday, April 18, 2008

Wooo Hooo!

I'm finally going back to work on least temporarily. I have been laid off work since Mar.5 and other than 3 days where I was called in, I have been off the whole time. Another company that is on strike has disrupted business where i work, hence the layoff. The strike is not over but i will be going back to work for the next 3 weeks (supposed to be). Hopefully the strike will be over by then and things can get back to normal for me. I want to get back to trying to reach my financial goals and it is hard to do when there isn't a regular income coming in!

Thursday, April 17, 2008

Dividend Dollar Daily Round Up

The Round Up

The housing boom is over.

$125 oil in the short-term?

The Money Gardener talks about the smart RESP.

Wednesday, April 16, 2008

What did I do With My Refund?

I am very happy with myself. I received $1700 back from my income tax return this year. I have actually saved the whole $1700 plus an extra $300. I previously could not decide what i was going to do with the refund. What am I saving this for? My home down payment fund. As you can see my home down payment goal is now almost reached at 95%. Did i want to spend this on a new high def tv or a new computer. Yes, and the refund would have put a nice dent into the cost of the tv and paid for the computer completely. I resisted the temptation and instead am securing my financial future.

Hockey Playoff Predictions

I am a huge hockey fan and i love this time of year. I know that this has nothing to do with financial matters, but thought it would be fun to make some NHL playoff predictions. Obviously these series are in full swing, so it won't be quite the same as making predictions before the series started. Here we go:

San Jose vs Calgary -Calgary in 7
Detroit vs Nashville -Detroit in 6
Colorado vs Minnesota -Colorado in 7
Dallas vs Anahiem -Anahiem in 7

Ottawa vs Pittsburgh -Pittsburgh in 4
Montreal vs Boston -Montreal in 5
Philadelphia vs Washington -Philadelphia in 6
New Jersey vs NY -NY in 7

What are your predictions?

Tuesday, April 15, 2008

Top 3 Investing Mistakes

The Dividend Guy started the whole top 3 investing mistakes thing. I am finally getting around to throwing my 3 mistakes into the mix. Luckily I haven't made too many mistakes as i was lucky to read about some of the common mistakes others have made and learn from them. So without further ado, here they are:

1. Investing in my RRSP - You're probably thinking what the?? I'm sure there will be some people that totally disagree with me here. Let me explain. My strategy is to invest in dividend paying companies and then live off those dividends. If I am investing in an RRSP, it has to be converted by the age of 71. If I convert it to an RRIF then I have to draw down on my capital every year. I forget the formula and percentages, but it is significant. I want to have control in how my money is spent and managed, and investing outside of an RRSP provides that best. Like I said, i just want to live off the dividends, not draw down on my capital.

2. Not Starting Sooner - If only I had started sooner! If i had started investing at the age of 20 instead of almost age 30 i would be in much better shape. Granted, I didn't have much money to invest at age 20. If only i had understood the powerful concept of compounding over time. It is a crime that this stuff is not taught in schools!

3. Investing in Bonds - Bonds barely stay ahead of inflation. If you want to hamper your wealth creation, then buy bonds. Now, when I am close to retirement i might shift some of my portfolio into bonds (within my RRSP at least). I am young and my risk tolerance is such that i have no business owning bonds. I own a bond ETF and i will be selling out of it soon. See this article as to why bonds are a bad deal.

What are your top 3 investing mistakes?

Dividend Dollar Daily Round Up

The Round Up

Give Me Back My Five Bucks asks how much do you save for retirement?

The Simple Dollar gives you an idea of what to do with all those old baseball cards. In my case it is hockey cards.

Get Rich Slowly has a couple of posts on emergency funds. This is something I have been thinking about a lot lately. Check out his posts here and here.

Monday, April 14, 2008

My Financial Goals

As you have probably noticed I have some financial goals listed to the right in bar graph form. I thought i should explain what these goals are and why i have chosen these.

Emergency Fund

The first goal is an emergency fund. Due to a recent layoff (temporary) I have come to realize the importance of having an emergency fund. I have set a goal of $5,000, as this should provide for about 3 months of expenses should i ever lose my job. I hope to achieve this goal over the next 2-3 yrs. You can check out an earlier post about why you should set up and emergency fund.

Dividend Income

I have set a goal of $40,000 of dividend income. This is the amount of income i would like to be collecting from dividends when i retire. As you can see it is currently at $0, as i have been investing inside of an RRSP until just recently. I am changing my strategy to invest outside of an RRSP in companies that grow their dividend year after year. I hope to retire in about 20-25 yrs if all goes well.

Down Payment

The third goal is to have $10,000 for a down payment on a home. I am currently renting and want to get out of that rut so i am building my own net worth and not someone else's. I am well on my way to this goal and have about 75% saved thus far. I am trying to decide what to do with my tax refund and I may put it toward my down payment. We will see. I hope to achieve this goal in the next 6 months.

Bike Loan

I have a bike loan for a motorcycle I bought a couple of years ago. At this time i have no plans to pay off the loan early, as i want to concentrate on some of the other goals. For now i will be paying the monthly amount until the loan expires. As you can see i have about $8,000 left in the loan and it will be paid off in May 2011.

Net Worth

The final goal is a net worth of $1,000,000. I pretty much just pulled this number out of the sky. It is not nearly important to me as the dividend income of $40,000/yr. However, I would still like to achieve this goal even though it will take quite a long time. I obviously have a long way to go on this one but hope to achieve it by the time i retire. You can learn how to calculate your net worth here.

These are my current financial goals. Hopefully they will inspire you to set your own!

What are your finacial goals?

Dividend Dollar Daily Round Up

The Round Up

Dividends4Life has listed his favorite 5 stocks.

The Simple Dollar has a visual guide for making your own laundry detergent. I think I might give this a try.

The Money Gardener shows his growing dividend income. A great looking chart.

Former Fed Chair vs Current Fed Chair. I'm siding with the former fed chairman.

This couple is in serious financial trouble unless they change their ways.

Sunday, April 13, 2008

World's Most Expensive Homes

I posted earlier about the Forbes 2008 billionaires list. Today we are going to look at the most expensive homes in the world. Why? Because everyone loves lists. Especially when it involves lots of money!

Can you imagine paying well over a $100 million for a home? I know I can't. The most expensive property? How about $165 million for a 75,000 sq/ft home in Beverly Hills. The US may be in a housing crisis, but there seems to be no such thing in the ultra high end of the market!

Be sure to check out the video tour of the worlds most expensive home, it is impressive. You can read all about your dream home at the Forbes website. There is a great picture gallery too.

*photo credit

Thursday, April 10, 2008

Income Tax Refund

I just got my income tax refund back the other day. Certainly when one receives money back, there is always the temptation to spend it on something we want. I am no exception and my first thought was, new computer or a plasma tv! I am going to resist temptation though and put the money towards one of my financial goals. I haven't decided yet, but it will probably be the home down payment or the emergency fund. If you are tempted to spend your refund, stop and ask yourself if you really need that item. More than likely you don't! Instead, spend it on a good dividend paying company that constantly increases the dividend. You will thank yourself later!

Wednesday, April 9, 2008

Dividend Dollar Daily Round Up

The Round Up

Desjardin Group says Canada should scrap the penny, nickel, and $5 bill.

The Money Gardener points out that Procter & Gamble has raised their dividend by 14%.

The Dividend Guy has an analysis of Potash Corp. Is there any better ticker than Potash, POT?

Tuesday, April 8, 2008

97 Tips for Canadian Real Estate Investors: My Thoughts

I read the book 97 Tips for Canadian Real Estate Investors by Don Campbell. There are also 3 contributing authors, Peter Kinch, Barry McGuire, and Russell Westcott. Below are some of my thoughts on the book.

If you are new to investing in real estate, or even if your a veteran, I would consider this book a must read. It has a lot of great tips and ideas and i personally learned a lot from the book. The tips range from Tip#82: Use Closing Dates Strategically to Maximize Your Cash Flow to something more common like Tip#12: The TDSR- a Ratio to Remember. I think newbies and experienced real estate investors can learn something from this book.

The book made me realize a few things. If you want to be a sophisticated (think good here) real estate investor you need to do your due diligence on everything! From finding good tenants, to buying properties below true market value, to using great professionals (ie. accountant, lawyer, etc.) you need to be willing to go the extra mile. More than a few times the book stressed doing that extra 10% to make the difference between a winning property and a losing one. I also realized that for me personally, real estate investing is probably more work than what I am willing to do to be successful at it. Others however (maybe I'm talking to you), are willing to put in the extra effort and find it very rewarding and fun.

The book is broken down into 9 different sections. They are listed as follows:

Part 1: Stop Thinking! Start Knowing! The Foundation on Which All is Built
Part 2: Money Matters: Mortgage and Financing Tips
Part 3: How to Make Your Investment System Work
Part 4: Focus on the Two Types of Economic Fundamentals & Dramatically Increase Your Bottom-Line Results
Part 5: Data, Bricks and Mortar: The Practical Side of Wealth Creation Through Real Estate Investment
Part 6: Negotiate the Deal You Want (Practice Makes Perfect)
Part 7: Purchasing and Closing: The Art of the Deal
Part 8: Tenancy Issues: Make Defence Your Best Offence
Part 9: Legal Insights and Tax Tips: What You've Got to Know (So it Won't Hurt You)

There is an Appendix at the end with some great tools for doing your due diligence and finding a great property.

Bottom Line

Overall I thought it was a good book and worth the read. I would argue a person could use some of these tips for buying their own personal property and not just for investing in real estate. Borrow or Buy?

Buy (as long as you have an interest in real estate investing)

Dividend Dollar Daily Round Up

The Round Up

Dividends4Life has his stock analysis of Clorox up.

Loonies and Sense tells you if a cash back mortgage is a good idea.

Are parents to blame for financial problems? Frugal Dad gives his opinion.

Want to buy that first investment property? This article at Million Dollar Journey gives you a heads up on the financing side of things.

Monday, April 7, 2008

Dividend Dollar Daily Round Up

The Round Up

The Money Gardener has posted some of his most recent company purchases. Some good ideas here.

Keeping your eggs in one basket? The Wisdom journal has a different opinion from most. I agree with this, but the investor must be willing to do their homework and due diligence!

High dividend payout ratio = high earnings growth rate. The Dividend Guy makes a post about just that. Check out the chart, very interesting stuff.

The Globe and Mail has their weekly financial facelift up.

Dividend growth becoming a casualty?

Sunday, April 6, 2008

Dividend Dollar Daily Round Up

The Round Up

It is always interesting to read about someone else's situation.

For those living in Ontario, these charts show how the recent changes to the federal and provincial budgets will affect the taxes you pay on dividend income.

This article by Dividend Money relates very well to the post I made about getting a new credit card.

Get Rich Slowly has a great post about the extraordinary power of compound interest. Check out the chart in the post....really powerful stuff!

Saturday, April 5, 2008

How I Calculate My Net Worth

Today we are going to look at how I calculate my net worth, and how you too can do the same.


Net worth is defined as:

Net Worth= Assets-Liabilities

A liability is anything on which you owe money. It could be a credit card balance, car loan, mortgage, money you owe a friend etc. An asset is anything you own that has a dollar value. This could be a home, a car, cash in a savings account, stocks, bonds, baseball cards, etc. The list of both assets and liabilities can be long and varied.

Now some people would say a car or a home is not an asset. Robert Kiyosaki, from Rich Dad Poor Dad, believes a home is not an asset but a liability. Why? He defines an asset as something that generates positive cash flow for you. If it is not generating positive cash flow, then it is not an asset. He believes a home is a liability because it is costing you money in mortgage payments, property taxes, upkeep, etc. Most people though, consider a home or a car an asset because they have a market value and if they sell it they receive money in return. I fall into this latter camp of thinking.

An Example

As an example, here is my net worth statement from Jan.1/08

Net Worth Statement Date: Jan.1/08
Assets Value
Liabilities Value
Home $0.00
Bike loan $9,043.55
RBC $4,934.91
Visa $0.00
Shareowner $7,356.73

Bike $7,000.00

Car $2,200.00

Etrade $1,072.51

ICICI $3,022.43

Sunlife $1,543.49

Total $27,130.07
Total $9,043.55

Net Worth $18,086.52

Now, my net worth statement needs some explaining. Normally one would list assets, such as a home, stocks, bonds, cash, mutual funds, etc. This makes it easier to see your asset allocation, which is good to know. I have done things a little different and listed assets by the different accounts i have, such as Sunlife or Etrade. I find this easier as i just go in and grab the numbers from the different accounts to calculate my net worth. I am not concerned with my asset allocation on my net worth statement, as all i am looking for is my net worth. You will probably want to list your assets under their proper asset allocation though.

Determining Values

You may be asking how I determine the value of my vehicles when i list them in the asset column. Easy. I just go online and check out the auto trader or ebay to find an asking price for my model of vehicle. Not obviously this is not totally accurate, as what people ask for the vehicles and what they get can be two different things. I think this provides a good rough idea of what my bike and car are worth though. The only true way to find out what they are worth, would be to sell them, and i'm not going to do that! If i owned a home i would do the same thing and check prices of homes in my neighborhood or go online and check the MLS for homes similar to mine in my community.

How Often?

How often should you calculate your net worth? I have seen other blogs where they calculate net worth once a month. Personally, I don't think it is necessary to do it this often. It reminds me of the person who checks if their stocks are up or down every day. Once a year or once every six months is enough to give you an idea of how your net worth is doing. Ideally, it will be going up and not down! If it is not going up, you should be asking why? I calculate my net worth once every six months.

Net worth is an easy calculation and gives you some insight into how you are doing financially.

Dividend Dollar Daily Round Up

The Round Up

This article about the Ontario Teachers pension shortfall just goes to show that a person can't even be certain of a defined benefit pension in retirement. This is why we should all be investing in dividend paying companies.

Million Dollar Journey has posted his latest net worth figures.

Girl Power! Ok, I'm a guy, so this isn't great news for me. Dividends4Life has a post about how women make better investors then men.

Net worth figures from Single Guy Money.

Friday, April 4, 2008

Dividend Dollar Daily Round Up

The Round Up

An article at the Globe and Mail saying it's still not time to buy the dividend paying Canadian banks.

This article asks, can you still make money in Canadian Oil Sands Trust? This is an income trust that pays a good distribution and could be a good way to fight those rising pump prices.

The Div Guy has posted his latest update of his financial net worth. Always interesting to see how someone else is doing.

An NDP MP has introduced a bill to get rid of the penny. If they want to get rid of the 20 billion pennies, they can just send them all to me. Retirement here I come!

Why Set Up An Emergency Fund?

Why have an emergency fund? One word, emergencies. When i say emergency, I mean a true financial emergency. Not having enough money to pay for the vacation you have been planning for the last 6 months is not an emergency. An emergency would be if you have lost your job and you don't have the money to pay the monthly mortgage payment. You should only use your emergency fund if really necessary.

I have known for a long time that everyone should have an emergency fund, but just recently came to realize that they are a very important part of financial planning. About one month ago I was laid off from work because my employer was affected by the American Axle strike. This jolted me into the realization that I don't have an emergency fund and I might be needing one.

Thus far I have not needed to dip into an emergency fund because I had a lot of bank time built up at work and i will be able to collect unemployment. The unemployment cheque should hopefully be able to cover my monthly expenses such as food, rent, insurance, etc. However, if I was a home owner with a mortgage to pay for, i would probably be having to use some emergency fund money.

When you set up an emergency fund it is important that you can easily get at the money. You do not want it locked up in some financial vehicle where you can't get your money out easily or not at all. I would recommend a high interest savings account. There are many online and they are insured by the Canadian Deposit Insurance Corporation (I believe FDIC in the US).

The Lesson

We can all learn something from my mistake. We should be saving for a rainy day, because invariably that rainy day is going to come sooner or later. Even if you can only set aside $20/mth into an emergency fund, you should start yesterday. That $20 may seem like a small amount but over time will grow. After one year you would have $240. As for me, I have set a goal of a $5000 emergency fund. I have some saving to do!

Thursday, April 3, 2008

Forbes Billionaires List

If you need a little motivation or encouragement (I don't know, maybe this will just discourage you), Forbes has their 2008 billionaires list out. Who is the top billionaire this year? Will Bill Gates remain at the top of the list for the 14th consecutive year? Where does the world's greatest investor, Warren Buffett,rank? This year's list has over 1000 billionaires for the first time ever.

It is interesting to see how they amassed their fortunes. One thing is for sure, whether they inherited it, made their money through investing, or owning varied businesses from steel to software, they are all filthy rich!

Dividend Dollar Daily Round Up

The Round Up

For those of you who don't know what your asset allocation should look like, The Dividend Guy has a good post about possibly modelling your asset allocation after pension plans.

Dividends4Life has a funny post about one spouse being frugal and the other being the spender.

Shareholders of the dividend paying company BCE will like to hear that the CRTC has approved the takeover of BCE. There are some conditions that have to be met though.

Wednesday, April 2, 2008

Plasma Persecution

I want a plasma tv!

You're probably wondering what wanting a plasma tv has to do with personal finance? Well, a lot actually. It relates to our spending habits, our wants vs needs, instant gratification, savings, budgeting etc.

I want a plasma tv and i want one bad! I have wanted one for a very long time, and thus far have been able to resist the urge to buy one. What this really comes down to for me is a need vs want. Do i need a nice new high-def large screen plasma tv? No. Do i want one? Yes!

Now there are several different ways to look at this. I watch tv and enjoy watching movies, so having a new big plasma would add value to something i enjoy. Plus the tv I have now is an old 27" CRT that doesn't have a great picture, but it gets the job done. On the other hand, if i bought the tv then it would be just a matter of time before i would be wanting the new sound system to go with it. Instead of looking at the $2500 for the new tv, my cost would balloon to who knows how much (I like to buy good quality stuff, not low end cheap stuff). I do have money sitting in an account (got the saving part right) which i could use to pay for the tv, so i wouldn't have to put it on credit. That money is for investments though and not meant for pleasure purchases.

Ultimately, what it comes down to is having the self discipline to not buy a new high-def plasma and use that money for investments instead. One possible solution to my dilemma would be to put aside, say, $100/mth until i can pay for the tv. That would take a long time though (instant gratification - another thing we all struggle with). What i am really scared of, is that i will one day break down and buy the tv even though my money is for investments and i don't really need a new tv. I have made it this long without buying one, so I'm hoping i have the will power to resist.

To say this isn't tormenting me would be a lie. I just hope I'm not on here next week having to admit that i gave into my wants and instant gratification urge. Wish me luck, i think I'm gonna need it!

In case you're interested, this is the tv I'm looking at.

Why We Want You to Be Rich: My Thoughts

I recently finished reading the book Why We Want You to Be Rich by Donald Trump and Robert Kiyosaki. My reason for reading this book, as with any financial book, was to see if i could learn anything new for my investing future. I was also looking to see if i could gain any insight as to how these men think and invest.

This is the first book i have read from Donald Trump and the second I have read from Robert Kiyosaki. Having read Rich Dad, Poor Dad this book feels very much like it was Robert Kiyosaki's baby and it expounds his thoughts and ideas. It's as if Mr. Trump was handed each chapter after Mr. Kiyosaki had written and asked to add his two cents to what Mr. K had to say. This is a shame to me, as i think most readers would like to have more insight into Donald Trump and the way he thinks (maybe i just need to read another of Mr. Trump's books).

The premise of the book is that they think the American economy is in dire straights and they want you to be rich so you can be part of the solution and not part of the problem. They then proceed to talk about the 3 types of investors and that you should be the third kind of investor (winning investor). The third part of the book talks about what each of them learned from different people and events in their lives. I found this part of the book to be the most interesting, as it gives the reader insight into some of the lessons that these rich men have learned and how we can apply them to our own lives. The last part of the book they give advice to people at different stages of their lives. They also talk about why they like real estate and owning their own businesses.

My one big complaint with the book is Robert Kiyosaki's constant slam against stocks and other investments. Can a dividend growth stock (or other stocks for that matter) not be a good investment? It is like he is saying there is only one right way to make money ie. real estate and owning a business. Otherwise you are not a winning investor - you are a loser.

Bottom Line

Ultimately, I feel my time would have been better spent reading something else. Although the book gave me insight into how they think, i don't think it reimbursed me enough for the time spent reading it. It could have been a lot shorter and more concise. Borrow or buy?


Dividend Dollar Daily Round Up

The Round Up

Not really financial news, but this story about Bell throttling speeds of 3rd party internet providers could possibly affect you.

A lost decade of investing?

The Dividend Guy talks about what the band Nine Inch Nails taught him about investing.

This article from John Heinzl at the Globe and Mail talks about how Canadians are on a spending bender and Americans are saving their pennies.

Give Me Back My Five Bucks has a real life example of resisting the urge to shop. I think we have all been there before!

Tuesday, April 1, 2008

Warren Buffett's Words of Wisdom

Warren Buffett is the world's richest man (worth $62 billion...yes, that's billion) and it would probably serve us well to listen to some of his wisdom that he espouses every year. He is actually quite entertaining too, with comments like, "You only learn who has been swimming naked when the tide goes out - and what we are witnessing at some of our largest financial institutions is an ugly sight". I think we can all learn something from the world's greatest investor and how his mind thinks by reading his annual letter to shareholders.

To that end, there is a new link in the Other Sites of Interest section directing you to Warren Buffett's yearly letter to shareholders. Definitely time well spent.

Dividend Dollar Daily Round Up

The Round Up

Gavin Graham wrote an article about how Canadian banks are oversold.

Tyler over at Dividend Money had a novel way to make some money while in college. Any college or university students would find this particularly interesting.

As someone who is looking to purchase their first home, I found this article about "Even More Reasons Not To Trust Your Real Estate Agent" from Quest for Four Pillars very interesting.