With the ’10s quickly coming to an end, it’s a good time to reflect on the past decade and list our accomplishments. Looking back, this was an incredible decade of growth and happiness for me and my family. We are so grateful for what we’ve been able to achieve.
2010 was a big year for me. I had just started a new job. My wife and I were getting accustomed to living on one income with a new baby at home. I started this blog.
We began to assemble the building blocks for financial success. I started a budget and began to track our net worth – which was just $102,000 at the beginning of the decade.
Fast forward to the end of 2019 and our net worth is more than $800,000. That’s an impressive 23 percent compounded annual growth rate.
But I’m getting ahead of myself. Here’s how we got to where we are today:
2010
We still lived in a two-bedroom starter home that we had purchased back in 2003. I made $75,000 as a business development manager at the University of Lethbridge. My wife stayed home full-time with our newborn. We dreamed of upgrading our house and had our eyes on our dream house in a thriving new neighbourhood.
One year earlier I had opened a discount brokerage account at TD and, using the $25,000 I had transferred from my previous employer’s group RRSP plan (which was invested in high fee mutual funds), bought my first dividend paying stocks.
I was totally enamoured with dividend investing. It helped that I started DIY investing in July, 2009 – well after the turmoil of the global financial crisis. My dividend stock picks earned an incredible 35.54 percent. Clearly, I was the next Warren Buffett.
2010 was also the second year that TFSAs were available and I had maxed out my contribution room each year – again, investing in Canadian dividend payers.
We had opened an RESP for our daughter in 2009 and continued to contribute $50/month – basically all we could afford at the time – into a term deposit / GIC at TD Bank.
Oh, and an F-18 Hornet crashed during a practice run at the airport while I was president of the Alberta International Air Show Association. I got my first taste of media interviews. Fun times.
Finally, I started this blog in August 2010 as a way to document my financial journey and hold myself accountable to my goals. I didn’t imagine it would completely change my life over the next 10 years.
2011
The highlight in 2011 was the purchase of our new house – a brand new one that we built as our forever home. We had saved for 18 months to top-up our downpayment to 20 percent of the purchase price and avoid costly CMHC fees.
We moved into the house in August that year, and found out shortly after that we were about to have baby number two.
The new house came with a big mortgage and a shift in our financial priorities. I drained my TFSA – worth $14,500 at the time – to help top-up the downpayment. Unfortunately, I wouldn’t contribute to it again for several years.
My investment returns were less prolific that year – earning just 9.82 percent – but my RRSP had grown to $41,000.
A funny thing happened with this blog. It earned $137 in January that year. Then $195 in March. Traffic started to increase, advertisers started to get in touch, and by the end of the year the blog had earned $13,000.
We ended the year with a net worth of $190,000. But we were just getting started.
2012
This was an incredible year both personally and professionally. The highlight, of course, was the birth of our second daughter. Our family was complete.
I also started to make serious money from this online venture. Not just from the blog, but I also offered freelance writing for other websites, most notably my long-standing gig with the Toronto Star. I also launched the Rewards Cards Canada blog.
We decided to incorporate and capture the earnings from my online activities into a small business. The idea was to stream dividends to my wife (co-owner) and reduce our tax burden.
That year we earned $66,000 from our online business. We knew we were onto something, and that solidified our plan for my wife to stay home full-time. We had a reliable second income stream.
I bought out the lease on my 2007 Tucson and for three months we were car-payment free. Then we bought a new Santa Fe (curses) late that year – a decision that meant forgoing TFSA contributions for another four years.
2013
This was one of those completely forgettable years where nothing notable happened. We paid our bills, saved where we could, and tried to survive as parents of a pre-schooler and a toddler.
My RRSP grew to a respectable $91,000 after a top-up loan caught up most of my unused contribution room. Our net worth continued to climb and was now sitting at $327,000.
2014
The highlight of 2014 was that we took out a home equity line of credit and paid a contractor to develop our basement. That meant adding new debt to our finances and another strike against reaching all of our savings goals.
No regrets, though, as we have enjoyed the space and got the line of credit paid off relatively quickly.
My RRSP finally crossed the $100,000 threshold and the dividend stock portfolio returned a respectable 8.53 percent. But cracks started to form in my strategy.
The problem was when I realized my bad behavioural biases weren’t doing me any favours as a stock picker. I strayed from the blue-chip dividend growers (since I already owned most of them) and bought a few smaller cap stocks and high yield stocks that didn’t do well.
At work, I got the last salary increase that I’d see for five years as the provincial government froze wages for non-bargaining public sector employees. I would have to rely on my side hustle more than ever.
Only there was one problem. A major change to Google’s algorithm meant a few of my high ranking articles no longer appeared on the front page when you searched those terms. I lost 90 percent of my search traffic overnight, and online income dropped by 20 percent. Uh-oh.
One major step I took to combat this loss was to start my own fee-only financial planning service. I took on my first few clients in 2014. Who would have guessed this would be my main source of income today?
2015
The single most important thing I did in 2015 happened when markets opened on January 2nd. I sold all of my dividend stocks and switched to an indexing strategy – more specifically a two-ETF solution of Vanguard’s VCN and VXC.
I don’t want to downplay the significance of this change. I was a die-hard dividend investor, and there’s a bit of a cult following of dividend investors online. I lost blog readers because of this move. I likely lost the respect of certain dividend bloggers.
But looking back I know it was the right thing to do, both from an evidence-based perspective and from a personal behaviour perspective as I was simply not cut out to be a stock picker.
My RRSP soared to more than $119,000 and our net worth grew to more than $450,000. Online income recovered back to 2012 levels. The side hustle was back!
2016
My wife and I celebrated our 10th anniversary in 2016 with a childless trip to Vancouver. It was glorious. We also ran eight kilometres around the seawall at Stanley Park. I was hooked on running.
Financially, this was another one of those forgettable years. I wrote about how the waiting was the hardest part. We were paying off our line of credit, paying off our new car, and saving what we could. But our big goals were still a few years away. We just had to keep chugging along.
The lone bright spot was that our car loan was paid off in November and we could finally start diverting that money into a TFSA.
We also started maxing out the kids’ RESPs. And my RRSP kept growing – now to $133,000.
Our net worth reached a milestone – smashing through the half-million mark and ending the year at $532,000. Ok, it was a good year.
2017
Our youngest daughter started Kindergarten in the fall of 2017, giving us a small taste of freedom (at least for the weekday mornings).
With no car payment, and our line of credit nearly paid off, we made a big effort to save in 2017. I put $10,000 into my RRSP. I also put away $1,000 per month into my TFSA, an approach I still take to this day until it is fully maxed out.
The result was a $100,000 increase in net worth – to $635,000. Financial freedom at 45 was becoming more and more realistic by the day.
I also ran in three races in 2017 – a 6k and two 10k – with plans to do my first half-marathon in 2018.
2018
With both kids in school full-time, my wife had time to help me with the online business – taking care of the accounting, scheduling, design, and administration (true weaknesses of mine). That’s been a life-saver and helped take the business to new heights.
Markets didn’t cooperate in 2018, but my RRSP was now worth $166,000 and I grew my TFSA to $29,000. We paid off the last of our line of credit and could focus solely on our savings goals. It was time to ramp it up!
Our net worth by the end of the year nearly reached $700,000.
I finished two half-marathons: the first in Calgary in a time of 1:52:34, and the second here in Lethbridge in a time of 1:52:26 (hey, at least I’m consistent).
2019
What. A. Year.
We went on an epic 32-day trip to Scotland and Ireland. We earned more from our online business than I did from my day job. I quit my job.
Unreal.
Our net worth crossed the $800,000 mark. We’re so close to reaching our $1M goal by the end of 2021. My RRSP is so close to $200,000.
I switched to an even simpler portfolio, with the new Vanguard all-equity ETF (VEQT).
We’ve managed to put ourselves in such great shape financially that I felt comfortable leaving my day job to focus entirely on blogging, freelancing, and financial planning.
I’ve been at it for three days and I can’t believe I didn’t do this earlier. It’s an amazing feeling to work for yourself and not have to answer to anyone else.
What’s next for 2020-2029?
The 20s are shaping up to be a great decade. My wife and I will work side-by-side at home on our online business. We can come and go as we please, and attend all of our kids’ activities and special events.
We’ve got the travel bug and plan to visit Maui in February and Italy in April. I doubt we’ll stop there, now that I don’t have a limited amount of vacation days to hold us back. We’ve talked about going back to Scotland again soon.
Then there’s my well-documented goal of reaching $1M net worth by the end of 2021. That’s still well within reach, even though I’ve shed one major income source.
I want to have the mortgage paid off by the end of 2024. That’s a stretch goal, but it can be done.
Looking far ahead to the end of the decade, it’s not out of the question to reach a net worth of $2M.
Final thoughts
I could have stayed in my day job for another 5-10 years, collecting a nice salary while earning another good income stream on the side. That would’ve been the smart move, financially speaking, and allowed us to meet and exceed all of our lofty savings goals.
But life isn’t about earning the most money, or saving the biggest pile. The fact is, I wasn’t happy rushing the kids off to bed so I could write another article or work on a client’s financial plan. I wasn’t happy spending my weekends working online instead of sledding, skating, or swimming with my kids – or spending quality time with my wife.
The truth is, I was burning out. It’s tough to work all day, spend a few hours with my family, and then pull out my laptop for another two hours every night. I did that for nine years. Did I really want to spend another year, or two, or five, doing the same thing?
The clear answer was no. We have a viable online business that has more earning potential than my day job ever had. I just need to put some daylight hours into it to uncover its true potential.
Plus, I actually enjoy it! I love writing about personal finance and investing. I love helping people achieve their financial goals and dreams. It’s the perfect job for me because it still feels like a hobby.
The ’10s have been an eventful decade, and we’re looking forward to see what the ’20s bring.
What did you accomplish this decade?
I love sending readers and clients on a mission to test their financial advisor. I get them to ask about lower cost portfolio options such as index mutual funds or ETFs. The responses are typically hilarious – so much that I wrote an entire post on the sh!t my advisor says.
A reader I’ll call Michelle emailed me about a recent conversation with her advisor about switching to ETFs.
Hello Robb, I love your articles. Thank you!
I spoke to my advisor about switching to a low cost ETF strategy for my RRSP. She told me there can be liquidity issues with ETFs and that she always sells them with limit orders and it can take time. Is this true? I own one with CI First Asset that she recommended.
Also, she was trying to scare me that I’d be responsible for ensuring I drew down my RRSP properly, implying this was a difficult task that I might not be able to manage. I will have to start drawing down in 10 years.
Your thoughts would be much appreciated.
Michelle’s advisor is right in that limit orders are useful when buying and selling ETFs. That’s because the liquidity of an ETF is best measured by its bid-ask spread. The smaller the spread, the more liquid the ETF. Bid-ask spreads on large, liquid markets like the S&P 500 will be very tight at all times. Spreads will be wider in less liquid, more “niche” exposure ETFs.
Stocks with higher trading volume tend to be more liquid. But an ETFs liquidity reflects the liquidity of the underlying stocks or bonds it holds.
When in doubt, avoid trading too close to the market’s open or close, and always use a limit orders. Stick to broad-market ETFs. Look for all-in-one solutions like Vanguard’s VBAL, VGRO, or VEQT. It’s never been easier to be a do-it-yourself investor.
The advisor’s other comment – about Michelle drawing down her ETF portfolio – is nonsense. First of all, retirement is 10 years away. Why stay in expensive, actively managed mutual funds for the next decade on the assumption that Michelle’s advisor will do a good job assisting in the portfolio drawdown at that time?
Yes, retirement withdrawals can be complicated, and many investors will need guidance. But Michelle can pay for that guidance when the time comes, rather than overpaying for advice through product fees today. Or, she can take control of her DIY portfolio and follow a total return strategy to generate retirement income. Or, she can switch to a robo-advisor who can assist in portfolio withdrawals for a fraction of the cost of a full-service advisor.
There are plenty of reasons why commission-based advisors want to prevent their clients from switching to low cost index funds and ETFs. The most obvious is that actively managed mutual funds simply pay more commission to the fund dealer and advisor.
If we believe that, then it’s easy to paint commission-based advisors as devious and evil. But a recent paper titled, ‘The Misguided Beliefs of Financial Advisors‘ suggested that most advisors actually mean well, they just simply don’t know any better.
“Advisors give poor advice precisely because they have misguided beliefs. They recommend frequent trading and expensive, actively managed products because they believe active management, even after commissions, dominates passive management. Indeed, they hold the same investments that they recommend.”
If you work with an advisor at a bank or investment firm, don’t be afraid to challenge or question their advice, especially when it comes to fees on the products they recommend. For every high-fee, actively managed product there is a low-fee, passively managed equivalent that is most likely better suited for your portfolio. Insist on the low fee option.
This Week’s Recap:
This week I wrote about our tendency to kick debt down the road.
From the archives: How to create your own financial plan with these eight steps.
Over on Rewards Cards Canada: What’s the difference between Air Miles Cash Miles vs. Dream Miles?
Friday was my last official day in the office – hopefully forever!
Quit my job to blog full time. Am I retired?
— Boomer and Echo (@BoomerandEcho) December 7, 2019
Finally, a quick update on life insurance as a few readers asked if I had the option to convert my group insurance to a private policy. It turns out I can, but only to a maximum of $200,000. I’m happy with my decision to go with a new $600,000 15-year term life policy.
Promo of the Week:
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Our partners at Credit Card Genius have a great promo offer for this card right now where you’ll get a $75 Amazon e-gift card on approval.
This Week’s Recap:
An economist tackles a big question – will the stock market crash in 2020?
A Wealth of Common Sense blogger Ben Carlson explains why bull markets last much longer than you think.
Rob Carrick shares some lessons from your fellow Canadians on how to be successful with TFSAs.
Mr. Carrick also shares an important piece on how investment firms are ducking responsibility for bad advice that costs clients:
“The investment industry talks endlessly about the value of the advice it provides. But no loophole goes unexplored in finding ways to avoid taking responsibility when that advice goes wrong.”
PWL Capital’s Ben Felix is back with his latest Common Sense Investing video about investing in IPOs:
Nick Magguilli (Of Dollars and Data) shares his psychological tricks for worry-free spending.
Michael James discovered an error in the rules-based spreadsheet he designed to manage his portfolio and now wrestles with a decision to fix his mistake.
The most dangerous of all people is the fool who thinks he is brilliant. Jason Zweig shares his own experience with overconfidence.
Million Dollar Journey compares bond ETFs, GICs, and high interest savings accounts in this fixed income investing summary.
Finally, travel expert Barry Choi shares eight hotel booking tips to ensure you get the best value when booking hotels online.
Have a great weekend, everyone!
Canadians started piling on the debt after the financial crisis in 2008. Back then our household debt-to-income ratio was sitting around 150 percent ($1.50 owed for every dollar of disposable income). Today that number hovers around 177 percent. We are kicking debt down the road, instead of kicking it to the curb.
It can be reasonable to take on debt for big ticket items such as a mortgage, vehicle, education, or for an investment. We often do so because it’s easier to pay off a loan over time than it is to save enough to pay the full cost upfront. That’s life.
But the pain of debt can be masked by the cheap cost of borrowing. Low monthly payments, interest-only payments, and long amortization periods give the illusion that our debts are manageable. We think a long overdue raise, promotion, tax refund, or some other windfall will solve our money problems, but until then the debts keep piling up.
We get trapped in an unending cycle of minimum monthly payments and creditors are happy to oblige if it means getting you into a bigger house with a new SUV and an annual trip to the Dominican.
Here are four ways we keep kicking debt down the road:
1.) Minimum payments on your credit card
A cardinal sin of personal finance. We’ve all seen the disclaimers on our credit card statements that say if we only make the minimum payment each month it’ll take a lifetime to pay off your balance in full.
My latest American Express statement had an outstanding balance of $1,086 and the minimum monthly payment was only $10. At that rate it would take 9 years and 1 month to erase the $1,086 debt, and I would have paid another $1,000 in interest charges along the way.
Yet many people do this every single month. It’s easy to see why when you’re living paycheque-to-paycheque and there’s no wiggle room in your budget. A $10 payment gets the credit card company off your back and gives you some breathing room today. Unfortunately it’s your future self who’s forced to pay the bill.
The average credit card debt is hovering around $4,200, according to TransUnion. Most credit cards charge 19.99 percent interest or higher, making this one of the most expensive forms of debt to carry over from month to month.
That’s why I recommend treating credit card debt like a four alarm fire emergency. Slash your spending, pause any savings plans, and divert any extra cash you can towards your credit card balance until it’s gone for good. This is one debt you cannot afford to kick down the road.
Related: Debt avalanche vs. Debt snowball
2.) Interest-only payments on your line of credit
The run-up in housing prices over the last decade has fueled a borrowing frenzy with Canadians tapping into their home equity at a record pace. Canadian home equity line of credit balances reached $230 billion earlier this year. That’s more than 3 million HELOC accounts open at an average outstanding balance of about $65,000.
One insidious feature of a HELOC is that it only requires a monthly interest payment. In fact, about 40 percent of HELOC borrowers don’t regularly pay down the principal.
Let’s say you have a $70,000 balance and the interest rate on your HELOC is 4 percent. Your monthly interest payment would be about $233 and each month that amount would be taken from your chequing account and applied to the HELOC balance.
But unlike other loan repayments there is nothing stopping a borrower from transferring that $233 right back to his or her chequing account – a move called “capitalizing the interest.” Also known as kicking debt down the road forever.
A big line of credit balance tends to linger until the mortgage comes up for renewal, in which case the borrower tries to roll the HELOC balance back into the mortgage, or until the homeowner sells the home and the balance is paid off from the sale proceeds.
A HELOC is not an ATM. It can be useful for a specific purpose, such as a home renovation or to buy a car. Using it to supplement your income, though, is a bad idea that will catch up with you eventually.
If you find yourself with a lingering line of credit balance make a plan to pay it off over a reasonable amount of time. Set up automatic transfers from your chequing account each month to match your target pay off date and start whittling down that balance today.
3.) Extending your amortization
You bought a house and took out a mortgage amortized over 25 years. When it comes time to renew in five years, instead of sticking with your amortization schedule at 20 years, your mortgage broker talks you into extending the amortization back to 25 years to keep your payments low.
While it might sound good in theory to give yourself the flexibility of a low payment in case of emergency, it’s too tempting to use that option to free up extra cash flow for lifestyle inflation and spending.
Extending your amortization means never getting any closer to paying off your mortgage. It prioritizes today’s cash flow over tomorrow’s freedom – not something your future self will appreciate when you have to delay retirement until that damn mortgage is paid off.
The smart move is to not only stick to the original amortization schedule on your mortgage but also to reduce it further by changing your payments to bi-weekly instead of monthly, increasing your payment by $50 or $100 when your budget allows it, and taking advantage of your pre-payment privileges when possible.
Making mortgage payments is automation at its finest – forced savings that you won’t miss once it has left your account.
4.) Long-term car loans
Canadian auto debt continues to grow as the average consumer’s auto-loan balance climbed to $20,160 last year. I’m on record saying that Canadians’ obsession with having two brand-new trucks or SUVs in the driveway is killing our finances.
Blame the fact that six and seven year car loans are now the norm.
The trend towards longer term car loans is problematic for two reasons. One, people are getting talked into buying more expensive cars at the dealership. That’s because the focus is about the monthly payment rather than the total cost of financing the vehicle. Longer term loans keep monthly payments affordable and increase the chances of selling an expensive vehicle.
Two, consumers get trapped in a negative equity cycle when they want to trade-in their vehicle before it’s paid off. The existing loan balance gets rolled into the new car loan, and the now more expensive car loan cycle begins.
Related: Why does my car dealer want to buy back my car?
Breaking the cycle takes sacrifice. Drive your cars longer (10 years+), buy used, only buy as much car as you need, reduce your household vehicles from two to one, and save up and pay cash for your next one.
Final thoughts
Successful money management starts with being smart about debt. Kicking it down the road only prolongs the inevitable.
Tackle your credit card balance first, and be relentless. You’ll never get a better guaranteed return than paying down debt at 20 percent interest. Stop treating your home equity like an ATM and start paying down the principal. Don’t wait until you sell your home.
Stick to your amortization schedule and try to pay off your mortgage in 15-25 years. Extending your amortization or taking payment vacations is not a path to prosperity.
Finally, break that auto-loan cycle. Long term financing might make your monthly payments more affordable today, but it’s awfully expensive in the end, especially if you keep trading in your car every 3-5 years.