My wife and I are spending this August long weekend planning our dream trip to the U.K. next summer. So far we’ve booked flights to Edinburgh, Scotland and found an Airbnb for our two-week stay in Kilkenny, Ireland. We’re trying to fill in the rest of the details, including travelling to Inverness, flying to Dublin, and finding interesting attractions to see along the way. We hope to finalize our itinerary in the coming weeks.
It’s gratifying to see our dream vacation turn into reality. I first blogged or made reference to a 4-week trip to Ireland back in November, 2011 as part of an 11-part financial freedom series:
How accurate was this goal? Incredibly, the only thing that has changed is our desire to see Scotland in addition to Ireland on our month-long adventure.
We’ve been talking about this trip for more than 10 years, but seven years ago I wrote it down in this blog and we held ourselves accountable to making it a reality by 2019. Here we are, in 2018, making concrete plans for our dream trip to the U.K. in the summer of 2019. Just like we planned. It’s a beautiful thing.
This Week’s Recap:
I wrote one post this week on how I try to keep the needle moving forward on my financial freedom goals despite low (or no) wage growth.
Over on Rewards Cards Canada I explained how we redeemed Aeroplan miles for flights to the U.K., saving thousands on fees and taxes along the way.
Weekend Reading:
Horizons ETFs made headlines this week when it announced two new all-in-one balanced ETFs to take on Vanguard’s asset allocation ETFs. Not everyone was impressed with the announcement, however, as Horizons is claiming in its advertisements that these ETFs come with 0 percent management fees. The problem is, it’s not really true:
Purpose Financial CEO Som Seif points out correctly that while this new “fund of funds” may come with no additional management fee, the underlying funds (the seven ETFs held under the umbrella) do come with fees.
This is really sad Smoke and Mirrors marketing by an industry peer. It’s what I hate about our industry. The underlying funds have fees (can read in fine print). So saying 0 Mgmt fee is a lie. Forcing ppl to read fine print for facts is dishonest. #needtodobetter https://t.co/BOKsshcqSW
— Som Seif (@somseif) August 4, 2018
Does Canada really need an inheritance tax? Global’s Erica Alini tackles this complicated topic.
The stock market is half the size of its mid-1990s peak, and 25 percent smaller than it was in 1976. Here’s why that’s a problem for everyone.
Steadyhand’s Scott Ronalds lists twenty smart takeaways from 20 years in the investment industry. My favourite lesson:
“Ignore the phrase, “the market is at an all-time high.” It’s overused and is an inappropriate scare tactic that encourages market timing (which doesn’t work). If you refrained from investing in stocks when the market was at an all-time high five years ago, you’ve missed out on big gains.”
Morgan Housel on why you’re more likely to be right if you’re constantly trying to prove yourself wrong.
And again, here’s the brilliant Housel with the spectrum of financial dependence and independence. What level do you fall under? I feel stuck somewhere between level 7 and level 8.
A great read on why points obsessed travellers (Hi!) are terrified of losing their perks, referring to Starwood fans fearing what’ll happen to their beloved loyalty program when it merges with the giant Marriott rewards program later this month.
Michael James has been serving as executor of an estate, causing him to reflect on how to sort his own affairs to make it easier for his sons.
On the same topic, Rob Carrick asks solo seniors who will execute your will when you die?
Here are four lessons from Hetty Green, the richest woman in Wall Street history.
We always hear that long-term stock returns should average between 8-10 percent a year. But what are normal stock market returns? PWL Capital’s Ben Felix explains.
And here’s Ben Felix’s latest YouTube video where he explains why foreign withholding tax is a tricky little detail that can eat into your investment returns:
A Wealth of Common Sense blogger Ben Carlson explains the concept of ‘willing losers’ where people take actions that put them at a disadvantage, such as people who carry a credit card balance, or people who day-trade.
Tom Bradley says investors will look back and marvel at how good things were from 2014 to 2018. He says to expect lower returns over the next five years because the bull market is showing its age.
Here’s why Canadians are increasingly putting the ‘remote’ in working remotely:
“A growing number of Canadians are taking the term “working remotely” literally, leaving the hustle and bustle of city life behind to work from their cottage or winter home down south.”
Canadian Dividend Investing’s Nelson Smith shares an early retirement strategy – using your RRSP to save taxes.
Finally, a truly bizarre tale about how an ex-cop rigged McDonald’s Monopoly game and stole millions.
Have a great August long weekend, everyone!
When I worked in the hotel industry our management liked to use a phrase called ‘manage the gap’. The goal was to maintain a 2 percent gap between revenue growth and expense growth. So if expenses were forecast to rise by 3 percent, we’d want to see revenues grow by 5 percent. Managing the gap meant keeping a close eye on costs so that we could quickly respond to changes in the market and raise prices if necessary.
Managing the gap isn’t as effective a strategy when dealing with our personal finances. Most of us don’t control our own destiny when it comes to our wages and so we can’t simply ask for a raise when we notice our household expenses starting to increase.
In fact, stagnant wages have become more commonplace in today’s economic climate. Since 2008, many workers who are not represented by a union or negotiating body have had their salaries frozen or even rolled back. The lucky few have seen modest annual cost of living increases at best.
Slow Wage Growth (Or No Wage Growth)
One of the biggest obstacles in my journey toward financial freedom is that my salary has increased just 16.8 percent over the last nine years. That averages out to less than 2 percent a year; barely keeping pace with inflation and certainly not enough to keep up with the needs of a growing family.
Related: On job security and preparing for the worst
The environment won’t get better any time soon. The province – even with a public sector friendly government in place – still faces a stiff economic challenge and massive deficits ahead. They recommend continuing what’s now been a four-year wage freeze for all non-bargaining staff, putting a halt on further increases until September 30, 2019.
Despite all of this, I still have my eye on financial independence and I’m still on track to reach this milestone by the time I turn 45.
I’ve recently changed roles within my organization, the results of which should lead to a reclassification of my position and a chance to earn a promotion. Change is slow, however, as I was reminded by this quote from an article in The New Yorker:
“I don’t work in a start-up. I work in a brick-and-mortar university, one of the most institutionally conservative workplaces in the world outside of North Korea.”
Side Hustle to Prosperity
In the meantime I’ve ramped-up efforts on my side business – adding another freelance writing contract, and working to build more advertising partnerships. The extra hustle has paid off so far this year with revenue increasing by 25 percent.
My wife even got in on the act, using websites like Kijiji and Facebook’s local Swap & Buy groups to sell a bunch of our old baby stuff. She not only got rid of a bunch of items we’ll never use again, but she earned $700 in the process!
On the expense side we monitor our daily spending and save money where we can. Smart-phone apps like Flipp and Checkout 51 help us save a few bucks on our groceries. A regular review of our subscriptions and recurring bills keeps our monthly payments in check.
The big-ticket items are where we can really save money. We paid off our car last fall and freed-up $800+ per month – money we directed towards our savings goals to help inch us closer to financial independence. Rather than buying a new vehicle right away we’ll keep our two payment-free cars on the road for the next several years, allowing us to build up our savings even faster.
Our mortgage comes up for renewal in the fall and I expect to get another great deal under 3 percent. It has been seven years and we still love our house enough to call it our forever home. Staying in this home and resisting the urge to move and upgrade will save us tens of thousands of dollars in moving expenses and realtor fees.
Final thoughts
When I project what our finances will look like in the next five-to-10 years I make sure to be ultra-conservative with the numbers, keeping my salary and expenses in-line with inflation. If I get a promotion, or regular salary increases return to the 3-4 percent a year range, I’ll simply treat that as a bonus to help reach our goals faster.
Slow wage growth won’t derail our plans for financial freedom. By finding creative ways to earn more money and keeping our expenses from getting out of hand, we can continue marching along towards financial independence.
One downside to driving an 11-year-old car is the lack of technology and features that come standard in today’s vehicles. My ’07 Tucson has a CD player, for example, but I haven’t bought or burned a CD in years. I prefer to stream music via Google Play. So my options were to listen to local radio and endure the same songs from Taylor Swift and Maroon 5 over and over again, or to listen to some 10-year-old CDs.
Then, while browsing Reddit a while back, I read that you can buy a Bluetooth adapter that plugs into the cigarette lighter socket in your vehicle and acts as an FM transmitter. Tune the car’s FM radio frequency to a blank station, set your device to the same frequency, connect to your Bluetooth-enabled device, and just like that you can stream music and use your phone hands-free.
I bought one from Amazon two months ago and it works great! Best of all, it only cost $27.99. So for less than $30 I’ve improved my driving experience and increased the likelihood of me driving this car for many more years.
Tangerine $250 contest winner
We hosted a giveaway this week as our partner Tangerine offered up a $250 gift card to a retailer in your favourite money back spending category. We had a total of 77 contest entries with 52 of those coming from blog comments and 25 coming from Twitter. I assigned each entrant a number and then used a random number generator to select the winner.
Congratulations to blog reader Andrea, who left a comment on July 24th at 9:33 p.m. I’ll have Tangerine get in touch with you directly to arrange your prize. Thanks to everyone who participated. I hope to do more of these giveaways again soon.
This Week’s Recap:
On Monday I wrote about how my wife and I manage our household budget to accommodate her spending needs.
On Thursday I asked what stock you’d choose to own for the next 25 years. A surprisingly difficult question to answer.
In this week’s Smart Money column at the Toronto Star I explained why you need to take care of your human capital.
Promo of the Week:
Here’s a shout-out to Airbnb, our family’s favourite source for finding places to stay when on vacation. We’ve used Airbnb a number of times when we’ve stayed in Calgary, Toronto, Vancouver, Kelowna, and most recently on our vacation to Vancouver Island. It’s fantastic!
We love Airbnb because we can rent an entire home for as much (or sometimes less) than the cost of a hotel room. The kids get their own space, WE get our own space, and we get a kitchen to prepare our own meals. Who wants to eat at a restaurant every day?
We’re currently searching Airbnb for places to stay in Scotland and Ireland for our trip to the U.K. next summer. There’s so many options, from rural farmhouses to downtown lofts.
Give Airbnb a try on your next holiday and use my referral link to get $45 off your first trip (I’ll get a $25 credit, too).
Weekend Reading:
Robots have been taking our jobs since the 1960s. Does the next industrial revolution spell the end of manufacturing jobs?
Here’s an excellent piece from The Micawber Principle on the purpose of an emergency fund and other savings.
Rob Carrick explains your money anxieties in three words: Pitiful income growth. So true. My own salary has risen a paltry 1.75% per year since 2009.
Morgan Housel shares some brilliant examples of real world knowledge vs. book knowledge.
If you’ve read this blog for a while you’ll know I’m a big fan of behavioural economics. One of the leading thinkers in the field – Shlomo Benartzi – has helped millions of people save more money for retirement.
A Wealth of Common Sense blogger Ben Carlson shares a thoughtful list of 10 money revelations from being a parent:
“5. Pay up for experiences but many of the best experiences are cheap or free. Kids can have fun just about anywhere. My daughter loved our trips to Disney and Mackinac Island but she probably gets just as excited when we go to our favorite bakery on the weekends for seventy-five cent donuts or the local park. Experiences don’t have to be expensive to be memorable.”
The science behind menu engineering and the subtle ways restaurants get you to spend more money.
Here’s a great post by Clare Nicholson on The Financial Diet about how she finally learned to negotiate for what she’s worth.
Investment blogger Michael Batnick on thinking big and survivorship bias.
The lowballed retirement: Why Americans underestimate what they need:
“If your entire retirement plan is based on one particular assumption – how much you will be spending every month – and that figure turns out to be way off, then you have just lit some TNT under the last quarter of your life. And by that point, it is largely too late to do anything about it.”
I love this post by Jonathan Clements about why we should pursue passions in our 50s, not in our 20s.
‘No, these golf clubs aren’t new …’ and other costly surprises your partner is hiding from you.
Finally, why midlife crisis is a myth. We don’t peak in middle age, say the experts. So forget about the stereotypes and embrace change.
Have a great weekend, everyone!