Dear Saver: These are the Forces That Work Against You

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Life is hard. Between keeping your financial head above water, living in the moment, and simultaneously saving for the future, there are so many variables you have to manage. Do you buy that thing because it’d be nice to have? Do you stay in a lesser hotel to save a few dollars on your trip? For that show you’re seeing, do you spurge on orchestra seats or resolve to the upper mezzanine?

We deal with these dilemmas every day, and if you’re a saver, you probably pretty good at balancing the pros and cons of your spending options.

But despite your best efforts, there are still forces that work against you. They work against you no matter what your resolve is. And frankly, these forces suck.

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What’s Your Marginal Rate?

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Not too long ago, I used to work for minimum wage in my spare time lightwalking for the Canada Opera Company. What lightwalkers do is stand on the stage wearing some neutral colours as the lighting designer and crew adjust the lighting to make sure faces are lit and unintended shadows are mitigated. Reason: it’s cheaper than having the actual opera singer stand there doing nothing.

The gig was fun. I’d work a 4 hour shift one weekend and pocket $44 and get to hang out on the majestic stage of the Four Seasons Centre in Toronto and rekindle my love of theatre.

But one day I stopped altogether. Why? Because my marginal tax rate caught up to me. Let me explain.

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Thinking of Locking in Those Investment Returns? Think Twice.

Taxes, Commissions, Reduced Yields, and more.

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I was talking to my parents and sister the other day about investments casually one weekend afternoon. They remain interested in how I’m doing and financial health is of obvious importance to them for themselves and their children.

“Make sure when you make a good enough gain, you sell it. Otherwise you haven’t made any money,” my mother confidently told me.

My sister agreed: “Yeah, I don’t hold anything really long term. Once I’ve made maybe a few grand, I’ll sell and then just buy it again later.”

At first blush, their strategy makes sense, right? Make your gain official, buy it again, rinse, repeat. But there are obvious problems with this approach, problems that would erode your long term gains.

So let’s talk about that in the context of a fictional case study.

Continue reading “Thinking of Locking in Those Investment Returns? Think Twice.”

September 2018 Financial Update

A deceiving month.

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September was a deceiving month, one that I guess is me deceiving myself into believing, I saved more than I did.

Let me explain: this month I spent $1658.59, for an incredible 74.49% savings rate… yet my net worth only went up $704.09. For reference, the month before my net worth jumped over $13,000!

So what happened? I went on vacation and I spent roughly $3000. Why is it not factored into my monthly savings rate? Because I tally vacation spending into my year-end figures, not month-to-month. Reason being is that vacation expenses might create some outliers and inconsistent month-to-month data for the purpose of analysis.

More on the vacation on a future post (it was British Columbia, which was beautiful, by the way…)

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Things I Never Cheap Out On (Part 2)

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Last week I talked about something very anti-frugal: the concept of purposely cheaping out on things as opposed to buying high-quality and potentially long-lasting things.

However, there are just some no-go things when it comes to spending money, where I will spend obscenely larger amount to get the highest quality I can. Some of these items are just basic common sense, whereas others you might think are a bit borderline – I’ll let you decide.

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Things I Purposely Cheap Out On (Part 1)

And there is something about drugs in here, I promise.

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Frugal folk are all about quality. That means buying things of excellent quality and workmanship because they know it’ll last longer or taste better than the cheap stuff. It’s simply a matter of ROI – why buy something for $1 that might break any minute when you could spend $10 and keep it for life?

However, we all have our vices when it comes to cheaping out on things. And personally: I cheap out on quite a few…

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The S&P 500 is at all-time highs. Should you sell?

Short answer: No.

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Index investors have much to be pleased with, particularly those who bought American.

The S&P 500 has rocketed to all-time highs in recent weeks with NAFTA negotiations trending positive and solid corporate earnings. At the same time, journalists, investors, and regular people alike are all talking about how the bull market is on its last legs.

“Be careful. You should sell. I don’t think there’s much room left to grow,” said a colleague to me as we chatted personal finance. We were talking pensions casually when the conversation shifted to ETFs and index funds (he is all in on real estate, by the way…).

As he walked away, I smirked, but I had a second guess moment: what if he was right?

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