Category: Financial Freedom

Secrets of the Wealthy – Live on 20% of your income

I hear you.  It is inconceivable that someone except the wealthy could actually live on 20% of their income.

When GC goes on to say live on the 20%, he scribbles on a white board the following:

Income – 100%

Subtract Taxes – 40%

Pay Yourself – 40%

Live on – 20%

He then says that if you can afford to pay the government 40% for the in-the-present services they provide, you should be willing to invest in your future for no less!

And if you are taking 40% of your gross income for investing, that leaves you 20%!

Understanding that 85% of (American) households are spending 110% of their income (hopefully the stat is take-home income and not gross income) one can imagine the frustration at being told you should be living on 20% and not 66% of gross.  The immediate reaction is “there is no way to reduce my expenses to live on 20%”.

I am right here with you.  That was my initial reaction too.

But then something magical happened.  GC said, “Ok, you can’t live on 20% if you are making minimum wage.  So make more than minimum wage.  Take your current expenses.  That becomes your 20%.  Now, how much do you have to earn to have the 100% to live on the 20?”

Now, the magical part wasn’t my being insulted about my middle class income.  I expect you reacted the same way to that statement I did initially.  But then I had a mindset shift that said work the problem from the opposite direction.  And this is what GC was getting at.

As an aside, the Canadian Government lets you save 18% of your income tax-deferred in an RRSP so that you will have retirement income.  

This is not an overnight fix.  This may not be a quick fix.  It may take months to years.  But the first step is mindset.

Once you shift mindset, you need to determine how to increase your income.  Some jobs have capacity for extra income (pay raise, overtime, bonuses, commission).  This that don’t would require either education/training for a promotion or transfer, or a new job, or as a last resort a side hustle.

GC says a side hustle should be the last resort because it takes away from your focus on your main job to the detriment of both.  But this is a post for another day.

As always, if you want to discuss this post, or anything else, give me a shout!

Once you are ready to set aside some (or all) of that 40%, let me know and we can discuss how I can help you out.  There are multiple avenues to apply step 4!

Secrets of the Wealthy!

One of the people I follow shared today the following Secrets of the Wealthy. Of course, there is more context than just the sound bite. The secrets:

  1. Pay yourself first
  2. Live on 20% of your income
  3. Don’t lose money
  4. Invest in assets that cash flow
  5. Have more passive income than earned income.

He goes on to say:

“The most important is to be patient and invest for the long term. If there is immediate gratification, it is most likely an expense rather than an investment. Investments take time to bear fruit.”

I will expand on these points in the next few posts. So don’t get your hackles up on the live on 20% until I’ve expanded on that…

If you would like to discuss any of these, or any other topics, please reach out!

I just learned a new term – HENRY

HENRY – High Earner Not Rich Yet. High income, but even higher lifestyle.

Have you heard this term before? High Earner Not Rich Yet. This is used to describe people who have a high income, but an even higher lifestyle.

I learned the term reading an article about a couple who called into Dave Ramsey’s show. They earn 225,000 between the 2 of them, but they have almost 1,000,000 in debt (student loans, car loans, mortgage, credit cards…). Due to their debt load and rising interest rates, they are now on the verge of bankruptcy.

The difference a Year makes

It is one of those secrets of success; If you want to change, you have to make a change. If you don’t change things, and external forces don’t do it for you, then life will continue on the path it has been on. You can look into the future and reasonably predict what it will look like.

Well, a year ago, the world as we know it changed drastically.

Did you change for the better or for the worse because of it?

Now, this sounds like a judgemental question. But it isn’t meant to be. It is, however, meant to be a nudge.

I get it. At first, we all paused, waiting to see what would happen. Then the rules changed. Restrictions happened. Then they eased. Guidance changed. Restrictions came back. Now we have vaccines and easing of restrictions. But we are also being told to smarten up (OK, not quite the words Dr H used, but still). Makes it feel like more restrictions could be reintroduced.

So, did you hunker down? Pause? Change your activities?

Pretty well everyone I know made changes. Travel was out. In store shopping was/could be risky. No eating out (take out excepted). No bars/clubs/concerts/trips.

So with all the things we couldn’t do with our money, did we save and invest it?

Amazon and other online retailers reported record sales. Shipping companies are finding they have capacity problems and expansion isn’t keeping up.

One stream of my income (I have 3) ceased to exist. But my other 2 sources actually showed a slight increase. My wife’s only source of income also came to a screeching halt. She has worked on 3 alternative source.

Because of government support such as the CERB, we didn’t lose any ground compared to plan. Business owners in my social circles report 1 of 2 things – their industry was hammered and they couldn’t (or didn’t) change so took a hit. Sometimes a big hit. But other owners report record years.

I’m obviously one of the ones who didn’t change enough for any of my 3 businesses. That said, I have been attending online conferences, webinars, and the likes trying to get inspiration for ways to pivot. I have a few ideas; keep watching this space…

Enough about me.

How did the last year affect you?

Did life go according to plan? Did you rewrite the plan? Do you have a plan?

Need Assistance with a Plan?

If you don’t have a plan, or would like help reviewing your plan, you can reach out to me through either the Chat box here (it’s linked to my FB Business page so pops up on my computer and/or phone depending on what I’m logged into) or you can phone 587-600-0013 or email protect@ksfraser.ca.

Money is value-less?

A few days ago I mentioned that money in and of itself is of no value.

Consider physical money. Some cultures used beads, others used shells. The Romans used pounds of Salt (origin of the word salary). In short, money can be anything we collectively agree to use. The western world has agreed upon paper (now plastic) slips and metal coins.

Let’s contrast money against Maslov’s Heirarchy of needs.

  • Paper money can’t provide you shelter. It isn’t big enough to cover you, and it would take a lot of other materials to stitch it together to form a blanket, rug or wall.
  • You can’t eat money (for nutrition; yes you can chew paper…).
  • It doesn’t provide you safety. And if you try trading it for safety, chances are the person you are trading with will try to extract all they can through threats of violence, so making you less safe…
  • Money causes issues with Friends and Family. It changes the relationship. For friends, if you are using money to buy friendship, the friendship disappears as soon as the money does. For Family, unless you gift it, it can lead to stress and resentment when you seek to reclaim your money.
  • If your self esteem is dependent upon the money you have, what happens if your money disappears? (Spending/inflation/theft/etc)
  • An the last level in the hierarchy is self actualization. You can’t purchase creativity, morality or problem solving abilities.

Now, the world is in the midst of a transformation to virtual money (think credit cards, debit cards, e-transfers, crypto-currencies). You don’t even have the opportunity to sleep on a bed of money.

So why do we have money?

It is a medium of exchange. It replaces barter. If you and someone else have something the other wants, than a trade is possible. But what if you don’t? what if you need to broker a 3 party trade? Or worse, a trade of future goods (e.g. crop of wheat for shoes made from leather from a cow that hasn’t been born yet?). So we accept Money as the representation of our efforts in the past to be traded in the future.

But there is a risk here; the purchasing power for a unit of money (i.e. how much a dollar can buy) decreases over time due to inflation (size of money supply versus goods and services available to purchase).

How do we protect against this risk? Convert the money into Wealth (an asset). This would be an item that holds intrinsic value. It could be a physical item, or it could be rare skills (i.e. learn something not everyone knows/can do). This would put you into the later 3 stages of Money I wrote about a few days ago.

To learn more, give me a shout!

kevin@ksfraser.com
587-600-0013
Airdrie, Alberta
Canada

Do you know the stages of Money/Wealth Accumulation?

The stages of money and wealth accumulation:

  1. I have to get some money (A kid asking their parents)
  2. I have to earn some money (adolescent or adult working a job)
  3. I have to Make some money (small business owner)
  4. I have to grow some money (Investor)
  5. I have to create some Wealth (creator of value)

Did you notice that the last stage changed from Money to Wealth? In another post I will discuss why money is not wealth.

What stage are you in? (I move back and forth between stages 3,4,5 on a regular basis)

If you are looking for someone to assist you in these stages, give me a shout!

kevin@ksfraser.com
587-600-0013
Airdrie, Alberta
Canada

Is (the love of) “Money is the root of all evil” accurate?

“Money is the root of all evil” is an often trotted out misquote. I suspect the people who say this phrase the most are those that do not have any money.

As one of my mentors said, “If money was the root of all evil, the devil would provide you an endless supply”.

How about the full quote, “The love of money is the root of all evil”? If we examine the extreme case of “love” of the money meaning pursuing money to the detriment of all other things, then yes it could be evil.

If you “hate”* money, then you will avoid it. (Can we all name someone we know who hates money?)

However, if we look at the case of pursuing money because of what it is (medium of exchange) and what it provides (i.e. converting once asset (e.g. time) into another (food/shelter/…)) then it can not be wrong. That doesn’t mean that there aren’t unethical (i.e. evil) means of pursuing it (theft, fraud etc) but it doesn’t make the pursuit of it in itself evil.

Once we can get past the mindset that money is evil, than we have a chance at accumulating some. The next step after accumulating some is to convert excess in to wealth. But that is a topic for another post.

*Yes, love and hate are not opposite sides of the same coin but rather the positive and negative versions of the same emotion…

What Happens If a Life Insurance Policy Lapses?

Did you know: The dollar amount of death benefit payouts that seniors forfeit annually through lapsed, or surrendered life insurance policies is $112 billion! (2015). This is more than the net worth of either Mark Zuckerberg (Facebook) or Jeff Bezos (Amazon)!

That is $112 billion worth of cash value down the drain. These could have been death benefits, inheritance, or donations to charities. This is $112 billion that insurance companies get to retain. All because policyholders surrendered their policies or allowed them to lapse.

Why do policies Lapse?

A life insurance policy lapses when a premium isn’t paid.  This results in all benefits of the policy being lost!

However, there is a brief grace period during which a premium payment for the life insurance policy can be made.

Can a Lapsed policy be recovered?

Yes, there are a few circumstances in which the life insurance policy can be recovered. 

  • It could be as simple as resuming premium payments.
  • It could involve a lengthy process that includes a new medical exam, repaying all premium payments from the lapsed period,
  • It might require the services of an attorney.

How to avoid a Lapsed policy

In short, pay your premiums.

Most insurance companies can automatically withdraw the monthly payment from a bank account.

Some companies may take missed premium payments out of the policy’s cash value. Note: term life insurance has no cash value.

If you’re in danger of a lapse, contact me today. Together we can review your financial strategy to help you and your loved ones stay covered.

My USA Trip Summer 2019

My wife and I just returned from a trip to the USA. We went down for a family reunion, and then visited our favorite spots in the western part of the country.

Family Reunion

We started in Nebraska. We flew through Minneapolis to Omaha where we rented a car and spent the night in a Best Western. The hotel was very nice. The room was large, and breakfast was great.

We drove to the family reunion in a state park. The heat and humidity was much higher than we were used to, but there was lots of chilled water so we were fine. It was a great gathering. My wife met 6 of her Grandmother’s first cousins.

AMTRAK!

We returned to Omaha through Lincoln. We stopped in the Haymarket region for lunch and ice cream.

Back in Omaha, we drove around the city a bit. We saw parks, a large pedestrian bridge, and a number of landmarks.

We went into a museum located in a former Train Station.

We boarded an Amtrak train. It was scheduled to depart, but due to flooding and summer track work the train was delayed. We didn’t depart until 01:30.

The coach seats were very comfortable. My wife had a great sleep in them. Had I been 6 inches shorter so that I was the design height for the seats, I too could have had a very good sleep.

We spent 40-some hours on the train on our way to San Fransisco.

San Fransisco

In San Fransisco we visited a number of spots.

We saw the XXXX musuem which is a victorian style manor.

We walked through Fisherman’s Wharf. Marcia bought a T-Shirt at Hard Rock Cafe.

We forwent the Alcatraz prison as we had seen it on a previous trip to SF.

We saw the Painted Ladies (seen in Full House) as well as the house which was used for the Mrs Doubtfire movie.

We rode the Cable Cars. I had visited the Cable Car museum on a previous trip but hadn’t ridden on them. This time we bought transit day passes which included the Cable Cars.

We went to Gharadelli Chocolates where I had possibly the most expensive Banana Split on the continent. The difference compared to DQ was they used hard ice cream (made in house) of the appropriate flavours (chocolate, strawberry, vanilla).

San Diego

We flew to San Diego. We stayed at the Days Inn where they were renovating the rooms.

The hotel shuttle took us down to the USS Midway Museum. This Aircraft Carrier is a sight to behold. I’ve been in it before but Marcia hadn’t. We toured the ship.

We took the Ferry from near the Midway out to Coronada Island where we walked past the Hotel Del Coronada to the beach. Even using sunscreen, Marcia and I both ended up with sunburns. On our way back to the ferry we had Ice Cream cones.

We rode the other ferry line (route?) to the conference center. From there we walked into the Gaslight quarter up the Gharadellis to purchase chocolate (Marcia didn’t want to carry it in her suitcase from SF). We then walked back to The Olde Spaghetti Factory for supper.

We finished supper just in time to get on their LRT line back to the hotel with the fans from the Giants/Padre game. I hope San Diego put on extra trains after the game, as our train was packed and that didn’t make a dent on the crowd standing on the platform.

We toured Old Town. A large part of Old Town is now a state park set up similar to a museum.

We also visited Balbao park. In the park is the San Diego Model Railroad Museum. In the museum is a number of clubs with layouts under construction. There was 1 N scale, 2 HO, 1 O, a Lionel 3 rail club as well as a small garden layout. This is the 3rd time I’ve visited (2011, 2015, 2019), and the layouts do change as time goes on.