Archive for Early Retirement

Debt A Four Letter Word


“Debt” A four letter word

My first “word of the week” was Debt. I choose that word because it has the most direct impact on financial independents. There is good debt and bad debt, unfortunately most households have a lot of the bad consumer debt.
Canadians have never owed as much as they do now. Debt continues to grow at 3 times inflation and is rising at four percent year over year. The latest numbers from Statistic Canada indicate that household debt now stands at 167.8 per cent of disposable income, a record high. This suggests that, on average, Canadians owe $1.68 for every $1 of disposable income. Statistics Canada.

Another new survey by the Canadian payroll association suggests almost half of workers are living pay cheque to pay cheque due to soaring spending and debt levels. The poll found that 47 per cent of respondents said it would be difficult to meet their financial obligations if their pay cheque was delayed by even a single week. The survey, which polled 4,766 Canadian employees, also found that 35 per cent said they feel overwhelmed by their level of debt. For the first time, more respondents found mortgages the most difficult debt to pay down, with 32 per cent of respondents selecting this option compared to 23 per cent who cited credit card debt.

Some economist feel that household debt is okay as net worth has risen with the debt level. Other economist see a bigger problem as the very wealthy and investors have added to their net worth, where lower and middle income earners have fallen behind. It’s not just Canadian households debt that is high, there is the federal and provincial debt. When we do get a recession both provincial and national debt will explode higher. Check out the national and provincial debt clock.

The Canadian national debt clock shows, as a country what we owe, your share, debt per day, and per hour. It changes so fast I will give you the link here National Debt Clock 

The provincial debt clock shows what your province owes as well as your share Provincial Debt Clock

When we combine household, provincial, and federal debt, Canadians have a lot of a four letter word. “DEBT”

“Savings are a gift to the future, Debt is a burden on it”.

Ernest Hemingway Quote  “How did you go bankrupt?
Two ways. Gradually, then suddenly.”

Just For Fun !! World Debt Clock US Debt Clock

in the begining

I started investing in equities in 1990. Prior to that I was in high school and always worked and saved but it wasn’t until a I started full time employment that I became serious about investing. Back then there wasn’t info plastered all over the internet so I read lots of books/newspaper and took some courses at night thru my local college. One of the teachers was a financial advisor and he got me investing in mutual funds. I dollar cost averaged into all my accounts registered and non registered. Knowing my non registered account would be used to purchase a house I was still 100% in equities. I was young and took the gamble. All in equities payed off as from 1990 it was a down to sideways market for a few years and with dollar cost averaging every month I kept buying low. In 1995 I got married and in 1997 we purchased our house. Another good timing moment as it was near the bottom and continued dollar cost averaging into equity mutual funds in our registered accounts.

Then being able to save slowed down mortgage/ kids/stay at home wife we could only put a few hundred away every month. I had a full-time job, and ran a company after my day job and on weekends. That’s when I realized they weren’t lying about the magic of compounding interest. In 2008/2009 great recession we were in a little better position and the house was almost paid off. We had a little extra cash to invest, over a six month period we dollar cost averaged in, were still in mutual funds although I knew how much the MER(management expense ratio) was. We stuck with mutual funds as we had a long term relationship an awsome financial advisor and over the 20 years with him, we made a lot of money with active managed funds. I was waiting for my advisor to retire before we move our portfolio over to a more passive index/ETF strategy. Unfortunately our advisor passed away before he retired. In the beginning a 2%-2.5% MER doesn’t amount to much but as our accounts grew I could see how that would effect our overall performance. We did move our accounts over to a brokerage account and into low cost ETFs . That’s how we got to where we are today.