Financial Goals

What are some of your financial goals?

I have recently (last 5 months) been really working on getting out of debt. In fact, I have paid of 20% off my debt since April 2013 and my goal is to be completely debt free my March 1 2015.

I’m using a strategy (I don’t know of its name) whereby you put all your debts in order from smallest to largest and make all the minimum payments except the smallest one. Then you pay the minimum amount and add $200-$300 a month to it. This pays off your smallest debt the fastest and builds momentum – I would know, I paid off my car loan 9 months early and am thrilled to apply the car payment to my first credit card.

As for those of you who keep reading my posts will know I also just crossed over the positive net worth line recently so this has also been a huge motivator.

The thing about goals is they need a plan of action, a deadline and to be specific. Some of you may use the SMART goals strategy. I follow that and it works great.

Going forward, I’m thinking I may post my spreadsheet templates I use for keeping track of my finances for download. Until then, let me know what some of your goals are in the comments.

You can also check out my Facebook at Josh Allen Facebook

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Net worth

What is your net worth?

My goal was to cross the positive net-worth line by September 11, 2013, based on projections I have made on decreases in my liabilities and increases in my to my stock portfolio.

I picked up some extra work for my professor on the side, once he paid me on the 17th, I then applied that money to my credit card since the stock market was closed for the day. At that point I measured the amount of assets I have including my TFSA my employee stock options and my RRSP and combine them together and then minus my liabilities – my two credit cards.

It was at this point, that I then crossed zero line and entered into a positive net worth. I completed the goal approximately 24 days before my goal deadline and I’m super excited to be going forward from here.

I would encourage all of you to continue on striving forward in whatever financial plans you have, striving to build your wealth and to continue developing your plan as you go along. Good luck!!!!

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Inflated earnings. Inflated markets.

Second quarter fiscal earnings reports have been coming in throughout the past couple weeks and for the most part have beat analyst estimates (partially because the estimates have been lowered so much).

The problem is, all these earnings are fake. The money the consumers use to spend is from QE, so it’s not money they earned, it’s on credit and loans. So you put that kind of money in the economy it creates a false sense of growth because once that money is spent the businesses think they have growth and they expand, but once consumer credit dried up, that expansion the business just did is for not. The business now has smaller sales, can’t afford the expansion they just did and had to lay off employees – who of course can’t go out and buy stuff. And the cycle continues.

The stock markets are at all time highs but their growth is not reflective of the company earnings and economic growth.

Personally, I’m slowly selling my non-commodity based stocks. I think the market will crash, and commodities will skyrocket. I’ll hold commodities which are inverse to stocks and once stocks bottom out, I’ll buy stocks again.

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Why corporations & citizens are quite similar!

Why corporations & citizens are quite similar!

Obviously, this is a skewed down snapshot. I am not commending the activities all corporations have done. Yes, some have done very destructive things, just keep in mind that it was people that made those decisions. Its people that decide to do good or bad. Corporations are just groups of people. I’ll follow up with my rant in another post. Till then, sound of in the comments and share your opinions.

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A Financial Learning Reminder

How do you learn about personal finance, investing and other business?

There was a great article posted over on Ready To Be Rich about keeping your mind open about where you learn from.

Personally, I try to learn from a variety of people that I believe to be professionals in their respective industries. Furthermore, I like to study multiple similar fields to gain further perspective. For example, I enjoy studying finance, and people often have strong emotional ties to finance so I also study a little bit of psychology, personality styles and different intelligences (Intellectual, emotional… Etc).

I get excited at the discovery of new books and readings and enjoy learning and having my mind opened to new thinking.

What are some of your favorite sources for financial/business/investing news, learning and growth?

Sound off in the comments, like and share please!

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Paying Off Debt… Which way works best?

So you have some debt, congratulations, you are just like everyone else. Debt, is broken down into two categories: Good Debt and Bad Debt. Good debt for example, would be taking a mortgage for which you have multiple tenants paying the rent and some extra on top of the mortgage and expenses I.e., your mortgage and expense payments on the property are $1200 a month, you are renting out a house that is 2 storey’s and have someone living in the basement, main floor and the top floor each paying $500 or even more a month. Thus $500 X 3 = $1500. This my friend, is good debt. Because the debt is helping you make money ($1500 in income – $1200 in expenses = $300 a month in profit. Now if you are smart, you have incorporated and are claiming that as revenue and being taxed at the corporate rate which is substantially lower than the earned income rate (in Canada and the US at least). Bad debt, are the usual products you are accustomed too: credit cards, mortgages for house(s) that only you live in, loans (especially student loans), lines of credit etc. Click for more on Credit Card Payment Terms according to Financial Consumer Agency of Canada (FCAC), you can also try their Credit Card Repayment Calculator. You may also check on the back of your financial statements for your credit cards, some of them outline your payments, the interest and how long it will take to pay the balance off it you make the minimum payments.

The article I am initially referencing talks about some of the pitfalls of getting debt consolidation – combines all your debts into one and make one payment instead of multiple. Although the article mentions some things to keep in mind, I would strongly recommend not getting a debt consolidation at all. Some say that it is more convenient to have one payment and so on, my advice to that kind of thinking: Grow up and get organized. These are your finances, be responsible for them.

Here is the method I am using, I read about it in the book: Cashflow Quandrant – Robert Kiyosaki check it out on Amazon, iTunes, Chapters.

Robert advises his readers to learn by properly managing their debt. He suggests things like making a calendar event each month outlining your payments and for how much, this is really helpful if you have online billing/banking to see what your payment is in advance, as well as allowing you to write the event in your electronic calendar for consistent reminder.

Roberts’ method: Say you have several different debts:

Car loan $1000 (left over), credit card1 $2000, credit card2 $5000. Total debt: $8000

Payments (est): Car loan: $120/mo, credit card1: $50/mo, credit card2: $100/mo. Total payments: $270/mo.

Robert notes that you should be out trying to find any creative and legal way to “create” extra money. This could be a paper route, doing some yard work, checking out work on TaskRabbit or whatever, but find a way to make an extra $200-$350 a month. Not only is this extra income, it gets you thinking creatively and really putting your skills to work while also adding experience to your resume and if nothing else builds some good references.

Ready for this part? It may seem a little strange. Pay all the minimum payments on all your debts… then, take that extra $200-$350 a month and apply it to your smallest debt size. This will increase your momentum and help you feel a sense of accomplishment and increase your desirability to pay off the next one and the one after. Sometimes, taking the numbers out of the numbers is helpful. So lets look at it:

Not including your interest, just taking the $270/mo would take you 30 months to pay off $8000 (assuming a lump sum divided by monthly payment approach). That also assumes you accumulate no additional debt in the interim. Kevin O’Leary in his book Cold Hard Truth On Men, Women and Money suggests putting your cards in a small container with water and freezing them. Then when you want to make an impulse purchase you’ll have to wait for it to thaw.

So your Car Loan which has a monthly payment of $120 on $1000 balance will take 8.3 months. Now lets add say the $200 added on top of your $120/mo. totaling $320/mo. $1000/$320 = 3.12 months (the fourth month would be a much smaller payment).

Credit Card1 = $1800 balance (paid $50/mo while paying the loan) and a $50/mo payment (min). Now here is the trick, taking the additional $320 you have extra. You are still making the extra $200/mo, which is hopefully part of your routine now, and taking the $120 payment from your loan and applying them both to credit card1. $1800/mo divided by $50/mo payments (again not including interest) would take you 36 months (3 YEARS)! But don’t forget, you have an extra $320! So now your combined payment is $370 a month. $1800/$370 = 4.86 months. Thats 1/7th of the time! And hundreds if not almost one thousand in interest.

Credit Card2 = $4200 balance (paid $100 during the 8 months of paying off other bills) and a minimum payment of $100/mo would take an astounding 42 months… nearing 4 years! And finally you have substantially larger payments now… your payments now is $370 + $100(previous credit card1 payment) = $470/mo.! Take the $4200/$470= 8.93 months.

So at the beginning, and using a lump sum payment method (which typically isnt the case – unless you are using a debt consolidation) would take you 30 months… If you take just Credit Card2 at $5000 or even the $4200 and $100 balance, that would be 50 or 42 months depending on when you calculate the payment from. You are verging on literally, half a decade, HALF A DECADE!!! The method outlined above would take you 17 months! Just under half the time if you used a debt consolidation method. Which again, could save you thousands, and even more if you were to just pay the minimum amounts.

Personally, I am working on this method, and have done a little bit extra, I increased the payment of my loan 3X. I also did some work for a company for a couple days and earned $350 (which is my monthly “created” money). So I have narrowed down my debt repayment time to a fraction, by tripling the payment size, I now work hard a finding extra shifts at my current job, and applied for another. This has a three fold benefit, it will provide a second source of income (I call diversified income), will allow me to more easily cover my expenses by expanding my means – not living below them, and most importantly will allow me to increase the amount of money I am saving each month, currently at about 20%. I firmly believe that poor people are poor because they continue to use their savings and investments to pay off their debts, then they get back into debt. I refuse to do this.

Avoid These 3 Pitfalls of Debt Consolidation: 

FCAC Credit Card Payment Calculator

What are your thoughts? How do you work on paying off debt faster? Sounds off in the comments, hit share, and subscribe! Thanks!

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Is A “Level Playing Field” Something That Can Be Earned? Should It Be?

In a recent article by the Financial Post, Telus CEO, Darren Entwistle argues they have made significant investment in Canada and its communications infrastructure, and as such, deserve a fair and level playing field when the CRTC makes changes to the communications regulations.

One of his arguments, is the availability for foreign ownership of media and communication companies such as Rogers Communications Inc, BCE and Telus Corp. The CRTC allowed partial foreign ownership of the new (and now up for sale) Wind Mobile when it first was starting out back in 2009. Is it fair that the CRTC allow small firms to attain foreign internal capital simply on the premise that they are small firms? Telus makes a valid argument that they have invested $30B since 2000, why are they prevented from attaining that same capital for growth? Of course, the answer is to allow new competition into the wireless industry which is currently an oligopoly of Bell, Rogers and Telus.

Additionally, and one of my personal favorite arguments is the talk on value, not just dollars. I know Fido and Koodo offer some pretty solid deals that create a lot of value, however a lot of packages on the market are just cheap. Having worked at a major carrier and dealt with customers who followed the notion that “a cheap plan equals a cheap bill”. I can attest to this usually not being the case. Especially among younger people.

You see, with a small plan, it’s really easy to go over your amounts and that makes the overage charges massive. You can blame the carrier for being to expensive but at the end of the day, you are the “informed” consumer. You should be aware of the available plans. It was nobody’s decision but your own for selecting that plan. Also keep in mind you can always change your plan to another one if you find you are always going over. From my experience, a bigger plan covers more features and means your bill will be more consistent in price.

Entwistle goes on to talk about their work in offering a variety of Telus plans and including nationwide coverage. The article is interesting, for those who are the fight major corporations type you will probably find it repulsive and conceited. I on the other hand want the best quality products and services. To me something LTE matters, a lot (I used almost 10Gb on my phones’ LTE last month). So although its great that there is a dirt cheap plan by Wind or whomever, I still want that premium service of LTE and great coverage.

To me, my phone and its internet plan are one of the most highly valued services I subscribe to. It will be the last bill that I cut off or even cut down on, when I am looking to save money. I just never really understood why someone would go out and get a premium device and the not have any data or a decent package! Its like having a Formula 1 race car in the suburbs – pointless.

What’s your opinion? What is the purpose of having a premium smartphone without an internet connection?

I know people are starting to say that “there is wifi everywhere.” No. There isn’t. This is Canada. Or some people go to Starbucks or McDonalds just to get wifi. That is seriously the most inconvenient thing I have ever heard of. That is completely missing the point of having a mobile phone! Check out the links, and share what you think in the comments? What are the rates like in your country? Any better or worse? What do you think should change?

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How Soon Should Kids/Teens Start Investing?

Investing. It seems so complicated. And so much has been in the news lately about how “dangerous” it can be. Not to mention how scared most people are given the recent financial meltdown. So why should kids be learning about investing? And why are big funds so interested in getting them to learn about investing?

How young should you start investing?

9 year old, Ryan Ross started his business with chickens, then lawn mowing and finally power-washing housing. The trick? He charged his customers a premium and hired someone else do to the work for cheaper and kept the difference. He then bought buildings in BC and Ontario! This is exactly what corporations do, but some would call that evil, or the devil or whatever. If thats your opinion, this blog probably isn’t for you.

Or take for example, Willow Tufano, a 15 year old (at the time) who has already closed on her second home as an investment property. She has hopes of having 10 by the time she is 18. These are just a few examples, I personally started buying stocks when I was 19, granted it was through the company I am working for (I still buy stocks through the company), but now I have been running my own portfolio for almost a year. I have read many books on investing but the fact is, although having theoretical knowledge is powerful, if you don’t have goals, rewards and a series of SMART goals for your investing, it doesn’t matter how much you know you won’t make much money for long.

When big funds are looking to get kids started in investing to the point of changing the curriculum, I think its very good. Look at the baby boomer generation, many of them covered in massive debt not including their mortgage (which literally means “until death” from latin translation), they think saving money (which is devaluing consistently through Quantitative Easing) will help them. The financial meltdown proved that it didn’t.

So kids need to be more financially literate from a much earlier age yes, however, these funds which are looking to teach them about this investing also have another intention in mind. You guessed it! If they teach them about investing and leave a good impression, who are the kids going to sign up with when it comes time to open an investing account? That fund – exactly. Now, as a conservative capitalist, its a phenomenal idea! Its a brand new source of revenue and the business model, if done right, could turn the economy around, albeit two generations later.

So as long as these funds and companies take a long term approach with these kids in investing they will be VERY profitable. If they take a short term approach and don’t properly teach or fully teach upcoming students then, it will be a mass one-time influx of profit and commission and then a sharp downfall. I also hope that the industry doesn’t just teach them about packaged funds like mutual funds and stuff, those are high commission and don’t build real wealth. But the notion is plausible, as with investing the young you start the better off you’ll be later on, but try telling that to kids and teens. Hopefully, they will have had a hard enough look (although at the cost of their parents) on how the economy, stock market and companies can really effect everyone’s lives that they will want a different life badly enough to make a financial change!

What are your thoughts on funds doing this? Think it will help the economy? Make students more confident and knowledgable in investing and how to make money through passive or portfolio income instead of earned income – the most highly taxed income type available, its also the one almost everyone receives the majority if not all, of their income through.

Ryan Ross – Dubbed Trump in the making!

Willow Tufano

Teaching Kids About Investing

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Is Owning A Home Part Of Your “American Dream”?

Owning a home – is it a dream? Is it a real one? Is it worth it? Is it one you are a part of?

To me, owning a home seems nice, but I don’t aspire to own one. I’ve been reading a lot about homeownership, mortgages and learned about mortgages in one of my courses. Personally, as of this writing at 22 years old. I don’t want to own a home (maybe a condo), but I’d rather not.

Homes, especially a house are too much work to maintain. And there is always unforeseen expenses. According to Kevin O’Leary in his book “Cold Hard Truth On Men, Women and Money” he demonstrates how the expenses of owning a home eat away at the equity you gain over time. And it’s difficult to bet on future costs because interest rates on mortgages don’t stay static and could rise or lower. Go read it, you’ll understand. Should be reading those kind of books anyways.

So, I will do all I can to avoid such action, and I am talking specifically about owning a home that only I live in. I will buy homes as investment properties, but the difference is, I’m not paying for it. The tenant is.

Being a renter allows me to be mobile, I can leave and move wherever work takes me. And as a student, and people who are a part of the upcoming generation workforce, being mobile could make or break your career and life. Check out O’Learys’ book and the link below on some interesting shifts that Americans are having over homeownership.

Thoughts? Anyone want to buy a home? What reason do you have for that? Like and share, give me your thoughts in the comments!

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What is the most valuable thing to a student in post secondary school?

What do students want the most from their experience at a post secondary institution?

How would you change your post secondary experiences?

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