Invest It Wisely

Living to 100 and Beyond: How Will It Affect Your Retirement Plans?

Kevin — Mon, 14 May 2012 09:00:06 +0000

This is the first in a series of articles on living to 100 and beyond. This post was originally published on May 17, 2010.

Ever since time immemorial, humans have been born, they age, and one day, they die. Each of us is blessed with only a few short decades of youth; it’s all downhill from there. Indeed, retirement at the age of 65 seems almost cruel when you think about it: Most of your youth is already gone, and many of your retirement years will be spent visiting your new best friend, the doctor, and watching life pass you by as friends and family slowly pass on. Of course, there is joy, too, such as the freedom of finally being free from work, while being able to enjoy the company of children and grandchildren.

What if we didn’t have to suffer the consequences of aging; what if things didn’t have to be this way? What if one day, each passing year meant an increase in your personal expected lifespan? What if we were even able to reverse the processes of aging, so that you could be restored to youthful vigor and vitality? Sounds like wishful thinking? Ever since the beginning of time, people have been searching for the Fountain of Youth. It hasn’t yet been discovered, but in the future, maybe a miraculous fountain won’t be needed.

New Orleans Mardi Gras 1907. Illustration showing title float for Momus parade. "The Quest for the Fountain of Youth". Source: http://nutrias.org/~nopl/monthly/february2007/february2007.htm

By now, you are probably asking yourself, “what is this guy on?” Well, I am simply talking about the singularity. To explain what the singularity is, one first has to look at the general technological trends. Take a look at the time elapsed since major events in our history:

Agricultural revolution: ~10 000 years

Bronze age: ~4 000 years

Iron age: ~3 000 years

Widespread use of gunpowder; widespread sailing across the oceans: ~500 years

Industrial revolution: ~200 years

Flight; automobiles: ~100 years

TV: ~70 years

Transatlantic flight: ~50 years

Lunar landing: ~40 years

Beginning of widespread Internet use (information revolution?): ~15 years

Arriving at the singularity

As you can see, the pace of technological advance has been accelerating. The amount of change in the last 100 years alone is simply incredible, compared to all of the centuries before. It’s hard to comprehend the vast amount of change for those of us who have only been around a couple of decades, but if you had been born 100 years ago, then there would be no TV, no Internet, no international flights, no nuclear power plants… we have changed the world tremendously in the past 100 years.

As a species, we have greatly reduced the incidence of disease, we have greatly increased the dissemination of information; heck, in spite of all the bad news that you read about, the human race has built an amazing wealth of capital and technology. We stand on the shoulders of giants, of all those who have come before us and contributed to the accumulation of knowledge and progress. We’ve stumbled along the way, too, especially in the first half of this century with two world wars and with clashes of irreconcilable ideologies, but this doesn’t mean that we haven’t made a great deal of progress, in spite of the challenges that we have faced.

Given the improvements to our living conditions and to lifespans, why is it that we still imagine our later years as being more or less similar to how they’ve always been? Surely with all the change in the past 100 years, the change coming up is going to be even more incredible. It’s just hard to see, since we are actually living through these times and experiencing the progression of history first hand.

So, is this really what is still in store for us? Maybe not anymore. One guy who has put a great deal of thought into these ideas is Ray Kurzweil; you can read more about his thoughts on the singularity at his site, KurzweilAI.net.

The retirement plan

So, what does this mean for our retirement plan? First, let’s take a look at how retirement plans are often done today. The usual retirement plan takes a regular savings plan and places a few assumptions on it, such as a compound annual return of 8%, a retirement age of 65 or before, and a life expectancy of another 15-20 years beyond that. The savings built up over time are drawn down during retirement, and it looks something like this:

Traditional retirement plan. Prepared with MSN MoneyCentral.

There are a few issues with this sort of a plan:

What happens if you live “too long”? You no longer have any retirement savings.
What if your income changes over time? There is no longer a full-time work guarantee for many of us.
Do you really want to settle for a “so-so” retirement, watching your nest egg dwindle with each passing day?

In order to fully capitalize on the potential advantages of longer lifespans, the above approach clearly won’t work too well. Our graph should look more like the following:

Retirement seed. Prepared with MSN MoneyCentral.

How can we get here? In order to achieve this, we can’t stick with a traditional plan, but we have to take the call to action and go above and beyond that. There are a few key points that will help form the foundation of this new retirement plan:

In my next post, I will talk more about the lifestyle and expectation changes, as well as how a longer lifespan changes investing strategies. What do you think about the coming changes, and how will it impact your retirement strategy?

Giveaway code: 9232

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Weekend Reading: Happy Mother’s Day Edition + Announcing the iPad Winners + My Trip to Grenada and Some News

Kevin — Sun, 13 May 2012 21:25:24 +0000

St. George's, Grenada, 2000 (Photo credit: Wikipedia)

Hi everyone,

Happy Mother’s Day to all of the great mothers and grandmothers out there! Your job is the most important in the world: raising the next generation. Props to all of you.

News

Adama D. Brown wrote an excellent review of Easy Voice Recorder, over at Brighthand Smartphone News & Reviews. Thanks very much to Adama and the team!

I also recently returned from a trip to Grenada. My girlfriend was there on business, and I joined her to spend the time together. Yes, I was spoiled with sun and warm waves. However, since she was there on business, I also worked during the day. It was really easy to get most things done on the Mac, though I didn’t find a reasonable replacement for Paint.NET so some stuff was a bit of a pain, like processing screen shots or doing diagrams for the book I’m working on.

During the evening we took a bit of time to swim at the beach or pool, and eat with her coworkers. The weather was really great the first week, though it started to rain every day in the second week. It was still warm and pleasant.

The resort was also quiet, since it’s low season now. The first day I managed to piss off a guy selling spice necklaces since I wasn’t interested. There’s more pressure on the local merchants since tourism plays such a big part of the economy, and the last cruise ship of the season docked while we were there. I ended up buying another necklace later from another beach merchant. For some reason, they all kept trying to sell me “Ganja” when they learned that I was from Canada. Do we Canadians have a reputation as being big potheads? Needless to say, I declined but I was amused.

The trip overall was really nice, and even though it wasn’t supposed to be a vacation, it was almost like a honeymoon for us, having that resort almost all to ourselves. The only real downside of the trip is that we got completely massacred by sandflies on the weekend we rented a car and drove up to Belmont Estate, an organic chocolate plantation. We both got over 30 bites on our legs each, and there were nights where it was SO itchy that we couldn’t get any sleep. That’s the downside of warm countries — the insects seem to be hungrier and more aggressive!

This trip is the main reason you’ve seen less weekend editions and stuff from me, as I focused the limited time I had on building the business. I think I’m going to take it easy with blogging in general, but don’t worry, I have no intentions of quitting.

I also ran into a couple of my old coworkers on the flight back home, which was a really big coincidence. They were coming back from Australia, where they had been on business. My old company is now a shadow of its former size, but at least they still have jobs and things seem better since the latest acquisition.

iPad Winners

I’m also happy to announce the winners of “Two Years of Blogging: My Thoughts, and an iPad 3 (The “New Ipad”) Giveaway + Other Great Prizes!“:

Rebby
Julian
Katy M.

Congrats guys, and don’t forget to answer your emails so you can claim your prize!

Weekend Reading

Career

Investing

Adding Gold and Silver to Your Investment Portfolio
Das Gold der Notenbanken – Funktion und Bedeutung (An interesting take by a German Banker on the role of Gold in the banking system)
Eagle Energy Trust: Permian Basin Asset Ensures Sustainability
Why Hold High Yield Stocks

Miscellaneous

Personal Finance

Retirement

Have a great weekend, all!

Giveaway code: 9232

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Getting Screwed Out of Your Hard-Earned Capital: How CDs and GICs Are Rip-Offs for Long-term Investing

Kevin — Wed, 09 May 2012 09:00:08 +0000

US Dollar Purchasing Power (Photo credit: fbobolas)

Is there such a thing as a guaranteed rate of return? There seems to be a trend for people to “flock to safety” by buying certificates of deposit (CDs) or their Canadian equivalent, guaranteed investment certificates (GICs). There is no risk if a capital loss, at least in nominal terms.

However, money is just a scorecard. What matters is what we can acquire with that money in terms of real resources. What happens if you earn a rate of return of 2% on your CD, but prices increased by 3% over the same period of time?

CDs and GICs can make sense when compared to leaving your cash in a chequing or savings bank account. If you’re using it for that purposes then that’s one thing. However, what about as a long-term investment? Can CDs and GICs preserve your capital over the long term?

What is the real rate of inflation?

Inflation is a hard and pernicious thing to measure. The traditional measure of inflation, and the one I agree with, is that it is a monetary phenomenon and not a price phenomenon. What this means is that if you buy a computer in year 1 and it costs $1,000, you buy another computer in year 2 and it also costs $1,000, and both the money supply and production doubled in the mean-time, you just got screwed out of half of your money, even though prices didn’t rise. Inflation is not just about rising prices. Had there been no inflation, the computer would have dropped in price to $500, since workers are now producing twice as much.

However, it is very hard to measure how increasing money actually affects the economy, and the individuals within that economy. To a certain extent, credit creation based off of demand is legitimate and some of both inflation and deflation is to be expected in a healthy, functioning economy. Problems set in when bad debts are papered over rather than being allowed to fail, and when the government spends money into existence and spends this money on favoured parties. These favoured parties get to spend the new money first before prices have risen, thereby transferring over real resources to themselves and screwing over those who get the new money last, if they even get it at all.

On top of it, you have various ways that the official rates get fudged. If I no longer have enough to buy steak, and I buy hamburger meat instead for the same price, then my consumer basket has changed. In a sense, since I’m not paying more, I didn’t experience any inflation at all, right?

Getting screwed out of our hard-earned cash

Let’s say the official government inflation rate is 2.5% (in line with official numbers), and that skeptics are claiming that the real rate of inflation is actually 6%. Let’s say that the truth lies somewhere in between and use 4% as our inflation rate. We’ll take a look at how our time deposit fares in this scenario, using a 5-year time deposit rate of 2.10%, compounded daily.

Invested	$100,000.00
Interest	$111,070.73
Less: Taxes at 20%	$2,214.15
Net payment	$108,856.58

After five years, we receive interest of $11,070.73 on our investment, pay taxes of $2,214.15 on our gains, and lock in a gain of $8,856.58. Not so bad? Not so fast.

The purchasing power of our money has changed over this period of time. We can no longer buy the same amount of real goods, per dollar. It would be short-sighted of us to consider our nominal gains in a vacuum, without considering the impacts on our purchasing power. Let’s discount this net payment at varying rates of inflation, depending on your favourite statistic:

	Real returns after taxes	Loss
Discounted @ 2.5%	$96,065.18	-$3,934.82
Discounted @ 4%	$89,123.25	-$10,876.75
Discounted @ 6%	$80,640.95	-$19,359.05

There is nothing flattering about this picture. Not only did we lose money in real terms, but to add insult to injury, the government taxed us on our loss! Even going by the official government statistics, we still lost 4% on our investment, and going by the skeptics’ estimated inflation, we lost a full 20% on our investment. Ouch!

My personal rate of inflation

Home prices in Canada have been increasing at a nominal rate of something like 7% per year throughout the last decade. Gas prices… at 8% per year. I don’t remember how much food cost 10 years ago, but I do remember I used to get a lot more for $50 than I do, today. Inflation here is probably at least 3% to 4% per year.

Add it all together and I think that I have been personally experiencing an inflation rate far greater than 2% to 3% over the past few years. Some of you might say “well, you’ll recover on the housing inflation when you sell”, but I don’t think so; another decade of 7% per annum in a country with plenty of land doesn’t make too much sense to me. Rents have been increasing more or less at the same pace; at some point these rises have to temper out.

Dear reader, what is your personal rate of inflation? What are your thoughts on investing in GICs and CDs in an environment where rates of return are very low, but rates of inflation are high?

Giveaway code: 9232

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5 Tips on How to Eliminate Distractions and Increase Your Productivity

Kevin — Mon, 07 May 2012 09:00:33 +0000

Image via Wikipedia

1. Find a quiet place with few distractions — like a library.

When I am at a library, I can find and keep a high degree of focus. There is nobody to distract me, and the quietness and solitude helps me to stay on task. I can fill my entire mind with the task to be accomplished, and I work much more effectively as a result.

Sometimes I work from home which also has its benefits, but I also find it is easy to get distracted. There are games on my computer, a TV, a radio, various chores that need to be done, and it is hard to maintain focus for a long period of time. If someone else is home, too, then forget it — work time is over.

There is also a psychological component to it — the home is a place of relaxation and socializing, two goals which can conflict with getting things done. A library is a place for study and concentration, which is more conducive to getting things done.

2. Limit multi-tasking.

We humans may have highly parallel brains, but we are mostly single-task creatures — we are more effective at concentrating on one task at a time.

I have never understood the hype of being an “effective multi-tasker” when trying to do several tasks at once is actually just a good way of sucking up time. Whether it be checking up on email or chatting on an instant messenger while trying to get stuff done, all of the constant context switches will simply lower your overall productivity.

Here is a very simple proof: Compare the speed of writing “a, b, c, d, e” five times in a row, versus writing the same sequence but doing all of the As first, then all of the Bs, etc…. Which series do you complete faster?

3. Limit fast-burning carb intake.

Another source of distractions can be frequent hunger pains or periodic blood sugar crashes. These happen more often when we have a high-carb diet, or when we eat a diet with lots of refined foods and sugars.

Stick to fruit, vegetables, and hearty carbs, and keep overall calories from fast-burning carbs low. Get more energy from healthy fats, which burn more slowly and are more effective for long, sustained workloads. Train your body to burn more fat instead of asking for sugar every couple of hours, and you will be able to work more effectively as well as have a healthier metabolism.

4. Set aside enough time for relaxation and downtime.

Our brains become depleted over a whole workday, especially one involving a lot of mental focus and energy. Schedule the more difficult tasks for earlier in the day, and ensure you have enough downtime in the evenings to connect with loved ones, reflect on the day, and get enough sleep to be fully prepared for the next day. Apps like F.lux help to make it easier to sleep at night.

Don’t forget about physical play and exercise — this is especially important for those of us that spend hours in front of a screen and don’t move around enough.

5. Do only one task at a time — but have many tasks to choose from.

One quick road to burnout is to do the same thing, hour after hour, and day after day. A bored and burned-out brain is an easily distracted brain. Do a variety of tasks over the workday to keep things interesting and to exercise different parts of your brain, resulting in a more balanced workload and more overall productivity and creativity.

Dear reader, what are your tips for reducing distractions and increasing productivity? I would love to hear them.

Giveaway code: 9232

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You’ve Just Registered a Canadian Corporation: What’s Next?

Kevin — Mon, 30 Apr 2012 09:00:03 +0000

Tesoro Corporation headquarters, San Antonio. Source: Wikipedia

In my last post on this topic, I previously discussed how to form a new Canadian corporation. In this post, I’ll go into a little more detail on what happens once you’ve incorporated, and the rights and duties of the three main groups of the corporate structure: shareholders, directors, and officers.

Before we get started, the usual disclaimer: I am not a legal expert, and this article in no way constitutes legal advice. It’s possible that this article contains factual errors or omissions. Follow this advice at your own risk, and do your own due diligence before taking any action.

Initial meetings and resolutions

When you incorporated, you listed an initial set of directors. These directors remain in place until the first meeting of shareholders, at which time the shareholders elect the new set of directors. This meeting must be called within the first 18 months after incorporation.

You’ll also be working with some internal documents, such as the corporate minute book and the corporation’s financial statements. You need to keep these documents up to date, but you can also keep them at your primary place of business.

Early on in the life of the corporation, the directors may also hold an “organizational meeting”. At this meeting, the directiors can pass corporate by-laws, appoint officers, issue shares, make banking arrangements, and more. These resolutions must be recorded in the corporation’s minute books.

The directors also need to appoint the officers of the corporation. Officers are responsible for the day-to-day operations of the business.

Here are some important points from the 2011 Guide to Federal Incorporation that you should be aware of:

One person may act as a director, officer and shareholder at the same time. In many small businesses, one individual is the sole director, the sole officer and the sole shareholder.

In a small business where one or two people act as directors, officers and shareholders, meetings are not necessary. Shareholders in these corporations often prefer to act through written resolutions.

If the directors change, the corporation must file the Changes Regarding Directors form with Corporations Canada within 15 days of the election.

The latter changes can be filed online at no additional cost.

Keeping your corporation in good standing

It’s important to keep your corporation in good standing. Otherwise, it may be dissolved by Corporations Canada! Here are the important points:

An annual return must be filed every year. This is not your tax return.
The fees must be paid. It’s $20 to file an annual return.
You must notify Corporations Canada of a change of registered office.
You must also notify Corporations Canada of a change regarding the directors.

You can always obtain a Certificate of Existence or a Certificate of Compliance, should a bank or other party ask for it.

Other obligations of the corporation

A corporation has duties to its shareholders. Even if you are a shareholder, director, and officer all in one, you still have duties to yourself that need to be recorded and fulfilled.

Among some of the things that you need to keep track of:

Meeting minutes and resolutions.
All official documents, such as the Articles of Incorporation.
Corporate by-laws, a share register, accounting records and financial statements. The shareholders have the right to view these financial statements.

Shareholders may also request that the corporation appoint an auditor.

The corporation must hold a shareholder’s meeting within 18 months of incorporation, and it must also hold each subsequent meeting every year, and no later than 15 months after the last meeting. In place of a meeting, the shareholders can also agree to a written resolution. This also needs to be kept in the corporate records.

Usually, the annual meeting should be held somewhere in Canada. However, if all the shareholders agree or the corporation’s articles allow, this meeting may be held anywhere.

Now that you about the general requirements of a corporation, let’s look at the three main groups: directors, shareholders, and officers.

The rights and responsibilities of directors

Anybody can be a director, so long as:

They are at least 18 years of age.
Of sound mind.
Not bankrupt.

Usually, at least 25% of the directors must be Canadian. In addition to the previously-mentioned rights and responsibilities, directors also have the following duties and liabilities:

Duty of care. Directors must at all times act honestly, in good faith, and in the best interests of the corporation.
Remaining informed. They must be aware of what the corporation is doing, as they are liable for its actions!
Preventing conflicts of interest. Directors and officers must disclose in writing any personal interest they may have in regards to a contract with a corporation. Otherwise, the contract can be annulled by a shareholder or the corporation.

In addition, directors are personally liable for the following:

Up to six months of unpaid wages to employees.
Unpaid sales taxes.
Unpaid source deductions.

In other words, a director can’t use the corporate veil to screw over either the government or the corporation’s employees.

The rights and responsibilities of shareholders

As the owners of the corporations, shareholders have rights upon the directors, officers, and the corporation. They can elect and dismiss directors, approve by-laws, appoint an auditor, and demand to see corporate records. Shareholders are also limited in liability to the amount they paid for their shares.

Shareholders influence the corporation by passing resolutions. There are three types of resolutions:

Ordinary resolutions. These require a simple majority in order to pass.
Special resolutions. These need a two/thirds majority. Examples of these including changing the corporation’s name or divesting all of the corporation’s assets.
Unanimous resolutions. If even a single shareholder disagrees, these cannot pass. An example of an unanimous resolution is the decision to not appoint an auditor.

These resolutions are passed at shareholder’s meetings, or by written resolutions signed by every shareholder.

Shareholders may also enter into a shareholder agreement. These agreements include taking on the rights and duties of the directors, although in this case, the shareholders would also be taking on the liabilities of the directors as well. The 2011 Guide to Federal Incorporation goes into much more detail on the types of agreements that shareholders can arrange with each other.

The rights and responsibilities of officers

Officers of the corporation are appointed by the directors, and their duties and responsibilities are also assigned by the directors. The same duties and obligations of a director apply equally to the officers of the corporation.

A recap

The reporting and paperwork requirements of a corporation may seem more onerous, but it’s really not as bad as it seems, especially if you are a self-controlled corporation or you run the corporation with a partner you can fully trust, such as your significant other. In that case though, I recommend that the primary partner maintain 51% or more of share ownership in order to maintain primary control. Otherwise, you could run into tie deadlocks, which will prevent things from getting done.

What are your thoughts on incorporating? Is it worth it? If you live outside of Canada, what is incorporation like in your country?

Giveaway code: 9232

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How to Register a Canadian Corporation

Kevin — Wed, 25 Apr 2012 09:00:34 +0000

Prince Edward Island - 2003 (7) (Photo credit: Smulan77)

Have you ever wanted to start your own business? If you are based in Canada, then you should seriously look at incorporating under federal law. It’s incredibly easy to register a new corporation, and you don’t even need to go through a lawyer. File online, and you’ll be incorporated by the next day!

What are the advantages of incorporation?

Separate legal entity. A corporation acquires a life of its own that continues to exist even beyond the life of the founders. It can acquire assets, enter into debt, and enjoy many of the other rights and obligations of a natural person.
Limited liability. Generally speaking, a shareholder of a corporation will not lose more than their initial investment. As a director and manager of the corporation, you may still be exposed to personal loss, since many banks will want personal assets as collateral. The corporate veil also does not protect you from criminal negligence and harm.
Small-business tax rates. An incorporated small-business that keeps a significant amount of its income in the business may pay significantly lower taxes.

There are, of course, a few downsides as well, including higher startup costs and more paperwork to do.

Small-business tax rates

Let’s look at the small-business tax rates in more detail.

If you run a Canadian-controlled private corporation (a CCPC), and your business is based in and operates out of Canada, then you could be eligible for the small-business deduction. This allows you to save greatly on the tax rates that you would otherwise have to pay, up to $500,000 in income.

The federal small-business tax rate is 11%. See below for the provincial rates, and the combined rates (note that the provinces may have their own income limits and stipulations which apply to the provincial rate).

Province	Provincial rate	Combined rate
Manitoba	0.00%	11.00%
Prince Edward Island	1.00%	12.00%
Saskatchewan	2.00%	13.00%
British Columbia	2.50%	13.50%
Alberta	3.00%	14.00%
Newfoundland and Labrador	4.00%	15.00%
Northwest Territories	4.00%	15.00%
Nova Scotia	4.00%	15.00%
Nunavut	4.00%	15.00%
Yukon	4.00%	15.00%
New Brunswick	4.50%	15.50%
Ontario	4.50%	15.50%
Québec	8.00%	19.00%

Western Canada is the best place to run a small business in terms of tax rates, though Prince Edward Island is a good exception at a combined rate of 12%. Québec, as usual, is by far the highest-taxed province with a combined rate of 19%, even for small businesses.

1. How do I incorporate federally?

If you’ve decided to incorporate federally, then you’ll need to submit the following:

A NUANS name search report.
Articles of Incorporation.
Board of Directors information.

You’ll also pay about $220.48 for everything.

The online process will guide you through all of these in detail.

Come up with a name. The first thing you need to do is to run a NUANS name search, to ensure that your name is available for use across Canada. This will cost you $20.48 (April 2012). Once you have your NUANS report, you can then pre-confirm your name with Corporations Canada. This will ensure that you can use this name to carry out business in Canada. The responsibility will still be on you to ensure that you don’t violate any trademarks with your name; in addition, you also need to register a trademark if you want to trademark your business name. You’ll also need to be prepared to defend your trademark.
File your Articles of Incorporation. Once you’ve confirmed your name, you can then go through the actual registration and file your application online. What this means is that you will file your Articles of Incorporation and submit your Board of Directors information.

I highly recommend reading the 2011 Guide to Federal Incorporation, which has a TON of information and valuable resources to help get you started.

When filing your articles of incorporation, here are the things you need to enter:

Classes of shares.
Restrictions on share transfers.
Number of directors.
Restrictions on business activities.
Other provisions.

If you are incorporating yourself, none of this will be very complicated. The most important part is the restrictions on share transfers. If you want to be a private corporation and not subject to the onerous regulatory requirements of public trading, you need to be specific on what you put, here. Thankfully, the online registration website makes it very easy to fill this in.

You will also need to put the names and addresses of the incorporators; these are the founders of the corporation. They do not necessarily have to be the same people as the directors.

AN EXAMPLE

ARTICLES OF INCORPORATION

Corporate name

Acme Amalgamated, Inc.

Province/territory of registered office

Ontario

Classes and quantity of shares

The corporation is authorized to issue an unlimited number of common shares.

Restrictions on share transfers

See attached schedule

Minimum and maximum number of directors

1 – 3

Restrictions on the business the corporation may carry on

None

Other provisions

See attached schedule

Incorporator’s Declaration

John Smith, [Address], [Signed].

SCHEDULE: RESTRICTIONS ON SHARE TRANSFERS

The right to transfer shares of the Corporation shall be restricted in that no shareholder shall be entitled to transfer any share or shares of the Corporation without the approval of:
1. the directors of the Corporation expressed by resolution passed by the votes cast by a majority of the directors of the Corporation at a meeting of the board of directors or signed by all of the directors of the Corporation; OR
2. the shareholders of the Corporation expressed by resolution passed by the votes cast by a majority of the shareholders who voted in respect of the resolution or signed by all shareholders entitled to vote on that resolution.

SCHEDULE: OTHER PROVISIONS

RESTRICTIONS ON SECURITIES TRANSFER: The corporation’s securities, other than nonconvertible debt securities, shall not be transferred without either (a) the sanction of a majority of the directors of the corporation, or (b) the sanction of the majority of the shareholders of the corporation, or alternatively (c), if applicable, the restriction contained in security holders’ agreements.

Any vacancy on the board of directors shall be filled by a vote of the shareholders.

You don’t have to worry about copying these provisions, since the online system will let you select them automatically from a template when you go through the process of registering online.

You will also need to file your Initial Registered Office Address and First Board of Directors. This is super-straightforward to do. All you need to do is enter your primary address of business, and enter the names and addresses of your directors. You can personally be a shareholder, director, AND an officer of the corporation, so there is no need for these to be different people.

2. How do I incorporate provincially?

After incorporating federally, you’ll also need to register the corporation provincially. Note that this usually does not mean you also incorporate in the province, so be careful about how you proceed! Usually what this means is that you have to register your federal incorporation in the province(s) where you plan to conduct business.

Unlike the Canadian government, some provinces also like to take their slow, sweet time. I’ve been waiting for more than a week for my registration to go through (and I never did receive the documents for my sole proprietorship).

3. Permits and other formalities

You’ll also want to register for a Business Number, which you’ll need for opening a Goods and Services Tax/Harmonized Sales Tax account. If you expect to sell more than $30,000 worth of goods and services in a year, then you’re required to collect sales taxes and remit them to the government. Each province has its own schedule of sales tax, and it also depends on whether you are selling the product within the province, or if you are selling from out of province.

See this guide to charging and collecting sales tax for more information.

You’ll also need to check with all other federal, provincial, and municipal regulations and bylaws to see if there are other permits required.

Congratulations, you are now incorporated!

In my next post on this topic, I’ll look at the formative activities when starting a corporation, as well as other duties you need to be aware of. Good luck!

Giveaway code: 9232

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How These Mental Anchors Are Seriously Holding You Back in Life

Kevin — Mon, 23 Apr 2012 11:00:56 +0000

Image via Wikipedia

I’ve recently been thinking about why people think that self-employment is such a big risk, especially in industries where human capital is important and economies of scale tend to be less important — like professional software development, for example. What is it that makes it so risky?

Is it the fact that you have to compete in a free market? Sure, but then again, so does your employer.
Is it the fact that you lose out on benefits and retirement savings match? That stuff doesn’t come for free, and you should consider it as part of your salary, but it doesn’t mean you couldn’t provide that for yourself.
Is it the fear of not receiving a stable pay check, and perhaps living on a low income for months on end? That is a valid concern, but there are tens of thousands of jobs out there — it’s not like you’ll go broke and die alone just because you took a shot, no matter how dramatic some people make the choice out to be.

Why is it risky to live off some of your savings, and either become successful or re-enter the workforce? What exactly are you risking?

Our anchors are too heavy; they drag us down and dampen our curiosity and sense of exploration.

Anchor #1: Our fear of not keeping up with our peers. The more I think about it, and the more I dig into the reasons why I myself have been averse to the idea of self-employment in the past, and why I think others are averse to the idea, is the fear of failure to keep up with our peers. As much as we try not to, and perhaps we don’t admit it, but we are always comparing ourselves to our friends, family, neighbours, coworkers and colleagues, and judging ourselves in relation to them. What other metric is there to go by? What will my mom/girlfriend/etc… think of me if I do this and am not wildly successful?

Anchor #2: Our fear of not accumulating enough wealth for ourselves and our family. At the same time, we have a fear of not achieving our goals. Jobs usually aren’t all that bad, and through a job, we can build up retirement savings, go on vacations, and stash money aside for the future, for our retirements, and for our children. We count on our jobs to get us there, even in today’s world where employment is less than assured, and governments are racking up so much debt that job-destroying inflation and taxation are sure to increase in the future. However, that lies outside of our realm of experience; we don’t see that, we only see our own lives, desires, dreams, and goals.

Self-employment seems like a big risk when you take all of this into consideration. Will I still be able to reach my retirement savings goals? Will I still be able to provide for my family?

What happened to your sense of exploration and excitement?

Do you remember the sense of wonder, excitement and curiosity you had as a child? You probably got yourself into all kinds of trouble, scraping some knees and bruising some elbows, but at the same time, you probably had a blast and gained so many great memories. What a shame it would be if you were too afraid to climb up into the treehouse cause you might have fallen off the ladder, or if you never got on a bike because you might have fallen off and scraped your knees and elbows.

Nothing worth achieving is ever easy in the beginning. A sense of fear is a good tool to prevent us from rushing headlong into danger, but at the same time, especially with all of the wealth of modern society, I am afraid that we get too attached to this wealth and we become so afraid of losing it that, ironically, we are unwilling to make the choices that could help us to increase our wealth.

You will not die alone like a fool.

I sometimes think about what people had to go through in World War II, and I think “now that was a real risk!” No matter what side of the war you were on, that war was nasty, brutal, and one of the worst evils that humans have ever done to themselves, if not the worst. Could you imagine being an Allied soldier, facing the bullets and mortars at the beaches of Normandy? What about the Germans and Russians alike, who fought bitterly in subzero temperatures and watched as their comrades were killed or frozen to death. What a life a Russian soldier must have had: Turn back, you get shot; press on, you probably get shot anyways, and at the end of it all, you might still have ended up in the gulags!

Somehow, all of that madness came to an end, and people’s entire lives were changed. My own grandmother grew up in this world, and she faced tough choices in her life that I will never have to face in mine. She didn’t grow up in a world that was interconnected and online, and while she did have her own business at one point, she had to risk a lot more than simply “not making a dime” for a few months!

I’ve also travelled to Ethiopia, a country where many people today live a very primitive agricultural existence and where the only real choice for them is if they wake up or starve. Ironically, though, the further away you get from the cities the happier people seem to be, because they don’t know what they are missing. It’s not their fault at all — if I had been born there, would I have the opportunity to be doing what I’m doing now? I don’t know. My life would certainly be very different.

Take the opportunities that you have been given in life, and be grateful for them

Every time I feel fear and doubts creeping up in my mind, I just remind myself to be grateful that I even have the shot. I am only an average Canadian, but hey, that is pretty good if you look at all the possible places I could have been born! I don’t understand how some people with millions in net assets and hundreds of thousands in income can become so paralyzed. At the same time, it seems that those with little wealth but big envy are the least happy in life.

My advice for getting over the fear

Get over what other people have. No matter how much you have, someone else will have more than you. Keeping up with your peers in this way is unsustainable. I believe in surrounding yourself with people better than you so that you can learn from their qualities, but if you can’t get over your jealousy of those who have more than you, you will never reach true happiness.
Get over yourself. Your life is not so dramatic that leaving your job will end up into some sort of a Hollywood tragedy where your entire life is ruined. Don’t use your desire to take the easy road and get some wealth the easy way be the excuse that prevents you from living the life you truly want to live.
Dream a little. Bring back some of that inner child. The universe won’t care if you spend your life worrying or not, but you owe it to yourself to give that inner child a chance.

Dear reader, have you ever been held back by these mental anchors? What holds you back? We can’t change everything about ourselves, but I really do believe that these anchors are mainly a product of our own creation rather than something we inherit, so we can do something about them! I’d love to hear your stories.

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Weekend Reading: What Lies Ahead Edition

Kevin — Sun, 22 Apr 2012 18:33:02 +0000

Before you read on: My iPad giveaway is still open! Don’t miss your chance to enter and win!

I am always astonished at how technology has made our lives so much easier in such a short period of time. My grandmother grew up in a time where there were no televisions, no commercial air travel, no washing machines, and life as a child meant lots of manual labour and taking care of your younger siblings, and long bike-rides to school! When her grandmother was growing up, there were no radios or cars, and much of the American west was still wild and free.

I don’t think we appreciate enough just how much the world has changed in just a few generations and how this change is accelerating; when else in history have things changed this quickly? If you were living in Roman times, your great-great grandparent’s lives were probably not much different than your own. If living in prehistoric times, there was probably no discernible difference at all. Now, change is measured in years and months.

What’s next? All of these technological solutions come with their own set of problems. Within a couple of decades, most cars will be automated and electric, and cost less than gas-powered vehicles. How will we deal with the huge increase in traffic that will come about? Automated driving can help, but to a certain extent. How will we deal with the existential risks posed by bio-engineering and nano-technology?

What I think is the biggest issue to come: How will we humans deal with a world driven and powered by machine intelligence? As a software developer, I fully expect that most humans will be unemployed by 30 to 40 years out, and that while my profession will be one of the first to get hit, no profession will be immune, whether it be white collar or blue collar.

Do you drive as a living? Robots will replace your job with their unwavering attention and accident-free driving.
Do you work in construction? Robots will be able to get the job done more quickly, and without losses from workers’ compensation or unions.
No profession will be left out. Haven’t you seen what Jude Law was up to in the movie A.I.? As weird and far-fetched as this seems right now, every culture has done things that seem quite bizarre to other cultures, and I do think that this will become a reality for many people. Why not? Robot partners will never nag, complain, or be selfish.

How will we humans survive? How do we ensure that AI doesn’t kill us all? While people are focused on nuclear weapons and terrorism, I actually think that it’s artificial intelligence that poses both the prime existential risk and the salvation for our species. If you’re working on AI (to a certain person that might be reading this post, yes, I’m directing this at you!), you could either be complicit in the death of billions, or responsible for the one thing that can solve all of our world’s problems. Are you taking your work seriously?

Let’s say that AI has taken over most professions. What then? How do we survive?

World output will be huge. Humans need never work again, but…
How will this output be distributed? If it’s based on property rights, what happens to people who have no property? If it’s based on socialism, what happens to those who fall out of favour with the central dictatorship? And…
AI will out-think us in every possible way. All rights and morality are pleasant fictions that derive both from our evolved behaviour and our reason; they help us to coordinate and avoid descending into a hellish nightmare of all against all. When power disparities are great enough, all that matters is what the universe allows. The universe allows us to destroy the habitats of monkeys and violate their “rights”. Why would a vastly superior intelligence have any interest in respecting our rights, when there’s not much we could do to actually defend them? We would be like monkeys or ants to them.

I understand the appeal in living for the moment, enjoying a nice ski run, a vacation on the beach, and I do love all of that stuff. However, our future and the future of our unborn children includes a world where this stuff is going to become a reality, so I do spend a lot of time thinking about this. Will we make it through? What will the world be like on the other side? Will it be a utopia on Earth, or are all the sci-fi writers right about their pessimism?

Special mentions

A special thanks to Rob Carrick for featuring IIW in his personal finance reader!

Weekend Reading

Business

Claiming a Business Loss – Losing Money Never Felt So Good

Career

Economy

Giveaways

The New iPad Giveaway!!

Internet

How to Dramatically Increase your CTR in Google Organic Search Results

Investing

Miscellaneous

I’m Hot Because I’m Bald

Motivation

Personal Finance

Politics

Technology

Android Emulator Now Supports Native OpenGL ES2.0!

Have a good weekend, all!

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Interview: CapLinked Co-Founder and PayPal Mafia Member Eric M. Jackson

Sasha — Fri, 20 Apr 2012 09:00:01 +0000

The following is a guest post by Alex Levin, who writes for JW Surety Bonds.

The early founders and employees of PayPal are famous for dreaming big. Known informally as the “PayPal Mafia,” these entrepreneurs have gone on to fund or help create numerous game-changing startups, including YouTube, Yelp, Flickr, LinkedIn and Facebook. And now Eric M. Jackson, the former VP of marketing for PayPal, has added his own contribution to the long list of PayPal Mafia internet startups – a private investment networking site called CapLinked.

According to Jackson, while the internet was busy revolutionizing all sorts of industries, the world of private investment went largely neglected. Facebook had made connecting with friends easier than ever, and YouTube put video entertainment at the fingertips of anyone with a computer, but professionals with a very real need for engaging in investment opportunities were stuck with old technology that was difficult to use. In order to remedy this, Jackson and co-founder Chris Gray created CapLinked as a way for investors and private companies to connect, manage deals and stay in touch even after a deal has been completed. And the results have been astounding – since its founding in 2009, over $27 billion dollars in deals have been made through CapLinked involving nearly 80,000 companies, making CapLinked an undeniable success.

And as Jackson puts it, the success indicates to him that CapLinked finally provides the service that the private investment community has needed for over a decade.

What was the inspiration for creating CapLinked?

I think the simplest way to answer is that in 2009, I was having coffee with [co-founder] Chris Gray and we were talking about business lessons we learnt in our careers – I had been at PayPal before and had a media company, so I had raised some capital before, and I was talking about how challenging it is to get a business up and running.

When it came to raising capital, there weren’t a lot of tools but then the other problem was to keep updated with investors. And Chris, who had been in investing for 15 years as well as private equity, he said from his side of the table there weren’t a lot of tools to help him invest and find opportunities either, and we realized that there should be a way to make this a lot easier than sharing information on LinkedIn or Facebook. So that realization was difficult for all parties involved and led us to create a new platform that’s social and easy to use and makes it a much simpler process.

How does CapLinked work?

At a very basic level, CapLinked gives companies, investors and their advisors tools for networking, managing and raising capital as well as exchanging updates. So think of it as a centralized platform for all the parties involved in private investing to come to and share info.

You can set up a profile and network on the site and be introduced to advisors and lawyers, and you can set up a deal room. And unlike other online deal rooms that can be very expensive and require longterm commitments, the site is free. So you set up a free deal room and populate it with info from your transaction, you can share it and it feels very social – so the software is not clunky and user unfriendly.

It’s meant to be much more enjoyable and really intuitive while also giving you the tools to go through due diligence. Then, after the deal is done the investor can continue receiving updates from this guy through a full suite of investor relation tools.

Generally speaking, it is a social network and you might say it’s a professional network where people that are looking for private investing come and find good prospects to work with and then are given the tools to be able to deal with them.

How does CapLinked differ from past private investment tools?

It really brings it out of 1995 and by that I mean that private investment has been stuck with old 1995-era technology for a long time – this includes spreadsheets, faxes, emails loaded with attachments, etc and it was a really old school process that desperately needed an update. When you look what’s going on with public markets, those investment tools are far more sophisticated and it’s time for private investment to catch up. It’s moving the entire industry away from email clients and lengthy cumbersome spreadsheets and moving it to a much more centralized and online environment – and even an environment that’s more secure than just emails flying around the internet. So it also protects privacy.

What has the success of CapLinked taught you?

The success of CapLinked has proven that it’s a product that people want. It’s really taken off and grown quickly and in the 13 months we’ve been available to the public, we have worked with technologies and industries that you wouldn’t expect to see – not just high tech but commercial, real estate, food and beverage and it just shows that a good set of tools is important for any business and that there is a real need for it in the business world.

Alex Levin is a writer for JW Surety Bonds, a surety bond agency licensed nationwide.

Giveaway code: 9232

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Three Important Milestones on Your Journey to Independent Financial Freedom

Kevin — Wed, 18 Apr 2012 09:00:44 +0000

Income tax (Photo credit: Alan Cleaver)

So I’ve been off on my own for a couple of months now, and while it hasn’t been too easy, it’s certainly been a lot of fun. However, at the end of the day, I need to ask myself: does this have a future? Can I keep “having fun”, or do I eventually have to snap back to reality and start putting my CV out there? While one must be prepared for both eventualities (if you haven’t planned for that, then you haven’t been giving the matter enough thought), I don’t think that diminishes in any way from the great experience that I’m gaining in the present.

I’ve setup a few milestones for myself, to help goad me into making continual progress, and ensure that I’m not slowly turning into just another unemployed bum. A lot of people call themselves freelancers, but that’s often an euphemism for couldn’t get a job! Here are my milestones:

Milestone 1: Transition from an unemployed bum to self-sufficiency

It’s a little harsh to say, but if you aren’t able to generate enough income to at least pay for your bills, then you’re just screwing around, like an unemployed bum. As fun as it is to joke around and have fun doing your hobby all day, if you can’t even pay your bills, then it’s nothing more than a hobby.

I’ve estimated that I need about $50/day (365.24 days a year) to reach this goal. This would be enough to pay for the food, the car, the mortgage and property taxes, repairs that come up; basically all of the day to day expenses that one has to pay. This is the floor. So long as I can reach this point, I’m not going to be eating the seed corn. On the other hand, this is a mile-post and not an end-goal. I don’t want to be an unemployed bum, but nor do I want to remain on the margins.

Milestone 2: Come into my own as an independent worker

How much income do you need before you can consider yourself as having come into your own? My opinion is that you should be making at least as much as you were at your day job. This will probably be some multiple of your self-sufficiency level, such as 3x. Keep in mind that I’m talking about gross figures here. At self-sufficiency levels, we don’t have to pay much in taxes, but as income rises, we do need to start setting aside a substantial portion of revenue for Uncle Sam and the other uncles out there.

I think that if anyone can make what they were making at their day job, but do it on their own, that is pretty sweet. Imagine having all the benefits of working on what you love, working your own schedule, being your own boss, and still earning just as much as you were before! I think this is a great goal to strive toward, and once reaching that point, I think it’s fair to say that you’ve achieved a measure of success.

Milestone 3: Self-actualization

As an entrepreneur and freelancer, you are not bound by the relatively narrow confines of your job. You don’t have to deal with “salary scales” and other BS that the HR department will put in your way. It’s certainly a challenge and a struggle just to match your day-job income, but you don’t have to stop there. For me, a good level of self-actualization would be 10x the self-sufficient level. Although taxes would greatly cut into this, I would still be able to bank plenty for the future, as well as re-invest into growing the business.

The hardest part is getting the ball rolling.

Speaking from personal experience, I think that things are toughest in the beginning. You’re learning what to do, you’re learning how to manage your time, and dealing with the shock and stress of no longer having a steady income. You may feel more socially isolated, and since there is a long delay between work and results, you might feel that you’re working for nothing. Why not just go back and work for the man?

I think that reaching the first milestone is the toughest, but at the same time, if you plant many seeds, you will get there. My seeds are starting to bear fruit and I have real hope for passing this milestone soon, so I can focus on coming into my own.

The world is not black and white, and there are pros and cons to both lifestyles. It definitely comes down to priorities. That said, I think that there’s no reason to be afraid, and to not give it a shot. I think that you can gain valuable experience from both sides of the fence. Does the fact that I quit my job after 7 years mean that I was wasting my time there? No. I learned a heck of a lot, and that is in fact how I got started in the mobile business. No matter what happens during your freelancing experience, treat it the same way: as an opportunity to gain some real great experience, and have a blast while doing it!

I would love to hear your thoughts and stories, as always!

Giveaway code: 9232

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Should I Convert My Variable Rate Mortgage to a Fixed Rate Mortgage?

Kevin — Mon, 16 Apr 2012 09:00:28 +0000

Mortgage debt (Photo credit: Wikipedia)

With recent bank promotions of 2.99% fixed for four years (some even for five years!), there have been a lot of discussions on whether it’s a better deal to go for a fixed-rate or not. What do you think? Better to go for a fixed-rate, or a variable-rate? In this post, I’ll compare both scenarios, and take a look at what happens should interest rates rise.

What if I’m looking to get a new mortgage?

Well, if you have a choice between a 3% variable-rate mortgage, and a 3% fixed-rate mortgage, I think that taking the fixed-rate mortgage is a no-brainer. The same rate, but with less risk! No need to read on if you are in that situation.

What if I already have a variable-rate mortgage, and I’m thinking about refinancing?

This situation gets a little bit trickier. In our case, we took a variable-rate mortgage a year ago back when the discounts on prime were still in effect, so we’re paying 2.30% on a 5-year variable. We have four more years to go before it’s time to renew into another mortgage, and another rate. When we were looking for a mortgage, premiums on the fixed rate were a little bit ridiculous; the situation has changed and now you can get a fixed-rate at 2.99%! Is it worth it?

Let’s analyze the following scenario:

$250,000 mortgage.
Variable-rate mortgage @ 2.30%.
Fixed-rate mortgage @ 2.99%.
Mortgage is up for renewal in 4 years from now.
25 year amortization.
Monthly payments.
Bi-annual compounding.
Figures start at period 1 (though choice of period does not alter the relative differences very much).

Our calculations will be done using the Canadian mortgage style. For the curious, here is how you calculate a Canadian mortgage in your spreadsheet:
Payment = PMT((1 + RATE/2)^(2/12) - 1, NUM_PERIODS, -MORTGAGE_AMOUNT, 0, 0) Interest portion = IPMT((1 + RATE/2)^(2/12) - 1, THIS_PERIOD, NUM_PERIODS, -MORTGAGE_AMOUNT, 0, 0)
This is for a mortgage that is paid monthly, but is compounded bi-annually as is the standard for a Canadian mortgage.

First, let’s look at the scenario where rates do not change for the next four years:

	Variable – Baseline @ 2.30%	Fixed @ 2.99%
Monthly payment	$1,095	$1,182
Interest paid	$21,520	$28,082

Our monthly payment for a variable-rate mortgage will be $1,095/month, while for the fixed-rate mortgage it will be $1,182/month. Not a big difference, but things get more interesting when we look at the total interest paid. By sticking with a variable-rate mortgage, if rates don’t rise at all, we will save $6,562 in interest payments.

Wait a second… are you really expecting that rates will stay at the same level for the next four years!?

It’s always possible, but maybe it’s not that likely. Let’s look at another possible scenario: Rates rise by 50 basis points per year, so that by four years out we’re ending at a variable mortgage rate of 4.05%, with a prime rate at 4.75%. How would things look, then?

	Variable – Increasing @ 0.5%/year	Fixed @ 2.99%
Monthly payment	$1095 – $1322	$1,182
Interest paid	$29,748	$28,082

The two mortgages are much closer to each other! In the face of rising interest rates, the variable mortgage starts to fall behind the fixed-rate in terms of total interest costs. (Note: My original post had it slightly in favour of the variable-rate mortgage, as I had interest rates increasing every 8 months instead of every 6. Thanks to Mr. Math for pointing that out).

What about if rates rise even faster than that?

I find this scenario no more likely than the scenario of rates staying at the exact same place for the next four years, but let’s say that the prime rate increases by a full 100 basis points per year. This would end the variable mortgage rate at 6.05% by four years out, with the prime rate at 6.75%. If we were renewing, we could expect fixed-rate mortgages to be in the 8% to 9% range by this time.

If there was a good chance of rates being that high, banks would be taking on a pretty big risk by loaning cheap mortgages. The value of those mortgages could be expected to fall substantially. Then again, the banks could all be wrong; it’s happened before.

With rapidly rising interest rates, the variable-rate mortgage no longer looks so attractive:

	Variable – Increasing @ 1%/year	Fixed @ 2.99%
Monthly payment	$1095 – $1607	$1,182
Interest paid	$39,314	$28,082

Things are starting to get painful for the variable-rate mortgage holder. They’ll definitely be better off in a fixed-rate mortgage if rates climb this much over the next 4 years.

I haven’t touched on penalty fees, time spent meeting with mortgage brokers, etc… so all of those factors must also be considered before you decide to refinance.

Dear reader, what about you? Have you decided to refinance lately? What are your thoughts on the current interest-rate environment?

Read more about Canadian mortgage trends here: Canadian mortgage trends.

Giveaway code: 9232

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What Do You Lose when You Decide to Stop Working for the Man?

Kevin — Thu, 12 Apr 2012 09:00:14 +0000

Milton from Office Space: Source: http://www.youtube.com/watch?v=RZuzQkRnCDY

In my last post in this series, I compared and contrasted the income and tax situation of working for the man versus working for yourself. After adding up the benefits and tax effects (and not counting additional tax breaks that your business may be eligible for), the main effect was mostly a wash. Yes, self-employed people have to cover their own benefits, and yes, self-employed people get smacked with the pension contribution twice. Even then, there was not a big difference in net income at the end of the day.

There is, of course, more to it than that. In this post I’ll take a look at some of the other, more intangible benefits that we both lose and gain, when we decide to follow the more solitary path of working for ourselves.

Working environment

This is very circumstantial and will depend on the sort of place you work at. For me, there were both positives and negatives. I got along well with all of my coworkers and my boss (who as of the time of this writing has also left the company), my desk was comfortable and has a lot of space, and the working environment was decent. I have had a mix of good working spaces and less-than-ideal working spaces, and while this one wasn’t the best, it was fine. It was an open concept with some desks facing each other at a 45 degree angle, so I didn’t quite like having to look at someone else’s head the whole day, but other than that it was good.

Aspects to a corporate working environment

+ Social interaction

+ Free coffee

+ Environment designed for work

- Fluorescent lighting

- (for some) hostile coworkers / bosses

- Noise & chatter

Career

I had been at my company for seven years before I decided to take the leap of faith. Some of those years were while I was still completing my university degree, so there was a lot of history there. I know that trying to take the leap right out of school would have been a mistake, since I would not have had any real working experience. Taking it 1 or 2 years after graduation would also have been a mistake, since things were still progressing rapidly, I was advancing quickly, and I was still learning a lot.

When did it finally become the right choice for me? When the company stalled, projects dried up, and I felt I was experienced enough in terms of skills and abilities to go for it, I asked myself the following questions:

Where could I be in the next two-three years if I continue to work for this company, or if I change jobs and continue my career at a different company?

Where could I be in the same timeframe if I decide to work for myself?

I felt that the best move for my career at that point would to be take the leap of faith, and differentiate myself far more than had I just continued as a software developer at some other company.

A question often asked of people in the corporate world is if they are a leader, or a soldier. Call me an outsider, but I prefer to be neither. I don’t have an innate desire for telling other people what to do, and neither do I just want to do what other people tell me what to do. I’d rather be a collaborator, and that’s not always possible within a hierarchical structure. It’s only within the free-er markets outside of the hierarchy that you can actually collaborate, rather than simply leading or following.

Aspects to a corporate career path

+ More clearly delineated — the path is marked, and the steps to get there are known.

+ The corporate world can be the best environment for making rapid and early gains.

+ Economies of scale and coordination benefits mean that your skills can sometimes be leveraged more effectively within the corporate structure.

- Seniority blocks progress — jumping ship may be required.

- Others directly decide your progress and advancement.

- Gains taper off after some time. Do you want to be in the same spot in your 40s?

Lifestyle

The biggest differences between working for the man and working for yourself has to come down to the lifestyle. Again, this will really depend on the sort of place you work at, so I will draw from my own personal experiences. Your mileage may vary.

The biggest benefit to me of working for myself is that I can work from home, at the library, at the cafe… wherever I choose. I set my own hours and working schedule. The problem is… this benefit can also be a drawback. At my job, all I had to worry about was getting my work done. Others were responsible for deciding what I worked on, what my schedules and deadlines should be, and how I should get there. Now, I need to decide all of that on my own. If I don’t manage my time effectively, I’m the one that ultimately suffers in the end. I don’t feel well and want to take a sick day? I’ll have to eat that cost. You bear both all of the costs and all of the benefits when you decide to work for yourself.

Aspects to the corporate lifestyle

+ Compartmentalized: Your office is for work, and your home is for playing around and relaxing.

+ Get paid for doing your work, and enjoy some insulation from the free-market realities of customer payment delays, losses, and lawsuits.

+ If everyone else is putting in 60%, you can put in 80%, look good, and still spend some time goofing off every day.

- Rigid work schedule and vacation time.

- Rush-hour commuting.

- Do you really want to spend your time goofing off when you could be working on your own projects?

I don’t think the grass is greener on either side of the fence; rather, I think that there are pros and cons to both. However, I do believe that true freedom is only found in working for yourself or within a company/partnership at a certain level. Whether that is important to you will depend on your life circumstances and what you are aiming for.

Dear reader, what are your own personal advantages and disadvantages to working for the man? Would love to hear them.

Giveaway code: 9232

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Things You Need to Know Before Becoming a Freelancer: How Much Do You Need To Earn?

Kevin — Tue, 10 Apr 2012 09:00:51 +0000

What is your opportunity cost?

Daytime landscape view of people walking near Shinjuku Eki (Photo credit: Infradept)

In my last post in this series, I talked about becoming a freelancer, and some of the things we have to consider. Why would someone become a freelancer? Is it feasible for someone of average means? How much money do you need to survive?

Another important point to consider is the opportunity cost: How much do you give up by pursuing self-employment? First, you need to evaluate what you have, both tangible and less tangible. For this post I’ll use the example of someone making a base salary of $60,000 gross from their employment plus benefits and a bonus, and someone making a similar amount from self-employment. I will calculate estimated total federal and provincial taxes using the Canadian Income Tax Calculator.

Working for the man

The grass isn’t necessarily always greener on the other side of the fence, and there are benefits to working for the man. For one, you usually only have to do your 37.5 to 40 hours, and for two, you get some additional benefits that you’d have to cover yourself, if you were working for yourself. Here’s a hypothetical employee making $60k plus benefits and bonuses, paying taxes as if he lived in Ontario:


Base salary	$60,000
Plus: 8% bonus	$4,800
Plus: 5% RRSP match	$3,000
Plus: Insurance benefits*	$1,000
Plus: Cell-phone plan*	$800
Plus: Gym membership*	$250
Total gross income	$67,800
Total gross income including benefits	$69,580
Taxable gross income	$61,800	Hours worked/week:	40
Less: Combined income tax	$12,703	Commute:	10
Less: Canada Pension Plan	$2,217	Total	50
Less: Employment Insurance	$1,176	*Total gross/hour (49 weeks/year)*	*$27.67*
*Net income*	*$51,704*	Net income/hour (49 weeks/year)	$21.10
*Estimated

Let’s go over each item:

Base salary: He makes $60,000 a year.
Plus: 8% bonus: It’s been a good year for the company, so he gets an additional $4,800.
Plus: 5% RRSP match: He’s been a diligent saver, and the company rewards him by matching his retirement contribution, for an additional $3,000.
Plus: Insurance benefits: The estimated value of what he would have to pay for his private insurance.
Plus: Cell-phone plan: The company provides him with a phone and plan.
Plus: Gym membership: The company also provides him with complimentary gym access.

These are the rewards he gets for working at the company. Add it all up, and it comes to:

Total gross income: $67,800. This is how much cash he receives from the company.
Total gross income including benefits: Add in the value of the benefits, and it’s around $69,580 in total compensation.
Taxable gross income: He has to pay taxes on the $67,800 in cash, minus $6,000 for his retirement contributions.

Subtract the various tax items and he is left with $51,704 in net income. He gets three weeks of paid vacation per year, so his before-tax hourly wage, including commute time, is $27.67/hour. After tax, it’s $21.10/hour. If he wants to freelance, he needs to match or beat these hourly wage figures.

Working for yourself

There are benefits to working for yourself, too. First, you no longer have to face rush hour, and though you can choose to do your 37.5 to 40 hours, you can also do more. You have a lot more flexibility when it comes to taking vacations or time off, though you have to pay for the time yourself. Working for the man gave us $67,800 in cash, and $51,704 in net income after taxes, insurance, cell-phone plan and gym membership expenses. The taxation situation when working for ourself is slightly worse, but as you will see, it is not that bad:


Total gross income	$69580	Less: Insurance	$1000
Less: Combined income tax	$10059	Less: Cell-phone plan	$800
Less: Total CPP	$4434	Less: Gym membership	$250
Less: Employment Insurance	$1176	Less: Transportation	$1000
Less: Insurance	$1000	Less: Other business expenses	$5000
Less: Cell-phone plan	$800	Less: Employer CPP	$2217
Less: Gym membership	$250	Less: Retirement contributions	$6000
*Net income*	*$51861*	Taxable income	$53313
		Hours worked/week:	47.5
		Commute:	2.5
		Total	50
		*Total gross/hour (49 weeks/year)*	*$28.40*
		Net income/hour (49 weeks/year)	$21.17

Total gross income: $69,580. He has to earn a little bit more cash if he’s working for himself, since he gets no benefits. Since our freelancer has to cover his benefits himself, we assumed that he had to earn a total gross income of $69,580. Let’s go over each item again:

Total gross income: $69,580. Our freelancer has to work a little bit more to get back to the same point of income.

We’ll then calculate how much tax he would pay, on the right-hand side of the table:

Less: Insurance: He’s paying his own insurance, now, and this is deductible.
Less: Cell-phone plan: He pays for his own cell plan.
Less: Gym membership: He pays for his own membership.
Less: Transportation: This didn’t even show up in the other table, as employees cannot usually deduct their transportation expenses to go to & from work.
Less: Other business expenses: As a business, we can deduct other expenses incurred in the operation of our business.
Less: Employer CPP: Self-employed people can deduct this cost from their income.
Less: Retirement contributions: We’re still going to put the same $6,000 toward our retirement, which will help us save taxes.
Taxable income: Once you add in all the deductions, our taxable income is $53,313. This is less than in the employment case, but as you will see, the tax effect will end up a wash.

Now we calculate our actual net income by subtracting our tax payable, pension contribution, employment insurance, and the benefits which we now have to pay for, ourselves. After we all that all in, we end up with a net income of $51,861. As you can see, it’s pretty much a wash. We started with a similar amount of gross income and ended up with a similar amount of net income, whether working for the man or working for ourselves.

How much does a freelancer need to earn per hour?

When our example was working for the man, he grossed about $27.67 for each hour spent at work or in traffic. If he works for himself, he will have to gross about $28.40 per hour over an equivalent amount of time. Since he does not have to spend as much time in traffic, this means he has to earn about $29.89/hour for each hour spent actually working, if he still wants to take three weeks vacation a year and earn about the same yearly income after tax!

But he now has to work 47.5 hours a week to get to the same place!

Fair observation. If he worked only 40 hours a week, he’d need to gross $35.5/hour. However, although this is a fair observation, this is not a fair comparison. When he has to commute to a job, he has to eat up 50 hours total of his time. Therefore, you should compare apples to apples and use the same amount of time when working for yourself. Our freelancer also has a lot more flexibility, and ways he can increase his income:

He can work more. When you are working for yourself and enjoying what you do, there are no issues in doing 50 to 60 hours, or even more.
He can earn more. There is no reason why our freelancer has to stay at $30/hour gross for the rest of his life. There may be more opportunities to diversify and increase income.
He can save more. No need to eat lunch out every day, or pay as much for transportation. Sure, there are expenses incurred in running a business, too, so it may be a wash, but it’s still a point worth considering.

I have not even gone into the value of the intangible benefits, such as not having to ask for permission to take vacations, and being able to work on what you choose. As with many things in life, the decision is not black & white, and there are pros & cons to both sides. There is also no reason why freelancing and the corporate life can’t overlap, especially if you end up working for your own company.

Dear reader, have you ever run the numbers? What would it look like for your situation? I imagine that as salary increases at work, it becomes harder and harder to take a leap. If our employee was earning double, his gross requirement would then be $60/hour. However, this blog is meant for everyone and not just people earning large salaries, and the truth is that most of us are not in that situation. Even if we were, it’s also possible to get there as an entrepreneur or freelancer.

As always, I would love to hear your thoughts.

Giveaway code: 9232

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Weekly Reading: Easter Edition

Kevin — Mon, 09 Apr 2012 23:04:43 +0000

Easter eggs Deutsch: Osterreier im gepflochtenen Osterkorb mit Osterglocke (Photo credit: Wikipedia)

Did everyone have a good Easter weekend? I did! I saw my family, my girlfriend is back from Nigeria, and everything is just going well. Things are looking up since that punch to the face I took last month. Sure, my income hasn’t recovered, sure, I’m still out of a bike, but my girlfriend is back! Sometimes I think it’s those sort of things that make the biggest difference.

Here are the most recent posts at Invest It Wisely:

I’m also currently doing a giveaway — don’t miss your chance to enter and win!

Two Years of Blogging: My Thoughts, and an iPad 3 (The “New Ipad”) Giveaway + Other Great Prizes!

Now that everyone’s back from the Easter weekend, here is some great reading for your week ahead:

Weekend Reading

Economics

Weird Effects of Inflation: The Costs of Coinage

Investing

Four Key Characteristics To Look For In Dividend Stocks
Investing in oil with 3 Canadian Oil Sands Stocks.
Marquee Energy: Undervalued Oil Junior with Strong Production Growth Ahead
Picking a Cotton ETF for Your Portfolio.

Miscellaneous

Motivation

Personal Finance

Politics

Technology

How the Android License Verification Library is Lulling You into a False Sense of Security

Carnivals

Have a great week, all!

Giveaway code: 9232

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Canada’s New Budget: A Paradigm Shift – Although a Small One

Teacher Man — Wed, 04 Apr 2012 09:00:51 +0000

The following post is by staff writer Teacher Man, who writes at My University Money.

Alberta mtn.'s1 (Photo credit: bbob)

While the budget that was announced last week wasn’t exactly revolutionary (despite what political spinsters on either side might have you believe) I believe that it was a small step in an overall paradigm shift that is subtly taking shape in Canada. As a Manitoban I would describe our political culture as “West-light.” We like to think we are as individualistic and as independent as our tough-guy big brothers in Alberta, and Saskatchewan (even though we don’t like to admit the latter has grown bigger and stronger than us). In reality, this might describe our rural population to some degree, but the provincial government has been NDP for three terms now due to strong popularity in the mega-centre of the province (Winnipeg).

All this to say, that we are in the grey area that exists between the east and west poles in Canadian politics, and in many ways perfectly positioned to be an impartial observer in this whole democratic tug-of-war.

A Less Taxing Agenda

When the Conservatives entered government several years ago, their ability to enact the finer points of their agenda was hampered by their minority status. Nonetheless, they have successfully won the battle for the time being and have used their new-found mandate to push the role of the federal government toward their preferred position on the political spectrum. I would argue that as Conservative strongholds in Alberta and Saskatchewan continue to gain population, this shift is becoming more and more noticeable.

[Kevin] I’m not too crazy about the fascist bill C-30 — this is not smaller government.

As the manufacturing core of Ontario weakens, and Quebec realizes that their social services-heavy model is not sustainable with decreased federal government handouts, the Western idea of how Canada should be run is undeniably pulling the balance of power towards them. The relative economic prosperity in the West has only aided in this process. If you don’t believe me, take a drive through formerly economically-depressed small towns in Alberta and Saskatchewan, as well as parts of BC and Manitoba. These geographical shifts can’t help but have an influence on the national stage. The dominant ideologies that Western Canadians have historically espoused, and from which the current Conservative party derives its current budget, will become the driving force in Canadian politics for the foreseeable future.

[Kevin] This is a great point by Teacher Man. It also helps that the western provinces from B.C. to Manitoba have policies that are much friendlier to small business, and significantly lower debt as compared to the big two eastern provinces. At Financial God, I go into more detail of the numbers of Canada’s Economic Action Plan 2012.

Teach a Man To Fish

The idea that at the end of the day you are responsible for your own path in life and your own decisions is paramount in the west and this is what this most recent budget is hinting at as well (some might say it shouts it, while I would reply it gently whispers it). The government has decided that the OAS age will gradually increase, government programs need to be scaled down or eliminated altogether, EI regulations will be more stringent, and support for small businesses has been emphasized.

[Kevin] Support for small businesses is great, and the changes to EI will help encourage people to get back into the work force. We must also keep in mind the overall picture here: government spending will still continue to increase year over year; the government is NOT cutting overall spending. It’s just that revenues are projected to increase even faster, turning the deficit into a surplus.

Along with recent changes such as lower corporate tax rates and the cut to the GST rate, there is clearly a substantial level of support for a scaling back of the bigger government model that Canadians have formerly endorsed. I don’t think too many people will argue that this change has been fuelled by Western policies, people, and money. This represents a clear historical change from the former precedent that seen Quebec and urban Ontario’s interests dominate the political scene.

[Kevin] A rise in the TFSA exemption to $10,000 once the budget has been balanced will also be interesting.

What This Means For Your Personal Finances

If the current government is allowed to play out their vision of Canada (and I would argue that it appears they will) it will ultimately mean that each of us will have to take on more of a responsibility to plan our own financial lives. If you’ve detected a hint of bias, that’s probably because there is one. I can’t deny that I am partial to the idea that people should have to better educate themselves and plan for their own future as opposed to having others do it for them. The OAS shift will be gradual and will exempt the almighty Boomers (yes, you caught a whiff of derisiveness there). It will not affect CPP payments, and is easily able to be planned for if you have the will and foresight to be able to do so.

[Kevin] Also, keep in mind that people making nearly six figures in income are still eligible for OAS welfare! I wonder if it wouldn’t have made more sense to lower the income brackets. It’s hard to argue that someone making $80,000 needs social assistance from the government.

The EI changes will encourage labour mobility, and this is a reality we must face in a Canadian labour landscape that is rapidly changing. The cuts to taxes mean that we bear the responsibility of using that money productively, and not digging ourselves into bigger financial pits before asking the government to bail us out (the Canadian way?). Planning and working towards your own financial independence is a positive thing, and any government should provide incentives for this instead of disincentives and reliance on inefficient government decision-makers. This is the reality that we are slowly, but definitely moving towards. It is a pretty good deal when you see where other paths have lead our developed world brethren around the world (*cough cough* Europe).

[Kevin] Based on overall spending and heavy regulations, I would say that heavy bailouts and subsidies are the American way, not the Canadian way. Canada, today, has more economic freedom than our friends to the south, and this is a big reason why we have done comparatively better in this crisis.

The Center Is Still the Centre

With a new controlling constituency comes a new paradigm; however, those of you who believe that this slight tilt back to the right will turn into an extreme slide I wouldn’t worry too much. We do still live in Canada, and no matter how well the oil sands and the vaunted “Calgary School” of politicians do, I highly doubt we will ever present a red and white mirror image of our neighbours to the south.

[Kevin] I have no personal interest in moving the political spectrum toward the “right”. Economic and personal freedom are basic human values which we all deserve to enjoy, and belongs on the spectrum of “voluntary social cooperation”. It has nothing to do with the left-right spectrum, regardless of how the media likes to paint things. Remember that the next time someone accuses you of being right-wing.

For now, my advice would be to try and see the bright side to encouraging people to rely on their own merits, and to help each other on a personal level as opposed to waiting for the inefficient bureaucratic machine of big government to come to the rescue. Take pride in the fact that Canada is enjoying unparalleled status on the international stage, and that our global competitiveness hasn’t been this strong in decades.

[Kevin] Agreed! Thanks for the great staff post, Teacher Man!

Giveaway code: 9232

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Two Months of Entrepreneurship: the Good, the Bad, and the Ugly

Kevin — Mon, 02 Apr 2012 09:00:27 +0000

March (Photo credit: flavijus)

Some of you have been waiting for it, and here it is! I left a sinking ship a couple of months ago, and I have been sailing away in my own direction since then. Has it been easy? Nope. Has it been challenging? Yep. Has it been fun? Hell yes! That’s not to say that it hasn’t had its ups and its downs. The month of March in particular has been an emotional roller coaster for me. I ran into quite a few frustrating events. Just a friendly warning: I get quite deep and personal in this post, so if you have no interest for that sort of stuff, I recommend that you stop reading now.

I believe in getting the bad stuff out of the way, so first, let’s talk about all of the things that went wrong. Then I’ll get to the good stuff. When you’re working for yourself, everything is amplified, both the ups and the downs. I would be lying to you if I said it was all rainbows and butterflies, and you wouldn’t understand me if I didn’t share at least some of my personal thoughts and experiences.

Here we go, into the tunnel of darkness…

Entering the tunnel of darkness

Taking a sucker punch to the face

A boxer is knocked down and receives the 10 count. (Photo credit: Wikipedia)

February was mainly smooth sailing, as I was working on my apps and I had website revenue to keep me fed and comfortable, if not as comfortable as a full-time salary. In March, things started to get more turbulent. I took a punch right in the face from a big giant. This caused my website income to plummet down to near nothing. This happened around the same time that my girlfriend was preparing to go to Nigeria on business, so there was a lot to distract me at that time, but once she was gone it really started to sink in.

Website revenue down to about 20% or less of what it was before. Not much revenue coming in from other sources. I still had gas in the tank, but now I had a big hill to climb, and I had no idea how far away the next gas station would be. How was I going to pay my bills this month? How much would I have to take out of my savings?

Alone in the dark

Then my girlfriend left on her business trip to Nigeria, leaving me all alone back in the condo. She’s still there now, but she is thankfully coming back earlier than expected. In the beginning I had to worry about her on top of my own things, but thankfully things turned out to be run pretty well over there, and her location was pretty safe. She was telling me how they are continually stopped by armed guards with military rifles (they even have those inside the hotel!), and it was quite intimidating, but at least it also provided some security. She was also there with other coworkers, and for me that was the most important part: that she wasn’t there by herself.

Before she left, she had been stressed out at work, causing all kinds of symptoms to show up and scaring the both of us into thinking that she was seriously ill, even though all of her tests were coming back clean. That seems like it’s improved a lot now that she’s overseas and able to focus on one mission; she loves her job, but sometimes I think she takes on far too much!

So, we’ve been keeping in touch through Skype, but otherwise I’m at home by myself. It’s one thing to work at home when you have others at home with you, but it’s another thing to work at home when you’re the only one there, day after day. You can turn on the radio, but it does get quite empty and lonely at times. I would compensate for this by heading more often to the library or meeting up with friends. Sometimes it was good to get away from the condo, just to get some fresh air, especially in that week when we had really warm weather.

My bike gets stolen

My emotions were already taking a toll from the impact of getting sucker-punched in terms of lost revenue and having my girlfriend leave for nearly a month, when I took another one on the chin. I was feeling a bit better when the warm weather came around, until I wanted to enjoy it with a bike ride. I wasn’t too happy to find my lock destroyed and my bike stolen!

I went to the police station and filed a report, but I doubt I’ll ever see my bike again. Insurance is no help since the value and my deductible are the same!

An expensive month

I finally went ahead and incorporated as a corporation under Canadian federal law. Why? Well, one reason is that the provincial bureaucracy is a joke (as of this writing, they never sent out the documents for my sole proprietorship and they haven’t even registered my corporation which I had to pay several hundred dollars to file. I wonder how many times I’m going to need to follow up with them to at least get that done, though as I am registered federally, I don’t depend on them to the same extent). The Canadian system, on the other hand, was just great: Submit online and get your documents online the next day!

The second reason is that corporations get taken more seriously. Whether it’s opening bank accounts or what not, just having an “Inc.” to your name automatically gets you more respect. Unfortunately the respect costs a few hundred dollars.

I also had to change my tires, front brakes, and rear suspension after five years of driving. I guess that is normal, but paying another $1300 still hurts, especially when you have little income. With an income of about $1000 for the month and expenses totalling about $3000, that puts me $2000 in the hole for the month of March.

Nearly KO’ed

The final emotional blow to happen this month was when I learned that my mother had gone through a major illness, and I wanted to get in touch and wish her well. For the whole story, see “nature versus nurture“. I learned that things haven’t changed — she’s happy with her husband and daughter, their family is perfect, her daughter is smart and in private school (i.e. “better than you will ever be”), and she couldn’t care less about me and has no desire to reconnect. I guess I shouldn’t be surprised — some things just don’t change.

Thankfully, this story isn’t all gloom & doom! I just wanted to give you a picture of what I’ve been feeling inside. This month has had its ups and downs, and things amplify off of each other. Sometimes everything just seems to be working against you. How familiar does this story sound to some? You lose your income, you have bills to pay, and things in your personal life just don’t seem to be working out right. Each event colours the event that comes after it.

So much in life is about our state of mind and our beliefs and emotional moods, and this is more true than ever when you’re depending entirely on yourself to succeed. Not only that, but I know that I’m certainly not alone; people everywhere go through all kinds of crap, whether it be a nasty breakup, a close family member dying, or getting fired from a job after being there for a long time. If I can help anyone else by showing that these kind of events don’t have to hold you down, then it’s worth it. Life throws a lot of punches at us… but it’s the spirit to survive that carries us through to the light.

Light at the end of the tunnel

Light at the end of the Tunnel. Source: Living the Simple Vintage Life

The first is that I found out my girlfriend’s coming back early! If we are really lucky, she might even get a mission to somewhere a bit closer and I’ll come join her. I got sick more than once, I had fears, I had doubts, I had moments where I wondered if I had not made a huge mistake. However, many good things happened during this period of time, too. I told you that this story wasn’t all going to be doom & gloom. A lot of good things also happened during March; things I can be proud of and things I can look forward to.

I signed a book contract

I can’t talk too much about it until the book is published, but I’m going to be writing a technical book related to my field, with a draft ready hopefully in six months time. This is very cool! This could allow me to branch out into many areas and help solidify my position as an expert in Android development. Maybe this leads to consulting or other gigs down the road. I don’t know, and sometimes I have doubts about pulling it off, but I’m excited at the same time!

My first app launch has been going really well

You guys must be getting annoyed about hearing about this “Easy Voice Recorder” by now. However, the launch has been going really well, and it’s one of my major sources of optimism. If I can pull this off, there will be no need to be begging for a job in a few months from now.

Here are some of the highlights:

Free version has recently surpassed 17,000 total downloads, with a retention rate of more than 2/3rds and a current download rate of 700+ daily. Things will be really great if this continues following the growth curve I have plotted out in Open Office.
Paid version launched and getting great reviews as well!

This is really great news. It is usually very tough to get a foothold in the market, especially with literally hundreds of thousands of apps out there. How do you get yourself recognized and known?

My philosophy has always been to deliver great value and earn the user’s respect. I could have gone the same route as many other developers, and slapped a bunch of ads in the product right away and maybe be earning $5 a day now from ads or something like that. However, if I had done that, would I have differentiated myself enough? Would users be happy? Would my ratings be as high? I strongly believe that a big part of the success here is due to taking a different approach and placing a proper value on the long run. It’s not so dissimilar to how the Yakezie works, is it?

I always love receiving feedback from users. It feels really great to get comments like these:

“Excellent Actually my 1st review here on Android Apps! Truly impressed with this app. Does exactly what I want in a simple way with included Widgets for easy access. Nice clean interface with easy access to record/stop buttons. Able to easily email recording as .wav file! Definitely able to delete and share recordings as needed. All for the great price of Free.” –Mrq5

“Can I give it 10 stars? Amazing voice recorder app. The best out there as far as I’m concerned. Works great with ICS too!” — Victor

“Good recorder I like the fact that it has different size widgets. Easy to use That’s what I like about it the most. Works well on the motorola photon 4 g. And yes you can delete all of your recordings! Just go into the play back and look for your file of recordings press it for 3 seconds and then select delete and it will delete that particular recording. definitely 5 stars for this app!” –Ken

This reminds me of why I made the leap. It was for moments like this.

I know that you can’t have all of your eggs in one basket, and I’m already working on apps #2 and #3.

Turning around the websites

I also have good news to report on the website front. I’m reaching and surpassing 50,000 page views a month across my sites (I know this is nothing for some of the big guys out there, but it’s a milestone for me), and Geoff from Don’t Do It Yourself had some really awesome advice that pushed me to make some great and seriously needed changes to Invest It Wisely. Amongst some of the changes:

I switched to showing excerpts only, including for the first post. This helps with readability and load times, and encourages readers to visit and comment on the articles they actually want to read.
I switched to using LinkWithin, which puts these nice images at the end of the post for readers to click on and visit your other posts.
I have added a call to action for users to subscribe at the end of the post. Less intrusive than a pop-up!

I have already noticed an improvement in bounce rates, and personally, I feel that these changes do result in a better user experience. Please let me know what you personally think as I welcome all advice and feedback.

My tips for surviving the first couple months of entrepreneurship

I’d like to close by sharing some of my own personal tips, which I have learned from my own battles on the seas. Shawanda has some more awesome tips in her “20 rules to follow after quitting your job“.

Break early, and break often. Your productivity depends on it. If you start to feel that you’re losing focus, and catch yourself drifting to Facebook or chatting, you need to get away from the computer and move around for a bit.
No multi-tasking. It might offend some people, but when you’re working, you’re working. It’s not time for “let’s gossip about our weekend on Facebook”. You can save that stuff for when you’re walking around outside or taking your downtime.
Plan what you want to do in the day, then do it. If you wanted to write two blog posts and get some coding done, then write it down and get it done. You also need to set limits: If you’re losing inspiration and it’s taking you hours to get a post done, stop, and move onto something else. This also goes for email: I have wasted a lot of hours going through emails, and then oh, 5 new emails appeared, let’s check those too, and before I know it I just spent two hours just dealing with my emails. This is a big time waster, and the way to deal with it is by allocating a set amount of time. Still have emails? Unless it’s urgent, they can wait until later.

Most importantly, never give up hope. Everything is exaggerated when we work for ourselves, because there is truly no cop-out. We can’t take a “sick day”, there are no vacation days, and we can’t blame anything on our coworkers or bosses. Everything comes down to us. Whether we succeed or fail, we bear the ultimate responsibility for making it happen.

Sometimes this means us feel excessive doubts and worry when it’s not warranted. There’s no need for this. The worst that can happen is that you lose some money, but there are so many intangible benefits that you gain at the same time. Self-employment is not a final decision: it is part of your career. Treat it as seriously and as professionally as you would any job, be proud of your successes, and accept that sometimes, things just happen. Sometimes you get punched in the face, but you have to get back up and keep fighting. You know the sayings: There’s light at the end of every tunnel, and it’s darkest just before dawn. Every failure is a valuable lesson to learn, and makes you stronger for the future. Never give up hope!

Dear reader, have you recently switched jobs, whether to work at a new company or for yourself? I’d love to hear your stories.

Giveaway code: 9232

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Weekend Reading: the New Ipad Giveaway Edition, with over $1200 in Prizes to Be Won!

Kevin — Sat, 31 Mar 2012 09:00:37 +0000

Image via CrunchBase

The heat of last week is gone, the cold has returned, and Canada’s government passed their new budget. I will cover in more detail on Financial God in a post this coming Monday.

So my 2nd blogversary passed by this Thursday, and I’m celebrating with a new iPad giveaway, plus other great prizes! There’s over $1200 in prizes to be given away in all.

Celebrate two years with me, read my thoughts, and enter the giveaway!

A great big thank you goes to my very generous sponsors, who kindly helped make this giveaway possible! Here are some great posts that I recommend you go over and read:

Simply Investing: Are you thinking about investing, but never get around it?
Stock Trend Investing: Why You Need a Roth IRA
Prairie EcoThrifter: What Buddhism Teaches Us About Personal Finance
Sustainable Personal Finance: What Games Taught me About Life and Finances
Young & Thrifty: 9 Reasons Why I Deactivated Facebook
Budgeting in the Fun Stuff: Yes, I am a Hunger Games Fan
Cents to Save: Debt SnowFlake Challenge Week 11
My Personal Finance Journey: The Best Financial Calculators Government and Academia Provide
Stoopid Success: Get The StoopidSuccess E-book
Yes, I Am Cheap: Nine Tax Deductions That Prostitutes Can Claim
Squirrelers: Cognitive Dissonance and Money
Edward Antrobus: 10 Useful Tools for Mobile Blogging

Jai Catalano did this very cool feature of Invest It Wisely over at this site: Take A Red Pill & Invest It Wisely.

Here are the recent posts at Invest It Wisely:

The pro version of Easy Voice Recorder is now available, and the official site for my Android Apps, Digipom, has also launched. Check it out.

Weekend Reading

Editor’s picks

3 Easy Steps to Get Physically and Financially Fit — I just love how health and personal finance is tied together in this post.
Take a stand against bullying – I think that bullying is a natural animalistic behavior (animals do it to each other all the time), but why do we let kids behave like animals? Why isn’t it taken more seriously? Worse, what happens when adults become the bullies? What can kids do in that case? I loved this post by Jana.
The Yakezie Value Proposition – What makes the Yakezie great? The fact that the Yakezie exists in all of us. The Yakezie isn’t a single website, nor a single person: it’s a code of values which anyone can live by.

Blogging

The Complete Guide to Selling CPM Advertising

Canada

Ontario’s Budget: Fodder ?

Economics

Government

Why Are the Students in Québec Protesting?

Health

Health Tip: Don’t Exercise Before Blood Tests

Investing

Miscellaneous

Personal Finance

Have a good weekend, all!

Giveaway code: 9232

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Two Years of Blogging: My Thoughts, and an iPad 3 (The “New Ipad”) Giveaway + Other Great Prizes!

Kevin — Wed, 28 Mar 2012 12:00:06 +0000

My second blogversary is tomorrow, Thursday, the 29th of March. My very first post went live on March 29 two years ago. It has been quite an adventure since then, with many changes both in my personal life and in the online world! Here are some of the highlights:

I purchased a home with my girlfriend, and we moved in together.
I started taking my first Mandarin courses a bit more than two years ago. I’m now almost finished the whole program (30 credits!). On one hand, I could be halfway through an MBA or something like that. On the other hand, it was great learning a new language, even if I still have a long way to go. It wasn’t easy going through the program, but I enjoyed it.
Two years ago, I was in a bit of a rut at my job. Things were going well, but I had been doing the same thing for a while. Since then, I learned a great many new things, got promoted, and even mustered up the courage to take a leap into the world of self-employment.

It’s been a great adventure, and certainly one that I haven’t shared alone. I’ve enjoyed sharing the journey with you, my fellow reader. 20s Finances is asking us to share our advice and tips for newer bloggers out there, even though I still consider myself a young blogger. Here are my answers to some of the questions a lot of you may have:

Why did you start blogging?

At the time of my mild rut a couple years ago, I was debating if I should go back to school to pursue a CFA and MBA, and perhaps jump into the world of finance. I had done well in those classes at school, and I liked to compare different scenarios. My fellow colleague, Mich from Beating the Index, loved to talk about investing in oil & gas companies, as well as his daily battle to beat the index. I recommended he start an online journal to record his thoughts, and I decided to try the same to document my own thoughts and journey in personal finance. Back then, I didn’t know much about the blogging world or about other personal finance bloggers.

I’ve since learned that I’m not as much into the finer details of investing in stocks as my buddy is. I like seeing my money grow, but I prefer an approach based on index funds and following simple and sound strategies, such as spending a LOT less than you earn, and not getting ripped off by the banks.

I’m not sure if this blog succeeded in helping me pursue a CFA/MBA in the end. I’d like to pursue a master’s someday, but since it’s not cheap, I also need to look at the opportunity costs!

Where this blog really helped me the most is in forming new connections and learning new ideas. I have learned so much in this short span of time. Invest It Wisely is the main reason I was able to make my jump to full-time self-employment. It’s still too early to say where things will go, and I’ll be honest: I would have had a much more relaxed schedule had I stayed at the job. I also would have hated my job. It’s enjoyable to fight the storms and fight for your future, instead of letting it be dictated by what happens at your company and by the whims of your bosses!

Since then I have started to work on developing my own apps. If you have a bit of time, please try out my first pro app, Easy Voice Recorder Pro, and let me know what you think!

I am also starting to write my first book and a major section of a second. Many of these doors have opened for me simply by being exposed to this world of opportunity. For that, I am again thankful to you, dear reader, for keeping me going through the thick and thin of it.

How long did it take you to earn $100?

Probably almost an entire year. I made very little money at all during my first year of blogging. Blogging doesn’t make a significant amount of money for me even today (far less than what I earned at my day job), but it helped me accumulate enough extra savings so that I could make the jump.

What is (at least) one thing you wish someone had told you before you started blogging?

Tough to say. However, something I highly recommend is regular backups, of both the database and of your files. This is doubly important if you don’t have your own hosting. Most importantly, breathe, and relax. Not always easy, I know, and I need to often take this advice myself, but the key to blogging is longevity and resilience, and you won’t get there if you’re always feeling stressed out.

Giveaway

On to the part I know you’re all waiting for. To celebrate my second blogversary, I’m giving away over $1200 in prizes! There are three prizes to win in all:

Top prize: The new iPad 16GB with 4G + Wifi (value $649) . The new iPad has a high-res screen of 2048×1536, quad-core graphics, and long battery life. With the 4G connectivity, you’ll have access to high-speed internet wherever you are. I would love to get one for myself!
Follow-up prize: Simply Investing course (value $347). This course is a simply investing approach to value investing with a focus on dividends. Learn the same techniques used by successful investors like Warren Buffet and Benjamin Graham. You can find out more at the Simply Investing course description.
Follow-up prize: Stock Trend Investing Gold Membership + $25 via Amazon (value $216). This membership will give you access to simple investment strategies and teach you how to analyze the market to grow your savings and net worth. You can learn more at the Stock Trend Investing website. There is also a $25 gift card via Amazon to make the prize even better.

Please note: This giveaway is open to legal participants in Canada and the U.S. only. Also, entries are only valid if they are new entries. For example, if you’re already subscribed by email, you can’t count that as an entry. You have to do something new.

Giveaway code: 9232

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The Dangers of Over Diversification

Teacher Man — Mon, 26 Mar 2012 09:00:41 +0000

Focus on and take control of your retirement (Photo credit: s_falkow)

The following post is by staff writer Teacher Man, who writes at My University Money.

The financial industry makes a mint of throwing buzzwords as people that are financially illiterate. How many times do we see financial planners throw around the term “diversification” as if it were not merely one of the Ten Commandments, but first on the list? Diversification is definitely important, but if you’re not really sure what it means, it can be used to justify selling almost anything.

“Hey, does your portfolio include any emerging markets? Better grab this mutual fund for international diversification.”

“The Canadian market is hot this year, we’ve got a 5-star fund to cover the entire sector and it makes sure you’re well-diversified.”

“I would recommend you diversify your holdings with a fund that focuses on growth stocks.”

Sound familiar? That’s because most mutual fund salesman financial planners get paid a commission to sell certain mutual funds regardless of what is already in someone’s portfolio. Often, people who have been saving for years and “buying RRSPs” (a pet peeve of mine is when people say they are going to buy a RRSP… It’s not a financial product people, the P stands for plan) from the same company every year. When you look at what their money is actually invested in, they are inevitably buying the same companies over and over again under different mutual funds and recommendations.

A Kernel of Truth

Diversification is important if you are picking single stocks. This is where the “common sense knowledge” comes from. You obviously don’t want to “Put all your eggs in one basket.” Don’t invest in only mining companies, or go all in on a certain technology stock for example. Where most people should look at diversifying, is actually in the department of asset allocation. Once you decide the amount of your investments that you want tied up in equities, the rest should be pretty straightforward. If you’re a young investor, getting into a mutual fund that is 60% bonds is probably not in your best interest in terms of investing time horizon. If you’re approaching retirement and have a low risk tolerance, being convinced to go with a 100% growth equities fund is probably not a good idea. Once you talk to a fee-only planner and determine your asset allocation, the actual exposure to equities is actually very easy to take care of, and it doesn’t cost a lot of money to meet the magical standard of “being sufficiently diversified.”

Buy American? What Does That Even Mean Anymore?

When you actually look at the makeup of international conglomerates today, the whole idea of needing a lot of stocks is almost a joke. There are holding companies out there such as Power Corp for Canadians, or the famous Berkshire Hathaway of Warren Buffett, that allow you to efficiently invest in companies from a broad range of sectors, that sell products all over the planet. Companies like Coca-Cola, Johnson and Johnson, or the Royal Bank of Canada have holdings all over the world, and are so geographically diversified that an issue in one part of the world barely dents their overall financial position. Most buy-and-hold investors that I follow often find that between 20-30 stocks (and sometimes as few as 8-10) are easily enough diversification to suit their tastes. After all, why do you need 5 gold companies if they all depend on the price of gold anyway?

Passive Investing

I have little faith in my personal ability to pick the right individual stocks. For this reason, I am definitely a fan of ETF investing. It is the easiest way to diversify your holdings quickly and efficiently. One interesting thing that I have seen lately, is that even so-called advocates of ETF investing can over diversify. I think that 5-7 ETFs should be the absolute maximum that you need in order to effectively track the world’s stock markets. I’ve seen people that jump on every new ETF that comes out, and doing this merely makes their finances more complicated, and less efficient if one is paying a higher MER than they have to be.

To be brutally honest, investors that merely focus on making smart financial decisions, properly determine their asset allocation, and just buy an ETF like the Vanguard S&P 500 ETF (VOO) over and over again, will probably do better than 90%+ of investors out there. When you really consider that those 500 massive companies that make up the index are really only American companies in the sense that, that is where their headquarters are, then it becomes pretty apparent most investors would be fine just keeping it simple a broad-based ETF such as that one. As a bonus, it costs almost nothing to own (an MER of .06%) and many brokerages are beginning to offer commission-free ETFs at this point as well, which makes it even more cost-efficient.

Don’t try to outsmart yourself this investment season. Take a look at what your portfolio is really trying to accomplish, determine if it’s geared toward your investment goals, and then decided just how much you should be willing to pay for the “magic” of diversification.

Giveaway code: 9232

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Weekend Reading: Heat Wave Edition!

Kevin — Sun, 25 Mar 2012 13:00:14 +0000

Français : Jour de printemps dans le parc de Bagatelle (Paris, France) English: Spring day in the park of Bagatelle, Paris, France. (Photo credit: Wikipedia)

Do you guys remember my recent posts talking about skiing, cold weather here, and snow there? Yeah, that’s gone. Since last weekend we’ve seen temperatures hit the 20s, which is a change of nearly 30 degrees Centigrade from a couple weeks before that! Within the span of less than a month we’ve gone from cold winter temperatures to heat and rain! I was hoping for one more ski trip, but with nothing but rain and heat I’d be surprised if there’s even any snow left on the mountains. There isn’t any down here in the city.

Happy Spring, and happy belated Saint Patrick’s Day as my weekend reading did not run last week.

Weekend Reading

Featured

I have only recently discovered Street Smart Finance, but I really like where they are going and I enjoy their thoughts on saving for retirement: A Surefire Way to Secure Your Retirement

My University Money is out with his new eBook on ETF investing! I reviewed his eBook while it was still a work-in-progress, and you’ll be hard-pressed to find better material for the low price of free! I highly recommend you go and check it out.

The Financial Blogger gives us valuable tips and advice in Can You Survive Google? 1 Year After The Panda Update.

Don’t forget to check out the $50 Amazon Gift Card Giveaway at Wealth Artisan!

Sustainable Personal Finance talks about monopolies and economics in What Games Taught me About Life and Finances.

Have a good weekend all!

Giveaway code: 9232

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Reader Question: Helping a Mother Save for Retirement

Kevin — Wed, 21 Mar 2012 09:00:57 +0000

An assortment of United States coins, including quarters, dimes, nickels and pennies. (Photo credit: Wikipedia)

I recently received a question from Rachel, a reader here at Invest It Wisely, and with her permission I am publishing the question here so we can get feedback from fellow readers and bloggers.

Rachel is concerned about her mom’s retirement. Her mother is self-employed and has no other relatives to lean on other than Rachel and her brother. They have been pooling their money to help ensure their mom’s safe retirement, but they are unsure of what the next step should be. How can they safely and securely invest their money to assure a safe retirement for their mother?

Saving securely for the future

Canada is well-known for having some of the highest mutual fund fees in the world. Rates can be upwards of 3% when you go with a financial advisor, and you also need to watch out for back-loaded fees, which is an additional fee you get slapped with if you decide to transfer your funds before a certain time period has passed.

What are the alternatives?

Real Estate?
REITs?
Stocks?
Commodities?

The Canadian housing market is high, so I am not sure about real-estate. I do believe that stocks and commodities can be a good investment, if invested in a diversified manner and with a long time horizon in mind.

Index funds as the core

I personally believe that low-cost index funds are the best strategy for long-term growth. If you are an advanced investor or own your own mutual fund, you might be able to achieve more growth by following a different strategy, but it’s pretty hard to beat an index fund by trusting someone else to manage your money for you.

The evidence is simply not there. My fellow blogger and friend Andrew Hallam has tried to educate us on this point again and again; actively managed mutual funds tend to underperform for various reasons, including but not limited to the following:

Taxation. Increased trading from mutual funds may decrease returns and increase your personal tax liability.
Returns-chasing. Because active funds trade a lot more than passive indexed funds, they lose more of their capital to brokerage and trading fees.
Survivorship bias. Mutual funds seem to perform better because you don’t read about the ones that no longer exist.

It comes down to simple mathematics: If an actively managed fund charges you 2% to 3%, and an index fund charges you 0.5% or less, and they invest in the same companies, then it’s going to be really tough for that active fund to outperform the index fund.

That 1%-2% difference compounds year after year. You can end up forking over a huge portion of your gains to your mutual fund company over a long enough period of time, simply by paying an additional 2% in fees every year! Unfortunately, as a Canadian, we don’t have access to the best low-cost index funds like Vanguard, but there are decent options out there.

One needs to be invested for the long-term

When you are investing in the markets, I do believe you need a time horizon of at least 20 years or longer to really see the fruit of your gains. Imagine someone that had started investing in the 1920s. They would have suffered immensely through the Great Depression and World War 2, but if they stayed strong and continued investing through these years, they would eventually have done well for themselves.

The important factor here is that these returns are realized to those who stick for investing in the long run. It takes up to 20+ years or more to really see the benefits of a long-term investment plan. You have to consistently invest every month, and you can’t give up hope when there is a big market crash. In fact, if you are still far from retirement, a market crash is good for you because you can buy more equity at a cheap price! You only really want the markets to be high when it’s time to start selling your shares.

Diversifying to reduce risk

A common rule of thumb is to invest your age as a % in bonds, and the rest toward equities. For example, if Rachel’s mother is currently 45 years old, then they would allocate their investments as follows:

45% Bonds
55% Equity

If they invest $1,000 every month, then $450 should be put into the bonds, and $550 should be put into equity.

Over the course of time, changing valuations will affect your portfolio. For example, let’s say that over 5 years, stocks rise and bonds stay around the same. Then your ratios might look like this:

25% Bonds
75% Equity

Rebalancing should be done at least once a year to bring ratios back into line. After five years, Rachel’s mother would be 50 and would want a 50/50 split. She should focus her future investments on bonds, and possibly sell some of her equity in order to buy bonds.

Why does this work?

You wouldn’t normally do this when dealing with individual companies. Imagine if you kept plowing more money into Enron as it fell. That would be a recipe for disaster.

However, when you deal with the overall market, the picture is different. The market as a whole is in relatively undervalued and overvalued states, depending on the bubble of the day. By rebalancing, you shift your money away from where assets are overvalued toward where they are undervalued. It is debatable whether this increases overall returns irrespective of risk, but there is a strong case to be made that this increases your returns for the same level of risk. Michael O’Higgins writes more about this in his book, Beating the Dow with Bonds: A High-Return, Low-Risk Strategy for Outperforming the Pros Even When Stocks Go South.

What can Canadians invest in?

The picture is slowly improving for Canadians. Your financial advisor probably won’t tell you about these options, but the landscape is improving.
Here are some funds you can look at that have decent management expense ratios:

TD Canadian Index Fund -e (0.33% management expense ratio (MER))
TD Canadian Bond Index Fund-e (0.51% MER)
TD International Index Fund-e (0.50% MER)

If you were doing 40% bonds and 60% equity, you could allocate an investment of $1,000 a month as follows:

$300 –> Canadian Index Fund
$300 –> International Index Fund
$400 –> Canadian Bond Index Fund.

Retirement tax planning

There are three main choices for Canadians:

RRSPs (Registered Retirement Savings Plans): Get a tax refund now, pay income taxes later.
TFSAs (Tax Free Savings Accounts): Pay taxes now, pay no taxes later.
Unregistered: Pay taxes now, pay capital gains or dividend income later.

My Own Advisor goes into more detail in his post “I’ll maximize my TFSA first, thanks“.

The investment decision will depend on Rachel’s mother’s income position:

What tax bracket is she in now?
What tax bracket does she expect to be in when she retires?

Readers, I’m unclear of what the tax impact would be if Rachel and her brother are providing the funds for her mother’s retirement. What are your thoughts on this?

How do you calculate how much income your mom can get on her investments?

I used this compound interest calculator to come up with a reasonable estimation: http://www.moneychimp.com/calculator/compound_interest_calculator.htm. According to MoneyChimp, the real return of the S&P 500 for the last 25 years is 6.66% (what a number). Yes, this is including the lost decade that we’ve just went through! It’s tough to say what returns will be going forward in the future, and since we have some bonds in the mix maybe we should lower our estimations to a 5% real return.

Let’s say they invest $1,000 a month for 25 years out, compounded at 5%. After 25 years they will have $597,991 (actual results will vary, but let’s say this is the middle range).

I then recommend withdrawing no more than 3% to 4% per year. This is what I call an “infinite” portfolio. This means that her mother could safely withdraw $18,000 – $24,000 a year in retirement income for the rest of her life, if her and her brother save $1,000 a month. If they save $500 a month, her mother will end up with $298,995 which would be good for $9,000 – $12,000.

Keep in mind that these are real figures, so inflation is already taken into account. Her mom will also be eligible for OAS and CPP on top of this. If she gets an additional $6,000 a year in OAS and $6,000 a year in CPP, and her children saved $1,000 a month for her, then she could enjoy an inflation-adjusted income of $30,000 – $36,000 in retirement, and even if the government partially or fully reneges on these promises, she will not be totally left in the lurch. This is not a huge income, but it’s more than enough to live comfortably. With the infinite portfolio strategy, her income will also rise in real terms, year after year, over the long run.

What about if you’re close to retirement?

The closer her mom is to retirement, the more variance there will be. To help compensate for this variance, the proportion of funds in bonds will increase, but this may also have the impact of lowering returns. A strategy of laddered GICs and CDs can be used, depending on the CD rates and GIC rates. If they only have 10 years to retirement, they might end up with a portfolio amount between $140,000 and $175,000 by retirement time. With the infinite portfolio strategy, they would be able to safely withdraw $4,000 to $7,000 per year. This doesn’t seem like much, but it’s actually still a very big help because it’s almost like getting an extra OAS or CPP cheque! In addition, even with the withdrawals, should they continue contributing to the fund in her mom’s retirement, her income will still rise in real terms.

By the time she’s in her mid 70s, the portfolio balance could be between $280,000 and $375,000. This would allow withdrawals in a range of $8,000 – $15,000. With the addition of OAS and CPP, as well as additional cash from the sale of her primary home, this would be enough to afford a decent retirement home, should the day come when she can no longer be fully independent.

Please keep in mind all figures here are in real-terms, so they are already adjusted for inflation. In addition, there is always the chance of variance and reduced returns. That is why I like an infinite portfolio strategy, because if you plan to live on the lower income ranges, you can survive through these periods of low returns. If things go better, then the extra income is just a blessing.

Other options

If Rachel’s mother’s health and inclinations allow, she might want to become a landlord during the first few years of her retirement. The housing market in Canada is currently high, but things might change in 10 years. There might be some really good rental options, and saving money now will help give her the flexibility to take advantage of that opportunity.

Your thoughts

I think it’s very commendable and honourable that Rachel and her brother want to help their mom save for their retirement. Dear reader, what would you recommend? Please help a fellow reader out, and let us know what your strategy would be. We would appreciate it very much.

P.S. Happy Spring!

Giveaway code: 9232

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Going Back to the Basics and Increasing My Focus

Kevin — Mon, 19 Mar 2012 09:00:46 +0000

I started this blog nearly two years ago (does time ever fly by), and since then I have written series of posts covering a wide range of topics, such as buying your first home, how to invest for your retirement, and building your path toward financial freedom. I have greatly enjoyed writing about all of these topics, but I feel it is time to start adding a bit of focus to my writing, and to strive toward a laser-like intensity toward the ultimate goal of achieving financial freedom.

I have started out on a new journey of entrepreneurship, and in a way, I am living out the dream I have strived toward for a long time now. I have not yet reached financial independence, and I might still be a while away from there, but I am on the way. My writings will continue to be personal, and I will continue to write under the frame of this new mindset and stage of life.

THE CHANGES AHEAD

To give you an idea of where I want to go, one of my favourite series is the one on living to 100: Investing in your future. I really do believe that there are changes coming that are going to completely change the way that we live our lives, and blow open many of our common biases and ideas about the way that things work.

On my other finance site, Financial God, I delve more into the political and moral morass that we find ourselves in, and I also share some of the amazing technological changes coming down the road that have the potential to radically change our lives, for better or worse.

To put it concisely, while it might not be the end of the world, I do think that 2012 is the beginning of the end of the world as we know it. Things are going to continue to change from here on out, and the questions on everyone’s mind will always be: “How does this affect me?” and “What can I do to prepare?”

A NEW FOCUS

I still believe in the motto of “maximizing your life EV”, even more than I ever did before. EV is an acronym for Expected Value, and it is another way of saying “let’s do what we can so that we don’t just live for the present, nor do we wait until the future: let’s make things better over our entire lifespans”.

How can we do that? I still believe that personal finance is one of the important pillars supporting this goal. A sound foundation needs to include the following components:

A high savings rate.
A healthy buffer between income and expenses.
Low-cost and efficient investing for the future.

Once the foundation is in place, we can build it up and make it stronger over time, and we can eventually use it to support our long-term goals. I am a strong believer in financial independence and freedom from the rat race, so those are the most important goals to me. Here are some of the things that can be achieved through a solid financial foundation:

Income-based financial independence.
Wealth-based financial independence.
The freedom to live the life you’ve always wanted, whether it be freelancing, staying at home with your kids, or starting your own business.

MY OWN PATH

My own path has been both traditional, and unconventional. It has been traditional because I have gone to university, graduated with honours, and I worked in a corporate setting at a good job in a good environment. I had debt, I paid it off, I struggled with low-income wages, made financial mistakes, and learned from them.

This path is not a bad one — work for a few decades, pay off the mortgage, and build up a nest egg big enough to take care of me and my family for the rest of my life, by the time I retire. It is also a very linear path, with not as much room for exploration, trial & error, and risk & reward. For many people, that is not such a bad thing. I never thought of myself as entrepreneurial in the past, and I think that there are many good things to be said for a linear path, so long as one sticks to the basic personal financial foundation.

My path has also been unconventional because I have since decided to give up the stable salary and go and work for my own, even at the expense of a greatly reduced level of income. I have gotten used to a high rate of savings, so my lifestyle has not had to suffer too much even though I have just started out. I am only just beginning to forge down this path, and I don’t yet know where it will lead, but I have greatly enjoyed the experiences and the opportunities that I’ve had until now.

I am not a “get rick quick” guru, and I can’t promise you that the less-beaten path is an easy way to riches. What I can promise you is that by laying down the foundation, you will give yourself the choice, so that you can have the freedom to try one path or the other, and maximize your own life EV.

WHAT’S IN IT FOR YOU?

This site wouldn’t have much of a purpose if there was nobody around to read it. I want to know: Why is personal finance important for you? If you had a bit more money or freedom, what would you be able to achieve? I would love to hear your own stories.

Giveaway code: 9232

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My Plan to Not Go Totally Bust In 2012

Kevin — Thu, 15 Mar 2012 09:00:39 +0000

Image by DanieVDM via Flickr

Some of you are probably wondering how I am going to be generating money, now that I am out on my own! I put a lot of thought into this since before I decided to leave a sinking ship, but the world always changes and plans change, too. Here is where I am currently looking to grow in 2012:

1. I am a software developer by trade, specializing in Android and mobile development.

I want to focus both on writing my own apps and writing apps for other people. I worked as a mobile software developer in my past corporate life, and I started getting into Android in 2011 and loved it. I have already published my first app, Easy Voice Recorder, and I decided to take a somewhat different route by making the free version completely ad-free. I did not want to go the route of some other developers and release a crippled app, or annoy the heck out of my first users with ads.

I also wanted to make it an easy-to-use app, with a great experience and a good amount of polish. Later on, when I feel it’s ready, I will add some additional features and release that as a pro-upgrade version. There are also alternative ways to branch, such as an “Easy Call Recorder” which would share the same interface but also allow call recordings.

What do I still need to do?

I have not incorporated for now, and I’m not sure it’s the right point in time to do that. The taxation and reporting regulations are onerous for someone like me who is currently earning less than they did at their day job. As income increases, it becomes more worth it.

2. Write a book.

I also plan to write my first book ever this year. As this will be my first book, however, I would love to network with those of you who are also planning to write a book or for those of you that have already done so!

3. Continue to expand my technical knowledge.

I have been working on a 3D tutorial site called Learn OpenGL ES. This site is all about how to develop 3d graphics for Android devices, and it will also contain more information on WebGL and iPhone in the future. I am a software developer by trade, and I think that there is a dearth of information in this field.

I believe there are so many opportunities to develop this niche and develop my own technical skills at the same time. I am less sure on how to monetize, since the same strategies that I have applied to my personal finance site will not map directly onto a technology and informative site. Nonetheless, I have many ideas in my head, including using the site to branch into consulting and training down the road. I am really looking forward to putting more time into this niche.

I should also look into emerging platforms, such as Windows Phone 8. I think that iOS is a crowded platform, but if it makes sense, I’ll learn about that too and try my hand there.

Read more about the plans of others to boost their online income in 2012.

I would love to hear your thoughts and suggestions.

Giveaway code: 9232

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I Need Your Vote For March Money Madness!

Kevin — Tue, 13 Mar 2012 09:00:06 +0000

Hi everyone,

Whether you’re stopping by Invest It Wisely for the first time, or you have been here since the beginning, welcome! I appreciate every visitor and every comment, and it is you that keeps me going, through the thickness and thinness of blogging. My dream is to get out of the rat race, and I recently made a leap to full-time to help propel me toward this goal.

March Money Madness

I am currently competing in two March Money Madness events! The first is Free Money Finance’s March Money Madness, Round 2. A great guest post from Mathieu Bouville, Retirement Portfolios for Those Drawing an Income, is competing against Crystal’s epic quit post! Please head over and vote for your favorite.

I am also competing in the Yakezie March Madness, organized by Narrow Bridge Finance. I am currently squared off against Sustainable Personal Finance, a formidable and worthy opponent. I need every vote I can get! Please head over and vote for your favorite Yakezie!

Thank you very much for the support, and best of luck to all of the participants.

Giveaway code: 9232

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Invest It Wisely

Living to 100 and Beyond: How Will It Affect Your Retirement Plans?

Arriving at the singularity

The retirement plan

Giveaway code: 9232

Weekend Reading: Happy Mother’s Day Edition + Announcing the iPad Winners + My Trip to Grenada and Some News

Recent posts

News

iPad Winners

Weekend Reading

Career

Investing

Miscellaneous

Personal Finance

Retirement

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Getting Screwed Out of Your Hard-Earned Capital: How CDs and GICs Are Rip-Offs for Long-term Investing

What is the real rate of inflation?

Getting screwed out of our hard-earned cash

My personal rate of inflation

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5 Tips on How to Eliminate Distractions and Increase Your Productivity

1. Find a quiet place with few distractions — like a library.

2. Limit multi-tasking.

3. Limit fast-burning carb intake.

4. Set aside enough time for relaxation and downtime.

5. Do only one task at a time — but have many tasks to choose from.

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Top Personal Finance Posts to Help You Achieve Financial Freedom

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You’ve Just Registered a Canadian Corporation: What’s Next?

Initial meetings and resolutions

Keeping your corporation in good standing

Other obligations of the corporation

The rights and responsibilities of directors

The rights and responsibilities of shareholders

The rights and responsibilities of officers

A recap

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How to Register a Canadian Corporation

What are the advantages of incorporation?

Small-business tax rates

1. How do I incorporate federally?

2. How do I incorporate provincially?

3. Permits and other formalities

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How These Mental Anchors Are Seriously Holding You Back in Life

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Weekend Reading: What Lies Ahead Edition

Special mentions

Recent posts you might have missed at IIW

Weekend Reading

Business

Career

Economy

Giveaways

Internet

Investing

Miscellaneous

Motivation

Personal Finance

Politics

Technology

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Interview: CapLinked Co-Founder and PayPal Mafia Member Eric M. Jackson

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Three Important Milestones on Your Journey to Independent Financial Freedom

Milestone 1: Transition from an unemployed bum to self-sufficiency

Milestone 2: Come into my own as an independent worker

Milestone 3: Self-actualization

The hardest part is getting the ball rolling.

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Should I Convert My Variable Rate Mortgage to a Fixed Rate Mortgage?

What if I’m looking to get a new mortgage?

What if I already have a variable-rate mortgage, and I’m thinking about refinancing?

Wait a second… are you really expecting that rates will stay at the same level for the next four years!?

What about if rates rise even faster than that?

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What Do You Lose when You Decide to Stop Working for the Man?

Working environment