About 2 weeks ago, I asked if we could still make money out of the stock market. Then, I wrote a second post about making money with real estate properties. The key behind those two posts is to find a way to make enough money so we can retire early, happy and wealthy!

50 years ago, this wasn’t a dilemma: you simply had to work 60 hours a week for your whole life, stop working when you are too sick and take the money you had hidden under your bed to pay the bills. The more fortunate had a pension plan fully paid by the company. In any cases, you had about 5 years (10 maximum) in front of you before you pass away. Financing your retirement wasn’t a big issue.

However, our generation doesn’t necessarily want to retire early, but they want the financial independence of doing what they really want… especially at the age of retirement. According to me, retiring means quitting the 9 to 5, 5 days a week job. It doesn’t mean stop working at all (life would be quite boring!).

In order to reach financial independence, we have seen that we can invest in the stock market (and live with market fluctuations!) or we can buy rental properties (then again, lack of liquidity and non-payment are part of the risks). There is a third option: creating your own company.

Why creating a company is so great to make money?

There is only one word to answer this question: TAX! They key point of having a company is that it spends money before paying the government. As the opposite, as a salaried, we pay the government first, and then, we pay our expenses. So imagine if you could pay yourself first, and then pay the rest? This is what a company is about

Several young professionals are wondering if they would be better of putting all their money and effort into their company in order to make it grow. Some people say that most companies don’t survive the first 5 years (actually 9 out of 10) and then, most of the survivors die in the following 5 years (another 9 out of 10). However, if you are part of that small amount of survivor… you will probably be making a lot more money than with any regular job.

I would say that the biggest risk is not really to succeed or not (you can lose your day job anytime due to economic crunches and you can have foundation problem or renters problems with a rental property). The biggest risk is to forget that you will stop working one day and you will need money to live on.

The thing is that most company owners inject all their cash flow into the company and don’t put money aside to assure their retirement. Companies are often illiquid and their main asset is their owner. Therefore, if you want to quit, it becomes harder to sell and get money out of your company (on top of the fact that you will be paying taxes on the money withdrawn!).

So it is really important to have a financial plan that will cover the cash flow at retirement. If you plan it at a young age (as if you plan a systematic investment in index funds or if you systematically pay down your debts on rental properties), you should be able to build a nice golden retirement!

What I noticed is that there is no unique way to make money for retirement. The best way will be the one you like the most. If you like real estate, you will probably be able to become richer with rental properties than with the stock market. On the other hand, if you have the opportunity to create a company (even if it’s as a sideline), you will benefit from the fastest growing cash flow in your life

What are your thoughts about making money for retirement, what is your plan?

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I’m still upset against my employer for not getting me a better salary. I guess they calculated their things right as I would have to pay them back my MBA if I was to quit my job tomorrow. I actually have 3 years to work for them before I am “free”. I made a few calls and I realized that it might be a problem due to the current recession. I had several managers interested in having me in their team but their company would not sign a free agent with a 20K moving clause ;-). Therefore, I have to review other options… Sounds like a few articles to post in the upcoming weeks

Weight! Still going down during last week, I have reached 180 lbs for the very first time. Hence, my weight is now fluctuating between 180 lbs and 184 lbs. I decided to put extra attention to the food I eat until I reach 175 lbs. This less ice cream L. I cheated only once this week so I am pretty proud! But the real challenge is during the weekend. I’ve been eating a lot during the past weekends and it wasn’t always good food (unless you consider M&M’s, jujubes and sugar pies as good for health ). My guess is that if I can “survive” next 2 weekends without eating crap, I should be good to reach 175lbs by the end of July… Wish me luck!

On another, we have a complete new team with our Montreal Canadiens. Most people are upset because we signed small players (Gomez, Gionta, Cammalleri) and a guy that is slower than a drunk turtle (Hal Gill). At least we signed an offensive (but old) defenseman with Spacek. I am the one who thinks we have a better team today than a week ago. However, I was hoping to sign Kovalev…. There is still hope… not much

Here are some good read for the weekend:

Buymystockpicks offers a video about RIM and Apple stocks.

Bibble Money Matters definition of net worth.

Million Dollar Journey is offering a simple way to make a budget.

Intelligent Speculator found the next big bet to trade on: Inflation!

Canadian Dream has some tips on cheap summer travel.

Four Pillars Talks about tax deductible mortgage/debt in Canada.

The Credit Toolbox defines a payday loan.

The Digerati Life suggests to pay yourself LAST?!?

Where Does All My Money Go talks about the TSX since the beginning of the year.

ABC’s of Investing says that not all index funds are diversified.

image source: RDS.CA

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Regular readers might remember that I was under serious income raise negotiation for the past few weeks. The sage finally ended last week as I had my semi-annual meeting with my manager. I got my final answer: eat it. It wasn’t really how it was said (it was more like: I really want to keep you but HR said eat it)… Did I ever tell you that Human Resources was the evilest department of a company?

They would “reposition” me on the salary scale at the end of the year (yeah, yeah, I see the carrot in front of my but I am hungry now!). Well this is making me think that I might want to go shopping before X-mas!

So now I have to really sit down and think about quitting my job or not. There are a lot of things implicated when you quit your job (especially if your whole family depends on your income!). so here we go:

7 things to consider before quitting your job

1. The Pay check

Hey! I’m not a financial planner for nothing! This is the main reason why I am changing actually. I would not trade my job for 2K/year and I do not suggest you quit your job only for a better salary (unless there is a huge difference). Employers in general will see you coming and you won’t be able to hit the jackpot several times. Nobody wants to give a big salary (even if you are a superstar) to someone who will quit his job 2 years after for a higher bidder. Pay check is important, but it should not be the only criteria.

2. Work Conditions

This is probably one of the most important points to look at before quitting your job. What is your schedule? Is it flexible? Can you work 4 days a week? How many weeks of vacation do you have? Do you have sick days? Are you able to take them according to your vacation plan or you must ask permission to take a day off?

3. Location/environment

Cost of transportation, traffic and work environment could be determinant when you select a new job. Quitting your job because you get stuck in traffic for 1 hour every day and night is priceless. There are also some places where you are afraid to go out of your office at night. It is always nice to come in the office and have a smile when you look around.

4. Your Manager and co-workers

Your immediate managers and co-workers will definitely influence how your day goes at work. We long see interviews to hire new employees. I think that the interview could be used by the new employee in order to know more about his managers and his future co-workers. While it is hard to assess future relationship, you can always ask him a few questions:

- Why the last person left?

- What he would do in specific situations?

- What is the turnover rate inside his department?

- If I ask your employees, how would they describe you?

This will not only give you additional information on your future manager but will also show that you are clearly interested in the position and that you are able to ask clever questions during a job interview!

5. Insurance, pension plan and other non monetary advantages

There are several ways to get a pay check. You get the money deposited in your bank account and then, you have all the other non tangible advantages your job is giving you. When you are about to quit your job, you have to assess what you have and give it a money value. The best way is to compare each category one by one. If you need help, call you HR and they will tell you the approximate value of each of them.

6. Career opportunities

If you want to grow within a company, you must ask to know if they prefer getting new blood of they prefer to train their own people before giving them promotions. You should also ask your future employer if they have career plans for each employee. Ask him how he got here, that might give you an idea as well

7. The company philosophy

The company philosophy will shape their managers and employees. If you don’t fit in the company culture, don’t bother quitting your job for this one. You are better off finding the right fit with an employer before quitting yours.

In order to make a good decision (the worst thing is to regret quitting your job!), I’ll try to make a grid with those factors and if it works out, I’ll share the “job quitting evaluation grid” with you Enjoy your weekend!

image source: IHP

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As the economy is pretty slow and most governments want to stimulate the economy through stimulus package and by decreasing their one day interest rate, we are currently benefiting from the lowest interest rate of the last decade (… century?).

We recently observed a small raise on long term mortgage rate (4 years and 5 years). Only a few months ago, it was possible to get 3.55% for 5 years in Canada. Now, we are back to about 4% if you can find a great deal.

So several people are asking: is variable interest rate going back up as well?

The short answer (and the long) is NO. So tell me why mortgage rates went up? Aren’t they following variable rates? Then again, the answer is no.

Long term mortgage rates are following the bond yields as they are similar (important debt amortized over a long period of time with a security attached to it). Since we recently saw an increase of yield in long term bonds, long term mortgage rates followed.

However, the variable rate depends on a totally different thing; the FED in the US and the Bank of Canada. Those entities have control over the monetary mass and the one day “inter-banking” rate. This is the rate at which banks borrow from each other at the end of each day in order to cover (the shortage) or lend (the excess) of money they have in their accounts. Historically, banks variable rate follow (almost) exactly the fluctuation ordered by the FED of the Bank of Canada. Therefore, if the Bank of Canada would raise its interest rate by a quarter, the next morning, all Canadian banks would follow by increasing their variable rate.

So is the variable rate will increase?

Over a short term period, the answer is clearly no. Bank of Canada expressed its wish to maintain the interest rate until June 2010 in order to give a chance to the Canadian economy. On the US side, many experts claim that the raise in the interest rate will only appear in 2011!

But if you want to go further, you must know what the main effect of a rate increase is on our economy. Imagine that you are driving a car at 100mph on the highway (and that cops (regulation) are having a drinking on you so they can’t stop you ). If you brake a little it, your car will slowdown. If you jump on the brakes like a maniac, you might crash your car in the landscape. Then, imagine the economy as your car. When you are driving too fast (and regulators our not “available”), one of the only way to slowdown the economy is to increase the interest rate by a few points (just hitting the brake gently). This is exactly what the Fed refused to do a few years ago thinking it would make our economy crash in the landscape.

But what if you car is driving 20 mph? If you brake, you will completely stop. And this is exactly what would happen in our economy right now. To be more accurate with my analogy, I would have to say that you are driving at 20 mpg, climbing a hill and if you ever brake, you will start going the other way!

So this is why I don’t expect to see the variable rates going up over the next 12 months…

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Here we go, now you are reading my title and you think “this guy, this little Quebequer who hates his country…. Such a shame!”. Not quite right. In fact, I am very proud to be Canadian and if ever Quebec separates, I’ll be moving in Western Canada for sure!

However, Canada Day is pretty special in Quebec; this is also called “Moving Day”. For some unknown reason, most rent expires on July 1^st and then, most people move on that date. The thing is that I always have a friend that moves on that date as well!

Therefore, again, today I am stuck driving to Montreal, get stuck in traffic and move furniture and boxes the whole day. The great part is that I have to work tomorrow morning…

However, I really love the new Olympic Vancouver 2010 Maple Leaf Poster:

So I leave you enjoy your Canada while I’ll be sweating and swearing all day!

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All three of our new calculators are easy to use and will display your results in writing, as a graph and in a table, giving you the information you need to know what to do next.

We have also updated our Balance Transfer Calculator so it now has the functionality to allow you to input more than one existing card balance when working out how much you’d save by moving your debt.

It’s only by using credit card calculators such as these that you can really get a true idea of how much it could cost you if you don’t manage your balances properly.

Credit Card payoff calculator - Use this great new tool to see how long it will take you to pay off your current credit card balance and also to set a repayment plan if you want to clear the balance in a set number of months. You can also set a desired monthly payment and work out how long it will take to pay off your credit card balance based on how much you can afford each month.

Balance transfer vs low rate credit card calculator - Last year saw the launch of low rate credit cards which offer a low admin fee and a low typical APR of around 6-8% on your credit card balance for a set amount of time. However, along with the launch of this new type of credit card came the question of whether it is cheaper to use a low rate credit card or a balance transfer credit card. This calculator has been designed to answer that question for you.

Minimum repayment credit card calculator - Did you know that paying off just the minimum repayments towards a balance of £2,000 on a credit card charging 15.9% would take 29 years and four months to pay off (2% minimum repayments) and cost you an extra £2,997.83 in interest fees? This handy credit card tool will show you the true cost of making minimum repayments and how long it will take you to clear your debt. You can also play around with it a bit and see what a big difference it makes if you increase your monthly repayments slightly.

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As you probably remember, a few personal finance blogger and I entered into a friendly stock picking competition on January 1^st 2009. The purpose was to pick 4 stocks each and pray that we are lucky enough so we can create a positive return at the end of the year. As 4 stocks is definitely not enough to maintain a well balanced and diversify portfolio, this is far from being a scientific competition and I do not encourage you to take our picks for granted.

What is really interesting to see into this stock picking competition is the ranking from one quarter to another. After the first quarter result in March, I was second and most of my fellow bloggers were showing negative returns. However, now that the market surged from March to beginning of June, the ranking has completely changed.

Some people who had “bad stock picks” for the first quarter saw their very same stocks (we are not allowed to change our picks… unfortunately!) soared during the second quarter. We had a few bloggers that decided to bet on the price of crude oil. Since there was a lot of speculation lately (it went from $35 in December to $70 during last month), they are showing a much better portfolio yield now!

As for my own choice, Google (Nasdaq: GOOG) keeps doing well this year. There is a lot of changes in the techno world and betting on a highly liquid cash company is definitely a must. Google can easily survive this economy crisis and grow stronger from it.

Com Dev International (TSX: CDV) is not doing much right now and it is definitely not helping my portfolio to outperform others ;-). However, we still have another 6 months ahead of us and I strongly believe that it is a good pick (maybe for 2010 ). The thing about stock picking is that you must be patient!

Bank of Nova Scotia (TSX: BNS) is still doing fine but the bank rally seem to be over. I guess I won’t get much out of this stock this year. If it would be include in my own portfolio, I would have to decide if I keep it for its good dividend yield or I sell it in order to cash in my profit. There was definitely a misevaluation of Canadian bank stocks at the beginning of the year but the results from the last quarter seemed to have brought all investors on the same pace.

Unfortunately, my “safe pick”, Johnson and Johnson (NYMEX: JNJ) was not a great one considering that we just went through a stock rally (bull market? Who knows!). Therefore, this one is slowing me down in the competition… for now ;-). What influences my results compared to a real portfolio is that I don’t get to count the dividend (from JNJ and BNS) in my returns. It would have contributed to give me a few additional percent ;-).

So here’s the ranking and their latest post about the contest (will be live at the end of the day!):

1	FourPillars	48.83%
2	IntelligentSpeculator	43.32%
3	WildInvestor	41.45%
4	Wheredoesallmymoneygo	28.52%
5	TheFinancialBlogger	13.29
6	Million Dollar Journey	4.76%
7	DividendGrowthInvestor	0.70%-
8	ZachStocks	-3.04%
9	MyTradersJournal	-11.36%

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I’m shortly starting the month of July, my very first month as a free man! Ok, I am ignoring the fact that I still have to write a final paper but it doesn’t matter; I got my weekend back, I got my life back. So what’s next? Where is my promotion, my bigger office and my new BMW? Huh… not quite there yet apparently!

Will I change job?

Funny enough, spending 2 years with managers and learning how to become one gave me all the reasons in the world to not become one! Ok… I am exaggerating a bit. However, looking at the number of hours worked by manager around me makes me wonder why do accept such responsibilities if it’s to be paid per hour as a burger flipper? Is it for power? Is it because they just love their company? Or maybe they would love to own their own business and this is the closest they found with a (virtual) “guaranteed income”. So will I change job after my MBA to become a manager? Hell no!

However, I have built a hell of a network and I can easily get myself better employment conditions as a financial planner ;-). I have made great friends and I also learned how to “play” their game. If you know how a manager thinks before he hires you, you can get much more (Fred, please ignore this line ;-0 ).

What is my next big project?

NONE! Huh… then again, a little bit of exaggeration from my evil me. I actually have 3 huge projects in mind:

- Taking care of my wife and my family (which is by far the most important thing I will do!)

- Keep losing weight and getting in shape (this is definitely happening already so I should succeed by the end of the summer by weighting 170-180lbs and get rid of all my fat!).

- Bring my business to another level. I really would like to wonder if I keep working or if I can simply live from my online income… I think that by putting more effort into it, I’ll be able to achieve this goal within the next 2 years…. This would be amazing!

If I had to do it again, would I do it anyway?

If I had the power to go back in time in August 2007, I would still come to my first class and do my MBA. This was a painful experience where I almost lost my sanity and my family. However, this brought me where I am, this helped me become who I am today and this will surely be helpful in the future. So I would still do it, knowing what was coming for me!

What is the next step once you have done your MBA?

Take a deep breath and relax!!!! I am actually considering taking more days off and going on vacation… I’ll see if I can manage something with my manager

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Man! I think that if my life with be included in the VIX (volatility index), I would make the index soars to new highs in the past months! There are some important movements within our internet company and we are currently thinking about making some important moves. I guess I have to find something else to get busy with since I’m almost done with my MBA! I can’t tell you more about it right now as we are not quite sure what we are doing with our company anyway ;-).

I keep going to the gym and I try to resist as much as I can to ice cream (we all scream for ice cream!). I must say it is easier to go to the gym than saying no to a delicious blizzard (vanilla ice scream with bits of Crispy Crunch and Coffee Crisps…. Aaahhhhh). Nonetheless, I stick between 182 and 185lbs… slowly going down toward the 180 lbs psychological bar… At this rate, I should go under 180lbs sometimes in July… This is quite exciting! I also noticed that the more I work out, the less I want to eat junk food and sweats. I even surprised myself to stop eating my Tim Horton morning breakfast halfway. I tasted the enormous quantity of salt inside and I throw it away.

Here’s a few good read for the weekend:

The Credit Tool Box tells what a good Beacon Score is.

The Dividend Guy bought some more fixed income.

The Digerati Life provides some useful money saving tips.

The Simple Dollar comes with his rule#2 of investing: don’t over-think your investments!

Intelligent Speculator introduces us to managed account.

ABC’s of investing is giving us more information about dividend stocks.

Four Pillars tells that good debt is truth. (all debts are good even the one to buy a plasma TV ;-)!… just kidding!).

Where Does All My Money Go comes with a credit card payoff calculator.

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Yesterday, I wrote about the fact that I truly believe that we can still make money out of the stock market. I think that there are 3 main ways to make a lot of money (there is technically a 4^th one which would implicate you working like a damned demon for a company for several years and hope to get the VP position). The first one is to invest in the stock market. This one is quite “easy” as if you simply buy ETF’s and wait 30 years, you will wake up one day with a lot of money! However, it requires golden guts

The second option that we will be discussing today is through rental properties. This is the baby boomer’s classic success story of the guy who didn’t have much education but was a hard worker. He pilled up his money to buy his first property, than his second one and he bought a land, build 20 properties on it and he is now living by the lake… I must agree with you that I also fell in love for this story. We all know people who succeeded through real estate. We all know them because real estate is easy to see, buildings last and it makes us think it is safer.

However, while I still think that we can make money through real estate, it is far from being a safe investment. There plenty of risk that you must consider (illiquidity, default payment from renters, major repairs, drop in value (think of the American market), etc.). So don’t think that it is that amazing! What is really cool though, is that it can be used as a big “dividend tank” that send you money months after months!

Why you can still make money with real estate:

Depending on where you live, there are several reasons why you can still make money through rental properties. The major point is that borrowing doesn’t cost much right now. I am convinced that people who have the guts to borrow as much as they can today will be greatly rewarded in a few years. We have a unique chance of paying almost no interest in order to buy depreciated assets… Doesn’t this sound like the opportunity of a lifetime?

The second point is that there are a lot of rental properties which has been depreciated in value. This is probably a great timing to start looking around and look at how much it would cost to buy real estate in your area. Unfortunately, this is not the case everywhere. In Quebec, value didn’t drop much. In fact, my house keeps increasing in value years after years. However, I would be curious to look at properties in Florida!

The third point is the blessing of having a recession (say WHAT?). Well if people start losing their job, they will probably consider selling their house and start looking for an apartment. Therefore, you have better chance of getting renters. On the other side, it might become harder to get paid on time Nonetheless, the demand for apartment will definitely increase in the upcoming year. I don’t think that young couple will get their first 350K mortgage at the age of 25 anymore… they will stay in an apartment for a few more years and gather more money before buying! This would be the client you should be looking for!

Any thoughts on real estate investing?

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