If I could somehow destroy just one industry with a quick and easy motion, payday loan industry would be the one. I hate them with a passion.
Warning: There might be some NSFW language present.
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If I could somehow destroy just one industry with a quick and easy motion, payday loan industry would be the one. I hate them with a passion.
Warning: There might be some NSFW language present.
Here’s the thing. When few weeks ago I’ve shared my thoughts on budgeting and how everyone should totally have one, I’ve received a very well thought-out response from one of my readers.
I hate paper bills in my pockets (even though new Canadian bills are now actually plastic). The sound of my pockets jingling doesn’t make my jolly. Any time I get stuck with $20 or more bucks in cash I feel the urge to run down to an ATM and deposit it into our account. Plastic money for me is a much better alternative to paper money, and when people say “- Well, cash is king!” all I want to say is “- I hate cash. Cash sucks! Cash is nothing but annoyance.”
Here’s the thing about exercise. Nobody really wants to do it. We all know we should be doing it at least twice a week, yet only a minority of people actually do it. And the funny thing – people actually doing it on a ongoing basis don’t look like they actually need to do it. It’s mostly skinny beautiful people jogging in the morning! At the same time I’m staying under a blanket making up the reasons why I should stay there. My leg kind of hurts. Tuesday is not a good day to start exercising, it has to be Monday. Preferably Monday, January 1st. I don’t want to wake up my wife. The pillow is way too soft and comfy. Plus I heard about a serial killer targeting specifically joggers…
When it comes to savings accounts, in my view there are only two valid options today. It’s either President’s Choice Financial or Tangerine (or Bank Formerly Known As ING DIRECT). I would never consider opening a savings account at any other bank simply because none of other banks offer completely free savings account with all features included without fees of any kind. These two are your best options because:
I’m giving away a copy of David Bach’s Smart Couples Finish Rich book along with Finish Rich Workbook (both Canadian edition, eh?). If you’re struggling with money and would like to change your financial life, I think this would be a great book to read to start your journey to recovery and towards greater financial success.
What’s more important, this book focuses on couples. I’ve always thought agreement on financial matters is absolutely crucial for couples because seen many times what disagreements can do to couple’s finances. David explains how to properly communicate with each other about money, and how to get the dialogue going.
This book would be a great help to you if you are in a long-term committed relationship and don’t have open, frank discussions with your significant other about money. The entire book focuses on ways to open up this discussion and make it go easier, particularly in the early steps of the plan. The raw financial advice is pretty basic; the power of this book is found in the strengthened relationship that it can facilitate.
A long, long time ago
in a galaxy far, far away when I was taking yet another night course in college, I was searching frantically for an article about automatic electronic relays (don’t ask me what that is!). By accident, I came across a book review on David Bach’s Automatic Millionaire. Being a curious person, I clicked on the link and quickly scanned through it and thought it’s worth checking out later – especially since back then I was dealing with being in debt, and one of the chapter was specifically addressing that problem.
David Bach’s style of explaining personal finance matters was very appealing to me – not judgmental, action-oriented, and very positive. He didn’t say I was a bad person for being in debt, he didn’t try to present me with some sketchy concept of attracting money by imagining yourself rich (Yuck!). He simply broke down personal finance into milestones, and walk through them. All I had to do was to follow along.
Later on, I’ve read a lot of personal finance books. But Automatic Millionaire will always be the book that changed my life after I stumbled upon it completely by accident. Sometimes I wonder how our lives would be different if I didn’t click on thank link. Where my net worth would be right now, if I’d still be in debt, if I’d start investing money with a great dream of becoming financially independent one day?
All you have to do is to leave a comment (or send me an email at firstname.lastname@example.org) and tell me your most important issue with money. What you find the most difficult thing to tackle? What frustrates you the most? Maybe it’s your debt, maybe it’s fear of investing, maybe it’s your secret addiction to Big Whoppers that drains your bank account. Simple as that!
I will pick a winner on Friday, June 20th and will contact you shortly for your mailing address.
WARNING: This article is full of stereotypes, generalizations, and simplifications. Just like all of my stories.
Usually, immigrants are portrayed by the media as struggling households, working low-paying jobs and barely getting by. Well, here’s some rather shocking statistics for you:
– According to BMO Harris Private Banking, roughly half of all wealthy people in Canada are immigrants or 1-st generation Canadians. This means they either immigrated to Canada or were born here to immigrant parents and thus inherited some of their habits. At the same time, 7 out of 10 of them built their wealth from the ground up. They started at zero, and reached the millionaire status with their hard work.
– According to study done by Purvi Sevak and Lucie Schmidt, immigrant households are ahead of native households in terms of wealth accumulation. In simple terms, immigrants save more money than native Canadians/Americans of the same age. They might not make as much money as their counterparts, but they end up with more wealth in their coffers.
How’s this possible? How come people who came to Canada/US from third world countries sometimes barely speaking English and in most cases with no marketable skills are so far ahead in terms of personal finance than people who lived here for generations and thus supposedly should be ahead of them? Let’s figure it out together.
I happen to be an immigrant myself. Years ago, my family (dad, mom, me, and my brother) moved to Canada from Russia. My parents thought Canada provides more opportunities for people, and is also more stable socially and economically. So trust me, when it comes to being an immigrant, I have firsthand experience.
Being an immigrant myself, I can completely understand the underlying causes for this phenomenon. See, immigrants might wear the same clothes as you, and drive the same roads, but being outsiders gives us a bit of advantage due to cultural differences. Immigrants save more money because they think and live differently. They also have different habits when it comes to money, and as a result a lot of them end up wealthy.
People who grow up in Canada and USA are surrounded by debt. Let’s be honest, debt became a part of life here. People borrow money to buy houses, they borrow money for school, they borrow money to buy cars they drive to school, and they buy groceries on credit cards, and even buy dogs using in-store credit with 168 easy payments spread over 24 years. Immigrants on the other hand don’t borrow money. It’s cash all the way, baby!
First of all, not many banks will lend money to people without credit history/credit score. Banks only lend money to people with history of repaying their debts because they kind of want their money back plus a little something. But when you arrive here from another country, you have a completely blank history of borrowing. Banks see it as high-risk lending, and prefer to lend to more stable crowd.
Second, immigrants are not used to institutional credit as a concept and generally don’t trust banks. As a result, they tend to save more and generally are more disciplined with money. Cash is king, like your old-school grandmother probably used to say. If you don’t have cash, you don’t spend money. Immigrants save more money not just for retirement, but for all other major purchases because they save money instead of borrowing. You want to buy something expensive? You set money aside for months and sometimes years until you save enough to buy it outright. Borrowing from an institution is very foreign to immigrants.
If you have no debt, you have more money to save and invest. If you don’t waste money on interest payments just so you can have the latest gadget sooner, you end up with more money in your pocket. So, having very limited debt lets immigrants save more money.
Immigrants in most cases come to Canada/US from poorer countries and modest means (otherwise, why would you move here?). They’re used to having less and not enjoying finer
more expensive things in life. What would be considered “poverty” by most people here passes for normal living in our countries of origin.
Example #1: Having only one car in your household or owning an older vehicle is considered as signs of struggle in Canada/US. But check this out – when I was growing up in Russia, we had no car at all. My brother and I walked to school every day (uphill both ways!) and my parents used public transit for going to work. Having a family car was viewed as utter luxury, and far from everybody could afford it. Ever since then I have very low standards when it comes to personal transportation and feel completely content with driving an almost 20-years old car with no power windows. As a result, I don’t waste money on lease payments or finance charges.
Example #2: Houses in North America are enormous. And you don’t have to be from a stereotypical “poor” country to say that, even people from Western Europe will tell you the same thing. Where I come from, living in an apartment is considered perfectly normal, while living in a single family housing is something that only very wealthy families can afford. So, now you can understand why most immigrants don’t need to buy large expensive houses and prefer to live in more economical dwellings and save more money as a result.
Same goes for most household spending. Having more than one television set in our house feels like overkill. Chasing clothing trends and latest electronic gadgets seem unnecessary waste of money. Going out to eat to a restaurant and spending money on food while there’s a perfectly good dinner sitting in your fridge is just weird to immigrants!
Call it “being cheap”. I call it “being efficient with money”.
While immigrants don’t get the highly paid jobs, they compensate for it by working an extra job (or two!) on a side. They’ll come on weekends for some extra work, they’ll volunteer for working on stat holidays, and they’ll work side gigs in spare time – whatever it takes to bring more income.
It doesn’t mean they work like this all their lives! They might work like this for the first 5, 10, or even 15 years after coming here. But at some point their savings and assets grow to the point where wise investing takes over, and working for money becomes less of a priority. At this point, a lot of them ease off gas, and let money they’ve saved produce more money so they don’t have to. Makes sense?
Years ago, when I got in trouble with college debt, I worked two jobs all summer to pay it off. And by working all summer I mean every single day for four months in a row including weekends and holidays. While some of my friends though I’m a bit nuts, it was worth it when I paid off my debts completely with all my extra earnings.
Even right now, working a “normal” Monday to Friday job, I feel guilty for doing nothing on weekends, and always look for ways to be productive. Heck, I think this blog came to be simply because I was looking for something to do in my spare time.
Work hard, spend less, and have no debt. Say no to unnecessary spending, and try to increase your income. This is how immigrants save more money. Any financial advisor will tell you these three things will put you on a road to wealth.
Holy macaroni, does the time fly or what!? Feels like only few days ago I was putting together the list of our goals and resolutions for this year. And here we are, almost half way through the year. Somebody asked me other day – how am I doing on my goals and resolutions? Have I given up yet? Well, let’s take a look at the original goals:
HIT! This goal was smashed to pieces! For every single month starting from January to May we’ve put away 30% of our income towards investments for the future. It doesn’t include saving for future spending (new car or travel, etc.), it includes specifically saving money towards investments for our financial independence. Check out our latest investment in solar energy in Ontario!
In fact, we’ve increased it to 33% (weird number but whatever works!) few months ago after we realized we actually have some leftover money in our budget. Being debt free has an awesome effect of leaving more money in your pocket; money you can put towards your own goals, not your bank’s. Take that, big banks!
Most financial advisors recommend saving at least 10% towards retirement, but I really feel 10% won’t be enough – partly because we don’t make a lot of money, so it will take a larger portion of our income to save considerable amount of money. Not fair, but just means we have to work harder on this saving thing. Years ago we’ve started with 10%, later increased it to 20%, and now we’re at 33% rate of savings. One day I’d like to get to 50% of savings through either increasing our incomes (can somebody hire me for $100,000/year? I’m great at making sarcastic comments and eating sandwiches), or cutting down our expenses – although we already live lean and mean.
BONUS HIT #1!: We’ve finished saving for a new car. Our car is a gazillion years old by now, and while it served us faithfully for years, the chances of it breaking down beyond reasonable repairs are getting higher with every kilometer. Heck, with almost 250,000 kilometers on its speed-o, the engine might fall out tomorrow. So, few months ago we’ve opened up a savings account just for this and been throwing whatever we can into it on a monthly basis, including our 2013 tax refunds. Now that we have $10,000 sitting in that account (I ain’t paying over $10,000 for a new car), I don’t really care if this one breaks down one day – we can simply write a check and buy a new one overnight. One less thing to worry about!
BONUS HIT #2!: We’ve also increased our mortgage payment by 10%. While it wasn’t on my original list of goals and resolutions, this is something we’ve been doing every year for the last 3 years. Thankfully, our mortgage company doesn’t mind us doing it unlike some restrictive banks out there. This is the trick I’ve learned from one of my friends – by increasing your mortgage payment every year, you’re speeding up the repayment process by years. And while having extra money for fun might have been nice, seeing our mortgage being repaid is fun too, trust me. Besides, we can always find something cheap for fun, fun doesn’t have to be expensive. Heck, when I was a kid I played with a stick for fun…and it was fun!
CLOSE CALL!: In five months (January to May) I’ve made eighteen entries in my blog, so it works out roughly 3.6 times/month which is a bit below my goal. Now, this goal really doesn’t change anything in my world, but the whole point was to work out a bit of a habit for myself. And I’m almost there! March was a bit of a miss with only one entry because I got incredibly busy at work. So, with some extra entries here and there, I hope to bring up the overall total to 5 (five) times a month by the end of the year.
How much money do Olympic athletes earn? – just something I’ve always been wondering about so I did some research on Internet.
Investing in solar energy – blog post about our latest investment, and why I hope to make some money with Ontario’s solar energy.
On a side not, I’m really enjoying this whole blogging thing. I do like writing, and I’d like to think that my posts are somewhat informative and helpful for other people. Reading other blogs is also quite enjoyable, and I love little friendships with like-minded individuals I’ve formed in the last few months. Twitter is not exactly my thing, but I love being able to talk to people across the world who are facing same challenges and have similar goals when it comes to financial freedom.
Million Dollar Journey – Awesome blog about smart investing towards financial independence.
Freedom Thirty Five Blog – Liquid blogs about out-of-the-box investing towards financial freedom and top 1% status. He focuses on less traditional investments such as investing in farmland in Saskatchewan, and mortgage investment corporations (something we’ve invested in ourselves). Fantastic read if you’re looking for something both informative and entertaining.
Budgets Are Sexy – hawk-sporting J. Money makes financial nerdiness cool. He’s a pimp daddy of personal finance blogs.
Stacking Benjamins – great blog and also podcast about financial matters run by Joe and OG. Before I found them, I thought I was the biggest movie nerd in history. These guys surely put me to shame with their movie references.
EPIC FAIL!: Well, I failed miserably in this department. But it’s not going anywhere from my list of goals and resolutions for this year!
My original intentions were to carefully track my food intake to the point of weighing all my meals and at the same time to ramp up my gym visits. As far as tracking down food intake, it stopped around March (my excuse was being busy) and never resumed. Gym visits are sporadic – and while I truly enjoy working out once I’m there, sometimes watching yet another episode of Dragons’ Den on Netflix seems like a way better way to pass the time than lifting heavy things and putting them down. Seriously, that’s all people do there.
I find it funny (and sad at the same time) that I have enormous discipline when it comes to finances and can fight over a single dollar in our budget just to hit our goals (sometimes it backfires on me), yet when it comes to simple things like going to a gym or cutting down on cheese appear to me as incredibly hard things to conquer. Frustrating!
HIT! While this goal doesn’t have anything to do with personal finance or investing, I’m proud that I’ve hit it. There are many ways to waste the time in this world, and reading books isn’t the worst of them. What can be better than acquiring new knowledge and being lightly entertained at the same time?
Wolf of Wall Street by Jordan Belfort. This book was later turned into a movie by the same name starring Leonardo DiCaprio.
Wiseguy: Life in a Mafia Family by Nicholas Pileggi
The Behavior Gap by Carl Richards. Brilliant book that discusses how most people miss out on great returns by making some rather stupid things with their investments.
The Richest Man in Babylon by George Samuel Clason. I’ve came to a conclusion that everything you need to know about personal finance is directly discussed in this book. If you read just this one book, you don’t need to read any other books on personal finance, seriously.
I’m planning on sticking to my schedule and making a point of reading two books a month.
WORK IN PROGRESS!
The reason why I put this on my list of goals and resolutions, was because I’ve noticed that sometimes I spend way too much on Internet (and other ways too) reading up on something that is completely irrelevant to my life. I’d be listening to talk radio on the way to work discussing latest politics scandals. I would find myself reading news on subjects that have no connection to my life whatsoever.
Why waste this time on it? Why obsesses myself with subjects that will never affect my life in any way. Who cares about politics? Shouldn’t I focus on my dreams and goals before paying attention to anything else?
So, now on the way to work me and my wife mostly talk instead of listening to daily news. I stopped paying attention to news sites and anything to do with politics. It’s work in progress, but it’s slowly getting better.
I’ll continue working on these goals and resolutions, and revisit the list once again, just around end of the year. I’m really hoping to make progress on all goals and resolutions I’m doing poorly right now, and I will try to excel at the ones I’m hitting already.
After all, if you’re a Financial Underdog and were not born with a silver spoon in your mouth and a nice trust fund to live off, the only thing that’s left to do is to keep working on improving yourself. And an occasional episode of The Walking Dead here and there, am I right?
It’s been a while since we’ve talked. Five years ago I’ve walked out on you. Five years ago I’ve decided to end it with you. And these five awesome years were filled with joy and happiness. In all honesty, I don’t miss you one bit.
We’ve met when I started going to college. A sweetheart counselor thought she’s doing me a favor by introducing me to you. See, I was new to this country, and didn’t know anybody, so it felt nice to have somebody to rely on. Too bad I’ve never finished college and had to go back to work, but you’ve stuck with me even after I dropped out.
My life felt easier when you were right next to me. You took me places, you bought me stuff. I remember going on a trip to Europe with you, and you made it extra sweet for me. You paid for hotel, my meals, and even an awesome camera I just had to have before heading there. I still have pictures, dear Debt.
I remember you buying me a new car. You felt I deserve something better to drive because my old car was not as shiny as new ones, and didn’t have fancy options. At first, I resisted but you’ve talked me into it by saying how hard I work and I deserve to enjoy finer things in life. So, you bought me a new set of wheels, and after parking my old car in a garage (hurt feelings!) I started driving in style, just like all of my friends.
What started as a fun flirt on a side soon turned into a nightmare of a relationship. Before I knew it, you basically moved in with me. Good memories of trips together were long gone, but you were right next to me every day. Every night you kept me awake as I crunched the numbers in my head trying to figure out how I can make it work. You forced me to work on weekends to bring more money home to pay for you. All of my money was going towards you, but you kept demanding more and more. Your collecting friends started calling me at night asking about money. You made my food taste bland and every day seemed joyless because you sucked the life out of me. You have no idea how bad you make people feel. Heck, some people commit suicide because you got a hold of them.
Breaking up with you was hard but truly worth it, dear Debt. I’ve kicked you out of my house, sold your presents, and got rid of your shiny new car. Took me months to clean up your mess! But my old car was happy to see me, and in all honesty I don’t miss any of your presents. I sleep well at night, and my new friends Budget, Savings, and Investing take good care of me. We spend a lot of time together, and I haven’t thought of you for a while now. Because of them, things are looking up for me! All because I’ve made a decision to end it with you.
I’m glad you’re gone, dear Debt. Don’t ever come back. Forget my number, and forget my house. You’re dead to me.
Lately, mortgage investment corporations have been getting an increasing amount of media attention. Yet if you’re interested in investing in general, there’s very little information out there on what mortgage investment corporation (MIC) is and how one can benefit from them. I’ll try to explain it to the best of my abilities and even share my personal experience with one.
MICs are investment vehicles that focus primarily on mortgages. Thousands of investors pool their money together. Then a newly formed MIC starts lending out the funds to qualified borrowers. MICs are professionally managed by a management team that is compensated with management fees and incentified with a partial cut into profits.
In reality, mortgage investment corporations are just like banks. Banks borrow money from depositors and lend money out to borrowers. The difference between the amounts of money they make from lending and interest they pay to depositors is their profit.
Somewhat similarly, mortgage investment corporations raise their capital from investors, lend the money out, and funnel the profits back to investors. Some of them choose to also borrow money from banks at low interest rates – but not all of them.
There are many MICs currently on the market, some private and some public. The amount of money flowing into them from investors attracted by very reasonable yield is always exceeding previous years numbers. Largest players in this market include Firm Capital, MCAN Mortgage Corp., Timbercreek Senior MIC and Trez Capital MIC.
While the amount of capital under management and lending guidelines vary from company to company, the general business model behind generating income is very similar between them.
I’ve stumbled into MICs almost by accident. At the moment, I wanted to park some of our money in a investment with good returns, but at the same time somewhat liquid – meaning we’d be able to get the money out even if it meant paying a penalty.
High interest saving accounts offered by major banks do not offer meaningful returns these days – you’ll be lucky to get anything over 2%. On the other hand, putting money into an index or mutual fund (even with stable history of returns) didn’t seem appropriate for this money. Hey, I like mutual and index funds just like any other guy, but we all know they can go up and down rather wildly.
Through our financial advisor, we’ve found Crossroads DMD – a Calgary based mortgage investment corporation. They’ve been in business for a number of years, and pride themselves on delivering outstanding returns to their investors while operating a portfolio of many millions under management. This includes first and second mortgages, bridge financing, and construction loans.
Unlike conventional mortgages, these types of mortgages come with higher interest rates. While some people might say it’s because the risk is greater (and honestly, I tend to agree with them to some degree), one must understand this area of financing is very under-served and thus the amount of capital available is limited. Big banks that come with big capital prefer to deal with conventional mortgages, so smaller companies like Crossroads DMD are able to capitalize on small and medium-sized loans in this specialty market and command higher interest rates because of it.
When they lend out investors money, borrowers put their properties on the line. This means these mortgages are secured by real hard assets thus minimizing the risk to investors. They won’t lend out more than 85% of the asset value – which means even if the borrower goes belly up, the investment corporation will be able to recover the funds.
Over the last several years, Crossroads DMD delivered on average over 10% to their investors in form of dividends. Since inception, the average rate of return is 10.6% per annum.
This particular investment also features hurdle rate – a specific target for return on investment that must be reached before the profits are distributed to shareholders. Investors get paid first! Investors also get a 10% share of the profits above the hurdle rate thus benefiting from great performance of the management team. What a great incentive for the management to deliver good returns.
While the investment is liquid and money can be returned to you upon request, an early exit fee (sometimes called “retraction fee”) will apply if money is withdrawn before 3 year mark.
Amount invested (Nov. 17, 2011): $19,200 split between two TFSA accounts.
Investment balance (Mar. 31, 2014): 24,192.15
Return on investment: 10.44%
Personally, I’m quite happy with this investment. While some index funds showed outstanding gains over the same period of time, I feel like this is a more stable investment for me. The returns are stable even through tough times! The management team does a great job taking care of investors’ money, and the dividends keep dripping steadily into account. Also, while I might have to pay an exit fee, I have the access to these funds at any time.
All in all, good place to park the money for 3 to 5 years with fairly predictable outcome.
Let’s be honest, the great market crash of 2007 is still not that far behind us. Lots and lots of real estate investments went belly up or taken a serious hit, so some people might not be comfortable with the idea of investing into a mortgage company. I know my first reaction was like that! But after reviewing company’s strict lending rules and their historical returns on investors’ money, it became clear to me that the management in charge of investors’ money is absolutely top notch.
Here’s a snapshot of returns investors received over 10 years:
Notice how returns have not changed much during our last real estate crash? Yes, the returns went down by 0.4% but never dipped below their hurdle rate of 10 percent. This means their lending practices are very conservative, and their performance doesn’t correlate with real estate market performance in general.
But I’m not going to sit here and tell you this investment is completely safe. The risk is always there, and you have to be comfortable with risk. This is not a magic investment that combines higher than average returns and low risk! Mortgage investment corporations can and do go out of business, so approach this type of investing with caution. Do you homework, read the memorandums, and do research on past performance and current management team.
Check out this awesome checklist for picking MIC to see what you should be paying attention to while considering your options.
Putting your money into a mortgage investment corporation is not very exciting. There are no stratospheric returns to brag about. Mortgage investment corporations are not widely mentioned on the news like latest Facebook IPO. You simply put your money in, and it starts dripping dividends into your account in a form of cash distribution or reinvestments. You won’t hear from them unless you receive a statement with your earnings. And if you’re trying to impress your friends with this investment at the next cocktail party, most likely you will put them to sleep explaining what they do.
Some investment can be exciting. For example, one of our investments in solar energy is truly exciting to me because of the difference it will make in Ontario. Green! Solar! Energy! Sounds pretty cool, eh? Mortgage investment corporation on the other hand is a very predictable and boring investment that simply drips dividends into your account. Yawn.