Monday, March 23, 2015

Where To Put Your Money?

     A coworker of mine recently stated that the put money into RRSPs. I asked here why? She said to reduce her taxes. Where am I going with this?
Looking At Things Different

     A few years back, I came across a book at the book store in the financial  section. When I noticed the title I remember I saw the author on the Oprah Winfrey Show.  The book in question is Rich Dad Poor Dad by Robert Kiyosaki.  The book challenges your beliefs about money and gets you to look at money in a different mind set.  So I bought the book and took it home. I read it but never took action. My biggest lesson I took from this experience is that you can read all the books or attend seminars on investing, trading, rental real estate and entrepreneurship that  you can get your hands on, but nothing will happen unless your take ACTION!!!!. So after reading the book, I did not take action out of fear.
      A few years after this book reading, I heard about Canada's Youngest Retiree Derek Foster. Derek Foster is just an average guy who escaped the rat race at the age of 34.  Derek didn't invest in RRSPs as it didn't make sense to him as he was in the lower tax bracket. Derek also wanted to retire early as he did not like working.  He invested in stocks that paid dividends and income trusts and REITs that paid distributions.  A couple of things helped him a long the way. Derek purchased a huge amount of shares on margin in a cigarette company after the stock tanked due to a lawsuit. These shares increased in value and he sold.  Another thing Derek did was take out a loan at 8.5% interest to buy RioCan REIT which was paying a 11.5 % yield and was a monthly payer. So the distribution paid the payment each month. With the distributions increasing over time the loan was paid  off quick. The latter to things helped him to escape the rat race a lot sooner then just buying the stocks without any debt what so ever.
       Derek became an author and started speaking about dividend investing. I think he now has 5 or 6 kids.  He is still out of the rat race and him and his wife home school there children.

So What Did I Finally Decide to Do?

     In the early months of 2010, I decided to take action after waking up one morning and saying to myself that I didn't want to live like this anymore. So I decided to start paying myself 30% of my income regardless of where it came from. So two thirds of the 30% went into savings and one third to investing. The money left over at the end of the month went all into the investing account.
     As the savings grew and the interest rate on my bank account decreased, I paid myself first 30% of my income to the investing accounts. At the end of the month, I would pay myself first 30% of the investing accounts and 30% of the savings account. If I was cash flow positive at the end of a month, the entire interest from savings account and entire dividend amount paid for the month would stay in their respective accounts.
        In an RRSP or 401k, the money is locked in. Therefore if you take it out you are penalized and have to pay tax at your marginal rate as it taxed the same as interest. So I put my money into a margin account and a TFSA account. Although a TFSA is a registered account, you deposit money with after tax dollars so the gains and income within a TFSA are tax free.  For disclosure, I have put money into RRSPs in the past, but do not do it anymore.


       After deciding to pay myself first, I found life getting less stressful as I was building passive income. The passive income has growth to about $300 a month. I get paid this money regardless of what I am doing and where I am at in the world.  These companies tend to grow their earnings and therefore increase dividends to their shareholders.
        I am have since moved up paying myself 35% and then recently started 37%.  

For those who are interested,  there is a company called Sharpe Trade LLC.  This is a website that has 2 well known known people writing posts , doing podcasts and videos.  There is people behind the scenes also.  The two well know people also have a premium portfolios, in which they discuss why the enter a trade and exit a trade before it happens.  The website is  On of the 2 well known people also has a portfolio in which he calls Sharpe Income.  This started with $500 and $25 dollar contributions each week. This person also goes on the show his results through a PDF and a spreadsheet.

Disclosure:  I have no affiliation with Sharpe Trade LLC.

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

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