Our Financial Path.

Should Canadians Still Invest in An RRSP If They Received CERB During 2020?

Post author By MJTM
Post date February 26, 2021
No Comments on Should Canadians Still Invest in An RRSP If They Received CERB During 2020?

Many Canadians struggled financially through a challenging 2020 amid the ongoing pandemic, social distancing, remote work and lockdowns. Some 8.9 million people applied for the Canada Emergency Response Benefit (CERB), a government fund to help the unemployed during the lockdown. Now that the CERB program is closed, many people are asking what that means for taxes and RRSP investments in 2021.

Specifically, many people who received a CERB payment still have some of their emergency funds left. As they return to work this year, those Canadians want to know how CERB influences their taxes and whether investing the emergency fund into their retirement plan is a good idea.

If not, what can Canadians do with CERB funds they still have? Is a GIC investment a better option, or what about simply keeping the benefit for a rainy day? In the article below, we answer those questions:

What is the CERB?

The lives of most Canadians changed when the COVID-19 pandemic brought lockdowns and an economic downturn during 2020. Many people were left making financial choices they had never had to consider before. Cutting back if necessary and finding the best financial tools such as the most affordable insurance, best GIC rates, or available benefits became important for most households.

Canada’s federal government developed several programs to help people weather the economic storm spawned by COVID-19.

One such program was CERB, an initiative to support workers nationwide financially. It allowed the employed and self-employed to receive $2,000 in financial aid over a four-week period if directly affected by the pandemic. There were seven rounds of CERB funding, meaning some Canadians got $14,000 in benefits.

What is an RRSP?

A Canadian Registered Retirement Savings Plan (RRSP) is a self-investment plan that lets people establish a retirement fund. Both the account holder and spouse/common-law partner can contribute to the RRSP, with deductibles helping reduce tax payments.

That’s because income earned in the RRSP is usually tax-exempt if funds remain in the account. Payments received from the plan typically come with taxes.

CERB, Taxes, and RRSP Payments

Understanding whether you will pay tax on a CERB fund depends on your taxable income last year and the current marginal tax rate. People have different tax rates, and CERB may affect tax payments on an individual basis. For example, a top-level earner can repay more of the money they received, while low-income Canadians will have less tax liability.

One recommendation is to leave some of the received CERB payments to cover potential taxes. A good number would be around 30% of the total received. If you lost your job or were partly unemployed, you may have received the total CERB funds up to $14,000. However, people question whether it would be better to park CERB money into an RRSP instead of keeping some of the funds ready for taxes.

If you have contribution space and funds, contributing to your RRSP can help offset taxes related to the CERB benefit. That sounds great on paper, but there are some caveats that people should not ignore:

Eligibility Concerns. Since ending the CERB program last September, the government says it has sent 441,000 letters to Canadians who it believes were ineligible for the payments. These “education letters” state that those who received a CERB payment but were later deemed ineligible must repay the money.

Recipients who have been incorrectly given financing say the Canada Revenue Agency is to blame for providing confusing eligibility standards. Either way, it is risky to rush ahead and invest any CERB funds in an RRSP before confirming eligibility from the CRA.

Does an emergency fund work as an RRSP contribution? Keep in mind that while RRSP contributions decrease taxable income, they do not remove taxes altogether.

For example, if a person contributes $10,000 to an RRSP, they will not owe tax on that amount. If the person fell into the 35% tax rate, this contribution would reduce their taxes by $3,500 ($10,000 x 35%). In other words, you won’t get a dollar-for-dollar reduction in taxes and may still need to pay some tax on the CERB funds you received.

Another important consideration is the emergency fund may still be helpful. COVID-19 isn’t going away yet, despite Canada embarking on a nationwide immunization program. The pandemic is still here, and further lockdowns are possible. It can be risky to invest the remaining emergency funds in an RRSP if there is a chance you may need the money for living expenses later.

Just remember, the funds in an RRSP can be difficult to withdraw. RRSP holders have to request to withdraw their funds, and the money you withdraw is also subject to withholding taxes. Once you make a withdrawal, you will not be able to get the contribution room back, impacting retirement savings.

Holding out on an RRSP investment. RRSP accounts are great because they work for you to help lower your tax bill from the previous year. That’s one of the main benefits of this retirement investment under normal conditions. However, 2020 was not an average year, and people receiving CERB benefits earned less income during the year.

As your earnings rise back to normal levels in 2021, it may be worth waiting to make RRSP contributions. That’s because your tax rate was lower in 2020 due to the drop in income. With full employment and earnings in 2021, your rate may rise. RRSP accounts can provide more tax cuts for higher-income tax brackets. That means it may be worth skipping RRSP contributions instead of using them for 2021 earnings because you get a more significant tax cut.

Conclusion

RRSPs are healthy investments that help lower your tax bill, but timing is everything. Using your CERB funds to pay into an RRSP is probably not the best use of those benefits. If you have some of that cash left, using it to pay your 2020 tax bill is a good idea. Still, it is worth making sure you were eligible for the CERB payment you received before using the funds.

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Toronto, ON M5V 1R7

1-844-726-0907

Financial Independence

If You’re Selling in 2021, Fix These Outdated Fixtures First!

Post author By MJTM
Post date January 16, 2021
No Comments on If You’re Selling in 2021, Fix These Outdated Fixtures First!

Have you ever noticed that every commercial that takes place in a home is beautifully designed, updated, and looks fresh out of a HGTV makeover show? They never show homes with older appliances, pine cabinets, formica countertops and outdated tiling. They never show homes that look like what most of our homes probably look like.

The name of the game is update, update, update. People want the newest appliances, latest trends, and fixtures that don’t look like they’re decades old. And, if you’re thinking about selling your house anytime soon, you may want to look around your home for areas that need work.

Here are some outdated home features to fix up before selling.

1. Mismatch paint colors, bold colors, and/or wallpaper

You may have painstakingly chosen the paint colors in your home that matches your aesthetic, but not all buyers are going to be smitten with that neon green dining room or that powder room with gold brocade wallpaper. If you’re going to sell, you’re going to have to roll up your sleeves and cover the bold colors and patterns with a neutral color palette.

Neutrals are more appealing because it’s easier for the buyer to seem themselves and their belongings in the space. Neutrals allow them to pay attention to details in the home without being distracted by overwhelming paint colors.

2. Outdated, stained, or worn flooring

Buyers aren’t going to look too favorably on homes with carpeting that’s seen better days, vinyl flooring from the 70s, or scratched up hardwood to name a few examples. Today buyers are interested in hard surface flooring. Colors and styles can vary, but cool tones, shades of grey, flooring in creative patterns, and (interestingly enough) wood that looks a little distressed.

3. Kitchens with old fixtures, appliances, and more

Kitchens are the heart of the home and buyers want a kitchen that feels more like a dungeon. Buyers want kitchens with stainless steel appliances, islands, walk-in pantries, and stylish backsplashes among other things. Buyers also want lots of storage space so their many small appliances can be tucked away out of sight and have plenty of space so they can stock up on food for emergencies.

4. Neglected patios and/or decks

Patios and decks were incredibly popular in 2020 because people wanted a space in their home where they could enjoy some fresh air. So, if you have a deck whose stain is faded, has loose boards or railings, or the planks are cracking which could cause splinters… You might want to invest some time and money into improving the deck’s condition. If your patio is cracked or there are weeds growing in between the pavers, take care of that as soon as possible. Power washing is also a great way to give your decks or patios a fresh look. You’d be amazed at how old years of dirt and grime build up can age things!

5. Energy inefficiencies

According to insights from top agents for selling in 2021, energy efficiency is a huge selling point for buyers. Not only are they interested in being eco-friendly, they want to save money! You can improve your home’s energy efficiencies by replacing doors and windows, air sealing and insulating your attic, plant shade trees around your home to keep it cooler in the summer, and upgrade appliances and systems to be more energy efficient.

Sellers shouldn’t have much difficulty selling their houses because there’s no shortage of qualified buyers out there. Heck, there are more buyers than houses in many markets! However, if you want to attract a wide range of buyers and even get multiple offers, you need to get rid of the outdated features and invest in what buyers want. It may cost you money, but if you choose your upgrades wisely, you could add a lot of value to your home. You know the saying – you need to spend money to make money!

Financial Independence

Tips to Master a Hot Seller’s Market and Find Your Dream Home

Post author By Daniel
Post date November 3, 2020
No Comments on Tips to Master a Hot Seller’s Market and Find Your Dream Home

We won’t sugar coat this: entering the housing market when seller’s hold all the chips means you’re going to have to do everything in your power to prepare for battle. It’s going to be tough to find a house in today’s housing market because inventory is low, as 87% of real estate agents who took part in HomeLight’s 2020 Q3 survey.

Don’t worry though – all hope’s not lost! Here are five tips that’ll prepare you for a competitive market and land the house of your dreams.

1. Learn all you can about your new neighborhood

Whether you’re going to a new job, going on vacation, or looking for a new doctor, you’re going to do your research so you can make sure you know what you’re getting into. The same amount of research should go into the area where you’re hoping to move into.

You’ll want to know what the school district is like, if there’s an HOA for your development, if there’s access to public transportation and so on. You’ll also want to scan real estate listing sites to get an idea of how far your budget will go toward finding your perfect house.

2. Get your mortgage pre-approved

When you go into a real estate office, a mortgage pre-approval letter will let the agent know you’re serious about buying a house and they’ll know how much you’re able to spend. The letter can also be used as a bargaining chip when making an offer because it tells the seller that you’re primed and ready to go.

3. Hire a highly qualified real estate agent

The pre-approval letter we mentioned is a good thing to have when you’re looking for an agent, but you don’t want to show your cards just yet. You need to do your homework to find agents who are highly respected in the community, who have plenty of experience selling homes in your price range, and give off the vibe that they’ll go above and beyond for you.

Why is doing your homework so important before hiring anyone? It’s because the real estate agent you hire is going to play a huge role in sealing the deal and you want to make sure you find someone who is going to work in your best interest.

4. Make an offer the seller can’t refuse

No one wants to spend more money than they have to, right? Of course not! Why pay full price if you can negotiate a lower price? In a seller’s market, you can make a low ball offer, but it’s not going to turn out like you’d hope. Since it’s a seller’s market, 87% of agents said their clients are submitting offers above asking. They’re doing this because the sellers are likely to receive multiple offers and they won’t even entertain a low ball offer.

Your best bet when making an offer is to make it as appealing as possible. You can bid at or slightly higher than asking price. You can submit a clean offer, meaning there’s no contingencies, no buyer repair requests or asking the seller to pitch in on closing costs.

Ask your agent what would be the best course of action to ensure your offer will be considered and/or accepted.

5. Include a personalized letter with your offer

You might not think a personal letter would be something that could sway a seller to accept your offer, but 61% of agents say their clients are using this strategy and get good results. Buyers who submit a personal letter shows the seller how important their house is to the family and it shows them that their home will be in good hands. After all, it can be hard to sell a house you’ve created so many memories in! It’s understandable that the seller would want to make sure the new owner will love the home as much as they did.

The housing market is always changing and now may be the right time for you to make your move. Before you do anything, heed our advice. You can never be too prepared when entering a strong seller’s market, especially if you’re looking for a house in a desirable area!

Saving

6 Ways to Spring Clean Your Savings Strategy

Post author By Daniel
Post date April 8, 2019
No Comments on 6 Ways to Spring Clean Your Savings Strategy

Spring is finally here, even if the weather doesn’t seem certain yet. That means that we have endless opportunities ahead of us to get out and enjoy the sunshine, smell the fresh flowers, and refresh our outlook on life. Usually, Spring is a time of the year when we like to get rid of the clutter in our homes and try something new.

However, it’s not just a good time to spring clean your property; you can also spring clean your saving strategies too. There are plenty of great ways to start working on your budget in the months ahead. Here are our top tips for 2019.

1. Hang Your Washing Out to Dry

We know how difficult it can be to find a day in the US when it’s not pouring down so that you can hang up your washing. In the spring, there’s more chance that you’ll get at least a couple of hours of sunshine that you can work with. However, even if you don’t want to hang your washing up outside, you can try a clothes dryer instead. The sunlight will still dry your clothing faster than you might think. There’s also the option of a heated clothes dryer too, which only cost about 10c an hour to run.

2. Download Some Plugins

The chances are that you won’t want to fill your browser up with endless plugins designed to save you money. However, there are some apps that may be more helpful than you’d think. For instance, a single automatic coupon app that works on every website will be able to tell you whether you’re really getting the best price on your products before you hit the “Buy Now” button. You could save a fortune with coupons and voucher codes that you never would have found on your own.

3. Compare More

Remember the days when you used to spend forever walking from one store to another trying to find the best deals? Fortunately, those days are over. However, that doesn’t mean that you shouldn’t be comparing prices anymore. Instead, you can do it all from your smartphone or desktop computer instead. Simply log online and compare the costs of the products you want to buy with a quick search on Google. There are even comparison websites available where you can check you’re getting the best deal on your loans and finance (even with bad credit), car insurance, energy bills and so much more.

4. Have More Bubble Baths (or Showers)

Who doesn’t love a nice relaxing bubble bath after a long day? Filling a bath around half way will cost you about $10 a year when you have a standard gas boiler installed. On The other hand, baths aren’t the best idea for people who have an electric immersion heater. If you have an electric heater, then you’re going to be spending almost triple as much as you would with a gas boiler. In that case, you’ll be better off having a shower instead. Find out what kind of boiler is heating up your water and start from there.

5. Use Your Phone

We’ve already acknowledged that you can use your phone to compare the price of crucial products and services online. However, did you know that you can also take your strategy to the next level with money apps too? Your phone’s app store is brimming with fantastic tools that help you to track your spending and improve your budget. You can even find apps that will invest any leftover pennies you have from your purchases into businesses. In no time, you could be making some serious cash off the change that you wouldn’t have noticed without your new app.

6. Use Your Spring Cleaning to Make Money

It’s the season of spring cleaning – so why not make the most of it? If you’ve gone through your clutter and found a bundle of things that you’re sure someone what might want, put them on eBay and see whether you can get a hit. There’s also the Facebook marketplace and other selling groups that you can try out too. Remember, you might not make a fortune selling things this way, but if you were just going to throw the items out anyway, then you might as well see what you can get. On the other hand, if you can trust the weather for an afternoon, you could pay the minimal entry fee and sign up for a local car boot sale if you think that will get you some more buyers.

Tags start saving

Traveling

Tips to Help you go on Vacation Without going into Debt

Post author By Daniel
Post date January 25, 2019
No Comments on Tips to Help you go on Vacation Without going into Debt

Occasionally it’s important to get away from your normal routine and take a relaxing vacation. While some people prefer visiting new destinations, others just want to spend some time with family members they haven’t seen in a while.

However, some people are not comfortable with making vacation plans due to the costs involved. No matter how great a vacation is, it does more harm than good if it’s likely to drive you deeper into debt. But if you prepare early enough, you can have an outstanding vacation within your budget. Here you’ll find some tips to help you plan a vacation without accumulating debt.

Determine the costs

If you intend to take a vacation, it’s important that you understand how much it will cost you, so you can make adequate plans. You’ll need to find out the charges (for example accommodation, transport, food, activities at your destination, etc.) in advance. To get the right estimate for accommodation expenses, you can look up the prices for hotels in your destination.

While it can be quite hard to plan the exact places to eat or take part in activities, you can rely on reputable travel blogs to get an estimate. You can also get travel guides for your target destination.

If the vacation is all-inclusive, you’ll have an easier time making the estimates. If you need or want to participate in an activity that isn’t included in the package, you’ll have to pay the additional costs. To be on the safe side, account for unplanned costs that may come up.

Start saving

After knowing the amount, you need to start saving in advance for the vacation. The best way to get started is by starting a monthly savings goal and following it consistently. If you can open a savings account dedicated to the vacation fund, it is easier to avoid the temptation of spending money. Most importantly, making automatic deposits will ensure that you actually save for the vacation.

If you have decided the date for the vacation, calculate the time left, and factor in the costs to know how much you should be saving each month. If you have yet to decide on a date, you can find creative ways to cut back on expenses and save money. Know that there are some expenses that you can comfortably survive without and that saving money is a major step towards a debt-free vacation.

At times, you may get a great vacation deal but you haven’t saved enough money. While taking a quick $1000 loan to fund a vacation is not a good idea, sometimes it can pay off.

Earn more and stay motivated

While it’s great to cut back on unnecessary expenses to free up some money, it is better if you can find ways to earn more money. If your schedule is already tight, and you can’t take an extra job, you can sell off the stuff that you no longer need around your house.

While the rewards are obvious, sticking to the plan can be a difficult task, especially because sometimes, it is not easy to maintain the motivation. Nevertheless, you can find several ways to keep the fire burning until you achieve the goal to save.

You can start following bloggers who tell stories and document their experiences in the destination you intend to visit. When you see photos and read exciting stories about the vacations, you’ll be motivated to continue with the plan, even if you have to make a sacrifice in the short term. In addition, you can track the savings plan and watch the funds grow.

Find a good travel agent

While some travel agents might charge for their services, there are many agents who get compensated by the hotels, flights, and cruises that they book for their clients. As such, you can tap into their expertise for free and end up saving time and money for your vacation.

All you need to do is submit a list of activities that interest you, as well as the amount you plan to spend, and your agent will provide you with the most suitable options. More often than not, agents are updated about special offers from hotels, destinations, and airlines. While you can do your own research if you have the time, you may not be able to choose the best deal, especially if you are not experienced. You shouldn’t expect the travel agent to lower the accommodation fee, but they can help you get a better room.

Travel during off-peak seasons

After you decide where you want to go, try to figure out the best time to travel. Normally, a travel agent understands the destinations and the most appropriate times to visit to get the best rates. But if you are planning the vacation on your own, make sure you are traveling to a destination when there aren’t many tourists interested in the area. You can look up the visitors’ bureau website and determine the low and high seasons for a destination.

While you might be forced to travel when the weather is not at its best, you can still enjoy better conditions, and you won’t have to deal with overpopulated destinations. If you are taking a flight, it will cost lower when you fly during midweek, as well as early on Saturdays.

Set a daily allowance and shop for the best deals

Regardless of the destination you plan to visit, you can make huge savings by finding better deals. You can accomplish this through retailers and websites with promotional packages. When you plan ahead about where you will eat and sleep, you can avoid making mistakes when you are tired or desperate to find a place to rest. At the same time, consider any additional expenses like souvenirs and plan where you’ll get them at a bargain.

When you arrive at your destination, it is easy to fall into the temptation of spending more than you had planned. It can be disheartening if you spend most of your money during the first three days of the vacation and are left struggling for the remaining days. To avoid getting into debt while on vacation, you should make sure you have allocated a sufficient amount for your daily expenses and stick to it.

Final words

Nobody needs to go into debt when taking a vacation. If you can’t afford to pay for the vacation, you definitely shouldn’t travel in the first place. But if you can plan early, it is easy to enjoy a great vacation without introducing unnecessary stress in your life.

Tags travel without debt

Investing

We Sold our House at a Profit and Still Lost Money

Post author By Daniel
Post date January 15, 2019
16 Comments on We Sold our House at a Profit and Still Lost Money

A while back, we argued that purchasing our house in the suburbs was a good financial move for us and the actual cost of ownership would compare to a $703 per month rent. To know the actual true cost of house ownership, the only accurate way to know for sure is to look back at the past 3 years and count every penny we have put in the place.

This was a great exercise, not only for our own finances but to give you a clear idea of the actual costs of home ownership. Some expenses would still incur if we were renting, therefore, in that situation, we just calculated the difference in cost.

Inevitable buying costs

To purchase a property in Canada, we have to go through a notary. They are basically real estate lawyers. As the buyer, we had to pay $1,200 to close on this house. This cost varies a lot depending on where you are, some will charge as low as $500, while some lenders even pay for it.

In addition, our municipality charged a land transfer tax equivalent to roughly 1% of the property value. We paid a total of $2,550 in land transfer tax at the time of signing. This varies between cities, Toronto for example, charges a tax on top of the provincial one so you end up paying almost 2%.

We also did a house inspection before putting in our final offer. This protects buyers from any hidden faults with the property. They go through the house and look for all the possible issues with the property. Of course, this by no means guarantees that nothing will go wrong with your property but it is a good safety measure to take and it gives you negotiating power if the inspector finds small issues.

We paid $700 for our inspector and after she mentioned that the shingle roof had to be replaced in the next 3 years, we negotiated with the seller to get all appliances included. They were all brand new, stainless steel appliances, so we saved roughly $4,000 there.

CMHC insurance (or PMI)

At the time of purchase, we decided to put only a 5% down payment on the house so we had to pay mortgage insurance. This added a total of $8,079 to our mortgage. The only way around this would have to put a $54,000 down payment, which we did not have on hand at the time.

In the United State, PMI would be very similar. For the same amount, PMI would add 117.79 to your payments for the first 90 months which comes out to $10,601 in total premiums.

Sometimes, it makes sense to spend a little on insurance to put less money down. Depending on current interest rates and your expected rate of return on investments, it can be more profitable to invest your money in the market rather than in your home.

The same goes for paying off your mortgage faster but sometimes, it is not all about the numbers. Feeling financially safe has its value too.

Home owner’s insurance

During the three years, we paid $39 per month in homeowners insurance to protect against fires, theft, damages, liability etc. The total cost over the years adds up to $1,404. Compared to renter’s insurance, which only covers liability and your furniture, we were paying $14 per month so the difference here over the three years is $900.

Municipal and school taxes

Every year, we paid $2,800 in municipal taxes and $450 in school taxes. This adds up to $9,750 in taxes over the three years. We also had a small issue with our subversive pump recently and that added $600 to our water tax bill so that didn’t help.

Maintenance and remodeling

The general rule of thumb for maintenance costs is 1% of your property’s value. U.S. News and World Report say that homeowner’s spend anywhere between 1% and 4% of a home’s value each year on maintenance and repairs.

In our case, we have very little maintenance expenses over the three years we were there. The only thing we changed was our hot water tank before it got too old. Total cost: $450.

We did spend on small remodeling projects but never spent a considerable amount of money. We always did our projects ourselves so we saved a lot on labor.

The first thing we did was to paint the dining room. Total cost: $60.

We then changed the cabinet’s handles to give a modern look to our kitchen. Total cost: $100.

One of our weekend projects was the accent wall in our master bedroom. We bought flooring on sale at the hardware store and glued it to the wall with PL. We invited a friend over and made it a day. Total cost: 100$. (Plus $20 for the beers!)

Inspired by this DIY, we remodeled a bathroom with the same technique as our bedroom since that wall turned out so well.

Instead of tiles, we waited until the wood flooring was on sale and given the smaller surface, we barely spent anything. We even had some leftover glue and paint. For the mirror, we found a nice one in a discount store for $40. We then ordered LED strips on eBay for $10. Total cost: $90.

We also changed the electric baseboard heater of our bathroom simply for aesthetics and noise and changed the bathroom fan for a silent one since it felt like we had a turbojet in there every time we took a shower. Total cost: $240.

This summer, we redid our patio since we never liked the one originally built. The old deck was grey, started to rot, and unappealing.

We sanded the base, changed the look of the railings completely, and secured a closed off section for the pool. Then, opted for modern steel balusters to give a brand new look to the place.

At the hardware store, we had the option of premade railings that went for about $120 per 6’ or we could assemble our own railings for about $30 per 6’. We went the DIY route and saved another 15% off the purchase price since we waited until a sale.

The worst part of the project was to get the stair railing to fit properly. We could not get the balusters to fit, the angles we off, and we ended up starting over 3 times before getting something solid in place.

After replacing some rotten beams, redoing a section what was not well supported, and building our railings, we ended up buying $150 of wood. Our biggest expense here was the steel balusters. Total cost: $450.

Finally, after having our house on the market for months and months, we had the floors sanded and varnished to spruce up the property. After getting a few estimates, we went with a guy who did the whole job in a day for $1000.


Water Heater	450
Paint:	60
Kitchen Cabinet’s Handles	100
Bedroom Accent Wall	100
Bathroom Accent Wall	90
Heater and Fan	240
Deck	450
Floors	1,000
Total	$2,490

Yard care

We never paid anyone to mow our lawn or to spray pesticides on our lawn but we do get some pretty nasty winters up here in Canada. We moved in the spring but for the next two winters, we spent $250 for a plowing service. This adds up to $500 for the three years we were there.

Utilities

When we were living in a smaller condo, we were paying under $50 per month in electricity. Now that we had much larger square footage, we spent roughly $120 per month on electricity. This includes our heating since the whole house was heated by baseboards. Over the three years, we spent $2,520 more as homeowners.

Furniture and appliances

We were fortunate to get all major appliances for included when we bought the house since we negotiated it in our offer. We got a brand new stainless steel fridge, stove, and dishwasher and used washer and dryer.

On top of all of this, we also negotiated to get the lawnmower, a weedwhacker, a hedge trimmer, and a few tools for free which saved us a lot of shopping.

In terms of furniture, the only piece we bought brand new was our couch. We got it for $600, on sale. Everything else came from hand-me-downs or we got it used from Kijiji or Craigslist. Finally, we furnished two guestrooms, which we later used to earn a few extra dollars on Airbnb, and office space.

We did not spend more than $1,000 in total.

Opportunity cost

By renting, we could have kept our down payment invested in the market. Since the day we bought our house, the S&P500 increased 20.154% (with dividends reinvested). Therefore, our $13,500 down payment would have grown to $16,220 if kept it invested. We are assuming a single holding portfolio here for simplicity but it gives us a total opportunity cost of roughly $2,700.

Interest

Each month, we paid $1,300 in mortgage payments. Out of that, about $535 has been going towards interest. Over the three-year period, this comes out to $19,260 in interest payments to the bank. As JL Collins puts it; interest is the cost of renting money.

There’s no free lunch in real estate.

Transaction fee

At the start, we tried the DIY route and chose to advertise our house on a flat-fee website. Selling our house seemed easy, we did the visits and open houses. The package we bought gave us the exposer we needed to find the right buyer and all the support one could need to sell a house. The total cost for this was $699 for their basic package. However, after months and months on the market and multiple offers which did not go through, we ended up hiring an agent.

We negotiated with the real estate agent a lower commission and signed a contract until the end of the year hoping to sell in a few weeks.

We were at the peak of the market, received multiple offers but, again, none of them went through. Finally, after a year on the market, we finally sold our house for a total of $35,000 more than we had bought it three years ago. In the end, we ended up paying $11,800 in commission for the transaction.

Appreciation vs inflation

In many cases, a home is not a great investment. However, it is not always terrible. Especially as your main residence, it is hard to see how renting would be better. A longer holding period would have helped us absorb more of the fixed costs such as the purchasing expenses and the realtor’s commission but no matter what it still costs a lot to buy and sell real estate. Even if the value of the home increases, it does not mean you are making any profits.

In this calculation, we did not even calculate inflation but that also eats up some of that $35,000 increase.

The actual true cost of home ownership

In the end, the actual cost of owning this house was pretty high. Once we include every single expense, it is surprising to see how much we have actually put in this place.

Notary	1,200
Land transfer tax	2,550
CMHC (or PMI)	8,079
Home owner’s insurance	900
Municipal and school taxes	9,750
Maintenance and remodeling	2,490
Yard care	500
Utilities	2,520
Furniture and appliances	1,000
Opportunity cost	2,700
Interest	19,260
Transaction fee	11,800
Total	62,749

Of course, we sold the house for more than we bought it so we can subtract that amount: 62,749 – 35,000 = $27,749. So, over a three-year period, we spent $9249 per year or $771 per month to live there. Pretty close our $703 estimate from the New York Times rent or buy calculator.

For $27,000 over three years, there is no way we could have lived a similar lifestyle as renters. We now downsized to a small condo downtown and even this small property would rent for a lot more than $771 per month.

Unless you are moving every year, it is hard to see how renting would be better than owning. If you have any thoughts, please comment along. 🙂

Tags debt-free, mortgage-free, rent or buy

Traveling

The Family Travels Through Thailand

Post author By Daniel
Post date December 26, 2018
4 Comments on The Family Travels Through Thailand

In our last article, we left off right after our month-stay in Chaing Mai. Since then, we have spent a month in the south of Thailand, stopping in Koh Lanta, Ao Nang, Krabi, and Phuket before flying back to Bangkok to catch our flight to Japan.

Traveling to Koh Lanta

Our first stop in southern Thailand was Koh Lanta, a family-friendly, peaceful, island located less than 2 hours away from the nearest airport in Krabi. We flew from Chiang Mai to Krabi airport on Air Asia, a budget airline. Both the service and experience was excellent. Everything you could expect from an international airline, but for a tenth of the price.

To book the flights, we used a few travel-dollars we have received to apply to credit cards and flew for free. Once we landed, we charted a private transport to Koh Lanta. We had booked a car but they sent us a minivan with plenty of legroom so that was a plus!

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Once we got to the island, we stayed for a week at the Tamarind Twin Resort. The hotel was pretty good for what they charge. We paid only $30 per night, again, booked through credit card travel credits.

It was a very large room, modern, clean, and the walk to the beach only took a minute or two. The pool was great and the beach (Long Beach) was very clean. Our baby had a ton of fun in the sand and playing in the ocean.

The highlight of Koh Lanta was definitively the beach. The water was clear and the sand was smooth. The sunsets were breathtaking and seemed to last forever.

On our second week on the island, we stayed at the Riviera Boutique House. Overall, that was the best budget hotel we stayed at. The service was excellent, our host was very helpful. We rented a scooter one day and drove around the island to the old town, we chilled on the beach, enjoyed the pool.

Our last stay in Koh Lanta was at The Thai House Resort. We had reserved a bungalow without AC but once we got there, we quickly realized how hot it got. Not only was it hot but too stuffy. The bamboo bungalow was very basic, had a tiny window, and a general feeling of ugliness.

Only a few hours after checking in, we asked the owner for another option. She asked double the rate for a modern concrete bungalow with AC ($60). That is pretty much the going rate for beach-front bungalows in the region but it meant we had to spend way more for our stay (and could not pay that extra charge with credit card points). After a little negotiation, we were able to get upgraded to a beautiful bungalow for only $4 more per day. That made all the difference!

We enjoyed our three weeks in Koh Lanta but there were a few things that slightly annoyed us.

The food options were very limited. There were a ton of restaurants but all serving the same tourist menu. Whenever we see restaurants with a hundred-item menu, (pizza, pasta, Thai food, hamburgers, seafood, fish…) we avoid them. Finding some good, local, restaurants was a challenge and we had to walk around a bit before finding something.
Access was not the easiest. Even if this island has a ferry, the drive from the closest airport took us about an hour and a half and cost $100 for a private transfer. This might not sound like much but it is huge for Thailand.
The Infrcture was laking. Internet was slow and, water being sparse, the showers had very low pressure.

On the plus side, however,

At the three spots we stayed, the beach was amazing. The sand was nice, the waves were not too big, and the water was sparkling blue. We did not see any trash in the ocean, nor on the beach.
Boat activity was minimal. The island is fairly quiet and peaceful for that reason.
Hotels are reasonably priced and, for the most part, well maintained. Everywhere we stayed was around the $30 per night mark. We always booked walking distance from the beach since a minute walk really does not bother us but basic beachfront bungalows go for about $60-$100 per night.
The island is very colorful and offers tons of natural beauty to admire. We highly suggest renting a scooter and exploring a bit in-land. We only paid $8 per day for ours.

Our stay in Ao Nang

After three weeks in Koh Lanta, we booked a private transfer to Ao Nang. Once again, we booked a sedan car but got a nice, big, minivan. This time, we got luxury leather seats with plenty of legroom. As for hotels, we booked 8 nights at the Ibis with points from our RBC credit cards and got the whole $65-per-night stay for free. The hotel was super nice, clean, offered a nice pool area, and a great breakfast selection.

It can get weird to raise our kid without support or activities. Being so far from family can get hard but nice resort-style hotels like this one are great to get distracted a bit. We hung out by the pool, let her play, and enjoyed the sun.

By then, after months of traveling, we definitively started to miss family. Especially with a newborn, having that support would be nice. We are always by ourselves, only us three, and it even if we are never bored, we do feel a small void.

Another thing we really start to feel is the closeness. We have been living in small hotel rooms for months and it does have it’s downsides. When our baby is taking a nap, for example, it is really hard to stay silent without a living room or office space. Even typing on the computer can wake her up sometimes.

From Ao Nang, we visited Phra Nang Cave Beach by longtail boat. It was a fun adventure. The boat ride only takes about 15 minutes and cost $8 round-trip. From there, we visited a small cave and admired rock climbers conquering the flank. It was an easy day-trip, even with a baby.

Another fun activity accessible from the beach in Ao Nang is the Monkey Trail. This free trail crosses to the national park around the mountain. It was pretty well maintained and easily accessible; simply walk until the end of the beach and start climbing up the stairs.

Unfortunately, we did not see any monkeys. It was still nice to see the jungle and the quiet beach on the other side of the mountain.

A quick stop in Krabi

After months of slow travel through Thailand, we finally did a quick, 3-day, stop in the town of Krabi. This was a nice stop after the month of beach life. We took another private transfer to get there, another $100, but this time actually got the car we booked.

Traveling by land was a big plus with an infant. Even for the island, we were in a van and took a ferry. It was so much easier than taking boats all the time.

Originally, we had planned to visit 2 or 3 islands by boat but after consideration, we rebooked our hotels to stay car-accessible the whole way.

We visited a nice weekend market, explored the town, and walked through the mangroves.

It was nice to come back to a city after spending so much time at the beach. The restaurant scene was much better and the liveliness of it all was refreshing. With now much better options to choose from, we finally ate amazing food again.

Traveling in luxury in Phuket

The next stop on our Thailand trip was the island of Phuket. Again, we used a private car transfer to get to our next hotel and got to the Marriott Resort and Spa, Nai Yang Beach bright and early.

We paid for the room with rewards points so it did not cost us anything. In addition, we got upgraded to an ocean-front Villa since we are platinum members with Marriott. Throughout all of our travels, this has to be the most luxurious hotel we stayed at. Our villa had amazing decor, a private pool, and a crazy ocean-view.

The resort was beautiful. They offered watersports, amazing restaurants, and a very relaxing atmosphere to end our stay in Thailand.

The service was simply breathtaking. One new thing we never experienced before was turndown service. Every evening. the maids would come to prepare the bed for use, change our towels, set our slippers on the side of the bed, and leave us a little thought on the pillow with fresh flowers.

It was completely over-the-top and no one actually needs this service but it was a nice touch.

Last stop in Thailand: Bangkok

Finally, our last stop before flying out was Bangkok. We stayed 3 nights at the very nice Marriott Marquis, again, paid with points. Once more, they upgraded us. This time to a suite on the 32nd floor.

The view was amazing. the hotel was wonderfully done and the service was outstanding.

The highlight of this property was definitively its breakfast buffet. The ginormous selection was breathtaking and the quality exceptional. They have an Asian section, juice bar, Western section, salad bar, cereal bar, and a never-ending selection of food.

We also tried 3 of their ten restaurants and were very impressed. The service was outstanding and everything we had was delicious.

Their business lounge was also very nice. It offered great views of the city from the 27th floor and the outdoor terrasse was also a nice touch.

The food was good, however, alcohol was only served from 5:30 P.M. to 8:30 P.M. On the plus side, they did offer a full-service bar so we ordered a few cocktails. Most lounges usually only offer self-serve.

The suite was very nice and elegantly decorated. We had a huge bathroom with a rain shower, full bath, and marble finishes. We finally got the luxury of hanging out in the living room when Baby was sleeping since the bedroom door could be shut close.

All-in-all, we had a great time in Thailand and after 69 days, we finally flew out to Japan. Thailand was so welcoming. Especially with a baby, they were all so smiley and happy. They LOVE babies. Some restaurants, we had 5 or 6 waitresses hovering around her and entertaining her! They just go crazy for them.

In contrast, Tokyoites were pretty straight-faced. But that is another story for another post.

Cheers, Mr. Mrs, and Baby Xyz.

Tags around the world with an infant, budget travel, how to travel for free

Traveling

Slow Travel Through Thailand (Mostly Chiang Mai)

Post author By Daniel
Post date November 23, 2018
4 Comments on Slow Travel Through Thailand (Mostly Chiang Mai)

It has been over a month now that we have arrived in Thailand. Some might think we are crazy to slow travel with an infant in Thailand but the experience has been amazing so far. They don’t call it the Land of a Thousand Smiles for nothing. Everyone seems fascinated by our baby! 🙂

With everything to discover over here, we never found the time to write at all but here we go.

Our free hotel in Bangkok

Since we flew for free with Swiss airline (thanks to our American Express cards) we had to land in Bangkok. From there we flew to Chaing Mai after only 5 days in the capital.

Arriving was pretty hectic. We took a taxi from the airport at 6 A.M. got to our hotel before check-in time but they were great and had our room set up by nine.

We stayed at the i-Sanook Residence, a great hotel away from the crowds. It is not located right in the action but it is still close to everything and offers free transport to four main spots around the city.

It had a superb pool, included breakfast, and was really affordable for such a bustling city. We really enjoyed the huge breakfast variety, from bacon and eggs to dumplings and chicken stir-fry. The offerings of both Western and Asian cuisines were delicious.

We booked this through credit cards rewards and the whole 5-day stay was completely free.

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A true foodie destination

Bangkok is a crazy city. Amazing, but crazy.

We had a blast exploring the many many street markets. Discovering so many dishes. Tasting all the flavors.

The food game here is on a whole other level. There is street food everywhere! Even on the smallest, narrowest, streets, there would be three or four vendors. The most surprising thing is to see their set-up; they usually have a scooter with a sidecar where they put their propane or charcoal grill and a workstation. Like food trucks but on scooters.

We ate Pad Thai, fried chicken, sticky rice, curry, ramen, a ton of delicious meals. Out of all of the time we ate out, we were disappointed only once or twice. Thai’s sure know how to cook!

As per the cost, most meals were around 60 Baths ($2) per plate. As long as you are willing to try the local cuisine, you can find plenty of restaurants, even sit-downs, for 60B or 90B ($2 or $3). Some street stalls even have dishes for under 30B ($1).

A good find for us, especially with an infant, was to eat lunch in mall food courts. They offer a huge variety of local cuisine, every stall is locally run, not franchises or anything like in North-American malls. The best thing is; they charge the same price as street vendors.

In food courts, at least, you get clean tables and AC. It was a great break from the heat right around the noon peaks.

In a city that reaches 35°C (95°F) on a regular basis, air-conditioned malls are a life saver.

In Bangkok, we only ate Thai food from food courts like at MBK or Central World, street stall or local joints which mostly consisted of a few tables in someone’s house with a grill or wok out front where an old lady cooked.

Getting around Bangkok

Oh, the traffic! We could not believe how much traffic there was. Any time of the day, it was always jammed.

Transport, in general, was pretty hectic. Taxis in Bangkok are known for over-charging tourist so we always asked for the taxi-meter. Instead of the driver simply saying how much it will cost, the meter runs on the official taxi rate and is usually half the price as what the drivers try to get away with.

The problem was, even with a cute baby, most drivers would not take us when we asked for the meter. Especially on a rainy day, they would just drive away if we asked for the meter.

The worst was when we were coming back from the Grand Palace. There was a huge downpour. We waited inside for the rain to stop and then we walked around for a good 20 minutes before anyone would pick us up on the official rate. Looking back, we would have greatly benefited from using Grab; the local Uber app. It is safe, reliable, and reasonably priced.

We overpaid a few times and got the meter price a few times but in the end, it was never extravagant. We are talking about a few dollars here and there.

Thailand is really really cheap, most of our taxi rides came to about 100B ($3). The most we spent during our stay was going to and from the airport. The 30-minute drive was 500B ($17).

A great discovery we made was to try the Chao Phraya River Express Boats. These commuter boats are amazing to get around the city cheaply and run all day long, every 20 minutes. The fare was only 15B (50¢) per person and you simply hop on and get off when you want.

Our hotel offered transport to one of the piers so we just got on and explored the city from there. We went to the Grand Palace and visited some temples by boat. We also used it to get back home a few times just to save on the taxi and skip the rush hour traffic. Not only was it cheap but it was also pretty fun. Riding the river was much better than sitting in a taxi.

What to do all day?

With a baby, our outings were a bit limited but in no way boring. We still got to do a bunch of stuff.

Before leaving for this around the world trip, we expected to slow travel with very few activities, apart from taking care of our baby. We had the time off and rather than staying home, we saw this trip as a nice way to explore the world while raising her. However, after spending weeks in Europe, never stopping and doing stuff every day, we realized how awesome our baby is! She is such a good traveler.

We were able to do much more than we anticipated. As long as we did not go out for more than three or four hours at the time, she was fine. Also, she has been great about taking naps in the stroller and baby-carrier, allowing us to be more flexible with our outings.

In Bangkok, we spent a lot of time in markets, temples (called Wat), and just exploring the city.

Almost every day went like this:

Woke up when our baby said so,
fed her, showers, breakfast at the hotel,
got a complimentary ride from the hotel,
explored,
go to a mall to eat lunch in cool AC,
go back to the hotel for the nap, feeding, and relaxing,
another short activity,
supper, often takeout if our baby was asleep,
relax and go to bed.

We visited huge markets like the Pratunam Market which is Thailand’s largest clothing market. From food stalls to fake Louis Vuitton bags, to hand-make silk, the markets offer a huge variety and are an adventure of its own. We could spend the whole day in one of those.

Over the days, we also visited so many Wats! They are all over the city and it is an easy way to escape the busy noisiness. It was so quiet and relaxing in there. The Wat Phra Kaew, for example, had beautiful grounds, enormous sculptures, and impressive architecture.

Thai temples are museums of themselves and most of them are free to enter. However, they ask you to cover up. No shorts, skirts, or tank tops.

In Wat Pho, we saw the reclining Buddha. A 46m long gold Buddha so big they had to build the temple around it after it was sculpted. Wat Pho is now recognized by UNESCO in its Memory of the World Programme and is also known as the birthplace of traditional Thai massage.

Talking about Thai massages, they are dirt cheap over here. For about 200B ($6), we got some amazing massages. That will buy you an hour-long session in most places around town.

After five days in Bangkok, we took a budget airline, VietJet, to Chiang Mai. Waiting at the BKK airport, we tried the Domestic Bangkok Airways Blue Ribbon lounge.

The service was impeccable. The duck we had was very tasty. The food selection was nice. They had good snacks and hot meals cooked to request.

However, their alcohol selection was very limited. We visit a lot of airport lounges and this is the first one which does not offer liquor. They had beers and wine, that’s it.

Comfort-wise, the lounge was amazing. They even had massage chairs to decompress, a nice seating area, and a modern decor. This lounge was meant for Bangkok Airways first class passengers but we had access through our Priority Pass membership included with our American Express card.

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Once on board, we were very pleased with the level of service, legroom, and quality of the aircraft given the fact that we flew budget and the tickets were only $40.

Slow travel in Chiang Mai, digital nomad central

Once we landed in Chiang Mai, after a very short hour-or-so flight, we took a luxurious airport transport to the condo we had booked. We traveled in a large SUV, with leather seats and all, and only paid 150B ($5) for the ride!

For our accommodation, we rented a really nice condo called the Nimmana located in the trendy and touristy Nimman neighborhood. Since Chiang Mai was the longest stop in our trip, we booked through Airbnb and stayed at one spot for the whole time.

The condo offered amazing grounds, a beautiful pool, a sauna, and a gym. Not to mention great staff and a central location right in the action.

This city is renowned for being a hub for digital nomads, slow travelers, expats, and alike. It offers most luxuries and comforts of the West at a fraction of the cost, great weather, delicious food, and amazing people.

The place we got was far from the cheapest. You can easily find studio apartments under $150. We even found some places for only 3,000B ($100) per month. It will not be luxurious but it will be livable.

We opted for something nice, new, and central. Comparing other complexes around, we chose one of the nicest spots. Even so, we only paid $570 for the month and it would have been a hundred dollars cheaper if we leased it for 12 months.

Being so expensive in Thai terms, there was a lot of expats and tourists in our complex. It was nice to meet people at the pool and easy to make friends for the month.

The neighborhood was super nice. Mostly aimed to cater to Chinese tourists and expats. Many of the co-working spaces, coffee shops, restaurants, and bars were all walking distance from our place. Even if there was a lot of Chinese and Westerners, there were still a bunch of local, authentic Thai restaurants and shops. The market beside Maya Mall was very enjoyable and the food stands all over the streets were amazing.

Meeting new people

The people we met here were great. Traveled people, most of them working remote or running something online, living the stress-free life.

Over there, someone making $20 per hour teaching English online can easily work two or three hours per day and live a life of luxury. The cost of living is so low that most of the financial stresses of Western life disappear. It is easy to live without a budget and still never run out of money.

We’ve met Jason from Mr. Free at 33 who lives in Chiang Mai now full-time since 2017. He was a great host and we had some very insightful chats.

He reached financial independence at the ripe age of 33 and moved to Thailand to benefit from geo-arbitrage. Moving here practically made him feel like an instant millionaire. Lifestyle wise, with a modest passive income, he can live like a king! It was great to meet him and see how it is possible to retire early and still live a very comfortable life using geo-arbitrage. We admire his jump to move to Thailand for good and his determination to achieve FIRE so early.

Using the Meetup app and a local expat Facebook group to find like-minded people was really helpful. We played board games a few nights, attended a few meetups, and met so many interesting people from all over the world. Even attended a Bitcoin mixer a few times. Meeting new people was refreshing.

Things to do in Chiang Mai

Since we had a whole month to fill, we had to find a few things to do. One of the first things we did was to visit Wat Phra That Doi Suthep, a beautiful temple on top of Doi Suthep mountain.

In the past, it used to take hours to get up there but they have built a new road since the last time we were in Thailand. Now, it only took us half an hour to get to the top using a Songthaew (or Red truck taxis).

Those are amazing! Songthaew are shared taxis where other passengers can hop on with you. The driver calculates the route and drops everyone off at their desired location kind of like a bus. They are red pickup trucks with seats in the back and since the arrival of Grab (the Asian Uber), they lowered their fixed price to 30B ($1) per ride to compete. Awesome!

In Bangkok, getting around was almost impossible but in Chiang Mai, Red trucks made everything so easy. Just waved one down and pay a dollar. And there is no shortage of them, there was always one around!

The view from up at the temple was beautiful, the viewpoint offered views of the whole city. Dating back to 1383, this Wat was one of the nicest we have visited.

In the center of the Wat, a huge copper-plated chedi was shining in the hot sun with all its golden grandeur. Even the stairs up are an attraction. Two dragons protected the entrance and their bodies climb up the 309 stairs up to the temple, it was pretty impressive.

On another day we went to the Chiang Mai Zoo. It was an easy activity to do with a baby, even on a hot day. However, the zoo seemed to be made for cars. The distance between each exhibit was quite long. In terms of animals, they had a wide variety, ranging from local elephants to penguins and pandas. All-in-all, it was a nice day and the entry fee was only 100B ($3).

We also spent a few days in the Old City, the historical city-center of Chiang Mai. We visited a few Wats, our favorite being the very old Wat Chedi Luang. When it was built in the 1400s, it was one of the tallest buildings in the city before collapsing during an earthquake in 1545. Now, its ruins still stand and offered a nice piece of history.

There are also so many markets to visit but our favorite has to be the Tha Pae Walking Street Sunday market. This street market becomes so alive on Sundays. The smells, the flavors, and the craftsmanship, all come together.

In Bangkok, for example, most markets sold the same junk, replicas, or knockoff from China. Even when you look closely at the silk, which is one of Thailand’s specialty, they are all the same and clearly, all come from the same massive distributor. At the Walking Street, however, most of the things were handmade and sold directly by the artisans. Everything was unique and refreshing.

Finally, we also visited the Mae Sa waterfalls at Doi Inthanon National Park. To get there, we booked a private driver for three hours for a total cost of 600B ($20).

The Mae Sa waterfalls are a series of 10 waterfalls. We climbed up to number 8 before, finally, turning around. The path was nice, right in the jungle. Some people were swimming but the water seemed too brown for us.

After two hours in the National Park, we went back home and stopped at Maya mall for a nice lunch in the cool AC.

That about does it for the notable things we did in Chiang Mai. We mainly stayed around our neighborhood, walking around, attending meetups, playing bowling, swimming in our pool and taking care of our little girl. Once you get into the slow travel mood, a routine quickly take place.

The Thai healthcare system

Unfortunately, our little girl got sick during our stay in Chiang Mai. After a few days of fever, we decided to visit a doctor.

In Thailand, healthcare is free for locals but tourists and expats can visit public hospitals and get treated for a modest fee. With more than 1,000 public hospitals, most locals use these facilities.

Going to the hospital was an option, they offer a relatively good standard of care but we would have to wait in a crowded waiting room. Lines can be long and we wanted to make sure we get serviced in English so we opted to go private instead.

The private clinic was able to give us an appointment that same afternoon. We got there and saw a doctor after waiting only 5 minutes. Going private, we got the first-class treatment. The nurses and doctor were educated in Western universities, spoke perfect English, and had access to all the latest equipment.

It was also much cheaper than expected. Nothing near North American prices. Our total price for our visit, including a blood test and 30 minutes one-on-one with the doctor, came to less than 1,000B ($33)!!!

The anti-biotics then prescribed came out to only 150B ($5).

After a few days of treatment, our little baby was back to her normal, happy, self. Overall, we had a great experience with the medical treatment here, in Thailand.

Traveling down south

After a whole month in Chiang Mai, we are finally flying down to southern Thailand, starting with Koh Lanta. We will be staying for 3 weeks on this island before exploring the mainland a bit. We will keep you posted in our next article.

Cheers,

Mr., Mrs, and Baby Xyz.

Tags digital nomad in Chiang Mai, slow traveling in Thailand

Financial Independence

Basics of FIRE (Financial Independence and Early Retirement)

Post author By Daniel
Post date October 26, 2018
2 Comments on Basics of FIRE (Financial Independence and Early Retirement)

With all this traveling going on, we forgot to talk finance! This is a personal finance blog after all. Since we plan to reach financial independence after only 10 years in the workforce, we constantly need a little reminder to keep pushing. Our ultimate goal is to reach FIRE with roughly 25 times our yearly expenses in investments. Achieving this is no easy feat! There are a lot of steps and preparation involved. Going back to the basics of FI is a good way to remember why are we doing all of this.

Today, we are going back to basics and sharing the first steps of our financial journey. The basics of financial independence are not complicated; spend less than you earn, and save the rest. But there is a little more to it.

Here are the basic steps we are taking to reach our goal in this short timespan.

Basics of FI #1: the cutting

The first step we took once we knew we wanted to reach financial independence was to take a deep look at our spending and cut anything we could without affecting our lifestyle too much.

We live in Canada and during the cold winters we can only dream of summer but once it’s finally here, the terraces are so inviting. It’s so easy to go out, eat at some nice Tapas with some drinks but all of that cost money. We were spending hundreds of dollars on food but slowly cut down to a more reasonable budget, while keeping all the fun outings. We just go less often.

Here is the secret; if you go on a complete cash diet and stop buying coffees and eat only Ramen noodles to save money, it won’t last. You will give up and go right back to your old ways.

The better way to do it is to gradually cut things you truly don’t need.

We were paying for both a cable and a Netflix subscription. Why? Because we could.

However, could we watch thousands of hours of TV a month? Maybe, be that would just be unhealthy.

We decided to cut the cord and keep the cheapest option. Now, we can watch our shows on demand, ad-free, for a tenth of the price we were previously paying.

Another thing we were paying for was our gym memberships. We were rarely going, and where we would go, it was just for specific classes we enjoyed. Once we looked at our options, we saw that those same classes were accessible individually. Instead of keeping a monthly subscription, we started paying per visit and cut our gym expenses by half.

Finally, the other huge saver for us was the brown bag. We were eating out for lunch every day but it added up to hundreds of dollars each month. Instead, we started preparing ourselves a lunch 2 or 3 times per week and slowly increased every day of the week.

Moving progressively will be easier to keep up and allowed us to cut our yearly spending by half. Over the course of a few months, we were saving thousands! Once we saw a surplus in our budget, we felt comfortable moving forward to the next step in our plan to reach financial independence.

Basics of FI #2: the savings

Working your budget and cutting your expenses is amazing. We can literally feel a tingle when we see our spending drop but what really gets us smiling at the end of the day is saving the difference!

If you save $50 per month cutting your cable subscription but spend $60 on another pair of jeans you don’t need, you are not saving anything.

As we cut our spending, we make sure to save the difference.

The more we cut our spending, the more we can put aside and the same goes for our income. As our income grows, whether through promotions at work, new jobs, or side hustles, we always made sure to increase our savings rate accordingly.

The more we make, the more we put aside.

We shy away from lifestyle inflation and try to keep our needs minimal. The best tip we can give here is to continue living like a student for as long as possible. If you finish college and get your first real job, it’s not the time to go lease a brand new car or buy a new TV, it’s time to increase your savings rate. First to secure a healthy emergency fund, then to invest for our future goals.

When I finished college and starting working in finance, I remember getting my first bonus and wanting to buy myself a new watch but instead, I did the wise move of investing it all. That money has now grown to almost double what I originally invested.

This definitively had the most impact on our journey. We started investing most of our money through index funds and always kept adding to it.

In general, our goal is to save up (and invest) over 25 times our annual expenses. To get there, we are aiming for a 50% savings rate (currently over 60%) and investing tools to grow our wealth.

Basics of FI #3: the investing

After the savings comes the fun part; investing. Once we had a few extra dollars laying around, we started investing in stocks. We wanted to save up for a down payment to buy our first home. Looking back, we took some unnecessary risks with money we could not afford to lose. We should have stuck to a high-interest savings account since this was a short-term goal. Investing should have been for our longer-term plans but everything ended up OK.

Another big investing mistake was to buy stocks without knowing anything about them and try to day trade. The very first year we started investing, we blindly bought stocks in hopes of good earnings announcements but we honestly did not even know what the companies were selling.

After a few months, we had one bad day where we lost $2,000 in a single day. After that, we stopped trading without research and put a halt on day trading altogether.

Now, we switched to index investing and focus on our long-term goals of early retirement.

Investing in low-fee index funds was, by far, our best financial decision. By diversifying our portfolio and keeping the fees to the bare minimum, we are able to maximize our return over the long-term.

We follow a fairly simple 3-fund approach as the base holdings in our portfolio. We invest through Vanguard, mainly into the Total Market Index fund, Canadian All Cap Index fund, and Total International Stock Index fund.

To see our exact holdings and asset allocation, you can read the latest installment of our Open Book series where we share our portfolios. We also share the reasoning behind each investment we make.

This is a crucial step in our investment process. You should always know why you are investing in a particular fund or stock. Know exactly what is your goal behind each investment.

Whether you are saving to retire early or just to be financially independent, the best advice we can give you is to start now. Compounding returns work like magic and are the best tool to build great fortunes. Even on average salaries.

As millennials, we have decades in front of us and our investing journey has barely begun. For example, if you simply stick your money into a savings account returning only 1%, your money will grow 10.46% over a 10-year span. A $1,000 investment would only grow to$1,104.62 over the next decade.

Source: Get smarter about money

However, if you start investing in the stock market early on, investment returns of a total market index fund which tracks the entire US equities market has been much better. Historically, it has been averaging around 7% after inflation.

Over the same 10-year time-frame, the same $1,000 would have almost doubled to$1,967.15. This is where things get interesting!

Source: Get smarter about money

Now, in our case, not only did we start early, but we are constantly investing more. Consistency is the name of the game.

By automating our savings and investing we took the need to think about it out of the equation. We invest part of every paycheck and are simply forced to live only on what is left. You can check with your employer if they offer a savings plan such as a 401k.

Consistently investing in simple, diversified, funds with a long-term goal in mind is the key to reach financial independence. Once you get the basic steps down and get things rolling, you will see your wealth grow considerably over time with little to no effort.

Finally, the why

Never forget why you are doing all of this. For us, it is for the freedom. The freedom of doing the things we like when we want to. The freedom of working on projects we actually want to work on. And the liberty of living at the pace and place we wish to.

Once we reach financial independence, it does not mean we will retire and sit on the beach all day but at least we could. It will be an option for us.

If we want to travel for 6 months, we will.

If we want to work in a coffee shop and chitchat with clients all day, we will. That’s the freedom.

Hope this got your saving train going and we wish you the best of luck on your path to financial independence, Mr. and Mrs. Xyz.

Tags Basic steps of Financial Independence, Basics of FI, Basics of FIRE

Traveling

Family Travels in Germany with a Baby

Post author By Daniel
Post date October 21, 2018
1 Comment on Family Travels in Germany with a Baby

As part of our big tip, we stopped for a week in Germany. We are so thankful to be able to travel to Germany with points. This expensive country would have definitively hurt the wallet quite a bit if it was not for travel rewards.

Our around-the-world trip is going great so far. We spent some incredible time in Italy and are so glad our family travels are going smoothly. We did forget our passports in Italy but, fortunately, got them back a few days later. Other than that, we did not get robbed, sick, or hurt, so life is good.

We are now staying in Thailand for two months and enjoying ourselves a bit too much to take the time to write every week.

In Bavaria, we stayed at the Westin Grand in Munich, an amazing luxury hotel which we booked with our credit card rewards points.

Upon arrival, we got upgraded to a suite with an amazing view of the city (above) given our status with Marriott.

We also gained access to the hotel club lounge and free breakfast at the restaurant. This lounge must be one of the best of all the chain. The service was outstanding, beers, wines, and drinks were served all day, meals were served, deserts, snacks, you name it.

Located on the 23rd floor, spanning on two levels, the lounge offers a great view of the city and greatly helped us keep our costs low since we ate about one meal per day there and drank from there rather than the room’s minibar or grocery store.

The suite we ended up getting was in two sections, one bedroom and one living room with a dining table and second bathroom. A huge space we did not need but let’s enjoy the amazing benefits of the SPG card when we can, right!

Since we planned to be in Germany during Oktoberfest, we had to go a few times and enjoy the true Bavarian hospitality.

The first time we went, we sat down in the Spatenbrau tent and ordered a pork leg with a beer. Calling this a tent is a large understatement but that is how they call them.

Above all expectations, the food was astonishing! It is so surprising to see these huge operations, feeding thousands of people at the same time, churn out such high-quality meals.

The tents are enormous. Boasting traditional colors and elegantly decorated, they can host thousands of patrons at a time. It was nice to see all generations, from kids to octogenarian, enjoying themselves in traditional garments. The beer was flowing and the plates flying.

Boasting leather pants, called Bundhosen, men are walking down the streets of Munich in this festive fall season. The atmosphere was just so joyful.

We went back to the Oktoberfest, this time over the weekend, and it was even busier than during the week. The crowd was dense, it was a bit trickier with Baby. Thankfully, the carrier really helped to get her around safely. With her hanging from my chest, we were able to walk through the crowd easily.

People were dancing on tables and signing to the musicians on stage. Definitely, something to experience once in your lifetime!

We ordered chicken and more beer. Again, it was delicious.

Apart from that, we visited a few churches, markets, and admired the history of Munich. Participated in a free walking tour and learned a bit more about the city but, of course, everything was in a small radius so it was pretty limited.

From our hotel, we could easily take the metro everywhere. We purchased a weekly pass with the MVV, which operates the metro, buses, and railcars, for only 15€ per person.

Of course, we could not miss the impressing Gothic revival architecture of the New Town Hall.

Every day, at 11 A.M. noon, and 5 P.M. the Glockenspiel plays. This show reenacts an important wedding to the town’s history with figurines, music, and carillons of cast bronze bells. This event seems to attract every tourist in town and, coincidently, we ended up in that square almost every day at 11 A.M.

It is quite impressing to see but the most impressing is to see all these tourist filming the play on their phones. There must be thousands of videos of this event on Youtube!

Other than that, we visited BMW Welt and did the BMW factory tour.

If you are at all interested in robotics, I highly recommend the BMW factory tour.

You can visit BMW Welt for free. It is mostly a showroom for all their models, including some prototypes, motorcycles, and models from Mini, and Rolls Royce.

The factory tour, however, shows you all the ins and outs of car making. It was fascinating to see the giant robot arms assembling the cars.

Being the first BMW factory, it was fun to learn a bit of the history of the company and see where it all began. For only 9€, it was one of the best “museum” experience I ever had.

After a week traveling in Germany, we took off back to Switzerland to catch our plane to our next stop; Thailand.

Once in Switzerland, we stayed 3 nights at the Sheraton Zurich Hotel for free using our SPG rewards points, saving us $483 per night. The hotel was great, located in a nice up and coming area with a lot of shops.

Again, this hotel had a lounge so we ate all our meals there instead of spending outrageous amounts of money on restaurants. Even eating at fast food joints or takeout restaurants would have cost at least $20 per person, per meal.

The hotel’s menu was ridiculous; $7.5 for a bottle of water and $25 for a glass of wine! We just drank everything from the lounge. 🙂

The old city of Zurich was nice but it was not long before we were on our way to the airport.

Obliviously, we took the time to stop before our flight by the Primeclass Lounge for a little drink and lunch.

We had first entered the Aspire Lounge but could not even stay due to its proximity to the smokers area, the whole place stank. The food selection was lousy and the looks missed a little class.

After entering there for nothing, running out, and finding the next closest lounge near our gate, we ended up in the Primeclass which was beyond our expectations. With a wide variety of drinks, snacks, and hot meals, we were very happy with our visit.

Thanks to the American Express Platinum card, we get unlimited lounge visits so visiting two in a day did not bother us a bit.

On the plane to Bangkok, we got an extra seat for Baby and enjoyed a rather calm flight. She slept most of the way and we arrived at our destination at 6 A.M. the following day.

Cheers, Mr. and Mrs. Xyz

Tags credit card reward points, family travel in Germany, travel to Germany with points