The Grind Continues…


It has been a while since my last post. I have been working crazy hours, even on the weekends. Sunday evening is pretty much my only downtime right now. I try to keep focused by telling myself that it will all pay off down the road – the financial freedom.

In terms of savings over the last two weeks or so, our savings rate has been pretty steady. We still have not purchased any investments in any of our investment accounts. I still think the stocks that are on my watch list are overvalued. It is getting worse as the market is rising. We continue to stock pile cash, waiting for bargains to pop up.

Meanwhile, the housing market in Toronto continues to crazy. It keeps getting scarier as people are bidding hundreds of thousands of dollars over asking on some properties. The house price to income ratio in Toronto is getting worse. Now high income earners are even priced out of the market. All of this allowed by excessive debt when interest rates are at all times lows. This is beginning of change however. The US Federal Reserve just raised interest rates again (last hike was in December 2016) – making debt a little more expensive in the US which should trickle over to Canada as bond yields go up. I think the higher the housing market goes, the harder it will crash. There is no way local incomes can sustain such high prices for very long. Look at Vancouver, it has slowed down substantially. Although, housing is still overpriced in Vancouver. I think when interest rates normalize or likely during the next recession (because there is always a next one), housing prices will come crashing down in Vancouver and Toronto. There is just too much debt floating around and a significant amount of it is concentrated in vulnerable households. These are households that are squeezed already and will be even further squeezed with higher interest rates.

All of this is also happening while Canadian debt to income levels are at an all time high. Going over $1.67 of debt for every $1 made in the last quarter. A record. The Bank of International Settlements (the Central Banks’ Central Bank) recently released a report highlighting the indicators of financial crisis are going off for three countries: China, Turkey, and yes, Canada.

I might be saying the same thing over and over again but right now is a great time to get out of debt and be liquid. Have funds ready to pounce on opportunities. When housing and stock markets are shooting upwards, I always try to avoid getting entranced in the upward motion. I try to stay disciplined because eventually housing and stock markets come back down to earth – it’s never different this time. No matter how much people say it.

Work on improving yourself. Don’t get caught up in the hype of buying a house by leveraging yourself to the hilt. Don’t go into debt to buy personal goods (clothes, furniture, electronics, household appliances) – it always comes back to bite you. Don’t try to keep up with the Joneses’. Live within your means. If you are not happy with your means then find a way to make more money. Hustle. Or cut out expenses.

One of the websites that I follow is the Conservative Income Investor. He does not post as often as he used to but his posts are full of great insight when it comes to investing and getting wealthy. I though it post from last week was great. He discussed how Eminem built his half a billion dollar fortune. Yes, half a billion dollars! Some of the takeaways I got from the post:

  • You can buy private businesses for steep discounts relative to public companies. I talk about buying publicly traded stocks a lot. However, buying a private business can be even better. It is generally not a passive venture like buying a publicly traded stock. However, buying a private business can give you freedom from your employer. It can also give you a separate income stream – certain businesses you can make passive after building them up for a year or two and then putting management in place to run them. The easiest private business that I can think of buying is a well-established franchise.
  • Set up various income streams over the course of your lifetime. Once you have built up a significant amount of income producing assets, just maintain them. Let the income flow in and use that income to buy more assets. For example, buy publicly traded stocks. Buy a rental property. Buy a private business. Use the income from these ventures to buy more ventures, thus, creating a compounding machine. Owning publicly traded stocks is probably the most passive investment you can own so that’s why I always say once you buy a great company, just sit back, relax, and let the profits roll in. Occasionally check on your stocks but not too often.
  • If you want to open a business or even if you are an employee, focus in the area where the profits are. For example, if you are an accountant. Focus on a specialized area such as international taxation which is a niche and where the profit margins are higher. If you are a medical professional, try to become specialized or open a practice that has a niche. Not all industries and businesses are equal when it comes to profit margins. Heck, areas within professions and industries are not equal when it comes to profit margins. You can become very successful by opening a business, being an employee, or being self-employed in a niche market. You can charge a premium that others cannot. This can give you the capital you need to diversify your holdings. Remember that you do not want to solely rely on the income from your employment, self-employment, or business. You want to diversify your income base: Sell your time for money; open a business; own publicly traded stocks; have liquid funds in savings accounts; and own real estate.

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