People Are Stupid
By · CommentsSorry for the blunt title but with regarding to saving and investing many people are stupid. I recent posted an image of a dividend payment I received and was blown away by the lack of knowledge that people have about stocks and dividends (and from that it was gleaned that they were obviously lacking funds), so I thought I’d write a little post about it. Here’s the image:
You can see here that Emera paid $0.35 per share each quarter. This translates to an annual return of 3.84% just for the dividend, and that doesn’t include capital gains (increase in stock price over time).
Some of the comments I got were:
“Wahahahaha! Spend it wisely.” – they thought I just got 35 cents from the company. Say what!
“Wait what? You buy 1000 shares at $.35 a share for an initial investment of $350. You get paid $350 a quarter in dividends? That’s a 400% return. How does that work and not be a ponzi?” – this person though the dividend price was the share price, hence the huge return and ‘ponzi scheme’ comment
“Well to be fair most people don’t have C$36,460 dollars laying around to buy 1000 shares to only be getting $1400 a year in dividends.” – I used 1000 shares as an example (you can buy any number of shares), and also the annual return of this dividend is 3.84% which is pretty good and doesn’t include any capital gains.
“Staying poor isn’t exactly a choice though.” – I think he meant ‘being poor isn’t a choice’ because staying poor is a choice. Most of us can move, work, save and invest our way out of poverty.
So get educated about investing and get out of that poverty mindset folks!
How to Pay Little Tax
By · CommentsDid you know that you can receive up to $50,000 in dividends without paying any tax?
Jumping Girl
I just found that that my personal taxes for the year are $0 and I didn’t pay any income tax during the year (from paychecks, etc). So how do I do it?
My recommended setup is to have a corporation, which will pay low small business taxes, and then pay yourself dividends from your business so that you can pay your personal bills. You just take out what you need each month as needed and leave as much in the company as possible. Last year I withdrew about $33,500 which was as easy as a quick online bank transfer between business and personal accounts! No bookkeeping or crazy paperwork needed.
As a bonus you don’t have to deduct or worry about Employment Insurance (EI) or Canada Pension Plan (CPP) payments since you don’t have any income.
If some of you are upset by the fact that people don’t pay much or any tax on dividends, you need to understand that dividends come from after tax income of the corporation. So the income from your business (or whomever gives you the dividend) has already been taxed.
The combined federal and provincial tax rate for a small business is around 15%, before deductions. Oh, did I forget to mention that as a business you get to deduct expenses, such as driving to work, parking, clothes, some meals, vehicle expenses, etc?
You also might be saying, ‘But Will, I don’t have a business’. All you have to do is think about how to take your current employment situation and make it so that you have a corporation. This could be asking your company to pay you as a contractor, start a small side business, or worse case change your job or career so you can be paid via your corporation.
Some of you also might think that this is really difficult. It’s actually very easy. All you need is a separate bank account (for your company) and go to a Registrar (where you go to get your driver’s or marriage licence) and have them set up a company. I actually had my accountant do this. You just have to provide a unique name for your company (they will do a name search), or just buy a numbered company so that you don’t need a name.
When creating a company you have to come up with a share structure. I gave this very little thought, so my accountant basically creates 100 shares and you pay $1 a share for example. Or you can give your wife Class B (non-voting shares), say 40% and you can take 60% Class A shares (voting) and call it a day. I never gives shares a second thought after that, it’s just a formality.
You might be worried about not paying CPP which is a valid concern. I’m unsure of what I will actually receive when I retire since I haven’t paid into lately. But I did pay for many years and was in school so there will be something there. And I’m saving my own money so I’m not worried about losing some of my CPP benefits.
If you’re pissed about people who do this, I say ‘Get over yourself and join the club’. You likely have a poverty mindset. You worry about others and big corporations screwing the little man, instead of what you can do to better your own life. If it makes you feel better, keep in mind that we are still paying in the range of 12% tax on the income, not to mention 13% HST (harmonized sales tax) for any purchases along with property tax (mine is over $5300/year).
So make sure you aren’t spending all the money you are saving with my method. Buy stocks with a history of increasing dividends as I’ve talked about.
Don’t Believe the ‘Common’ Wisdom
By · Comments
As you know I only do contract work. There are many reason for this such as making more money, less deductions, less taxes via a corporation, no EI/CPP withdrawals due to paying myself dividends and so on.
Over the past 3 years since I moved to a relatively rural area in New Brunswick, I’ve been working on remote projects for various large clients from Staples, to Sun Life Financial and Suncor Energy.
Over Christmas I took a little over a month off to enjoy some time with my family and work on other things such as guitar practice and teaching. I just finished a project and so I have decided to take some time off before starting another project.
So what do all these things have in common? The answer is simple: I asked!
There is a lot of common wisdom out there that is severely limiting. Usually contractors don’t take time off unless it’s a really long multi-year contract and when they do it’s only a week or two, as they would be disruptive to the client.
A lot of these rules don’t hold true if you decide not to believe it. I’ve said it many times before, just ask! My contract is almost seen as a big bucket and within that bucket I can choose when and how long to work. It doesn’t mean you have to work full-time the entire length of the contract.
That reminds me I also asked to work part-time since January and so I’ve been working about 6 hours a day since then. And with the time change (3 hours) between my client and I, this means I don’t start work (at home) until 11am. A few times here and there I have worked a couple hours more to get certain things done.
I’m also reminded that a lot of people think that busy projects require a lot of overtime. I actually rarely work overtime but I could if I wanted to. Being at home I get a lot done so when things get really tight you just have to buckle down and crack off a lot of code.
Many people think you can’t work remotely doing highly important IT work. The client only allows on-site work for example. Or I have to live in a big city and commute because that’s where the work is.
So the moral of the story is don’t accept common wisdom, it is commonly wrong!
Work at Home? Just Ask!
By · Comments
I’ve received some emails and comments from some of you who were thankful that this wasn’t another ‘work at home’ scam site. I aim to provide my real life experiences – someone you can hopefully learn from and apply in your own life.
Recently I was interviewed on radio and in the newspaper about how I was able to move to a small town (on the outskirts) in the relatively impoverished province of New Brunswick.
If I were to describe myself in one word, that word could be ‘contrarian’. I see what everyone else is doing and realize there’s got to be a better way! Everyone trudges to work each day for hours stuck in rush hour traffic, they put in overtime to ‘look good’ while often not getting paid for it, their salaries have stagnated for years, what they do get paid is often reduced dramatically by all sorts of deductions, then they can’t save any money so many will have to work into their retirement age.
Okay so how do we get out of this rat race? If you are reading this blog post then you are at least on the right track. It all starts with recognizing something is wrong and the desire to change it. Many people have accepted their reality as fixed and don’t even question what they have to do each day to survive. So congratulations!
What I am about to talk about comes from a mindset that is determined to find a way. I can’t stress this enough. I question everything that I see and I have dogged determination to change it and won’t stop until I have achieved it.
Belief. Do you believe deep down that you can change your circumstances? You have to believe it’s possible, you just have to ‘find a way’. If you say ‘my job doesn’t allow me to work at home’ then you have already given up.
There are definitely certain jobs that require you to be physically present. I mean really present not just your boss wants to see your butt in the chair or you ‘need’ to be face to face. If this is the case you have a few options: move somewhere close to work so you can walk, or try to find a similar job in a small town such as retail outlets, banks, call centers, etc or finally change your career if it is that important for you to be happy. Sometimes there are work locations that are in the suburbs (or out of the downtown core) such as retail and even professional services (chiropractic, specialists, engineering consulting).
If you have a job that could be done at least part-time from home then you can set up a plan to work remotely. It could start as one day a week and expand from there. During my radio interview I mentioned that there aren’t all these ‘remote, work at home’ jobs begging me to take them. They aren’t readily available and managers are still hesitant to allow this, but it is slowly improving.
I believe that you have to put your desires out there. I have made my position clear and now when I get calls they know that I only accept contract positions (no employee positions) and that I work from home.
So the title of this post was ‘Just Ask!’ and so I want to emphasize that you have to ask for what you want. Don’t assume people will say no! Also plan a strategy ahead of time. Look for another job and find one that will allow you to work at home (for at least one day a week) and then go ask your boss if you can do the same. You have to negotiate from strength. If possible, try to have some savings which will empower you to make a change since you won’t be desperate to keep that job and accept whatever demands your employer places upon you.
Some of you may be thinking that ‘work at home’ means having your own internet business. This is a great idea and will be a good challenge depending on what you are selling. I also teach guitar via webcam and sell online guitar lesson courses and memberships so that could grow to a level for you that will allow you to do it full time. That would be an amazing way to go!
Here are some excuses that I hear all the time. Make sure these aren’t any of yours!
1. I have to work downtown. That’s where the office is and I need to work with other people.
2. My boss won’t let me work from home.
3. There are no jobs in my town so I have to move to where there are jobs.
4. I don’t have enough experience or skills to ask to work remotely.
5. If I ask my boss to work from home, he/she will say no.
6. I can’t work at home, there are too many distractions.
If you are thinking that you can’t achieve what I have then I’m sorry but you have already lost! So I hope you will remain positive and driven to achieve your goals.
What’s your favourite excuse? Post them in the comments below.
Living in New Brunswick
By · CommentsWe received an aerial photo of our home recently and it’s pretty nice so I thought I’d post it here.
We love living in a rural area, although it’s not without it’s issues. We’re so happy we moved to the east coast and are looking forward to the spring and summer where lots of swimming in the lakes and oceans will be had!
We’re both working from home which is one of the few ways to making living in this area work!
Computational Investing – Getting Prepared
By · Comments
Computational investing is the practice of using computers to make portfolio recommendations by reducing the risk of a number of stocks.
As you may know after years of disappointing mutual fund performance and excessive management fees, I decided to take matters into my own hands. I accomplished this by setting up a self-directed investment account using TD Waterhouse.
For stocks I buy ones that have a history of increasing dividends. So basically I rely on the dividend payment and don’t expect much from the capital gains of the stock. Most people solely focus on the price of the stock going up. This dramatically decreases the amount of work as well as risk. And the beauty of this is that every trade is only $10.
I also buy bonds, both government and corporate bonds and usually longer term. I plan to hold them to maturity so I know what rate I am going to get for the life of the bond. As you start to have more money in your portfolio you may want to focus more on retaining what you’ve worked hard for, instead of going after high rates of return.
I decided to enroll in the Computational Investing course from Coursera. It’s free and given by Georgia Tech. It uses spreadsheets and python programming so it’s not for the faint of heart.
It starts on Feb 22, 2013 which is this friday at the time of this writing. As an avid Googler I already managed to find the video lessons from the previous session of the course, and started to install the software, as well as the recommended reading.
When I watched the first few videos they mentioned that volatility was used to determine risk. This seemed a little strange to me so I did some Googling and sure enough there are many who say this type of mathematical approach is bogus, such as Warren Buffett who uses value investing.
But after watching many of the videos from the last session there are some interesting topics such as market and limit orders, market makers, short selling, valuing companies based on market capitalization and other methods.
The course requires some python programming so you have to install the Ubuntu operating system on your Windows machine, or on Macs we are fine. One of the prerequisites is Xcode and since I already had it from previous iPhone development projects, I had to install the newer version.
The instruction guide says not to install anything as they are making major changes, but the course starts on friday so it is a little confusing. Some of the videos out there have different instructions on how to install QSTK so they aren’t much help.
Then you install macports which lets you download all sorts of packages from the internet including Python.
Turns out I was missing some of the xcode software for unix development so I had to download that separately from the website. The command line was telling me it couldn’t find the ‘make’ command so I had to Google that as well to find the solution.
This might be the biggest hurdle for people to overcome who don’t have Python programming experience and might scare a lot of people. Next up is the QSTK software which is used to analyze stocks.
Running this ‘sudo sh MacInstallation.sh’ took a really long time, not just 10-15 minutes and I did received some errors with DSDP.
Then running the setup.py didn’t work as it doesn’t exist but I noticed there was an ez_setup.py so I ran that instead. All sorts of errors. To be continued!