Credentialism and Educational Inflation

Has anyone else noticed that jobs that historically didn’t require any formal education now often require post-secondary credentials. Jobs that required grade 10 now require a High School diploma, High School diploma jobs now have College or University requirements and basic jobs that used to require a University degree now require a Graduate degree.
This rampant credentialism has caused 4 things to occur:

1. On average people are entering the workforce older than they used to.
2. The debt level of students has skyrocketed. The average Canadian post-secondary student now graduates with over $25,000 in debt. While in the United States the average student debt comes in at just over $37,000.
3. Grades have been inflated A- is the new C+. So basically the quality of the programs has been watered down over the years to accommodate the demand.
4. Jobs that don’t actually require post-secondary now do. Post-secondary programs are being developed to accommodate every area of the economy rega…

How to Value Real Estate Rental Properties

I’m a numbers guy. However, when I started looking for rental properties there was one qualitative factor that I considered before any quantitative metrics, location. After the properties were filtered by location I’d filter the list further using cash flow modelling and cap rate. I’ll go over all three of these below:
LOCATION Now being a numbers guy location has never been something I’ve ever considered when making investment decisions. I own a number of publicly traded REITs (real estate investment trusts) and to be honest I don’t care if they are in good or bad neighborhoods. My only concern on these types of investments is if they make money. These large publicly traded companies have full time employees that handle all the tenant issues, maintenance, insurance, marketing, evictions etc…
My rental won’t be my full time job so I don’t want to spend more time than I have to dealing with tenants and repairs.  As a result, I’ve limited my search to working class neighborhoods. Most of t…

Real Estate Investment – Rental Property

Over the last couple of months I’ve been seriously considering adding a small rental unit to my passive income stream.  Although we have the equity to purchase a duplex or triplex we wanted to first test the waters with a smaller less expensive unit. This will allow us to see if being a landlord is for us without tying up a lot of equity.

So after a few months of searching I’ve finally found a small 2 bedroom bungalow that I think will fit the bill. It requires quite a bit of work (roof, kitchen, bathroom, landscaping) however, all these deficiencies were reflected in the price. Although I’m a white collar office dweeb I am pretty handy and have already renovated a few houses and built a few additions/garages so I am confident that I can do all the work myself. Another advantage of purchasing such a small unit is that the repairs are all much less expensive and won’t require as much of my time.

When looking at real estate I used two financial metrics to determine if the rental was a …

Retirement Portfolio Net Worth – As of April 1- 2017

The goal is an investment portfolio of $1,000,000 and an annual passive income of $40,000. We are currently mortgage free but won’t be including the value of our principal residence or cottage as we have no plans to sell either. We will also be omitting the value of our workplace defined benefit pension plans and RESPs.
ASSETS: Retirement Portfolio: $472,617

Investment Loan: $42,407
Retirement Portfolio Net Worth: $430,210
*Dividends Received (year to date): $3085

FI - Strategy

Well everyone knows the basic formula for financial independence because it’s extremely simple. Earn more than you spend, invest the excess. Keep doing that until you can retire.

I have been taking a somewhat blended approach with my investment strategy. I started investing approximately 17 years ago as a University student. At that time I was very focused on value investing in dividend paying blue chips ie- (TD, MMM, JNJ, PFE, TRP etc.) However, over the years I’ve expanded my approach and now also allocate some of my portfolio to contrarian type investments. I’m currently 98% invested in equities but over the long term plan on reducing my weighting to 90% equities, 10% fixed income.

My goal in retirement is to receive at least 60% of my income through dividend payments with the other 40% coming from capital gains. I have also not ruled out purchasing a rental property to diversity my passive income sources. However, real estate has appreciated much more rapidly than rental rates, so…

4% Withdrawal Rate

Since you’re reading a personal finance blog you’re probably already familiar with the 4% rule. However, for those who aren’t the 4% rule is basically a rule of thumb that many financial planners use to calculate a “safe” annual withdrawal rate from your retirement nest egg. This “safe” withdrawal rate is also supposed to account for inflation. So in my case I calculated that we’d need approximately $34,000 (then I added another 20% for contingencies) which comes out to approximately $40,000. So $1,000,000 X 4% = $40,000.
An easier way to figure out how much you need to save is to simply multiply your estimated annual spending by 25. So if you require $40,000 a year you would need an investment portfolio of $40,000 X 25 = $1,000,000
There are 3 major assumptions built into the 4% rule that you have to be comfortable with:

1. Your portfolio will generate annualized returns of 7%. So if you have a very low risk tolerance and plan to have a large percentage of your portfolio in bonds/cash…

FI 3000 Is Born

Well here it goes. I’m 37, married with 2 kids, we own 2 vehicles a modest house and a small cottage. We both work in government type positions with government type pay.  So all in all very middle class. Actually, we may be the very definition of middle class.  So what sets up apart from every other middle class family? Well, the answer is not much…except for one thing. I have a goal, in 8 years, approximately 3000 days (thus Financial Independence 3000 is born) I plan on having enough money for us to continue our middle class lifestyle without the need to continue working. Based on our relatively modest lifestyle this is going to take approximately $1,000,000 and no debt. I’ll go over how I’m going to go about accomplishing this in my next few posts.