The Economy of You

An economy is essentially a byproduct of monetary transactions. Money comes in, money is spent on services. Money is lent, money is spent, money is paid back with interest. These are the fundamental parts of the system.

Investing relies on the economy and we hope the economy grows in a healthy way. However, every investor should be prepared to weather a storm. Unfortunately, due to extreme amounts of lending and not paying back these loans in the western world, things are getting pretty scary out there. Is a crash imminent? I can’t say. What I can tell you is, by keeping your personal economy strong you can be prepared for this.

Lately, I’ve cut spending on items that don’t produce value. I’m spending more on investments, saving more liquid cash, and seeking novel ways to grow my money. If everyone were to do this, the economy would slow. The few FIRE minded people out there can benefit if they jump on this opportunity while the economy is strong; your money will go further when it’s not.

It may sound like I’m not enjoying the fruits of my labour, but I am:

  • Getting more enjoyment out of the things that I have
  • Finding joy and new experiences in starting businesses
  • Focusing on internal growth. (Go to your local library and get a book. Do it now!)

I really enjoy seeing my net worth increase and learning, so this is easy work for me. If it’s not your cup of tea, I hope you can see the light at the end of the tunnel and can grow your own way.

Look at your personal economy and see how you can make it stronger, more robust, and be prepared to weather any storm. When the downpour starts, you’ll be happy knowing you came prepared and can hit it full on.

-Mike

 

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Canada’s Debt Problem

Well, the numbers are out and it doesn’t look good. Canada’s debt to GDP ratio recently reached 354.5% due to a long period of low-interest borrowing. I’m fortunate in the fact that I’ve never been in debt but it’s hard to watch my fellow Canadians and my government go so far into it.

I’m fortunate in the fact that I’ve never been in debt. I worked 40 hours week and did freelance work during college to pay for my education. My education has been the best investment I’ve ever made, as it’s paid me back a huge dividend over the last 4 years. Going into debt for an education is considered good debt, as long as there is a career waiting for you as a result.

If we as Canadians can make an effort to get out of debt sooner than later, we’ll be a more prosperous society because of it. In the last 4 years I’ve slowly taken more and more control of my money and that is what spurred me to write this blog.

I hope I can provide you all with a philosophy that will teach you take control of your money, and provide you some strategies to help you do so.

-Mike

 

Inflation: What is it exactly?

Inflation: a general increase in prices and fall in the purchasing value of money.

Oh, so THAT’S what inflation is? Thanks for clearing that up, Mike. We can all go home now.

Sarcasm aside, the definition certainly doesn’t clearly explain what effect is has on your money. When the cost of goods and services becomes inflated, it means money you have already earned becomes less valuable. Inflation is one of the main reasons you NEED to invest your money. Nobody likes throwing away money, why let inflation eat away at your hard earned cash?

Canada has enjoyed relatively low rates of inflation over the past 5-year period (about 1.24% to 1.61%). In the 1989, however, that number was 5.26%. Let’s break it down:

  • A $1 candy bar in 1989, would be $1.05 in 1990
  • A $10 pack of beer in 1989, would be $10.50 in 1990
  • A $100 grocery bill in 1989, would be $105 in 1990

I like to imagine inflation as the following: I walk to the grocery store, buy my groceries for the month (Yes, I only spend $100/mo for groceries), and on the way out I toss a $5 bill in the garbage. Nobody in their right mind would do this voluntarily, so, why would you let this happen to your money when it’s sitting in a bank account somewhere?

Mike, How can I stop throwing away money? Get a no-fee bank account, open a high-interest savings account (HISA) or even better, a tax fee savings account (TFSA) and put your money in there and your money will immediately start working for you. Tangerine, EQ Bank, and PC Financial are all good choices.

I’m with Tangerine and I have zero complaints after moving from a full service bank. If you decide to go with Tangerine, use my Orange Key (43631608S1) on sign-up to buy me a beer. Thanks!

– Mike