CBA Blog

One Minute can change your life

Time passes quickly like the breeze. In practically no time, it is gone for eternity. Many don't get another opportunity for Ctrl-Alt-Delete or reset. Some figure out how to begin once again with Esc key in the event that they are not excessively somewhere down in the forest. We realize what is great for you and what we odd to do, however frequently put them off. For instance, we should save no less than 10% of our income routinely, taking care of all credit cards balance, monitor income and costs, cash flow planning. For some to research further on necessities and investments, RRSP, TFSA. Be that as it may, frequently we put them off. In any case, what we do rather is living in the safe place of work, the recognizable jungle gym, and universe of virtual reality like online social media and gaming.

Allow me to remind that the safe place is an extraordinary spot, yet nothing at any point develops there. Do you have at least some idea that one tweet, one minute in any event, briefly can transform you? 

Since the 2020 pandemic, raising cost living on everyday items for food, shelter, gas and other necessities makes the low and middle-class squeeze harder to put something aside for their future. Do you have any idea about that the working class is diminishing and the rich gets richer particularly during inflationary times?  So, what do we do? A wise person once said, “we cannot direct the winds, but we can control our sail”.   

We can control our sail with MICE.  The first step is MONITORING your income and costs.  What is your income? Do you have an enslavement that is depleting your income? What amount do you spent a month in the café, including espresso at Starbucks or bubble tea? How much would you say you are spending on motor vehicle expenses?    Understanding your spending history, will help you understand the present so you can plan for tomorrow.  

The second rule is INVESTMENT.   Without having investments, there is no future like funds for rainy days or having a down payment for real estate purchase.  Like the ants, they stock up food during the summer and eat during the winter.   Exhausting the personal TFSA (Tax Free Savings Account) and RRSP (Registered Retirement Savings Plan) is a strongly recommended.   If you are a business, having a short-term investment instead of leaving everything in business chequing (unless there is no fee for maintaining a certain balance) is strongly recommended.   On the types of investments, the bank has certified financial planners to advise.  This is a decent beginning. 

The third rule is CONTROL.  Are you adjusting your sails or are you letting the winds directing your steps?   Are you paying yourself first?  Paying yourself first means your first fruits of at least 10% goes to savings.  If you are religious, are you putting aside the first percentages for your spiritual god(s)?  Our elected is not shy to forcefully deduct taxes from your income or charge interest for late payment on quarterly tax installments.  Are you in command over your spending?  If you would like to cut down on your personal expenses, do you have creative ways to lower your food and personal expenses like buying bulk, cooking at home, taking transits?   For business, are you monitoring your variable expenses like advertising methods?   If taking control of spending is hard, do you have a monthly budget?   On income, do you see more open opportunities out there that you can take a stab along the edge?      

The last rule is ENCOURAGEMENT.   In this world, no one will believe in you unless you believe in yourself.   Periodically, our negative self-talk prevented us from pushing ahead, search for new data, break new ground or have a go at something else.   For me, I have several ways of empowering myself. One of them is my tennis side interest. In professional tennis, not including the best 10 players on the planet, the 11 to 200 ranked players have fairly comparable abilities levels. What set the players apart are them figuring out how to win.  Days before each match, they would attempt to grasp their rivals' solid strength and shortcoming.  During the initial couple of moments of the match, they would test each other out to get a vibe of one another. Then, they play different sort of strokes - level and weighty, slices, drop-shot and hit various ball pace continually. On the off chance that you notice, when they made an excessive number of unforce mistakes or are frustrated, they generally figure out how to energize themselves in the court. They urge themselves by conversing with themselves, chiding themselves, smashing their rackets on the ground.  At times to quiet their nerves, regularly, whey would shut their eyes with towel, taking a gander at their rackets, siphon themselves up by hopping, skipping the ball longer before each service game to stay focus. They continually press their Esc key to reset. Great players realizes that they can't live on past fruitful shots and can't underestimate any leads during the match on the grounds that the great players can make a comeback.  Best players will constantly get a grip on their feelings and figure out how to win. Dissimilar to any semblance of Federer, Nadal or Djokovic; Michael Chang from the US was one of the few players with less skills than players in his association, had no executioner shots or booming serve except for loads of strategic ball placements and fearless fighting spirit.   I will never forget his 1989 French Open 4th round match with Lendl where he fought in pain to stay in the game and against all odds won.  Another similar tennis player is Brad Gilbert.  Their psychological durability pushed them to top 10 on the planet during their primes.  

Thus, one moment, one twitch, one minute can change the match and your life.

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Financial literacy - Part 7 - Types of loans and how to use them

Welcome back.  If you have been reading my past blogs on financial literacy, you will see that the poor work hard for their money while the rich use money (including borrowed money) to work for them. 

The rich lend to the poor and get richer while the poor borrow and got poorer.   Does this sound familiar?   On the flip-side, the rich lend to the rich and both get richer.  Does this sound familiar too?   

I write these because I have seen first-hand how undisciplined consumers got into consumer loans and spiraled into a vicious cycle of poverty.  They are the people I grow up with.  That they will be okay if they made the minimum payment every month.  I saw my working-class parents work hard, owned a home while accumulating unpaid consumer debts.  I have seen my clients get to a disadvantage position from unpaid credit cards.  I believe they fall into the debt trap because of the lack of understanding of borrowed money and discipline.  

To understand the simplicity, we must first understand loans and how the bank works.  The bank will lend to its AAA clients at a prime interest rate +/- 1%.  That being said, there are various types of loans - mortgage, line-of-credit (home-line/personal/business), personal/business loans, bank credit cards, retail credit cards, payday loans, and the black market.   The higher risks the lender deemed the borrower, the higher the interest rates.

A mortgage loan is borrowed money for real estate - for personal/business or investment.  Because they are backed by real property, interest rates tend to be much lower.  In today's economy, AAA residential mortgage rates tend to be below prime.   If it is for business purposes, the interest will likely be prime + 2-3%.   If the mortgage is borrowed from B- lenders, the interest rate will be higher and C lenders the highest.   Unless you have a home-based business, own commercial space, or own real estate for rental income, mortgage interest payments can be used as business expenses.   With real property, with time it stands an excellent chance to appreciate in value.   

Line of credit.  There are two types of line of credit - home-line of credit (backed by real estate) and unsecured line of credit.   For those with a home-line of credit that pays a low-interest rate, you can convert them into mortgages and invest in real property should an opportunity knock.  The line of credit used for investing in appreciating assets is a win-win.  Renovating your home using line-of-credit is also a win-win because your home will go up in value.  However, you must SELF setup repayment every month within a specific time.  If you must use the line of credit to finance a depreciating motor vehicle, please ask the car dealership for financing/leasing instead.  The real purpose of a line of credit is meant to meet short-term personal/business cash flow short-fall.   For those with an unsecured line of credit, interest charges is prime + 4.5-6.5%.   However, many businesses are dependent on line-of-credit to operate their business for survival.   Debt-free businesses stand a better chance of survival from major crises and stand a better chance of expansion should opportunity knock.  Debt-free businesses can easily get loans from AAA lenders.

Credit cards.  There are two main categories of credit cards.  What they have in common is that they lend you money to spend interest-free.  However, the interest-free grace period is a maximum of 30 days.  If you overstayed the grace period, you will be charged interest.  If you have a balance on the credit card, you will be charged the whole amount for the period.  The preferred credit cards are issued by the bank.  The other type is the retail credit cards which are issued by big departmental stores like the brick or home depot.  The preferred credit cards charge 19.99% while the retail credit card charges 29.99%.   The purpose of credit cards is short-term convenience.  It is not purposed for cash withdrawals or long-term borrowings.   This type of loan is the number one killer that gets many undisciplined consumers into the debt trap.   However, if you have extra cash to invest, do invest in financial institution mutual funds.  You not only are the client, but also the owner of the financial institution. 

Payday loan.   These are loans for people who fall through the cracks in the financial system.   They are the ones who live on the edge, close to being homeless.  The most vulnerable and living in a constant vicious cycle of poverty.   They are easy prey for predators.  Often easily falling into scams.  Payday loan charges up to 60% interest.   If you are in this position, seek professional help.  They can help you reduce your debt and offer concrete financial planning. 

Black-market loan.  These are people who are more desperate than people taking payday loans.  If you are in this position, seek professional help before you lose everything you have built and dream.  

The only way to get ahead financially is to be disciplined.   Spend what you have, follow the 10% pay yourself rule, invest in equities, and pay your credit card on time.   The point I want to make is you do not need to be rich to become rich.   Neither do you want to help the rich get richer?   You want to use the rich to get richer.  This is what it means to be a wealthy barber. 


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Financial literacy - Part 4 - Paying yourself first & building equity

Life challenges are like the wind.  We cannot direct the winds but we can adjust our sails.  The sailboat needs to get from point A to B.  However, the wind does not necessarily blow in the anticipated direction or speed.  Sometimes, it can be a storm or windless.  Therefore, sailors must constantly adjust their sails in order to steer the boat in the right direction.   

You might be familiar with the book "the wealthy barber".  The book talks about paying yourself first.  The simple barber pays himself first before any authorities or personal obligations.  He owns a simple house, drives a simple car, lives a simple life, and retires a millionaire.  You see, when we were employees, at each payroll, our paycheque shows a deduction for CPP, EI, taxes, and in some cases union dues before we actually see actual money in our bank account.  Depending on your tax bracket, it can go as high as 50%.   Before long, we do not feel anything and it does not take long to accept that life is paying your share to the Government before paying yourself.  When we become self-employed entrepreneurs, we first pay Government taxes in installments or at the very end when we file our taxes.  Even though we draw dividends or payroll from our company, we failed to still fail to pay ourselves first.   

What is actually paying yourself first?  Simply put, it is paying yourself before you pay taxes, expenses, and personal responsibilities.   If you are religious, you should give the first fruits to your creator first before paying yourself.   You set up a pre-authorized payment to invest under your name.  The investment can be a straight term deposit, mutual funds, or other investments.   

This concept of paying yourself is not new.  In 1955, the Government of Singapore introduces the Central Provident Fund which is a compulsory contribution for both employees and employers.  The CPF is Singapore's social security system for a down payment for their primary residenence, medical bills, and retirements.  You can call this "forced savings".   The employees and employers contribute 20% each month which means the employees get to save 40% from their gross payroll.   For example, if your income is $5000 per month, you would have saved $2000.  If you ask me, I would think that force savings are good when you do not know how to spend your earned income.  Today, many retirees in Singapore are millionaires.  They own real estate and savings.   On the other hand, many retirees in Canada are the opposite.  In Canada, working people saving at 40% of their payroll is next to impossible.  However, putting aside 10% is more realistic or $500 per month. 

Suppose you invested in dividends mutual fund and you got an average return of 8%.  When you add compound interest, within 10 years the amount, this $500 a month contribution will grow to $92,582.84.  $296,973.61 within 20 years and $750,647.59 over 30 years.   You get all this by doing nothing and going on your daily life.   By the time you know it, you have built yourself asset and equity.   

Stay tuned for part 5.  


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I have a box client whom I dread doing their books. Each year, they gave me bag(s) of mess-up receipts, invoices, bills, bank, and credit card statements that looks like a house robbery in-progress. Oftentimes, papers were folded oddly or have water stained with no meaning pattern to follow. This is not the real challenge as I have other clients who did the same as I have no problem organizing them. I understand they hate paperwork.

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