Archive for June, 2010

What If I Could Be Me At 20 Again?

By: Mike | Date posted: June 08, 2010 (6:31 am)


I am about to turn 29 this fall. I’m also about to buy my 3rd house. I am happily married and the father of 2 children. My wife stays at home to take care of the family while I work 4 days a week and generate a 6 figure income. I am quite happy about how things have turned out so far. Both my personal and financial situations look to be heading in the right direction according to my Microsoft Money software ;-) . On the other hand, I can only tell you how much I think I suck sometimes.

When I think of what I know now and what could have been accomplished if I known all this nine years ago. There are tons of opportunities that I hadn’t seized in my early 20s. This is why I suck. While I know it’s not too late for me to wake up, I just can’t stop thinking about what could have been achieved over the 9 years that I just wasted (partially). If I could enter a time machine and meet me the day I turned 20, I would tell myself:

Stop playing tetris and start writing!

While completing my bachelor degree, I found nothing more enjoyable than playing Tetrinet; an online Tetris game where you could battle against 5 others players (that were your classmates during a very boring economics class). I have always loved to write. Back then, instead of thinking that I could:

A) sleep during the whole class

B) play Tetrinet and have fun

I should have added:

C) start a blog since I love writing!

Starting a blog in the year 2000 would have been the biggest step in my career.

You are young, take risks!

When I first finished my bachelor degree, I had a few options in front of me:

#1 Get a decent job in a big finance firm

#2 Continue in my father’s company and deliver bread

#3 Start working online with a few friends of mine.

Since I had debts and I was looking for the classic corporate ladder climbing process, I decided to take the decent job in a big firm. I had left 2 very lucrative entrepreneurial projects aside for the sake of security.

Aim for an income source that depends on your performance

I understood this concept only at 26 where I made the switch to become a financial planner. This is when I learned that if you are really good at something, try to find a job that will pay a variable bonus based on your achievement (not your department’s or the company’s). This is sometimes hard to find depending on which field you work. But in general my advice: I would tell anyone to stay away from the cost centers of a company. Those are the first to get cut during a recession.

Leverage what you have, you are young only once in your life!

I learned this lesson at 25 and yet I could have made so much more if I had started by leveraging student scholarships when I was 20! When you are young, you should never borrow money to buy consumables or go on vacation. However, you should definitely take a look at all your borrowing options to buy or create assets. By assets, I mean something (like an investment or small projects) that will generate a positive cash flow in a near future. The earlier you start, the richer you will be.

Don’t lease a new car!

At the age of 22, I got my first new car. Since I was afraid of having a car loan and the payments were smaller with a lease, I took the latter. This was a huge mistake as I paid  much more for the car in the long run. I should have bought it right away and concentrated my payments toward this debt instead. However, I don’t regret buying new. I kept my car for 7 years and saved a lot of money (and mechanical problems!) this way.

Work on the 20% and skip the rest

I have mastered the Pareto Principle by the age of 26 when I started my MBA (I have written a complete article on the Pareto Principle over at The Financial Blogger). There is a universal law where about 20% of anything will be responsible of about 80% of the result. In business you will make 80% of your revenue from 20% of your clients. At school, you will get 80% of your grades due to 20% of your effort. So focus on the key 20% and forget about the details… they aren’t worth your time ;-) .

Last advice but not the least: Marry this girl!

Oh wait, this is exactly what I did at 22… I wasn’t too far off ;-) I have been with my wife since the age of 16 and I certainly don’t regret a minute spent with her :-D

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A Positive Mental Attitude At Work

By: Mike | Date posted: June 07, 2010 (5:16 am)


Have you ever wondered why some people get promotions as often as getting treats at Halloween while others toil  for decades without even seeing a decent raise in salary? Forget about those brownnosers and concentrate on the real reason: your attitude at work.

When I look at some of my co-workers, I can tell you who will get the next promotion and who will continue to spin their wheels while being angry at the World. The “Company” is looking for hard workers and positive employees. If you want to be part of the rewarded, there are some key attitudes to demonstrate:

#1 Work!

This one seems quite stupid but there are a lot of people concentrating on “face time” at work. They come in early, stay at their desk the whole day, tapping on their keyboards, but at the end of the day: nothing has been accomplished. People that are all about face time are the worst off as their bosses prefer to ignore them instead of telling them that they know they are not truly working. Why? Because it is a too much work to prove that an employee doesn’t really work. However, you will be set aside pretty fast if a manager thinks you are part of this group!

#2 Stay positive

We are living a tragic moment in the working reality: our environment continuously changes from month to month. Therefore, new processes, ways of working emerge and you need to adapt. Those who complain are not part of the “good ‘ol hard working” employees. In fact, even if you are a rockstar at work, you won’t get what you deserve if you keep nagging your boss in front of everybody saying that this or that doesn’t work properly. You can criticize, but bring a solution at the same time. If you just complain, once again, you will be cast aside.

#3 Do more

I learned a lot from my first manager. He used to spend a lot of time coaching me and telling me how to become a more valuable employee. He told me something very smart:

“if you want a promotion, show me you can do the job”.

This means that if you want another position, start doing things that is required of the person who is already there. So when the position becomes available, you will be first on the list. Some call it working for free; I call it working to climb the corporate ladder.

#4 Be a pro

If you are looking to get promoted from amongst your co-workers and stay in the same department; I suggest you be start becoming the pro. Being a pro doesn’t mean being the best or a show-off. The real pro is the one who masters his job and help his colleagues reach another level. By helping others, you will achieve 2 important tasks for your manager:

A)   You will demonstrate that you can contribute to your team and help others do the same.

B)   You will earn the respect of your co-workers and they won’t bad mouth you once you get your promotion ;-) .

#5 Don’t play games

I know it is very tempting to talk about others during your lunch hour. It is so interesting to say things about others that some people make a hobby of that. Don’t be part of this group. Some people do it to “be part of the gang” but I’ll tell you one thing; that gang is probably doing the same thing to you when you are not around!

If you take a second to look at people working around you, you will notice their behavior and will see how a good attitude at work can benefit you.

Green Panda; What is Cool Around the Web This Week

By: Mike | Date posted: June 04, 2010 (8:37 am)

 

Every Friday, I’ll pull out the 15 coolest personal finance article I found on the blogs I read weekly:

#1 DIY credit repair @ Money Under 30

#2 How much money do I need to retire? @ The Oblivious Investor

#3 Can you believe I am selling Enemy of Debt? @ Enemy of Debt

#4 Best self employed retirement plan @ The Wealth Pilgrim

#5 9 ways to ensure your road trip sucks @ Len Penzo

#6 How to get a good deal when shopping @ Money Help for Christians

#7 Predictably irrational @ Joe Taxpayer

#8 Do you want to ruin your financial life by 30? @ Studenomics

#9 Fixed or variable, why not both? @ Canadian Finance Blog

#10 Only the poor or super rich say “money can’t buy happiness” @ Financial Samurai

#11 Get out of debt: start acting wealthy @ Debt Free Adventure

#12 What would you do with a cash windfall? @ Fiscal Geek

#13 Do you ever just miss shopping? @ Budgets are sexy

#14 Roth IRA rules & tips: 2010 and beyond @ The Digerati Life

#15 ETF Sector Investing @ Intelligent Speculator

Joining The Yakezie Challenge

By: Mike | Date posted: June 03, 2010 (5:19 am)

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As you probably know already, we had bought Green Panda a few months ago. The main reason why we bought this blog is because we liked its young and fresh approach. Personally, I feel that the way you think and shape your personal finance in your 20s will have a great influence on the rest of your life.

In order to contribute to improving the world of personal finance, we recently joined the Money Mavens Network. This group has been formed by 9 great bloggers who share information and anecdotes of different aspects of personal finance. Instead of regrouping a bunch of look-a-like blogs, we decided to form a group of complementary bloggers. This is why you will enjoy so many different topics discussed among this group.

While participating in the Money Mavens Network, I thought it would be a good idea to take my contribution to the personal finance blogs to another level. Since I have been reading Sam’s blog (Financial Samurai) for a while, I took a look at his Yakezie Challenge.

What is the Yakezie Challenge?

This is basically (another) group of bloggers who have teamed up to improve their ranking by one of the highest website authorities of this planet: Alexa. This chick (kidding!) basically has the power of life and death over our blogs as she determines their ranking.

Beside improving your Alexa ranking, I have jointed the Yakezie challenge for another reason. To be honest, most blogger groups are made for one single goal: bring more visits to everybody by sharing links among them. While it’s a win-win situation between the bloggers who get more traffic and the readers who get to know more quality blog, the Yakezie challenge brings something more: it regroups a lot more bloggers than other networks.

What is nice about it is that this is a way for me to find about other blogs that are not as mainstream compared to the big bloggers. While you sometimes find very poor articles, there are also hidden gems among them. And this is why I am joining the Yakezie Challenge; to discover new blogs.

It won’t change much for you besides the fact that you will have the opportunity to discover more blogs during my “what is cool around the web” roundups ;-) .

Improve Your Chances of Getting a Mortgage Loan

By: Green Panda | Date posted: June 02, 2010 (10:51 am)

If you’re considering buying a house in the next few years, it may seem like the process is overwhelming. Having recently bought a house, we know it’s completely doable and there are some thing you can do to increase your chances of getting a great deal on a mortgage.

Aim for a Sizable Down Payment

The days of getting a house for no money down are gone. If you want a competitive rate for your future house, show your lender that you’re serious with a big down payment. Can you put down 20% (or more) for the house? If not, what’s the most you can put down?

Having a larger down payment, you’re probably aware means you’ll have a smaller mortgage payment. That’s going be a big help for your monthly cash flow, which I’ll discuss in a moment.

Besides making your down payment, you should still have a buffer for your emergencies. Don’t completely drain your savings account. You might think this is overkill, but if you buy a house, please know that you’re not suddenly immune to layoffs.

Have an Enviable Cash Flow

You need to prepare yourself for having a mortgage by having a solid history of positive cash flow. Your lending will look over your finances with a fine toothed comb. They will want to know if you’re able to pay this mortgage. If you can keep your total housing costs (not just mortgage) under 30%, you’ll look more promising to lenders.

My recent experience has been that banks aren’t as conservative as you think. It’s best to run your own numbers and make sure you’re comfortable with the new mortgage payments and other home owner costs. We looked at homes $50,000-$70000 less than what the bank thought we could afford.

When you step up and show that you’re in control of your cash flow,you’re giving yourself a bit of leverage. You can shop around to find the best deal.

Hunt for Your Mortgage

Now you have a great down payment and you’ve optimized your cash flow and you’re ready to go house hunting. There are several sources for getting a loan and not all of them are equal. Be aware and ask questions on any fees associated with getting a mortgage through them.

  • Commercial Banks
  • Credit Unions
  • Mortgage Brokers
  • Online Lenders

Comparing your options is a great way for you to find the lowest interest rate and fees.

Your Thoughts on Getting a Mortgage

If you’re on the hunt for a house, what steps have you’ve done to prepare? If you bought a house, how did you get a great deal on your mortgage?

Asset Allocation Basis Part 4: What Are My Other Investing Options?

By: Mike | Date posted: June 01, 2010 (5:08 am)


After reviewing which kind of investments fall into the category of fixed income and looking at the stock market, as an investor, we may think that we have covered all the asset classes. However, there are what we can call “hybrid” products that are not necessarily classified as fixed income nor as equities. Over the years, investors can now improve their asset allocation by choosing from a new bunch of “other” investments.

Linked Notes

One of the most popular products on the market these days are linked notes. How do they work? It’s an investment solution where your capital is 100% guaranteed by a financial institution but the  yield at maturity is unknown. The linked note has a fixed term to maturity (usually 3, 5, 8 or 10 years) and the yield is determined by the “basket” of securities traded on the stock market. It can be either a portfolio of stocks, an index or it can also be actively managed by a portfolio manager. In any case, you benefit from the guarantee of capital and you improve your chances of increasing the yield since the stock market usually out performs traditional certificates of deposit over long periods of time.

So you can participate in the markets without taking any risk? This sounds like the best investment possible, right? Not exactly ;-) . There are usually important management fees attached to linked notes and the yield is usually capped so that you won’t benefit from the full potential of the market.

Commodities

This is another very popular asset class. Commodities regroup all the resources that are being traded on the stock market. Among the most popular, you can speculate on the price of oil or gold. They are highly volatile and highly dependent of economic events. Instead of betting on the strengths of a company, you are better on the demand for a resource. If you are right, the price will rise significantly and you will make a lot of money. However, I suggest that young investors avoid trading commodities because of the high volatility. In the very same month, your investment can show +5% and -5% 2 weeks after…

Real Assets

According to me, real assets are a very interesting asset class. They include all companies managing or working on pipelines, bridges, highways, etc. Since the overall road structure needs to be renewed everywhere in North America, these companies may benefit from huge governmental contracts.

Real Estate and Land

You believe in real estate but don’t have enough cash down to run your own 4plex? You can now buy indices that follow the price fluctuation of real estate or land.

You know your asset classes, now what?

Knowing your asset classes is the very first step before investing. However, we are still far away from opening an investment account. In the upcoming post of this series, we will look at determining your investor profile and how you should do your asset allocation.

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