Monthly Archives: August 2016

The slow track or the fast track to wealth

In our first world economy, we all have the potential to become wealthy. But is that what we want?

What is the role of wealth in your life?

Becoming wealthy is not everyone’s priority.

Some people think about love, beauty, sports, sex, dance, fashion, etc. They are committed to their goals and for them, they just need enough money to continue working towards their goals.

Many people don’t have any goals, they are social lemmings who live their lives without a sense of direction, they just follow what everyone else is doing.

For some other people, wealth takes a front seat, they believe that everything else will become easier if they are wealthy.

The two tracks to wealth

For those interested in building wealth, there are two tracks. The slow track and the fast track. Which track you take depends on your priorities, your ambitions, your self-confidence,  and your willingness to put in the work.

What is the slow track to wealth?

The slow track to wealth is to become wealthy through working a regular job and saving for decades. This method has proven to be reliable. If you work a regular job, save every month and invest in low-cost index funds or ETFs, it is almost guaranteed that you will become wealthy.

Let’s do a quick example. For this example, let’s ignore the effects of inflation.

Let’s imagine that a person saves $5,000 per year and he/she gets and average return from the market of 8%. How long will it take this person to become a millionaire?

It will take 36 years to accumulate $1,000,000.

To save $5,000 per year is not that difficult, practically anyone can do it, but most people are conditioned to spend, not to save, therefore very few people will become wealthy even though it is within their reach.

With one million dollars, a person can spend about $80,000 per year  for the rest of their lives without running out of money. The slow track is not bad at all.

What is the fast track to wealth?

Most people who become millionaires, they do so by creating  businesses or by investing in real estate. They take risks and responsibilities that others are not willing to take. They have a vision of where they want to go, they eliminate all the excuses and work relentlessly towards their goals. A fast track business should make you wealthy in 20 years or less.

I will give you an example:

I am in the Airbnb business. I have an apartment which I rent via the Airbnb website. If my goal was to become a millionaire as fast as possible, I will be able to do it without too much difficulty. I earn about $1,000 per month with one property. If I were to get an additional  Airbnb property every 4 months, by the end of one year I would be earning $4,000 per month. By the end of two years, I would be earning $8,000 per month. By the end three years I would be earning $12,000 per month. On year number three I could be earning $144,000 per year. If I spend $44,000 on my living expenses and invest the other $100,000, I could be a millionaire in less than 10 years.

I don’t have to be a computer genius and I don’t have to spend half of my life getting master’s or doctorate’s degrees. I could simply become a millionaire by running a business which doesn’t require much brain power.

This is just an example of how easy it is to become a millionaire. Many people who become millionaires have simple ideas.

We are masters of our destiny

We are not helpless. We can take control of our destiny any time we want. If we wish wealth, wealth is there at our feet. The only obstacles in becoming wealthy are self-imposed. Financial success is only limited by our lack of imagination.

Increase your wealth by reducing your taxes

Before giving a speech at Toastmasters
Before giving a speech at Toastmasters

In our journey to build wealth we are constantly looking for ways to increase revenues, reduce expenses and invest wisely.

If you earn more than $20,000 per year guess what is one of your biggest expenses…


In Canada, a person in a higher income bracket is already paying more than 50% of his income in taxes. If you add sales tax, property tax, gas tax, cigarette tax, alcohol tax, corporate tax, school tax, import duty, and all the other taxes I don’t even know about, high earners are getting a royal screw by the government and by the rest of us less well-off people.

Canada is a wonderful country. We have so many social programs which are the envy of so many other countries in the world. But, please people, be aware that all those social programs are not free. Someone is paying for all of them. I will take a second to express my gratitude to all the tax payers who support our social system. Thank you!

However, as much as a society  benefits from the tax revenues, it’s the responsibility of each individual to find legal ways to reduce his/her taxes.

Here are some tips to reduce the tax burden:


Change your source of income

For some reason, our government has decided to tax different sources of revenue in different manners. Employment income and interest revenues are taxed at a higher level than dividends and capital gains.

Let’s look at some examples. Assume that your tax bracket is 40%

If you earn $50,000 in salary, you pay $20,000 in taxes (ouch)
If you earn $50,000 in interest, you still pay $20,000 (ouch again)
If you earn $50,000 in capital gains, you will pay $10,000 (this is more humane)

So, the trick is to change your income as much as you can from salary and interest to capital gains.

In addition, the government has created special accounts which allow us to pay NO TAXES (such as the Tax Free Savings Account) or accounts which allow to defer taxes many years into the future ( Registered Retirement Savings Plan).

Pay your taxes decades later

How would you feel if you have a debt and your are allowed to pay it 10, 20, or 30 years later. Would you take it?

This is exactly what the government allows you to do when you open a Registered Retirement Savings Plan (RRSP) account. The taxes that you owe today could be paid decades from now.

Assume again that you earn $50,000. You can take $18,000 and deposit it in your RRSP account. Now your taxable income is $38,000. Your tax bracket is reduced. You pay a smaller percentage of taxes on a smaller amount of money. When you retire at age 65, you can withdraw your $18,000 plus whatever gain it made and you will pay regular income tax on that money.

Pay $0 taxes

This is the biggest gift the Canadian government has given to taxpayers. We are all allowed to open a Tax Free Savings Account (TFSA). Money in a TFSA can grow 100% tax free. The only drawback is that there is a limit in the amount of money we can deposit in a TFSA. For 2016 the limit is $5,500.


Tax reduction is the low hanging fruit. Very few of us use all the opportunities we have at our disposal to reduce our taxes and our expenses.

Many people consider tax self education very boring, but this kind of education can pay high dividends for the rest of your life and remember, dividends are taxed at a lower level.

Now (and always) is the worse time to invest in bonds

With friends on a rainy day
With friends on a rainy day

Anytime anyone goes to a financial adviser two things happen:

  1. The financial adviser will only recommend their “in house” products — you know, the ones that have 2-3% management expense fees.
  2. They will ask you your age and they will miraculously show you a fund that is tailored made for all people your age.

We have already spoken about point #1 in previous posts. For sure, financial advisers will ALWAYS offer you the funds with high expense fees, because they get paid kickbacks, called trailer fees. Those kickbacks represent the major portion of their income. But guess what? Those trailer fees come out of your pocket. It is to the advantage of the financial adviser to always recommend the products which pay the best commissions for him/her. There are hundreds of low cost index funds and ETFs which financial adviser will never recommend, because even if those low cost index funds and ETFs are the best products for their clients, there is no commission involved. The investment adviser’s job depends on your ignorance.

On point #2, they are equally inept. The typical formula to choose a portfolio of stocks and bonds distributed like this: 100% stocks minus your age. That means that if you are 30 years old, you should have a portfolio of 70% in stocks and 30% in bonds. If you are 50 years old, you should have 50% in stocks and 50% in bonds, and so on. Really? the major contributing factor is our age? How about if I am already a millionaire? How about if I can hardly pay my rent? How about if I am good health? How about if I am in bad health? It doesn’t matter, he/she will simply look at the table his employer gives him and plunk you into the bracket recommended in their sales manual.

Historically, stocks have always been a better investment than bonds, but investing in bonds has always provided a false sense of security. In fact, what they provide is reduced volatility. We should not confuse less volatility with less risk. On the long run, bonds ARE NOT less risky than stocks, they are less volatile.

The reality is that the more bonds you have in your portfolio, the more you are handicapping your growth potential. Why would anyone slow down their money earning potential only because they are older? When you are older, when you need your money the most, it is precisely at that moment when you would like to get the most out of your money.

Here is another thing that is killing me. Sure, we all have heard that no one can predict the market and that a diversification between stocks and bonds is the prudent thing to do. But there is a moment in time when you can put rules of thumb to the side and use your common sense.

This part is a bit technical but this is how bonds work:

If interest rates goes down, the value of bonds goes up. If interest rates goes up, the value of your bonds goes down.

At this moment, August 2016, interest rates are at a record low. They are about 1%. If Interest rates don’t have much room to go down, then the value of your bonds don’t have much room to go up.

However, interest rates have a lot of room to go up. If interest rates go up, you will lose money. The potential to lose lots of money is very high.

Knowing this,why would anyone put any percentage of their hard earned money in bonds? Your probabilities of winning are low and your probabilities of losing are high. You are better off keeping your money under your mattress.


  1. Look for a fee only financial adviser.Don’t get a financial adviser who makes his/her living out of commission, he/she will only offer you the products which give him/her the highest commission.
  2. Don’t have any bonds in your portfolio, especially now but ideally never. Why would you shortchange your return. Even after retirement, you still would like to see your money to grow.

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How to get the most happiness out of your money

How much is this moment worth?
How much is this moment worth?

Money can buy a lot of things, but to have a lot of money in your bank account should never be the main objective in your life. Once you have covered your basic needs of food and shelter, your most important objective should be to be happy. So how do you get the most happiness out of your money?

Here is what I have learned through reading and personal experiences.

Buy experiences, not things

I am a member of a club called McGill Toastmasters. It is a club devoted to learning speaking and leadership skills. We meet for two hours once per week and it costs me $12.50 per month ($1.56 per hour). In exchange I get a fantastic learning experience, I get lots of entertainment, and I get to network with many interesting people who have become close friends. The $12.50 I spend every month is one of the best purchases of happiness in my life.

I met my friend Cheryl about 10 years ago (2006). At that moment I discovered that she had been going to the same coffee shop every morning for many years. At that time I was reading The Automatic Millionaire. David Bach, the author, writes about “the latte factor.” He explains that if we save the amount that we spend on lattes, we can all become millionaires. When I explained this concept to Cheryl and suggested that she stop going to the coffee shop she was taken aback. She explained to me that it was not about the coffee, but about the experience of having a coffee in a place that provides so much happiness. For Cheryl, this is one of the most precious moments of her day. She is investing in an experience and she is getting a great return for her money.

You don’t have to spend much money to buy a beautiful experience. You can spend time with friends at the park, at the bar or at a restaurant. It’s those memories with your friends which will bring a smile to your face, not the latest gadget nor the latest clothing item.

Buy time

The glorification of “busy” is over. At one time I used to admire people who were always busy, now I admire friends who take time for themselves and for their friends. Many of my friends have packed agendas from the moment they wake up until they go to sleep. Many of these friends have high paying jobs. It is interesting to see how they have so many things but they don’t have time. Time to go to the gym, time to have a beer with a friend, time to sit down and watch a sunset.

At one time I was a workaholic. I used to work 10 hours a day, seven days a week. I had money but I didn’t have time. Now, I work part time. I read books at the park, I meet with friends on weekends or weekdays. For me time is more valuable than money.

If you have kids or a spouse that you love, the most valuable thing you can do for them and for you is to spend time together. Go out for a walk, to the park, to the beach, to a dance event. In short give up some of your working hours to spend time with the people you love.


When my ex wife and I got divorced, I invited her to celebrate by going to Cuba. When my daughter got into a fight with her boyfriend, I invited her to Cancun. Giving to the people you love, is one of the most valuable sources of happiness. Don’t give because it’s Christmas or their birthday, give because giving is pleasurable.

Close your eyes, think about someone you love, or think about a cause worth giving to and show your generosity. You will thank yourself.

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