Capital in Any Century

My last post was all about saving money because as the saying goes: “it’s not what you earn, but what you keep.” But let’s be honest here, it’s also what you earn. Unfortunately, (or fortunately depending on how you choose to look at it), I stumbled into a profession that offered a relatively high starting salary but provided limited earnings growth potential. Pair this with the fact that I’m like, really, truly, over retail pharmacy, one might expect that I’m pretty SOL in the earnings department. Luckily though, I am hoping my investments will provide a portion of my future earnings, assuming I get off my lazy duff and actually invest my savings.

But first, let’s hark back to a simpler time in 3rd year pharmacy school. An personal finance expert named Mike Sullivan had come to give our class a talk about the importance of investing once we were members of the professional class. To drive home the message, he darted his laser pointer around a PowerPoint slide demonstrating the power of compound interest. “If you start saving just $1000 per month for the next 40 years at an interest rate of 8%, by retirement you’ll have amassed a fortune of $3.5 million dollars!  And if the markets average a 12% during the next 40 years, you’ll have well over $10 million dollars!!”

ol-gil

Mike Sullivan, circa 2008

So we all signed up with him, started investing immediately and were well on our way to being decamillionaires by retirement. Oh, no wait, the year was 2008 and the worst financial crisis since the Great Depression happened just a few short months later.

I often wonder, late at night, about this so-called wealth adviser with the world’s worst timing. He’d had with such high hopes for the markets on that fateful February 2008 day.  Perhaps I could track him down and meet him for coffee.  We’d reflect on the other investments he’d likely advised over the years: a Miami condo in 2006, Greek bonds in 2010, going all in on gold in 2011.  We’d reminisce about his Bear Stearns and Nortel picks and recall him dismissing Google as just a fad. Mainly I’d ask what he was investing in now and immediately DO THE EXACT OPPOSITE.  Ultimately we’d part ways and he’d retire to his cardboard box under a bridge. Despite all of this, Mike Sullivan taught me something very valuable that day: markets rarely cooperate so I ought to double my savings rate and halve my expected rate of return.

Just for kicks though, let us imagine that I’d started investing in February 2008 as per Mike Sullivan’s suggestion.  What kind of meager return could I have expected given the market turmoil that occurred between then and now?  According to this S&P 500 Return Calculator, I’d have averaged 7.914%.  Oh, Mike, you lovable loser.  Turns out you were pretty much right after all.

Fall Finance Cleanup

I recently spent one week on vacation, away from the demands of the daily grind. I slept in and unabashedly ordered room service breakfasts dangerously close to noon. I spent mornings in bed reading books or giggling at the Florida news headlines. I stayed up late reading books about finding my calling in life whilst shunning my ego. I went to the gym for hour-long elliptical or treadmill sessions hoping I’d feel slightly less guilty about indulging in a dessert or three at dinner. On port days, we trekked the hills of downtown Halifax and endured hurricane winds to see the Bay of Fundy and stumbled upon boho chic storefronts in Portland, Maine. I figured the week of relaxation would rejuvenate me and prepare me for another long slog at work.

That’s not how things unfolded, though. I was slow and unmotivated returning to work on a Sunday. I dragged myself through, hoping I’d ease back into work mode and be raring to go by Monday. On Monday I woke up with a pounding headache, body aches, and sinus pain and pressure. As a strong believer in the mind-body connection, this was a clear sign that things weren’t right. When the idea of returning to work precipitates a full blown influenza episode, I am clearly in the wrong place. So I decided to take the next week off to eat healthy foods and take long walks and read books to nourish my soul. At that point, I will decide if I can over-medicate myself enough to endure my horrible workplace any longer.

In the interim, I am utilizing my time off to clean up my finances.  Since I’m unsure of my ability to return to work, I’ll need to prepare for a potential drop in income. Thus, I decided to go through my bank account / credit card transactions line by line and scrutinize each expenditure. It’s amazing how our little expenditures can make major dents in our budgets. By doing this, I realized just how many of my costs are unnecessary and don’t affect my overall happiness. Having already applied the Pareto Principle to cut my spending on major expenditures like housing (mooching off parents) and transport (driving an older car bought second hand) this was the next logical step.

Here’s the breakdown of the savings I’ll realize:
-removed US roaming from my mobile plan: $15/month
-cancelled Audible subscription: $20/month
-cut bank fee charges: $12/month
-switched gyms for parents and I: $100/month
-cancelled auto charity withdrawal: $30/month
-made lump sum payment then refinanced mortgage: $600/month

My total savings from about a day’s worth of work: $777 per month and $9,324 per year!!! As someone who considered herself frugal, I was appalled at the amount I was spending on useless shit. I’d need an additional $233k in my retirement nestegg to fund an additional $9,324 in annual spending (based on a 4% withdrawal). Ugh, I’m nauseated just thinking of the additional years I’d spend chained to the pharmacy counter just to pay for THINGS THAT DON’T MATTER. Over the next week, I plan to actually calculate my monthly passive income and monthly expenses and determine if I can officially declare myself officially FI.

Labour Day Musing

With today being Labour Day, a day celebrating the rights of workers, I thought I’d reflect on a few tidbits I personally found interesting.  It seems that in Bangladesh, there’s a movement to declare the anniversary of the Rana Plaza collapse, April 24th, Labour Safety Day.  For those unfamiliar with the disaster, over a thousand garment workers were killed when their structurally faulty building collapsed.  Loblaw, which ordered Rana Plaza workers to make their Joe Fresh line of clothing for some 20 cents per hour, hired self described “retail genius” and cosplay enthusiast, Joe Jackman to help market the brand. In a 2015 op-ad, the Globe outlined the brilliance Jackman displayed in marketing the Joe Fresh line of clothes, ensuring soccer moms across Canada needn’t leave the grocery store to purchase bland and frumpy outfits.
BeFunky Collage

“They displayed a lot of the clothing like produce: on tables, rather than racks or shelves.  They trumpeted the affordable prices with round orange signs that said food more than fashion. And on the day of the launch, the team placed a naval orange with a Joe Fresh sticker on every staff desk across the country.”  Pure genius. 

I mention this, since my employer also sought Jackman to revitalize the face of their brand, while simultaneously implementing a couple of programs designed to ensure their own cheap and abundant slave labour.  Currently, our store is in the process of initiating a program plainly named “Best Way” which makes clear, in unequivocal terms, the BEST way to do your job.  In the pharmacy, our project goes so far as to provide tape markings on the pharmacy floor outlining the borders of your work station.  These initiatives make explicit the company’s desire to not have anyone think, or in this case, even step outside of the box.

The procedural changes happen to coincide with the latest round of buyout offers being offered to full-time, unionized workers. By dictating the “best way” for workers to do their jobs (with threats of random firings hanging over their heads like the Sword of Damocles), management can keep us all cheap & replaceable.  Providing each worker a script to recite ensures that your workers can be new and dumb, monotonously asking when you’d like to pick up your prescription the way fast food workers ask if you’d like fries with your order. It also ensures that no one has the education or seniority required to be paid a living wage or demand benefits.

This American-based, metric-focused, assembly-line form of pharmacy was to be expected as many of our company executives have been passed, hot potato style, from large US pharmacy chains.  Regardless, it represents an all new low in Canadian pharmacy practice, providing a little slice of Bangladeshi work culture closer to home.  Now I know I’m breaking any new ground by stating the obvious: retail sucks. Nor am I obtuse enough to directly compare my 6-figure, professional job to a Bangladeshi garment worker.
However, as someone who was recently made to take a pay cut, has worked many overtime hours without any pay, worked virtually every weekend this summer (including all 4 long weekends), and developed excruciating neck / back pain from being hunched over a counter for 12 hours at a time, I feel the need to stand up for my rights these days.  I’ll be capping off this lackluster summer with 7 AM training session this Wednesday to implement the new initiatives.  All of this is pushing me dangerously close to wanting to hang up the lab coat once and for all.  After spending the summer cursing my godforsaken job, I am questioning whether I actually need a job (godforsaken or otherwise).

Planning for my departure

Stumbling upon articles documenting the trials and tribulations of women my age reminds me of how incredibly lucky I’ve been. Certainly, hard work and sacrifice have factored into my career progression, but it would be impossible to discount the role that luck has played. Graduating pharmacy school during a massive pharmacist shortage and beginning my investing career in 2009 when markets presented tremendous value, has provided a huge boost. I was able to land my first “grown-up” job at 24, and not 32 and I’ve never had to dance burlesque to make ends meet. Even Garth Turner spoke succinctly of the lack of savings among many in my demographic: “The liquid assets among 35-year-olds who have been working for seven or eight years is breathtaking. There aren’t any. Instead, all the cash has gone into lifestyle, a soul-sucking condo or repaying student debt.”

The financial head start that I have is of particular importance these days, when I find myself uncertain of my future. Layoffs and prolonged unemployment are quickly becoming the norm in my field. Even those of us who have jobs struggle to keep them in hectic, short-staffed environments and are forced to meet outlandish quotas designed to maximize corporate profits. My own body, often the first harbinger of my cognitive dissonance has displayed increasing weariness. On my days off, I am often up before 6am, excited to get a jump on my day. I exercise, read anything I can get my hands on, watch documentaries, catch up with friends and spend time with my mom. On the days I’m working, I’m sluggish and uninspired. I drag myself out of bed and down stimulants to provide the energy to head out the door. Stumbling upon this book has reminded me that you may be able to put up with a sh*tty job for a while, but not forever. Eventually, your desire to self-actualize and / or inability to tolerate anymore BS will push you out.

Be it my immigrant work ethic or my parents’ propensity to disown me, but I can’t just walk out on a job without an sufficient safety net.  So here’s what I’m thinking:

My next payday is September 1st, which happens to be my rent cheque cashing day. The financial boost will allow me to make another lump sum mortgage pre-payment ($10k), bringing my total mortgage debt obligation to 250k (on 3 properties). Given the average interest rate of 2.04%, I’ll then let the mortgages run their full course as they are tax deductible and at a rate approximating inflation. The other point worth mentioning is that my rentals are worth $1.25MM according to MPAC. Not that I plan to sell, but having $1 million in equity is a nice safety blanket. Based on current projections, I can reasonably expect about $30k per year in rental income, increasing gradually as the mortgages are paid off.  Next, my investments are worth approximately $550k today. I’ve been very inconsistent with my investment allocation / tracking / re-balancing so this will be my next order of business. Using FIRECalc’s 4% withdrawal rate, I can expect to withdraw $22k per year today without depleting my capital. With my rental mortgages on autopilot, I can redirect any monthly surplus to my investments. I’ll continue maxing contributions to my employers pension plan (15-18k per year in forced savings) but redirect any excess to my unregistered investment accounts.

I’m not sure if anyone ever feels fully ready to escape the daily work grind, but at least I’m giving it my best shot.

House Hunting: Part I

An interesting dichotomy seems to exist in the Canadian economy today.  While Canada (mainly Ontario) lost 31,000 jobs in July, the real estate market soared some 20% to record setting levels.  So luckily, we no longer need jobs since our houses are earning us $150k/year as we live in them!  And it’s a good thing too, because the job market is pitiful. One might expect that as a health care professional, I’d be able to avoid the job market gloom… but you’d be mistaken.  Check out a locum pharmacist listing I stumbled across:

Shoppers Drug Mart::

Location: Etobicoke/Mississauga, ON*

Dates and Times:  August 6 (3pm-10pm)

Technician: Leaves at 6pm

Software: Healthwatch

Methadone: No

Rate:  $31/hr not incorporated and $33/hr for fully incorporated

*Ontario: where dreams and high paying jobs go to die

Now, I work on the Mississauga/Etobicoke border and earn about $50 per hour.  This figure is not inclusive of my health, dental, drug, or vacation benefits, nor my 6% pension match.  So if I were a new grad looking for work today, I’d be expected to earn 60% of my current wage, live without benefits and accept a measly 7 hour shift on a Saturday night.  Not to mention, I’d have to get into a bidding war for dilapidated, post-war Etobicoke bungalow or an overpriced shoebox condo overlooking a highway.   So, in summation, no thank you.  My employer, however, is likely salivating at the thought of a new flock of heavily indebted recent grads with student loans, leased luxury cars and exorbitant mortgages, willing to work sans-benefits for $31 per hour.  I know that my job is hardly secure, which is why I’m using my contrarian nature to prepare for the inevitable day of reckoning.

By using the lowest interest rates in history to gorge on residential real estate, Canadian households are now the most indebted of the G7. In Ontario, our Liberal government has bungled their way to a debt-to-GDP ratio above 40%, trumping basket case California in their heyday.  Eventually, interest rates will creep upwards and public & private debt levels will limit future consumption and lead us into a recession.  The whole house of cards would have collapsed long ago if not for government goosing the sector by allowing CMHC to backstop loans for poor people and banks offering sub-inflation mortgage rates.

The rational part of my brain is painfully aware of the Great Canadian Housing Bubble.  So why then, am I spending my Sunday afternoon hitting up open houses?   ¯\_(ツ)_/¯ More on this later…

Scaling Back

This coming September marks my 7th year as a pharmacist. Since getting my full fledged pharmacy license in September 2009, I have pretty much worked non-stop. In fact, I look back in equal parts shock and horror at my Google Calendar from those early work years:

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One whole day off in June 2010…what a slacker

I was living in the middle of nowhere and working a fulltime job for one company, while simultaneously working the equivalent of a fulltime job in locum shifts. I essentially spent my mid to late twenties working, sleeping and driving between the aforementioned. I eschewed romantic relationships, maintained only superficial ties with a handful of friends and scheduled time to see my family when I had a rare day off. Working in a small town kept me off the hedonic treadmill. I lived in a $590/month 1-bedroom apartment located catty corner from a strip club and drove a 9 year old Honda CR-V I’d inherited. This was fine though, as ostentatious displays of wealth felt especially gauche given the financial turmoil at that time. And quite frankly, when you live in a town with a population of 22,000 where the Swiss Chalet is considered fine dining, you really have no choice but to save your salary.

Once I’d saved a respectable amount of money, I spoke to one of my former pharmacy school classmates about how to begin investing. My friend Eric was the only person I knew with a brokerage account and I figured I could recruit him to be my money manager. I was intimidated by the world of investing, which up until that point I’d associated with Bay Street guys in expensive suits and BNN shows that went over my head. Eric could have charged me a percent or two and allocated my money for me, but instead he gave me the best piece of financial advice I could have asked for. He said “No one will ever care about your money as much as you do, so learn to manage it yourself.” I knew he was right, and I quickly became a voracious reader of personal finance books and blogs. I watched Peter Schiff’s YouTube videos and read Garth Turner’s blog and idolized guys like Gerald Celente and Max Keiser (I know I’m more than a little weird).

Once I’d been investing for some time, I became accustomed to seeing the balances of my accounts tick higher. The rising stock market tide from 2009 onward was raising all ships, mine included. Fearful of a market pullback, I diversified into real estate, renting out the properties I’d purchased while I continued to live in my strip club adjacent abode. My ridiculous schedule caught up with me at times. At various times, I’d work myself to the brink of emotional and physical exhaustion and be under medical orders to take time off. Being goal oriented and having the material needs of a hobo, I identified with financial independence blogs that discussed earning enough passive income to not have to work for money. Reaching financial independence became the ultimate life goal.

Looking back now, I’m not as filled with regret as one might expect. Sure, I went without drunken nights out, passive aggressive frenemies and random hookups in my 20s. Instead, I met tons of people who’d lived lives dramatically different from mine. I gave flu shots to Mennonites and dispensed methadone to addicts and checked IV bags for NPO patients. I made countless blister packs for nursing homes and mixed thousands of antibiotic suspensions for kids with upper respiratory tract infections and locumed at pharmacies that would not have been able to open without me there. I did well by doing good, which I think is the best any of us can hope for. Somewhere along the line, my investments began producing enough passive income to sustain my lifestyle. So I’d technically reached my goal, but faced with the prospect of leaving the workforce, I wavered.

I like my job now and working isn’t so crummy when you have a normal schedule. These days, I find my focus has shifted from work and money to more leisurely pursuits. So starting this month, I’m working far fewer hours.  I’ve not yet elucidated what my new life goals will be, but I’m hoping my newly lightened work schedule will allow me to uncover them.

Why I’ll Never Retire, and Neither Should You

I read an interesting book on my vacation. It provided an overview of the economic growth and technological development that occurred between 1870 and 1970. Reading it made me realize that had I been born a mere century earlier, I’d have grown up without modern luxuries like “electric lighting, indoor plumbing, home appliances, motor vehicles, air travel, air conditioning, and television”. And given that the average life expectancy for a woman was just 40 in the late 1800s, at the ripe old age of 31, I’d be considered geriatric. My impending demise would be the least of my concerns, however, as I’d likely be too busy sewing mine and my families’ clothes, dragging in buckets of water to heat over a hearth for our monthly bath, and raising my many children (assuming they’d made it past infanthood – a rather large assumption, since infant mortality rates were well above 20% at the time).

Retirement, was another novel innovation that had begun to gain traction by the turn of the century. Previously, men had been required to work until death or face destitution in their final few years. The concept of retirement was initially introduced as a safety net to be drawn upon as failing health limited one’s earning ability late in life. However, as life expectancy rose, the investment industry began to equate retirement with decades of relaxation and leisure activity. Commercials showed older couples golfing, traveling or relaxing on a beach, while real retirement risks like cognitive decline, depression and even early death were conveniently overlooked.

Luckily for millennials, the traditional concept of retirement now seems as antiquated as the horse and carriage. Millennials have heard too many Nortel or Stelco horror stories and know better than to place all of our eggs in corporate baskets. Defined benefit pensions are unicorns in the private sector and even if you are fortunate enough to be enrolled in one, there is no guarantee that you’ll be around long enough to benefit from it. Ridiculously high property values will keep many millennials off the housing ladder for the foreseeable future, so cashing in housing equity to fund retirement may not even be possible for many of us.

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Retirement: among the many things my generation will never do

Given our unique financial prospects, millennials will have to re-imagine the traditional retirement to fit modern times.  By avoiding overpriced real estate, keeping frivolous expenditures to a minimum and establishing multiple streams of income, millennials can enjoy retirement perks like freedom, autonomy, travel and personal growth decades earlier. We are no longer content to simply live for the weekend, putting off personal ambitions for 40 years just to have the rug pulled out from under us. Too many of us have realized that depending on government or a corporation for your livelihood is not only unfeasible, but quite frankly, undesirable. And mediocrity is nothing to aspire to.