Saving money is in a way deferring consumption. Money itself is an IOU from society to consume an amount of goods and services. when you put money aside you are delaying consumption.
You could consume something today, but if you instead save and invest these IOU's you could buy more, bigger and better items to consume later.
Now I'm going to claim that the ultimate goal of saving and investing is to maximize the amount of goods consumed throughout a person's life.
say you have these options,
1. Buy a $100,000 Porsche today in cash.
2. Invest the money and use the dividends to lease a new $600 a month car every 3 years for the rest of your life.
3. Invest the money for 10 years @7% then lease a $1200 a month Porsche every 3 years for the rest of your life.
Choice #1 gives immediate gratification.
while choice number 2 or 3 delay the consumption, there by maximizing the total consumption.
Good things come to those who wait
A disturbing fact in North American culture,
as soon as a kid gets his first job he moves out of the parents house.
when the kid makes more money, possibly cause he is done school or university, he buys a car.
he makes a little more money, he buys a house, or rents a better place, he is no longer a student after all.
the kid gets married, now there are 2 incomes and the 2 can share the house and possibly share one car, and maybe even start paying off student debt? that's great until the babies start coming.
In this sad yet typical story there is no delayed consumption. Any income made is spent right away. And so you are doomed to work for the rest of your life.
I personally think the single most important financially wise decision a young person can make is to live in the parents house for as long as possible at least until mid 20's in order to build some capital.
The second most important decision is to delay buying a car for as long as possible. take the bus / subway. and build your capital.
If I were to give any advice to a young person it would be build capital first.
Tuesday, July 13, 2010
Thursday, July 8, 2010
Changing Jobs
I recently accepted a new position at another technology start up company. I gave my current employer my resignation effective July 31st.
I was able to negotiate my compensation from a very strong position.
My first job was at an online advertising company. I joined this company at start up and it is now very successful, a world leader. The founders did not give any stock options, and I was young an naive enough to accept. 5 years later I was tired of making other people rich. I left to join my current position, a consumer electronics start up, a slightly different yet lucrative field.
A month ago I was contacted by a Venture Capitalist who offered my an opportunity to work at a company he was invested in. I was a perfect fit for them because of my prior experience. Something that is impossible for them to find here in Toronto.
I knew I had huge negotiating leverage,
1. They came to me.
2. I had a unique skill that is difficult for them to find in Toronto.
3. They were very much in need for someone with these skills and experience.
4. I already had a great Job.
5. I don't even need a Job.
So I agreed to meet them for lunch. I had lunch with 2 of the VC's and the CEO of the company, I made a good impression.
I got another call and we scheduled a meeting at their offices, where I met more of the company. Then they offered me something. which I turned down regardless of what it was.
The next day I was called again with a better offer, which again I turned down.
The day after that, I was called again with a better offer which I finally accepted.
I have an older cousin who is currently a partner in a private equity firm in Dubai. He works hard.
We had a conversation 5 years ago when I told him I am planning to retire by 30.
His response was, I used to think the same way, but when you get to 30 you realize that you are earning more money than you ever thought possible. and so you don't retire.
I was able to negotiate my compensation from a very strong position.
My first job was at an online advertising company. I joined this company at start up and it is now very successful, a world leader. The founders did not give any stock options, and I was young an naive enough to accept. 5 years later I was tired of making other people rich. I left to join my current position, a consumer electronics start up, a slightly different yet lucrative field.
A month ago I was contacted by a Venture Capitalist who offered my an opportunity to work at a company he was invested in. I was a perfect fit for them because of my prior experience. Something that is impossible for them to find here in Toronto.
I knew I had huge negotiating leverage,
1. They came to me.
2. I had a unique skill that is difficult for them to find in Toronto.
3. They were very much in need for someone with these skills and experience.
4. I already had a great Job.
5. I don't even need a Job.
So I agreed to meet them for lunch. I had lunch with 2 of the VC's and the CEO of the company, I made a good impression.
I got another call and we scheduled a meeting at their offices, where I met more of the company. Then they offered me something. which I turned down regardless of what it was.
The next day I was called again with a better offer, which again I turned down.
The day after that, I was called again with a better offer which I finally accepted.
I have an older cousin who is currently a partner in a private equity firm in Dubai. He works hard.
We had a conversation 5 years ago when I told him I am planning to retire by 30.
His response was, I used to think the same way, but when you get to 30 you realize that you are earning more money than you ever thought possible. and so you don't retire.
Wednesday, July 7, 2010
Book smarts does not equal buisness smarts
I studied Engineering at school and every now and then I meet some of my nerdier class mates for a game of Settlers of Cattan. Last time we met I saw one of the nerds and I found out that he was working at a company that does not compete with my employer doing something my employer is willing to pay a lot for.
My current employer is a start up rich with venture capital and is stock option grant happy. It is also offering a $3,000 referral bonus to encourage employees to refer people they know. When I brought up the prospect of offering him a job with us, my college refused to even listen to my offer. so I assumed that he must be doing even better than I was at his current job.
After we were done our little game, my college was going to put on his back pack and take the bus to the subway to go home to his parents house. At the time my car was in for service and BMW had given my a 128i loaner car. When i offered him a ride in the car the reaction I got was Wow you can afford a car on your salary. that's amazing I wish I could make enough for a car.
Now we are professional engineers turning 30, and he is still living like a student. This guys is one of the smartest people I know. I used to ask him for help when I didn't understand something at engineering school.
However when it comes to business, he is an Idiot.
My current employer is a start up rich with venture capital and is stock option grant happy. It is also offering a $3,000 referral bonus to encourage employees to refer people they know. When I brought up the prospect of offering him a job with us, my college refused to even listen to my offer. so I assumed that he must be doing even better than I was at his current job.
After we were done our little game, my college was going to put on his back pack and take the bus to the subway to go home to his parents house. At the time my car was in for service and BMW had given my a 128i loaner car. When i offered him a ride in the car the reaction I got was Wow you can afford a car on your salary. that's amazing I wish I could make enough for a car.
Now we are professional engineers turning 30, and he is still living like a student. This guys is one of the smartest people I know. I used to ask him for help when I didn't understand something at engineering school.
However when it comes to business, he is an Idiot.
Tuesday, July 6, 2010
July Dividend Income Report
This Time around I was on Vacation in Los Angeles. I spent the Canada day long weekend + 1 day off work. unlike my trip to Jordan this time I did spend a lot :( but it was worth it.
They had a store called Nordstrom Rack it is similar to Winners in the US except it is bigger and the discounts are better.
Dividend Lover NR Portfolio: $$10,866.00 $3,922.00 increase
Dividend Lover TSFA Portfolio: $1,868.60 $18.30 increase
Dividend Lover RRSP Portfolio: $10,106.90 $296.16 increase
Total Yearly Dividend Income: $22,841.50 $4,236.69 increase
The large increase in the Non Registered portfolio was due increasing the leverage in the account, as I wanted to take advantage of the opportunities the market is currently presenting.
The increase in the TSFA portfolio was due to 1 month of DRIP.
The increase in the RRSP income came from a 2,000$ contribution, since I got my NOA I was able to put in the correct amout in there, instead of the conservative estimate I put in on Jan 1st. with this 2,000 I've maxed this years contribution at $22,000
This brings us to 22.84% of the 100,000 yearly dividend target. a respectable increase from the last report
They had a store called Nordstrom Rack it is similar to Winners in the US except it is bigger and the discounts are better.
Dividend Lover NR Portfolio: $$10,866.00 $3,922.00 increase
Dividend Lover TSFA Portfolio: $1,868.60 $18.30 increase
Dividend Lover RRSP Portfolio: $10,106.90 $296.16 increase
Total Yearly Dividend Income: $22,841.50 $4,236.69 increase
The large increase in the Non Registered portfolio was due increasing the leverage in the account, as I wanted to take advantage of the opportunities the market is currently presenting.
The increase in the TSFA portfolio was due to 1 month of DRIP.
The increase in the RRSP income came from a 2,000$ contribution, since I got my NOA I was able to put in the correct amout in there, instead of the conservative estimate I put in on Jan 1st. with this 2,000 I've maxed this years contribution at $22,000
This brings us to 22.84% of the 100,000 yearly dividend target. a respectable increase from the last report
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