For years now I’ve been meaning to golf more.
It’s not really possible to golf less than I have over the last few years. In 2018 I made it out to the course exactly zero times. 2017 was a little better; I went to the driving range once and played nine holes. I don’t think I played in 2016 and I maybe went out twice in 2015. Even from 2005 to 2015 I went out 2-3 times a year. I was hardly Tiger Woodsing the place up.
I used to basically live on the golf course. In high school, when I wasn’t working I was golfing. I’d even get up at 6am to be on the course for 6:30 in May and June during my last two years in high school so we could squeeze in nine holes before going to school. We’d be groggy all day, but it was worth it.
My grandparents also owned a golf course, so I’d be out there at least once a week. That was pretty outstanding, actually. I’d play 18 holes and get my grandma to cook me a nice meal. I’d spend time with my grandparents and I never paid a nickel for any of it. Cheap teenage Nelson was then able to direct his cash to more profitable pursuits.
Perhaps biased by those memories, about once a year I consider getting a golf membership again. Alas, the days of free golf are long gone. My local course charges between $2,000 and $2,500 annually, depending on the year and the number of perks you sign up for. That is a lot of money for entertainment that only realistically runs from May to September.
At that point it becomes pretty easy to talk myself out of it. $2,500 is a lot of money. For that much money I could get CFL season tickets and afford to stay in a hotel every time I go. I could pay for my annual gym membership and an annual swimming pool pass. Or I could buy two $20 books every week and still have snack money left over.
So I usually forget the idea before I start. I just can’t justify the expense. There are simply far cheaper ways to entertain yourself.
But then I start to think about it another way. If I write just one $50 article a week for a year, that’s enough to cover my gym membership. Working just three hours per week at my part-time grocery store job accomplishes the same thing. So I attempt to justify this additional expense by creating the income to cover it.
Is this a smart thing to do, or am I looking at things all wrong?
Essentially, I’m trying to have my cake and eat it too, at least from a financial perspective. If I work a little extra I can have what I want while keeping my savings rate relatively constant.
I think such an arrangement can also force you to appreciate the sacrifice, too. Every time you’re working those extra hours you’ll think about how they’re paying for something you enjoy.
And as long as your hobby doesn’t cost too much and you’re stuck working 80 hours a week to pay for it, you should have plenty of time for both. I could easily find the time to work one additional eight hour shift every three weeks to pay for a golfing habit.
Ultimately, this is a bit of a slippery slope. Why exactly do I need to take on extra work to do something I enjoy? Why can’t I just do it and then maybe cut back on travel or something else I spend money on?
Also golf is a sport that comes with more expenses than just paying for green fees. I wouldn’t be able to resist tasty golf course food. The course is about a 15 minute drive from my house and gas ain’t free. And are you even a real golfer without fancy new clubs and sleeves full of whatever the happening new ball is? You’ll get laughed off the green if you use Top Flite.
(I just googled Top Flite and all the results are model airplanes. It shows how long I’ve been away from golf)
And do I really want to golf that badly anyway, or is it the nostalgia talking? If I wanted to play, I would have found a way. Taking on a part-time job to afford some hobby creates two obligations, making it more likely I’ll just throw up my hands and abandon the whole exercise.
Should you do it?
There are basically a million hobbies that are free or damn close to it. There are a lot cheaper ways to go outside than doing it on a golf course.
But what about hobbies that you’ve been doing forever? Say you really like golf and you’d like to find a way to pay for it. Should you take on additional work to do so?
Maybe a hybrid approach is best. You’ll work harder during the winter to save a little more while you’re not golfing. Or you’ll accept an overtime shift at work once a month. This might help you pay for some of your hobby, but not all of it.
Ultimately, you’ve got to reward yourself or you’ll end up having a miserable life living in your basement. I say as long as you’re still reaching your financial goals, feel free to spend money on whatever hobby you desire. Except genealogy. This shit is dumb, yo.
These seem to be relatively popular, assuming I have any readers left. My mom is still here, right?
It turns out even she’s too embarassed to admit she reads this crap.
Alright, so here’s the deal. I’m doing an AMA over at the ol’ dividend investing website. So go check it out if you’d like, and please ask a question or two. I will cry if you won’t. WHATEVER I’M NOT AFRAID TO ADMIT IT.
Let me start off with a story a local farmer told me. I think you kids will like this one.
Jan has always been an enterprising farmer, anxious to do whatever he could to improve the yield on his land. Each winter he would read up on some of the latest farming trends, eventually investing his time and capital into the more promising ideas. He even went as far as planting an obscure crop one year after a big crop failure in Asia sent prices much higher.
(Don’t ask me what crop it was. I just racked my brain for five minutes and can’t remember)
One year, in the late 1990s, he stumbled upon his best idea yet. The premium paid for organic products was massive when compared to the regular stuff. We’re talking anywhere from 25-75% more for the same ol’ wheat. He investigated the steps it would take to become a certified organic grower. They weren’t easy. He was forced to leave land fallow for two growing seasons and do various things to remove any lingering pesticides. He could no longer use conventional fertilizer. Special machinery was needed. And so on.
The list was long, but he did it. It was all worth it during year three when his bumper crop was worth more than ever. Jan also figures his land is worth 20-30% more than conventional land, since he’s regularly getting that much more for his crops.
One day, while standing on his fancy organic field, Jan realized something. His neighbor was spraying pesticides on his crop. It wasn’t a particularly windy day, yet it sure did look like some of the liquid was ending up on his land. After waiting a while for the neighbor to finish up, he went over and inspected the edge of his property more closely.
Sure enough, it was damp. Some of the pesticide had made its way onto Jan’s organic field. He quickly realized this was likely happening every year. After all, the only thing separating the two was about 15 feet worth of road.
Jan did the right thing and reported the findings to the organic council or whoever it is that certifies land as organic. They promptly took his classification away and refused to give it back.
Just kidding. He did no such thing. He shut his mouth and went back to farming. He swears yields from that part of his land are consistently higher than the rest.
How this relates to your personal finances
I realize this is only loosely related, but screw it. What am I supposed to do, not tell that organic farming story?
Let’s talk a little today about biases, and how they might be making you poorer. But first, another story!
I like to refer to one of my buddies as a walking bias factory. He constantly comes up with poor ways to justify things. The things he cares about are uber important, and he has strongly-held opinions about them without much independent thought behind them. When faced with evidence that one of his pet opinions might be wrong, he flatly ignores it. You can see the pain in his face if you push just a little bit.
Naturally, this delights me, and I take the opportunity to troll him whenever possible. Just a bit, though. I’m not an animal.
I suspect many of you are doing the same thing when it comes to your finances. How many times have you heard the following?
- Never pick individual stocks. Only ETFs will make you rich
- Buy the most expensive item. It ultimately ends up being the frugal choice
- All mutual funds are trash
- Only a maroon goes without life/disability/travel insurance
- Retire at 65? Why? 40 is the ideal retirement age.
And so on. There are a million of these things.
We blindly accept a lot of these as facts because they’re easy to believe in. Just look at the S&P 500 performance over the last decade. And all of the people who are screwed because they didn’t get disability insurance. Retiring at the conventional age may have worked for Baby Boomers, but there’s no way in hell we can expect a millennial to wait that long.
But how many of these are really true? If all mutual funds were trash, would this fund exist:
(I cut off the bottom axis. That growth was since inception in 2009. Annual returns have been 17.2% annually.)
That’s the Pender Small-Cap Opportunities Fund, which invests in small-cap Canadian companies. It has absolutely demolished the TSX Composite since inception. You can’t invest in it, though. They recently closed it to new investors despite only having less than $200 million in total assets.
I can bust a lot of the other myths I put up earlier, but I won’t bother. Just check my archives; they’re full of posts saying why the average rule of thumb is bullshit — at least some of the time.
Get to the point, Nelly
I am. Geez, guys. Whoever writes the subheadings here is kind of a jerk.
We blindly believe the organic bread at the store is made with 100% organic wheat. My friend the farmer would urge y’all to not be so naive.
We blindly believe all mutual funds are trash, ignoring the funds that absolutely kill it over a long-term basis. These funds don’t confirm our already-held beliefs, so we ignore them.
The overall point is this. You likely haven’t done the research on many of the things that strongly influence your life. You just heard something was true and you chose to believe it because that fact sounded reasonable at the time.
I constantly seek out opinions that differ from mine. You should see some of the people I follow on Twitter. I get mad every time they pollute my feed with opinions that are clearly 14 different kinds of wrong. I mean hell, I follow people who invest in gold and crypto currency. I follow feminists who somehow believe 2018 isn’t a terrific time to be a woman. I follow early retirees and debt bloggers and so many more people I really don’t see eye-to-eye with. I’d say a full 25% of my feed is this way.
Why do I put myself through this? Because without these differing opinions constantly challenging me, I’m no better than my walking bias factory buddy, just repeating the same maxims I heard some smart guy say five years ago and talking my own book.
Think critically and don’t believe everything you read. Loosely hold new opinions and constantly challenge existing ones. Change your mind on things that are important. These are the things that will take you to the next level.
It’s taken me a little while to realize this, but hey. Apparently getting things in a reasonable amount of time is not my strong suit. Hell, it took me 18 years to figure out long division.
The key to happiness is to design the life you want to live from scratch. Some people like the routine of going to work each day, but most of us don’t. We want to be able to randomly take a Thursday and go to an interesting event two cities over without having to worry about the consequences at the office on Friday.
I’ve recently taken steps to do this myself. Gone are the days where I’m going into my grocery store job five days a week. I’m down to 1-2 days a week and couldn’t be happier. I get the interaction with the guys without falling into the trap of workplace politics. I feel more like a casual observer than someone who actually cares about what’s going on.
I should have done this a year and a half ago rather than quitting my writing job.
Speaking of my writing job, I’m back at it, baby. You can read my stuff here if you’re so inclined. I’m also available to write on your blog. Because, hey, who doesn’t need a bunch of dick jokes and incomplete sentences masquerading as actual serious points about finance.
Just think about it is what I’m saying.
Anyway, let’s get to the point of this article — you don’t need to wait for financial independence to make the life of your dreams.
Unhappy? Then change things, stupid!
Back when I had a more conventional job, I used to fall into the same trap whenever things weren’t going well. I’d vow to quit my lousy job and travel around North America, seeing a ball game at all 30 MLB parks. Only then would I be happy.
This was not healthy, of course. It was nothing more than escapism. I didn’t really want to travel long-term. I just wanted to be away from my crummy situation.
After doing this a few times I began to realize something. If I’m fantasizing about being away from a particular thing on a regular basis, then it’s probably a good idea to quit that activity. It doesn’t matter if that thing is a job, or a hobby, or some other form of commitment.
Of course, things aren’t always that simple. You can’t quit things willy-nilly. Most people can’t live without a job, and many have become accustomed to having a certain lifestyle. In other words, taking a pay cut is out of the question. Which means they’re stuck between the proverbial rock and a hard place. The only way they can quit their lousy job is to replace it with one that offers a similar level of pay. That wage comes with similar responsibilities and duties, which negates the whole point of quitting the lousy job in the first place.
So they turn to financial independence. That’ll solve all their problems.
Remember, you don’t need financial independence to be happy
Let me tell you guys about a buddy of mine who lives a pretty interesting life.
He discovered he doesn’t need much to make him happy. He lives in a small house in an extra quiet part of a small town. His leisure time is spent watching movies, reading books, and going online. He doesn’t own much stuff because there simply isn’t room in his small house for it. Besides, things don’t really make him happy anyway. Much of his disposable income is spent going on random road trips.
These decisions were a result of a long thought process about his life and what made him happy. About 15 years ago he was on the fast track to an upper management post at a certain Canadian retailer I used to own shares in. Once he hit middle management it didn’t take him long to conclude being in charge of people made him miserable.
He realized he would be much happier if he wasn’t in management, trying to motivate retail employees who want nothing more than to slack off all day. So he made a choice. He vowed to live a life so simple that it could be sustained on a entry-level salary. He then quit his stressful middle management job in favor of one that barely makes more than minimum wage. It’s been 15 years now and he doesn’t regret his choice for a second.
Don’t Wait. Act
The point is you don’t necessarily need financial independence to live the life of your dreams. You need to define what your ideal life is first before striving to become so rich you no longer need to work.
Say you want to become a full-time writer, or blogger, or whatever. Do you really need to hit a $1 million net worth to do that? Hardly. The world is filled with entrepreneurs who quit their jobs to start something new. Hell, some people might argue having no safety net will make someone more likely to succeed. Failure just isn’t an option.
For many people, financial independence ultimately becomes something they need before embarking on the life of their dreams. I’d argue waiting to design your best life is silly. Do it today, and do it with gusto. Don’t wait for your net worth to hit that magic number, just go for it.
But at the same time, I get it. The kind of person who waits until they hit a seven-figure net worth to make significant life changes is obviously a little risk adverse. Quitting their job and moving to a tiny house in the middle of nowhere is out of the question. So they wait until they hit their number and then make the change.
This is perfectly okay, of course. Just remember, you don’t need to wait that long. If it’s your dream to write or open a small store, take steps to do that today. Not tomorrow, not 10 years from now when you’re moderately wealthy. Do it today. Start designing your ideal life now.
A lot of Canadians own mutual funds because of their ease, comfort with a financial advisor, or a litany of other reasons. Us here at FinancialUproar.com (me and 27 hobos I picked up at the landfill) aren’t here to judge. Sure, we’d like you to invest in low-fee ETFs, but those aren’t for everybody. If you’re going to invest in a fund, put your money in the best ones. Is the TD Monthly Income Fund one of them? Let’s find out.
- Fund name: TD Monthly Income Fund
- Assets under management: $7.8 billion
- Minimum initial/subsequent investment: $100/$100
- Recent price: $21.10/unit
- MER: 1.48%
- Other fees: 2% fee to withdraw within the first 7 days/2% switch fee (this fee may be waived, probably if you put your money into another TD Fund
Note the fund has a 60/40 equity to fixed income split, which is a little more aggressive than the standard 50/50 split you’ll see from most balanced funds. Most of the top holdings are large Canadian banks and other dividend paying blue chips.
Note the fund’s top holdings are very similar to the top holdings of a TSX 60 ETF. Thus, it wouldn’t be particularly hard for investors to just hold that ETF to get equivalent exposure to the Canadian equity market.
Note that the 60% equity weighting includes some preferred shares, which are more like bonds than stocks.
I’m confident a portfolio consisting of a 50% TSX 60 ETF, 40% Canadian bond ETF, and 10% Canadian preferred ETF would get pretty close to the performance of this mutual fund while not charging nearly as much in fees.
The 2% early withdrawal fee is nothing to be worried about. That’s in place to protect TD just in case you change your mind. If you pull your money from an investment within a week you deserve to pay for the privilege, tbh. The 2% switch fee is more concerning. The company says they have the right to waive it, but I’m willing to bet they’re not going to if you pull your money out of TD’s asset management pocket.
The fund has a 1.48% management expense ratio, which is pretty reasonable in the mutual fund world. The average fee is somewhere in the 2% range.
Here’s what the fund has returned over the last 1,3,5, and 10 years, versus all the other balanced funds out there. Note all info comes from Morningstar, which is super helpful when comparing funds.
These are actually pretty solid results. I’m impressed. This is enough to get the fund a 4-star ranking over at Morningstar.
The Globe and Mail offers different return numbers. I *think* they include reinvested distributions, but to be honest I’m not 100% sure.
Finally, we have the return numbers on TD’s fund facts page. These only go up to October 31st, so maybe that’s the reason why they’re different still? I dunno.
One thing that makes it tricky for investors is many of these big funds have various classes of shares that offer slightly different things. It’s hard to compare apples to apples. This *might* be what’s happening here, but returns shouldn’t differ that much. There’s also no explanation why return numbers from Morningstar and the Globe and Mail should be different, since I made sure to compare the exact same class of the same fund.
The overall point is the TD fund has done pretty well compared to peers. If you’re going to own a balanced fund, you could do a lot worse than this one.
Despite the thing being called the TD Monthly Income Fund, it really doesn’t pay out that much. Morningstar has the annual yield below 2%.
The TD Monthly Income Fund is a pretty solid balanced fund. It has historically beaten its benchmarks and does so while offering a fee that’s a full 25% less than the average Canadian mutual fund. You could do a lot worse than owning this one.
Still, there are some issues. The income coming from the investment (at least what I could find) is hardly impressive. That switch fee isn’t in an individual investor’s best interest either (although I’d bet it isn’t charged when you’re buying funds yourself using a discount broker).