2024: The Get Rich, SLOW Scheme – A Plan That Will 100% Work!

As you get into this article you will find time-sensitive and timeless phases to improving your financial well-being as well as building financial peace of mind, based on my experiences and reflections over the years. These days I am in a financially comfortable position, however, by no means am I where I want to be as far as financial success goes, it is up to each of us to determine what success means for us as everyone’s goals and life outlook will be different and defined differently. That being said, I wish I had followed the financial phases we will be discussing all those years ago when starting my career out of school in my 20s. It would have truly put me further ahead from a financial perspective and given me financial peace of mind much earlier on in my journey. In my opinion, we all get caught up in the get-rich-quick schemes from friends telling us about the latest and greatest stock out there, business opportunities to just wanting to beat the rat race faster but not enough people try educating the younger generations or adults for that matter about slowly and steadily winning the financial turtle race. As I get closer to my 40s, I can tell you now it doesn’t get easier, you still get sucked into ‘the next best stock’ that is meant to get you to ‘financial freedom’ sooner but don’t fall for it. You can get to financial freedom and a good head space by staying committed and consistent with your financial plan. Get Rich … Slowly!

5 Time Sensitive Phases:

Phase 1: Pay Off Debt (excluding mortgage debt)

Start off by paying down the highest interest debt accounts first, also referred to as a ‘debt avalanche’. It doesn’t matter if it’s a credit card which generally runs around 20% on balances, lines of credit which usually run around 10-15% depending on if it’s collateralized like HELOC (Home Equity Line Of Credit) or not, and so forth. Even if you have another type of debt with higher interest rates than your credit card, make sure you pay the minimum payment to not take a credit hit! The reason we suggest paying the highest-interest account first is because for every dollar you pay down in high-interest debt, you will save a tiny bit more which you can now contribute to paying down even more causing your debt to come down faster and pick up momentum till your debt is free. In the event you have an interest-only payment debt product like a student loan and/or a HELOC don’t think of these as a favorable situation for yourself, these types of products while yes they keep your payments to a minimum don’t help you pay down your principal so you’re never getting ahead instead just paying the cost of interest on an ongoing basis, and delaying the acceleration of debt paydown. On a side note you may come across another strategy called ‘debt snowball’ which just means instead of handling the highest interest rate debts first to tackle the smallest debt accounts first then work your way up to the largest one – and the thinking behind it from a physiological perspective is for one to see the smallest debt accounts getting paid off and empowering and encouraging you to keep working up your debt ladder, however in my opinion the ‘debt avalanche’ works better as you save more in interest as you tackle the highest interest debts first.

Tip: Generally speaking you want to pay down a mortgage last as mortgage interest rates have been below 5% in the last 10 years. Even as of now interest rates have peaked and have come back down to around 5% on a 5-year fixed rate. Instead of paying down your mortgage, you want to invest as generally markets have yielded around 10% for the past few decades which means you’d profit more vs paying down your mortgage debt. In the future, if our interest rates ever got to 8% – 10%+ then perhaps it’d make more sense to also focus on paying down a mortgage as the markets would have a harder time beating that. Then again if our Canadian markets ever got to 8% – 10% mortgage rates I think we’d have bigger financial problems in the economy!

Phase 2: Build a 6-Month Emergency Fund

Some financial gurus out there suggest saving a minimum of 3 months of expenses for your emergency fund but let’s be real here, 6 months gives you a bigger cushion and can reduce your stress further, also what if you get laid off plus have unexpected emergency expenses to deal with. Don’t leave it to chance, I can tell you from my own experience I have never mentally felt better having that baseline of six months put aside, it truly creates financial well being from a mental health perspective. Now even though this is the shortest section, don’t mistake this as being the least important. In fact, I’d argue this is the most important of all the phases. See how to structure an emergency fund best here.

Phase 3: Automate 85% Of Your Investments, Invest In ‘Low Cost’ ETFs or Index Funds!

My favorite app to use is the Wealthsimple app (disclaimer: I am NOT getting compensated to use Wealthsimple, I use it and like it). The reason I like the app is i) you can use the app to automate deposits into the trading account from your chequing account at your bank on a weekly, bi-weekly, or monthly basis and similarly the second reason I like this app is ii) you can automate or setup recurring buys of an ETF/Index fund or even stocks on a daily, weekly, bi-weekly or monthly basis. The set it and forget about it is the golden way to go about it. You pay yourself first, then it gets invested on a recurring basis allowing you not to take action or have to think about it, easy! I invest 65% into VFV.TO (Vanguard S&P 500 Index ETF) and 20% into HXQ.TO (Horizons NASDAQ-100 Index ETF).

When it comes to the type of accounts to put money into:

1. FHSA: Depending on your home ownership situation and if you meet the qualifiers, open this account first. You will get a $8,000 contribution room per year, for a lifetime maximum of $40,000, the contributions will be tax deductible and you will be able to withdraw it without penalty to buy your first home. You can keep the account open for 15 years or till you turn 71 years of age and the funds will keep growing tax-free until you’re ready to make a withdrawal to purchase your primary residence or if you don’t it will just roll into an RRSP account, so a win-win situation for your future.
2. TFSA: This program started in 2009 and if you’re old enough you’d have a max contribution room up to $95,000 as of 2024 as the new contribution limit went up to $7,000 from 2023 to 2024. These funds grow tax-free forever! The downside is you’re contributing after-tax dollars but years from now when you withdraw it won’t be taxed, at all! That being said, if you hold US equities that pay dividends etc you will be penalized with withholding taxes.
3. RRSP: I would hold off on RRSP contribution to your later years and take advantage of the TFSA first for a few reasons, i) RRSP contribution limits depend on your Notice Of Assessment based on your prior year’s employment income ii) you tend to make more money as your career develops which will then allow you to keep your taxable earnings lower and save more taxes than earlier in your career iii) you could get creative and take out your tax-free grown TFSA funds and deposit it into your RRSP account to get a bigger tax break, then wait till the following calendar year for the TFSA account contribution limit to reset then take the tax refund from your RRSP contribution to newly fund a portion into the reset TFSA account.
   • Side note, the only other time you could or would want to contribute to an RRSP first vs TFSA is if you’re thinking of buying a principal residence earlier on and want to apply the first-time home buyers plan (HBP) you withdraw funds from your RRSP tax free up to a max of $35K and use it towards the home purchase (incremental to FHSA), however, keep in mind there is a string attached which is that every year for the following 15 years you will be required to pay back a portion of it by contributing it back to the RRSP or it will be added as a taxable income. For instance, let’s say you withdraw $15K from your RRSP to fund your home purchase, this means you will have to deposit $1K per year to your RRSP account for the next 15 years or have that $1K added onto your income line when filing your taxes and end up paying taxes on it (this does not happen with your FHSA usage).
4. Cash Trading Accounts: Once you have maxed out your FHSA, TFSA, and your RRSP then start contributing towards and investing using a cash trading account. However keep in mind all the dividends, interest, and capital gains from buys and sells will get taxed every year and if you want to reduce how much you pay then opening the other accounts first is prudent.

There is a silver lining when it comes to the type of account to invest in, if you plan on investing in speculative or riskier stocks like we will discuss in phase 4, a Cash Trading Account might work better for you (knock on wood) however if you experience a loss in a Cash Trading Account you can use the loss to offset prior or future gains, however, if you produce a loss inside a FHSA, TFSA, or RRSP account then that room is wiped and doesn’t get reset, keep this in mind.

Phase 4: I Can Beat The Market Fund – 15% Allocation

Let’s be real, you and I both know there’s no way you’re not going to try and beat the market by picking individual stocks or by making alternative investment decisions like investing in Bitcoin or Ethereum. I say that’s fine, however, let’s limit our risk exposure to a 15% maximum and use these funds to buy as many or as few individual picks as you’d like. This way your 85% is guaranteed over your lifetime to go up regardless of how this 15% does, fingers are crossed that it accelerates your growth but if not it won’t make too big of a dent to your overall financial well-being. To give you an idea, I own one Canadian junior lithium mining stock (very speculative – found lithium deposits but not generating sales), one Canadian telehealth stock (speculative – already generating sales and profits), and Bitcoin (as a hedge to all the money printing the US and Canadian Governments have done), these are my fun picks I decided to go with after doing my own due diligence to ensure I was comfortable making these risky bets, and yes I’m referring to these as bets as it is gambling with an educated guess backing it. At the end of the day, this 15% can go to zero dollars and you need to be comfortable with that. If you’re not comfortable, reduce this allocation and increase phase 3’s allocation from 85%.

Did you know, that from 1970 till 2016 out of 355 mutual fund managers only 10 were able to beat the market, that’s only 2.8%. 281 went out of business, that’s 79% ouch! And the rest 18% were market equivalent or losers, now if professional “full-time” money managers don’t do so well, what are the chances you will outperform over a prolonged period? This is why it is important to limit your stock picks to a minimum and exposure to a limited percentage of your portfolio.

Tip: Read ‘The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns’ by John C. Bogle, the founder and CEO of The Vanguard Group. Once you read this book you will quickly realize how bad your odds get with picking individual stocks over the long run, even professional money managers get it wrong most times as they can’t pick correctly consistently over the years.

YouTubeVideo: HOA Vanguard John Bogle

CEO of Vanguard, John C. Bogle on Investing: Summary, Stick To Low Cost Index Funds or ETFs.

Phase 5: Time For Real Estate Investing

Finally, now you can get into home ownership or real estate investing if you can save up 5% to 20% down payment needed depending on the use case. If the home purchased is a primary residence you can get away with a lower down payment, but you’d be making a higher monthly payment and have to buy CMHC insurance or for a rental property, 20% is a must. In either case, try doing this without touching the investments or cash from the earlier phases, let your TFSA account grow uninterrupted. If you must access funds go with phase 4, your cash account but under no circumstances touch phase 3, let that automatically keep growing and building for the long term.

Now here are my thoughts on real estate investing. If you are younger my advice would be to try doing everything possible to buy at the very least a duplex (2 units), so you can live in one and rent out the other one. This will ensure you turn part of the property into a cash-flow machine and open up some tax benefits. This will also allow you to accelerate your net worth. Disclaimer, this is not financial advice please review all ideas with your accountant and banker to ensure this makes sense for your financial situation.

5 Timeless Engagements:

Timeless 1: Employer Match and Alternate ‘Free Money’ Programs

Employer Match: If your employer does offer an employer-matched contribution program (usually for retirement plans) do yourself a favour and max it out to take advantage of the free contributions they will make, this is free money, however, just understand what the maximum your employer is willing to match and only contribute to those levels. Occasionally you will get the likes of Sun Life, Great West Life, or whoever manages your company’s funds reaching out asking if you’d like to start a retirement investment account with them to which just say ‘no, thank you’, as mentioned in phase 3. There is a high probability that, if you go with an index fund you will outperform over the long run vs their returns with all the fees they charge you to manage the account. Tip: for the invested dollars via the employer match, review the funds available and pick one with a positive history yet low MER fees, generally they will give you options to pick from, and never go with the default as they usually have higher MERs which can eat into your gains and set you back over the years.

ESPP: There are a handful of Canadian companies that offer ‘Employee Stock Purchase Plans’. If your employer offers this, take advantage of it as it is free money. Of the various companies I have been at only one offered such a plan and it was 15% off the current stock price, now this is more risky because even if you get it for a 15% discount if the company has a bad quarter or annual results it could wipe out the savings but over the longer period this will prove beneficial, especially with dollar cost averaging at play assuming you consistently buy into it and usually employers deduct a portion directly from your pay and invest into this program regularly once you have signed up.

Timeless 2: Home Ownership Types & Situations

What I’m about to say next is controversial as you will hear many conflicting thoughts between homeownership for primary use or as rentals, however, my advice is don’t buy a primary residence till you have at least $2M of income-producing assets (stocks, rental properties, alternative assets) and safety net (emergency funds) built up first. The truth is a principal residence is a forced savings account however it comes with a lot of expenses that can’t be written off and works against you like mortgage interest, maintenance fees, property taxes, upkeep, insurance, and so forth versus with rental properties you can write off a lot of those expenses against the income it produces.

Two things to keep in mind i) with either FHSA or RRSP home purchase elements is how and when you plan to use them, ii) if your partner or spouse has a primary residence and or has used her or his FHSA or RRSP home purchase elements which can then be a conflict of you using yours and iii) if you decide to rent your residence instead of buying a primary residence, are you mentally strong enough to put the difference between buying and renting into investments. For instance, I pay $2,000/month in rent (for a downtown Toronto condo) vs if I were to purchase a home valued at $500K with an interest rate of 5% (a bit lower than actual as of 11/2023) with estimated maintenance fees of $450/month, and property taxes of $200/month my monthly obligation would be $2,798/month in total so instead of buying a place I take the difference of $798/month and buy additional shares of VFV.TO and HXQ.TO. Also keep in mind the assumption is you’d have to put 20% down to avoid CMHC insurance, that’s a $100K downpayment which now gets stuck in the property versus keeping it invested. The biggest reason for wanting to buy would be the capital appreciation from a primary residence which would be 100% tax-free, however, each person needs to weigh the pros and cons of what makes best sense to them and also most importantly if you can stay disciplined to put the difference into further your investments.

In the past year, for individuals who took on a variable rate mortgage for their primary residence, it has not been beneficial to them to hold a primary residence as all that additional interest they paid could not be write-off versus in my situation with my rental property I can write off the additional interest paid against the rental income and if I am in a position where I have paid more in interest versus rental income the remaining loss would be applied to my T4 (employment income). Another advantage of renting if you work from home mainly is the access to the T2200 (tax form) provided by employers which allows you to write off a reasonable portion of the rent you pay along with hydro, internet, cell phone, and so forth which does help lower your tax liability even further.

If you must buy a primary residence, as mentioned earlier, buy a duplex so you can rent out a portion of the home while still having a primary residence. This way even though it is a primary residence it also doubles as an income-producing asset and not 100% liability but also opens up tax write-off eligibilities.

Timeless 3: Take Advantage of All Employer Perks!

Canadian organizations offer various employee perks linked to health, dental, and vision which for the most part are standard business practice, however, there are a lot of organizations out there who will give additional perks like gym membership, work equipment tied to monitors, and other accessories, company cars, cell phone and internet plan reimbursements and more. These are perks you want to take advantage of and it’s free money for you. Usually, these reset once a year and it’s a use-it or lose-it situation so you want to take advantage of these free dollars. These could be considered a taxable benefit but the monetary benefits outweigh the small tax liability that comes with it.

Timeless 4: Resume – Always Ready To Go!

I have never been in a situation where I have been laid off, fired, or quit without something else lined up. However, I have over the years come to know friends and colleagues who have ended up in these situations. I can tell you it’s heartbreaking when you hear people you have come to know struggle to find a new job, but the truth is the stress begins as soon as they cut ties with their employers for whatever reason, as they first get a rush of stress because they all of a sudden need to update their resume and cover letters and start from ground zero to start applying. My recommendation is regardless if you’re on top of the world at work or not, updating your resume every 6 months will give you peace of mind, one small change here, and one small change there will keep you ready to go with minimal updates when and if the time arises. Also, keep your LinkedIn profile updated!

On another note, if you do ever get let go, never sign anything without reviewing it with an employment lawyer first. Most organizations will offer you the bare minimum but in provinces like Ontario, you could be entitled to as much as 24 months of severance pay! Talk to an employment lawyer first.

Timeless 5: Fitness, Yes Fitness!

If you are thinking why is there a fitness section embedded into the content, don’t worry I contemplated keeping it or replacing it with something else as well. But the more I thought about it, the more I realized over the years fitness has directly and indirectly helped me manage my finances, more specifically the stress finance plays into all of our lives at various degrees. Fitness will help everyone manage their financial stresses better, even for you, trust me.

I learned this one the hard way. I must admit I have fallen for the peer pressure to grab drinks, I have fallen for wanting to please friends and significant others, and I have fallen for late-night eats. Looking back now, all of those fun moments were just that ‘moments’, people come and people go but your physical well-being, health, and attractiveness go beyond that and do wonders for your financial well-being directly and indirectly, not to mention all those ‘moments’ were expensive or added up. I’m not saying never to go out or never buy things or be cheap, I’m just saying be selective, invest in long-term relationships, invest in your mental well-being, but don’t go out every time someone asks, be selective. I can tell you now individuals who keep themselves in check come across and look more confident and this leads them to better opportunities, better decision-making abilities, and most importantly manage stress better. Sure there are other factors but aesthetically looking great goes a long way to boost one’s confidence. I will leave it at that but I hope you take this advice and stay committed and consistent to your physical and mental well-being and attractiveness as much as you stay committed and consistent to your financial well-being! It is a lot harder to stay committed and consistent to health goals, so if you can do that you will easily crush your financial goals. I realize my comment about attractiveness in this section might rub some people the wrong way, but I would rather work with someone who’s both smart and who takes care of their mental and physical health, wouldn’t you?

If you have made it this far from the bottom of my heart congratulations! I hope all the suggestions based on the experience and mistakes I made help at least one of you out there. It goes without saying when you start and thereafter you will need to live below your means to accumulate these assets, however, if you sacrifice to a level you are comfortable with will be rewarded in the long run. I do have a big ask, I did my best to illustrate and communicate all of these time-sensitive phases and timeless advice, if something you read doesn’t make sense please email me (contact form found on About HOA page) and I will revise the article to incorporate your ask or clarification so all readers find it easier to read and digest but if I don’t have to update anything fantastic, it means my communication skills are on point (LOL) and it would mean the world to me if you passed this along to a friend or family member.

HOA