So what to invest in? We think that "The Market" is our only choice. Here are some alternatives:
- Have a car loan? Pay it off - you pay your car loan with after tax income. Not having a car loan is like having this payment back tax free. What you need right now is the largest cushion between your income and your expenses. You may lose your job in the next 3 years. So a low run rate is a portfolio goal
- Insulate your home. By doing this well you can save up to 40% of your winter heating bill. The average Canadian home spends about $3,000 a year. Again this is a huge return on a tax free basis
- Add solar water heating - this has about a 30% tax free return
- Pay off your kids tuition loan! - She/he is shackled to this - Free them up if you can
- Reduce your mortgage principal - again here you get your expenses down and raise your after tax income
- Cook your food from scratch and take lunch to work - There are 200 work days a year. How much do you spend on coffee, snacks and lunch? Could be $10 - 30 a day. That is 2 Mac Airs or a vacation for 2 in a really nice resort. You can reduce your food bill for home by between 30 and 50% if you have relied mainly on pre cooked food. A minimum of $5,000 a year.
- Get rid of the second car - With depreciation - that is $9,000 a year - we rent when we have to and ride share
There is no uncertainty about this portfolio approach. Nor do you have to give up a lot - the second car might be hard for some but if you can do it - it has a huge impact on your income situation.
You don't have to rely on some stranger to do this for you. You can sleep better at night. There is nothing in the "market" that can come close to the return. And nothing better to do to get ready for the storm to come.
