Hello everyone.

Today we touch on how being a high earner doesn’t always translate to financial freedom. Also BC published their maximum allowable rent increase at 2.2%.

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Eddie

I had a phone call with the President of a multinational business this week.

He told me his Director of Finance makes $250,000 per year, and he knows that the wife also pulls in $200,000, so they earn $450,000 combined income.

And their finances are in absolute shambles.

I tell this to my wife, Mj, she couldn’t believe it.

Like, how can a household earn four hundred and fifty thousand dollars per year and have no money?

Unfortunately it’s alot more common that most think; in my line of work, I’ve seen it far too often.

It’s not necessarily the folks earning $25/hour that struggle with finances. In fact there are many that become disciplined early on and end up retiring wealthy on honest salaries.

Financial mismanagement goes all the way up the corporate ladder. And we see it in the professional sports world all the time, too.

Essentially, folks unwittingly or greedily make bad financial judments, one after another, after another.

Mj asked, but this guy is a Director of Finance, how can he not understand money?

Well, when I really think about it, throughout all the business degree, CFA, equity research, and portfolio management/high net worth advice, it hardly if ever turns and focuses on the individual. There was no real “hey eddie, this is how YOU do it..”

You can learn endless things about economics, diversification, portfolio theory, derivatives, accounting, stocks and sectors, etc…almost none of it says: here’s how YOU can make good judgements about your money flows.

It’s simple in theory: earn more, spend less, invest the difference in low cost ETFs (for example), do this for a long time, get wealthy. In other words, be a lion, don’t be a gazelle.

Back to the question - how does one spend $450,000 in Canada? Here’s a scenario for a family of four:

Negative $1,500 cash flow on $450,000 household income.

This list is non exaustive too. There are always random shit we forget. Birthday’s, anniversaries, christmas, nanny, schooling, didn’t even mention the clothing bill!

But how is that negative cash flow even possible? How can one spend more than they earn? Credit Cards!

Paying for bills today using credit, not cash, this keeps the train humming along. And meanwhile you start every month underwater counting down the days until the next paycheque to try and and catch up.

But month after month, year after year, you never do. Every day, all day, corporations (lions) will try and convince the gazelles to keep stretching for that bigger house, or that fancier car, or that Euro trip because you had some points built up on your credit card.

That is a fictitional scenario above, but let me tell you again, it’s not uncommon.

And it’s really sad, because waking up with no money and a credit card bill casts a shadow over the sunrise…you stop performing at work, you stop performing at home.

Sorry for the downtrodden tone of this Journal, that’s just how it came out today…

The good thing is, there are ways to fix this…to be continued in a future issue.

There is so much political intervention in the province of BC’s housing economy that it’s causing a lot of pain the in the real estate world.

A good chart below from Steve Saretsky shows the cumulative increase in major real estate costs since 2020, absolutely dwarfing the maximium allowable rent increase.

This not only hurts residential real estate business owners, but it has knock on effects too.

Shrink profit margins far enough and the incentive for new home building dries up quickly. Then add on municipal permitting delays, zoning requirements, development charges, and the incredible amount of time to get a project started. Estimates have been published that say that taxes, fees, and government related costs can represent about 30% of the price of a new home.

This results in fewer projects, new housing remains expensive, and therefore the market still largely unreachable for young people.

“A lion does not turn around when a small dog barks”

—African Proverb

What is your money story? I’d love to hear, and perhaps share with the group, as these stories are the most helpful (maintaining anonymity of course).

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