A word on savings…

(This was originally published in the November 2016 version of The Dividend Growth Newsletter. It is available here.)

Canada’s Inflation Rate was 1% in January of ’15 and rose as high as 2% in January of ’16. In September, it was 1.3% and will likely rise a bit more towards the end of the year.

If your money was in a Savings account earning 0.80% or less, you’re actually not saving.

If your money was in a High Interest Savings Account earning 1.5% and you are paying income tax on the interest, you are still not actually saving.

If your money is “laddered” in five GICs with ⅕ coming due each year over the next 5 years, and your average interest rate is 1.80% and your marginal tax rate is 27.5% or less, you are breaking even.

If your money was invested in the WORST performing dividend mutual fund over the past 5 years and earned an average of 1.32% per year, and your only income was $50,000 in eligible dividends, you paid no income tax and broke even against inflation.

Could you imagine how much money you could SAVE if your portfolio performed better than the average dividend mutual fund?

What does retirement mean?

(This was originally published in the August 2016 version of The Dividend Growth Newsletter. It is available here.)

What if we were to define retired persons as people who no longer need to keep saving money in order to live the life they want? Retiring early means amassing savings derived from both active income and passive income – as quickly as possible.

The secret to a faster savings rate is to increase passive income starting today. Ongoing increasing passive income offers additional peace of mind and a buffer in case retirees outlive their retirement plans.

Investing in Dividend Aristocrats offers a diversified, lower-risk method to consistently increase passive income.

Case in point: 10 years ago, Coca-Cola’s quarterly dividend was $0.16 with an annualized dividend yield of 2.91%. Today, that dividend is now $0.35 with an annualized yield of 3.22%. It doesn’t seem like much, but at $21.92 per share on Aug. 4, 2006, the dividend yield based on cost today is now 6.38% and passive income has more than doubled over the past decade!