From Middle Class To Millionaire

From Middle Class to Millionaire

The money guidebook for the other 99%

David Campbell Lester

Copyright © 2014 by David Campbell Lester

Smashwords Edition

All rights reserved. No part of this book protected by copyrights may be reproduced or used in any form or by any means without prior written permission from the publisher.

Every effort has been made to ensure no existing copyrighted material has been used in this book. In the event of a question as to the use of any copyrighted material, we will be pleased to make the required corrections in any future printings.

Cover designed by: Niall Kelly

Photography: Ryan Szulc

Retouching: Andrew O’Driscoll

Edited by: Catherine Leek of Green Onion Publishing

Interior designed and formatted by: Heidy Lawrance of WeMakeBooks.ca

Contents

Preface

Where Did the Middle Class Go?

PART ONE

Securing Our PENSIONS!

Chapter One: Government Pensions on Notice

Government Inaction

Some Solutions

Increase RRSP Maximums

Individual Investment in Government Pensions

Norway’s Example

Chapter Two: Become a Millionaire in Retirement

Build a Million-Dollar RRSP

How Much to Invest?

Employer Matching Contributions

What to Invest In?

TFSAs – What Are They?

TFSAs Versus RRSPs

What Should I Put in My TFSA?

TFSA Investment Example

My Kids’ RESP or My RRSP – Which to Choose?

What to Put into an RESP?

Emergency Fund

What to Put in My RRIF?

Success Story: James – Instant Retirement Fund

Appendix 1: Stocks on the XDV (iShares on the TSX)

Appendix 2: CUD – S&P US Dividend Growers Index Fund (CAD Hedged)

Part Two

Let’s Get Some PROPERTY!

Chapter Three: Home Ownership – The Middle-Class Dream

Home Prices on the Rise

Low Interest Rates – Good News

How Much Can You Really Afford?

How to Make an Easy 3% – Pay Your Mortgage

Turning Your Home into Income

Mandatory: Pay Off Mortgage Before Retiring

Success Story: Me – Loft to Luxury

Chapter Four: Develop Other Income Streams

Income from Your Interests

Start Your Own Part-Time Business

Re-Educate Yourself for the New Economy

Lifelong Learning Plan

Success Story: Mary – Cooking Up More Business

Part Three

Saving Those PENNIES!

Chapter Five: Budgeting for Success

Know Your Income

What Are My Expenses?

Emergency! The Way Out

Success Story: Damien – Be Your Own Artist

Chapter Six: Paying Off Debt

How Much Do I Owe?

How Much Do I Pay?

Avoiding Debt

Using the Credit Card Companies to Your Advantage

Success Story: Jazmine – Targeting Debt

Chapter Seven: Insuring Our Families and Our Future

How Much Insurance Do I Need?

What Insurance Does My Company Provide?

What Kind of Insurance Do I Need?

Home and Car Insurance

Mortgage Insurance

Credit Cards

Credit Card Travel Insurance

Life Insurance

Success Story: Ravi - Insurance

Chapter Eight: Money Tips and Tricks

Handling Your Money

Dear Bling Keep a Money Journal

Don’t Hate but Love Your Bank

Insurance – It Pays to Shop Around

Credit Matters

Crunch All the Numbers

Household Expenses

Smoosh Your Cell Phone Bill

Don’t Brown Bag, Fierce Bag It

How Much Does that New Car Really Cost You?

Buying Car Insurance like a Winner

Top Ten Ways to Exercise for Free

Holiday Shop like a Champ

Cheap Summer Vacations for the Rest of Us

Hockey: Every Kid Needs the Opportunity to Play

Money and Relationship Contracts

Students Starting Off

Tricks for the Backpack

Going Back to School Soon?

Wills and Estates

Checklist for Preparing a Will

What to Consider When Making Your Will

Power of Attorney and Living Wills

Success Story: Jeff – Studying Money

Part Four

Positive PERSPECTIVE!

Chapter Nine: Changing Negative Belief Systems

Loving Your Life

Before the Love

Reaching for the Life You’ll Love

Success Story: Jimmy – Decide What You Love to Do

Chapter Ten: Wadda’ ya Want?

Living by Your Values

Be Better Off, Now

Don’t Chase

How to Discover Your Values

Success Story: Julia – Getting Out of a Rut – Way Out

Chapter Eleven: Kick Your Life in the Bum

Kicked in My Pants

Financial Coaching

Start from Scratch

Brainstorming Personal

Brainstorming Professional

What Do I Want Personally?

What Do I Want Professionally?

How Do You Get Started?

Material Goals

Success Story: David – Work Backwards

Chapter Twelve: Building Your Action Plan

Success Story: Sasha – Focus, Dream and Surge Forward

Chapter Thirteen: If You Feel Needy – Give

LOVE Your World Back

What Does Kiva Do?

How Does Kiva Work?

How They Get their Loans

How Do You Heart Kiva too?

Success Story: Grace’s Peanut Butter

Conclusion

Soups On, Be Happy

Feel the Solution First

Life Status Worksheets

About the Author

Preface

Thank you everyone for making my first book, I (Heart) Money, and blog a huge success! I’d like to thank my big brother Gord, who always encourages and motivates me, Ron McKenna from Cognition LLP for helping me with the Wills and Estates section, and, of course, my Mom and Dad who say they still love me even when I’m grumpy.

The last few years touring and meeting all of you has been really rewarding. I received many e-mails and comments from you telling me of your personal successes. I’ve been from one side of the country to the other and even to California with my US version of I (Heart) Money, and the outpouring of love was truly amazing.

Watching the news and economy over the last few years I’ve seen a disturbing pattern form around the middle class. Stories have described it as the class that is under the most pressure in the coming years. Having grown up middle class and having written the first book to serve this group, I needed to write a second book that was purely about bringing Middle-Class families off the endangered list.

No longer can we rely on the government or business for answers; I truly believe the solutions reside with us – the people. From Middle Class to Millionaire also suggests pension reforms that can help in the future as well as a two-pronged strategy that we can put into action right now.

1. Build a nest egg with every asset class available to us; from investing to buying an affordable home. We need to be smarter to reverse the economical and political pressures that we are all experiencing.

2. Change our money belief system back to the positive one of the past. After years of hearing how we are down and out, we have been saddled with a negative belief system about our future. A more positive outlook will lead to greater success.

In this book, you’ll get more empowering tips and tools that will help you move from being a money moper to money maven/maverick. You’ll get real-life success stories on how everyday people designed their ultimate life, costed it and then implemented it.

This book is intended to show you my philosophies and strategies for saving and growing personal financial wealth. You should know, however, that I am not currently working at a bank or investment brokerage. I have owned and may still own the stocks named in this book.

Let’s all go From Middle Class to Millionaire! Woot!

"Great then is the good fortune of

a state in which the citizens have

a moderate and sufficient property;

for where some possess

much, and the others nothing...

a tyranny may grow out of

either extreme...where the middle

class is large, there

are least likely to be factions

and dissensions."

Aristotle, about 2,400 years ago

Great then is the good fortune of a state in which the citizens have a moderate and sufficient property; for where some possess much, and the others nothing ... a tyranny may grow out of either extreme ... where the middle class is large, there are least likely to be factions and dissensions.

Aristotle, about 2,400 years ago

Where Did the Middle Class Go?

When I was a kid – just a few short years ago – it seemed that everyone was of the middle class. We all seemed to be dropped off at school in recent model Pontiacs or Buicks, we all played hockey on weekends, baseball in the summer, and got to go on a vacation to see the pirates at Disneyland in Florida. My mom stayed home, like most moms in my neighbourhood, and it seemed like everyone was the same as us. At least that was my 6-year-old’s perspective.

So who exactly is the middle class? We employ that term at will, but do we know who the middle class is? And why is there so much talk about them being under attack in the news?

According to the Environics Focus Canada 2012 Report, 93% of their survey considered themselves some sort of Middle Class. Of that, 19% considered themselves Lower Middle Class, 56% considered themselves Middle Class and 18% considered themselves Upper Middle Class. Only 5% considered themselves Lower Class and the infamous 1% had only 1% classifying themselves as Upper Class. Seeing that perception is reality, it is safe to assume the Middle Class is composed of those who refer to themselves as Middle Class in one way or another. According to an April 2014 piece in the New York Times, Canada’s Middle Class has been doing better than the rest of the world, but I don’t think that the slowest sinking ship is something to be proud of. Let’s grow and prosper.

It would also be prudent to look at the numbers. According to the Progressive Economics Forum, 59.7% of Canadians fall into the Middle-Class income brackets, from low to upper middle (Figure 1). According to 2009 Statistics Canada data, these families make between $40k and $125k a year.

Figure 1

A Breakdown of Canada’s Middle Class

That means if you declare yourself Middle Class (because perception is half the battle) and also within the $40k to $125k family income range, this book is for you.

The word on the street is that the Middle Class is shrinking, which is alarming. Economists point out that the gap between median and average individual income has been growing. The median educated Canadian’s income increased from $45,800 in 1976 to $48,300 in 2009. This equates to an increase of only 5.5% over 33 years. These figures are in real dollars, which means the 1976 numbers have been converted to 2009 dollars to make an apples to apples comparison.

We have seen that only the top 20% of Canadians have seen a real increase in income. Nationally, the upper class’s income jumped from 36.5% in the 1990s to 39.1% in 2000. The middle and lower classes dropped in their share of the national income according to the 2009 Statistics Canada report. This means that if you divided our population in five, based on how much they earned, only the top 5th increased their income from the 1990s in a significant way.

We are also seeing a loss of confidence in the financial future of Middle-Class kids and parents. In 1990, 60% of those surveyed thought that they would be financially better off than their parents at their age. In 2012 that number had dropped drastically to 52%. Not only are our financial numbers declining but so is our hope for our future.

So what do we do? Kill the rich?!

No, that’s another book. I’m going to be more practical. We need to build a new belief system to make us hopeful again. Let’s develop a strategy to grow the Middle Class and then use proven tactics to