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Investing 101: Is Financial Freedom your Goal?





If you are an immigrant like we are, you probably came to Canada to realize your dream of a better future, a comfortable life, good opportunities for you and your immediate family and, of course, financial freedom, correct? Financial Freedom means different things to different people but we define it to be the ability to do what you want, when you want to, with whom you want to, for as long as you want to.


Is achieving financial freedom even possible in this day and age? We think YES! It is “easy peasy” and all you need is financial education, a good strategy, a good coach, and… oh yes, time.


In this financial literacy series, you have already learned about the basics. This time, we’ll share three insights regarding how you should think of money and your future.


Insight #1: The relationship between health and money


Two topics impact every person, whether you want to accept it or not, health and money. Scientific discoveries have allowed humanity to live longer and healthier lives. So if the purpose of science is to keep humans healthier longer, we can say that science has achieved success.


Now, with money, humanity has come up with algorithms, formulas, and extrapolations. However, no amount of financial engineering and expert “gurus” have been enough to accurately predict economic depression and inflation, or control poverty. Economies have collapsed and bounced back up again without evidence that a common understanding has been achieved, especially in the field of personal finance.


This happens because just the mention of the words, finance, money and wealth generates different emotions in every person. This is a natural reaction to the overwhelming sensation that we do not understand how money really works, or have a solid plan to follow. Risk, greed, optimism, insecurity, and fear are some of the main reasons we do not talk about money.


So what is the relationship between health and money? If we live longer and healthier lives we need more money. But first, you need to understand how cash works.


Insight # 2: Understanding Cashflow


What is cash flow? If you google it you will get lost in a sea of financial and accounting definitions of cash and cash equivalents. The easiest way we explain it is by using Meriam Webster’s definition #2 - A flow of cash.


Cash can only flow two ways, IN and OUT. Cashflow IN would be your salary, a prize, a gift, your parent's allowance or a tax return. Cashflow OUT would be anything you buy, spend, pay, burn, or lose. As a result, positive cashflow is when more money/cash is coming in, than what is going out. Meanwhile, negative cash flow would be the opposite. But wait a second, is negative cash flow actually possible? In other words, can you spend more money than what you get paid? Yep.. and that is when debt comes into the picture!

There is a lesson to be learned here, as Morgan Housel mentioned in his book The Psychology of Money, “if you spend money on things you will end up with things and not money”.


Banks, lenders and credit card companies are betting on your ability to generate more cash flow in the future and therefore they take a risk on your health, workability and your desire for things, and give you a loan. You are now a Debtor!


In reality, there are four things you can do with your cash flowing IN: use it for living expenses, use it to pay taxes, use it to pay off your debt or save it for your future. Which of the four do you use your money for?


If you understood how Cashflow works do you think you can leave space for savings?


Insight #3: Knowing when you will retire



Do you know that in today’s money in order to live in retirement with financial independence you need to have accumulated between CAD $1.2 to $1.7 million dollars!

Remember, people are living longer, so if you retire around the age of 65 you might need to sustain yourself until you are well into your late 80s or early 90s. This amount of money is the equivalent of saving between 35k to 50k a year for 34 consecutive years. Does this look like a mountain that is too high to climb for you?


You are not alone! According to Morgan Housel, people fall into three categories: “Those who save, those who don’t think they can save, and those who don’t think they need to save”. However, the results from the CRA’s 2019 Canadian Financial Capability Survey (CFCS), state that “…Canadians who have a plan to save are more confident that they know how much they need to save for retirement (56% vs. 28% in the 2107 study) and that their savings will provide the standard of living they hope for (71% vs. 32%), compared with those who do not have a plan for retirement.


In fact, Canadians’ anxiety about retirement is heavily concentrated among those who do not yet have a plan to save for retirement.


We agree, just saving will not be enough, that’s why it is important to understand the factors involved in creating wealth. However, creating the habit of saving, which is a decision that you will make and you can control is the first and most important step towards achieving your financial independence. And you really do not need a reason to save, you should just save for the sake of saving because the biggest benefit is the flexibility and the options that you will have later in life. It’s like doing something now that your future self will be grateful for.

Let’s review what we have learned so far:

  • You will live longer than your parents did, so you will probably spend more time in retirement than the previous generation.

  • You have the power to decide to keep a positive cash flow, minimize debt and start the habit of saving.

Remember this is only the beginning of our series! The next articles will cover the Money Talk, the Wealth Formula, and the power of compounding interest among other interesting topics.


If you can’t wait or want personalized help, find me on Slack and let’s start planning your financial future.


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