Who Is Thomas Picketty  & What You Can Do To Avoid Becoming a Bad Inequality Statistic – Part 2

*If you missed Part 1 of this Picketty Project check it out here.*

To the six of you that got through Monday’s post, congratulations!  Now for the stuff most of you actually want to learn about.  (Who cares about the 1% – what can I do to make sure I don’t end up as a used-to-be-middle-class person?!)

To put things bluntly, if you screwed up the birth lottery and don’t have rich parents, then screwed up the marriage lottery and didn’t marry rich, then you’re at a substantial disadvantage if you want to rapidly increase your net worth.  You can argue against this all you want, but the facts are pretty straightforward.

That being said, while the path to the upper part of the middle class might have gotten narrower and harder to navigate over the past few decades, there is still a trail to follow.

If You Can’t Beat ‘em Join ‘em

Who Is Thomas Picketty & What You Can Do To Avoid Becoming a Bad Inequality StatisticWe know the game is slanted.  We know that those who own stuff are going to see bigger cheques than those that work for cash going forward.  So the easiest way to get ahead is simply to align your interests with the rich and super rich.  The best way to do that is buying stocks – ASAP.  We’ll let you in on how we choose to get exposure to stocks here, but the key thing is to become an owner of businesses (that’s what a stock is for those of you that are a little new to this stuff) as soon as life lets you.  If that means cutting out a few luxuries or living in a slightly smaller house, you’ll make those sacrifices if you want to get cash flow from investments as opposed to only your job.Continue Reading

Who Is Thomas Picketty & What You Can Do To Avoid Becoming a Bad Inequality Statistic – Part 1

Want to show everyone you’re current and knowledgeable?  Not that pretentious, but actually want to read some pretty interesting stuff about how our world got to how it is today?

Either way, putting Thomas Picketty’s bestselling book: Capital in the 21st Century on your coffee table makes a lot of sense.

Picketty (pronounced pique-et-tee with a thick Parisian accent if you want to really piss off all of your friends and be called a know-it-all) has done what most thought impossible.  No, I don’t mean that he has mostly explained the ultra-complex nature of wealth inequality and put forth some logical (if unlikely) fixes to the situation – although he did that as well.

Instead, pique-et-tee (don’t you hate me just a little more now?) managed to make a book about economics a bestseller.  That’s pretty damn difficult.  The Ph.D. from the Paris School of Economics also managed to write a 700+ page book that people are actually talking about (even if they don’t read most of it).  For anyone not named Rowling or Martin that is rarely seen.  Finally, a French dude managed to sell a lot books in the USA – which is probably a sign of the apocalypse.  When one takes all of those points into consideration, it’s pretty tough to ignore that there must be something to this whole inequality thing.

R>G = ?????

Who Is Thomas Picketty & What You Can Do To Avoid Becoming a Bad Inequality StatisticFull disclosure, I did not climb the entire mountain read the entire book.  I did get through about 500 pages of the monster before succumbing to the temptation to read this executive summary instead (an excellent bang for your buck and reading time) and then read some of the more popular reviews about the book.  Despite the fact that some ultra-conservative commentators have picked at the edges of some of the data Picketty used, it should be noted that Picketty has responded to all specific criticisms and there is absolutely nothing out there that factually refutes the statistics put forth in the book, regardless of what you heard someone with a bachelor of arts degree say on talk radio.

Capital does make reference to income inequality and pays attention to the rise of certain salaries at the top end of the scale relative to the rest of us “middle-classers”; however, this isn’t the focus of Picketty’s thrust.

His main goal is to explain that overall wealth inequality (essentially your net worth as opposed to what your paycheque looks like) is rapidly surging around the world and that it will likely only get worse.  He sums up his argument with the simple formula of r>g.  Now I should admit that while I’m a bit of a finance geek that likes to read, I’m by no means qualified to explain the premises Picketty puts forth.  But I feel safe in saying that r>g can basically be boiled down to the idea that going forward (and for most of human history) overall growth in the economy is not split evenly between the people that provide the labour and the people that provide the financial capital.  To simplify it even more, the people that own stuff – land, factories, stocks, patents – will see their bank accounts grow much quicker and at a much faster overall rate than the people that work for a pay cheque and then use that money to live life.Continue Reading

2014 Personal Finance Resolutions Mid Year Review

I can’t believe it is July already.  Time really flies when you are having fun (or just insanely busy).  Since it is a little over mid-year, I thought it would be nice to do a mid-year review on how I am doing with my personal finance resolutions for 2014.

Sometimes you lose track of the goals that you set out in the first place- especially when you complete them and start setting another goal.

I am for some reason, a very goal oriented person.  If I don’t have a to-do list written out in front of me, I do not fare well.  This is either do to the fact that I am goal oriented, or is more likely explained by the fact that I have poor short-term memory and if I do not write it down, it does not happen.  I relish crossing off lists and sometimes I break down the larger goal into smaller goals just to feel good about crossing something off the list.

So it is kind of refreshing to review the goals that you had set out in the beginning of the year to give yourself a check up (and a wake up call most of the time) to see how you are doing.  Evaluating yourself in an honest way is an important way to be self aware and I think, is an important aspect of, well, being an adult.

**groan** I know.  I cannot believe I am not “young” anymore.  Enjoy your twenties while you can, folks.

Anyway, back to my 2014 Personal Finance Resolutions.  I will list my resolution and show the progress (or non-progress) that I have made.

Maximize the TFSA

Young & Thrifty Resolutions for 2014I have maximized my TFSA for 2014.  Unfortunately, I may have over contributed to the Tax Free Savings Account (more on that later) and in early 2014, I had set out to have $43,000 in total in 2014.  Because of the possible error I had to withdraw money immediately to avoid further interest and penalties, and so my Tax Free Savings Account went from $37,000 in early 2014 when I made the resolution to somewhere around $41,000.  The crappy thing about it was that I had the money sitting in there and it wasn’t even invested!  So the interest and penalty was all for nothing.  More on that later.

So in theory, I maximized the Tax Free Savings Account as best as I could.  Maybe if I’m lucky by the end of the year my Tax Free Savings Account will have $45,000 of equity in it. :)  I would say this is completed.Continue Reading

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