Social Icons

Tuesday, April 17, 2012

Derek Foster and the value of simplicity: from investor to minimalist

In his latest newsletter, Derek Foster exposed the benefit of living simply, without gadget. I totally agree with the idea. However, I love my iPod, my laptop, my digital camera. When I was in Montreal, I used to have a cell phone. I didn’t have a land line and having access to a phone whenever needed was of a great benefit. 

When I buy a gadget, I use it for a very long time. A little way back, I bought myself a mini laptop, with a screen of 10’1. It’s very light and I can easily carry it everywhere I go. Without it, I couldn’t watch on my stock or either blog... I love my gadgets and I wouldn’t like to live without them. But I guess the point of Derek Foster was about over-spending and how folks in the 60s, 70s were not spending as much as the popular crowd of today.

Fact is, every single dollar save is a dollar in place for financial freedom. The less gadgets you own, the less you spend... But imagine having to go to an Internet cafe every single time you need to access to your emails, check on stock, etc... In that case, not having a laptop wouldn’t be of any help to save money. I guess you could always go to the library, but it will be annoying.

Personally, my only luxuries are my debt, on which my minimum monthly payment is a bit less than $300. I had been living below my needs for years and it has allows me to save a fortune to generate a dividend income that can pay alone my minimum living expenses. While being unemployed, I don’t have to worry about making ends meet. Unemployment benefit will basically be money to help me decrease my debt level and maybe for a little bit of shopping... lol.

Anyway, there will never be enough emphasis made on the importance of savings and Derek Foster latest newsletter was great for that. Generally speaking, I am a great saver. I never had any problem to save money, it always came naturally to me. It’s a nature that varies from an individual to another. My brother, who’s 16 months younger than me, is much more a spender than a saver. A good friend of mine, who grow in the same little suburb and went to school with me had real problem at saving money. I had to borrow her some money once so she can make a car payment on time... I am not better than anyone else, but just to say that a “saving nature” has nothing to do with from where you are coming from or your family environment.

However, the how-to-save-money is something that can be learned. The Fabulously Broke Blogger is an illustration of that. She had paid more than 60k worth of debt quite quickly once she realized the power of savings. Today, my investment me to face a laid off without too much trouble. It’s a blessing to be able to survive on dividend distribution. At this point, my dividend income could allow me to pay my minimum living expenses, but just the minimum. In case of survival needs, I am pretty much like Fabulously Broke, I could make a nice living on $1 000 a month. Generating $12 000 a year in dividend income is really not difficult. However, my word is to stay away from companies that provided an exaggerated dividend yield. We have lived quite an adventure with Yellow Media Inc. (YLO). YLO was one of those arrogant businesses giving away too much cash to their investors. And the results are what we know today.

The power of dividend investment and living below your needs

From what I calculated back in February 2012, my annual dividend income is of 7 007$. This is the dividend amount generated by my non-registered portfolio only. I have an investment in US dollars and I also have my TFSA that doesn’t really generate any substantial dividend income. In my non-registered portfolio, I hold a bit more than 3k in the First Majestic Silver Corp (FR). First Majestic Silver Corp (FR) doesn’t distribute any dividend at this time. So I could eventually reinvest the money in order to increase my dividend income. But even a 7k dividend income is quite substantial.

Let’s have a quick look, one more time, at my monthly budget. What do I need to support myself?

Monthly rent to my old folks: $350
Gas: $50
Student loan: $98
TD RRSP loan: $107.03
American Express at 0.99% for a year: $29
RBC credit line: $45
TD Visa: $28
Banking fees: $6

TOTAL: $713.03

Those are for the minimum of the minimum expenses. But of course, I buy myself some coffees, I sometime buy cosmetics, eat out or whatever else. So adding up my minimum monthly expenses to $1 000 would be quite reasonable. I cannot pay that $713.03 from my dividend income but I could easily, with a bit of restructuring.

This amount doesn’t include my car insurance. I am currently good until September 2012. I had paid 1 300$ for my first year as a car driver... Quite a lot of money, knowing I drive a 2002 car... However, I should be paying less next year, maybe $900?

To that $900, we need to add oil change and tired change... maybe $140? Right there, owning a car is expensive, it’s more than $1 000. I could eliminate the car, but it would be very annoying not having a car while living where I am, in X town of New Brunswick.

I thing you got the point by now: the less we spend, the better is.

In Derek Foster latest newsletter, we learned the importance of savings, but we also learned something else: Derek Foster had sold his house and many of his belongings! Why? Well, Derek Foster has decided to hit the road with his wife and 5 (or 6?) kids... oohahahhhhh! I am just wondering what he will do for their school year. Anyway, from what I understand, it will be a one year road-trip. Maybe the little kids will be missing one year of schooling, I really don’t know. However, I felt as excited as if it would be me going on a road trip. 

Derek Foster had lived for a long time close to Ottawa, from memory Wagana Beach or something of that sound. Anyway, he won’t have high residential tax fee to pay for a little while. It’s going to be much more fun to be living in a camper, enjoying the outside live style. Having his money, I would be doing the same. Only problem being the schooling of his little boys and later on, his little girl, but hey, it’s none of my prob!!!

Interesting? Oh yeah, Derek Foster is always interesting to follow and read, almost just like me.


Anonymous said...

I think in your case, you live a very frugal lifestyle. You have very few niceties, you rarely splurge, all your money is basically tied to the stock market and you are not a homeowner and still live with your parents at a very minimal cost.

Sunny said...

I have some niceties. I do acrylic paintings. I spend for my art.

I am definitively not a homeowner and I will probably never be.

I am living with my old folks yes lol... but only since September 2011. Before I was in Montreal and before that I was in Ottawa.

Its not like I had been dependent of my parents all my adult live.

So come on now.

Anonymous said...

Sunny is investing in the stock market to make money and to be financially free. I think that is a good thing.

There are a lot of bloggers who are living frugally. One blogger I follow invests tries to invest over 50% of his net income each month into dividend growth stocks because he wants to be financally independent by the time he is 40. He started when he was 28.

Yes you got to enjoy life along the way but remember you need to pay yourself first.

Sunny is a way ahead of most people her age financially. Sunny used leverage to help her, but good debt helps you if you use it right. There is nothing wrong with it.

Sunny said...

There you go :)

Anonymous said...

Owning a vehicle if you don't have a stable & at least middle class income/job is a unforgiving cash drain. Your cost estimates IMHO are way understated. Licensing, fuel, maintenance, repairs etc. Changing oil & rotating tires is nothing. Don't expect that the cost of insurance falls, either. One year driving means nothing. Get rid of the car unless its an absolute necessity. That's what Foster would do. Cheers. Anony-scrimp-a-torious

Sunny said...

I needed a car while being here, so I got my mom car. It gave her the chance to upgrade for more recent year. I am getting my oil and tire change tomorrow.... and by the way, I got a job in Montreal for a couple of months. :)

It doesn't look like I am going to renew my insurance. That was the most expensive part. My mom want to keep her old car, so I won't resell it.

There's no repair to be done on a Toyota.

Dividend Mantra said...


Thanks for the mention, and thank you for following my journey! (I'm assuming you're referring to my blog.)


I'm a huge fan of Derek Foster and am doing my best to emulate him. Do you have any other details on his recent move? So he sold his house and all his belongings and moved into an RV? Interesting stuff!

I only signed up for his newsletter recently and did not get a copy of the email where he discusses this information. I would be indebted and hugely thankful if you could forward me the newsletter in an email.

Glad to see you're journey is still going well. Been following for a while.

Best wishes!


Thank you

Thank you for visiting!
Blogger Templates