How much do you know about financial independence?

Rewoga, heckler and clarkee - you're making me cry a little inside because of what you're leaving on the table. Please go burn your Air Miles cards. They are awful.

When it comes to rewards, you can either get cash back (e.g. MBNA world elite), flight rewards or goods (e.g. gift certificates and products).

Cash back is usually the best deal for people because it's simple and requires no math.

Flight rewards can be worth it if you know how to redeem them properly.

Let's go through some examples:

Flight Rewards
At best, you can fly YVR to YYZ for 4k airmiles and earn 1 mile/$10 spend (premium BMO card). This requires you to spend $40k. You can boost that slightly by keeping on top of Safeway specials.

Compare that to other programs:

Aeroplan
It can suck. Availability is not great, but it's still the best program in Canada overall. I generally redeem for business class seats because that's where the real value is at, but let's look at a typical economy redemption.
With an aeroplan visa and ideal spend (e.g. gas, groceries), you'd need 25k miles to fly YVR to YYZ. Best case scenario spend is 1.5miles/$1 = $16,666 spend.
With an Amex, best case scenario is 2pts/dollar for a $12.5k spend.

On top of this, you need to spend about $140 or so in taxes and fuel surcharges. Airmiles will charge taxes, but not fuel surcharges. You're still way better off even if Airmiles charged $0 to redeem.

Cashback
If you don't want to deal with that hassle, then use a straight up 2% cash back card.
* Assuming a ticket price of $700, your minimum spend is $35k.

Goods
Redeeming air miles (or any points) for products or gift certificates is 99.999% guaranteed to be a waste of points.

Gift Cards
Let's say you redeem for a gift card at 95 miles for a $10 gift card. To earn 95 miles with a free card, you need to spend $1900. Your return is $10/$1900 = 0.5%
If you earn 95 miles with a premium card, then you need to spend $950 to get a $10 gift card. Your effective return is 1.1%

Products
Here's a sample product:

This vacuum cleaner is 2,310 miles. To get that you need to spend between $23,100 and $46,200.
https://www.airmiles.ca/arrow/RewardsProductDetails?productId=prod2094495

It's valued at $299.99 + tax = $335
http://www.shop.ca/c/electrolux-access-t8-hepa-bagless-canister-vacuum-EL4071A-22518078

Your return is then between 0.73% and 1.45%.

Bonus: Annual fee or not to annual fee
Let's use a simple example. You can earn 1% cash back with no annual fee or 2% cash back with an $89 annual fee.

If you spend $8900 or less, go for the 1% cash back card.

If you spend $8901 or more, you are leaving money on the table by not getting the 2% cash back card.

At $8900, you will receive $89 at 1% or $178 AT 2% (minus $89 fee)= $89.

If you spend $20k, your return at 1% is $200. At 2% it's $311 ($400 - $89 fee).

Good points EXCEPT - a flight to TO is only 2700 points (return)….not quite as bad.

I should figure out points I get for fuel (Shell) and groceries (Thriftys).

What Norman said but extend not just to MBNA World Elite but BMO World Elite if you want purely for travel. You get air tickets without taking it up the hoop on taxes. Flights are open-booking ie not constrained by limited providers eg Air Miles. Redemption is a piece of cake. Even the cheap orientals at redflagdeals.com generally agree that card translates the best for pure travel.

MBNA is definitely worthwhile though if you want to buy stuff using it.

I still use Air Miles for Shell gas purchases. That adds up quick. Then use Air Miles for domestic flights.

you guys are totally missing out on the Thrifty's Smile card program. You load the card before purchasing your groceries, pay for groceries with said card and 5% of the total will be directed to TORCA.ca for local trail support.

Contact TORCA.ca to get yourself a Thrifty's Smile Card today…..not sure if they let you load the card with a visa, but if they do its a win/win for everyone.

Good points EXCEPT - a flight to TO is only 2700 points (return)….not quite as bad.

I should figure out points I get for fuel (Shell) and groceries (Thriftys).

Welcome to points devaluation. Quote from airmiles.ca says it's 3600 in low season and 4900 in high season.

I maintain that airmiles blow.

Well, we just booked 2 flights to Costa Rica with our Royal Avion card; $2500 value; for money spent on our Visa that we would have spent regardless. Not to mention, we had enough points for both our business class flights to Italy last year and will have enough for some flights later next year. Seems like a win to me. Flights are a way better redemption value than goods/hotels etc.

Aeroplan
It can suck. Availability is not great, but it's still the best program in Canada overall. I generally redeem for business class seats because that's where the real value is at, but let's look at a typical economy redemption.
With an aeroplan visa and ideal spend (e.g. gas, groceries), you'd need 25k miles to fly YVR to YYZ. Best case scenario spend is 1.5miles/$1 = $16,666 spend.
With an Amex, best case scenario is 2pts/dollar for a $12.5k spend.

On top of this, you need to spend about $140 or so in taxes and fuel surcharges. Airmiles will charge taxes, but not fuel surcharges. You're still way better off even if Airmiles charged $0 to redeem.

I've been all in on Aeroplan for 20 years. My company has always used Air Canada for travel, which I used to do a lot of, and before they got set up with corporate credit cards, I was able to use my Aerogold card for all my travel expenses.

The best value use of points for me is flying my family back east to New Brunswick to visit my parents. It's easy to get seat sales from Van to Toronto or Montreal, but not so much for the last stretch to NB.

One Aeroplan feature that most people aren't aware of is that on one leg of your reward trip, you can make a stopover. For example, coming back from NB, we will usually stop in Ottawa or Winnipeg to visit other relatives, and then continue to Vancouver. It costs no extra points, just the taxes for the extra flight, and there are some rules about connections, distance between starting point and stopover, but I've never not been able to make it work. It squeezes a lot more value out of those 25,000 points for a domestic trip.

Aeroplan has definitely made it tougher to book decent reward flights, but for flights that you can plan well in advance, like family vacations, it's not so bad. One thing that has caught a lot of people out in recent years is that if you don't accumulate any points for one year, you lose everything. That's easy to avoid though, all you need to do is buy one tank of gas at Esso and swipe your Aeroplan card at the pump.

so quick one - does this make sense -

30 % of monthly income has been split up like this - 10% into a reg high interest savings account for trips/toys etc
10 % into a tfsa and or mutual fund
10% into an rsp that is going to have a pretty decent lump some thrown into it.

mid twenties couple - almost no debt (should be debt free in about 1.5 months) want to buy a house in 2 - 3 years but be very comfortable with paying for up keep etc.

also want to throw 1k or 2k into something for fun?
any ideas

10% into a trips/toys account, if you make $60,000 annually, that is $6,000. Something to consider might include adjusting your spending habits so that you can increase the amount of monthly income to your savings/investment vehicles to 50% instead of 30%.

The 10% into TFSA or mutual fund…Not an either/or. Buy mutual funds within it or ETF, and watch it grow.

I don't understand how buying a house will lead to your independence. Seems more like prison, 25 years to life.

And as for "throwing some money in to fun", pay letsridebikes.ca to take you on a tour of Utah's national parks, only $1,500 and includes Arches, Zion and Bryce Canyon. Airfare, accommodations, meals not included, bring your own touring bike and camping gear. Leave November 3rd from Denver and return…..whenever you want!

Best of luck!

What Norman said but extend not just to MBNA World Elite but BMO World Elite if you want purely for travel. You get air tickets without taking it up the hoop on taxes. Flights are open-booking ie not constrained by limited providers eg Air Miles. Redemption is a piece of cake. Even the cheap orientals at redflagdeals.com generally agree that card translates the best for pure travel.

MBNA is definitely worthwhile though if you want to buy stuff using it.

I still use Air Miles for Shell gas purchases. That adds up quick. Then use Air Miles for domestic flights.

Interesting, didn't realize the BMO card lets you avoid taxes on flights. That's one downside of Avion as some Europe round-trips have ridiculous taxes of $600+ per ticket.

Shogun: as another poster said, the points are earned on dollars that would be spent either way. We pay for everything possible on the reward cards including reimbursable business expenses for my job. I don't buy stuff thinking about earning points, but I damn well want to earn them since the CC processing fee is priced into all goods and services.

So, outside of RSP and TFSA, how does a taxable investment account work?

So, outside of RSP and TFSA, how does a taxable investment account work?

Not sure if I understand your question, but simply put..open up an investment account.

Why would you want to?

1) Liquidity: You don't have the same limits or rules as it relates to withdrawals as you do with your RRSP or TFSA.

2) Capital Gains: If you sell an investment for more than you paid for it, you get a capital gain. If you sell for less than you paid, you get a capital loss. At tax time, you subtract your capital losses from your gains. This gives you your net gains. You pay tax on 50% ? or half ? of your net gains.

3) Offset taxable income: At tax time, you’ll add up all your gains and losses from buying and selling unsheltered investments. If you come out ahead, you have a net gain to report. If you lose money overall, you must declare a net loss. Only 50% of this amount is taxable. A net capital loss cannot be used to offset other sources of income.
However, you can carry a net capital loss back for 3 years to offset net capital gains in those years and claim a refund. Or, you can carry it forward indefinitely to offset future net capital gains. You can also apply your capital losses from previous years to offset new capital gains.

4) Profit??: If you have maxed out your available tax shelters then it could make sense to keep on making money.

So, outside of RSP and TFSA, how does a taxable investment account work?

One thing to remember when you open a NR account is that some companies distributions are not made up entirely of eligible dividends and can include interest and return of capital which is a pain at tax time because every ROC changes your average cost base which you need to track in order to calculate capital gains when you sell.

I try to keep all securities that pay a dividend of this sort in a reg account just to avoid the bookkeeping hassle.

http://business.financialpost.com/personal-finance/family-finance/high-net-worth/how-a-couple-with-a-net-worth-of-10-million-and-annual-income-of-215000-can-pay-0-in-income-tax

A couple with lotsa money pays 0 income tax

I took the semi-retirement option at 19, started working seasonally for 8 months of the year so I'd have time to enjoy life and learn valuable skills which will benefit me in the long run when I wasn't working. For the last 10 years I've been on the path to fincancial independence and it seems to be working out alright.

I have zero debt, savings in the bank that grow every month for a down payment on house or land when the time is right, eat good organic food, have plenty of expensive hobbies, take extended holidays to warm countries every year, have original art hanging on my walls and really own more material shit than I know what to do with. All while only working part of the year and snowboarding, mountain biking and enjoying life as much as possible in between work. Da fuck?

Since I don't make piles of money, I can't count on investment returns to earn me alot of money every month so I do well for myself by keeping my costs low, being self sufficient wherever possible and saving money that way. Regardless, no matter how much or how little you're investing, the same principals apply though..if you're buying precious metals, you buy low and sell high. Duh. If you're bank is offering promotional interest for 6 months and it'll earn you more money, stick it in one of those accounts. It's free money, so why not do it?! Pretty simple if you ask me. I make half what most of you make every year but probably put twice as much in the bank.

I didn't get a university education right out of high school even though peers, family and society told me I'd never amount to anything without one. Look at all the poor fuckers out there with $60k in student loans and nothing to show for it.

I do, however speak 3 languages fluently, play several instruments, know how to frame, plumb and finish a home, build forms for foundations, rebuild an engine and repair just about anything that can break on a car, bike, chainsaw or what have you, fell trees, grow and make my own food, brew beer, distill alcohol, catch fish and live pretty darn well. If I don't know how to do something, I have the time to do the research and teach myself what I need to know. Over the years I've had the opportunity to work for friends, sometimes for money and other times for work trades, which has led to learning all kinds of skills which in the long run save me piles of money every year and are setting me up for financial independence. I think about everything in life as a learning opportunity, not just about making money.

Every time you're able to do something yourself, you're saving money, saving taxes you'd have to pay and you get the Manly satisfaction of saying "I did that myself!". I fucking hate paying taxes, and so do you. We all have to pay taxes though, it's a fact of life. But by doing things for yourself you cut out the tax-man and have more money in the bank at the end of the day. Win/Win if you ask me.

Build your own house? Yup you can do that. Fix your car? Yup that's actually pretty easy too. Cook wholesome food that rivals most 5 start restaurants? Yeah, just follow a recipe. Ride a 3 year old, aluminum framed mountain bike with small wheels? You're damn right you can shred on that fucker, especially if you have the time to learn to be a good rider instead of hoping that bigger wheels/matching helmet, shoes and jersey will make you better.

Eating well is expensive, but it doesn't have to be. I buy 1/2 of a cow with a friend every year, bought from a little old 80 year old-hard-as fuck lady a few hours from where I live. I get to see the cow before I eat it, support a local farmer and fill my freezer with organic, grass fed locally raised cuts of the finest meat you can buy for way less $$$/lb than it costs to buy shitty hormone filled ground beef from the grocery store. The other half of my freezer is full of 25lbs of frozen Pine Mushrooms I picked behind my house, huckleberries and blueberries from the mountains around where I live, some fish I catch etc. I buy organic grains for pennies on the dollar by buying in bulk compared to what I would spend on smaller amounts from the grocery store every week. I bake my own bread, the kind of shit that a French bakery sells for $7/loaf and it costs me less than 50 cents to make.

Our society is programmed to think that we need everything instantly, that we can't possibly wait for something, that we need to throw down cash (or credit card) every time we want something. It takes a while to start thinking differently but once you do, you'll realise how easy it is to live within your means and start putting money away - and have more time to enjoy life as well.

Ya, I'm a bit of a hippie with a rather red neck but at this rate I'll be retired, living in a house I've build with my own hands from skills I've learned for free, from trees I've felled on my own property and able to live a nearly completely self sufficient lifestyle before I'm 40 while having lived an incredibly rich and fulfilling life until then. It's not hard, you just need to reprogram your brain to think outside of the box. The rest takes care of itself.

This is the best thing I've read on nsmb. You should create a lifestyle blog.