Free Lunch Friday #3: 1 Million for retirement, credit card hacking & Wealthica
Learn why you possibly need 1 Million to retire, how to leverage credit cards to save big, and what the hell is the rule of 72?
Happy Canada Day financial wizards! Today, we’re going to learn about retirement and how you can leverage credit cards to hack your way towards your goals. If you have any suggestions of topics you would like me to talk about, let me know!
The rule of 72 or how to double your money
The rule of 72 is a great way to know how much time it’s going to take for your money to double. You don’t need fancy financial software, just a calculator (or nothing if you’re good at math)
You can use this rule to understand the ideal time horizon you should hold your financial assets to start getting actual return on investment(ROI). Let’s say you’re investing $10k in the stock market with an interest rate of 5%.
Years to double = 72 / Interest Rate
where: Interest Rate = Rate of return on an investment
So in that case, it would take 14 years and 4 months for your 10k to get to 20k. You can use the rule of 72 to calculate how much fees are going to eat up your savings such as financial advisors, mutual funds, credit card debt and much more.
It’s a simple rule of thumb that will help you buy financial products such as high-interest credit cards or bonds/stocks without using an Excel spreadsheet.
Who wants to be a millionaire?
How nice would that be? The brand new sport car in the garage, the pristine pool with an outstanding view, the designer clothing, etc. If this what you had mind, I’m sorry to tell you but having a million is far from the rich and famous lifestyle.
Do you know that on average, you should save 1 million to comfortably retire? Becoming a millionaire isn’t that glamourous anymore, is it? That’s a serious goal to reach out, and it becomes considerably more challenging if you’re not investing.
There’s a rule of thump to learn how much you need to save for retirement. I consider myself financially literate and I’m freaking out every time I’m checking this chart, so don’t worry:
Retirement savings guidelines
Age milestone: 30 Amount saved for retirement: 1x your income
Age milestone: 40 Amount saved for retirement: 3x your income
Age milestone: 50 Amount saved for retirement: 6x your income
Age milestone: 60 Amount saved for retirement: 8x your income
Of course, those are just basic guidelines. You should keep in mind your financial goals and how much you’re expecting to spend after retiring. There’s key percentages on how much you need to save, but start with saving money and putting it in a tax-free saving account.
The great thing with investing for retirement is that you can put this money on more risky stocks if you’re not close to retirement. The government built programs to fund your retirement if you don’t have enough savings and you can even develop a strategy to leverage both these programs with your retirement money.
How to use credit cards as a superpower
Credit cards are a wonderful tool, but it can quickly become a double-edged sword. If used wisely, you can travel for free, win great gifts, increase your credit score, and sleep for free at luxurious hotels. But, you can also get drowned in debt if you’re unable to “control” yourself. Let me show you how to use credit cards as a superpower.
When you sign up for a new credit card, some of them have benefits called introductory offers. Those cards have conditions to respect and when done, you receive rewards. These rewards are usually bonus points to spend with the credit card company, travel perks, cash-back on specific purchases, and waiving out annual fees.
1 point is roughly equal to 1 cent, so if you’re considering a card with a 60 000 points rewards you should get a value of $600 as the bare minimum. However, the best credit card rewards can comes with expensive annual fees, credit score and minimum income requirement.
The key is to find special introductory offers from credit cards company and leverage the rewards to get free hotels, travels, and even cars!
Just keep in mind that if you have difficulty paying your credit card each month, it’s not a good idea to try this strategy. However, it might be a great opportunity to start browsing alternatives and get a free flight at the same time.
My watchlist
LCID | Lucid Group is a luxury EV enterprise with a strong cash position of $5.4 billion and a debt-to-equity ratio of just 58%, providing it with sufficient liquidity through at least 2023. They are building cars with a bigger autonomy than Tesla and expect to produce 12,000 to 14,000 vehicles by the end of this year. Analysts are planning a revenue forecast of 160%, so it’s worth to be following the activities of this young company.
LSPD | Lightspeed Commerce is a point of sales (POS) company with a great track record except for a big drop in 2021. If you’re a big fan of undervalued stock, this is the perfect example. This Montréal company is helping SMBs worldwide to make more money with a few solutions similar to Spotify. If you’re willing to double-down on tech assets, this is a ticker to consider.
Financial software of the month: Wealthica
I’ve been using Wealthica* for a year and a half now and it’s one of my favorite financial software. It’s a cloud-based software that enable you to connect your different financials like banking, brokerage, and even crypto accounts.
The reason? You’re finally getting a global view of your total assets:
You get the bigger picture of your bank accounts transactions
You can see the performance of the stocks, funds, options, and bonds you own
You can follow the volatilities of your cryptos
By using bank integration, they are making sure that your accounts are staying connected and that you understand your wealth. They have different plans and power-ups to customize your dashboard based on your needs.
But to be honest, I tried the premium plan and it’s not worth paying $12 a month for it—I didn’t get enough value.
The good news is that Wealthica is free! You can add the accounts you want and after a week or so, you’ll start getting reporting and breakdown of your finances.
*I’m not an affiliate of this product and I’m not getting commissions by promoting them.
That’s all for this month folks! If you learned something, please share with your friends that are interested in investing and personal finances.
Note that I am not an investment professional, and this is not investment advice.