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Personal FinanceTax Planning

Why You Should Care About the Type of Income You Earn

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“Next to being shot at and missed, nothing is quite as satisfying as an income tax refund.” — F.J. Raymond

When it comes to taxes, the term “income” isn’t quite as straightforward as you might think.

In Canada, there are four main distinct groups of income you may have as an individual with a variety of different tax implications. In some cases, you may have sources of income with zero tax!

So, understanding this and arranging your affairs accordingly will enable you to enjoy tax breaks that most people don’t know about. This is why I love this quote by Martin Sullivan.

“There may be liberty and justice for all, but there are tax breaks only for some.” — Martin Sullivan

Below are the four main groups of income in Canada:

1. General income

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This includes income from employment, self-employment, sales commissions, tips and gratuities, pensions and other social benefits, interest, etc.

General income sources are taxed the most heavily in Canada.

2. Dividend income

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This is dividends paid to company shareholders. Dividend income receives a special deduction that can reduce the rate of taxation. However, the effect of the deduction varies.

3. Capital gains income

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This is the income you make by selling shares or other property, which are taxes on only half the profit made on the sale (except your home, which is exempt from tax when it is your principal residence).

4. Tax-free income

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Yes, there is such a thing as tax-free income.

This includes income from insurance, income from sale of your principal residence, gaming and gifts, which are generally tax-free (except gifts from your employer, and some gifts of capital, such as company shares — if the gift produces income, then the income is usually taxed).

In Conclusion

Note that general income sources are taxed the most heavily in Canada.

Dividend income and Capital gains income attract lower taxes compared to General income.

The best part is that there are certain income sources that are tax-free. In addition to the income sources included in this tax-free income group listed in #4 above, proceeds from loans such as equity from your home or loan from your tax-exempt insurance policies can also be included in this income group.

This 4th group of income represents a great source of tax-free income that can be used to significantly accelerate your wealth.

Depending on the type of income you earn, you may end up keeping less or more of your income. So, it is key to understand this and plan accordingly to structure your income to keep more of your money.

“The best things in life are free, but sooner or later the government will find a way to tax them.” — Anonymous

Note that every dollar saved in taxes will help accelerate your wealth.


P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Grab a FREE eBook version of my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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BusinessPersonal FinanceTax Planning

Are You Thinking of Selling an Asset? Think Again

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This pandemic has forced a lot of people to make significant financial decisions.

Some have sold assets to generate income to fund basic living expenses.

Some have sold assets to address immediate health issues.

Some have sold assets to pay off debt.

Others have sold assets due to fear and uncertainty of the future.

And some have sold their assets in exchange for cash stored in their homes.

While there is nothing wrong with selling assets, you should consider certain criteria before selling. The last thing you want to do is to derail your financial journey by liquidating assets without careful planning.

Here are a few considerations you may want to review when thinking about selling your assets:


Productive assets vs. Unproductive assets

Productive assets are assets that generate income or cash flow. An example of a productive asset is a business you own or a rental real estate. Other productive assets are dividend stocks as these generate dividend income.

A vehicle you use for Uber is a productive asset as you generate income with it.

On the other hand, unproductive assets do not generate income. An example is a car you use for personal purposes, your 60-inch flat-screen TV, a piece of land that you own lying idle.

If you’re considering selling an asset, it’s best to first sell non-productive assets. And then use the proceeds to buy productive assets if you don’t have other immediate use for the cash.


Pay off debt vs. Invest

Should you sell an asset to pay off debt or should you sell your asset to invest in a new opportunity?

Paying off debt is likely the safest investment you can make as there is zero risk of loss. However, safety does not always mean it is the best thing to do.

Also, if your goal is to be financially free by being debt-free, you must remember that debt freedom does not equal financial freedom. What gives you financial freedom is the ability to generate cash flow on demand to meet and exceed your financial needs.

When it comes to debt, start by classifying your debt into productive debt and unproductive debt.

Productive debt is debt incurred to acquire a productive asset. It is debt that provides you with the ability to deduct the interest for tax purposes. An unproductive debt is consumer debt.

If you’re considering selling an asset to pay off debt, it makes no sense to sell a productive asset to pay off an unproductive debt or a productive debt for that matter.

Rather than selling an asset to pay off debt, consider ways you can generate more cash flow from the asset to pay off the debt. Perhaps, you can sell a productive asset to buy another productive asset with more cash flow.

My bias is always to invest my resources. Then use the income from the investment to first pay off unproductive debt as this has no tax benefit. Then slowly pay off the productive debt using income from the asset.

When it comes to paying off unproductive debt, the best approach is to first invest in yourself by acquiring some high-income skills and use the cash from your side business hustle with your high-income skills to liquidate your unproductive debt.


Buying assets vs. Selling assets

As an investor, my bias is always to buy and never to sell.

So, when does it make sense to sell an asset?

My answer is simple.

The only time it makes sense to sell an asset is if you can use the proceeds to buy other assets generating MORE cashflow.

You can use this lens when you’re considering any asset or any group of assets for sale.

If you own a dividend stock and the company reduces or suspends its dividend, you can sell this stock and use the proceeds to buy a new dividend stock offering more cashflow.

If you own a rental property that is not generating sufficient cash flow or appreciating in value, you can sell it if you find a better opportunity in another asset class.

You could sell a number of rental properties you have if you find an opportunity to invest in a great business that has value and generates a lot more cash than your rental properties.

There are so many ways you can go about doing this. What’s important is to understand the principle. If you’re selling an asset, you’re doing so because you want to buy a replacement asset that has more value and generates more cash flow.


Final Thoughts

Now you have a framework for determining the logical process when you’re considering selling an asset:

  • Sell unproductive assets rather than productive assets.
  • Resist selling assets to pay off debt. If you have to sell, use the proceeds to buy another productive asset and pay off debt using cash flow from the asset.
  • The only time it makes sense to sell an asset is if you can use the proceeds to buy other assets generating MORE cashflow.

Consider listing every asset you own and the income generated by each asset. See if you can increase the income either by making changes to improve the operation of the asset or by swapping the asset with another asset.


P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Check out my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Business

Why You Should Not Start a Business If You Don’t Have Another Source of Cash Flow

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If you are considering starting a business, one key lesson you may have learned from this pandemic is the importance of cash flow.

Many businesses had their cash flow completely eliminated due to the pandemic. As a result, most of these businesses had to shut down in as little as 3 months, some in less than 3 months.

These businesses went out of business because they had no cash.

  • They did not have the cash reserve to sustain operations for 3 months.
  • They could not wait for the government relief programs which took a little bit of time to kick in.
  • They could not obtain short-term financing to stay in business.

So, what’s the lesson for those considering starting a business?

Don’t start a business unless you have an additional source of cash flow to sustain your business for at least 6 to 12 months if your business is faced with hard times.

The famous multi-millionaire, Dan Lok in this video, introduces this concept of the wealth triangle. In the video he suggested a three-step method for generating wealth:

  1. Build a high-income skill that will generate over $120,000 in annual income;
  2. Operate a scalable business; and
  3. Invest in high-return investments that will earn at least 10% per annum.

He notes that starting a business is the hardest part. He cautions against starting a business before developing a high-income skill that can generate cash flow for you. As Dan notes in the video:

“A business takes a tremendous amount of effort to build. Don’t believe that you can start a business and make money within a few months. Be prepared to go a year, two years or three years before making a profit. The only way a business goes out of business is if it runs out of cash.”

I could not agree more with Dan.

Before you start a business, make sure you have a cash reserve that you can potentially use if needed to keep your doors open for business.

If you’re already in business, you will agree that cash is critical to keeping your doors open. As they often say,

Cash is King!

Several years ago when I started a business with my business partner, we faced a number of cash flow challenges as we did not pay close attention to these 5 key drivers of poor cash flow I discuss below.

“Never take your eyes off the cash flow because it’s the lifeblood of business.” — Sir Richard Branson

So, I want to share these 5 key insights I learned from my experience dealing with cash flow issues in my business very early on. I hope they will help you avoid running into cash flow issues as you run your business:


1. Low gross margin

Following a close analysis of our margins, we realized that the low margins on our sales were a critical contributor to a lack of sufficient cash flow in the business.

This was primarily due to the low fees we charged early on in the business. In our attempt to quickly acquire clients, we went low on fees and provided services similar to other providers. We essentially competed on price rather than on value.

We could not justify charging a higher fee due to the lack of differentiation in the market place. To address this concern, we now invest in ways to differentiate our services from the rest of the market. We are continually working on different ideas to change service delivery and add more value to our clients.

If you are able to offer more value to your clients, you can charge higher fees for the value you provide — value that clients cannot get from your competitors.

“Entrepreneurs believe that profit is what matters most in a new enterprise. But profit is secondary. Cash flow matters most.” — Peter Drucker


2. Slow-paying invoices

At some point in my business, this was a big concern as we had thousands of dollars in receivables that were 30 days, 60 days, and sometimes 90 days past due.

The impact on cash flow can be significant when invoices are not paid on time. For some understandable reasons, we were shy to ask our clients to pay.

Our clients are busy professionals and business owners, so most often they simply forget.

As business owners, it is our responsibility to remind clients to pay. To address this problem, we implemented a few things like:

  • Requiring upfront payment of a certain percentage of the total fees prior to commencing the engagement;
  • Invoicing more timely;
  • Following up more frequently on unpaid invoices;
  • Offering early payment discounts;
  • Implementing monthly or quarterly recurring pre-authorized payments; and
  • Automating the process to remind clients of unpaid invoices.
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3. High overhead expenses

Every business will have overhead expenses that must be managed closely. The overhead expenses impacted our cash flows and we found it challenging to cut in this area.

What we did was to look for cheaper ways to pay for the key things we needed. For example, we cut our radio advertisement which was expensive, and spent a fraction of that money on running events and online marketing.

“The more a business owner knows about their cash flow, the more empowered they become.” — Nick Chandi


4. Bad debt

If you’re in a business like ours, you will likely deal with bad debt. While the impact on our cash flows is less for this issue compared to the others, we have had our share of bad debts.

These are clients who just don’t pay part or the entire invoice. Requiring upfront payment has minimized this and implementing a more robust client engagement process is something we are refining to help substantially reduce the likelihood of bad debt.

“If I had to run a company on three measures, those measures would be customer satisfaction, employee satisfaction, and cash flow.” — Jack Welch

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5. Slow investment or capitalization of the business

A growing business requires capitalization to fuel that growth. You can capitalize one of two ways — reinvest your profits into the business or add debt to the business by borrowing.

In running our business, we’ve used both options but to a limited degree. Although our business has grown over the last couple of years, the growth has been slow, principally because we’ve not been aggressive in throwing more capital to fuel growth.

Growing a business is a double-edged sword. On the one hand, it can put significant pressure on your cash flow. On the other hand, if successfully implemented, it can add a lot of new cash flow streams to your business.

We’re now at a place in our business where we feel comfortable increasing the capitalization of the business a little bit more aggressively than we’ve done in the past.

We continue to minimize owners’ draw from the business so we can leave the capital to invest in growth.

“There is really only one way to address cash flow crunches, and it’s planning so you can prevent them in advance.” — Elaine Pofeldt

The key here is to have a long-term view of your business that will enable you to invest more in the capitalization of the business.

I hope you find a few points from this article to improve your business cash flow. In upcoming articles, I will look into other core areas of running your business.


In Conclusion

Cash is king!

If you don’t want to go through the experience that many businesses went through during this pandemic, then you have to keep a close eye on your cash flow and ensure you have sufficient reserves either in the form of cash saved or available financing if you run into hard times.

P.S. I am on a mission to arm you with financial education. That’s one reason I started writing on medium and that’s why I wrote Tax-Efficient Wealth. This book will help you accelerate your wealth in a tax-efficient way. Grab a FREE eBook version of my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Personal FinanceTax Planning

The Differences Between Canada Pension Plan (CPP) and Old Age Security (OAS)

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Clarifying the differences between CPP and OAS for Canadians nearing retirement

For many Canadians nearing retirement age and those considering their options for the best time to take retirement benefits, they don’t understand the difference between the CPP and OAS. In this article, I will clear the confusion and clarify the differences between these two popular benefits for Canadian Pensioners.


Overview and Definitions

The Canada Pension Plan (CPP) retirement pension is a monthly, taxable benefit that replaces part of your income when you retire. If you qualify, you’ll receive the CPP retirement pension for the rest of your life. To qualify you must:

  • be at least 60 years old
  • have made at least one valid contribution to the CPP

Valid contributions can be either from work you did in Canada or as the result of receiving credits from a former spouse or former common-law partner at the end of the relationship.

CPP payments are not automatic. You must apply in advance of when you want the pension to start in order to receive payment.

One important point to note is that the CPP is not a government benefit and it is not funded by the government. CPP is a defined benefit pension plan, funded by employees and their employers.

The funds are managed by the CPP Investment Board. The CPP Investment Board was established by an Act of Parliament in December 1997. The board is accountable to Parliament and to federal and provincial ministers who serve as the CPP stewards. However, the board is governed and managed independently from the CPP itself and operates at arm’s length from governments.

The Old Age Security (OAS) program is the Government of Canada’s largest pension program. It is funded out of the general tax revenues of the Government of Canada. This means that you do not pay into it directly.

The OAS pension is a monthly payment available to seniors aged 65 and older who meet the Canadian legal status and residence requirements. You may need to apply to receive it.


Pension amount

CPP

The amount you receive each month is based on your average earnings throughout your working life, your contributions to the CPP, and the age you decide to start your CPP retirement pension. Your contributions to the CPP are based on your earnings.

The standard age to start the pension is 65. However, you can start receiving it as early as age 60 or as late as age 70.

If you start receiving your pension earlier, the monthly amount you’ll receive will be smaller. If you decide to start later, you’ll receive a larger monthly amount. There’s no benefit to wait after age 70 to start receiving the pension. The maximum monthly amount you can receive is reached when you turn 70.

For 2019, the maximum monthly amount you could receive as a new recipient starting the pension at age 65 is $1,154.58. The average monthly amount is $679.16. Your situation will determine how much you’ll receive up to the maximum.

OAS

The amount of your Old Age Security (OAS) pension will be determined by how long you have lived in Canada after the age of 18. If you were a resident of Canada for 40 years between the age of 18 and 65, you will get the maximum OAS amount.

OAS benefits are adjusted quarterly (in January, April, July, and October) if there are increases in the cost of living as measured by the Consumer Price Index.

The maximum OAS benefit in 2020 is $613.53 per month.


Age of eligibility

As discussed earlier, the standard age to start the pension is 65. However, you can start receiving it as early as age 60 or as late as age 70.

OAS is a benefit available at age 65. You cannot collect OAS any early and new rules now allow for the voluntary deferral of OAS to as late as age 70.

Note that your employment history is not a factor in determining eligibility for OAS: you can receive the Old Age Security (OAS) pension even if you have never worked or are still working.

If you are living in Canada, you must:

  • be 65 years old or older
  • be a Canadian citizen or a legal resident at the time we approve your OAS pension application, and
  • have resided in Canada for at least 10 years since the age of 18

Clawback

With the CPP, there is no clawback. Clawback only applies to OAS.

The OAS clawback means that if you earn more than the maximum annual income allowed for a given year, you will have to repay part of or their entire OAS pension. The income threshold for 2019 is $77,580.


Survivorship

When a pensioner dies, the CPP will make the pension benefit payment to the surviving spouse. The surviving spouse must apply (it is not automatic) and the maximum combined CPP pension (personal CPP plus CPP survivor) cannot exceed the annual maximum benefit.

There are no provisions for OAS to continue to any after death. OAS ends when the pensioner dies.


Adequacy of pension funding

According to the CPP Investment Board, the CPP appears to be well funded.

Every three years, the Office of the Chief Actuary of Canada conducts an independent review of the sustainability of the CPP over the next 75 years.

In December 2019, the Office of the Chief Actuary reaffirmed through its latest triennial review that each part of the CPP remains sustainable at the legislated contribution rates throughout the 75-year period of her report (i.e., until 2095), based on actuarially accepted assumptions.

As of March 31, 2020, the Fund’s 10-year net nominal annualized return of 9.9% (or 8.1% on a net real return basis) is comfortably above the Chief Actuary’s assumption over this period.

OAS is funded by tax dollars. According to government reports, OAS is costing the government $36.5 billion dollars. The government predicts that the cost to fund Old Age Security will triple to $108 billion by 2030. OAS may be subject to changes in the future as this is not independently governed like the CPP.


Final Thoughts

Now you know the difference between these two benefits.

If you’re considering retiring, ensure you do some planning to maximize your benefits from these programs.

P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Check out my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Personal DevelopmentSelf Growth

20 Quotes to Inspire You to Invest in Yourself

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The best investment you can ever make is an investment in yourself

I believe that the best investment you can ever make is an investment in yourself.

If you realize that you’re the #1 asset in anything you do, then you will begin to prioritize investment in yourself.

And this is why.

If you’re employed, you were for a reason — for the special skill you possess. So you must keep investing in yourself to stay on top of your game if you want to keep getting promoted and keep getting higher bonuses.

If you own a business, you are the business. You make all the critical decisions. You hire the best people. You are the top sales and marketing guru in your business. So, if you want to keep generating higher and higher income, you have to stay on top of your business by investing in yourself.

If you don’t invest in yourself, no one will.

You invest in yourself by:

Learning and growing in your knowledge in critical areas.

Learning how to learn.

Hiring coaches and mentors to collapse time and avoid costly mistakes.

Growing in your spirituality.

Mastering the mindset of successful people.

Mastering how to effectively build relationships and how to work with people.

Learning how to build communities and how to build a movement.

It is suggested that you invest at least 10% of your gross earnings in yourself. Often times, if done correctly, this investment will yield rewards that are multiple times what you invested.

That is the power of investing in yourself.

Here are 20 quotes to inspire you to invest in yourself:


Quote # 1

“Be patient with yourself. Self-growth is tender; it’s holy ground. There’s no greater investment.” ―Stephen Covey

Quote # 2

“Income seldom exceeds personal development.” — Jim Rohn

Quote # 3

“Every moment of one’s existence, one is growing into more or retreating into less.” — Norman Mailer

Quote # 4

“Dream big, start small, but most of all, start.” — Simon Sinek

Quote # 5

“You cannot dream yourself into a character; you must hammer and forge yourself one.” — Henry David Thoreau

Quote # 6

“The only person you are destined to become is the person you decide to be.” — Ralph Waldo Emerson

Quote # 7

“Life is growth. If we stop growing, technically and spiritually, we are as good as dead.” — Morihei Ueshiba

Quote # 8

“Change equals self-improvement. Push yourself to places you haven’t been before.” — Pat Summitt

Quote # 9

“Personal development is a major time-saver. The better you become, the less time it takes you to achieve your goals.” — Brian Tracy

Quote # 10

“Personal development is the belief that you are worth the effort, time and energy needed to develop yourself.” ―Denis Waitley

Quote # 11

“There is nothing noble in being superior to your fellow man; true nobility is being superior to your former self.” — Ernest Hemingway

Quote # 12

“Personal confidence comes from making progress toward goals that are far bigger than your present capabilities.” — Dan Sullivan

Quote # 13

“Growth is the great separator between those who succeed and those who do not. When I see a person beginning to separate themselves from the pack, it’s almost always due to personal growth.” — John C. Maxwell

Quote # 14

“In this world you’re either growing or you’re dying, so get in motion and grow.” — Lou Holtz

Quote # 15

“One can choose to go back toward safety or forward toward growth. Growth must be chosen again and again; fear must be overcome again and again.” — Abraham Maslow

Quote # 16

“Strive not to be a success, but rather to be of value.” — Albert Einstein

Quote # 17

“Investing in yourself is the best investment you will ever make. It will not only improve your life, it will improve the lives of all those around you.” — Robin Sharma

Quote # 18

“Don’t go through life, grow through life.” — Eric Butterworth

Quote # 19

“Stay afraid, but do it anyway. What’s important is the action. You don’t have to wait to be confident. Just do it and eventually the confidence will follow.” — Carrie Fisher

Quote # 20

“We can’t become what we need to be by remaining what we are.” — Oprah Winfrey


Final Thoughts

If you want success and if you want to use all of your potentials, you cannot neglect to invest in yourself.

Being at the top of your game and staying there will require enormous investment in yourself. It is hard work, it takes time but the reward is much better than the effort you put in.

So, what are you waiting for?

Start doubling, tripling, or quadrupling the investment in yourself now. Your future self will thank you for this.

P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Check out my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Personal DevelopmentPersonal FinanceSelf Growth

Why Finding Job Satisfaction Is so Rare

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This is why so many people are stuck at jobs they hate

As a full-time employee, I worked for five different companies in the span of 17 years. This would seem like a lot of companies in a relatively short period of time. It certainly would be for the older generation but not for the millennials.

These days, it appears to be more trendy to move more frequently from one company to another in search of better pay, more prestigious job title position, more authority, and more power.

As I think back to my career in the corporate world, I don’t recall too many times when I really had job satisfaction. Something was always missing that made the job frustrating for me — terrible bosses, incompetent colleagues, poor compensation, lack of passion, lack of corporate integrity, etc.

I don’t recall one person in my 17 years career in the corporate world that loved his or her job or had anything amazing to say about the job. It was more common to hear colleagues complain about one thing or the other about their jobs.

So, why is it so rare for many to find job satisfaction in the corporate world?

In an article by Michael Hyatt, he writes that job satisfaction requires three components:

  1. Passion: This is where it begins. What do you care about? What moves you? What problems do you want to solve or issues you want to address? If your heart is not in your work, you have a job but not a calling.
  2. Proficiency: Passion alone is not enough. You have to be good at what you do. Being good enough will not give you the satisfaction you desire. You have to excel at your craft and be awesome. Mastery is the goal.
  3. Profitability. To enjoy a successful career, people must be willing to pay you for what you do. You don’t have to get rich, but there must be a market for your product or service. Otherwise, your career is not sustainable.

As Michael writes, if you have all three of these components, you can experience genuine career satisfaction which is at the intersection of all of these three components as illustrated in the figure below:

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Image Credit: https://michaelhyatt.com/

Anything short of these three components intersecting perfectly will lead to something other than true job satisfaction.

  • If you have passion and proficiency without profitability, you have a hobby. Many people that work in the Not-For-Profit sector will fall into this category. They have the heart to serve using the skills they’ve been blessed with but end up overworked, stressed, and unable to pay their bills.
  • If you have passion and profitability without proficiency, you have failure. You can fake it in the short-term but in the long-term, your lack of proficiency will be exposed. You will struggle to get hired, or simply be flushed in the next round of layoffs.
  • If you have proficiency and profitability without passion, you have boredom. This was my story in the latter part of my career where I had the proficiency and had decent pay but was bored as the job did not fulfill me intellectually or otherwise.

This explains why the majority never find job satisfaction because it is rare to find a job that has a perfect intersection of all of these three components.

To find job satisfaction, you will have to create your own job. If you’re in the corporate world, this means you must be in a position with a lot of authority.

If you’re an entrepreneur you have a better chance of finding job satisfaction in your business. However, note that most entrepreneurs don’t start out here. It takes years of tweaking the business to get to the point where you will have true job satisfaction even as an entrepreneur.

Final Thoughts

If you have job satisfaction, lucky you. It is rare.

If you don’t, ask yourself, “Which of these three components am I missing? What could I do to become more satisfied with my job?

P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Check out my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Personal Development

The Case for Taking Naps

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Why you should take regular naps for better health and creativity

Research in the last couple of years has strongly supported the case for regular naps pointing to a number of health benefits associated with napping.

WebMD in a recent article, “America, It’s Time for Your Nap” makes the case that a workday snooze can relieve sleep deprivation and boost productivity.

According to the article, people don’t nap to recover from last night’s party. They nap to make up for early-morning commutes, long work hours, and too many responsibilities at home. After a little nap, they feel more alert and do a better job.

If you work in a corporate office, I’m sure you have had your struggle with falling asleep on the job. To deal with this, we look for ways to get some shut-eye for a few minutes. We slip into storage rooms. We sneak to the car. And some lock the bathroom stall just for a few minutes of nap time.

With many of us working from home these days, we no longer have to sneak away to get a nap. We can now intentionally plan our nap times when we can at the comfort of our beds or sofas. I have certainly done this a few times to get a boost in productivity.

Even though there is strong research to support the many benefits of taking naps, it is still not widely accepted as a part of our working life in most North American companies. A few American companies are changing their personnel rules to allow a daily nap. The U.S. trucking and rail industries have instituted napping policies. And in some Asian companies, a nap is required.

In his book EssentialismGreg McKeown makes a case for sleep and naps in his chapter on sleep. He writes:

Even a brief period of deep sleep, in other words, helps us make the kinds of new connections that allow us to better explore our world. In a nutshell, sleep is what allows us to operate at our highest level of contribution so that we can achieve more, in less time.”

He goes on to say that the essentialist knows:

One hour more of sleep equals several more hours of much higher productivity.

Sleep is for high performers.

Sleep is a priority.

Sleep breeds creativity.

Sleep enables the highest levels of mental contribution.

“Each night, when I go to sleep, I die. And the next morning, when I wake up, I am reborn.” — Mahatma Gandhi

Daniel H. Pink in his book, When, writes about the necessity of nap-taking. He says research shows that naps give two key benefits:

  1. Improve cognitive performance
  2. Boost mental and physical health

He cites a number of research studies in his book, one of which is a Greek study, which followed more than 23,000 people over six years. The study found that controlling for other risk factors, people who napped were as much as 37% less likely as others to die from heart disease, ‘an effect of the same order of magnitude as taking an aspirin or exercising every day.’ Napping strengthens our immune system.

Daniel provides the following tips for taking an effective nap:

  • Take a nap 6–7 hours after waking: Pink claims your optimal nap time is about 7 hours after waking. This is a time that is consistent with the recommendation by sleep.org. Sleep.org says the best hour for most people to nap is between 2:00 pm and 3:00 pm. That’s because you’ve already eaten lunch and your blood sugar and energy levels will naturally start to dip. In fact, your body clock is often programmed to make you feel a little sleepy in the middle of the afternoon. If you try to nap earlier, your body might not actually be ready for more sleep.
  • Give yourself a few minutes to fall asleep: It takes most people about 7 minutes to fall asleep
  • Keep it between 10–20 minutes: 10-minute naps had positive effects that lasted nearly 3 hours. Pink’s research shows naps under 10 minutes aren’t effective and beyond 30 minutes starts to result in grogginess. Sleep.org suggests 20 to 30 minutes as the best time for naps.
  • Make it a “nappuccino” for maximum effect: It’s a cup of coffee followed by a nap. Caffeine takes about 25 minutes to enter your bloodstream, so you wake up from your nap with an extra boost.

Final Thoughts

For most of us, we still live with the stigma of naps = laziness. As a result, we don’t take naps at work. I’m certainly guilty of this.

We have to start intentionally blocking time in our calendars for daily “power naps.” We must realize the benefits associated with napping, one of which is increased productivity at work.

P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Check out my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Personal Development

Is Work Working for You?

service_Lease_Accounting

What is the purpose of work?

In her book, Your Money or Your LifeVicki Robin makes the argument that breaking the link between work and wages can lead to more fulfilment in your life. She makes a very compelling argument that I want to present in this article. I will start by posing a few questions she posed in her book.

What is work?

Vicki noted that the concept of work consists of a patchwork of contradictory beliefs, thoughts, and feelings as illustrated by the following definitions of work:

E. F. Schumacher, an influential twentieth-century economist, says:

The three purposes of human work are as follows:

  • First, to provide necessary and useful goods and services.
  • Second, to enable every one of us to use and thereby perfect our gifts like good stewards.
  • Third, to do so in service to, and in cooperation with, others, so as to liberate ourselves from our inborn egocentricity.

The late economist Robert Theobald tells us:

Work is defined as something that people do not want to do and money as the reward that compensates for the unpleasantness of work.

Studs Terkel begins his book Working this way:

This book, being about work, is, by its very nature, about violence — to the spirit as well as to the body. It is about ulcers as well as accidents, about shouting matches as well as fistfights, about nervous breakdowns as well as kicking the dog around. It is, above all (or beneath all), about daily humiliations. To survive the day is triumph enough for the walking wounded among the great many of us…It is about a search, too, for daily meaning as well as daily bread, for recognition as well as cash, for astonishment rather than torpor; in short, for a sort of life rather than a Monday through Friday sort of dying.

So, what really is work?

Is it a blessing or a curse?

A trial or a triumph?

Vicky redefines work by looking at what is consistently true about work. And this takes us to our second question.

What is the purpose of work?

Vicky challenges you to start by first reflecting on the following questions:

  • Why do you do what you do to earn money?
  • What motivates you to get out of bed to go somewhere and make money?
  • What is the purpose, in your experience, of your paid employment?

Now, consider the following list of various purposes of paid employment and see which one applies to you as you reflect on the questions above:

  1. Earning money: To provide for oneself and the family. To save for the future. To engage in philanthropy. And to achieve financial independence.
  2. A sense of security: To ensure that your place at the company is assured. To ensure that you’ll have benefits.
  3. Tradition: To carry on a family tradition of following a particular profession. To fulfill a duty to your family. Because everybody works.
  4. Service: To do your fair share. To make a contribution to others, society, and the world. To “be the change you wish to see in the world,” aligning skills with helping others.
  5. Learning: To acquire new skills, grow as a human, become more marketable. To be stimulated and challenged. To innovate and create.
  6. Power: To influence other people. To influence decisions and outcomes. To assure respect and admiration from those you want to impress. To achieve success and prominence in your field.
  7. Socializing: To enjoy connecting with your coworkers. To interact with other people and feel part of a larger community. To engage in companywide events and parties.
  8. Time structuring: To structure your time and give an orderly rhythm to your life.

Vicky writes that you would notice that work has two different functions: the material, financial function (i.e., getting paid), and the personal function (emotional, intellectual, psychological, and even spiritual). She concludes that in reality, there is only one purpose served by paid employment:

Getting paid.

That is the only link between work and money. The other purposes of paid employment are other types of rewards, which are certainly desirable but not directly related to getting paid. They are all equally available in unpaid activities. Vicky makes the point that:

“For middle-class workers and up, any stress, confusion, or disappointment we might feel concerning our paid employment is rarely because of the pay itself. We have already seen that beyond a certain level of comfort, more money does not bring more satisfaction. Perhaps the trouble with our paid employment, then, is that our needs for stimulation, recognition, growth, contribution, interaction, and meaning are not being met by our jobs.”

Vicky goes on to argue that breaking the link between work and money allows us to reclaim balance and sanity. She writes:

Our fulfillment as human beings lies not in our jobs but in the whole picture of our lives — in our inner sense of what life is about, our connectedness with others, and our yearning for meaning and purpose. By separating work and wages we actually open the door to integrating all parts of our lives, from earning money to loving our families, into one whole called “who we really are.” When we are whole, we don’t need to try to consume our way to happiness. Happiness is our birthright.

Vicky goes on to provide these 8 implications of breaking the link between work and wages:


1.Redefining work increases choices

When you break the link between wages and work, you open up more options for yourself. Vicki explains with an example.

Let’s say you are a natural-born teacher but you took a job as a computer programmer because you can make more money (which you are convinced you need). In the old way of thinking, every time someone asked you what you do, you would be forced to affirm, “I am a computer programmer.” What do you suppose the effect on you might be of this long-term incongruity between your inner sense of yourself and your outer presentation? You might be mildly unhappy and not know why. You might be ill. You might run up a credit card debt to reward yourself for doing something that doesn’t suit you.

By breaking the link between wages and work, when you’re asked what you do, you can affirm, “I am a teacher, but currently I’m writing computer programs to make money.” Being able to acknowledge who you really are allows you to re-evaluate how you’ve structured your “career.”

You might decide to reduce your programming hours so that you can volunteer as a teacher. You might decide to teach computer programming. You might bring in a third love, like kayaking, and teach that on weekends while you program computers for money.

Disconnecting work from wages allows the various parts of your compartmentalized life to break loose, slide around, and rearrange themselves in a pattern that serves you better.


2. Redefining work allows you to work from the inside out

Vicki makes the point that fitting our well-rounded selves into the square holes called job reinforces the impression that life consists of selecting options from a fixed list. Unless you’re an artist or an entrepreneur, most often your job consists of working with someone else’s agenda — for which service you get paid.

In large corporations, most workers don’t even have a clue as to who originated the plans they’re diligently getting to work. And such corporations buy not only our work but our personalities as well, with their unspoken cultural norms about who talks with whom, what to wear, where people at various levels “do” lunch, and hundreds of other daily choices.

It’s clear that if we think that what we do to make money is who we are, we will end up adopting whatever pattern will allow us to survive best at our job. But if who you are and what you do to make money are distinct, you can reclaim your lost self. As you come to know yourself, your values, your beliefs, your talents, and what you care about, you will be able to work from the inside out. You will be able to do your job without giving up your self.


3. Redefining work makes us life designers, not just wage earners

Vicki writes that in the modern era, we learn to spend most of our time selling one small slice of our talents (i.e. working at a particular job) to pay for everything we need. Lose your job and you’ve lost 100% of your income.

Disconnecting work from wages, however, opens the door to valuing the big piece of the pie called “the rest of your time.” You might learn handyman skills or build that deck yourself or host a website or launch a blog…When you stop working for money, you may be out of a job but you are not out of work.

This means play might end up being pay. You might learn skills in a job that you take into your life. You may learn lessons in your life that later you’ll be paid for. The skills acquired in one job may lead to another. On one job you may learn the ins and outs of a trade so you can leave that job and ply that trade for fun…or profit. Work becomes self-expression. You are your boss, whether you’re paid or not, and you can carve out your own path.


4. Redefining work adds life to your retirement

As Vicki writes, retirement doesn’t mean you stop working. It means you can stop working for money. We all want to be useful, to be recognized by others for the contribution we make. If we think paid employment is our only admirable, respectable, and consequential way to contribute, then who’d want to retire? Nobody wants to be a has-been, washed up, put out to pasture. Disconnecting work from wages means that you are valuable in every role, task, activity — and it might free you to retire a lot earlier so you can give a lot more of yourself to others.


5. Redefining work honors unpaid activity

If you’ve ever tracked your time for an entire day or week or month, you will realize you have a lot of hours of unpaid activities. Important activities like cleaning, cooking, shopping, and chatting with family members.

Isn’t it true that these unpaid activities are often seen as worthless — as in worth less than paid activity? Isn’t it true that there is an almost universal belief in our culture that if you are not working for money, not building a career, not employed, you are a nobody?

Our inner work — the job of self-examination, self-development, and emotional and spiritual maturation — is just as crucial as paid work or housework or yard work. It takes time to know yourself — time for reflection, for prayer and ritual, for developing a coherent philosophy of life and personal code of ethics, and for setting personal goals and evaluating progress.

Disconnecting work and wages does away with that painful erasure of self from our identification with our jobs.


6. Redefining work reunites work and play

A friend once told me that you should design your life such that when people see you, they can’t tell if you’re playing or working. Vicki captures the same idea here as she writes…

Work is serious. Play is frivolous. Work is adult. Play is childish. Work is useful. Play is useless. Sometimes play may look like work, as in an intense chess game. Sometimes work can look like and even be called play, as in professional sports. And sometimes work feels so much like play that people say (somewhat guiltily), “This job is such fun I shouldn’t be paid for it.” So how do we tell the difference between work and play?

Both play and work can be competitive as well as cooperative. They can both build skills and give a sense of achievement. With both you can enter a state of intense focus, concentration, and flow. In fact, from the outside, watching a person fully engaged in an activity, one would not know if he or she was being paid or just playing. This is the power of disconnecting work and wages — you reconnect work and play so your whole life can glow with enjoyment.


7. Redefining work allows you to enjoy your leisure more

Vicki notes that the Greeks have always considered leisure as the highest good, the essence of freedom — a time for self-development and for higher pursuits. However, in our world today, we are unable to really relax and enjoy our leisure. Even our language betrays us by calling it “time off”, as though leisure were just a few minutes of recuperation before we’re back “on”, a once-again productive human being. If we did not identify so strongly with what we do for money, we might honor and enjoy our leisure more. It’s OK to play. It’s OK to relax in the shade and listen to the birds. It’s OK to take a walk to nowhere in particular. It’s OK to leave your technology at home and go camping. There is no shame in taking time to do activities alone either. It’s OK to take pleasure in just being rather than always doing. Leisure is not an identity crisis if you know you are not your job.

Perhaps because our jobs are so laced into every hour of our days, we take our leisure in unconscious and unsatisfying ways, like those micro-vacations consisting of secretly checking our phones while at work for texts from friends, social media, and maybe a recent skit from a late-night-TV comic. Separating work from wages reminds us to work with focus while at work and focus fully on our chosen activities when our time is our own.


8. Redefining work sheds a new light on “Right Livelihood”

“Right livelihood” is the ideal of finding a way for your true work or vocation to be your paid work as well. As admirable as this is, Vicki notes that there is no guarantee you will find someone to pay you to do what you feel called to do. It may take many years to develop your art or your research or your social innovation or your technology to the point where those who have money will fund you.

By giving up the expectation that you will be paid to do the work you are passionate about, you can do both things with more integrity. You can make money to cover your expenses, and you can follow your heart without compromise. You can treat your paid-employment years like preparation for your full-time vocation, with each job teaching and honing important personal and work skills as well as building networks.

To whatever degree you’ve settled for work you don’t love, if you have failed at being paid to do what you love, you can know that you have not really settled, you are just setting yourself up for your next move and ultimately your Financial Independence.


Conclusion

In my opinion, Vicki makes a persuasive argument here redefining work and putting together a strong case for breaking the link between work and wages.

Most of us work at jobs we hate and never have the opportunity to spend a significant amount of time doing the work that actually lights us up, the work we love.

Even more devastating is the fact that we place so much value in paid work that it steals the fulfillment we would have otherwise enjoyed if we had clearly broken the link between wages and work in our minds and lifestyle.

Our goal therefore, is to immediately break that link between wages and work so we can start living a fulfilled life.

P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Check out my new book, Tax-Efficient Wealth, to learn how you can build 

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