Our wallets seem empty every day, but companies around the world keep recording record profits at the expense of the every day man. Why won’t these companies kick us some slack and give us cheaper prices and higher pay if they are making reams and reams of money. It’s quite simple really, we’ve just joined the wrong team. Instead of being on the side that makes money, we’re languishing paying our bills, living pay check to pay check while those that invest in corporate America continue to “steal” our money.
Just last week, the 5 big banks in Canada reported year end results and they only earned a paltry $29.25 billion in profits. Thanks to record high prices for homes and a population that is dying to get their hands on a second or a third mortgage, the banks continue to reap the benefits of an ultra hot housing market. Canadians in general have gotten used to borrowing and spending. It’s cool now to carry around a huge debt. Mine’s bigger than yours.
It’s hard not to like spending borrowed money. There is so much instant gratification from purchasing something brand spanking new. Plus owning bank shares isn’t sexy. When was the last time you scored a date boasting about your portfolio of Royal Bank shares. It’s much easier showing off a brand new $100k BMW M5. You wouldn’t have to try, they come looking for you instead. Never mind the fact that if you had $100k to spend, and invested in the Canadian financial sector instead of buying a BMW that you’d be up a good 18%, plus a healthy 4% dividend. That 22% gain would probably score you a brand new Honda Civic. Unfortunately, the only thing you’ll be impressing your friends with isn’t the hot date in the passenger seat but the 100km/6.2L gas mileage.
Achieving financial independence isn’t about the freedom to buy things at whim. Certainly that may feel like the goal since we’re all so enamoured by shiny new things. Getting to financial independence just means that it’s not a constant struggle to make ends meet. We want our money to work for us so that we don’t have to work as hard, but making that happen is easier said than done.
Investing in assets that can generate income is always a tough decision to make because we are fearful of risk. In our minds we are actually hoping for the markets to fail. Whether it be hating the banks, hating the cell phone company, or hating the big box stores. We actually think that we are better off not partaking in corporate profits because its our belief that these companies are evil. When they do succeed, we hate them more. The fact is, these large corporations are publicly owned. Our colleague, our neighbour maybe even our own pension fund could be an owner of these public companies. So why do we want them to fail? Is it because we want everyone around us to fail as well? Rather than joining the winning team, we get left out. We are always thinking that the other side is better, but really we are missing out on what’s already shown to be proven success.
If we truly hated the big 5 banks, we wouldn’t be constantly supporting them by taking out larger loans and increasing their profits through interest payments. Rather than taking loans from banks, we should probably be buying them and reaping the benefits of the foolish who continue to increase the banks coffers. The truth to it all is that most of us have a herd mentality. We go with what others do because it seems right. If others say that it’s good it can only be good. If we believe it to be better than it will be better. Only the fearless decide to take the road less travelled and those are the ones that are rewarded for their courage.