The Lake of Two Rivers

Copyright © 2013 by Rolf Eliason.

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

Rev. date: 08/27/2013

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CONTENTS

Preface

Acknowledgments

Chapter One: Keep It Simple

Chapter Two: The Wizard Of Cause

Chapter Three: What Are You Doing With Your Life?

Chapter Four: The Lake Of Two Rivers

Chapter Five: The Plain, Simple Truth

Chapter Six: Financial Enemies

Chapter Seven: Slay The Dragon

Chapter Eight: +Pit, −Fit

Chapter Nine: Anything Can Happen Anytime

Chapter Ten: What Really Counts?

Chapter Eleven: Out Of The Fry Pan

Chapter Twelve: Up The Chimney

Preface

Have you ever considered the value of mentorship? Most people can think of one or more persons in their life that have made a significant contribution to their personal development. I am no different. However, having been raised in a small rural town in Western Canada, some might wish to call me a Red Neck.

I would rather put a positive spin on it and say that I have strong opinions. You will certainly find in this book I love to tell stories. Why the Viking hat? You will understand later in the book.

Through mentorship and observing life stories, I realize personal finance is not as complicated as some make it out to be. This book encapsulates that mentorship I have experienced. These stories are noted in the form of plain, simple truth.

I encourage you to pass that same kind of mentorship on to people you love. It will have a positive, certain effect on their financial destination. With this, I hope to awaken your curiosity.

I also hope you enjoy the stories.

Acknowledgments

Many authors are quick to first acknowledge their significant other. I am no different, and this isn’t just protocol. Joan, our life together has transformed me into the financial advisor and man that I am. Thank you.

Through our love, we produced two boys that have grown into young men any parent would be proud of. It was only a few memorable exchanges between father and son that spawned the writing of this book.

The mentorship of my late father-in-law, William Hopkins, to me has been priceless and must be mentioned. The effect that man had upon my development will become evident as you continue to read The Lake of Two Rivers. His balance between work and play to me was a definite inspiration.

I also would like to thank my sister, Sharon Miller, for assisting with primary editing. She was quick to point out what a past participle and prepositional phrase is. I had long forgotten.

Thank you to my clients for sharing their hopes, dreams, and experiences. I highly value these types of dialogue. Together, through dialogue we grow.

Finally, I would like to thank Xlibris publishers for the independence they have given me and the support to make the process of bringing my work to print a comfortable, professional, and enjoyable experience.

Chapter One

KEEP IT SIMPLE

Not another book on personal finance!

This is a book on sizzle, not on steak. It is not just another book on personal finance but a collection of plain, simple truths, anecdotes and stories collected over a lifetime. I believe these stories and simple truths will have a strong positive effect on your financial direction if habits needing attention are addressed. If you are looking for guidance on complicated investment schemes, please look elsewhere. You will not find any here. This is a book focused on benefits. Yours!

The title of this chapter was chosen from a principle taught to me in a sales course taken many years ago. It is called the KISS principle. Keep it simple and supported. Not only do I wish to focus on benefits (they will be referred to as sizzle), I also wish to arouse your curiosity. Just as the map you refer to on a journey will have a significant bearing on your destination, I believe this collection of anecdotes and stories will inspire you to take appropriate action that will positively affect your financial direction and future.

Having an appropriate plan is not enough. You may already have wonderful plans, but you may not be reaching your expectations. That is, if you have a plan. However, without appropriate action nothing will happen. You may actually have to do something, such as alter your financial habits. That plan must be applied to your life with zeal and determination.

Time is precious to everyone, and it is my best guess you are wondering in the back of your mind if spending the time reading this book will be worth the effort. Will I learn anything of value? Just look around the business section of the bookstore, and you will find dozens of books on personal finance. What makes this one special?

As a former industrial sales representative, I would bet you are not so much interested in features or advantages of a particular investment strategy. I would bet strongly what is actually in the back of your mind is benefit: What is reading this material going to do for me? Do I really foresee any change in my finances after reading this?

I have spent several years in postsecondary education and almost twenty years in various technical sales capacities within the province of Ontario. I am now entering my fifteenth year in personal finance as an advisor and have been managing my own household portfolio of capital for about twice that length of time.

However, what I believe to be of significance is having listened to the life stories of many people, including their hopes, fears, aspirations, and life situations. This has given me inspiration in a direct way. This is what I believe truly matters: providing plain, simple truth extracted from actual life experience. It has been through lessons learned through heroes of mine that I feel compelled to give back.

Rocket science it is not

Let me provide clarity here. There is no magic. This is not a get-rich-quick scheme. The world is full of hucksters and Ponzi schemes. Many of these purveyors of financial advice, while self-serving, have been crucified in the media and are now in jail. Ponzi scheme has become a common household phrase. We understand the phrase "Bernie that made off with the loot!" Thank goodness he got jail time, and rightly so! The relationship between an investor and a financial advisor is a fiduciary relationship, which means the advisor must place the investor’s interest ahead of himself or herself. Period! To treat another person the same way you would have that person treat you, as the golden rule states.

A wallet versus a badge

My wife and I have two sons of whom we are very proud. At the time of writing, Carl, the older of the two, is a commercial pilot in Northern Ontario, and Evan, the younger of the two, is entering third-year law. I approached Evan one day and asked him a loaded question: Which would you rather have, a big badge or a big wallet? I was proud of his choice—the wallet, of course. The point that I bring to bear is there are many cowboys out there with a big hat but no cattle. They seem to have lots of ideas but nothing to show for it. All bark, with no bite. Another familiar saying goes Money talks! But isn’t it better to have both the hat and the cattle? You tell me!

A collection of thoughts thirty-three years in the making

Let’s talk turkey. In no way am I downplaying the value of education, but I have seen many highly educated people with plenty of ideas but not having two nickels to rub together. How can this be? My father was often noted to break silence in a business meeting with a raised hand, rubbing his thumb and index finger together in the air while saying quietly, Show me the money! The fact is that sooner or later, ideas need funding. Expenses must be paid. Programs require capital. Life is expensive.

One day you may choose not to work. If that decision is postponed, the time will eventually come when you will no longer have capacity to perform tasks required in your work. This may be for whatever reason, be it sickness, health, or family. For some, this change is realized sooner than for others. The real question is, from where will payments for continuing expenses come? Would the payments come from your line of credit? Are you kidding? It seems to me our banks in the last ten years have been very adept at selling home equity lines of credit, complete with a Robin Hood Flour type of application: general purpose.

What? You didn’t get to your Caribbean holiday? Why not just put it on the line of credit? While signing you up for the line of credit, advocates for these lines of credit don’t seem to focus on the fact that they have a vested interest in signing you up. They may not specifically tell you to use the home equity line of credit for use on personal-use property, trips, or other financial sinkholes, but there is a definite implication of easy money. Come on, get real! Business continues only where profit is made.

Fortunately, at the relatively young age of twenty-five I had wonderful financial counsel. Even though I may not have been a rocket scientist, I was smart enough to listen to someone smarter than I. At the time of writing, this would make over thirty years of investing and collection of thoughts. These thoughts have felt like a pressure pot of ideas just waiting to explode. So here we go…

Let’s just call it investing 101

There are many successful investors out there. The one most likely to come to mind is Warren Buffett. Undoubtedly he is by far the most famous investor today, and we are fortunate to live concurrently with the man to observe his habits. He is one to be emulated—financially, of course. He is a value investor. He looks for stocks on sale at a low price. After purchasing at a very low price, and as an owner, he then waits very patiently. His homework was done long before the purchase.

Wayne Gretzky is undoubtedly the Great One of Hockey, and more will be said of him later. Wayne truly has the game of hockey figured out. Likewise, Warren Buffett is also the Great One—but in the game of investment. Many people are fans of his style of investing. You only have to attend one of the Berkshire Hathaway meetings in Omaha, Nebraska, to observe several thousand enthusiastic investors living off every word the man speaks to understand his popularity. When speaking with clients, I often use a few of his quick quotes. I encourage you to Google them. His quips are awesome! For example, his number 1 rule is not to lose money. Rule number 2 is not to forget rule number 1. To say the least, Mr. Buffett knows well the value of downside protection.

I often ask, If your portfolio goes down 25 percent in one year, how much do you have to make to get back to your starting point? The answer is not 25 percent. The answer is 33⅓ percent. How can that be? When you drop 25 percent, you now have 75 percent of your holdings to work on. To get back the 25 percent lost, you must make one-third of the 75 percent you are now at to make it back to 100 percent. This equals 33⅓ percent of where you now are.

I believe this to be the very reason Mr. Buffett chose this rule. Why? It is more difficult to make money on lost money than on a previously larger base. And this truth works in an exponential fashion. If you lose 50 percent of your money, you would have to make 100 percent