Monthly Archives: November 2014

A Novel Approach is a bestseller in Amazon.ca’s Love & Romance category

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IMG_3858A Novel Approach to Financial Independence is one of the bestselling e-books in Amazon.ca’s Love & Romance category this weekend, as you can see in the screen shot to the right. Here’s the link to Amazon’s listing.

Love & Romance? What about personal finance? Well, I’ve always described the original Findependence Day as a financial love story so it’s not as out of the box as it may seem at first blush. Click on the red link in the title above to find out more about the Romance plot that’s at the heart of the original novel.

The full book features a couple, Jamie and Sheena, who are 28 at the start and follows their ups and downs as a couple over 22 subsequent years. It takes a “life cycle” approach to personal finance and centers around Jamie’s declaration that he will become financially independent (“findependent”) by the time he turns 50. There are numerous setbacks along the way, including business failure and betrayal, separation, children and more.

As CTV Senior Financial Commentator Patricia Lovett-Reid says in the foreword to both the original book and the e-book, money troubles are often the cause of marital disharmony. You can read that foreword, by the way, for free because it’s near the start and Amazon lets you “look inside.”

e-book is a “Coles Note” synopsis of the novel

I liken the e-book  to a “Cole’s Notes” synopsis of the original book, summarizing the plot but focusing more on the content on financial independence. It’s short (15,000 words) but costs only C$3.37. Amazon lets you designate purchases as gifts and with Christmas just around the corner, you have to admit it’s pretty cost-effective! Especially if you can change a young person’s life for the better, as we say in the ad below (also shown on the front page of Findependence.TV).

There is also a U.S. edition of the full novel available here, as well as a U.S. edition of the e-book, which you can find on the main page of this site.

billboardv51

 

 

 

The System Worked: How the World Stopped Another Great Depression

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systemworkedThe System Worked was published earlier this year, bearing the tantalizing subtitle: How the World Stopped another Great Depression. I ordered it from the library after reading a New York Times review on it and several related books.

I have to admit it took some time to wade through it, in part because I returned my copy to avoid lugging physical books through Turkey, where I spent three weeks in October. But on my return, I borrowed it again and finished the book.

The author, Daniel Drezner, is a senior fellow at the Brookings Institution and a professor of International Politics at Tufts University. I found his prose somewhat dull but the ideas underlying them are worth mining.

U.S., Europe and China pulled together

In book publishing it’s probably harder to sell an upbeat title than a pessimistic one. (When was the last time a newspaper led off an issue with “No planes fell from the sky yesterday?”)  And The System Worked is decidedly upbeat about how governments around the world coordinated their response to what could have been a global economic and stock-market disaster in 2008 and its aftermath. It credits this coordination primarily to the United States first and foremost, ably assisted by the Eurozone and China. Japan, it seems,  slipped into a second tier throughout this struggle to avert what otherwise was shaping up to be another Great Depression.

DreznerFP2
Daniel Drezner (Oxford Press)

The early chapters recap the common perception (a false one in the author’s view) that the system did NOT in fact work: this after Drezner lays out his case for why it did indeed work out splendidly. Those who claim otherwise cite specific trouble spots like the escalation of Europe’s sovereign debt crisis or the failure of climate-change negotiations. Here is a typical upbeat Drezner quotation:

“Even though the initial drop in output and trade levels was more acute in 2008 than in 1929, by any measure the global economy has rebounded more robustly over the past five years than it did during the Depression … The liberal economic order proved to be more robust than expected.”

Certainly, Drezner’s optimism has been justified through late November of 2014. Friday’s twin events of China cutting its interest rates and the ECB’s stimulus talks suggests that the world’s central banks continue to fight the good fight against deflation, depression and other horrors.

But can the system work for more than these first five years?

All of which makes the book’s final chapter all the more tantalizing. Entitled “Where do we go from here?” Drezner repeats his main theme when he says that on policy grounds, both TARP (Troubled Asset Relief Program) and the related Federal Reserve programs were “huge successes” in how they “greatly eased the credit crunch faced by the banks.” This despite the fact TARP “has remained political poison.”

Well, the skeptical reader may say at this point, we may have survived the first five years but can we keep it up? Drezner concedes “there are valid reasons to be concerned about the future.” There is still much fragility in the global economy and the Eurozone “has still not found a viable way to fix the internal imbalances between Germany and southern Europe.” A global recession is quite possible, he admits, and “there are a lot of ways in which things could go wrong” but “given what has happened since 2008, it is safer to conclude that they won’t.”

A big part of his faith is based on what he terms “the enduring strengths of the United States.” These include healthy demographics, geographical security, a dynamic pop culture and excellence in higher education and innovation. Add to that lower oil costs and the fact he believes America will be “the world’s leading oil producer some time before 2020.”

Meanwhile its chief rival, China, is reforming its development model so that “its domestic economy more closely resembles that of the United States.”

Drezner closes with the admission that in the world of international affairs punditry, pessimism sells. Nevertheless, he closes with this:

 “Pessimism has spread just as widely as financial contagion did in 2008. It is wrong and needs to be corrected … Going forward, a healthy dollop of optimism is in order.”

 

 

Why you should avoid car loans

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2012-toyota-camry-le
Don’t laugh: it’s paid for!

As anyone who believes in “Findependence” well knows, it’s best to torpedo debt as early in life as possible. This starts with student loans and high-interest credit-card debt and proceeds to home mortgages. As the book says more than once, “The foundation of financial independence is a paid-for home.”

This also applies to financing automobiles. I only ever bought a brand-new car once and that was a Dodge Shadow in 1989, purchased for around $10,000 or $12,000. If it was financed it wasn’t for long. Since then, it’s been slightly used cars bought with cash, including my current car, a late-model hybrid Camry that had only 12,000 clicks on it when I liquidated some tech stocks in the spring.

So I can’t speak with authority about the high cost of financing cars. But for those that want to go that route, read a piece in the Financial Post this weekend: The Great Car Bubble.  In it, the Post’s resident cheapskate Garry Marr (@dustywallet on Twitter) and Barbara Schecter investigate the explosion in car loans and describe how car loans can soon end up ballooning into debt that exceeds the car’s value.  The temptation is for consumers to be enticed by low interest rates and then compound the error by stretching out loan timelines. For example, it cites a case of paying out a total of $55,000 on a car that would cost just $35,000 if purchased for cash outright.

I don’t know about you but I could think of better uses for the $20,000.

Property Pals

While perusing the Post, hop on over to this Personal Finance piece by Melissa Leong about couples going halves to get a foot on the housing ladder. This is called “co-ownership.” You can also see Melissa Leong on video over at the Video Hub at sister site Findependence.TV.

 

9 things to be thankful for this weekend

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thanksgiving color seamless autumn pattern eps10From USA Today this weekend comes this article by Bob Powell  that should give “those saving for or living in retirement” several trends or statistics to be thankful for.

Among these are:

1.) Low inflation

2.) Longer life expectancy (See also the Hub’s Longevity & Aging section for more on this trend.) Go the full link at USA Today to click on its Life Expectancy Calculator.

3.) Social Security (or for Canadians, CPP/OAS/GIS. More on that in Monday’s Financial Post)

4.) Choices in the financial marketplace: stocks, bonds, insurance, annuities, mutual funds and ETFs, real estate, commodities, hedge funds

5.) Good health

6.) Little things and being in the moment

7.) Quality relationships

8.) The Internet

9.) Freedom

Get ready for the shift: the Future of Work

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TheShiftA big aspect of planning for retirement is health and longevity. Back in the summer, I devoted a blog at the Hub’s sister site to Mark Venning of ChangeRangers.com. Venning helps clients prepare for two things: making the shift from employment to entrepreneurship, and also to help prepare for a future of extended longevity and life expectancy. That’s “why the word ‘Retirement’ doesn’t work for me. It’s about longevity planning,” he told me, “My core message is plan for your longevity, not for retirement.”

That’s one reason the Financial Independence Hub includes sections both on Entrepreneurship and Aging & Longevity. But we’re not just a site for the Boomers: we take an “Ages & Stages” approach to financial independence, starting with material for Millennials and their focus on debt reduction, family formation and home ownership. Then by the time we reach those in mid-life (call them Gen X if you will), the focus is on Wealth Accumulation.

One of several book recommendations from Venning to his students — many of them terminated from full-time employment — is a book by Lynda Gratton called The Shift: The future of work is already here. It’s not brand new: my copy was published by Harper Collins in 2011. But it’s still relevant, especially to the generation of baby boomers, myself and Venning included, who are grappling with the issues of retirement planning.

Gratton, who is a business school professor, identifies five forces that are shaping the world of work, plus three “shifts.” They’re all worth summarizing here.

The 5 forces shaping our future

1.) Technology
2.) Globalization
3.) Demography and Longevity
4.) Society
5.) Energy Resources

The 3 shifts

1.) From shallow generalist to serial master
2.) From isolated competitor to innovative connector
3.) From voracious consumer to impassioned producer

For baby boomers and others who are nearing retirement, or moving into semi-retirement or self-employment, almost all of these forces and shifts need to be taken into consideration. In earlier blogs like this one — Never Work Again — we looked at the revolution in Internet marketing, which is based on both the Technology force and Globalization. When you can run a web-based business from anywhere in the world merely with a laptop computer and a smartphone, you know you’re embracing these forces.

Gratton’s points on demography and longevity seem particularly apt: this was the topic that most fascinated the team of researchers she tapped into for the book. “We quickly understood that technology is changing everything and will continue to do so, and that natural resources are depleted and carbon footprints must be reduced,” she writes. But demography and longevity “is intimately about us, our friends and our children … It’s about how many people are working, and for how long.”

 
The dark side: some boomers will grow old poor

In 2010, when Gratton was writing the book, there were four distinct generations in the workforce: the Boomers’ parents, the Boomers, Gen X (born between 1969 and 1979) and Gen Y (1980 to 1995). And coming up is Gen Z, born after 1995. Gen Y will be ascendent in the workplace by 2025 but increasing longevity means the Boomers and Gen X will still be hanging around, wanting to work and contribute in some capacity well into their 60s, if not beyond. Gratton also warns that “some baby boomers will grow old poor,” particularly if they don’t respond to the gift of extended longevity by embracing the forces and shifts that are confronting them.

laptop-millionaireBecause of globalization and technology, the privilege of being born in North America may no longer be sufficient advantage for those who don’t embrace The Shift. Books like The Laptop Millionaire describe how those with wealth can take advantage of outsourcing: for example, hiring English-speaking Filipinos as full-time virtual assistants for something like $250 or $300/month.

There is a dark side to these shifts: those not equipped to embrace change increasingly will have to compete for jobs or contracts with people half a world away who are technologically sophisticated and willing and able to work for much less than North Americans.

Gratton devotes big chunks of the book to fictional scenarios of the near future of work, some of them pessimistic, some of them optimistic. All in all, it’s well worth reading. It reinforced my own belief that “If you’re not sure whether you should retire or can afford to do so, then just keep working, preferably in a congenial line of work you can continue to practice well into your 70s.”