All posts by Financial Independence Hub

7 simple ways to pay off Debt in Retirement

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By Lyle Solomon

Special to the Financial Independence Hub

Carrying debt into retirement can ruin your golden days. You will most likely have a limited income after retirement. Though you can boost your Social Security income by taking the proper steps, your spending may rise yearly due to inflation, causing your budget to collapse. The burden of debt and the high expense of medical bills can wreck your retirement.

According to a CNBC report, the total debt burden of America’s senior citizens has increased by 543 per cent in the last two decades. 70% of baby boomers are in credit-card debt and are unsure how they can get out of it. It is recommended to pay off your obligations as soon as possible and enjoy your golden years. Repaying your debts during retirement is always a good idea. But how will you go about it? Here are some of the ways to repay your debt in retirement so that you can enjoy your golden years.

1.) Sort your debts by priority

The first stage in debt management in retirement is prioritizing which bills to pay off first. So, make a list of all your loans, including their interest rates and remaining balances. Unsecured debts, such as credit cards, typically carry high-interest rates because no collateral is required. I recommend that you begin paying off loans with the highest interest rates first, which will help you save money in the long term. Furthermore, unlike student loans or mortgages, you cannot deduct interest payments from your tax returns on unsecured debts.

It is preferable to pay off unsecured obligations first, as they are not usually tax-deductible.

2.) Seek professional debt assistance

Are you drowning in high-interest unsecured debt? If this is the case, you may be working hard to repay your obligations but cannot do so due to the constant high-interest rates. In that case, you can seek professional assistance by contacting a reliable debt relief business. The company’s debt advisers will examine your debts and develop a reasonable payback plan based on their findings. You can enroll in a credit card consolidation process to repay your huge credit-card debt. Settling debts can be possible under the guidance of a professional debt relief company. They will  negotiate with your creditors to lower the excessive interest rates. Once your creditors have agreed, you can begin making single monthly payments for all of your debts. In this manner, you may pay off your unsecured obligations without worrying about coordinating multiple payments. You can also save money on interest payments because your debts’ interest rates will likely be reduced.

3.) Examine your budget again

Hopefully, you have a budget to keep a proper spending plan and preserve money for your financial well-being. The more you put into your monthly loan payments, the faster you’ll be debt-free. As a result, you must save more to increase your monthly loan payments.

To do so, go over your budget and identify places where you may decrease costs and save money. You can save money on things like eating out, entertainment, cable TV subscriptions, etc. You can save a significant amount of money to put towards your monthly debt payments.

4.) Follow your preferred debt repayment plan

You can use any debt payback method, debt snowball or avalanche. The debt snowball strategy requires prioritizing the debt with the lowest outstanding sum first. At the same time, you must make minimum payments on all of your other loans. After you have paid off that loan, you must focus on the debt with the second smallest outstanding balance, and so on. Continue Reading…

What you need to know before investing in All-in-One (Asset Allocation) ETFs

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By Michael J. Wiener

Special to the Financial Independence Hub 

 

I get a lot of questions from family and friends about investing.  In most cases, these people see the investment world as dark and scary; no matter what advice they get, they’re likely to ask “Is it safe?”  They are looking for an easy and safe way to invest their money.  These people are often easy targets for high-cost, zero-advice financial companies with their own sales force (called advisors), such as the big banks and certain large companies with offices in many strip malls.  An advisor just has to tell these potential clients that everything will be alright and they’ll be relieved to hand their money over.

A subset of inexperienced investors could properly handle investing in an all-in-one Exchange-Traded Fund (ETF) if they learned a few basic things.  This article is my attempt to put these things together in one place.

Index Investing

Most people have heard of one or more of the Dow, S&P 500, or the TSX.  These are called indexes.  They are a measure of the price level of a set of stocks.  So, when we hear that the Dow or TSX was up 100 points today, that means that the average price level of the stocks that make up the index was up.

It’s possible to invest in funds that hold all the stocks in an index.  In fact, there are funds that hold almost all the stocks in the whole world.  There are other funds that hold all the bonds in an index.  There are even funds that hold all the stocks and all the bonds.  These are called all-in-one funds.

Most people know they know little about picking stocks.  They hear others confidently talking about Shopify, Google, and Apple, but it all sounds mysterious and scary.  I can dispel the mystery part.  Nobody knows what will happen to individual stocks.  Bold claims about the future of a stock are about as reliable as books about future lottery numbers.  However, the scary part is real.  If you own just one stock or a few stocks, you can lose a lot of money.

When you own all the stocks and all the bonds, it’s called index investing.  This approach to investing has a number of advantages.

Investment Analysis

Investors who pick their own stocks need to pore over business information constantly to pick their stocks and then stay on top of information to see whether they ought to sell them.  When you own all the stocks and all the bonds, there’s nothing to analyze or track on a frequent basis.

Risk

Owning individual stocks is risky.  Any one stock can go to zero.  Owning all stocks has its risks as well, but this risk is reduced.  The collective stocks of the whole world go up and down, occasionally down by a lot, but they have always recovered.  We can’t predict when they’ll drop, so timing the market isn’t possible to do reliably.  It’s best to invest money you won’t need for several years and not worry about the market’s ups and downs.

To control risk further, you can invest in funds that include both stocks and bonds.  Bonds give lower returns, but they’re less risky than stocks.  Taking Vanguard Canada’s Exchange-Traded Funds (ETFs) as an example, you can choose from a full range of mixes between stocks and bonds:
ETF Symbol     Stock/Bond %
      VEQT           100/0
      VGRO           80/20
      VBAL           60/40
      VCNS           40/60
      VCIP           20/80

Cost

Sadly, many unsophisticated investors who work with financial advisors don’t understand that they pay substantial fees.  These investors typically own mutual funds, and the advisor and fund company help themselves to investor money within these funds.  There is no such thing as an advisor who isn’t paid from investor funds. Continue Reading…

6 ways a Recession resembles a Bad Mood

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LowrieFinancial.com: Canva custom creation

By Steve Lowrie, CFA

Special to the Financial Independence Hub

There’s been a lot of talk about recessions lately: Whether one is near, far, or perhaps already here. Whether we can or should try to avoid it. What it even means to be in a recession, and how it’s related to current market turmoil.

To put market and recessionary concerns in perspective, it might help to describe six ways a recession resembles a bad mood. There are some intriguing similarities!

1.) There is no Precise Definition

We all know what a bad mood feels like. But there is no clear definition for a nebulous mix of real and perceived setbacks, and how they’re going to affect us.

Likewise, there is no single signal to tell us exactly when a recession is underway or when it’s over. Instead, recessions can trigger, and/or be triggered by a number of conditions connected in various fashions and to varying degrees. These usually include a declining Gross Domestic Product (GDP), along with rising unemployment, sinking consumer confidence, gloomy retail forecasts, disappointing corporate balance sheets, a bond yield curve inversion, stock market declines, and similar combinations of objective and subjective events.

In the U.S., the National Bureau of Economic Research (NBER) intentionally defines a recession rather vaguely as follows (emphasis ours):

“A recession is a significant decline in economic activity that is spread across the economy and that lasts for more than a few months.”

Closer to home, the Bank of Canada and/or the minister of finance typically let us know once we’re in a recession. As described here, they base their calls on guidance from the 2015 Federal Balanced Budget Act, economic indicators coming out of Statistics Canada, and economic analyses from Canadian economists such as C.D. Howe Institute’s Business Cycle Council.

Globally, the World Bank Group has stated, “Despite the interest in global recessions, the term does not have a widely accepted definition.”

2.) You usually can’t spot one except in Hindsight

How do you know when you’re in a bad mood? Often, you don’t, until you’re looking back at it.

Recessions are similar. Since a widespread downturn must linger for a while before it even qualifies as a recession, governments typically only declare one after it’s underway. For example, triggered by the abrupt arrival of the global pandemic, Canada and the U.S. alike entered into their shortest recessions to date, beginning and ending in first quarter 2020. However, neither government announced the news until July and August, respectively.

3.) Sometimes, we get stuck for a while

Hopefully, your bad moods come and go, resulting in more good times than bad. But sometimes, one misfortune feeds another until you feel gridlocked. It may take a while before improved conditions, a more upbeat attitude, or a blend of both help you move forward.

In similar fashion, recessions can become a self-fulfilling prophecy. As Nobel Laureate and Yale economist Robert Shiller describes, “The fear can lead to the actuality,” in which (for example) economic conditions might feed inflation, which inverts the bond yield curve, which signals a recession, which shakes corporate and consumer confidence, which leads to unfortunate reactions that further aggravate the challenges. And so on. When this occurs, a recession and its related financial fallout may last longer than the underlying economics alone might suggest.

4.) They’re Inevitable

It’s never fun to be in a bad mood, but we can all agree they’re part of life. It would be unhealthy, exhausting even, if we were endlessly giddy every minute of every day.

Similarly, nobody celebrates a recession. But it helps to recognize they aren’t aberrations; they are part of natural economic cycles. And while they may not be anyone’s favorite tool for the job, they can sometimes help rein in runaway spending, earning, and pricing for companies, consumers, and creditors alike. Continue Reading…

Artificial Intelligence can help investors and advisors alike

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By Fuad Miah and Justin Hacker

Special to the Financial Independence Hub

Financial and wealth-management advisors tend not to be big fans of robo-investing. No surprise there because service and understanding the client are front and centre in what they do.

But for many investors today, especially younger ones, robo-investing may be seen as a low-cost, low-maintenance way to grow their wealth. Robo-investing relies on algorithms to make investments automatically and this is with minimal human supervision at best. But there is no ‘expert’ service involved and that is not good.

On the other hand, how about using Artificial Intelligence (AI) to assist advisors in better serving their clients and, in the process, help those clients build better portfolios? Don’t look now but the technology is here and it can start with meetings. Nowadays people are slowly but surely returning to the office and financial advisors are even getting back to meeting face-to-face with their clients. But a face-to-face meeting is not always required.

A new world of hybrid meetings

Today, however, we are in a new world of meetings where firms big and small are adopting a mix of online, in-person and ‘hybrid’ meetings which utilize both the virtual and in-person variety. With AI an advisor can make this choice wisely.

It involves human-like AI that enhances the meeting experience for both the host and the attendees by allowing participants to focus on the meeting and forget about labour-intensive tasks like note-taking. How? A full transcript and recording of what transpired are automatically created and then crafted into a concise executive summary. And the technology can do even more by using what is called ‘collected telemetry’ (the conversation data that pertains to everything from context to emotion) to build an advanced analysis of performance and even  sentiment. Continue Reading…

Why are Millionaires flocking to Mexico? (and Non-Millionaire Retirees, too!)

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Panoramic view of Guanajuato City

By Billy and Akaisha Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

According to the Mexican Government, around 1.1 million expatriates lived in Mexico as of 2020. Of those, about 700,000 were from the United States, making Mexico the #1 country worldwide for American Expats.

We have listed a dozen reasons below why Mexico is attractive to those with plenty of money, and also to those who don’t have that much.

Freedom

While there are many reasons to move to Mexico, the Number One reason people come here is for the freedom they experience.

With less regulation on all fronts, critics might think that Mexico is a lawless frontier.

Not so.

Mexico is still a place where one can walk the beach with a beer in hand. We can give a homeless person food without filling out countless forms to gain permission or explain if there is mayonnaise on the sandwich or have the food rejected because it’s not in a paper bag. While we personally are not smokers, an individual who chooses to smoke can do so without being read the riot act or be subjected to invectives about their personal worth as a human being.

Many medications can be purchased over the counter without a prescription. One can afford medical care and not be forced into buying an expensive health insurance policy that doesn’t coincide with their personal health approach. Homeopaths, Naturopaths, Chiropractors and those who practice acupuncture or massage can be found easily and their services are affordable. One can walk into a lab and order an x-ray or a blood test on their own without a prescription.

There is respect for the elderly and those over 60 are not invisible. People who are chubby are not judged and can easily find someone to date or marry. People on the street say hello and good morning to complete strangers, and men still tip their hats to women. The young offer their bus seats to those of us who have more years than they do.

People say “excuse me” when they walk in front of you, and it’s perfectly safe to walk through a group of teenage boys without fear.

Common sense is common.

Some are moving due to political climate at home

The world is changing, no doubt. Many have chosen Mexico to get out from under the tense political climate back home.

Mexican culture is lively and accepting and it’s a breath of fresh air to live here. Smaller towns, especially, are like Norman Rockwell paintings.

But bigger cities offer fabulous diversions away from home country political pressure. There are museums, international dining, hiking, cultural events, music, art and volunteer opportunities too.

The caution here, is to not bring the “old” political attitude with you when you move. Grow into the easy and into the pleasantry here in this country.

Zicatela Beach, Puerto Escondido

Affordability

Having money or not, your quality of life should expand over what you are experiencing now in your current home town. The cost of living is such that you will get more for your money and your nest egg will go farther.

Truthfully, depending on where you might choose to live, purchasing a home can be expensive, but rents are cheap. And if you are at retirement age, you might find that putting your money into “living” versus “housing” might be the better choice, anyway.

In either case, gardeners, housekeepers, maintenance people and supplies are all cheaper than you will find in the US or Canada. In Chapala, Mexico, a housekeeper runs about $6USD for 2.5 hours. In Ajijic, Mexico – another popular Gringo town –  it is twice that price, but still not outrageous.

Legalities of permanent status are easier

Getting a permanente or a temporada card is easy to do. While some choose to fill out the paperwork themselves, having a lawyer arrange for this is also quite affordable.

Qualifying for residency is based on your annual income and/or net worth, and the threshold is easy enough to meet. The requirements for getting a temporary card are lower, and after renewing annually for 5 years, the temporada moves into becoming a permanente.

If you have your own state’s driver’s license, you can use that here in Mexico, but if you are not able to renew it, you can obtain a Mexican driver’s license in its place. So long as your present driver’s license is still active, you will only need to take the written exam of 10 questions. You won’t have to perform a driving test in the parking lot.

One can live on Social Security alone

While it’s always great to have more money, one can easily live comfortably on Social Security. The average [monthly] SS check as of 2021 is US$1,658. Rents are available for $300-$600USD per month for a one bedroom or a casita. So, those who are on a limited income can readily find a comfortable place to live and still have money left over for a social life and medical expenses.

For those who actually are millionaires, one can live like royalty in homes with lake views, swimming pools, 3- and 4 bedrooms, plus house and garden help: and they can still keep their millions.

Adaptability

Yes, Mexico is a foreign country. However, our ability as Norte Americanos to adapt to these perspectives can be far smoother than with cultures with which we have less in common.

Celebrating many similar holidays, perceptions and values run concurrent with those we already have. The time zones are also similar to the US and Canada, making contact with family members on Zoom, Facetime, or Skype a breeze.

Weather is better: geographic choices

No matter if you enjoy having four seasons or prefer a tropical climate, Mexico offers it all. Continue Reading…