All posts by Financial Independence Hub

How to manage a Side Hustle while studying full time

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 There’s no denying that getting your MBA — or any graduate degree — is a costly endeavor. Even if financial aid covers the cost of tuition, there’s still a raft of fees and the cost of books, moving, and living, which will vary widely depending on where you attend school. On top of all that, you have to give up your income for the next X years while you study.

Or do you? If the expenses are making you sweat, then you might be one of the many full-time students who consider taking on a side hustle.

What is a Side Hustle?

A side hustle is any job you do “on the side” to earn a little extra cash, whether it’s babysitting for your next-door neighbors, running social media for start-ups, or driving for Uber. It’s not your main focus, not what you center your life around, and certainly not what you’d answer when asked, “What do you do?,” but it’s a little bit of your time each week or month that brings in extra cash. If you’re lucky enough, you can get into a list of rich side-hustlers. Side hustles have been around since, well, paid work, but with the rise of the gig economy and the advent of public university tuitions, there are more students side-hustling than ever before.

Keep in mind that you took on a graduate degree to invest in yourself; if you end up sacrificing your studies for some extra pocket change … well, you shouldn’t need a finance class to tell you that’s bad economics. There’s no way your side hustle is lucrative enough to be worth NOT getting the most out of your degree, so if it comes down to making time for one or the other, your studies should always take priority. However, it’s also possible that you could be lucky enough to find a side hustle that actually enhances your degree by giving you experience in a relevant field.

Finding a Side Hustle

Often, the best side hustles arise purely by luck. Your favorite professor happens to need someone to do a little research for him or write up some case studies, or some other task related to your field of study, and you’re the man or woman for the job. Continue Reading…

The ultimate guide to safe Withdrawal Rates in Canada (for any Retirement age)

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By Kyle Prevost, for MillionDollarJourney

Special to the Financial Independence Hub

Most Canadians approaching retirement have two questions:

1.) How much can I take out of my investment portfolio each year if I want to be guaranteed not to outlive my money?

2.) Once I know the answer to my first question, can I live on that much money, plus whatever government benefits or private pension plan I might get.

The truth is that there are a TON of variables that go into answering these two questions for each person.  BUT the best that we’ve come up with so far is the “4% rule of thumb”.

That said, our 4% number (much more discussion on what this actually means below) depends on you optimizing your portfolio and withdrawal strategy.  If you’re embracing early retirement, and are looking at a retirement horizon of 30, 40, or even 50+ years, the 4% rule of thumb can still working surprisingly well for you!

Before we get to a discussion on the details of this handy tool and how it might apply to you, I should note that after talking to several financial experts in Canada, we all agree on one general observation about Canadian retirees:

It was really hard to get people who had been determined savers to spend their money!

Turns out that flipping the switch from a safe & investment mindset to an “enjoy life and spend nest egg” mindset is not as easy as one might initially think.

You’ve been reading MDJ for years, have used your Questrade DIY discount brokerage portfolio to accumulate a solid nest egg that includes your TFSA, RRSP, and perhaps even a non-registered account.  Now comes the time to start your retirement drawdown or withdrawal strategy. Surprisingly, when it comes to discussing Canadian safe retirement withdrawal rates, and and talking to folks who have retired at all ages, spending their retirement savings represented a massive mental strain for them.  I guess (as someone who has never retired or sold investments to pay for retirement) that I always thought that saving for retirement would be the hard part. Isn’t spending supposed to be more fun than squirreling away?

It turns out that once you get into that savings mindset, it can be hard to flip the switch back to enjoying spending the fruits of your labour.  This is especially true for folks who are looking at an early retirement withdrawal rate or strategy, because they are much more likely to have been super-aggressive savers during their time in the workforce.

Since this will be my first post for MDJ, I wanted to make it a real beauty.  I didn’t go into it expecting the topic to be so deep and full of variables! Afterall, the concept seems simple enough right?

How much can I take out of my investment portfolio each year, if I need that nest egg to last for 30, 35, 40, or even 50 years?

Personally, much like Frugal Trader, I’m hoping to retire sooner rather than later, so this question had particular relevance for me.  After diving into the math on this topic, it turns out that there are many things to consider when looking at how long your retirement savings will last, and it’s actually much more difficult to get a 100% mastery of, than the math involved with building an investment portfolio.  Use the table of contents links below to navigate the article if you’re short on time, or are only interested in one aspect of the extended article.

The 4% Retirement Withdrawal Rule

What the 4% Rule Means for Your Magic Retirement Portfolio Number

Potential Problems of the 4% Rule

How Has the 4% Rule Done In the Past

If I Want to Retire Early or do this whole “FIRE” Thing – Does the 4% Work for Me?

What Could Force My Retirement Into a Worst-Case Scenario?

Fees Suck – Get Rid of Them to Up Your Chances

Will The Returns of My Portfolio Look Like the Last 100 Years?

PWL Capital & Vanguard & the Shiller CAPE ratio

If Lower Returns Are the New Normal – How Does This Affect Me?

Sequence of Return Risk 

Avoiding the Worst-Case Scenario: Handling the First Ten Years to Reduce Your Risk

How Does OAS and CPP Factor into Safe Withdrawal Rates?

Emergencies or Tax Changes

Conclusion

The 4% Retirement Withdrawal Rule

Ok, so let’s maybe start with the rule of thumb that advisors have used when looking at retirement drawdown plans for a while now.

Back in 1994 a financial advisor named William Bengen looked at the last 80 or so years of markets and retirement, did a bunch of math, and arrived at a concept we now call “The 4% rule”.

The basic idea of the 4% retirement withdrawal plan is that someone could safely withdraw 4% of their investment/savings portfolio each year and – assuming a 60/40 or 50/50 split of bonds/stocks in their portfolio – they would never run out of money.  This idea of withdrawing a certain percentage of your portfolio to fund your retirement is called the Safe Withdrawal Rate (SWR). The math behind this magic 4% figure means that if you have the nice round $1 Million investment portfolio that we all dream of, you could safely pull out $40,000 the first year, and then adjust for inflation and withdraw 4% plus inflation after that. (So if there was 2% inflation between year one and year two, you could now withdraw $40,800.)

Bengen, and another highly influential study took their rule and retroactively applied it to retirees from every single year from 1926 to 1994.  They found that nearly 100% of the time (depending on what was in the investment portfolio) people could retire, and withdraw 4% of their portfolio for 30 years of retirement – and not run out of money.  In fact, a large percentage of the time, if retirees followed the 4% rule, they not only didn’t run out of money, they finished life with more money than when they started retirement!

Keep in mind, these authors didn’t worry about OAS or CPP, or a workplace pension, or even the tax implications of different types of withdrawals.  They were simply trying to come up with a useful rule of thumb for how much a person could safely withdraw from their retirement portfolio.

What the 4% Rule Means for Your Magic Retirement Portfolio Number

If you can safely withdraw 4% of your portfolio to fund your retirement, then the simple math tells us that if you can accumulate 25x your annual retirement budget, you no longer have to work. Continue Reading…

Are high rent costs a hurdle to Condo ownership?

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

The rising cost of rent in markets across Canada has become an especially prevalent issue in recent years, as a sharp lack of supply and steep real estate prices put the squeeze on home seekers’ affordability.

The fact is, rising ownership housing values, exacerbated by the federal mortgage stress test, have kept more would-be home purchasers in the rental market for longer; a total of 31% of first-time buyers say they rented for at least a decade before buying their first home, according to a recent Canada and Mortgage Housing Corporation report.

As well, new data from Rentals.ca reveal steadily rising rent costs in Canada’s major markets: up 0.7% in Vancouver to an average of $1,987 for a one-bedroom, while Montreal unit costs rose 8.1% to $1,285. In Toronto, such a unit went for $2,262 in the third quarter of 2019, according to the Toronto Real Estate Board.

A look at one of Canada’s most expensive rental markets

With more Canadians remaining in higher-priced rentals for longer, could these overall higher shelter costs be crimping their ability to eventually move up into the ownership market?

To see whether high rental costs are limiting Canadians’ homeownership options, Zoocasa conducted a study in Toronto, one of the nation’s priciest markets, to determine the rent-to-homeownership-cost ratio in the city. The study sourced average sold prices for condo units in 35 neighbourhoods across the 416 region, as well as the average lease rates for condo rental apartments in each. It also crunched the minimum down payment required to buy a unit in every neighbourhood, as well as the equivalent number of months of rent.

The rent-free possibilities

The findings essentially reveal just how long it would take to save a condo down payment in each neighbourhood, if the saver didn’t also have to pay any rent; while this may seem a dream scenario for many of the city’s dwellers, it could be a possible approach for the 47.7% of young adults StatsCan says still live within the family home in the city. The numbers also illustrate the minimum financial cost required to own a home in each area, as well as how feasible it would be to make the jump from renting to owning.

For the City of Toronto as a whole, the numbers aren’t too daunting; in order to purchase a condo unit in the city at the average price of $628,074, savers would need to amass a down payment amount of $37,807. Doing so would take a rent-free individual 14.7 months if they didn’t need to pay the city’s average rent of $2,567 monthly. The good news is, there are a number of affordable locales where a buyer could break into the market much faster – within a year in a total of 13 neighbourhoods.

In exchange for this affordability, though, buyers will need to give up their ideals of a central location and convenient commute; the majority of these neighbourhoods are located on the eastern and western edges of the city, with less direct access to public transit route. Continue Reading…

How to be frugal and save money this holiday season

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By Hari Subramanian

Special to the Financial Independence Hub

Knock knock! Who’s there? Holidays! Holidays who? Holidays that make your savings go boohoo! The holiday season is upon us. Thanksgiving is just around the corner (Nov. 28th in the US) and before you know it, people will be lighting the Christmas tree again.

I don’t mean to be a party pooper, but the holiday season can make a large dent on your savings and could even leave you with a sizable credit card debt. Constantly worrying about your dwindling bank balance can dampen your festive spirit. Thankfully, there are a few frugal ways to ensure that your savings don’t take a hit while you enjoy the holidays with loved ones.

Plan the holiday budget and stick to it

Sit down with your family and make a list of all the things you need to buy for the holidays: food, drinks, sweets, decor, party accessories, gifts and more. Don’t forget to include an estimated cost for every item on your shopping list. Cut down on a few things if you feel that the budget is overshooting the acceptable expense limit. Now comes the difficult part: once the holiday budget is ready, try and stick to it as much as you can. Use budgeting apps like Mint that allows you to set a budget, track your expenses by linking to your debit and credit cards, and notify you when you are about to exceed your budget limit.

Go easy on the sale

Come holiday season and a barrage of online/offline sales line up to woo consumers by offering competitive discounted pricing. Black Friday sale, Christmas sale, and Boxing Day sale are ready to pounce on us with massive discounts. Before you hop on the sale-crazy bandwagon, put your credit card aside and think about whether you really need those pair of boots or the new iPhone. Once you compartmentalize your wants from your needs, you would eventually go easy on the sale. Let necessities and not sale pricing be the driving force for shopping.

Rewards card to the rescue

Christmas rings an ominous bell for credit-card debts. While shopping excessively on credit cards could spell doom, not all credit-card expenses are bad, especially if you have a credit card that dishes out good rewards or cash back. A smart way to use credit cards is to accumulate reward points throughout the year and redeem them during holiday shopping. If your credit card gives you good cash back returns when you purchase at a specific store, ensure that you do a bulk of holiday shopping from that store. Continue Reading…

What you need to know when applying for an International Student Loan

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By Emily Roberts

(Sponsored Content)

Loans allow students to pursue their dreams even in the midst of financial challenges. While the benefits of student loans are clearly evident, students should approach loans with caution. Otherwise, you can end up sinking in huge debt that can affect your career goals. This article highlights some of the key factors you should keep in mind when applying for a student loan to ensure you get the best deal.

Fixed and variable Interest Rates

Lenders dealing with international student loans normally have two options when it comes to interest rates: the fixed and the variable rates. MPower Financing for instance, offer loans on fixed interest rates. MPower Financing is a US based lender offering student loans without a cosigner, collateral or credit history.

For fixed interest rates, as the name suggests, you will pay a fixed interest amount with no fluctuations regardless of the direction the economy takes. Thus, the key benefit of this option is that you won’t bear the burden when the market rates increase. Also, it can be a good option if you are a person who loves budgeting in advance. For the variable rates, the interest can change over time; it can either increase or decrease. The key benefit is that you get to save some money should the interest rates go down. Remember the key differences when making your decision.

Comparison can save you money

When you look up international loans for students or DACA student loans on the search engines, you will get countless results. This is because there are many lenders targeting international students. Continue Reading…