All posts by Financial Independence Hub

Maximizing Finances as a Young Adult

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business, people and money concept - smiling businesswoman with dollar cash money over gray background and forex graph going upBy Jenna Batten

Special to the Financial Independence Hub

For young people seeking to become financially independent, one of the most important underlying principles of frugality is making the most of your existing assets. Put simply, this means learning how to spend only what you must, how to invest strategically, and how and when to save.

Here are a few tips on how to address each of these points:

Spend Wisely

Being frugal with your money is always a good idea, and for some it’s a fairly basic practice: you spend only what you need, when you need to, without gratuitous or unnecessary expenses. However, even those who believe themselves to be strategically frugal with their finances may be surprised to see how many costs they can cut if they really sit down and analyze the situation.

Thankfully, doing so has become easier than ever before thanks to, you guessed it, an app—or rather a whole slew of apps, designed to assist in financial tracking. You can read about a number of these apps at Daily Worth, although the most popular options are Mint and GoodBudget. Both tools help to provide you with a comprehensive, visual display of what you spend and what your overall financial situation looks like.

With these sorts of tool handy, or simply with a detailed financial tracking system of your own, you can effectively create a budget based on your own financial situation and your particular habits. You can then adjust your spending habits wherever possible to ensure that you’re spending no more than you really need to.

Invest Strategically

Continue Reading…

Benefits of deferring CPP and OAS benefits

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Adrian
Adrian Mastracci

By Adrian Mastracci, KCM Wealth

Special to the Financial Independence Hub

The changes to focus on pertain to deferring receipt of CPP and OAS pension benefits.

However, those changes may not be well understood.

Today’s maximum CPP payment at age 65 is $1,065 per month. Similarly, maximum OAS payment at age 65 is $570 per month.

The first consideration is to answer this question:
“Are your CPP/OAS benefits more valuable early or later in retirement?”

I suggest most should answer “later.”
Inflation and health costs can seriously affect retirements, say after age 75.

The CPP/OAS pension combination is an important component of retirement plans.
Analyze these items in deciding when to start receiving CPP/OAS pensions:
Present and later sources of retirement income estimates.
Employment status today and in the future.
Accumulated retirement portfolio.
Family longevity and health.
The 2015 OAS repayment threshold is net income of $72,800 per spouse.
Full 2015 OAS repayment is reached at net income of $118,400 per spouse.
There is no benefit in deferring CPP or OAS pension past age 70.
Those age 70 or over should apply for both now.

Here is my summary of deferrals: Continue Reading…

Create a Money Machine: The Effect of Compounding

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effect_of_compounding1
Billy Kaderli, RetireEarlyLifestyle.com

By Billy Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

Our adventures around the world allow us to interact with many younger travelers in cafes and restaurants. Travelers are a great source of information about where they have been, places to stay and where to avoid. Things to do and the best way to get to a destination are often the topics of conversation.

Many times we are asked about how we can afford to travel for so long and then there’s the predictable wistful response: “I wish I could do what you’re doing.”

That’s when I tell them they can.

I explain in simple terms about investing and how they can create their own pension or annuity or as I like to call it a “personal money machine.” It is right about now when their eyes glaze over like they are speaking with their crazy uncle at a Thanksgiving Dinner.

I bring their attention back by saying they have something that I do not have; time. Usually I get a nod and a blank stare. I go on and ask if they know what “compounding” is. More often than not, they do not have a clue. These are college grads or they are taking a break from school to pursue their traveling bug. But to my surprise they do not understand the concept of compounding, which, in my opinion, is the easiest way to build wealth.

According to Investopedia, the definition of compounding is “the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.”

Bingo!

Sweet simplicity.

The earlier you invest, the sooner Findependence

Continue Reading…

A second home in the U.S. — good investment idea or not?

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Patrick McKeough, TSInetwork.ca

by Patrick McKeough, TSINetwork.ca

Special to the Financial Independence Hub

 

Now that it’s October, thoughts of winter may flit across the collective minds of Canadians. Last winter lasted much longer than usual across most of the country, and a large number of Canadians spent part or all of that harsh winter in Florida or other southern locations.

Many Canadians are buying second homes in Florida and other parts of the U.S., often with the belief that this will be a good investment idea as well as a winter haven.

Good lifestyle decision, bad investment

I was interviewed about this trend on CTV. Apparently I surprised everybody when I said that buying in Florida might make sense as a lifestyle decision but was liable to be a bad investment.

Here are a couple of the “buts” they raised, and my responses:

“But even if prices take years to move up, you’ll have use of your vacation home whenever you want.”

That’s right, and this may make it a good lifestyle choice. But there are always plenty of Florida rentals to choose from if you aren’t tied down to going to the same place on every visit. It’s much cheaper to rent for a month or two than to pay a full year’s cost of ownership.

“But you can rent the place out to generate income.”

Continue Reading…

Understanding Your Retirement Benefits: Part 1 – CPP

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MarieEngen
Marie Engen, Boomer & Echo

By Marie Engen, Boomer & Echo

Imagine celebrating at your retirement party without a clue as to how much you can expect to receive in pension income. It sounds incredible, but many people who will end their career in a few years are in just that situation.

When you work for an employer you receive your salary, but once retired your income can come from multiple sources. You need to know how much you will receive from these sources.

Since CPP is one of the cornerstones of retirement income, this is where I will begin.

A brief history of the CPP

The Canada Pension Plan (CPP) is a national public plan that covers people in all provinces except Quebec. It was created in 1966 by the government under Lester B. Pearson. Quebec wanted its pension monies to be under their control and so became the only province with its own program.

When CPP was created the contribution rate was 1.8% of pensionable earnings, to be shared by employers and employees; self-employed persons were on the hook for the full amount. The first deductions were so minuscule that they were unsustainable to fund the retirement costs of the baby boom generation that was just beginning their working years. Also, life expectancies were starting to increase substantially. Continue Reading…