All posts by Financial Independence Hub

Innovation is the key to growth

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By Erin Allen, CIM, VP Online ETF Distribution, BMO ETFs

(Sponsor Content)

It’s simple, innovation has the potential to create higher productivity: the same input generates higher output.  As productivity moves higher, more goods and services are produced, and as such the company or the economy grows.

Innovative companies in turn will displace industry incumbents as they see an increase in efficiencies and productivity leading them to gain market share. The long-term growth potential of these innovative companies is what investors in this space are after.

In the late nineteenth century, the introduction of the telephone, automobile, and electricity changed the way we communicated, travelled, transported, and powered our economy. The world’s productivity went through the roof as costs dropped, creating demand across sectors.

 Source: BMO ETFs, Nov 2022

Today, the global economy is undergoing a technological transformation that will shape the future. Innovations in areas such as artificial intelligence, robotics, DNA sequencing, energy storage and blockchain technologies are evolving at a rapid rate and seeing cost declines that are expected to further lead this growth.

BMO Global Asset Management offers three ETF series in partnership with ARK Invest that focus on disruptive innovations. BMO ARK Innovation Fund ETF Series (ARKK), BMO ARK Genomic Revolution Fund ETF Series (ARKG), and BMO ARK Next Generation Internet Fund ETF Series (ARKW).  ARK believes innovations should meet three criteria and invests accordingly in these unconstrained, high-conviction portfolios.

3 Criteria for Innovations

  1. Dramatic cost declines
  2. Cuts across sectors and geographies
  3. Serves as a platform for additional innovations.

For illustrative purposes only. Source: ARK Invest

Continue Reading…

How to Monetize your Creative Hobby as a Side Hustle

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Image Source: Pexels

By Beau Peters

Special to the Financial Independence Hub

Side hustles are becoming more popular than ever. As technology advances, e-commerce stores and selling platforms like Etsy have made it possible for people to monetize their creative hobbies and turn them into viable businesses.

Even if you don’t want to run a full-fledged business, the hobby you love could end up becoming a successful side hustle if you’re willing to put in a bit of time and effort. Whether you want a little extra cash each month or you’re trying to build a brand name for yourself, selling your creative products online can help you find financial independence: and have fun doing it!

So, whether you’re into photography, pottery, crocheting, or drawing/painting, chances are there’s an audience out there that would love to purchase your creations.

Let’s take a closer look at how you can monetize your creative hobbies and make a profit doing what you love.

Think of yourself as a Business

The best thing you can do as you work to monetize your hobbies is to think of what you’re doing as a business. Even if you’re only working on it part-time for a little extra income, you’ll end up being more successful with a business mindset. That includes understanding things like:

  • Finances;
  • Marketing;
  • Sales
  • Customer service

You’ll also want to make sure you understand how creative operations work. Even if you’re doing everything on your own, creative operations will make it easier for you to manage your workflow and optimize every step of what you’re doing. When you’re putting time into a side hustle, every second counts. Creative operations make it easier to produce high-quality work as efficiently and effectively as possible.

Consider whether you can commit to the business side of your side hustle. You don’t need to devote all of your time to it, but if you want to make money and build up a following, having certain business practices in place is important. It’s also crucial when it comes to keeping things organized and keeping your finances in order. You don’t have to have a marketing degree to market your side hustle. However, if you’re not sure about running your side hustle like a business, consider hiring someone on a part-time basis to keep things moving forward and to ensure you’re staying organized.

Find Financial Freedom

It’s estimated that 40% of Americans currently have a side hustle. The uncertainty of the COVID-19 pandemic caused many people to start freelancing or forced them to look for ways of bringing in extra income. Even in a post-pandemic society, the popularity of side hustles continues to grow, especially for those who love what they’re doing. Continue Reading…

Canada’s Real Estate Affordability Battle

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By Dale Roberts, cutthecrapinvesting

Special to the Financial Independence Hub

In my latest for MoneySense, I look at the affordability battle in Canada. Home prices are falling at the fastest clip in the last 20 years. But borrowing costs are also increasing. Mostly, it’s a wash. Even from the bubble peak in February of 2022 to July 2022, things have not improved for homeowner wannabes. Real estate is the most interesting and ‘exciting’ sector in 2022. Have a read of the real estate affordability battle in Canada.

Higher rates take on falling home prices on MoneySense.

In this post I will offer up a few of the important charts, but check out that MoneySense post for the wider perspective.

Average home prices down 22% in July

Home prices are falling fast. After a strong COVID-inspired real estate run, prices are now in a free fall. After peaking at $816,720 in February 2022, the national average house price fell 18.5% to $665,850 in June. The average price fell again in July, settling at $629,971—nearly 22.9% below the peak.

The average national home price in August increased to $637,673.

CREA

The national average price is heavily influenced by sales in Greater Vancouver and the GTA, two of Canada’s most active and expensive housing markets. Excluding these two markets from the calculation cuts $114,800 from the national average price.

Real estate ridiculousness

And here’s some longer term history using average Toronto home prices as an example. It was a crazy run.

  •  Average Toronto home price in 2000: $243,255
  •  Average Toronto home price in 2010: $431,262
  •  Average Toronto home price in 2021: $1,095,336

Rates are going up, up, up

In that battle against runaway inflation, central bankers are raising rates. Borrowing costs mostly follow suit. Here’s the path in Canada for fixed and variable rates mortgages.

And of course, on Wednesday September 7, the Bank of Canada increased rates another 75 bps, or 0.75%. Variable is getting more expensive.

  • A 5-year fixed will now run you about 5.04%.
  • A 5-year variable will increase to about 4.90%.

The B0C offers that they’re not done yet. There are more rate hikes to come.

Given the outlook for inflation, the Governing Council still judges that the policy interest rate will need to rise further. Quantitative tightening is complementing increases in the policy rate. As the effects of tighter monetary policy work through the economy, we will be assessing how much higher interest rates need to go to return inflation to target. The Governing Council remains resolute in its commitment to price stability and will continue to take action as required to achieve the 2% inflation target.

Bank of Canada

Variable rates will automatically follow Bank of Canada rate hikes. Fixed rates will follow the bond market, and the bond market will make a guess about the near and future path of rate hikes. The rate hike on September 7 was mostly already priced into the bond markets.

The money chart on affordability

In the MoneySense post you’ll find the telling table comparing costs for variable and fixed rate mortgages, for 10% and 20% down payment scenarios. Here was the working copy table. Continue Reading…

Learn why you should Buy This, Not That

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By Mark Seed, myownadvisor

Special to the Financial Independence Hub

Let’s face it, saving and investing should be simple.

  1. Save, automate your savings to buy stocks.
  2. Invest in stocks and/or low-cost products that invest in stocks to avoid mutual fund salespeople.
  3. Disaster-proof your life by having some cash stashed.
  4. Rinse and repeat.

But simple is not easy.

All too often, we humans love to make things far more complex than things need to be.

We’re wired that way unfortunately. Egos often get in the way. 

Given many people continue to struggle with personal finance, every day, there are tens of thousands of books published out there on this subject – building and maintaining a responsible investment portfolio is only part of the personal finance success equation…

Learn why you should Buy This, Not That

Sam Dogen (aka Financial Samurai) knows a thing or two about personal finance success.

Sam founded FinancialSamurai.com in July 2009 during the depths of the global financial crisis.

Sam’s goal through that site was to deliver and share a cathartic way to make sense of the chaos at the time. Fast forward to today, more than 90 million people have visited Financial Samurai, and tens of millions more have read his work on publications such as CNBC, Yahoo Finance, and Business Insider.

Sam was previously at Goldman Sachs and Credit Suisse for 13 years – but he’ll share more details below!

When Sam is not writing or playing with his kids, you can find him on a tennis court or softball field in San Francisco, or on My Own Advisor giving away a book!

Sam is a graduate of The College of William & Mary and received his MBA from UC Berkeley.

I got a chance to chat with Sam recently about his new book: Buy This, Not That – How to Spend Money Your Way to Wealth and Freedom.

Here is our interview below before Sam:

Sam, welcome to the site – I know you’ve left a few comments over the years and nice to see you back!

Mark, a pleasure. I enjoy reading about your personal finance independence journey in Canada and seeing you help others with their journeys at the same time as well!

Sam, maybe not everyone is aware of your financial journey and Financial Samurai beginnings. Can you share a bit of your bio with my readers? Where do you live, what have you invested in, and “how did you get here” to writing this book?

Sure thing, Mark.

I grew up in The Philippines, Zambia, Japan, Taiwan, and Malaysia before coming to America for high school and college at William & Mary. My parents were in the U.S. foreign service.

After college, I joined Goldman Sachs in NYC in their international equities department. It was a dream job, except for the fact I had to get in at 5:30 am and often leave after 7 pm! As a result, I decided to save and invest 50% of my after-tax paycheck so I could one day have options to escape.

In July 2009, I started Financial Samurai and helped kickstart the modern-day FIRE movement. It’s been great to see so many people embrace their financial independence journey since then. My definition of financial independence is having enough passive investment income to pay for your basic living expenses.

I decided to write Buy This, Not That because I felt it had to be written. When I started Financial Samurai, there weren’t a lot of personal finance bloggers with finance backgrounds. I noticed when I first got my book offer in early 2020, there weren’t many finance authors with finance backgrounds either! So, I decided to fill this hole and provide my perspective.

Instead of scratching the surface, I decided to go deep into many financial topics. I then tackled some of life’s biggest dilemmas many of us all face.

Learn why you should Buy This, Not That! Sam Dogen

Great stuff.

Sam, in your book, you wrote:

“My first hope with Buy This, Not That is to help you let go of the fear of making a wrong financial choice. Let that sink in: there are no wrong money choices, just as there are no perfect choices, only optimal or suboptimal.”

Talk to me about your investing and wealth-building journey. What mistakes did you make? What successes did you have? What did this teach you and what do you hope to pass along to others in the book?

Mark, I made the suboptimal choice of buying a vacation property I didn’t need in 2007. I got it for 15% off, but it ended up declining by another 40% during the financial crisis! Luckily, most of its value has recovered and I’ve been taking my kids there since 2018.

Not extrapolating my income into the future was my biggest lesson learned. I was paid very well in 2007 and thought my income was just going to go higher. Life is full of ups and downs. Therefore, please be conservative with your income and return forecasts.

One of the key takeaways from the book is to encourage readers to think in probabilities, not absolutes. Don’t think you need 100% certainty to make a choice. Otherwise, you’re going to miss out on a lot of great opportunities.

In The Psychology of Money, Morgan Housel wrote effectively:

You don’t have to be a perfect investor. Getting wealthy and staying wealthy is “about consistently not screwing up.”

I agree with this/have always agreed with this and this aligns nicely to your 70/30 decision making philosophy. Can you explain that for readers and why is that framework so important to you to convey in the book when it comes to investing and wealth-building?

Use my 70-30 decision-making framework to build wealth and make more optimal choices. The framework states that if you believe there’s a 70% probability or greater your choice is the correct one, go for it, while having the humility knowing that 30% of the time, you’re going to get it wrong. And when you do, you will learn from your mistakes and get better.

Once you start approaching everything with a probability matrix in mind, you’re going to gain a tremendous competitive advantage compared to those who don’t.

I like that.

Sam, I personally equate the definition of Financial Independence (FI) as your investments generate enough passive income to cover your day to day living expenses. I’m not into this Barista FIRE, etc. What’s your take? Agree? Disagree? Why?

Yes, since 2009, I’ve stated that being financially independent means having enough investment income to cover your basic living expenses. However, I think Barista FIRE is a reasonable stop gap where you can earn extra income and receive subsidized health care while working a traditionally lower-wage job.

But at the end of the day, don’t fool yourself. If you still need to work, then you are probably not financially independent.

When I left work in 2012 at age 34, I had about $80,000 a year in passive investment income. I knew I wouldn’t starve, but I also wasn’t 100% confident I was doing the right thing. Therefore, I had my wife, who is three years younger than me, keep on working until age 34. If everything worked out with my new adventure, she could join me. In 2015, she was also able to negotiate a nice severance and hasn’t been back to work since.

So, when did you realize FI (Financial Independence)?

In 2012 when I was 34. At the time, I had a net worth of about $3 million that generated about $80,000 a year in passive income. But the biggest catalyst was negotiating a severance that paid for 5-6 years’ worth of regular living expenses. My severance paid all my deferred cash and stock compensation over the next three years. I also had a private investment made in 2010 that wouldn’t come due until 2017 that was fully paid out. Continue Reading…

The 5 most important factors In your Decision to Retire

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By Fritz Gilbert, TheRetirementManifesto

Special to the Financial Independence Hub

A few years ago, I was working through my decision to retire. I was pretty obsessive about it and documented the many factors I was evaluating on this blog (stored in chronological order for your convenience).  After doing my homework, I decided to make the jump in June 2018.

In the four years since I’ve never regretted my decision.

The decision to retire is complicated and there are many factors to consider.  Consider them you must, however, so I’m listing the factors I consider most important and one which I consider essentially irrelevant.  To make your best decision on when to retire, it’s important to recognize all of the things that matter, as well as those that don’t.  Under each factor, I’ve included links to relevant posts for those of you who’d like to dig deeper.

The Most Important Factors

1.) Do you have Enough Money?

The first thing most people think about when they’re making the decision to retire is whether they have enough money to last for the rest of their lifetime.  Fair enough, and I’ll concede it’s way up on the list.  I’d warn, however, that having enough money is a necessary factor, but far from sufficient.

I’ve written many articles on evaluating whether you have enough money to retire.  Below are four that I’d recommend:

2.) Are you Mentally Prepared for Retirement?

Almost everyone thinks about money when they’re making the decision to retire, but far too few consider the non-financial factors.  If I were to choose one point to make from all the things I’ve learned in the 7 years of writing this blog, it’s that the non-financial factors are the most important for putting yourself on track for a great retirement. Important enough that I wrote an entire book on the topic.

If you’re thinking about retirement, the best advice I can give you is to spend time thinking about what you want your life to be in retirement.  Think about it at least as much as you think about the “money stuff.”  Once you’ve retired, I suspect you’ll realize #2 is actually the more critical factor.

If you’re married, have you and your spouse talked about your mutual expectations for your life in retirement?  How are you addressing any misalignments?  Trust me, you have some.  Take the time to find them now, and discuss how you’re going to work together to live the best years for both of you in retirement.

What Purpose is going to fill your days when you no longer have a boss telling you what to do?  Where are you going to live?  What are you going to do?  Important stuff, all, and a topic on which I’ve dedicated thousands of words.  If you’re still working, do yourself a favor and take a “mini-retirement” to think about the things that really matter before you take the plunge.

3.) Have you made a Realistic Spending Estimate?

In its rawest form, the decision to retire is a simple math problem.  Multiply your assets times a safe withdrawal rate, add any expected income, and see if the total covers your expected level of spending.  Given the importance of getting the correct answer to that formula, it’s critical that you spend some time developing a realistic spending estimate for your retirement years.  Since you’ve thought about what you’re going to be doing in retirement (#2), it’s a necessary exercise to track your pre-retirement spending for as long as feasible (I did 11 months), then make any adjustments for how you think it will change post-retirement.  Too many people “take a swag” on this one, but I strongly encourage you to resist that temptation and give it a lot of focus as you’re making your decision to retire.