All posts by Financial Independence Hub

A Password Dividend: Living your Dreams on $4,000 a month (US)

Posted By |
Image courtesy RetireEarlyLifestyle.com

By Billy and Akaisha Kaderli, RetireEarlyLifestyle.com

Special to Financial Independence Hub

Once someone learns that we retired at the age of 38 in 1991 and have been traveling the world ever since, they ask, “How could you afford such a lifestyle? It must cost a fortune for airfare, to live in guesthouses, hotels, apartments and eating out!”

When we tell them that this lifestyle hasn’t cost us anything — in fact, we made money — they’re floored. Remember, it’s a lifestyle, not a vacation.

When we left the conventional working world in January, 1991, the S&P 500 Index was 312.49. Today it is over 5300. That’s an average of roughly a 10% per year return including dividends. See the calculator below.

The S&P 500 Dividends Reinvested Price Calculator

Sure, we had expenses, but our net worth has outpaced both spending and inflation because we created a money machine.

The cost of not retiring

Whenever we’re considering a trip, we ask ourselves, “Can we afford it?” Our answer shocks some: “We can’t afford not to go.”

We’re no spring chickens at 72. We’ve experienced enough in life to know that we will be more disappointed if we don’t try new things than if we make mistakes at the ones we attempt. We’re only getting one shot at this life, and find that our travel list is getting longer, not shorter.

Over the years many of our friends have passed on: some who never got a chance to retire from their jobs, and they had plenty of money. For the last 3 decades we have been spending about $30,000 per year. We have mentioned a few times about loosening the purse strings and this is what we have done.

We have seen dozens of countries, stayed in resort hotels, purchased new computer equipment and digital toys, refreshed our wardrobes countless times, drank fine wine, had maids, gardeners, and ate at some of the most fashionable restaurants in the world. We have hiked, biked, and scuba’d, lived on tropical islands and in million dollar homes, lived with the Maya, met musicians and magicians and generally enlarged our perspective about the world.

After all this traveling, spending and inflation, our net worth is still higher than when we retired.

So how much did this lifestyle really cost us? Continue Reading…

Conducting a Full Financial Audit: A Guide for Small Businesses

Posted By |
Image courtesy Pexels; Pavel Danilyuk

By Crizel Carbellido

Special to Financial Independence Hub

Business finances are important for any company to pay attention to, but perhaps more so for small- and medium-sized enterprises (SMEs) given their limited capital and their need to make the most out of every single buck.

Errors or miscalculations in an SME’s financial records can potentially lead to disastrous consequences, such as an untimely shortage of funds, inefficient business decisions due to wrong financial forecasts, and — if worse comes to worst — a state of being in the red.

One of the best safeguards against troubles like these is a full financial audit. To that end, here is a quick guide on what financial audits entail, why they’re a must for your small business, and how to prepare for one.

Accounting vs. Auditing

To rookie entrepreneurs who are just getting a handle on their business finances, accounting and auditing may seem like the same thing: and the latter may even seem unnecessary. However, these processes actually serve different purposes.

While accounting is concerned with the regular record-keeping of a business’s financial transactions, auditing is a less frequent procedure meant to check if those records are indeed accurate and error-free. In addition, given that a financial auditor is typically an independent party, their services are invaluable for providing an unbiased look into a business’s finances and giving an entrepreneur a more objective appraisal of their company’s financial standing.

What are the Benefits of a Full Financial Audit?

To those who know the process better, getting a full financial audit yields multiple benefits for small businesses. One is that it helps spot any inconsistencies or errors made during the bookkeeping and accounting process. As mentioned above, identifying and correcting those mistakes are crucial for ensuring that an entrepreneur is basing their business decisions on accurate data.

Having an audited financial statement on hand can be helpful when dealing with various financial institutions, such as some business banking Philippines providers, just in case they happen to need exhaustive documentation about the business’s financial standing. If you’re exploring a banking solution like the Philippines’ Maya Business Deposit or financing through Maya Flexi Loan, it would be a good idea to complete a full financial audit of your SME first.

A financial audit can also be beneficial for cost-cutting measures, as the process will allow you to identify areas where you might be overspending and pinpoint expenses to be streamlined.

Lastly, having your business audited will make it easier for you to spot fraudulent activities from bad actors in your company. That means that you’ll also have better chances of neutralizing them quickly and, overall, improve the integrity of your financial processes.

In turn, this could elevate the reputation and credibility of your business: especially among potential investors, as they can be assured that you’re constantly on top of your finances.

Tips for Overseeing a Smooth Audit

Philippine businesses whose gross annual sales have reached or exceeded a sum of PHP 3 million are required by the Bureau of Internal Revenue (BIR) to submit an audited financial statement (AFS) every year. If your small business happens to meet that threshold, then you’ll need to work with a third-party auditor to conduct a financial audit on your business for full compliance with the country’s laws.

To make sure that the auditing process goes smoothly, have all the pertinent records prepared beforehand. Include your ledgers, financial statements, tax-related documents, and other accounting records. You can lessen the burden of collating all these documents by ensuring that your day-to-day record-keeping is transparent and organized, so that there won’t be a need for a last-minute scramble to locate what’s necessary. Continue Reading…

Podcast & transcript: What Business Owners need to know about Hacking threats

Posted By |
IT expert Darren Coleman of Coleman Technologies

In this episode of Two Way Traffic wealth management advisor Darren Coleman — who specializes in cross-border financial issues — discussed IT security with his namesake, Darren Coleman. Darren is founder of Coleman Technologies Inc., which handles IT managed services and cyber services. The latter Coleman – he’s been called Canada’s top IT expert – leads a team of technicians based in Langley, BC and Dallas, Texas. He says hacking is a trillion-dollar industry and business owners should take note.

Podcast host Coleman drew parallels between financial services and cybersecurity. He said he looks for gaps in a client’s financial plan, while in cybersecurity Coleman the IT expert looks for gaps or vulnerabilities in multi-factor authentication, threat protection to ensure business resilience, and endpoint protection (cybersecurity software that protects from viruses, malware and ransomware).

The two agreed what’s necessary in both their industries is prevention and managing risk. Another point is that Canada and the US have different tax regimes, and different laws for regulatory compliance.

“The U.S. government can gain access to your data if they want it,” said IT expert Coleman. “We believe the Canadian government can’t, but there are ways they can get it too.”

Their discussion explored …

  • Why clients of wealth management firms are good targets for hackers and what to do in a security breach when asked to pay a ransom.
  • How multi-factor authentication can prevent 99% of email breaches.
  • Why organizations devote too much security attention to senior management and not enough to everyone else.

Here is a link to the podcast …

https://podcasts.apple.com/ca/podcast/the-business-of-hacking/id1494816908?i=1000672496679

Darren Coleman of Raymond James [Darren Coleman or Darren #1 henceforth]

Welcome back to another edition of Two Way Traffic, the cross-border podcast. Today my guest is now, let me see if I pronounced your name correctly. Darren Coleman.

Darren Coleman of Coleman Technologies [Darren C #2 henceforth]

You got it.

Darren Coleman

So you and I are namesakes. You run a firm in Langley, BC called Coleman technologies and do outsourced IT infrastructure. You are a cybersecurity expert. Why don’t you take us through Coleman technologies.

Darren C #2

I am the founder and CEO. Part of my mission is to help protect a million people from hackers, so being here on your podcast supports that cause. I’ve shared my cybersecurity insights on ABC, Forbes, MSB Success Magazine. I’ve spoken at Harvard, and co-authored some books. So that stuff led my company down the road to be an expert within the cybersecurity realm. But more than that, we provide 24/7, direct-detect, flat fee, IT support to our clients. We really just become your IT department.

Are there off-the-shelf tools?

Darren Coleman

Our firm has a huge IT spend every year, but for a lot of medium and small businesses, can they not just get all the tools off the shelf?

Darren C #2

Not really. You can hire an IT professional, but you’re probably going to hire multiple people because they’re going to want to take holidays. You’re going to be looking at double the cost right there. But you can’t just buy antivirus. Antivirus isn’t good enough anymore. You need endpoint protection, threat hunting, content filtering, and audits. There are things the IT professional may be good at, but there are  things you need an expert for. If you’re looking for cybersecurity insurance, the forms are 10 or 12 pages long and require things you might not think about. Continue Reading…

Book Review: Retirement Income for Life (3rd edition)

Posted By |
ECW Press

By Michael J. Wiener

Special to Financial Independence Hub

Actuary Frederick Vettese has a third edition of his excellent book, Retirement Income for Life: Getting More Without Saving More.

He explains methods of making your retirement savings produce more income over your entire retirement.

These methods include controlling investment fees, optimizing the timing of starting CPP and OAS pensions, annuities, Vettese’s free Personal Enhanced Retirement Calculator (PERC), and using reverse mortgages as a backstop if savings run out.

This third edition adds new material about how to deal with higher inflation, CPP expansion, new investment products as potential replacements for annuities, and improvements to Vettese’s retirement calculator PERC.  Rather than repeat material from my review of the second edition, I will focus on specific areas that drew my attention.

Inflation

“We can no longer take low inflation for granted.”  “An annuity does nothing to lessen inflation risk, which should be a greater worry than it was before the pandemic.”  “We could have practically ignored inflation risk before COVID hit but certainly not now.”

It’s true that inflation is a potential concern for the future, but it’s wrong to say that it was okay to ignore inflation in the past.  Not considering the possibility of inflation rising was a mistake many people made in the past.  We were lulled by many years of low inflation into being unprepared for its rise starting in 2021, just as many years of safety in bonds left us unprepared for the battering of long-term bonds when interest rates rose sharply.

Inflation risk is always present, and financial planners who have treated it as a fixed constant were making a mistake before inflation rose, just as they would be wrong to do so now.  This underappreciation of inflation risk is what causes people to say that standard long-term bonds (with no inflation protection) are safe to hold to maturity.  In fact, they are risky because of inflation uncertainty.

People’s future spending obligations are mostly linked to real prices that rise with inflation, not fixed nominal amounts.  The uncertainty in future inflation should be respected just as we respect uncertainty in stock market returns.

Maximizing retirement income

Vettese does a good job of explaining that things like CPP, OAS, and annuities provide more income now because they offer your estate little or nothing after you die.  To make full use of this book, you need to understand this fact, and “you have to commit to the idea that your main objectives are to maximize your retirement income and ensure it lasts a lifetime.”

Spending shocks

Retirees should “set aside somewhere between 3 percent and 5 percent of their spendable income each year, specifically to deal with spending shocks.”  “This reserve might not totally cover all the shocks that people … might encounter, but it will definitely soften their impact.”

It’s easy to plug a smooth future spending pattern into a spreadsheet, but real life is much messier than this.  I’ve seen cases of retirees choosing to spend some safe percentage from their savings while also expecting to be able to dip in anytime something big and unplanned for comes up.  This is a formula for running out of retirement savings early.

Retirement income targets

In this third edition, Vettese assumes that retiree spending will rise with inflation until age 70, then rise one percentage point below inflation during one’s 70s, two percentage points below inflation from age 80 to 84, then 1.8% below at 85, 1.6% below at 86, 1.4% below at 87, 1.2% below at 88, 1% below at 89, and rising with inflation again thereafter.

This plan is based on several academic studies of how retirees spend.  I don’t doubt the results from these studies, but I do have a problem with basing my plan exclusively on the average of what other people do.  The average Canadian smokes two cigarettes a day.  Does that mean I should too?

The academic studies mix together results from retirees who spent sensibly with those who overspent early and were forced to cut back.  I don’t want to base my retirement plan partially on the actions of retirees who made poor choices.  Similarly, I prefer to base my smoking behaviour on those Canadians who don’t smoke. Continue Reading…

How to Maximize Retirement Income with Hobbies

Posted By |

In retirement, hobbies, believe it or not, can seamlessly transition into income-generating ventures: thus presenting an opportunity for older adults to monetize their passions. Whether it’s woodworking, photography, gardening, or crafting, the key lies in recognizing the market demand for these skills or products and strategically positioning oneself to capitalize on it. Here’s a quick look on discovering how collecting and small businesses can boost your finances in your later years.

 

Image Adobe Stock/Pikselstock

By Dan Coconate

Special to Financial Independence Hub

Retirement offers a perfect time to turn hobbies into profitable ventures. Many retirees seek ways to supplement income through hobbies that provide both enjoyment and financial rewards.

Choosing hobbies with financial benefits allows you to maximize retirement income with hobbies while staying engaged in activities you love. The right hobby can provide personal fulfillment and a steady income stream that supports your retirement goals.

Explore Collecting as an Investment

Collecting serves as one of the most effective ways to generate income. Collectibles like vintage items, rare artifacts, and diecast car models can appreciate over time. Market trends and knowledge about item values help collectors make smart investment decisions.

Limited-edition diecast car models typically increase in value, offering a return on investment. Collectors who stay informed about market demand can identify items with the most potential for appreciation. Adopting eco-friendly collecting practices for diecast model cars enhances the long-term value of your collection and supports environmental conservation.

Turn Hobbies into a Small Business

Starting a small business based on a hobby provides another income source. Retirees can transform passions like crafting, gardening, or baking into profitable enterprises. Selling handmade goods, plants, or homemade treats on platforms like Etsy or at local markets offers a steady income stream.

Consider expanding your hobby-based business by offering workshops or classes. Teaching others how to create or maintain their own collections or crafts can generate additional income. For example, a retiree who enjoys gardening can teach a course on growing and maintaining a garden.

Monetize Knowledge and Expertise

Sharing knowledge and expertise related to your hobbies can also generate income. Retirees can offer workshops, create online courses, or write e-books to teach others about their hobbies.

This method monetizes your passion and keeps your mind active and engaged. For example, if you have extensive knowledge of vintage car models, you could create an online course or write a book about the history and intricacies of collecting these items.

Invest in Appreciating Assets

Hobbies that involve acquiring appreciating assets, such as art collecting, antique restoration, or wine collecting, offer financial rewards over time. These assets often gain value as they age, providing an additional source of income in retirement. Staying informed about market trends and seeking expert advice ensures that your investments yield the best possible returns. Continue Reading…