Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.
My latest MoneySense Retired Money column focuses on a free retirement calculator called PERC, plus the accompanying new third edition of Fred Vettese’s book, Retirement Income for Life: Getting More Without Saving More.
As the column notes, I have previously reviewed the earlier editions of the book but any retiree or near retiree will find it invaluable and well worth the C$26.95 price. Also, there is a free eBook offer.
PERC of course is an acronym and stands for Personal Enhanced Retirement Calculator.
PERC is itself a chapter title (chapter 15 of the third edition) and constitutes the fourth of five “enhancements” Vettese describes for getting more without saving more. Vettese developed PERC while writing the first edition in 2018: it is available at no charge at perc-pro.ca.
In another generous offer, anyone who buys the print edition can get a free ebook version by emailing details of proof of purchase to firstname.lastname@example.org.
I have diabetes so I am careful about eating sugary foods. In this short statement lies the secret of simple financial management. You may say that’s an odd conclusion, but you will shortly see the principles underlying the analogy in the first sentence and its applicability to your finances.
The first element (I have diabetes) is “knowing” that I have a problem and the second element (I am careful about eating sugary foods) is “doing something about it.” In the same way, financial management requires that you first know what you own, what you owe, and what your cash inflows and outflows are. The second thing is to determine which debts to pay off first and which discretionary expenses you can reduce: in other words, you want to reduce your expenses so that you can generate savings that can subsequently be invested.
Let’s use another analogy. I need to get in shape. I enthusiastically join a club and start going regularly. But soon I am overwhelmed by the choice of machines and different exercises and my visits start to decline and eventually stop. What happened? I was probably over ambitious, didn’t have the discipline and made it overly complicated. I could have taken a simpler approach by focusing first on my diet and then doing something simple like regular walking to create the sustained discipline that is needed for long-term results. The message here is, start with something simple and sustain the routine. Continue Reading…
Estate planning is crucial for anyone looking to secure findependence and leave a lasting legacy for their loved ones. It involves making deliberate decisions about who will inherit your assets and how executors should handle your affairs after you’re gone.
However, many overlook the finer details, leading to common mistakes that can have significant financial and emotional impacts on those left behind. Understanding and avoiding these pitfalls ensures your estate plan fulfills your wishes and supports your loved ones without unnecessary stress or financial burden.
Common Estate Planning Oversights
Navigating the complexities of estate planning is no small task, and it’s all too easy to overlook crucial details that can make a big difference. Here are some common estate planning oversights that could derail your intentions and how to steer clear of these potential pitfalls.
Neglecting to Update Beneficiaries
Regularly reviewing and updating beneficiary designations on life insurance, retirement accounts and other financial assets ensures your estate plan reflects your current wishes. Life events — like marriage, divorce, the birth of a child or the death of a designated beneficiary — can alter your intentions for asset distribution.
Failure to update these designations can lead to your assets going to unintended recipients — like an ex-spouse or estranged family members — instead of supporting your current loved ones or preferred charities.
Underestimating the Value of a Comprehensive Will
Having a will that comprehensively covers all assets and wishes is fundamental to effective estate planning. Despite its importance, only about 32% of Americans have taken the step to create a will.
This document ensures your assets are distributed according to your desires, provides clear instructions for caring for minor children and appoints executors to manage your estate. An incomplete will — or the absence of one — can lead to family disputes, as loved ones may have differing opinions on the distribution of assets.
Such disagreements often result in extended legal processes, which can deplete the estate’s value through legal fees and other costs. Additionally, without a will, state laws dictate the distribution of your assets, potentially leading to outcomes that starkly contrast with your wishes.
Failing to Establish an Advanced Health Care Directive
An advanced health care directive guides medical decisions if you can’t communicate your wishes, providing physicians and loved ones with clear written instructions. Healthcare providers especially value this foresight, ensuring your care aligns with your preferences and alleviating the burden of decision-making from your family. Continue Reading…
Many Canadians are aware that you can open a U.S. dollar bank account at most Canadian financial institutions.
But did you know that you can also open a U.S. dollar investment account through many different investment companies?
The following are reasons why you may wish to consider opening a U.S. dollar investment account.
Reduce the cost of U.S. dollar conversion
Every time that you convert Canadian dollars to U.S. dollars (or vice versa), you will pay a fee to the financial institution that makes the conversion for you. That fee is known as the currency spread, and can usually be noticed by looking at the difference between the “bid” and the “ask” prices displayed by the financial institution.
For example, if the current spot exchange rate is quoted as $1.35 Canadian for each U.S. dollar, the bid (or price that you will receive for selling U.S. dollars) might be $1.32 and the ask (or price that you must pay to purchase U.S. dollars) might be $1.38. So, every time you buy or sell U.S. currency you lose 3 cents per dollar. If you are regularly converting currency, that becomes very expensive!
Buying or selling U.S.-listed securities in a Canadian dollar investment account is a common example of Canadians paying unnecessary currency conversion costs, allowing the broker to pocket the currency spread on buys and sells, dividends or interest paid. The more that you buy and sell, the more that you lose. These costs can be eliminated by simply owning your U.S.-listed securities in a U.S. dollar investment account instead since there is no need to convert currency on every transaction.
Hedge the impact of currency exchange rates
Have you ever felt like you had to limit your spending on travel to the U.S. because the value of the Canadian dollar was depressingly low? Or how about not ordering that item located in New York on eBay because it was priced in U.S. dollars which made it too expensive? The value of the Canadian dollar relative to the U.S. dollar has fluctuated greatly over time. In the past few decades alone, the exchange rate has ranged from more than $1.60 Canadian per U.S. dollar to less than $1.00 – yes, the Canadian dollar has on occasion been worth more than the U.S. dollar!
But why leave it to chance? If you have a portion of your investments denominated in U.S. dollars, you can always draw from it when you need it. You won’t pay conversion costs, and the current exchange rate should not matter because you don’t have to convert anything. For folks who require the frequent use of U.S. dollars for business, travel, or shopping, a U.S. dollar investment account can make a lot of sense.
For a simple illustration, consider a shrewd Canadian investor who vacations in Orlando, Florida for one week in February every year. The typical expense for this trip each year is about $5,000 U.S. dollars. This investor opened a U.S. dollar investment account and invested $100,000 U.S. dollars in an income-oriented investment portfolio that consistently earns 5% per year. This investor should never have to worry about exchange rates, or conversion costs since $5,000 U.S. dollars can easily be withdrawn every year!
Eliminate PFIC reporting (for U.S. citizens living in Canada)
Unfortunately for U.S. citizens living in Canada, Uncle Sam requires you to continue filing U.S. income tax returns. Also unfortunately, the I.R.S. requires additional reporting requirements for Passive Foreign Investment Corporations (PFICs), which may result in additional taxes owing. If you own any mutual fund or exchange traded fund issued by a Canadian company, it is considered a PFIC. Regulations require that all mutual funds purchased in Canada, must be issued by a Canadian company. Unless you enjoy the extra reporting requirements, this can be problematic for some investors. Continue Reading…
While the Hub’s focus is primarily on investing, personal finance and Retirement, Findependence has given me sufficient leisure time to absorb a lot of content on politics and the ongoing battle to preserve democracy and in particular American democracy. What’s the point of achieving Financial Independence for oneself and one’s family, if you find yourself suddenly living in a fascist autocracy?
To that end, I have recently read four excellent books that summarize where we are, where we have come from and where we likely may be going. (Note, this blog is an update of what I wrote in late November, but with two books added.)
In contrast to two of the books mentioned below, Heather Cox Richardson’s Democracy Awakening is disturbingly current and explicitly names names. There is an extensive recap of The Former Guy’s attempt to highjack the 2020 election and the subsequent event of January 6th and everything that has occurred since.
Yes, I’m sick of reading about him too, which is why I don’t even name him here (even on social media accounts I prefer to use 45). But after his deranged Thanksgiving rant and an equally insane Christmas greeting on the soon-to-be defunct Truth Social (aka Pravda Social), his behaviour has become nothing short of alarming.
Richardson is a history professor at Boston College. For Canadians in particular the book is a valuable primer on the founding of America, the Declaration of Independence, the civil war, the Constitution and its many amendments, the creation of the Democratic and Republican parties, and the politics of the last few centuries. I assume most well-read American readers are taught this in grade school (although maybe not, judging by the millions of deluded MAGA zealots.)
The book itself is divided into three main parts: Undermining Democracy, The Authoritarian Experiment, and Reclaiming America.
Richardson make frequent references to Adolf Hitler and the Nazis. As she writes in the foreword:
“Hitler’s rise to absolute power began with his consolidation of political influence to win 36.8 percent of the vote in 1932, which he parlayed into a deal to become German chancellor. The absolute dictatorship came afterward. Democracies die more often through the ballot box than at gunpoint.”
She goes on to write that a small group of people “have made war on American democracy,” leading the country “toward authoritarianism by creating a disaffected population and promising to re-create an imagined past where those people could feel important again.” In other words, MAGA.
I’ll skip to the ending but again urge readers to get a copy and read everything between these snippets:
“Once again, we are at a time of testing. How it comes out rests, as it always has, in our own hands.”
Hitler: Ascent 1889-1939
Even since I wrote the original version of this blog in November, the press has been full of alarming reports of 45’s Hitler-like rhetoric early in 2024: famously his references to vermin and to immigrants poisoning the blood of the American people, both from the original Hitler playbook. And who can forget his “dictator only on the first day,” an alarming recent example of many a truth said in jest?
A two-book series by Volker Ullrich looks first at Hitler’s political rise and then to his decline and defeat in the second World War that he created.The second book is titled Hitler: Downfall: 1939-1945.
While most of us may think we know this history going back to high-school history classes, not to mention numerous histories, novels and films about World War II, Hitler: Ascent is nevertheless a bracing refresher course.
Ullrich charts Hitler’s improbable rise from failed artist to political rabble rouser, to his failed beerhall putsch in the 1920s, his writing of Mein Kampf after a too-short prison sentence and ultimately his stunning January 1933 manoeuvre to become the Chancellor of Germany, which he soon consolidated as combined chancellor/president and ultimately the dictator he is now known to be.
The book also makes clear his goals for creating a Greater Germany at the expense of most of his European neighbours (famously Poland and France), and his plans for impossibly grandiose architectural structures to be implemented by Albert Speer, with Berlin (to be renamed Germania) the centre of what he hoped would be a global dictatorship.
The second Ullrich book — Hitler: Downfall, 1939-1945 — is also well worth reading. The final sentences are particularly relevant to today’s environment:
If Hitler’s “life and career teaches us anything, it is how quickly democracy can be prised from its hinges when political institutions fail and civilizing forces in society are too weak to combat the lure of authoritarianism; how thin the mantle separating civilization and barbarism actually is; and what human beings are capable of when the rule of law and ethical norms are suspended and some people are granted unlimited power over the lives of others.”
Of course, for most of us, reading yet another book (or two) about Adolf Hitler doesn’t usually create undue anxiety, since it all seems to be comfortably in the faraway past. Ancient history, as they say. Continue Reading…