Hub Blogs

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.

Retired Money: The Four Phases of Retirement

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As anyone who has left full-time employment probably knows, these days Retirement is seldom a one-time sudden event. Just as an airplane doesn’t vertically descend instantly in order to land but begins its descent hundreds of kilometres away, so too do formerly fully employed workers usually gradually cut back. In fact, as my latest MoneySense Retired Money column says, there are at least four phases of Retirement. Click on the highlighted text to retrieve the full online column: The Four Phases of Retirement.

That’s according to former financial adviser and retiree Riley Moynes, who has prepared thousands of clients for retirement over his long career. His views are encapsulated in a short booklet titled just that: The Four Phases of Retirement. The subtitle is What to Expect When You’re Retiring, which is a clearly a nod to the bestselling book on pregnancy. 

Having just reached the traditional retirement age of 65 earlier this month, I can attest to the gradual nature of Retirement, which in earlier Retired Money columns referred to the glide path analogy made above.

So what are the 4 phases?

Phase 1: Extended Vacation

This is the classical honeymoon phase that full-time workers imagine amounts to a permanent vacation. It typically involves extended travel, the chance to indulge in hobbies, spend more time with the family and (especially!) one’s spouse.

Phase 2: The plunge into the abyss of insignificance

This “drop from the top” can be one of the top ten traumas human being faces in their lives. With it comes the reality of five “unavoidable losses”: structure, identify, relationships, a sense of purpose and a sense of power.

Phase 3: Trial & Error

The retiree starts to realize the sands of time are starting to slip rapidly away and that if you are to accomplish anything with what time remains, it had better be soon. The dominant question here is “How can I contribute?” You tentatively start a few ventures and eventually commit to one but are prepared to go back to the drawing board if it doesn’t work out.

Phase 4: Reinvent and Repurpose

Not everyone reaches this stage (indeed, some may go back to Phase 1 and just kick back and enjoy themselves again) but for those who yearn to  leave a legacy, Phase 4 is the place to do it. The retiree ask three questions designed to identify one’s unique ability: What do you absolutely love to do? What do you do very well? And what attributes or skills have led to success in the past?

Moynes now gives workshops on Retirement (see www.thefourphases.com) and also published a companion book in 2017 titled The Ten Lessons: How You Too Can Squeeze All the “Juice” Out of Retirement (see www.thetenlessons.com).

Where is the most affordable housing for Singles?

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

It’s no secret that Canadian real estate is expensive, with home ownership financially out of reach for many in the nation’s largest urban centres. Detached Toronto houses, for instance, fetched an average of $1,282,240 in February: and that follows an 18.6 per cent decline from the year prior.

Affordability in Vancouver remains at an all-time low; according to a recent report from RBC, the lender’s Senior Vice President and Chief Economist Craig Wright stated Vancouver home buyers “are being challenged by the worst affordability levels ever recorded in Canada.”

Well beyond expert advice

Financial experts commonly recommend that for homeownership to be financially sustainable, shelter costs should not exceed a third of a household’s take-home pay. This is easier said than done in the majority of Canada’s markets: and not at all possible in some regions for those purchasing a home on a single income, according to data compiled by Zoocasa.

To determine the level of affordability in each market, the study determined the median home price-to-income ratio, based on regional home prices reported by the Canadian Real Estate Association, and median household incomes from Statistics Canada.

This ratio determines how many years it would take to pay off a home using 100 per cent of a household’s annual income:  the higher the ratio, the longer the timeline. And, while dual-income households have their fair share of affordability challenges in hot markets, the numbers paint an impossible picture for solo buyers.

For example, in Vancouver, where a single-income household brings in a median annual salary of $38,164, and the average home cost $1,071,800, homeownership outweighs incomes by multiple of 28. A home in the City of Toronto would set said buyer back 19 years for their home purchase.

Even most affordable markets too pricey for Singles

However, in a market as varied as Canada’s, affordability can change drastically by market, yet single-income households are still theoretically paying too much on homeownership in even the most affordable regions. Houses for sale in Hamilton, a popular secondary market to Toronto, still cost single buyers 15 times their income while in Saint John — the most affordable Canadian market — the average home price of $171,596 still outstrips the regional median income of $39,163 by four times.

Continue Reading…

The 10 worst mistakes that new Entrepreneurs are likely to make

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By Abby Vonda

Special to the Financial Independence Hub

When you’re starting your own business for the first time, it’s all about learning from your mistakes. But it can save you a lot of time, effort and money if you manage to avoid them altogether. Here are some of the 10 worst mistakes you can make as a beginner entrepreneur:

1.) Being too inflexible

Your business idea may look great on paper but in practice things rarely go as predicted. You may come across unexpected challenges and opportunities once your business gets off the ground. Don’t be so inflexible that you fail to recognise them.

2.) Forgetting your Vision

While flexibility is key, you don’t want to move in too many different directions at once. It will spread your time and resources too thinly. Keep your vision clearly in mind. It may adapt over time. But you should always have a reference point to come back to.

3.) Beating yourself up over Setbacks

When you’re just starting out, any setbacks can really dent your confidence and motivation. It’s important to remember that every business experiences these setbacks. And it’s learning to move forward and do things differently next time that will make your business stronger in the long run.

4.) Thinking you can do it all yourself

Very few people are able to master all aspects of entrepreneurship. Try to be aware of your own strengths and weaknesses. If you struggle with business administration or copywriting or keeping track of the numbers, get somebody on board to help you. This doesn’t even need to be a full time employee: freelancers and contract workers give you flexibility as well as the necessary expertise.

5.) Failing to consider Investment implications

When searching for initial investment, it can be tempting to jump at any offer. However, it’s worth taking your time to consider investment implications. What will it mean if investors have voting rights? And how would you feel if family members lose money, even in the short term, as a result of their investment?

6.) Keeping your idea too close to your chest

When you have a great idea, it’s tempting to keep it close to your chest. You don’t want anyone else to run off with it and get there first. But unless you are able to share your vision with others you may struggle to get it off the ground. Continue Reading…

5 financial tips that save money in the long run

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By Sia Hasan

Special to the Financial Independence Hub

The financial steps you take now can have a major impact on your life. Believe it or not, there are changes you can make right now if you would like to save yourself a lot of money.

Below are five tips you can follow if you would like to handle your finances in the best way possible.

1.) Save for Retirement

First, it’s never too early to start saving for retirement. For example, if you don’t already have one, you can open up a self directed IRA (or its Canadian equivalent, the RRSP.) Contributing money to your retirement account now can help you ensure that you save up enough money for when you are no longer able to work. If you start now, you can help ensure that you earn more in interest as well.

2.) Focus on Maintenance

Maintenance of your home, car and other things you own can be expensive. However, not maintaining your home or vehicle can actually be a lot more expensive in the long run. Therefore, even though it can be tough, it’s important to make maintenance a top priority. This can help you ensure that things last longer and can help you avoid more expensive repairs later on down the road.

3.) Take care of your Health

Along with focusing on taking good care of your car, your house and your other belongings, it is also important to take good care of yourself. Not only can taking care of your health help with your overall happiness and well-being, but it can save you a lot of money as well. Therefore, it’s important to avoid smoking or drinking too much alcohol, and it’s also critical to see your doctor and your dentist on a regular basis. Continue Reading…

Use your Tax Refund to jumpstart your Savings

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By Jordan Lavin, RateHub.ca

Special to the Financial Independence Hub 

It’s tax season, and if you’re like the majority of Canadians you’ll be getting money back from the government.

That’s right. Out of everyone who files a tax return for the 2017 tax year, 58% are getting a refund and the average amount is $1,765.

That’s not a small amount of money. $1,765 is enough for a nice new TV, a beach getaway, or maybe even a deposit on a new car. If you have a big tax refund coming your way, you might already be dreaming of all the ways you can spend it.

But I want you to think of it another way. Your tax refund is a refund. You’ve paid too much money to the government in taxes over the year, and now they’re returning it to you, without interest. If your tax refund is $1,765, that means you paid more than $147 a month too much in taxes over the year.

It’s your money, not free money!

It’s not free money. It’s your money, that you already earned and were forced to save.

You could take your tax refund and splurge on something fun. But since you’ve already saved that money, why not keep it going and use it to earn money that actually is free?

In fact, you can use a tax refund of $1,765 to generate $724 in interest by depositing it in a high interest savings account, TFSA, or RRSP, and allowing it to grow. That’s more “free money” in your pocket.

Need proof?

Today’s best high interest savings account rate is 2.3%. At that rate, a deposit of $1,765 will earn $41.03 in interest in the first year. After 20 years, it will have earned $1,030 in interest. Once tax is taken out, that means the total earnings on your savings would be $2,489 and change.

Wait, taxes?

Yes, money earned in an ordinary high-interest savings account is taxed at your marginal rate. For example, if you make $50,000 per year and live in Ontario, your marginal tax rate is 29.65%. For every $100 in interest your savings account earns, you will owe $29.65 in income tax.

The advantages of TFSAs

Fortunately, there are some ways to reduce the amount the government takes out of your earnings.

Continue Reading…