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New 2nd edition of US version of Findependence Day now available; plus an Interview with Myself

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Happy Canada Day!

Just in time for America’s Independence Day, I’m happy to announce that a new updated 2021 edition of Findependence Day is now available in the US market. Published by Best Books Media in New York, you can buy the paperback version of the book here through Amazon.com.

Or you can buy the new paperback for US$15.99 or Nook ebook for US$1.99 at Barnes & Noble.

Below is an Interview with Myself, which explains the timing, the differences and other things. If “An Interview with Myself” strikes some as a little bizarre, let me acknowledge that I originally got that idea from British journalist and author Malcolm Muggeridge, who I knew when he was the Writer in Residence at the University of Western Ontario journalism school in 1978-1979.

So without further ado, here’s the Q&A with myself:

 

Jon Chevreau: So Jon, you already had an American edition out in 2013. Why are you updating it eight years later?

Jon Chevreau: Good question, Jon, it’s mostly a matter of timing and the fact that North America, led by the United States, is just starting to emerge from the Covid pandemic. Suddenly, young people are starting to have hope again about their futures, including their financial futures. And, Findependence Day is a novel geared to younger adults, millennials, people just starting out on their life’s journey.

JC-Q: I see. I know Canada is a bit behind the USA in its vaccination program and economic recovery, but why a new US edition and not a new Canadian edition?

JC-A: True but the fact is that while the original Canadian edition has sold well and continues to sell in Canada, the original print run was such that there are still enough copies left that it doesn’t make much sense to make the old version obsolete. And besides, the content in the Canadian edition is still current.

As you know, Jon, the first edition from 2008 was actually written as a North American edition and attempted to include both Canadian and American content. But you decided a few years ago that the US market — which after all is ten times as large — needed its own edition with no reference at all to Canada or to Canadian financial content.

JC-Q: How do the different editions differ?

JC-A: Well, both the 2013 Trafford U.S. edition and the updated 2021 Best Books US edition are what I wanted the original edition to be. The cover concept was always the one you see above: it’s just that when Power Publishers published the first edition, the design team there went with the cover concept of the red balloon in the blue sky.

JC-Q: But you really wanted the image of a calendar set in the future, circling July 4th as the Findependence Day selected by one of your main characters?

JC-A: Correct. The 2013 and 2021 covers are quite similar although Best Books slightly reworked it and we changed the futuristic date from 2027 to 2036.

JC-Q: So the protagonist, Jamie, still has 15 years to achieve his dream of Financial Independence while he’s still young enough to enjoy it?

JC-A: Quite right, Jon.

JC-Q: Any other big differences?

JC-A: Well, the other thing the two US edition incorporated was something some people suggested I include in the original Canadian edition but chose not to at the time. That’s the chapter summary at the end of each chapter of the key lessons that Jamie and his wife Sheena learned. The new 2021 edition retains that feature and updates some of the financial info.

JC-Q: How do you categorize Findependence Day? Is it non-fiction or is it fiction?

JC-A: I wish you hadn’t asked that one, Jon because that’s a tough one to answer. In truth, it’s a hybrid of fiction and non-fiction, which I realize is a bit unusual.

JC-Q: So which is it, if you put a gun to our head?

JC-A: First, I’d say please remove the gun. Second, I’d say it’s primarily a novel but a financial novel.

JC-Q: Like David Chilton’s The Wealthy Barber and its many imitators?

JC-A: Sure, David Chilton established this genre way back in 1989 and no one has sold more copies than him in that niche. Incidentally, David has told us he “believes” in Findependence Day and that it is “excellent.” You can find that among the many laudatory testimonials the book has gathered over the years.

JC-Q: So why the hybrid and how does Findependence Day differ from all those other Wealthy Barber knockoffs?

JC-A: Well, most of the imitators tend to be what I call “information dumps” — the focus tends to be on the financial information and the stories around them tend to be a bit thin when it comes to characterization, plot etc.

JC-Q: And Findependence Day isn’t?

JC-A: We tried to bring traditional novel-writing structure and techniques into the book so that the young people who are its target audience would first be entertained and drawn in sufficiently that they’d want to see what happened to Jamie and Sheena. Yes, we sprinkle in the financial info as the plot proceeds but not at the expense of Story. So the minute any financial dump starts to sound contrived and unlikely to occur in real life, we cut it short and returned to the story.

That’s another reason for the end-of-chapter summaries and incidentally the reason we also created two Amazon ebooks that summarize the plot and reprise the end-of-chapter summaries. They cost just $2.99: they’re called A Novel Approach to Financial Independence. (one for Canada, the other for the US)

JC-Q. In short, we tried to write a “real novel.”

JC-A. We did try and many reviewers seemed to think we pulled it off. One financial planner, Diane McCurdy, said Findependence Day is “the closest you’ll come to a great beach book that helps you make enough money to retire!”

JC-Q: How is it a beach read? Continue Reading…

Mexico: US-style Living at one third the Cost

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Chacala Beach, Nayarit, Mexico. Photo credit Billy Kaderli.

By Billy and Akaisha Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

Mexico, that constantly media-bashed country to the south of the US, might be your better option for retirement.

One million Americans already call Mexico their home and it’s amazingly easy to obtain your residency visa for full-time living, most receiving theirs in a matter of days.

Snowbirds could easily add another million visitors to this number and can stay 6 months on a no-cost visitors visa!

With its proximity to the United States, both US and Mexican airlines offer non-stop flights to and from many destinations in the US. Or, of course, you could drive. So, visiting family or utilizing Medicare is much easier than if you were to live elsewhere overseas.

There are lots of reasons why Mexico is a great choice for retirement, so let’s list some:

Cost of Living

Mexico has everything that the US offers – along with a better lifestyle – at a fraction of the cost.

The Dollar exchange rate makes for attractive affordability.

The cost of a beer is 30 Pesos or about $1.50 at a bar. A lakeside lunch of grilled salmon with wine or margarita as your beverage plus a generous tip runs about $11USD per person.

Commonly used medicines at pharmacies won’t break the bank, and a consultation with a cardiologist or a surgeon is less than $40USD.

More on Medical Care

Many US doctors train in major Mexican hospitals where the “care” is still part of the healthcare industry.

Most doctors here – including specialists – are easily available through phone, WhatsApp or email and most speak English. Highly skilled dentists are abundant with oral surgeons performing teeth implants for a price less than your dental copay back home.

Assisted Living options run the gamut. Pricing for private rooms in a traditional Mexican mansion with gardens, comfort dogs, meals included, internet, laundry service and social activities and a driver to take you to appointments are about $2,000USD per month.

Housing

Here in Chapala, Mexico, all price ranges are available for both rentals and home ownership. For as little as $300 USD a month you can rent a one-bedroom furnished apartment or you can purchase a house in any of the towns which dot the lake for many times that amount.

Maids and gardeners are commonplace, and the price for plumbers, carpenters and electricians run about the same as a Lakeside lunch. Continue Reading…

Navigating Fixed Income Challenges with Flexibility

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By Brian Giuliano

Brandywine Global Investment Management, a specialist investment manager of Franklin Templeton

(Sponsor Content)

Flexibility and adaptability can work to an investor’s advantage in the challenging fixed income markets of 2021. Structural disinflationary trends are now clashing with cyclical inflationary forces in a global economy struggling to recover from the COVID-19 pandemic. Add on interest rates at record lows, demographic pressures, heavy government debt levels, and widespread technological disruption throughout the global economy.

The market environment of low interest rates makes it difficult to generate income while preserving capital. As a result, many investors have taken on additional credit or interest rate risk to try to earn a more attractive income from fixed income assets.

But there are pitfalls to this approach. Without a counterweight to the extra portfolio risk, investors could be vulnerable to an increase in interest rates or a selloff in credit markets.

One option for investors is a multisector strategy with the flexibility to adapt quickly to changing markets. A strategy that’s able to capture opportunities when available but also play defense when market conditions call for it.

Global Income Optimiser strategy

The portfolio team behind the Franklin Brandywine Global Income Optimiser strategy are strong believers in flexibility, which means we try to adapt the income and risk exposures in a portfolio to the market environment. This approach does not have any structural, home country or sectoral biases. We aim to rotate the portfolio across what we believe are the best risk-adjusted return opportunities in the global fixed income universe.

Our goal is to generate high-yield-like returns with investment-grade-like volatility for investors. We want to maximize the income that can safely be earned in a given market environment.

The Franklin Brandywine strategy seeks returns from across the investment universe, including global investment grade and high yield credit, developed market sovereigns, structured credit and emerging market debt. Furthermore, sector rotation, duration management, quality rotation and security selection are employed to meet the strategy’s investment objective. Foreign currency is hedged primarily back to an investor’s base currency, such as the Canadian dollar; however, limited exposure may be used opportunistically to add alpha for a portfolio.

This strategy became available to retail investors in Canada on June 4, when Franklin Templeton introduced the Franklin Brandywine Global Income Optimiser Fund*. Globally, the strategy has a successful track record, dating back to its inception in 2013. In the U.S, a similar fund, to the degree allowed by Canadian regulations, is 5-star rated by Morningstar.** Brandywine Global is a specialist investment manager that was part of Franklin Templeton’s acquisition of asset manager Legg Mason in 2020.

Portfolio positioning for the reopening

Brandywine Global sees growth and inflation returning to the global economy this year. We increased spread duration late in the first quarter of 2020 and began reducing high quality government bond duration; so overall portfolio duration was roughly flat last spring. From last summer through winter, we materially reduced portfolio duration.

Now, the positioning of the strategy is for a short duration, cyclically-oriented portfolio of companies that have some pricing power, given inflationary pressures from the reopening trade. There’s a mix of U.S. and European names with a concentration in the BBB and BB space. The level of credit risk is largely investment grade over the long term; less than 5% of the portfolio is in CCC securities. High quality government bonds can help manage volatility. These and other ‘safe’ assets offer lots of ‘episodic value’ for the portfolio at times, especially during volatile markets, by being sources of alpha and acting as a counterweight to riskier holdings.

Capital protection is a top priority, and the Brandywine team will not reach for yield in this strategy.

Environmental, social, governance assessments

Also, Brandywine Global integrates ESG analysis into our comprehensive assessment of information risk and price risk with this strategy. The focus is on the material ESG issues that can impact a country’s economic growth, the business activities of a corporation, or the integrity of securitized collateral. Continue Reading…

Financial knowledge of Canada’s retirement system isn’t improving, study shows

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Financial knowledge about the Canadian retirement system fell from 2020 to 2021, says the Retirement Savings Institute.

The financial literacy of average Canadians is still low when it comes to understanding our Retirement system, says a survey being released Tuesday. The third edition of the Retirement Savings Institute (RSI) surveyed 3,002 Canadians aged 35 to 54 and found the overall RSI index measuring knowledge of the retirement income system slipped from 38% in 2020 to 37% in 2021. This, it says, is “still showing a significant lack of knowledge among Canadians.”

The RSI Index is the share (stated as a percentage) of correct answers to  29 questions posed in the survey.

The best-understood subjects continue to be CPP/QPP and RRSPs/TFSAs. Canadians still find it tougher to understand employer sponsored pension plans and Old Age Security, where the average respondents “didn’t know” the answer to half the questions.

In a backgrounder, the RSI team at HEC Montreal [a business school] says the scientific literature in several countries has established a link between general financial literacy and preparation for Retirement. However, “the level  of general financial literacy among Canadians is fairly low, although comparable to what is observed elsewhere in industrialized countries.” It also finds knowlege about narrower topics like taxes to be “rather limited.”

Starting in 2018, the RSI started to measure on an annual basis the financial literacy of Canadians in their “years of strong asset accumulation in preparation for retirement.” Those younger than 35 tend to have “other concerns and financial priorities than retirement,” the RSI says.

Knowledge rises with education and income, and as retirement nears

Not surprisingly, the closer to Retirement age one is, the more knowledgeable of related financial matters we tend to become. The RSI score was 33.9% for the youngest in the survey aged 35 to 39, rising to 36.6% for the 40 to 44 cohort, then to 37.8% for the 45-49 group, and a high of 39.5% for those 50 to 54.

Also as one would expect, the more schooling the higher the score: those with high school or less had an RSI score of 31.5%, while those with college or equivalent scored 36.9%, and those with a Bachelor’s degree or higher scored on average 45.3%. Similarly, the higher the household income, the better knowledge. Thus, those with household income of $30,000 or less scored just 26.1%, compared to $60,000 to $90,000 families scoring 37.3% and at the highest, families making $120,000 or more scored 45.6%.

Equally unsurprising is the fact that higher earners are more knowledgeable about RRSPs and TFSAs, especially when it comes to contribution room and withdrawal rules. They are less knowledgeable about investment returns in those vehicles, and score a low 12.6% on penalties for over contributions and other rules related to taxes.

Many confused about Employer Pensions

Employer pension plans seems to be an issue. At all ages, Canadians found it difficult to know the difference between Defined Benefit (DB) and Defined Contribution (DC) pension plans. In particular, they tend to be confused about which one reduces longevity risk (DB) and which depends on returns generated by financial markets (DC). Low-income individuals are even less knowledgeable.

Workers who are contributing employer pension plans had significantly higher scores (41%) than those who were not enrolled in such plans (32.9%).

The older and richer understand CPP/QPP better

Also as you’d expect, older people and more well-off people understand the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP) better. As the chart below illustrates, most Canadians are now well aware that taking early CPP/QPP benefits results in lower monthly benefits (shown in the “Penalty” bar), but there is still a lot of confusion about whether CPP/QPP recipients can collect benefits while still working (only 25% correctly answer this.)

Most Canadians know there is a penalty for taking CPP/QPP benefits early but there is much confusion about collecting while still working.

Older people also know OAS and GIS better. As the chart below shows, most people know you have to be at least 65 years old to receive OAS, but knowledge about technical matters like the OAS clawback, the Guaranteed Income Supplement to the OAS, and taxation of these benefits tends to be much scantier.

Basic OAS timing seems well understood but many are murky when it comes to clawbacks and eligibility and taxation of GIS benefits.

Mortgages well understood, bonds and debt not so much

When it comes to major financial products, Canadians are quite knowledgeable about compound interest, but as less so about debt doubling and quite ill-informed about Bonds, as the chart below indicates. ( Continue Reading…

Renting vs Buying Property while living abroad: Which is best for Financial Independence?

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By Emily Roberts

For the Financial Independence Hub

Financial independence means different things to different people. It has an impact on your life planning and whether renting is preferred over buying property. If you’re planning to go abroad and live elsewhere like continental Europe, Eastern Europe, or south-east Asia, then plans may be different again.

In this article, we look at whether renting is better than buying when you’re financially independent (or working towards it).

What Does Financial Independence mean to You?

Financial independence is possible at various levels. People refer to it by different names including Barista FIRE, CoastFIRE, FI, and others.

One approach is to reach a modest level of financial independence to provide a minimal income from investments, and to let them grow from their current level for a decade or longer while working an easier, low-paid job. Another approach is to wait until you have enough and then retire, but with the occasional freelance or consulting gig too.

Financial independence doesn’t necessarily mean retirement, which generally speaking refers to stopping working as a primary source of income. Different strokes for different folks.

Advantages of Renting

When still working, renting comes out of your paycheck and reduces what you can invest for future financial independence. Some people decide to live and work abroad to reduce their living expenses, to allow them to save faster.

Renting in the US

Americans can rent places Stateside but have to be careful of the long-term leases and associated fees along with any restrictions on tenants.

Depending on the city, renting has become quite expensive, causing some to look abroad.

Renting Abroad

Renting abroad can save you considerable money compared to back home.

For instance, PropertyGuru provides rooms for rent in Kuching, Malaysia. They have rooms for under $100 a month, studios for greater privacy, and larger multi-bedroom apartments in newly constructed buildings too. Their team can locate suitable rental accommodation close to major facilities and transport links, so whether you’re working there, planning to retire, or just on vacation, they can find something suitable.

Advantages of Buying

Purchasing real estate is something that appeals to many people. When they don’t like the idea of not owning where they live, then they lean far more towards buying.

Owning property domestically is possible when the prices are affordable. Unfortunately, cities with the most jobs typically also enjoy robust real estate markets with high prices to match. Sinking most of the next egg into a home makes retirement difficult. The ongoing ownership costs aren’t cheap either. Continue Reading…