Victory Lap

Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at VictoryLapRetirement.com). You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.

TFSA room may jump to $6,000 in 2019 but is the TFSA right for you?

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By David Miller, CFP, RFP

Special to the Financial Independence Hub

2019 TFSA limits will likely see an increase to $6,000 for 2019, up $500 from $5,500 in 2018. But is taking advantage of the TFSA the right choice for you?

The big story

Most Canadians still don’t understand the TFSA or know if it’s the right type of account for them. More room is great but according to the CRA in 2015, only 10% of Canadians are currently maximizing their TFSA limits1.  Also, the CRA has looked to collect over $75 million in past audit penalties over improper use of the TFSA2.

The history

Starting in January 2019, annual TFSA room of $6,000 will be provided to each Canadian resident over the age of 18. Since 2009, Canadian residents have been able to contribute a small portion of their after-tax savings into this tax-free account. If you still are paying taxes on interest, dividends or capital gains on your investments in a non-registered account, it’s time to review the TFSA. If no contributions had been previously made, your TFSA room accumulates over time and a full $63,500 contribution could be made January 1, 2019.

The contribution you make today can grow without any tax implications in the future. If you over contribute, the CRA will penalize you 1% per month on any amount over the approved threshold. A best practice is to check first with the CRA to determine your personal TFSA limit for the calendar year.

Improper use

If you accidently, or purposefully, over-contribute to your TFSA, the CRA will impose a 1% per month penalty on the overage. This may be overstating the obvious, but over-contributing is a bad idea. You would have to reasonably expect your investments to grow higher than 12%/year (assuming simple math with a January 1stcontribution) to break even. Having TFSAs at two or more institutions may be a way you lose track of your contribution room. Ensure you check with the CRA to understand your annual TFSA contribution limit.

Another example of improper use could be frequently trading stocks within the TFSA, aka ‘day trading.’This may be considered a  ‘business activity,’ as perceived by the CRA and you could be taxed personally on all the income, dividends and capital gains.

Spousal successor

An important but often overlooked benefit to utilizing a TFSA is as an estate planning feature: the spousal successor declaration. Continue Reading…

3 ways to organize your new business

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By Sia Hasan

Special to the Financial Independence Hub

If you have a new business, then it is crucial that you organize it in the right way. Otherwise, you could end up missing out on more productivity.

So ensure that you get the most done possible during the day and increase profits while reducing problems with workflow. Set up your business for massive success by organizing your business better in the following three ways:

SOP (Standard Operating Procedure)

The first thing you need to do when organizing your new business is determine what kind of roles everyone has. There should be specific and unique classifications as to who is responsible for what.

The best way to do this is with SOPs. These are documents that show everyone what is expected of each role. You can have certain protocols as to how to handle consumer service, sales, and more.

The idea of the SOP is that anyone can plug right into your business and know how to perform that role without much hassle. It’s a step by step list of instructions so there is no confusion regarding what needs to be accomplished to deem that particular part of the business a success. Of course, this kind of thing won’t happen overnight!

It is best to sit down and make time to create your own SOPs. You might even read a few books or resources on the subject. This way, you have some guidance. There are a lot of different ways to do it, but you need to choose one that works for you.

For instance, some people find that they prefer to record a video and upload the files online. Then, it acts as a training resource. Others like to write down the procedures and share them in the cloud. Do whatever seems right for your new business.

The right software

We live in a world where software is more important than ever. It is vital that you use the right software tools or you could risk falling behind. Oftentimes, the right software will allow you to get more done, save time, save money, and stay on the cutting edge so you can generate new ideas for even more innovation. Consider the various types of software out there.

For instance, accounting software for nonprofits helps you keep an eye on your transactions. This is crucial for a company. If you lose sight of what you need to be doing for your income or expenses, then it could come back to bite you later. This is true regardless of what kind of business you run.

Another type of software is a great CRM. Being able to communicate with your team and upload information about customers is invaluable. It shaves time off the communication cycle and gives everyone what they need in the cloud.

Sales and Marketing Automation

Long gone are the days where marketers had to sit down and write out a new email, post, or ad by hand. Today, you can use automation software to make these assets in a scalable way. After all, your team can’t be there every second of the day.

You want your team focused on the higher-level aspects, so let them do that. Enable them with marketing software that automates your funnels. It can test your ads right away. Continue Reading…

Is every day a Saturday in Retirement?

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Is every day a Saturday in retirement? That’s what behavioural scientists Dan Ariely and Aline Holzwarth claimed in a recent study about retirement income. The premise being that when you’re no longer working 40 hours a week (or more) all of a sudden you have 40 hours a week available to spend money. Every day is like Saturday. Not to mention, many of the things your employer used to pay for, such as coffee, a smart-phone, or gym membership, now falls on you.

The study’s conclusion? Retirees should expect to spend as much as 130 per cent of their preretirement income after they retire. Yikes!

That flies in the face of typical retirement planning advice, which pegs the income replacement rate at around 70 per cent of your preretirement income. A lot of expenses should disappear when you reach retirement age. Hopefully your kids have left home, and your mortgage is paid off. You’ll no longer have payroll deductions for income taxes, CPP, and EI. Say goodbye to the long, soul-crushing commute, along with the expensive business attire.

Because of these reasons (and others) some retirement experts, like Fred Vettese, even champion a much lower retirement income target of 50 per cent of your income.

On the flip side, in this article about money myths, financial advisor Kurt Rosentreter seems to concur with the Ariely / Holzwarth study:

All the old retirement planning textbooks said you could expect to live off less than your working income (e.g. 70 per cent). The reality of what we are seeing in the trenches doing this work everyday is that there are three phases: Age 60 to 70 where we are seeing as high as 110 per cent of pre-retirement spending; age 75 to age 85, where costs can drop to 80 per cent after the first spouse death; and costs in the final phase of age 85 onward that can be lower or higher depending on health care.

This study resonated with me because one of my biggest fears about retirement is that I’ll overspend and completely blow my carefully planned budget.

Overspending is one of the biggest Retirement fears

Why is that a fear?

We do spend more money on the weekend. That’s when we do our shopping, our leisure activities, and when we go out for dinner. Weekends can be expensive!

Continue Reading…

If you have no faith in the future, should you invest?

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By Billy Kaderli

Special to the Financial Independence Hub

As many know, I am more than willing to offer financial advice in order to help others to become financially independent (aka “findependent.”) The sooner the better” that’s good for everyone, right?

I met a lady at a recent event that Akaisha and I attended, and in our visiting together I steered the conversation towards finances. Knowing that she lived in Hawaii and seeing that she was probably in her 40s, I falsely assumed she had some knowledge of money and how it works.

I was wrong.

After I shared with her that we retired at the age of 38, I asked what her financial plan for retirement was. She told me that she did not have much faith in the future, therefore she had no plan.

I asked her, “What if you are wrong?”

Her response was “I do not think I am wrong”

The Dollar is going to collapse

I have been hearing of the impending collapse of the Dollar for the last forty years.

First it was going to be replaced with the German Mark, then the Swiss Franc, then the Russian Ruble, Chinese Yuan, and now Bitcoin. Maybe someday they will be right, but so far, betting against the Dollar has been a costly investment.

I like to tell people that the Dollar is the cleanest shirt in the dirty laundry bin. Maybe you have some special inside trading information, but for me, I’ll stick with the U.S. currency.

Various apocalyptic scenarios

Maybe it’s part of being human, but it seems that society creates ominous future scenarios of various sorts to scare the living bejesus out of everyone. Continue Reading…

Could you become car-free?

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Billy and Akaisha on a Jak-a-Ran in Thailand

By Akaisha Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

It wasn’t a decision we took lightly.

In fact, Billy and I discussed the idea of becoming car-free for several years. There were good reasons to do it: no more maintenance and repair costs; no more fees for insurance, license plate renewal, or registration; no more fuel expense; and no more worry about storing the vehicle here in the States when we are traveling overseas for months or years at a time.

But there were also some obvious downsides. We wouldn’t have the freedom to come and go at a whim. And because we live in the American Southwest, where temperatures reach triple digits in the summer, we wondered how we’d manage to get around during the sun season.

Silly idea or feasible plan?

Most people we know couldn’t fathom the idea of giving up their vehicle and saw this new lifestyle choice as a hardship. Americans love their automobiles, and owning one is packaged as part of the American Dream. A look at the automobile and truck commercials today describe how we will be sexier, more popular, physically stronger, and obviously smarter if we purchase their brand of car.

As we’ve described on our Retire Early Lifestyle website, Billy and I live in an active adult community where we are within walking distance to stores, restaurants, and several different entertainment options. Most of what we need is near to us, and we appreciate the slower pace of life with all the rewards it brings. Many of our neighbors use a small scooter, golf cart, or bicycle to get around within a reasonable range. When we need to go somewhere farther, we trade services or pay cash to a neighbor or friend for their time. This is much cheaper than a taxi, more sociable, and we aren’t bogged down with worries about maintaining a vehicle. Both sides appreciate the trade, and our lives are enriched.

After almost two decades of world travel, we realized that the only place where we need to drive is in the States. Elsewhere, we take public transportation or hire a private driver. For the amount of time we live in the States, and for the amount of money that owning our own transport required, we finalized our decision to sell our vehicle.

The year was 2009.

What about you? 

Retirement takes many expressions and even if you could never see yourself as becoming completely free of car ownership, maybe you have toyed with the idea of keeping only one vehicle instead of two.

The following sites may help you with this transition: Continue Reading…