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.

Money never sleeps, even when you’re retired

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By Billy Kaderli

Special to the Financial Independence Hub

Just because you retire, your money doesn’t have to.

In the words of Gordon Gecko from the 1987 movie Wall Street, “money never sleeps.” And your money definitely won’t once you leave your job.

Many people are shocked to learn that since we left the conventional work force almost thirty years ago our net worth has actually increased, significantly out-pacing inflation and spending. Reading financial articles about what if retirees run out of money, I get the impression that the authors do not understand that once retired, your money can – and should – continue to work for you.

Working smart, not hard

Once you clock out or walk out of the office for the last time, that doesn’t mean your investments are frozen at that point. The stock market is still functioning and now your “job” is to become your own personal financial manager. Actually, you should have been doing this all along, but if not, start now.

You need to get control of your expenses by tracking your spending daily, as well as annually. This is so easy — only taking minutes a day — and this will open your eyes as to where your money is going. Not only that, but it will give you great confidence to manage your financial future. Every business tracks expenses and you need to do the same. You are the Chief Financial Officer of your retirement.

Income is important, but …

Many people structure their investments for income knowing they need $3,000 or more per month to cover their lifestyle. Which is fine, but inflation will be eating away at those numbers and most likely taxes will do the same. Over time your expenses will rise and your purchasing power will drop. You need protection to cover the increases.

Stocks provide that protection and there is an added bonus; when you sell, capital gains are taxed at a lower rate than ordinary income. Therefore, tilting your investments for growth as compared to income will help protect yourself against future inflation. Plus, it will minimize your tax liability.

The day we retired the S&P 500 index closed at 312.49. Today, this equates to a better than 10% annual return including dividends.

That’s pretty good for sitting on the beach working on my tan.

Making 10% on our portfolio annually while spending less than 4% of our net worth has allowed our finances to grow out-pacing inflation, while we continue to run around the globe searching for unique and unusual places.

The key is to start as young as you can with as much as you can and let the markets work in your favor. Time is the greatest asset with investing and younger people can utilize this to their advantage.

But what if you’re fifty?
Continue Reading…

8 habits that are killing your Retirement dreams

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A growing number of Canadians plan on working longer because they haven’t saved enough for retirement. We see it at a macro-level; Canadian households owe a record $1.69 in debt for every dollar of disposable income, meanwhile the personal savings rate in Canada stands at a paltry 3.4 per cent.

There are plenty of reasons why we owe too much and save too little. The economy stinks, people get laid off, and salary increases are few and far between.

That said we’re often our own worst enemy when it comes to taking care of our finances. Here are eight bad habits that are killing your retirement dreams:

1.) You don’t watch your spending

It’s tough to stop a money leak when you have no clue where your money is going. Small daily purchases do add up (latte factor, anyone?), but these spending categories can bust your budget much faster – big grocery bills, dining out too frequently, filling your closet full of new clothes, one-click online shopping, and expensive hobbies, to name a few.

The solution: Write down everything you spend for three months. I guarantee you’ll have an ‘a-ha’ moment at best, and at worst discover something useful about your spending habits that you’d be willing to change.

The goal of course is to spend less than you earn. It’s one of the major tenets of personal finance.

2.) You want the newest ‘everything’

Fashion and décor trends change, technology constantly evolves. Staying ahead of the curve means shelling out big bucks for the latest and greatest products. The problem is your capacity to buy new things will never keep up with the pace of innovation and change. It’s an endless cycle.

The solution: Wait. Early adopters pay a hefty premium to be first. Look no further than televisions, where the latest innovations can initially go for between $5,000 and $10,000: 10 times what they’ll cost in a year or two.

The bigger issue is the psychological need to always have the latest gadget or be at the cutting edge. Ask yourself whom are you trying to impress.

3.) You have the constant need to upgrade

Fewer than half of all iPhone users hang onto their smartphones until they stop working or become obsolete. Most want to upgrade as soon as their provider allows it: usually every two years. A small percentage upgrades every year whenever a new model is released.

While spending a few hundred dollars on a new phone every other year might not hinder your retirement plans, it could be a symptom of a bigger problem. The constant need to upgrade your technology, your car, and even your home can be a big drain on your finances.

Nearly three in 10 homeowners get the urge to move every five years, and 14 per cent actually want to move every year.

The solution: The same buy-and-hold approach that you take with your investments can also apply to your major purchases. The Globe and Mail’s Rob Carrick suggests a 10-year rule for homeowners to combat the odds of a housing crash and to save on transaction fees. Continue Reading…

How (not) to trade US midterm elections: you can’t Trump staying the course

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Investors should avoid making major portfolio changes in advance of the US midterm elections, says former advisor Dale Roberts

By Dale Roberts

Special to the Financial Independence Hub

When I was an advisor at Tangerine Investments I would have many more-than-interesting conversations with clients about short-term economic and political events; especially over Donald Trump. For those of you who do not live under a rock, Donald Trump is the more than controversial President of The United States. Mr. Trump went from real estate magnate and reality TV show host to the most important chair in the world. Many will write and say that the President who resides over the world’s largest and most influential economy and the world’s most powerful armed forces (by many times over) is the most ‘powerful person’ in the world.

So as investors, and for those who manage money, we should pay attention to what the most powerful person on earth does and says, right?

Nope.

As investors, we don’t invest in Presidents or Prime Ministers, we invest in economies and the companies that help drive those economies. With respect to investing in the U.S. the world’s greatest investor, Warren Buffett, often writes …

Never bet against America.

And heading into the Presidential elections of 2016 Mr. Buffett (a vocal Democrat and Hillary Clinton supporter) offered in a Nasdaq interview …

“America works … I’ve said this before, it’ll work wonderfully under Hillary Clinton, and I think it’ll work fine under Donald Trump … For 240 years it’s been a terrible mistake to bet against America, and now is no time to start.”

Ahhh, and there’s the very powerful and destructive key phrase tucked into that sentience; the two words “bet against.” If you make a short-term move, make a guess on a short term event, you’ve just turned investing into betting/gambling. You’ve turned investing into trading. As the saying goes, on the list of the world’s most successful investors you won’t find any traders.

Successful investors have a long-term outlook and a long-term holding period. Boring works. Excitement is for the casino. When asked what is his favourite holding period for a stock or investment Mr. Buffett will reply “forever.”

So don’t listen to me, but you might listen to the word’s greatest investor: who often states that he has never invested based on a short-term economic event or economic prediction or political event or political commentary.

An investor with a well-balanced portfolio will likely invest in US and International markets. When we invest in America we often own market-leading companies such as Apple, Microsoft, Johnson & Johnson, Walmart, Home Depot, McDonald’s, Coke and Pepsico, Costco, Amazon, Google, Netflix, AT &T, Exxon Mobil, Clorox, Facebook, Colgate-Palmolive, Goldman Sachs, and even Mr. Buffett’s conglomerate Berkshire Hathaway.

You’re not investing in Donald Trump, you’re investing in McDonald’s.

Investors can ignore the midterm elections

If you now understand that you don’t need to pay attention to the current President of the United States, you also do not need to pay attention to the next President of the United States, nor do you need to pay attention to the next group of Congresswomen and Congressmen and Senators who will fill the seats of The House of Representatives. You can ignore the midterm elections on Tuesday November 6th, 2018. You can ignore the Presidential election that will follow two years later. Continue Reading…

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…