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.

Your home and your retirement plan

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By Anita Bruinsma, CFA, Clarity Personal Finance

Special to the Financial Independence Hub

“Your home should not be your retirement.”

This is a common headline in personal finance and although the details are nuanced, the headline can give the wrong impression: that you shouldn’t rely on the equity in your home to fund your retirement.

Certainly, it shouldn’t be the only source of retirement income: homeowners also have to save using RRSPs and TFSAs. However, homeowners in high-priced housing markets will likely have excess equity in their homes that should be considered when building a retirement plan and determining how much they need to save.

The rationale for the “don’t rely on your home for retirement” advice is twofold: first, that you will always need a place to live and the value of your home will be needed to buy or rent another residence; and second, that you need money to buy food and other things, which you can’t do if all your wealth is tied up in your home.

Both these points are valid, but they don’t apply to everyone. Like all aspects of financial planning, each individual’s personal circumstances need to be considered and in fact, many people should count on their home to help fund their retirement.

You’ll always need a place to live

To address the first point — that your current home will fund your next home — consider doing an analysis that looks at the cost of renting for the years after you sell your home. For those in high-priced housing markets like Toronto, the proceeds from selling a mortgage-free home will likely more than offset the cost of renting for 30 years in retirement, including paying for long-term care. The same analysis applies to downsizing by buying a smaller place in a less-expensive market. This means there could very well be excess funds that can be used later in life and this should be accounted for when determining how much retirement savings you need. Continue Reading…

An update on Findependence Day

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Regular readers of this site [FindependenceHub.com] probably know that it sprang from another site that was created in 2008 to help sell copies of the original Canadian edition of my financial novel, Findependence Day. I am writing this blog somewhat sheepishly as it turns out that that site is no longer available under the original URL. That URL was the title of the book followed by .com but this post is to warn anyone that the new site currently residing on that domain has nothing to do with me or the Hub. Sadly, we no longer own that URL.

I won’t even provide a link here because I can’t vouch for what may occur there: earlier this week we took down the link to it from the Hub, as it took casual browsers to a different site that appears to originate from India. I realize some readers may out of curiosity be tempted to click on the link but if they do would urge them to heed any warnings that may generate; it may or may not be a legitimate site, and therefore could compromise the computer or device of anyone who visits the site and clicks on any portion of it.

Second US edition via Best Buy Books (updated in 2021)

How to buy the original book and subsequent US edition

That said, there are still ways to purchase the original book and subsequent revised U.S. editions. You can find used copies of the original Canadian edition as well as the latest US edition at Abe Books. They also sell copies of some of my other books, including The Wealthy Boomer and the co-authored Victory Lap Retirement.

We do not sell the two US editions directly but they are available directly from either Trafford.com [published in 2013] or Best Books Media [updated and published in 2021.] Hard-cover, paperbacks and e-book versions of the U.S. Trafford version are available at Trafford or via Amazon Canada.  In addition, Chapters Indigo offers hardcover or paperback versions as well as a Kobo ebook version. 

I introduced the newest US edition on July 1st, 2021 here on the Hub. See why by clicking on An interview with myself. The Best Books Media edition is also available in hardcover, paperback and ebook formats at Barnes & Noble.

The hardcover version is also available at The Book Depositary. Here is the publisher blurb from that site:

Findependence Day presents personal finance in a “can’t put down” story format easily digested by young adults entering the workforce and the world of money. Because money problems often cause marital breakups, it focuses on the financial journey of a young couple who experience the usual ups and downs of job loss, buying homes, raising children, investing and pensions, starting businesses, coping with stock market volatility, and more.

The secrets of financial independence are critical wherever you are in the financial life cycle:

– Newlyweds embarking on family formation will discover the importance of financial planning.

– Debt-plagued graduates will be motivated to embrace “guerrilla frugality.”

First U.S. edition from Trafford, 2013

How to get the original Canadian edition directly from me

While used copies of the 2008 edition can be had for as little as $4 or $5 on some of the sites flagged above, shipping charges will put the final tab well above $10.  But you can still buy brand new copies of the original edition directly from me for $16, postage included, and I’d be glad to sign them and write a short message.

We hope to build a landing page from the Hub in due course that will let interested readers buy the original book through PayPal or credit cards, as was the case on the now-disappeared site.

In the meantime, copies of the 2008 Canadian edition can be purchased directly from me by emailing me at jonchevreau8@gmail.com or mailing a cheque for $16 payable to J. Chevreau Enterprises Inc., 22 Thirty Sixth St., Etobicoke, Ont., M8W 3K9. The $16 price includes GST.

Make sure you include your own mailing address so we can send it via Canada Post. That email can also be used for e-transfers. We absorb the GST. Cartons of 36 copies are also still available for $105 plus postage (roughly $30): some financial advisors find this to be a cost-effective giveaway for clients and prospects.

 

Should your Small Business partner with a Social Media Influencer?

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Image Source: Pixabay

By Beau Peters

Special to the Financial Independence Hub

Justifying working with social media influencers in a big business is much easier. They have the resources, reach, and reputation to make the process seamless. But should your Small Business partner with a social media influencer?

Let’s examine three pros and cons of working with a social media influencer as a small business. Then, we’ll guide you in deciding if this type of partnership is worth pursuing.

Pros and Cons of working with a Social Media Influencer

Working with a social media influencer can positively impact your business’s bottom line, but first, you must weigh the pros and cons of this kind of partnership equally. Let’s start with three substantial disadvantages:

1.) Working with an influencer is hard to justify with a small budget

Small businesses have to be diligent about their finances. The last thing you want to do is spend unnecessary money on a marketing strategy you don’t need. When you have a small marketing budget, it can be hard to justify working with an influencer.

You must consider whether you can actually afford to bring on an influencer and that you’re committed to measuring the return on investment to ensure it’s worth it.

2.) It’s risky

Any marketing strategy is risky, but working with an influencer can be particularly risky because you can’t control people. Even if an influencer checks off all the boxes on your “ultimate influencer” list, they may not do what you thought they would do for your brand.

From taking your product and running to not producing the agreed-to content to being completely ghosted, many things can go wrong when working with a social media influencer.

If you aren’t comfortable with the risks, this may not be for you.

3.) It takes a lot of time and effort to find the right influencers

One of the most complex parts of working with influencers is finding the right ones to partner with. Working with the wrong influencers can damage your reputation. If they do something against your brand’s values, your audience won’t be pleased you’re associated with them.

Finding the right influencers to work with takes a lot of time and effort. But you must put in that time and effort to ensure you’re partnering with people with shared values, morals, and ethics.

Even with these cons, the advantages of working with a social media influencer can be significant for a small business. Here are three of them:

1.) Capitalize on the trust influencers have with their audience

Hyper-personalized customer experiences are becoming more important for marketing strategies to be effective. However, the challenge is building enough trust and a deep enough relationship with your target audience to provide that experience.

The great thing about successful influencers is that they know their audience. They built massive trust with them through content they can resonate with. You can capitalize on influencers’ trust with their audience when you choose the right ones to work with. Continue Reading…

Fed Pivot turned into a Divot

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By Dale Roberts, cutthecrapinvesting

Special to the Financial Independence Hub

It was a more than interesting week. Not much mattered until Jerome Powell (the U.S. Federal Reserve Chair) delivered comments on Friday. He came clean. Or at least he helped to reverse the delusion created by stock market enthusiasts that the Fed would ‘pivot’ and reverse course on the market-unfriendly series of rate hikes. Rates are going higher and they will stay higher. There will be some pain for consumers and business. Inflation must be crushed. They will do what it takes. The Fed pivot turned into a divot. The markets were not happy with the reality check.

In a Seeking Alpha article published just days before the Powell presser, Michael J Kramer of Cott Capital Management offered …

The futures, bond, and currency markets are already telling the world that there is no dovish pivot, and quite frankly, there probably never was a dovish pivot. The only market out there that hasn’t gotten the message appears to be the equity market.

If Powell can deliver a message that even a golden retriever (I own two goldens) can understand, then the equity markets’ day of reckoning will arrive in short order.

Also from Michael …

The futures knew it, bonds knew it, and the dollar knew it. Once again, the only market living on an alternate planet was equities …

Powell finally delivered a direct message

In his Jackson Hole speech, in the opening paragraph, he made it clear that his remarks would be shorter and the message would be more direct. That it was.

Very simply, rates still have further to rise, and once there, they will stay there for some time. In the following paragraphs, I have borrowed from Michael and others, I will avoid quotes for readability. My own commentary is in the mix.

Powell offered that reaching an estimate of the longer-run neutral rate is not a place to pause or stop. He said the June FOMC projections suggest rates would rise to just below 4% through the end of 2023 and that history warned against loosening policy too soon.

It’s evident that the Fed is aware of the mistakes made in the 1970s and 1980s with the stop-and-go monetary policy approach that led to even higher rates, and the Fed appears determined not to repeat those mistakes. There can be no 70’s show rerun.

Fed Chair Jay Powell said:

Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.

Powell noted that fighting inflation will take a sustained period of below-trend growth and a softening labor market, which could bring pain to households, and are the costs of reducing inflation. In the third paragraph of his speech, it’s right there. The Fed is willing to sacrifice growth and face rising unemployment to bring inflation down. He is telling the market there will be no “pivot” anytime soon.

Inflation is driving the bus

The Fed chair said central banks need to move quickly, warning historical episodes of inflation have shown that delayed reactions from central banks tend to come with steeper job losses.

“Our aim is to avoid that outcome by acting with resolve now,” Powell said.

The following image is not a live video, but an example of the headlines that ‘spooked’ the markets.

Federal Reserve Chairman Jerome Powell on Friday said the central bank’s job on lowering inflation is not done, suggesting that the Fed will continue to aggressively raise interest rates to cool the economy.

Get the inflation-killing job done

“We will keep at it until we are confident the job is done,” Powell said in remarks delivered at the Fed’s annual conference in Jackson Hole, Wyoming.

“While the lower inflation readings for July are welcome, a single month’s improvement falls far short of what the Committee will need to see before we are confident that inflation is moving down,” Powell said Friday.

The central bank has delivered four consecutive interest rate hikes over the last six months, moving in June and July to raise rates by 0.75%, the Fed’s largest moves since 1994. By raising borrowing costs, the Fed hopes to dampen demand by making home buying, business loans, and other types of credit more expensive. Continue Reading…

Which are better: Bonds or GICs?

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By Mark and Joe

Special to the Financial Independence Hub

Even for seasoned investors, during times of market volatility, there is a tendency for investors to shift their mindset from capital growth to capital preservation.

So, for capital preservation, are bonds or GICs better? Which is better, when?

We’ll unpack that a bit in today’s post and offer our take on how we manage our portfolios, along with insights from clients too!

Bonds 101

What are bonds?

We’d like to think of bonds as an “IOU.”

Bonds are very similar in fact to GICs (Guaranteed Investment Certificates – more on that in a bit), in that governments or financial institutions issue them to raise funds from investors willing to lend in exchange for interest. However, a major difference between the two is that in most cases, bonds are publicly traded, meaning investors have liquidity even if their principal is locked for the bond’s tenure (length of time invested). As a result, bond investors are exposed to capital gains/losses as bond prices are affected by various factors such as equity market performance, the prevailing interest rate, foreign exchange rates, and other economic factors.

We can see this playing out right now. There is lots of talk about bond prices effectively going “nowhere” anytime soon with interest rates rising.

Interest rates reflect the cost of borrowing money. General lending and saving money practices amongst institutions and retail investors alike make the economy go round!

If the economy is growing quickly or if inflation is running hot, then our central bank (Bank of Canada) may increase interest rates. This triggers retail financial institutions to raise the rates at which they lend money, pushing up the cost of borrowing. When this happens, institutions may also raise their deposit rates, which makes the incentive to save money and keep savings intact more attractive for folks like us too.

Bond prices and interest rates as they relate to GICs

So, we have summarized that bond prices have an inverse relationship with interest rates.

Rates go up, bond prices come down.

Understanding and accepting interest rate risk is generally part of the game when you own bonds.

Bond pros and cons: 

1. Liquidity – bonds (bond ETFs in particular) offer investors liquidity as they are publicly traded, you can get your money back without paying hefty redemption penalties less any transaction costs typically.

2. Lending options – you’ll read below that GICs are only issued by financial institutions and government-backed entities (for a reason!), but bonds can be issued by even corporations. So, you have many options – a portfolio of bonds can include different issuers, with different maturities, with different ratings (i.e., quality of the bond issuer subject to default) which can help bond owners increase their returns.

3. Bonds have volatility – we believe bonds are not “as safe” as GICs since they are exposed to capital gains and losses; market factors mentioned above.

There is of course much more to any bond story but this primer is meant to draw a snappy comparison of which is better, when, below!

GICs 101

GICs, by nature of their very name, offer more stability given they are backed up by the Canadian government – so they can be considered a lower-risk, lower-reward fundraising tool.

Like bonds, interest rates offered by GICs can vary over different maturities, between institutions, but rates are generally higher over longer periods of investing time.

Guaranteed Investment Certificates (GICs) are considered lower-risk investments because the guaranteed part means you are guaranteed to get back the amount you invest — the principal — when your GIC matures.

Ideally then, you buy a GIC, hold it to maturity, and get your principal back AND interest as well. This is not unlike a saving account: except that your money is locked in to grow for a predetermined period of time. When the investment matures or reaches the end of that time period, you get your money back plus the agreed-upon amount of interest.

As long as you let your GIC mature, you are guaranteed that money. However, if you withdraw the funds earlier than the certificate contract allows, you will be penalized and may lose some or all of the interest.

Beyond the nuts and bolts of some GIC products, here are some considerations below.

GIC pros and cons:

1. Safety – while bonds (and bond ETFs in particular) offer investors potentially higher investment returns, because GICs are safer, they tend to deliver lower returns for the risks-taken; based on the guarantees provided. Your GIC is insured if you bought it at 1) any major Canadian bank – banks are members of the Canada Deposit Insurance Corporation (CDIC),or 2) a credit union or Caisse Populaire. (This means you will get your money back if the financial institution where you bought your GIC closes down, defaults or the institution is unable to pay you when the GIC matures. Coverage depends on the value and type of GIC you hold.

Click here to see some very important term coverage information on CDIC!

Bonds vs. GICs – Which is Better?

Now, the drumroll … bonds vs. GICs – which is better?

We believe bonds can be great for many investors.

The key reasons to own bonds, in our opinion, is as follows: Continue Reading…