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FIRE in moderation: How about the term FIE? [Financially Independent Entrepreneur]

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I write a lot about seeking financial independence rather than early retirement. That’s intentional. I don’t necessarily want to retire – not anytime soon – but what fires me up is the idea of working on my own terms.

My goal is to be financially free by age 45. That means I’d be free to ditch my day job and pursue my passion of helping people with their finances (through educational writing, financial planning, and hosting seminars or workshops). I wouldn’t be retired, since I’d still derive an income from these activities.

Many FIRE [Financial Independence/Retire Early] bloggers have the same idea: work hard, save a large percentage of their salary, and eventually ditch the cubicle life. The dream is to retire early, but more often than not their “work” turns into blogging, book writing, and speaking about early retirement.

Ironically, selling the dream of early retirement tends to be another full-time pursuit. Just look at one of the original FIRE personalities, Canada’s self-professed youngest retiree Derek Foster. He’s written six books and runs a website where he sells his “portfolio picks.” He says “retired,” I say he “quit his job to become a writer.”

To be clear, there’s nothing wrong with pursuing financial independence or wanting to retire early. Any movement that helps people spend less, save more, and strive for a happier life is to be celebrated.

[From Twitter:]

 

 

CutTheCrapInvesting
 ·

Great article. I too am a fan of saving and investing but many FIRE will get wiped out in a real correction. Worse than this article projects. FIRE is out of control, reality may hit. @myownadvisor @esb_fi @RobbEngen @JonChevreau @The_Money_Geek https://seekingalpha.com/article/4277415-f-r-e-ignited-bull-extinguished-bear …

F.I.R.E. – Ignited By The Bull, Extinguished By The Bear

Retiring early is far more expensive than most realize.Not accounting for variable rates of returns, lower forward returns due to high valuations, and not adjusting for inflation and taxes will leave

seekingalpha.com

Boomer and Echo@BoomerandEcho

The safe withdrawal math is easily ignored when the income needed to live is actually earned through blog revenue. The dirty secret of the FIRE blogger movement is they dont have to touch their investments while they’re out there selling the dream. Continue Reading…

I prefer the phrase Financial Independence Work On Own Terms (FIWOOT) over FIRE

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By Mark Seed

Special to the Financial Independence Hub

The Financial Independence Retire Early (FIRE) movement certainly has legs, and maybe rightly so.

Like any good movement, it takes courage to do what others don’t care to do.

Financial independence takes know-how, it takes discipline to hone your financial behaviours; it takes time to remain invested when others are jumping in and out of the market.  It also takes saving your brains out thanks to a good salary and let’s not forget lots of luck.  Regarding the latter, you need a strong bull market – a long one – and we’ve had it for a decade or more.

It’s not that I fully disagree with the FIRE movement and what some folks are striving for.  I think many FIRE principles have great merit and kudos to those that live by these rare principles:

  • Save early and often, in great quantities.
  • Live frugally and avoid financial waste.
  • Avoid long-term debt that is not used for wealth generation.
  • Optimize your investing (i.e., keep your costs low and diversified) to realize your financial goals sooner than later.

I’ve written about FIRE before on this site.  A few times.

I even questioned if FIRE was right for me.  I know that answer.

Why I’m tired of retire early in FIRE

In some circles (not all thankfully), the focus of FIRE is on “retire early” part.  Work hard, make good money with the intention of leaving the corporate rat-race sooner than later.  That’s fine and definitely aspirational – if that was the end of it. However I’ve become tired (and maybe a bit cynical) of some members of the retired early crowd.  Why? Continue Reading…

How to save money through home warranties

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It’s a line often touted by lenders. “Mortgages are cheaper than rent,” they say. On the surface, it’s usually true. In some urban cores, many properties are grossly overpriced. However, like most sales pitches, there’s something they aren’t telling you.

Home ownership carries with it substantial financial responsibilities. In addition to your monthly mortgage payments, you’ll owe property taxes to your municipality. Do you live in a condominium? If so, you’ll also owe building fees, which pay for the upkeep of shared systems, common areas, and landscaping.

And then there is household maintenance. Every year, Americans spend an average of US$2,000 per year just to keep their homes intact. And that’s just an average: the average American household is now 37 years old. As a result, many spend more than US$2K a year on their house.

These expenses would only be mildly annoying if the economy were genuinely thriving. However, despite the stock market reaching record highs, more Americans than ever are struggling financially. 40% of us can’t cover a sudden $400 expense, and a whopping 78% live paycheck-to-paycheck.

More than ever, we’re looking for ways to rein in costs. Misguidedly, some opt to forego maintenance. This approach always backfires, though. A famous maxim says it best: pay me now or pay me (a lot more) later.

Instead, we recommend you investigate home warranties. Depending on your circumstances, they could save hundreds or even THOUSANDS per year. In this blog post, we’ll explain what home warranties are and if it is the right solution for you and your family.

What are home warranties, and how do they work?

Home warranties have been around since the 1970s. Until recently, though, most Americans had no idea what they were. Rodney Martin, CEO of America’s Preferred Home Warranty, says only 3-4% of households had them as of 2015.

There’s a simple reason why home warranties haven’t caught on. In earlier generations, the age of the average home was younger. As a result, maintenance costs were lower. Fast forward to 2018: that year, the average house in America was pushing 40 years old.

Maintenance costs are steadily rising. People are looking for answers. Accordingly, interest in home warranties is increasing.

So, what exactly are home warranties? In a nutshell, they are contracts that cover the repair/replacement cost of appliances and systems. All machines eventually break. Because it’s an expected outcome, though, homeowner’s insurance doesn’t cover them. Home warranties fill in this gaping hole, providing their holders with badly-needed peace of mind.

Let’s say your dishwasher grinds to a halt. Stepping over a river of leaking water, you grab your phone and call your home warranty provider. After confirming they cover your issue, they dispatch a repair technician. Apart from a nominal service fee, you pay nothing more out-of-pocket.

How can a home warranty save me money?

You might still be skeptical. After all, getting a home warranty means investing significant capital in something you’re unfamiliar with. Think of it like this: right now, the average American spends US$2,000 per year maintaining their home. Some years it’s less, but in others, it’s more. Continue Reading…

Cascades retirement planning software: a case study

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By Ian Moyer

(Sponsor Content)

The task of retirement income planning can be overwhelming for Canadians as they get closer to leaving the workforce. Making the right decisions can be difficult with all the possible sources of income they might have, including Old Age Security (OAS) and Canada Pension Plan (CPP), and of course, Canada’s complex tax codes don’t make it any easier. People need help.

Cascades is a Canadian retirement income calculator that takes the difficulty out of retirement income planning. In many cases it saves retirees hundreds of thousands of dollars in income tax, while showing a year-over-year road map guiding them through retirement. Who wouldn’t want to save money? But in some cases, like the one highlighted below, it’s not about extra tax savings: it’s about having enough money to last your entire retirement.

Bob and Ann’s story is based on a real-life case we came across last week, and it’s a great example of why proper retirement income planning is so important.

Meet retiree Bob, 65, and Ann, 56, still working

Bob is currently 65 and has been retired for 2 years. He was self-employed as a cabinet maker and still has his shop at home where he works part time bringing in $12,000 annually. Because he was self- employed, Bob has no defined benefit or defined contribution pensions. He currently holds about $250,000 in his RRSP, $15,500 in his TFSA, and $50,000 in a non-registered account. Bob receives close to max CPP at $12,600 and $7,248 from OAS.

Ann is originally from the United States and met Bob while he was vacationing in Florida. She is currently 56 and plans on retiring at 63 from her job as a logistics coordinator for an auto parts manufacturer. Ann brings in $57,500 annually and has a defined contribution pension currently worth about $140,000. Ann has no other savings apart from her defined contribution pension, but will receive $4,800 in CPP that she plans to start receiving as soon as she retires at 63. Because Ann hasn’t been in Canada for 40 years since the age of 18, she will only receive $3,500 annually from OAS.

Continue Reading…

Small changes that have a big impact on your Credit Score

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By Amanda Huon

Special to the Financial Independence Hub

If your goal is to boost your credit score then it’s important to know what factors affect it. There are a lot of variables that come into play when it comes to getting your perfect credit score. These variables range from payment history to credit utilization. It’s important to always be aware of your credit score because it plays a significant role in weighty decisions, such as purchasing a house, earning an amazing career, and having financial independence!

These quick tips will help you improve your credit score:

Level of Debt 

If you have a high level of debt, you’ll most likely suffer from damaged credit in one way or another. The amount of debt that you owe affects 30 per cent of your overall credit score. That’s a large chunk! However, all hope is not lost. There are always opportunities for you to repair your credit. In fact, there are credit repair companies out there that use personalized methods to help fix damaged credit score.

Payment History 

Another critical determinant of your credit score is your payment history. If you have a long history of on-time payments then your credit score is more likely to be in good condition.  However, missing a payment will negatively impact it. Of course, the longer the bill goes unpaid the greater effect it has on your credit. This is why it is extremely important to always pay your bills on time. 

Credit Usage

This tactic can yield speedy results. It can either quickly boost your credit or quickly slash it. Credit usage mainly focuses on the ratio between the balance you owe and your total credit limit on all you revolving accounts. This ultimately means that using your credit card at a lower rate can result in a better credit score.  Continue Reading…