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Unlocking Financial Freedom: A Guide to Calculating your Retirement Needs

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By Billy and Akaisha Kaderli

Special to Financial Independence Hub

Billy and Akaisha Kaderli, early retirement advocates, simplify the process of estimating your retirement savings needs.

Akaisha and Billy at the Tour Eiffel, Paris Image courtesy RetireEarlyLifestyle.com

Are you preparing to retire?

It’s going to happen someday, no matter if you want to retire early or later these questions below need to be answered.

How much do I need to retire?

Without going into complicated spreadsheets and analysis, a simple way to determine your “number” is to multiply your current annual spending by 25.

First you need to figure out what you are spending per year. Do you know? Most people have no idea where their hard-earned dollars go.

We offer an easy-to-use spreadsheet in our book The Adventurer’s Guide to Early Retirement, or you can make one yourself. The important thing is that you know how much you are spending annually.

For illustrative purposes let’s use this data

The 2022 Consumer Expenditure Survey by the Bureau of Labor Statistics reveals that the average American household’s monthly expenses total approximately $6,081, equating to $72,967 annually. We will round this to $73,000.

Are you above or below this average? Remember, this is not your take-home pay, but how much you are actually spending on rent/house payment, car, insurance, gas, clothing, and everything else that you spend money on.

Using the 73K figure, multiply this by 25 = $1,825,000 Dollars is how much you need to have invested in liquid assets. Most studies use 60% stocks, 40% bond portfolio. In our opinion that’s a bit conservative but it all depends on your personal risk tolerance. In our case Social Security and cash are our bond equivalent; thus we have a higher stock allocation.

Regarding Social Security, do you know what your estimated annual payments will be? Simply go to SocialSecurity.gov and create an account. All of your contributions and work history will be there as well as the number of quarters you have accumulated. You need a minimum of 40 quarters of work history to qualify for your payments.

Don’t get discouraged by the $1,825,000 figure, but how are you going to get there?

Based on December 2023 data from the Social Security Administration the average monthly cheque is $1,767.03 or $21,204.36. Multiply this figure times 2 in your household equals $42,408.72.

$73,000 expenses minus $42,409 in Social Security payments leaves a $30,591 income deficit that you need to create from your investments to cover your expenses.

Looking better?

Now let’s multiply $30,591 times 25 and your new “number” is $764,775 that you need to have invested in a stock/bond/cash portfolio.

If you are retiring early like we did before your retirement age, you will need to have enough invested to cover your living expenses before receiving your Social Security. Maybe that is 20 years or more so you need to plan accordingly.

How to get to your number

Hopefully you’ve already started investing and have a growth portfolio that is matching market returns or close to it using the ETF, VTI, Vanguard Total Market. Now you know how much you have to contribute through the years to arrive at your target, assuming that you will continue spending $73,000 per year. Continue Reading…

Ethical Investments can come with Conflicts of Interest

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The hidden risk every investor should be aware of

Image courtesy Pexels/ Markus Winkler

As I’ve often mentioned, the biggest risk you face as an investor is hidden or unrecognized conflicts of interest. It’s not because any one conflict of interest can do great damage to your finances. The risk comes out of the fact that conflicts of interest are everywhere.

That’s especially so with many ethical investments, also known as ESG (Environmental, Social and Governance) issues. These issues may come with pure motives, but they require outlays that depend on judgment calls rather than financial analysis. Companies deal with these issues by hiring outside consultants and firms to help with decisions. These outsiders supply guidance on how companies should spend their money. The advice they give can raise or lower a company’s profits. This is a potential source of conflicts of interest, for the companies and the consultants.

Alex Edmans is a professor of finance at London Business School and author of Grow the Pie: How Great Companies Deliver Both Purpose and Profit. He is widely viewed as an ESG advocate.

In an August 19 Wall Street Journal article entitled “A Progressive’s Case for Getting Rid of ‘ESG,’” Dr. Edmans wrote, “ESG has outlived its usefulness. It’s time we scrap the term.” He added, “While an incorporation of ESG can enhance financial and social returns, an obsession with ESG can distract companies and investors from both objectives — by causing them to ignore non-ESG factors that may be even more relevant for long-term value.”

This is what you’d call a “high-level view.” However, if you let ESG and related or similar issues influence your investment decisions, it can have a negative impact on your personal finances.

The downside of ethical investments 

Early in my career, I began writing about the harm that conflicts of interest can have on your investments. Back in 2010, I started writing an occasional column for The Toronto Star, on a wide variety of investment issues and questions from readers.

The term “socially responsible investing” was coming into fashion back then. In one of my columns, I addressed a reader’s question about investing in a mutual fund that described itself as socially responsible.

My view — then and now —i s that a socially responsible fund may not expose you to any extra risk. It may simply mean the fund’s managers are highly principled and want to do some good in the world. Of course, it may also mean they see the marketing value in declaring their good intentions.

In any event, the best way to get to a destination is generally to go there directly, rather than take a two-stage route. So I advised readers that if they wanted to do some good in the world, they should invest with profits in mind, then give a portion of their gains to a charity of their choice. Continue Reading…

9 Last-Minute Gift Ideas for Every Occasion: Holidays, Birthdays, and Other Special Days

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By John Lewis

Special to Financial Independence Hub

Life can get hectic, and sometimes special occasions sneak up on us faster than expected. Whether it’s a friend’s birthday, a colleague’s promotion, or a last-minute holiday party invitation, forgetting a gift can leave you scrambling. But fear not! With a little creativity and resourcefulness, you can still find the perfect present, even if you’re on a tight deadline.

This guide explores nine fantastic last-minute gift ideas suitable for any occasion, from birthdays and holidays to anniversaries and graduations. These options cater to various tastes and budgets, ensuring you can find something thoughtful and memorable, even with limited time.

1.) Hand-painted portraits

A unique and personalized present, a hand-painted portrait captures the essence of your loved one. You can commission a portrait based on a favourite photo, featuring their pet, or showcasing a cherished memory. While some artists might require a significant lead time, many online platforms offer expedited services where you can receive a digital file within a few days. This digital file can be printed on canvas, framed, or used to create a variety of personalized gifts like mugs, phone cases, or tote bags.

2.) Audiobooks

Audiobooks are the gift of knowledge and entertainment, making them perfect for busy individuals who enjoy listening while commuting, exercising, or doing chores. Consider the recipient’s interests when choosing an audiobook. Do they love historical fiction? Perhaps a captivating biography or a classic novel they haven’t read yet would be ideal. For mystery lovers, a suspenseful thriller could be a great choice. Many online audiobook retailers offer instant downloads or gift memberships, making them a convenient last-minute option.

3.) Colourful Wall Art

A vibrant piece of art can instantly transform a space, adding personality and a touch of joy. Explore online art marketplaces or local galleries (if time permits) to find unique prints or paintings that suit your recipient’s taste. Abstract art offers a conversation starter, while landscapes or floral prints can add a touch of serenity.

Pro-Tip: Consider the recipient’s home decor style when choosing the artwork.

4.) Cheesecake and Rose Bouquet

Who can resist the delightful combination of a delicious cheesecake and a beautiful bouquet of roses? Many online bakeries and gourmet shops offer gift sets featuring decadent cheesecakes paired with stunning floral arrangements. This decadent indulgence is ideal for birthdays, anniversaries, or simply to show someone you care.

5.) Create a Video Tribute

For a sentimental and heart-warming gift, put together a video montage celebrating your relationship with the recipient. Gather photos and videos from throughout your time together, add some heartfelt music, and maybe even record a personalized message. Continue Reading…

The Financial Side of the Medical Industry: What to Know

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Navigating the financial landscape of the medical industry is essential for healthcare professionals and medical students aiming to build successful careers. Understanding the economic aspects enhances the ability to make informed decisions and contributes to better resource management, ultimately improving patient care.

Here’s what to know about the financial side of the medical industry.

By Dan Coconate

Special to Financial Independence Hub

Image by Adobe Stock/Photographer Nuttapong Punna|.

When it comes to fast-growing industries, few stand out like healthcare.

While the top priority in healthcare is always quality patient care, you can only provide that care if you can afford to keep the lights on.

In other words, strong financial management is the foundation that allows any healthcare organization to fulfill its primary purpose.

Let’s take a quick look and discover the financial dynamics of the medical industry, covering budgeting, revenue cycles, and economic challenges healthcare providers face.

Cost Management and Budgeting

Cost management aids in sustaining healthcare facilities. Hospitals and clinics must carefully budget for various expenses:

  • Staffing
  • Medical supplies
  • Equipment
  • Technology upgrades

By implementing strategic budgeting practices, healthcare providers can optimize their operations, reduce waste, and allocate resources more efficiently. This is particularly vital in rural areas, where financial constraints can impact the quality of healthcare services.

Funding and Revenue Streams

Understanding the various funding and revenue streams is fundamental in the medical industry. In Canada, healthcare is primarily funded through public sources, including federal and provincial government allocations. However, private contributions, grants, and partnerships also supplement these funds.

Healthcare professionals and administrators should be well-versed in navigating these financial avenues to ensure their institutions remain well-funded and capable of delivering high-quality care.

Financial Compliance and Regulations

All healthcare providers must adhere to financial compliance and regulatory standards. This includes maintaining accurate financial records, adhering to billing practices, and ensuring transparency in financial transactions.

Compliance safeguards entire institutions against legal repercussions and builds trust with patients and stakeholders. Staying updated with the latest regulations and implementing financial management systems can prevent discrepancies and enhance operational efficiency.

Investment in Technology and Innovation

Investment in technology and innovation is a significant financial consideration for professionals in the healthcare industry. Advanced medical technologies, electronic health records (EHRs), and telemedicine platforms require substantial financial outlays but offer long-term benefits. Continue Reading…

Utilities: A Long-term holding that’s Breaking out

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Aerial drone view of a wind farm on the Atlantic coast. Image courtesy BMO ETFs/Getty Images

By Andrew Vachon, BMO Global Asset Management

The Bank of Canada (BoC) cut rates on June 5th for the first time after one of the most aggressive hiking cycles in Canadian history.

Market expectations from the BoC indicate that we may see 2 to 3 more cuts before the end of the year with the second cut potentially as early as July and the remaining later in the year.

South of the border, inflation has remained “stickier” however; the market expects the U.S. Federal Reserve (the Fed) to cut rates twice before the end of the year with the first beginning in September. Moreover, forecasters are predicting the BoC could potentially cut the overnight rate from the current rate of 4.75% all the way down to 3.5% by this time next year, presenting more opportunity for the Utilities sector. 1

With the anticipation of further rate cuts from the BoC and the Fed we may see the Utilities sector shine. Government bond yields tend to have an inverse relationship with utilities (when interest rates drop, utility stock prices typically increase, and vice versa). This is mainly due to the costs involved with these companies. The cost of construction for power plants, and the maintenance of infrastructure required to deliver gas, water, or electricity can make utilities expensive when the cost of borrowing is high.

From a technical perspective, the BMO Equal Weight Utilities Index ETF (Ticker: ZUT) just broke out of a massive “double bottom” reversal pattern this week. A double bottom pattern is a classic technical analysis charting formation showing a major change in trend from a prior down move. The recent close above resistance at $20.60 completed the pattern, shifted the long-term trend to bullish, and opened an initial upside target that measures to $23.40.

One of the key drivers for the turnaround in utility stocks as of late is a sharp decline in long-term interest rates. There is now a possibility of yields testing the lows of 2023, which could be a persistent tailwind for interest rate sensitive sectors of all stripes and perhaps push this Utility ETF above the initial upside target of $23.40 at some point in the next 6-12 months. 2

Yielding the Benefits

For the long-term investor, Utilities offer investors stable and consistent dividends over time along with lower volatility. The long-term growth potential to deliver safe and reliable returns, make the sector an attractive investment to consider adding to your portfolio. Utilities overall have remained fundamentally strong as they provide basic services such as gas, water, electricity and telecommunications that will always be in demand regardless of where we are in the economic cycle.

There are long-term benefits for Canadian investors, especially those who might consider the current environment as an opportunity to capture growth. Continue Reading…