General

Money never sleeps, even when you’re retired

Posted By |

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…

When High Income meets High Debt

Posted By |

By Laurie Campbell

Special to the Financial Independence Hub

November is Financial Literacy Month, a month in which Canadians are encouraged to focus on their financial well-being.  I’ve worked in the non-profit credit counselling industry for over 25 years. One thing that is as true today as it was more than 50 years ago, when credit counselling was first introduced in Canada, is that financial literacy benefits everyone: and everyone can use a refresher.

As the CEO of Canada’s first and longest-standing credit counselling agency, I’m always asked who our clients are, and to be honest, you only need to look in the mirror to understand the people we help.

Our agency sees people from all walks of life and all income levels, as debt can affect anyone and we can all run into financial difficulties. At Credit Canada, we see professional athletes, celebrity personalities, teachers, lawyers, medical professionals and actors. We see millennials dealing with student loan debt and credit-card debt, trying to buy their first home and build a family; we see couples heading into retirement with little-to-no savings, still dealing with debt while financially supporting their adult children; we see single parents trying to make ends meet while saving up for their child’s education, and in many cases, handling their elderly parents’ finances as well.

Many people might think debt problems and financial difficulties only affect those with low income, and while that might be true to some degree, not only do higher-income earners experience financial difficulties too, but they can also be more severe as their debt loads are typically higher. The math is simple: The higher your income is, the more credit you are granted: and the likelihood of spending beyond your income becomes much greater. Unfortunately, more money usually means more debt.

Also, having a higher income doesn’t necessarily mean you have better money management skills or spending habits. In fact, some of the best money managers and budgeters are those living on low or fixed incomes, simply because they can’t afford to lose control. Whereas people earning higher incomes might think to themselves that they have the money, so they might as well spend, spend, spend.

Regardless of income, anyone can run into financial difficulties if they do not practice sound money management and budgeting, because they won’t know what their financial limits are, and we all have them.

Sadly, financial literacy isn’t a skill typically taught in most schools or homes, so people from all income levels can struggle with financial management and control. Additionally, sometimes it’s more difficult for higher income earners to admit they need help, and much less seek it, because of the stigma around debt. Many people think they should know better, but the reality is many of us don’t.

It’s never wrong to admit you need help, but it is important to get the right kind.

If you are beginning to struggle with maintaining monthly expenses and other financial obligations, additional credit is, at best, a short-term solution, because you’ll end up having more debt to pay back. Plus, acquiring additional credit doesn’t come with budgeting and money management support, which are necessary for understanding how to balance income with spending to achieve future goals. Without that knowledge and support, you will be up a creek without a paddle. Continue Reading…

The first steps for investing in stocks

Posted By |

By Gary Bordeaux

Special to the Financial Independence Hub

The stock market is the 21st century’s version of the gold rush. You can make millions by just investing a thousand dollars if you know how to invest in the right stocks. You have to learn to read the signs of the stocks and you have to know which stocks to start your investments in. If you haven’t started your investments then here are the first six steps of investing.

1.) Find an App that works for you

If you’ve decided to invest in stocks on your own (instead of paying someone to do it for you) then you need a platform to work from. Apps like Robinhood are usually the best place to start since they let you invest for free without any fees. There are other apps that allow you to do the same thing as well. The trick is finding the one that works best for you. Some give you more features that are better for a more experienced stock trader but that can be a hindrance and confusing for someone who just started out with trading.

2.) Learn what you need to know about Stocks

Before you can put any money into the market, you need to understand what exactly you should expect. That is where sites like Option Animals come in handy. They have courses that will teach you exactly what you need to know in order to invest intelligently. Learn as much as you can before you put your money into a stock.

3.) Start Investing

It’s hard to make a massive mistake right away if you start small. So start small with what you have. Don’t put all of your money in at once. If you’re uncomfortable with it, only start at $100. Let it sit and wait until you’re comfortable with the unpredictability of the stock market. It’s okay to be nervous, but start with whatever you’re comfortable with. If you’re ready, then start moving faster and put more in it.

4.) Watch your Stocks

To be successful in the stock market there are a couple of things that you need to pay attention to. First, you need to be watching the money that you put in. You don’t want to be caught off guard and you need to know what to expect with the stocks. The second thing is Continue Reading…

What women want – and how to get it

Posted By |

By Ed Rempel, CMA, Fee-for-Service Planner

Special to the Financial Independence Hub

There was a gasp from the audience, when this photo of a homeless woman was shown at a talk I recently attended.

A new survey shows that almost half of women fear they will become a “bag lady” someday. They fear being financially desperate and living on the street.

No job. No income. No partner. That is the fear.

 

I have asked thousands of people: “What’s important about money to you?” The #1 answer for women is security.1

What does “security” mean? It’s surprising how often the “bag lady fear” comes up. The #1 explanation is similar, but less severe:

Security: “Having enough so I never have to worry about money.”

Women want to know there will always be enough income for their family, for emergencies, and for the things that are important to their lifestyle. They want to focus on their life, their family and their friends and not have to constantly worry about whether they can afford it.

What does that look like and how do you get there? The answer might surprise you.

First, three questions:

1.) Jennifer has $2 million in stock market investments. This is:

A. Very risky.

B. Financial security.

 

2.) Financial security is:

A. No debt and safe investments.

B. Large diversified portfolio.

 

3.) Who is more secure?

A. Mary has no debt.

B. Andrea has a $200,000 mortgage and $1 million in investments.

 

Whether you ever become financially secure depends a lot on your picture of financial security.

Most people who want security do exactly the opposite of what they need to do to get it. The biggest mistake most people make is to think they can be financially secure by paying off all debt and having safe investments, instead of investing wisely for long-term growth.

I call this the “Zero Plan.” You retire with zero debt, zero investments (nearly), and zero income (except a bit from the government). People who do this are actually making it hard for themselves to have the nest egg they will need to be secure.

The truth is, investing very little money and buying low-return investments means you will never build up much of a nest egg.

What does financial security look like? What I have learned from experience helping thousands of people become financially secure is this:

Real security comes from having a huge nest egg.

A large portfolio of equities (stock market investments) is financial security. That’s what security looks like. Continue Reading…

The financial benefits of carrying Life Insurance

Posted By |
Photo credit: Pixabay.com

By Gloria Martinez

Special to the Financial Independence Hub

For some, life insurance may feel like an unnecessary expense. It can range from a few to many hundreds of dollars each month — it’s something you hope you don’t need, and when you’re faced with other expenses, it’s natural to want to trim it from your budget.

However, life insurance can provide a host of financial benefits besides the death benefit, which is certainly an important element of any life insurance policy.

In fact, a 2017 Insurance Barometer Study by the nonprofit organization LIMRA and Life Happens found that 85 per cent of people carry life insurance to cover burial and funeral expenses. Those expenses can range between $7,000 and $10,000, and few people are prepared to incur such a large expense unexpectedly.

Don’t discount importance of the Death Benefit

 Even if you’re close to retirement or retired, keeping life insurance is a valuable asset. If you’re still paying off a mortgage that you’ve refinanced or you purchased your home later in life, consider purchasing a life insurance policy to cover the remaining mortgage should you pass away. A life insurance policy will also cover you or your spouse against lost pensions. If you have a large estate on which you’ll incur estate taxes after your death, you can purchase a life insurance policy that will cover the cost of those taxes.

What’s more, you’ll also protect yourself and your family with a good insurance plan that covers your children’s college expenses and pays off other debts besides the mortgage, such as medical expenses, other loans, or credit cards.

You can benefit from Life Insurance while still living

You can use your life insurance as more than just a death benefit, depending on the type you carry. Continue Reading…