Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

Starting a Business to attain Findependence

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Unsplash: Chris Liverani

By Devin Partida

Special to Financial Independence Hub

Many people seek the life Findependence [aka Financial Independence] can bring. While there are many ways to achieve this status, one great way is to start a business.

Building a company can be daunting, but it’s vital to consider if it’s something you really want to do.

How does starting a Business help you reach Findependence?

Many business owners trying to obtain findependence implement an exit strategy. This is where the company still operates normally but doesn’t rely on the person who started it to do the work. In other words, the company is automated to function without intervention from the owner. Other people prefer to sell their organization and live on the profit they get from it.

Instead of selling the enterprise, another route is to invest the capital in different areas. Some entrepreneurs use the profit their business generates to create additional passive-income streams.

You can invest your money in many different areas to reach findependence. Here’s a summary of a few popular avenues:

● Roth IRA: This individual retirement account [in the U.S.; similar to Canada’s TFSA] offers the investor tax-free growth and withdrawals. To withdraw money from an IRA, the owner must own the account for at least five years and exceed the age of 59 and six months.

● Property: Many entrepreneurs decide to invest their capital into real estate to sell or rent it again. Buying property could be an excellent chance to obtain passive income, which can aid with the end goal of reaching findependence. However, real estate might have additional costs, such as hiring someone to manage the investment for you.

● The stock market: You can’t talk about investing and not mention stocks. Most people are already familiar with this option, where someone purchases a portion of a company and receives shared ownership. Stocks can also generate monthly passive income via dividends, but many consider them high-risk investments.

If investing company profits to reach financial goals is something you’re interested in, there are other opportunities to look out for. Consider researching bonds and index funds to determine if they’re something you want to invest in.

What kind of Business should you start?

The type of organization you should start comes down to personal preference. Consider looking at your interests and what excites you. Many entrepreneurs create a company around what they already know. For example, if they have coding experience, they could build a business offering customers web development services. Whichever idea you choose, ensure you conduct sufficient research to know what it will take to make it a success.

Here are a few popular business ideas: Continue Reading…

How Aging Populations affect the Healthcare Sector

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Populations are aging, creating opportunities for investors in health-care stocks or ETFs. Image licensed to Harvest ETFs from Shutterstock.

By Paul MacDonald, CFA

(Sponsor Content)

In much of the developed world, the population pyramid is inverting. Population pyramids are a demographic tool used to visualize the age of a country’s population. Typically they look like a pyramid, with a broad base —representing a large number of young people—and a gradually narrowing tip representing the natural loss of population as individuals age.

However, as birth rates have declined and life expectancy has increased in developed countries like Japan, France, and Canada those pyramids are looking more upside-down. The United Nations estimates that by 2050 almost 30% of the population of North America will be over 60; that number is projected at over 35% for Europe.

The aging of the developed world is one of the most important demographic trends of our time. An older population means a smaller proportion of the population will be working and paying taxes, while more people aging require the support of social safety nets. But this shift is not all negative. From an investor’s perspective there are a wide array of opportunities in aging populations. At Harvest ETFs, we see this demographic trend as one of the key drivers of the Healthcare sector.

Why the developed world is aging

Aging in North America, Europe, and parts of East Asia reflects a myriad of key factors. One of the most significant contributors to population aging is the remarkable progress in healthcare and medical technology. Reduced mortality rates from diseases and improved treatments for chronic conditions have led to longer life expectancy.

At the same time, birth rates are declining. That is due in part to increased access to education and family planning, as well as changing cultural norms. Families are choosing to have fewer children, or have children when they are themselves older and more established in their careers.

Other factors like urbanization, economic pressures, the cost of living, and the prioritization of personal well-being over raising children have contributed to this demographic shift. With this demographic shift, however, comes a significant economic shift.

As populations age, economies age with them. A shrinking pool of younger workers and a growing group of retirees can create a new set of challenges and opportunities. Most notably it can challenge workforce productivity and the overall tax base of an economy as a smaller percentage of the population will be working.

However, a growing number of older individuals opens up opportunities for many companies, notably in the Healthcare sector.

The investment opportunities of an aging population

At Harvest ETFs we believe the U.S. Healthcare sector is among the areas best poised to benefit from aging populations in the developed world. Taking the United States as a core example of these populations, we can see that healthcare spending increases significantly when the population gets older.

According to the Centers for Medicare & Medicaid Services National Health Statistics Group, the per-capita total personal healthcare expenditures of a U.S. individual aged  19-44 is US$4,856. For an individual aged  45-64 that number is $10,212. For individuals 65 and older, it’s $19,098. Continue Reading…

Retired Money: What ETFs are appropriate for retirees?

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Photo by Alena Darmel from Pexels, via MoneySense.ca

My latest MoneySense Retired Money column looks at what ETFs might be appropriate for retirees and near-retirees. You can find the full column by clicking on the headlined text here: The Best ETFs for Retirement Income.

I researched this topic as part of a MoneyShow presentation on the ETF All-Stars, scheduled early in September, to be conducted by myself and MoneySense editor Lisa Hannam. Regular MoneySense and some Hub readers may recall that I was the lead writer for the annual ETF All-Stars package but after almost a decade decided to pass the reigns to new writers: this year’s edition was spearheaded by Michael McCullough.

While the ETF All-stars (which are selected now by a panel of seven Canadian ETF experts) are appropriate for all ages and stages of the financial life cycle, a solid subset of the picks can safely be considered by retirees. A prime example are the Asset Allocation ETFs, many of which have been All-Star picks since Vanguard Canada launched them several years back, and since matched by BMO, iShares, Horizons and others.

Generally speaking, young people can use the 100% growth AA ETFs like VEQT etc., or (which I’d be more comfortable with), the 80% growth/20% fixed income vehicles like VGRO. Near-retirees might go with the traditional 60/40 stocks/bonds mix of classic balanced funds and indeed pension funds: VBAL, XBAL, ZBAL, to name three.

Those fully in Retirement who want less risk but a bit of growth could flip to the 40/60 stocks/bonds mix of VCNS, XCON (check) and ZCON (check.).

In theory all you need is a single asset allocation ETFs, no matter where you are in the financial life cycle. After all, all these ETFs are single-ticket highly diversified global plays on the stock market and bond market, covering all or most geographies and asset classes. And their MERs are more than reasonable: 0.2% or so.

A single Asset Allocation ETF can suffice, but consider adding some tactical layers

In practice, most investors (whether retired or not) will want to do a bit more tinkering than this. For one, the asset allocation ETFs tend to have minimal exposure to alternative asset classes outside the stocks and bonds realm. They will include gold stocks and some real estate stocks or REITs, but little or no pure exposure to precious metals, commodities or indeed cryptocurrencies. (Maybe that’s a good thing!).

The MoneySense article bounces my ideas for adding tactical layers to an AA ETF. For example, you might use the 40/60 VCNS instead of 60/40 VBAL, for 80% of your investments, reserving the other 20% for more tactical mostly equity specialized ETFs. You’d aim for a net 50/50 asset mix after blending the AA ETF and these tactical ETFs. Continue Reading…

Managing Debt: How Business Leaders Overcame Financial Challenges

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Image via Pexels, Andrea Piacquadio

In this article, we’ve gathered seven effective strategies from founders and investment bankers on how to pay off significant debt while striving for financial independence. From embracing the “Snowball Method” to prioritizing high-interest debts, these experts share their personal approaches to achieving a debt-free life.

  • Embrace the “Snowball Method”
  • Achieve F.I.R.E. through Diversified Income
  • Reverse Order your Debt Payment Strategy
  • Utilize the “Debt Snowflake Method”
  • Consider Debt Settlement Options
  • Budget and Start a Side Hustle
  • Prioritize High-Interest Debts

Embrace the “Snowball Method”

In my journey to financial independence, I’ve found the “Snowball Method” to be an effective strategy for paying off significant debt. It’s like rolling a snowball down a hill; you start small and gain momentum. 

I began by paying off the smallest debts first, regardless of interest rates. The psychological boost of eliminating a debt was a powerful motivator, propelling me to tackle the next one. It’s akin to cleaning a cluttered room; you start with one corner and before you know it, the entire room is clean. 

This method may not be the fastest or the one that saves the most money in interest, but it’s the one that kept me going, and that’s what matters in the end. It’s not just about the numbers, it’s about the journey and the habits you build along the way. — James Allen, Founder, Billpin.com

Achieve F.I.R.E. through Diversified Income

I am an advocate of the F.I.R.E. movement, having both personal and professional experience with personal finance. I pursued F.I.R.E. because I wanted to follow my interests outside of my 9-to-5 job. I wanted to live a great life while exploring the world and spending more time with family and friends. Most importantly, I didn’t want to worry about finances all my life!

After making wise financial decisions over the years, I could leave my high-stress finance job in July 2019 to pursue my side hustles full-time. What I did was to diligently add to my emergency fund and invest as much as possible. In the first half of 2020, my partner and I could pay off $57,000 in debt, and we are now debt-free. I am now a full-time entrepreneur, with my businesses and side hustles generating a combined multi-six-figure per year income. — Samantha Hawrylack, Founder, How To FIRE

Reverse Order your Debt Payment Strategy

One strategy that has worked for me is to pay off my debt in the reverse order in which it was accrued. This means that I paid off the smallest debt first, and then worked my way through the rest of my debt: the highest interest rate last. 

The reason I did this was because it made me feel empowered and focused. I would think about how much money I was saving by paying off one bill early, and then use that motivation as fuel to keep going. — Jaanus Põder, Founder and CEO, Envoice

Utilize the “Debt Snowflake Method”

One effective strategy that helped me pay off significant debt while striving for financial independence is the “Debt Snowflake Method.” 

While the “Debt Snowball Method” is more well-known, the Debt Snowflake Method involves finding small, everyday ways to save or earn extra money and immediately using those funds to make additional debt payments. It might seem insignificant, but consistently directing small amounts toward debt can add up surprisingly quickly. 

For example, I would take advantage of cash-back apps, sell items I no longer needed, or even offer small freelance services during my free time. Every little contribution would go directly towards my debt, creating a snowflake effect that accelerated my debt payoff journey.  Continue Reading…

From Personal Savings to Business Success: Mitigating Financial Risk in Self-Funded Startups

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Image by Pixels

By Beau Peters

Special to Financial Independence Hub

Unfortunately, it’s rare for a startup to be successful long-term, let alone make it out of its first year alive. You’ve probably come across a lot of research that supports these claims. However, the information isn’t to scare you.

Instead, it’s to give you a realistic picture of how much it actually takes to be successful. If you don’t want your startup to be a part of the above research, you must first understand what contributes to a startup’s failure.

For many, it’s the financial challenges. Many startups don’t get enough money to cover what they need to start their businesses, they don’t manage the money well once they get it, or both. And when a startup is self-funded, it adds another layer of financial complexity that can lead to a failing operation.

Let’s discuss how you can reduce financial risk in your self-funded startup and make it past your first year in business and beyond.

Understand what it will Take to Fund your Business

Unless you’re someone with unlimited financial resources, how much money you can put into your startup is limited. You only have a certain amount to get your startup off the ground and maintain it until you turn a profit.

So, understanding what it will take to fund and run your business is critical. First, figure out what it will cost to launch and maintain your startup. Cover the following:

  • What are your product development costs?
  • Will you be renting an office space? If so, what are the associated expenses?
  • What are the cost of tech tools and software?
  • Will you have labor costs?
  • What will a marketing campaign for your launch and business cost?
  • What will your monthly expenses be?
  • What are your tax obligations?

Write down any other expenses unique to your startup that you’ll need to account for. Once you determine what the financial impact will be, you can create a realistic budget.

Create a Realistic Budget

To mitigate financial risk in your self-funded start up, you need to cling to your budget. Sticking with your budget ensures that you’re running your business within your means, can save some, and also afford your personal expenses.

Take the monthly business expenses you listed above and insert them into your budget. After that, input how much you’re bringing in each month. The hope is that your business pays for itself in the future. But factor in the personal money you put in to ensure your business stays afloat for now.

You’ll also want to detail how much money you’re allocating to business savings, an emergency fund, your tax account, and what you’re paying yourself.

Subtract your costs from your income and see what you have left over. If you’re in the negative, your next move is to find ways to cut costs. If you’re in the positive, consider investing the remaining amount or reinvesting it into your startup to keep growing. Continue Reading…