Many of us dream of financial independence. Chris Mamula, Brad Barrett, and Jonathan Mendonsa offer many practical ideas for achieving financial independence (FI) and enjoying the journey along the way in their book Choose FI: Your Blueprint to Financial Independence. They avoid many of the problems we see in the FIRE (Financial Independence Retire Early) book category.
The authors avoid the biggest problem with most FIRE books. It’s annoying to tell the story of a high-income earner deciding to live like a student his whole life and retire in his 30s, and then say “you can too!” Although I point out the bad parts of books, I can forgive a lot if my mind is opened to a good idea. For this reason, I’ve enjoyed FIRE books even if they have some bad parts. This book manages to avoid the worst parts of other FIRE books.
The authors don’t bother much with retirement. FI gives us choices so we can “scrap the idea of retirement completely and focus on building lives we don’t want to retire from.” The life you build can involve paid work, leisure, or any other pursuit you want.
Rather than focus on just one story, the authors draw from the experience of many people who have sought FI. A common theme is the importance of enjoying the journey. If you see your pursuit of FI as suffering for several years until you hit your magic number, you’re not doing it the right way.
FI’s benefits start even before you reach the target
You benefit from pursuing FI even before you reach your target. “If you have a mortgage, a couple car payments, a family to feed, and nothing in the bank, what choice do you have when your boss asks you to do something stupid?” I was able to push back somewhat with my boss in the late part of my career, and this got me more money and autonomy.
If reaching FI seems like an unattainable goal, it may help to break it down into milestones. The authors suggest “getting to zero” for those in debt, “fully funded emergency fund,” “hitting six figures” in your portfolio, “half FI,” “getting close,” “FI,” and “FI with cushion.” This last stage is defined as having a portfolio equal to 33 times your annual spending needs. This is a sensible target for a young person with a long remaining life who doesn’t really know how spending needs will change with age. Continue Reading…
Starting to invest earlier in life ensures that your money will compound and grow over time.
By the time you reach your thirties, investing tends to become a serious consideration. People in their thirties may have families, their first mortgage, and a blossoming career that enables investing to take place.
So what’s the best investment strategy for someone in their 30s looking to build wealth?
We asked financial planners, thirty-somethings, and other professionals for their best investment strategies and tips.
Here’s what they had to offer about building wealth in your thirties:
Invest in your own companies
I’m a 36-year-old business owner and dad of 3. As I drive my minivan around town, I often think about the best way to build wealth in my mid-thirties. I’ve looked to max out retirement plan contributions for the last decade and set defined contributions to investing in mutual funds and stocks. But, I don’t believe any of that stuff is the best way to build wealth. The place I’ve landed is to invest in yourself, your ideas, and your own companies for the biggest investment. That way, you create real assets where you have a direct impact on the outcome. If you lose the investment, you just lose money. But you still win because you’ve invested in yourself, and the long-term payoff on “you” is one of the most rewarding returns in life. — Brett Farmiloe, Markitors
Start early on Real Estate
Real Estate continues to be an excellent way to build wealth. Especially in a state like Arizona, where we currently have a housing shortage and a large influx of people wanting to live here, owning real estate should be a key part of building wealth long term. — Rod Cullum, Cullum Homes
Invest in things you understand
Keep it simple by spending less than you earn; with the money that you retain, you can start building a safety fund of 3-6 months of spending. By doing so, you won’t need to sell investments or go into credit card debt if an emergency comes up. In regards to investments, ensure you are choosing investments with low fees and that you have a clear grasp on what you are investing in. Fully understanding what your investment entails will prevent you from getting emotionally attached to your investments. — Keith Piscitello, S2 Wealth Planning
Pay off your Debt
The best way to build wealth for a 35-year old is to start by paying off all of your debt as soon as you can. Pay off your credit cards, student loans, car loans, and maybe your home loan. Continue Reading…
Retirement! For many of us, it’s an event so far in the future that it almost seems unreal. Taking active steps to plan and invest for the “golden years” feels unnecessary.
Yet as anyone who’s lived through their 30s and 40s can share, those decades go by quickly. And if you want to retire early, the worst thing you can do is wait to start saving or unintentionally sabotage your portfolio.
Long story short, if you want to retire early (and wealthy), you’ll want to start now. But what does “start” mean when it comes to saving for retirement?
The answer is surprisingly complex. The good news is that learning how to build your nest egg won’t consume all of your free time. With attention and discipline, you can retire early: so let’s get started.
1.) Visualize your future and figure out what that costs
You wouldn’t renovate your kitchen without choosing a style and establishing a budget. Think of building your nest egg the same way: you need a goal and a plan to get there. Sure, you know you want to retire early. But what does retirement look like for you once you’re there? Do you want to travel? Live in your hometown? Play bridge? Take piano lessons? Visualizing your retirement home base and how you’ll spend your free time will help you set your savings goal.
Envisioning a loose plan for what you want your post-work life to look like is a great start. But you’ll also need to take into account inflation and investment returns, among other factors. AARP’s retirement calculator can help you understand where you’ll need to be financially in order to achieve your goal. It will also help you prioritize the actions you’ll want to take now so you can actually get there later.
2.) Pay off debt and reapply the payments
Debt is a normal part of life for most Americans. Buying a home or paying for college often requires taking out a loan, and so does starting a business. Borrowing responsibly in these areas can help you get ahead financially, but other kinds of debt, like high-interest credit card payments, can hinder your retirement savings efforts.
First, if you have education debt and think the scholar-”ship” has sailed, think again. There are actually scholarships that pay off education debt for borrowers who have already graduated. And if you have excellent credit, you can also look into refinancing your student loans.
If you have credit-card debt, personal loans, or other high-interest payments, prioritize paying off those balances in full. If the payments were manageable for your budget, repurpose those payments into building your nest egg instead. Bonus: once you’ve paid those debts, your credit score will probably rise. And that helps you qualify for lower rates when refinancing or taking out a new fixed or adjustable-rate mortgage.
3.) Get sneaky with microsavings so you can live life along the way
Small dollars add up fast. That’s great news for people who want to enjoy life and save for retirement at the same time. If you’re aggressive with microsavings, you’ll have an easier time affording life’s little niceties and still be able to save for retirement at the same time. Continue Reading…
There are numerous life insurance mistakes Canadians are making, and who qualifies better to talk about these mistakes than life insurance experts? We asked numerous life insurance experts to weigh in on the top life insurance mistakes they have seen throughout their careers.
You can find a summary of their replies in the above chart, with more detailed explanations following in their segments (% shows how often a particular mistake has been mentioned).
The top three mistakes are:
1.) Putting off your life insurance purchase until it is too late, or not getting life insurance at all (especially in your younger years).
2.) Not doing a needs analysis and not understanding all possible risks resulting from being underinsured.
3.) Not leveraging the benefits of a permanent life insurance policy due to its higher cost, though there are numerous benefits to this product in the long run.
Tony Bosch, Development Hub Financial
Tony Bosch – Executive Vice President Broker Development Hub Financial
“Life insurance is a key component in most financial and estate plans”
Three key mistakes people make when purchasing life insurance:
Not doing a needs analysis: The first step in any life insurance purchase should be to do a proper needs analysis. People often fail to look at the big picture when buying life insurance. The calculation of how much insurance you need should be more detailed than just having your mortgage paid off or replacing a certain multiple of your income. In determining your life insurance needs it is necessary to determine what amount is actually necessary to “allow your family to maintain their standard of living and pay off outstanding debt”under “less than ideal circumstances,” factoring in that the grieving process and the time to recover emotionally may take several months or even years. Life insurance should provide “financial confidence.” allowing a family time to adapt and adjust to life without a loved one.
Product selection: Life insurance, unlike most forms of insurance, can come in a variety of payment options from low cost term insurance to permanent policies that can build substantial tax sheltered cash values and can help solve estate planning needs and/or serve as an alternative investment. The problem arises when the product selection overrides the need. Clients with a limited budget may be attracted by product features causing them to choose a permanent product with a lower face amount than is required. A family with three kids may like the idea of a shiny sports car but may need a mini van. It is critical to first define the amount of protection required and then choose the product or combination of products that meet this need within a given budget.
Choosing a solution based on price and/or convenience rather than contract guarantees and flexibility: A simple example may be purchasing loan or mortgage insurance through a lending institution. Although this may seem like an easy and convenient solution, it may require additional underwriting at the time of claim, which could result in a claim being denied. A basic renewable and convertible term plan underwritten by an insurance company may take a little more time to set up, but in most instances provides a better and more flexible policy that can adapt to your changing needs.
Life insurance is a key component in most financial and estate plans. Working with an experienced and trusted independent advisor will help make sure you and your family get the life insurance you require with the flexibility to adjust to your changing needs.
Michael Liem, Canada Protection Plan
Michael Liem – Canada Protection Plan Regional Vice President
“Don’t put it off until it is too late.”
Putting it off until it is too late: Even though Canada Protection Plan can help get life insurance for people with medical or lifestyle issues, I think it is always best to get insurance when you don’t need it and when you are healthy. It’s not how much you can afford, but rather how healthy you are that gets you the best insurance options.
Not telling anyone about your life policy: People get a life insurance policy but when they pass away, some beneficiaries don’t even know about it. I always suggest that advisors should acquire contact information for the beneficiaries and where possible, introduce themselves because these beneficiaries will most likely be contacting the advisor to make a claim.
Regularly reviewing a client’s policy: So many advisors provide the initial policy but never review them. People’s lives are constantly changing and they may need to adjust or add more coverage. If an advisor never contacts their client, then they should not be surprised when the client switches their business to another advisor.
Lawrence Geller, L.I. Geller Insurance Agencies
Lawrence Geller – President of L.I. Geller Insurance Agencies
“Everyone has asked to either renew the existing policy or buy a new policy.”
Of the many people who have assured me over the years that they only needed life insurance for a maximum of 10 years, every one has asked to either renew the existing policy or buy a new policy to replace the one that was renewing. Even then, most have deluded themselves by thinking that they would not need the coverage when the term of the contract ended, and almost all have wanted coverage at the end of the term.
Not a single client who bought a guaranteed paid up whole life policy has ever told me that they made the wrong choice of coverage, although many have told me that they wished that they had purchased a larger amount of life insurance.
Daniel Audet – Vice President Assumption Life
Daniel Audet, Assumption Life
“Don’t gamble on being uninsured.”
The top life insurance mistake, from a consumer’s perspective, has to be the choice to gamble on being uninsured (or underinsured).
LIMRA reported a year ago in 2019 that 32 per cent of Canadian households do not have any life insurance coverage, while 56 per cent of Canadian households do not have any individual life coverage. Everyone would agree that there are more pleasant things to consider and address than the risk of dying prematurely, and that may be the reason why so many Canadians are shying away from a proper assessment. More likely, the observation comes from a knowledge gap of the risk and associated loss. Many Canadians would not necessarily consider themselves as gamblers, meanwhile the chosen approach of not buying insurance (or not buying enough) is very similar to that of a gambler’s behavior. The gambler “invests” a little wager with a small probability of a large payoff. In comparison the non-insured “saves” paying a small premium hoping he/she wouldn’t die with a significant financial burden. Both types of gamblers have small amounts involved when compared to what is at stake, and the odds of the event, while relatively small, can have a significant impact. They are just at both ends of the spectrum: the casino gambler hoping for the big win, and the life gambler neglecting to consider the major financial loss.
Turning a blind eye to the needs of paying final expenses, replacing income, paying off the mortgage, or paying the estate bills, and choosing not to be insured (or underinsured) is essentially just like gambling the financial state of the loved ones left behind. Several Canadians, when asked why they do not own life insurance, have stated they could not afford it (27 per cent) or that they had other financial priorities (25 per cent). Continue Reading…
This is what we have learned in our almost three decades of financial independence. Things change, and sometimes radically. There simply are no guarantees.
From our point of view, a full and rich retirement is still possible for many people right now. Sometimes it takes personal flexibility in how one’s retirement is defined, as well as self-discipline and commitment to making one’s dream happen.
Many potential retirees will find themselves working part time to supplement their retirement lifestyle and perhaps to obtain a medical insurance plan. They may work from home in a virtual style of employment, make money from their hobby, or take advantage of a less stressful second-career opportunity.
Medical tourism will become more commonplace, as corporations look for financial alternatives to providing health care for their employees. As this idea becomes more familiar, retirees and potential retirees will consider this type of health care as a viable option if they are underinsured or if their own health care plan is lacking or if it’s too expensive to maintain.
Moving to more affordable countries
Moving to more affordable countries such as Mexico, Panama, Ecuador, The Philippines, Costa Rica, or Thailand will also become more attractive to those whose portfolios have been compromised for one reason or another. One can live a reasonably comfortable lifestyle in these countries for far less than in the United States or Canada.
Grander retirement dreams may be scaled back, but that is not necessarily a bad thing. Less can be more when one’s retirement money is spent for living rather than for maintaining things.
If one’s future retirement life is based upon the idea of keeping the same level of spending after there is no longer a paycheck coming in, you could be in for a shock. But if you have learned to live below your means, have kept your monthly expenses reasonably low, and have not loaded up with huge amounts of consumer debt, then the road of retirement ahead will not pose a threat. Continue Reading…
Posted By 
