Tag Archives: Financial Independence

What women want – and how to get it

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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…

8 habits that are killing your Retirement dreams

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A growing number of Canadians plan on working longer because they haven’t saved enough for retirement. We see it at a macro-level; Canadian households owe a record $1.69 in debt for every dollar of disposable income, meanwhile the personal savings rate in Canada stands at a paltry 3.4 per cent.

There are plenty of reasons why we owe too much and save too little. The economy stinks, people get laid off, and salary increases are few and far between.

That said we’re often our own worst enemy when it comes to taking care of our finances. Here are eight bad habits that are killing your retirement dreams:

1.) You don’t watch your spending

It’s tough to stop a money leak when you have no clue where your money is going. Small daily purchases do add up (latte factor, anyone?), but these spending categories can bust your budget much faster – big grocery bills, dining out too frequently, filling your closet full of new clothes, one-click online shopping, and expensive hobbies, to name a few.

The solution: Write down everything you spend for three months. I guarantee you’ll have an ‘a-ha’ moment at best, and at worst discover something useful about your spending habits that you’d be willing to change.

The goal of course is to spend less than you earn. It’s one of the major tenets of personal finance.

2.) You want the newest ‘everything’

Fashion and décor trends change, technology constantly evolves. Staying ahead of the curve means shelling out big bucks for the latest and greatest products. The problem is your capacity to buy new things will never keep up with the pace of innovation and change. It’s an endless cycle.

The solution: Wait. Early adopters pay a hefty premium to be first. Look no further than televisions, where the latest innovations can initially go for between $5,000 and $10,000: 10 times what they’ll cost in a year or two.

The bigger issue is the psychological need to always have the latest gadget or be at the cutting edge. Ask yourself whom are you trying to impress.

3.) You have the constant need to upgrade

Fewer than half of all iPhone users hang onto their smartphones until they stop working or become obsolete. Most want to upgrade as soon as their provider allows it: usually every two years. A small percentage upgrades every year whenever a new model is released.

While spending a few hundred dollars on a new phone every other year might not hinder your retirement plans, it could be a symptom of a bigger problem. The constant need to upgrade your technology, your car, and even your home can be a big drain on your finances.

Nearly three in 10 homeowners get the urge to move every five years, and 14 per cent actually want to move every year.

The solution: The same buy-and-hold approach that you take with your investments can also apply to your major purchases. The Globe and Mail’s Rob Carrick suggests a 10-year rule for homeowners to combat the odds of a housing crash and to save on transaction fees. Continue Reading…

How the USMCA affects Canadian homebuyers

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By Jordan Lavin, Ratehub.ca

Special to the Financial Independence Hub

Goodbye NAFTA, hello US-Mexico-Canada Agreement (USMCA).

The new trade deal with our neighbours to the south will have wide-reaching effects across all areas of our economy, and housing is no exception. While the agreement is said to be good for our economy overall, it’s not necessarily good news for your ability to afford a home.

What is the USMCA?

Canada recently reached an agreement with the United States and Mexico to replace NAFTA, the decades-old trade agreement that has stood since it was signed by Brian Mulroney, Bill Clinton and Carlos Salinas de Gortari.

The new agreement looks much like the old one, with some changes. Key differences include changes to the way the three countries approach auto manufacturing, fewer restrictions on trade of dairy products, and stronger measures against counterfeiting and media piracy. Like NAFTA, the USMCA makes it possible for the three countries to exchange goods without barriers.

For now, the US, Mexico and Canada will continue trading under the rules of NAFTA. The USMCA will come into effect once it’s ratified by its members, a process that could take months. In the United States, congress won’t vote on ratification until some time next year due to that county’s mid-term elections. Here in Canada, the looming Federal election means that if the USMCA isn’t made official by June, it could be delayed until 2020.

How does this affect Canadian housing?

If you’re wondering how having access to American milk at your local Superstore can possibly affect how much mortgage you can afford, you’re not alone. The implications for home affordability are driven by the market’s reaction to the uncertainty of the negotiation period, the removal of uncertainty brought by a signed agreement, and the actual economic growth that’s expected to occur because of the USMCA once it’s in force.

When the Trump administration demanded to renegotiate “the worst trade deal” ever, the market got spooked. As the trade war intensified, the US threatened to (and did) impose significant tariffs on imports from Canada. With repeated threats from our largest trading partner, there was a real chance that the Canadian economy could be jeopardized. Even though our economy was growing during that time, the Bank of Canada (BoC) was reluctant to raise interest rates, which it would normally do in that situation. Continue Reading…

If you have no faith in the future, should you invest?

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By Billy Kaderli

Special to the Financial Independence Hub

As many know, I am more than willing to offer financial advice in order to help others to become financially independent (aka “findependent.”) The sooner the better” that’s good for everyone, right?

I met a lady at a recent event that Akaisha and I attended, and in our visiting together I steered the conversation towards finances. Knowing that she lived in Hawaii and seeing that she was probably in her 40s, I falsely assumed she had some knowledge of money and how it works.

I was wrong.

After I shared with her that we retired at the age of 38, I asked what her financial plan for retirement was. She told me that she did not have much faith in the future, therefore she had no plan.

I asked her, “What if you are wrong?”

Her response was “I do not think I am wrong”

The Dollar is going to collapse

I have been hearing of the impending collapse of the Dollar for the last forty years.

First it was going to be replaced with the German Mark, then the Swiss Franc, then the Russian Ruble, Chinese Yuan, and now Bitcoin. Maybe someday they will be right, but so far, betting against the Dollar has been a costly investment.

I like to tell people that the Dollar is the cleanest shirt in the dirty laundry bin. Maybe you have some special inside trading information, but for me, I’ll stick with the U.S. currency.

Various apocalyptic scenarios

Maybe it’s part of being human, but it seems that society creates ominous future scenarios of various sorts to scare the living bejesus out of everyone. Continue Reading…

Could you become car-free?

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Billy and Akaisha on a Jak-a-Ran in Thailand

By Akaisha Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

It wasn’t a decision we took lightly.

In fact, Billy and I discussed the idea of becoming car-free for several years. There were good reasons to do it: no more maintenance and repair costs; no more fees for insurance, license plate renewal, or registration; no more fuel expense; and no more worry about storing the vehicle here in the States when we are traveling overseas for months or years at a time.

But there were also some obvious downsides. We wouldn’t have the freedom to come and go at a whim. And because we live in the American Southwest, where temperatures reach triple digits in the summer, we wondered how we’d manage to get around during the sun season.

Silly idea or feasible plan?

Most people we know couldn’t fathom the idea of giving up their vehicle and saw this new lifestyle choice as a hardship. Americans love their automobiles, and owning one is packaged as part of the American Dream. A look at the automobile and truck commercials today describe how we will be sexier, more popular, physically stronger, and obviously smarter if we purchase their brand of car.

As we’ve described on our Retire Early Lifestyle website, Billy and I live in an active adult community where we are within walking distance to stores, restaurants, and several different entertainment options. Most of what we need is near to us, and we appreciate the slower pace of life with all the rewards it brings. Many of our neighbors use a small scooter, golf cart, or bicycle to get around within a reasonable range. When we need to go somewhere farther, we trade services or pay cash to a neighbor or friend for their time. This is much cheaper than a taxi, more sociable, and we aren’t bogged down with worries about maintaining a vehicle. Both sides appreciate the trade, and our lives are enriched.

After almost two decades of world travel, we realized that the only place where we need to drive is in the States. Elsewhere, we take public transportation or hire a private driver. For the amount of time we live in the States, and for the amount of money that owning our own transport required, we finalized our decision to sell our vehicle.

The year was 2009.

What about you? 

Retirement takes many expressions and even if you could never see yourself as becoming completely free of car ownership, maybe you have toyed with the idea of keeping only one vehicle instead of two.

The following sites may help you with this transition: Continue Reading…