Tag Archives: Financial Independence

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…

Timeless Financial Tip #7: 6 Steps to Retiring as Planned

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Canva Custom Creation: Lowrie Financial

By Steve Lowrie, CFA 

Special to Financial Independence Hub

Retirement isn’t the only reason to set aside current income for future spending. But since it’s usually the elephant in the financial planning room, it’s worth a Timeless Tip of its own.

The following are 6 ways to leverage lifelong financial planning, so you can retire on your own terms and on your own timeline.

  1. 1. Don’t Delay Retirement Planning, Start Today

I know, it’s easy to assume retirement planning is for when you get older. How old? Well, older than you are today (you tell yourself).

It’s also true that a detailed retirement plan is unlikely to come into focus until you’re at least mid- if not late-career. It’s hard to take clear steps toward hazy targets.

But none of this means it’s wise to be too Rip-Van-Winkle-like about your retirement planning. Even if it’s decades away — and especially if it’s not — a few sensible financial planning steps should help you avoid having to take any huge leaps 20 years down the road.

  1. Do Some Financial Forensics

To get started, try doing some Family Spending Forensics. Don’t worry, no forceps will be required to get a grip on what you’ve got and where it’s going. No judgment! Just take a few hours every year or so to ask yourself:

  • How much am I currently spending, in what categories?
  • How much am I saving for upcoming expenses?
  • How much am I investing for the future?
  1. Have a Personalized Financial Plan

Once you have a sense of where you’re at, create a financial plan that outlines where you’d like to go, including in retirement. Your plan should describe what your goals are, when you would like to achieve them, their approximate cost, and where the money will come from. Revisit your plan annually to freshen it, as needed. Having a plan in place will help you:

  • Spot any spending or saving leaks early on. It’s easier to heal a hole when it’s still small.
  • Make the most of new income. If you receive a raise, pay off your mortgage, receive an inheritance, or otherwise come across “new” money, your financial plan will inform you how to use the assets for maximum benefit, instead of randomly spending them on “whatever.”
  • Make good lifetime choices. Few families have more money than they know what to do with. Instead, most of us must bridge gaps between our assets and our aspirations. So, think about:
    • How will you bridge your gaps?
    • Will you work longer or pursue a higher-paying job?
    • Should you spend less, now or in the future?
    • Will you choose to invest more aggressively?

A financial plan helps you make good choices among spending/saving tradeoffs: during your working years and into retirement.

  1. Invest Toward and In Retirement

For most of us, our financial success comes from income earned during our career years. But it’s usually essential to also have invested a significant portion of that income into an inflation-beating, globally diversified investment portfolio we can tap in retirement. A financial needs analysis quantifies what your investment portfolio might look like to sustain a satisfying lifestyle in retirement: Continue Reading…

Lean FIRE (as opposed to Fat Fire)

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By Alain Guillot

Special to Financial Independence Hub

I was told on Twitter that living on less than $24k per year is very frugal. Maybe it is, but I would like to explain how I live on less than $24K and I feel that I live like a king. 

(Editor’s Note: The Twitter discussion below followed Monday’s Hub post on by Myownadvisor blogger Mark Seed: Is Fat Fire realistic?)

First of all, my net worth right now is about $500,000. If we use the 4% rule, I should be able to withdraw $20,000K/year ($1,667/month) in perpetuity.  

How I live  

Map of Alain’s neighbourhood in Montreal

I live in one of the best neighborhoods in Montreal. It’s called “Le Plateau Mont Royal.” I have a beautiful park 10 minutes walking distance to the east, and another more beautiful park 10 minutes walking distance to the west, and I have the Old Port, 20 minutes walking distance to the south. 

 

 

Alain on Duluth Street

 

The street where I live is pedestrian only; it’s a cobblestone street.

Because I have been living in the same apartment for the past 12 years, my rent is low. $815/month. 

One of my small pleasures is to go downstairs, to a little park on the corner and drink a beer with my neighbors. (beer from the convenience store $2)

My apartment is what’s called a 3 ½. One bedroom, one living room, a kitchen, and a bathroom. I live on the second floor of a two floor building. 

 

 

The local supermarket

I do my groceries at a small family-owned supermarket where I have been shopping for 12 years and where I know the cashiers and the owners by first name basis. Because I follow a plant based diet, I eat 99% of the time fresh fruit and vegetables. My grocery bill hardly exceeds $10 per day ($300/month). I buy my fruits and vegetables daily. 

 

Continue Reading…

Is Fat FIRE realistic?

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By Mark Seed, myownadvisor

Special to Financial Independence Hub

 

Weekend Reading - is Fat FIRE Realistic
Image Source: Pexels, Gantas Vaičiulėnas

Is Fat FIRE realistic?

Before my answer to that question, for those outside the personal finance, devout FIRE (Financial Independence, Retire Early) bubble, a primer based on what I know …

What is FIRE?

I would like to provide a universal definition from the personal finance community today but there isn’t one. There are, however, some general thoughts/themes when it comes to FIRE and those who follow the philosophy around it:

  • Financial Independence, Retire Early (FIRE) is a movement related to extreme/aggressive savings rates and investment tactics that allow individuals to retire sooner than potentially any traditional budgeting or retirement planning approach might permit.
  • When it comes to savings rates: in some circles, by saving up to 70% of your annual income, some FIRE enthusiasts aim to retire early (and live off small portfolio withdrawals from their accumulated assets).
  • When it comes to portfolio withdrawals: in some circles, by withdrawing a small % of the accumulated assets (e.g., 4% of the portfolio), said FIRE enthusiasts may expect their portfolio to last a lifetime without fear of running out of money.

The FIRE movement – new term, old concept

The FIRE movement takes direct aim at some traditional retirement ages, such as age 60, 65 or even later on but there is no consensus on what is / is not a retirement age, of course.

The theory and movement goes: by dedicating the majority of your after-tax income to savings and specifically saving for retirement, well, you could “retire” sooner than most. Probably true.

From this perspective, FIRE is not a new concept even though the moniker is somewhat newish.

I’ve written multiple times about the FIRE movement and my thoughts on FIRE.

I’ll link to those thoughts here for additional reading as well.

I’m hardly anti-FIRE; this movement/approach/philosophy has always resonated how I live for the most part:

  • To live within your means or slightly below what you make as income.
  • To save early and often.
  • To avoid long-term debt that is not used for wealth generation.
  • To optimize your investing (i.e., keep your costs low and diversified, and avoid money managers).

Several FIRE retirement variations have emerged over the years to frame a particular lifestyle expectation that could come with FIRE. I’ll rank them in order of cashflow significance although these terms also vary based on the FIRE enthusiast you’re talking to:

1. Lean FIRE

As the first word suggests, lean is a strict adherence to a minimalist lifestyle. Many Lean FIRE adherents live on $25,000 per year, or less per year. Here are a few examples:

Jacob Fisker – Early Retirement Extreme. How he used to live on just $7,000 per year. Not a typo.

There is Jessica from Financial Mechanic, who spent less than $20,000 in 2020.

In more recent years, A Purple Life, wrote about a nomadic life earlier this year, living off less than $25K USD.

These are certainly jaw-dropping low numbers …

2. Barista FIRE

Not that you have to become a barista, rather, the term is used to highlight a combination of work-life balance that can be juggled – a form of semi-retirement if you will.

Barista FIRE is a type of semi-retirement whereby you can consider part-time work or work on your own terms, and still enjoy the benefits of some income and workplace benefits. (The term was coined as such since Starbucks offers benefits to part-time workers … something to consider for your semi-retirement plans!?) Continue Reading…

My 5 picks for classic books on Financial Independence and Retirement

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A book discovery service called Shepherd.com has just published a multi-book review by me about my recommendations for some of the best all-time books on Financial Independence and Retirement. You can find the full review by clicking here. Shepherd.com is a year old; an alternative to older services like Goodreads, it helps readers and authors share and discover books in various genres.

Picking just five books is of course a tricky exercise and having seen this published late in July, I soon thought of several other books I might have included as well or instead, notably David Chilton’s classic The Wealthy Barber. But it’s safe to say that with more than 2 million copies sold, that would not exactly be a ground-breaking new recommendation.

Chilton of course created a monster with the genre of the financial novel: a hybrid that combines a story and characters with an overlay of enduring financial insights and strategies for achieving financial freedom. He has spawned many imitators, such as Robert Gignac’s Rich is a State of Mind and my own Findependence Day, which is also flagged in the Shepherd reviews.

For this exercise, however, I opted to go with straight non-fiction financial books. My thinking was what books influenced me in my own journey to Semi-Retirement and Financial Independence, or the so-called FIRE movement, for Financial Independence Retire Early.

Here are the 5 books I did pick: go to the original link to get my analysis and reasons for each pick. Below I offer just a line each but each explanation is closer to 400 words so be sure to click on the original Shepherd link to get the full take on each. The five titles below each include hypertext to the Shepherd book store where you can order directly.

1.)

Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence

By Vicki Robin & Joe Dominguez

Probably first for most other proponents of the FIRE (Financial Independence Retire Early) movement is this classic, subtitled Transforming Your Relationship with Money and Achieving Financial Independence.

 

 

 

2.)

Enough: True Measures of Money, Business, and Life

By John C. Bogle

The late Jack Bogle, founder of Vanguard Group, published this excellent book in 2009. To me, the title speaks for itself. The sooner you realize you have “enough,” the sooner you can quit the rat race.

 

 

 

 

3.)

How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won’t Get from Your Financial Advisor

By Ernie J. Zelinski

Edmonton-based author Ernie Zelinski is probably best known for this self-published international bestseller and several others, all on the theme of escaping from full-time employment as soon as possible.

 

 

 

 

 

4.)

Pensionize Your Nest Egg: How to Use Product Allocation to Create a Guaranteed Income for Life

By Moshe A. Milevsky, Alexandra C. Macqueen

This book by the famed Finance professor and a certified financial planner caters to anxious would-be retirees who do not have the luxury of having an inflation-indexed, guaranteed-for-life Defined Benefit pension plan offered by an employer.

 

 

 

 

5.)

Work Optional: Retire Early the Non-Penny-Pinching Way

By Tanja Hester

The phrase “Work Optional” describes the state of being financially independent enough that you don’t have to work for money anymore, but nevertheless choose to for reasons like having a purpose, or structure. As the subtitle suggests, it’s about retiring early without having to be a miserly penny pincher.