Tag Archives: Findependence

A Q&A on FIRE and Geo-Arbitrage between FindependenceHub.com & RetireEarlyLifestyle.com

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Global early retirees Billy and Akaisha Kaderli

Almost since the Hub’s inception in 2014, the principals behind the popular RetireEarlyLifestyle.com have provided in-depth coverage of global travel and the tips to achieve early Financial Independence they used themselves to “retire” in their early 30s.

The following email interview was between myself and Billy and Akaisha Kaderli.  Our intention is to publish it on both sites. Here’s the link to their version, which ran Dec. 14th. 

So without further ado:

JC Q1: Akaisha and Billy, you are about the same age as myself and my wife Ruth and apart from being American and Canadian, we appear to have several things in common: we both run sites focused on Financial Independence, have written some books on same, and continue to be working at least on our own terms even though we have achieved Findependence years ago: more than 30 in your case, seven in ours. One difference is you travel a lot more, while we are content to stay in our Toronto home near Lake Ontario and take just a few weeks abroad, preferably if it’s a business expense. So let me start with the provocative statement that I think travel is expensive and over-rated. I have no doubt you can rebut that!

A&B: First, let us clarify that the time we spend on our website is what we consider to be our volunteer time. Yes, there are products that we sell, but 99% of our information is free because we are passionate about teaching financial literacy to those who want to learn.

In regards to your comment about travel being expensive and over-rated, it depends.

We think that there are differing styles of travel. There are tourists, visitors and travelers. There is no one-right-way to journey around, and we love it that people get out and about, expanding their minds.

Tourists tend to go on vacation for a week or two, spending a good deal of money on lodging, transport, entertainment and meals. Every day must be “perfect” and if the weather doesn’t cooperate or if service is not great, then there is this sense of disappointment. They tend to go to resorts or even exotic locations, but the lodging and amenities have a sense of Disneyland unreality, and are often over-priced.

Sure, there might be a water buffalo in some rice fields, with “workers” wearing a “traditional clothing uniform” but the real locals are miles away. Tourists will pay $10 or more for a beer that the residents of the area would purchase for about a buck.

Also, Tourists might like the idea of a vacation or might not. Mostly, they like the comfort and routine of home, and a vacation is an interruption in their experience of the familiar. Many times, it borders on the feeling that “this is a waste of time. I’d rather be home.” They don’t know any local phrases in a foreign language except maybe Yes, No, Thank you, Bathroom and Beer. Tourists have more of a passive approach to their excursion and want to be entertained. Then they rate their experience with their friends when they return home.

In order to go on this vacation, they stop their mail, perhaps have a house sitter or family member/friend water their plants or watch their pet. They have probably cleaned out their refrigerator and have to stock up once again when they return home. And it all seems to be a hassle. “Would have been easier to just stay at home in the first place. Plus, now we have this credit card bill and all these souvenirs to give to friends.”

Visitors on the other hand stay in a location for a bit longer – maybe even a month or so. They know some survival phrases in the local language and choose lodging that is more middle range than a resort option. About half the time, they will eat outside of big chain restaurants with well-known names and take a chance on a local restaurant.

They are a bit more self-guided in their entertainment choices, perhaps utilizing Google maps or a local tour of the area to become familiar with their surroundings. They may select local transportation or hire a driver to go from archaeological ruins and museums or they might take a self-directed walking tour.

Using a daypack, they bring their own drinking water and perhaps some snacks to munch on as they go from place to place in their day.

Traveling for them is not necessarily a “vacation” but more of an experience, or a sabbatical. They could take cooking classes, language classes, painting courses and the like and they interact with the local people.

After their time away from home, their lives have altered in some way, perhaps expanding their perspectives or dropping an outworn routine. They look forward to their next adventure.

Then you have Travelers.

Billy and Akaisha at Chacala Beach, Nayarit, Mexico

These are the people who go from place-to-place with no itinerary other than their own style of meandering. They usually buy only one-way tickets, figuring out how to return – if they do –  at another time. They communicate with the native inhabitants in their own language, purchase food, clothing and travel equipment from markets in the area and will often eat street food or dine in local restaurants.

These people travel for months, sometimes years at a time and rent apart-hotels, AirBnBs, house sit or bargain for a hotel room for a monthly rate. They may or may not have a home base for when they return from their wandering.

Travelers are more flexible mentally and are willing to have their routines interrupted. If the weather pattern is not to their liking, they might move on, or hunker down till the cold, heat, or rain stops. They do not live their traveling life as in “Today is Tuesday so it must be Belgium.” They speak with other travelers to get insight into their possible next stop.

Travelers employ digital equipment and apps to communicate with family and friends. They utilize email, sending digital photos or videos taken of their experiences, and they travel lightly. They throw their daypacks onto a bus or carry them on an affordable inter-country flight. Getting their cash in the currency of the country they are living in, they work the ATMs with a debit card that pays the withdrawal fee back.

They manage their lives online and have been receiving paperless mail for a long time. Photos are placed up in the cloud and they take care of business via Skype, WhatsApp or Signal, benefitting from medical tourism for their health care.

Travel does not cost them “more.” In fact, if they were spending their time “at home” they would still have a baseline of expenses – lodging, food, transport, entertainment for instance. But now they have incorporated these same expenses along with globe-trotting which creates memories for a lifetime and stories to share.

In general, travel has broadened their minds, giving them a unique perspective of the world and a confidence and self-reliance that pervades daily living.

We think it’s important to know one’s traveling style and enjoy who you are. There is not a one-size-fits-all, and we recognize that travel isn’t for everyone.

Someone has to stay home, attend the roses and mow the lawn!

Hub CFO Jonathan Chevreau

How does extensive travel differ from short vacations from full-time employment?

JC Q2: To clarify, we enjoy travel too; was just playing devil’s advocate. Before we switch to Findependence, do you think there’s a big difference between the expensive two-week vacations many salaried employees take, and actually renting a house or suite abroad for 3 or 4 months at a time in Semi-retirement?

A&B: Yes, there is a big difference, actually.

When one is still working, vacations are stress busters. Work hard, play hard.

These holidays tend to be results of pent up demand for luxury; things we have denied ourselves during our working life like splurging on fine meals out, visiting an exotic place far from home, a ski vacation, or a safari. Continue Reading…

The six phases of financial independence [Revisited]

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By Mark Seed, myownadvisor

Special to the Financial Independence Hub

I’ve recently updated this post to include more links to related content. I hope you enjoy it. 

The term “financial independence” has many meanings to many people.

To some, it means not working at all.

To others, financial independence covers all needs and many wants.

To others still, it means the ability to work on your own terms.

Where do I stand on this subject?

This post will tell you in my six phases to financial independence.

Retirement should not be the goal, financial independence should be

Is retirement your goal?

To stop working altogether?

While I think that’s fine I feel the traditional model of retirement is outdated and quite frankly, not very useful.

As humans, even our lizard brains are smart enough to know we need a sense of purpose to feel fulfilled.  Working for decades, saving money for decades, only to come to an abrupt end of any working career might work for some people but it’s not something I aspire to do.

With people living longer, and more diverse needs of our society expanding, the opportunities to contribute and give back are growing as well. To that end, I never really aspire to fully “retire” – cease to work.

Benefits of financial independence (FI)

In the coming years, I hope to realize my desired level of financial independence.

We believe the realization of FI will bring about some key benefits:

  1. The opportunity to regain more control of our most valuable commodity: time.
  2. Enhanced opportunities to learn and grow.
  3. Spend extra money on things that add value to your life, like experiences or entrepreneurship.

Whether it’s establishing a three-day work week, spending more time as a painter, snowboarder, or photographer, or whatever you desire – financial independence delivers a dose of freedom that’s hard to come by otherwise.

More succinctly: financial independence funds time for passions.

FI concepts explained elsewhere

There are many takes on what FI means to others.

There is no right or wrong folks – only models and various assumptions at play.

For kicks, here are some select examples I found from authors and bloggers I follow.

  • JL Collins, author of The Simple Path to Wealth, popularized the concept of “F-you money”. This is not necessarily financially independent large sums of money but rather, enough money to buy a modest level of time and freedom for something else. I suspect that money threshold varies for everyone.
  • Various bloggers subscribe to a “4% rule”* whereby you might be able to live off your investments for ~ 30 years, increasing your portfolio withdraws with the rate of inflation.

Recall the rule:

*Based on research conducted by certified financial planner William Bengen who looked at various stock market returns and investment scenarios over many decades. The “rule” states that if you begin by withdrawing 4% of your nest egg’s value during your first year of retirement, assuming a 50/50 equity/bond asset mix, and then adjust subsequent withdrawals for inflation, you’ll avoid running out of money for 30 years. Bengen’s math noted you can always withdraw more than 4% of your portfolio in your retirement years however doing so dramatically increases your chances of exhausting your capital sooner than later.

In some ways, the 4% rule remains a decent rule of thumb.

Are there levels of FI?

For some bloggers, the answer is “yes”:

  • Half FI – saved up 50% of your end goal (e.g., $500,000 of $1M).
  • Lean FI – saved up >50% of your end goal; income that pays for life’s essentials like food, shelter and clothing (but nothing else is covered).
  • Flex FI – saved up closer to 80% of your end goal (e.g., $800,000 of $1M). This provides financial flexibility to cover most retirement spending including some discretionary expenses.
  • Financial Independence (FI) – saved up 100% of your end goal, you have ~ 25 times your annual expenses saved up whereby you could withdraw 4% (or more in good markets) for 30+ years (i.e., the 4% rule).
  • Fat FI – saved up at or > 120% of your end goal (in this case $1.2M for this example), such that your annual withdrawal rate could be closer to 3% (vs. 4%) therefore making your retirement spending plan almost bulletproof.

There is this concept about “Slow FI” that I like from The Fioneers. The concept of “Slow FI” arose because, using the Fioneers’ wording while “there were many positive things that could come with a decision to pursue FIRE, but I still felt that some aspects of it were at odds with my desire to live my best life now (YOLO).”

They went on to state, because “our physical health is not guaranteed, and we could irreparably damage our mental health if we don’t attend to it.”

Well said.

My six phases of financial independence

With a similar line of thinking related to Slow FI, since we all have only one life to live, we should try and embrace happiness in everything we do today and not wait until “retirement” to find it.

After reviewing these ideas above, among others, I thought it would be good to share what I believe are the six key phases of any FI journey – including my own.

Phase 1 – FI awakening. This is where there is an awareness or at least an initial desire to achieve FI even if you don’t know exactly how or when you might get there.

FI awakening might consider self-reflection questions or thoughts like the following:

  • I would love to retire early or retire eventually…
  • I can never seem to get off this credit card treadmill…
  • I wish I had some extra money to travel…
  • Wouldn’t it be nice to buy X guilt-free?

(I had my awakening just before I decided to become My Own Advisor, triggered by the financial crisis of 2008-2009.)

Phase 2 – FI understanding. This is the phase where people are getting themselves organized; they start to diligently educate themselves on what their personal FI journey might be.

In this phase, they might set goals or get a better handle on what goes into their financial plan. Even if your plan is not perfect, it’s a start.

They might start asking some deeper questions like:

  • Why is money important to me?
  • What is my money for?
  • How do I know I’m doing it right?

I would say it took me until my mid-30s to get my financial life in order through more financial education and improved financial literacy. It was a process that took a couple of years although I’m always continuously learning and improving. I don’t pretend to know it all.) Continue Reading…

Was the F.I.R.E. movement doused by the pandemic?

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Cutthecrapinvesting: Image by Mohamed Hassan via Pixabay

By Dale Roberts

Special to the Financial Independence Hub

F.I.R.E is an acronym for Financial Independence Retire Early. It is a very popular movement that gets a lot of attention in the blogosphere and on social media. The idea is to eat excess amounts of ramen noodles, squeeze your budget until it squeals, save 90% of your income, invest like crazy in an all-stock portfolio, and then never work another day of your life after the age of 38. I’m kidding, please don’t “OK Boomer” me.

In reality, most from the F.I.R.E. movement will not “retire” early, but many may reach a wonderful form of financial independence. In 2020, was the F.I.R.E. movement doused by the pandemic?

2020 brought us a very quick and violent stock market correction. It was the most violent in history, but so was the recovery as governments and central banks came to the rescue of stock and bond markets. Looking back it feels like a blip. But in the moment it was more than scary, considering that we did not know the path of destruction that SARS-coV-2 might leave behind.

We still don’t know.

Did the F.I.R.E movement change course?

From what I read from my F.I.R.E friends (they’ll say I’m being rather presumptuous with the use of that friends description), they embraced the volatility. After all, volatility is not risk, if you can handle that risk, and you have an incredibly long time horizon. Volatility and falling stock prices are an opportunity, whether you are seeking to build that growing dividend stream or plan to one day also harvest shares to create retirement income.

In March of 2020 I asked …

Is this an incredible investment opportunity or what?

In the Globe and Mail, Brenda Bouw offered how F.I.R.E investors are managing through the pandemic. (Sorry that is paywall, but I’ll give you the important deets). That is a great piece with some good commentary, especially from advice-only planner Jason Heath.

The F.I.R.E. traps

F.I.R.E. followers need to be extra vigilant as their nest eggs need to last decades longer than those who retire in their 60s and 70s. There is the perception that the F.I.R.E. gang have less risk, because they are young. In fact the opposite is true. From Jason …

“You may need to over-save and underspend longer than you might think when you’re pursuing the F.I.R.E. movement,” says Jason Heath, an advice- and fee-only certified financial planner at Objective Financial Partners Inc. in Markham, Ont. “When you’re retiring at age 40 versus age 65, there’s so much more margin for error.”

Jason also pointed out that funds can quickly disappear because of costs associated with an extraordinary event, such as a serious injury or illness that requires long-term care or having a child with a disability.

“If you don’t budget for the unexpected, that could really compromise your early retirement plan,” he says.

Of course it is true that the F.I.R.E. folks may have the opportunity to go back to work if need be. But it’s also important to use the word “MAY.”  It’s not a given that health would permit the opportunity to work. There is no guarantee that meaningful work would be available. I hate to be a Dale Downer, but this is the reality that we should accept and recognize.

The good new is, they won’t actually “retire”

Nobody really retires early except for teachers and other public servants. So if you want to really retire early, you know where to apply for a job. You’ll need that guaranteed, defined benefit, indexed-to-inflation-for-life pension. And those may be hard to come by these days as governments are also doing the math on funding or backstopping those options.

Most will use that F.I. and ditch the R.E. And most will admit to that reality. They just want that freedom to do more of what they want in life with respect to leisure and travel and work. And that’s why I am a big fan of the movement. It is based on a wonderful end game (freedom) and it employs some more than important financial basics, behaviour and lessons.

You build wealth by living beneath your means. Here’s my personal finance book. OK, you may notice, it’s a blog post. Who needs a book? It all ain’t rocket surgery.

Everybody say FIWOOT!

Jonathan Chevreau calls it all Findependence. That’s perfect. Mark from My Own Advisor frames it nicely with his own acronym …

I prefer Financial Independence Work On Own Terms (FIWOOT) versus FIRE The Financial Independence Retire Early (FIRE).

Here’s Mark’s Weekend Reads.

Dance with the one that brought ya?

The greatest mistake within the community will likely be the commitment to an all-stock portfolio. There is that expression that you might ‘dance with the one that brought ya’. But that’s not the case when it comes to protecting your wealth and your F.I.R.E. Continue Reading…

“Findependence or Bust” — my interview with Pat Bolland on his new podcast

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Pat Bolland, host of The Just Word podcast.

Veteran broadcaster Pat Bolland interviews me on his new podcast: The Just Word with Pat Bolland.

You can find the full interview — which dropped early Tuesday — here.  The episode is titled “Findependence or Bust.” Scroll down a tad if you can’t see it immediately on your screen. It’s audio-only (at least this particular segment) and if it appears to pause on a mobile device, simply press the Play button again and it will resume where it left off.

You can find the podcast on the usual distribution outlets, including Spotify, Apple, Google and others.

I’ve followed Pat’s career in broadcasting and investing for decades and for a time we worked as editor (me) and columnist (Pat) during my stint at MoneySense magazine. Pat was my go-to-source for Fixed Income, although of course he’s extremely knowledgeable about all asset classes.

The interview is a wide-ranging one over Zoom, spanning about 25 minutes, with a particular focus on this website: The Financial Independence Hub. Pat probes me about why and how the site got started, about its demographics and audience and we discuss the difference between traditional Retirement and the concept of Financial Independence (aka Findependence) and the idea of the Financial Life Cycle.

As the title of the segment suggests, he fully fleshes out the word Findependence, including my self-appointed title of CFO, standing uniquely for Chief Findependence Officer.

We address the difference between Wealth Accumulation and so-called “Decumulation,”  and discuss a few Canadian authors of books that focus on the topic, or Retirement in general.

Our respective forays into Cryptocurrencies

Of course, we also covered a lot of ground about investing in general, ranging from cryptocurrencies and Bitcoin and gold/precious metals to robo-advisors and investing in a post-Covid world where vaccines are becoming common enough that investors can start to think about so-called “Recovery” plays.

We chat about what seems to have been the shortest bear market in history (March 2020) and the subsequent volatile markets. I was surprised to discover Pat was an early adopter of Bitcoin, albeit a tiny amount several years ago, which he ultimately bought a set of golf clubs with.

We then moved on to zero-commission trading, young investors trading on Robinhood, and the recent phenomenon of the short squeeze on GameStop and other popular meme stocks promoted on Reddit’s WallStreetBets forum.

Housing, investment real estate and REITs

We also discuss interest rates and housing, debt and financial repression, life expectancy and longevity, and what aging baby boomers like ourselves can expect in Semi-Retirement and (one day!) Full Retirement. We walk about Toronto housing prices and my long-term philosophy that the foundation of Findependence is a paid-for home (articulated in my financial novel, Findependence Day.)

We also address investment real estate and — for those who don’t wish to be a landlord — REITs (Real Estate Investment Trusts) or REIT ETFs.

What I’d tell my 35-year old self

Watch near the end for Pat’s question to me about what I’d tell my 35-year-old self if I could go back in time and do it all over again.

Hint: Pat thought my answer was “facetious!”

Top 10 tips on becoming Financially Independent (or “Findependent”)

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Financial independence is something for which everyone strives. But most of us never get to a stage of financial independence by choice and we reach this stage when we are very old and can no longer work anymore. And although it is not easy to achieve financial independence (aka “Findependence,”) it can be done if you know how to manage your money effectively.

1.) Develop a budget

The first thing that you need to do when you are trying to save money is to develop a budget. To develop a budget, you need to start by figuring out how much money you need to live on each month and then giving yourself an appropriate amount of money to use over the course of the month.

2.) Get a financial planner

If you have had trouble managing your finances in the past, you should consult a financial planner so that you can get the most out of your money. He or she can help you to plan out what you need to spend, so you will be able to figure out how much money you need to save in order to get where you want to be financially.

3.) Create financial goals

Setting financial goals ensures success, because it helps you to get a sense of what you want to achieve and where you want to go on your financial journey. Giving yourself short term and long term goals is usually the most effective way to achieve financial goals, because it allows you to plan and amend your plans as you go.

4.) Pay off your debts

If you have a lot of debt looming over your head, you should make sure that you pay it off before you start actively trying to save. Start by paying off your smaller debts that have the highest interest rate first, so that you won’t have to pay so much later on when the debt has increased.

5.) Get rid of student loans

When most people think of paying off their debts, they forget about paying off their student loans because they are a different kind of debt to your standard credit card debt or loan repayment. There are a few different options when it comes to repaying your student loan, from paying a fixed amount each week, to contributing a percentage of your average income every pay-day. Continue Reading…