Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.
Good piece in Wednesday’s Financial Post by Morneau Shepell’s Fred Vettese about how even higher-income Canadians may be able to qualify for the Guaranteed Income Supplement to Old Age Security. Normally, those with big RRSPs fret about having OAS benefits clawed back and they don’t even think about the GIS.
But, as writers have been pointing out ever since the Tax Free Savings Account (TFSA, the Canadian equivalent of the U.S. Roth plans) started up in January 2009, a big benefit of the TFSA is that when you pull money out it’ s not only tax-free but also doesn’t result in clawbacks of either OAS or the GIS. Today, it’s common to see TFSAs with balances of $40,000 and in some cases much more. (See the annual MoneySense Great TFSA contest, where some of the “winners” have hundreds of thousands in them. Similar tales have been told in recent issues of the Financial Post.)
Consider that a dual-income couple could by now easily have between $80,000 and $100,000 in a TFSA, even if conservatively invested. Add another $11,000 between them in January 2015 and we’re talking real money.
Vettese’s article is the best I’ve seen even pointing this out. Put this into your “Decumulation” file!
Lots of ink for so-called robo-advisers in the press lately. With the unveiling of several new start-ups north of the border, this is a trend that won’t be stopping any time soon. One of the first pieces on it of which I’m aware was in the June 2014 issue of MoneySense, bearing the headline “Subscription-based Couch Potato.” I should know, since I wrote both the article and the headline.
Late in August, I wrote a piece on this for the Financial Post, and tried to make the case that “light advice” might be a better term since human advisers can and often do get involved in the process. “Light” suggests a half-way point between the “no advice” model of discount broker enthusiasts choosing their own ETFs, and the “full” advice model of full-commission stock brokers or investment counsellors or wrap programs that give plenty of human oversight, but also charge for it one way or another.
Dan Bortolotti of Canadian Couch Potato and PWL Capital also devoted his Index Investor column to robo-advisers in the fall issue of MoneySense. Dan sees plenty of benefits to them, one of them being lower investment costs, but another is that he believes they’ll force investment advisers (humans, that is) to do a better job.
Rob Carrick of the Globe has also weighed in as have, no doubt, a multitude of other personal finance writers and bloggers. In this September piece, Rob wrote that robo-advisers have arrived and “may be just what your portfolio needs.”
The past weekend, David Pett of the Financial Post wrote a good piece on the topic, with full portfolios generated for younger investors and retirees by four of the major Canadian robo-adviser — sorry, I meant light advice — firms.
And finally I wrote a piece on this today (Nov. 14) for the Investor Education Fund’s Getting Smarter About Money site.
I’d like to hear from new users of this model
I’ll certainly be doing more on this topic and would like to hear from readers who have actually used them. As a relatively new service, these early adopters presumably come from one of three camps: brand new money from those starting out in investing; those migrating “down” from higher-cost full-service brokerage, mutual funds, wrap programs or investment counsellors; and those migrating “up” from no-advice rock-bottom costs of choosing their own securities at a discount brokerage.
Presumably in the latter case, the investors have concluded they have done their portfolios a disservice by picking their own stocks, ETFs or sectors: I used to joke about “self-wrecked RRSPs.” For them, moving from no advice at all to “light” advice may be a compromise whereby they’re now willing to give up 1% or so in annual costs in return for some relative peace of mind about the big-picture topics of asset allocation, geographical and sector concentration, and rebalancing.
I’d welcome hearing from investors from any of these categories, although I doubt much new money has gone into these services yet. That may happen though, as lottery winners and those selling their businesses look for a home for a sudden infusion of cash.
If and when we get our commenting capability and discussion forums rolling, that would be one place to give us feedback. In the meantime, I welcome hearing the investor perspective from all three of the camps just mentioned: just email me at jonathan@findependenceday.com or @me at Twitter.
P.S. Have heard from several clients of Wealth Simple. How about clients from some of the other firms?
Like troubled Brazil, Russia is another trouble spot among the four BRIC nations. (Brazil, Russia, India, China). While most investors probably have minimal exposure to BRIC economies (either through BRIC ETFs or mutual funds, or in more diluted fashion, Emerging Markets funds), this is an example of a geo-political emerging event that bears carefully watching.
Sometimes these seemingly limited local eruptions have a way of spreading globally and ultimately impacting markets far beyond. For an example, check out this Wikipedia entry on the 1997 Asian crisis, which began in Thailand. I dare say when investors first heard about trouble with the collapsing Thai baht, they had no idea the trouble would soon spread to the rest of Asia, with possible global repercussions. To contain it, the IMF had to step in with US$40 billion.
So investors should monitor the events in Russia closely. This is a good example of why we need to pay attention to geopolitics and macroeconomics. Right now, ISIS, oil, Turkey and the Middle East is at centre stage of investor concerns but the events in Russia, including the Ukraine, call for scrutiny and caution. Here’s Business Insider’s take on Russsia’s encroachments on the Ukraine.
While most homeowners won’t pay off their mortgages and reach financial freedom until right before retirement, I plan to do it a lot sooner — by age 31. I’ve managed to accomplish this in Toronto, Canada’s second most expensive housing market. How did I do it? Through frugal living, sacrifice and hard work. I was inspired to reach my “findependence” so early after reading Jonathan Chevreau’s book, Findependence Day: How to Achieve Financial Independence: While You’re Still Young Enough to Enjoy It. Here’s my story of how I plan to reach mortgage freedom and findependence and how you can, too.
My Journey Towards Mortgage Freedom and Independence
Sean Cooper
Owning a home has been a goal of mine ever since a young age. My lifelong goal of homeownership became a reality when I purchased a beautifully-renovated bungalow in the suburbs of Toronto in August 2012 for $425,000.
Buying a home at such a young age took a lot of sacrifices, but it has been well worth it. Instead of living on the main floor, I rent it out and live in the basement. I was inspired by the host of HGTV’s Income Property Scott McGillivray, who lived in the basement of his first house for nine years to get financially ahead. In my spare time I work as a freelance financial journalist.
Even after graduating from university, I continued to live like a student. I didn’t go out and buy a fancy car or go on a five-star vacation – I continue to ride my bicycle to work, pack my lunch and shop at discount grocers. Those savings alone add up to thousands a year. Instead of renting an expensive condo downtown, I was fortunate enough to be able to live at home, paying my parents rent, saving towards a down payment.
While not everyone can afford to buy a house at age 27 and be able to make the sacrifices I’ve made, there are still things you can do to help pay down your mortgage sooner and reach findependence.
Pay Yourself First
In the words of David Chilton, you should “pay yourself first.” I’ve been able to pay down my mortgage through pre-payment privileges. Most closed mortgages come with pre-payment privileges that allow you to make lump sum payments and increase your payment. The easiest way to pay down your mortgage is to pay yourself first: set up automatic withdrawals from your bank account, so you’re not tempted to spend. You’ll save thousands in interest over the life of your mortgage and be mortgage-free years sooner. Ease yourself into it – see what money you can afford to contribute right now towards your mortgage. Even an extra $25 a week can shave years off the life of your mortgage.
SMART Goal Setting
I’m a big fan of goal setting. Through goal setting I’ve been able to realize my lifelong dream of home ownership. Goals are most effective when they’re SMART (Specific, Measurable, Attainable, Realistic, and Timely). For example, if you’re saving towards a home, by putting aside an extra $200 per week in your savings account, you’ll have $10,400 saved in a year that you can use towards a down payment or a lump sum payment against your mortgage.
Create a Budget and Track Spending
It’s hard to know if you’re on your way to reaching your financial goals if you don’t have a budget. A budget is the most basic tool and effective tool for managing your money. Are you guilty of living paycheque to paycheque? Do you often wonder where your money goes each month? Not only can a budget help you gain control of your finances, it can help you achieve your long-term goals, like mortgage freedom.
A budget acts as a roadmap that helps you stay on course. Creating a budget doesn’t have to be complicated. It can be as simple as a Microsoft Excel spreadsheet. Just creating a budget can often lead to savings. You may be surprised how much you spend a month on coffee: by saving $2 a day, you’ll have $60 extra a month to put towards your mortgage.
While a budget is helpful, don’t forget to track your spending. Tracking your spend is vital to ensure you’re not going over-budget every month and putting your dreams of mortgage freedom in jeopardy.
Live Frugally
There’s a difference between frugal and cheap. Today it’s hip to be frugal. Being frugal means having the willpower to say no to spending from time to time. Changing a few costly spending habits can lead to big savings.
Rather than spending $10 everyday buying your lunch, why not brownbag your lunch instead? You’ll eat healthier and save a bundle. Instead of driving to work, why not take public transit or bike like me? The savings can add up quickly.
Frugal doesn’t have to mean being boring. You can still have an active social life. Instead of going to a pricey restaurant, you can host a potluck or have a picnic in the park.
Streams of Income
While living frugally can help save money, if you want to reach mortgage freedom sooner, boosting your income goes a long way. There are many ways you can bring in extra income: renting out your home, working part-time, or freelancing.
If you have some spare time in the evenings and on weekends, why not put it to good use by getting a part-time job? Rather than using your basement for storage, you could transform it into a rental suite and start bringing in a steady stream of income. With the extra money, subsidize your mortgage and make lump sum payments against your mortgage to pay it off years sooner.
If you’re willing and able to make a few small sacrifices, you can reach mortgage freedom and financial independence a lot sooner like me. You can work because you enjoy working, not because you have to.
Sean Cooper is a Personal Finance Expert and Financial Journalist. He is a first-time homebuyer and landlord who aspires to reach findependence by age 31. Follow him on Twitter @SeanCooperWrite and read his blogs and request his Writing and Web Design services on his website: http://www.seancooperwriter.com/
We’ve heard from several individuals about writing for the Hub and yes, we welcome contributions. Some guest blogs will be going up in the next week or so. Since this site does not charge at this point, we aren’t yet in a position to pay contributors but we are happy to provide what exposure we can. Contributors are welcome to include links where appropriate and of course can end each piece with a short italic description of who they are and how they can be reached.
Because the Hub aims to be a North American portal on financial independence, we welcome contributions from knowledgeable good writers from both the United States and Canada. Remember that the book Findependence Day (which began this whole adventure in 2008) is available in both American and Canadian editions. So are the two new e-books.
The standard length for blogs is often said to be between 400 and 600 words but there’s also evidence that lengthier meatier pieces can get good play and pick-up. Really, it’s a balance between having enough space to be substantial, while recognizing that in this time-starved hectic world we live in, most people have the attention spans of the proverbial gnat. If you run out of steam at 350 words, so be it. And if you need 750 or 900 words to say what you want to say, then go for it.
The longer the piece, the more you need to include subheads and at least a photo or image of some sort. I will act as editor to the extent necessary.
Try to target our six major categories
What topics? Scan the second (gray) bar on the home page to see what we’re focusing on. If you want to reach younger Gen X and Gen Y readers, then Debt & Frugality is the place to target. The category of Wealth Accumulation is very broad and can include anything from asset allocation to pensions to ETFs to robo-advisers (we just put up an item on the latter).
Further along the continuum of Financial Independence, there is the Decumulation section, which is all about drawing down on wealth instead of building it up. And the Longevity & Aging section is a key focus of the Hub because of our belief that the baby boomers and their children are going to be on this planet a very long time on average, assuming they take care of themselves. See the links in this section to the blogs of Change Rangers’ Mark Venning and Agenomics’ Lee Anne Davies.
The Business Ownership category is another important niche. We considered calling this one Boomerpreneurs because so many baby boomers are leaving corporate employment (voluntarily or otherwise) and going out on their own as consultants, freelancers, franchise owners or building entire new businesses from scratch. But of course Entrepreneurship is hardly restricted to the boomers. Most of us stayed in the corporate womb for far too long and might better have embarked on the entrepreneurial path much earlier. Those wishing to pursue “Multiple Streams of Income” (from the Internet or otherwise) may well be building businesses at younger ages, either on top of a full time job or taking the leap direct from college or some starter job that they chuck.
The category of Politics and Economics is very broad. See the initial post there to get a flavour for that. We believe the further you have travelled along the road to Findependence, the more you need to pay attention to geopolitics and macroeconomics. Those interested in this area will find plenty of scope here.
Reviews
The Reviews tab refers chiefly to book reviews, most of which should touch on financial independence in some fashion. As above though, this can include many genres of books: everything from history to biography to entrepreneurship and the Internet. Any book that addresses our main categories will be fair game. And if you’re the author of a book yourself, perhaps a self-published e-book? (we know all about that!). Drop us a line anyway and we can discuss it.
This doesn’t have to be restricted to books. If you love the latest album on iTunes or think a movie is wonderful and want to share it with the world, then give us a try. Of course, we’d be more inclined to run it if it touches in some way on Findependence: a film like The Wolf of Wall Street.
A word on the forums
Another place we’re looking for content is the discussion forums. We have five forums planned to start with and they take a demographic/ages-and-stages approach to the key steps in reaching Financial Independence. Once we have a bit of two-way to and fro between contributors, this may be the place to develop story ideas, ask questions, post links and even subtly promote your business or product, if done in a way that readers are presented with valuable content. They will be moderated but having gone through a long experience with the Wealthy Boomer forums in the past, I think we’ll be able to spot the difference between blatant sales pitches and valuable sharing!
It will be awhile before the forums reach “critical mass.” That’s beyond our control and up to the community. In the meantime, we’re happy to provide the infrastructure.
How to reach Jonathan
First, try jonathan@findependenceday. If I don’t respond quickly it might be that our email system is experiencing a hiccough during this transition between sites. If so, send a DM (Direct Message) to @jonchevreau at Twitter but be sure to @me as well to tell me to check the DM. Like many Twitter users, I can’t be relied upon to monitor DMs unless I’m flagged via the @function. Those who have my actual email are welcome to use it as well: I just don’t want to put it up on the web just yet because of all the spam it may create.
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