Hub Blogs

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.

The Case for Financial Assets over real estate

Posted By |
Billy kicking back on Mexico’s Pacific Coast

By Billy Kaderli

Special to the Financial Independence Hub

When I was a stock broker in California — one of the hottest housing markets in the US — real-estate was my competition. “Everyone” was making money in real-estate, so why would they invest in the stock market?

I needed an angle

I went to the Board of Realtors and got prices for 2-, 3- and 4-bedroom homes in the area, both at the current price and for 10 years prior. I did the math to calculate what annual return these houses were creating for that ten-year span, then compared that to the S&P 500 Index for the same time period.

The index clearly beat all three home styles without the hassles of ownership. Now I had my argument to help people invest in the market.

Ok, that was then and this is now

Using Zillow.com I looked up what the home we used to own was now worth. It was listed at US$862K. Again I did the math and found that over the last 31 years since we bought it, that house has appreciated 6.4% annually. Sounds OK, except that there were property taxes, maintenance and repairs that would need to be deducted lowering that annual return.

Then, I wondered, what if we had put the money to buy our home into the S&P 500? So I calculated that figure also.

Are you ready?

It would be worth 3 million (US) dollars today! Over three times the current value of the home, as the Index produced a 10.46% annual return during those 31 years. Continue Reading…

Why and how Financial Independence is achievable

Posted By |

By Jade Anderson

Special to the Financial Independence Hub

Financial independence can mean different things to different people, but the widespread definition is to be financially secure and on the right track to a safe retirement.

Sometimes people will still need to work in order to maintain their financial independence (aka “Findependence”), but the main idea is that you are free from any debt or outside help from financial institutions. This may seem like something that is unachievable for anyone outside of retirement age, who isn’t well established; however, because of the different types of financial independence, it may not be so difficult after all. Adjusting your spending habits, creating a budget for your self and several other things can lead you towards Findependence, if you know the right things you need to consider.

Reduce unnecessary expenses

Setting up a budget for the long term is extremely important if you’re wanting to become financially independent. If you can cut down on any unnecessary expenses (such as extra food, clothing, and entertainment) in your weekly spending, then you’ll find it will be a lot easier to save. If you are not used to saving money, starting small is important because it will help you establish a pattern of saving properly, and it will be easier for you when you move up to saving more of your average income.

Plan your savings and spending

Planning not only your savings, but also your spending is crucial for ensuring your financial independence. If you have a few debts, and you can make plans to pay off certain amounts by certain dates, you’ll find that the overall debt is easier to pay off, than if you paid it off in a lump sum. Using one of the financial calculators like those on Brighter Finance can help you calculate your budget and repayment periods for your loans, so you can keep track of your money more easily.

Continue Reading…

FP: A look at three retirement income planning software packages

Posted By |

My latest Financial Post column looks at a few retirement income planning software packages that help would-be retirees and semi-retirees plan how to start drawing down from various income sources: Click on the highlighted text to retrieve the full article: How you draw down your retirement savings could save you thousands: this program proves it.

There may be as many as 26 distinct sources of income a retired couple may encounter, estimates Ian Moyer, a 40-year veteran of the financial industry and creator of the Cascades program described in the article.

When he started to plan for his own decumulation adventure, five years ago, he felt there was very little planning software out there that was both comprehensive and easy to use. So, he hired a computer programmer and created his own package, now called Cascades.

While the main focus of the FP article is on Cascades, (available to financial advisors for $1,000 a year; do it yourself investors can negotiate a price directly), the article also references a couple of other programs we have looked at previously here on the Hub: Doug Dahmer’s Retirement Navigator and BetterMoneyChoices.com, the latter currently nearing the end of beta testing.

Dahmer has been writing guest blogs on decumulation here at the Hub almost since this site’s founding in 2014. See for example his most recent one, or the similar articles flagged at the bottom: Top 10 Rules for Successful Retirement Income Planning.

Dahmer says he’s pleased that others are waking up to the need for tax planning in the drawdown years: “Cascades provides a very good, easy-to-use introduction to these concepts.”

Planning for peaks and valleys in spending

Retirement Navigator’s Doug Dahmer

However, Dahmer would like an approach that doesn’t assume yearly spending remains relatively static: his Better Money Choices(available on line for $108 a year) allows for the “peaks and valleys” of spending as retirees pass through their Go-go to their slow-go and finally their “no-go” years.  Most retirees have to plan for sporadic large purchases like renovations or replacement of roofs or furnaces, plus of course vacations with widely varying price tags. Each spending peak represents a tax challenge, while the valleys are where the tax planning opportunities exist. Dahmer likens Better Money Choices to a gym monthly membership and Retirement Navigator to a personal trainer.

Personally, I found going through both firm’s programs a fascinating exercise, very much like putting together a jig saw puzzle. For me, Better Money Choices helps you visualize the final picture you’re trying to assemble, showing how much money you’ll need and when you’ll need it. Cascades provides vivid yearly snapshots of your year-by-year progress in putting the pieces together.

What does it really take to move overseas?

Posted By |
Overseas life is adventuresome

By Akaisha Kaderli

Special to the Financial Independence Hub

In preparing for a retirement overseas, we would wager that most people occupy themselves with the practical concerns of residential visas, banking, owning property, finding a doctor they like, medical care that they can afford and dealing with any language barriers. These are pragmatic matters with realistic solutions, and we say that these areas are almost the easiest part of making this lifestyle change. While the above mentioned topics are important and must be solved, we want to share with you what it really takes to move overseas.

It may surprise you, but what we have seen take people down, destroying their retirement dreams and sometimes even their marriages, are the emotional and psychological challenges one faces in adjusting to their new lifestyle overseas.

How do you prepare for these obstacles ahead of time? We hope the following tips and insight will shed some light on the topic.

Just like home, only cheaper

You could save a bundle moving overseas

Many people trip themselves up with their giddiness over the fantastic cost of living in their new location. They often come into a new country talking themselves into believing that living in their new destination is just like home, only cheaper. We want to tell you that no place overseas is just like home. Customs, foods, weather cycles, housing codes, the treatment of pets, the laws, the language, cobblestone streets and workmanship quality are all different.

We have seen folks love the quaintness of their new town but then fall apart because they can’t find parking near to markets where they shop. Their charming town might not have one-stop-shoping with a parking lot tying several stores together so they find that market day involves stopping in six locations, perhaps fighting traffic in between. Instead of taking their time to enjoy their enchanting town, they find this situation to be annoying and they carry the frustration with them all day.

 Culture and customs

Animals are treated as animals in developing nations and not as family members. Street dogs are common and if your heart is easily broken, then this might pose a problem for you. Continue Reading…

Accidental Death Insurance: What you must know before buying it

Posted By |
By Lorne Marr, CFP
Special to the Financial Independence Hub

Some insurance products are quite straight-forward (e.g. term life insurance), but others were created when insurance companies saw an opportunity in the market to increase their sales while reducing their own risk of needing to pay the claims. Accidental death insurance (often called accidental death and dismemberment) is one of these products.

Think of this product this way:

“If you look for a simple explanation, imagine all life insurance products to be cars. Your accidental death insurance is a car that you can drive only 30 minutes a day and only in one particular neighbourhood …”

Now, let’s understand this product better …

What is accidental death insurance?

Accidental death insurance is a life insurance policy (or an addition to an existing policy) that pays a claim only in particular cases: when the cause of death is an accident. In other cases, this insurance will pay nothing.

An important statistic to know is that only ~5 per cent of all deaths in Canada originate from accidents. That means that, in 95 per cent of cases, the policyholder will not be paid.

What is accidental death and dismemberment insurance?

Accidental death and dismemberment insurance is an insurance policy that pays a claim only if a death or a dismemberment (such as the loss of a particular body part, like a leg, hand, finger, etc.) occurred due to an accident. Typically, an accidental death and dismemberment insurance contract will define what amount will be paid in case of death and certain different types of dismemberment. Claim coverages associated with heavier dismemberments (e.g. a lost leg) are normally higher than claim coverages associated with smaller dismemberments (e.g. loss of a finger).

Is accidental death insurance worth it?

The quick answer is that, in most cases, it is not worth it. Continue Reading…