Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

Marketing for your Side Hustle

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By Christina Sanders

Special to the Financial Independence Hub

You may be running a small business on the side to achieve financial independence. These side hustles can be anything from lawn mowing to website design. No matter what your side hustle is, you’ll need marketing to gain new customers. It doesn’t have to cost you an arm and a leg either. There are plenty of options and methods for promoting your business through cheap, yet effective means.

1.) Focus on local markets

In marketing, there is a constant focus on target markets. These are the people that you want to buy your product or service. They’re the people most likely to buy your product because it solves a problem they have or they trust it to improve their life. This comes down to not only geographics, but also demographic data focused on income level, family size, interests, gender, and age. All these factors will help you to hone in on who you should spend your marketing efforts on.

For a small business, it’s likely best to focus on your surrounding geographic area. Utilizing a local market is usually less expensive and you have a competitive edge by being based in the same region as your customers. That geographic intimacy provides a better understanding of local culture, including common pain points and values. Use that to speak to your potential customers on a more personable level.

2.) Design distributables

You’ll likely want to make some business cards and flyers for your business. Digital marketing is crowded, often difficult, and can be expensive. Physical distributables are very effective, especially in local markets. They can be passed for referrals, posted on community boards, and distributed through mail. If you’re unsure about how your design should look, check out some flyer examples and look at what other businesses have done. There are simple and free online programs for designing flyers, brochures, and posters. Simply do a Google search to find one that works for you.

Having a personal brand in your advertisements goes a long way. You can build trust and confidence with your potential customers by having high-quality designs and messaging. Your brand should represent what values you and your customer both deem important. Having brand consistency will be important for becoming recognizable and memorable in your community. So don’t ever settle for less than high quality, because your brand defines what people will think of your service.

3.) Create a website

People may hear about your business and then wonder more. Where will they likely go? The internet. You need a webpage that answers questions they will likely be wondering and that drives further interest.

This doesn’t have to be difficult. Sites like Wix.com make it easier than ever to build your own website based on beautifully designed templates. Make sure you choose a website design that values ease of use over anything else. Make it incredibly simple for your customers to understand exactly what you do and any other information that would be valuable to them. This is called UX, which you can research online for a more in-depth understanding. Continue Reading…

5 financial fitness tips to help becoming #RetireReady

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By Jenny Diplock

Special to the Financial Independence Hub

As any personal trainer will tell you, a new fitness routine starts with a personalized plan and a target goal. And to improve performance, you need to train: especially in the off-season. Taking a similar approach to your retirement contribution goals can help you feel confident you’re #RetireReady.

In fact, according to a recent survey from TD, 79 per cent of working Canadians agree that reviewing their retirement contribution goals outside of RSP season is a good idea.

But even with these good intentions, the data shows just 40 per cent of working Canadians contribute regularly to their registered Retirement Savings Plans (RSPs) through pre-authorized contributions, 20 per cent don’t contribute to retirement savings at all, and nearly a third of working Canadians feel stressed out during the February RSP season.

When it comes to saving for retirement, contributing to your RSP once a year is like running a marathon without the right training. Because you’re not in the habit of saving, trying to come up with one large contribution amount just before the annual RSP deadline can be harder than contributing smaller and more manageable amounts throughout the year, potentially putting additional pressure on the rest of your finances.

To help improve your retirement readiness year-round: Continue Reading…

This is Easy Street for Canadian investors

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By Dale Roberts

Special to the Financial Independence Hub

Investing is simple. We are all familiar with the KISS acronym. Simplicity is the key to successful investing. I have been reading and studying investing and investment strategies for decades and came to the conclusion that for the most part “nobody knows nothing.”

Great. All that research and tens of thousands of hours of study and I came back to the fact that I don’t need to know much at all. What a complete waste of time? No not at all. The thousands of hours of study showed me why I, we, don’t need to know much. We do not need to be experts when it comes to investing. As I like to write: It ain’t rocket surgery. Here’s how you find Easy Street.

What is an investment portfolio? In its basic form we can think of a portfolio as having two components: great companies for greater growth potential and bonds to manage the risk. Those bonds work like shock absorbers on the portfolio to reduce the risk or volatility. The more bonds in the portfolio, the lower the risk level of the portfolio.

A typical portfolio will hold great blue-chip companies (stocks) such as Apple, Google, Microsoft, Facebook, Johnson & Johnson, Berkshire Hathaway (Warren Buffett’s company), Coca-Cola and on and on. On the Canadian side we’ll hold Tim Hortons, the big Canadian banks, the telco companies such as Bell, Rogers and Telus, plus railroad companies such as CN and CP Rail and major energy players such as Suncor and Enbridge and on and on.

The rich are business owners

We know that the richest people on earth are usually business owners. We’re going to join them. We’re going to own a piece of those businesses. When enough of those companies do well, you do well. And certainly not every business is going to do well: that’s why you own a bunch of ’em. And that’s why you’ll own great companies in Canada, US and around the globe. And we don’t have to know how to analyze those companies, we can simply go and buy the ‘entire’ stock market. Here’s What is Index Investing and why it’s simply a superior form of investing. It’s so easy we call it Couch Potato Investing.

And back to risk or volatility. Certainly stock markets mostly go up over time, but they do correct or go down with regularity; it’s a normal and expected part of investing. For the potential of those 9-10% annual returns from stocks we need to accept some risk. Keep in mind that stocks can go down by 50% in major stock market corrections. That’s not everyone’s cup of tea to watch their investment portfolio get cut in half. That’s why many or most investors will need some bonds in the portfolio. Bonds are fixed-income investments and are typically less risky than stocks. A bond pays you a fixed payment on a regular basis and bonds can also go up in value when stocks go down – think teeter totter.

A portfolio with a very generous amount of bonds would have only decreased by about 10%-15% in the last major market correction. For the period of 2008 to end of 2009, here’s a comparison of the US stock market (S&P 500) as Portfolio 1, and a Balanced Portfolio as Portfolio 2.

We see that the all-stock portfolio declined by 50% while the Balanced Portfolio with a 70% bond component declined by just over 15%. By the end of 2009 that conservative Balanced Portfolio is almost back in positive territory while the all-stock portfolio still has more of that hill to climb.

Percentage in Bonds a critical decision

The most important decision that will be made, or the most important question answered will be “What percentage of bonds do you need?” What is your risk tolerance level? What roller coaster do you want to ride? You get to decide. Continue Reading…

The Future is not quite now: A calm perspective on gloomy predictions

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Here are a couple of conversations I’ve been involved in recently. Does any of it sound familiar?

Conversation with a retired engineer. He asked, “What do you think about this driver-less cars business? Has anybody even considered how many people this will throw out of work? We have to do something about this! Otherwise, joblessness will go so high that it will cause a depression.”

Conversation with a middle-aged family doctor/real-estate investor. He said, with complete confidence, “I’m cutting back on my medical career and moving into real-estate development. Long before I want to retire, I expect my job to disappear due to competition from AI (artificial intelligence).”

When listening to predictions, especially gloomy ones like these, keep in mind that nobody can consistently predict the future. Also remember that the most widely accepted gloomy predictions are especially prone to fail. That’s because people, as individuals, react to and prepare for predictions of doom. They work on the problem before its predicted arrival time. Sometimes they offset it entirely.

Y2K was the ultimate example

The ultimate example came on the first day of this century, with the non-arrival of the so-called “millennial bug,” or Y2K for short.

In the late 1990s, computer consultants warned that at the stroke of midnight on December 31, 1999, computers around the world would freeze up because of a problem with their data-storage limits. Computers used to use just two digits to designate a year. So they wouldn’t be able to tell what came after 1999; ‘00’ could mean 1900 or 2000. The problem had a simple fix, however. By the last day of 1999, most computer owners had attended to it. Damage from the predicted crisis was negligible.

Today’s predictions — gloomy and hopeful — revolve around the expectation that computer speeds will continue to rise, and computer costs to drop, at much the same rate as they have for the past half century.

This trend has led to exponential growth in the processing power of computer chips, coupled with an exponential drop in their cost. This leads to casual-conversation predictions like the two I mention above: artificial intelligence will soon lead to legions of unemployed taxi, truck and bus drivers; and legions of unemployed family doctors will follow soon after.

The logical flaw here is that exploding computer power at shrinking cost is a technological advance. But there are social, legal and practical limits to how quickly business can translate these technological gains into real-world progress (or problems, depending on how you look at it).

Computer makers don’t need government permission to raise the speed of their chips. In contrast, makers of driverless cars face all sorts of problems, long before they make any money.

The shift to driverless vehicles will happen gradually, over a period of decades. After all, driving in traffic involves far more surprises than a champion Go player faces on the playing board. Drivers have to deal with changing weather, full sunlight and deep shadow, unpredictable human drivers with varying skills, unpredictable pedestrian web surfers, potholes, snow-covered street markings and so on.

The shift from human to AI doctors will occur at an even slower pace — in line with how long it takes to earn a driver’s license on the one hand, and a medical license on the other. AI will replace family doctors some time after it replaces the voice and chat help lines that people use when they have a problem with a computer, a cell phone or a utility bill.

Assume technological process leads to economic progress

People have a long record of guessing wrong about the impact of new technology, and on how long it will take for the new technology to become part of daily life. You’ll guess right much more often if you just assume that technological progress eventually leads to economic progress. Continue Reading…

Retired Money: Should you worry a large TFSA will trigger a CRA audit?

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MoneySense/Shutterstock

Should you worry that a large TFSA will trigger a CRA audit? My latest MoneySense Retired Money column looks at a legal debate between the Canada Revenue Agency and taxpayers who have succeeded too well in growing their Tax-free Savings Accounts (TFSAs) with shrewd investing. You can access the full story by clicking on the highlighted headline: Why the CRA is targeting some TFSAs in court. 

If you’ve contributed regularly to the TFSA since it began in January 2009 you now have $57,500 of cumulative contribution room. With decent growth, it’s easily possible to have accumulated $100,000 in a TFSA by now: in fact, the CRA told me for the article that of the 13.5 million TFSA accounts that existed by 2016, 18,000 have balances of at least $100,000 (a number that includes myself and my own Millennial daughter, thanks to a few good FANG stock picks).

A Globe & Mail article last week profiled several ordinary Canadian investors and financial bloggers who have TFSAs of at least $100,000. See How to Grow your TFSA: Tips from Financial Bloggers to Fatten Your Account.

My MoneySense article quotes an unnamed investor who is being audited because his TFSA has grown to $500,000, owing to  timely growth of some private technology companies. He doesn’t think $100,000 is enough to trigger an audit but suggests $250,000 may be. In other words, the CRA may be fine with TFSA doubles but five-baggers will invite scrutiny and ten-baggers most certainly so.

But the real controversy involves TFSAs that are run as de facto securities trading businesses. The Globe highlighted this latest crackdown in an earlier article in July but was merely the latest of a series of TFSA audit scares that have been surfacing virtually since after the first year the program existed.

Shrewd stock-picking is not “aggressive tax planning” 

Some of those earlier audits involved TFSAs that soared because they held private companies but my guess is that, as in my own case or that of my daughter, the vast majority of TFSA holders are neither day traders nor experts in investing in private companies. We only buy exchange-traded funds or blue-chip North American stocks, including the FANG tech giants (Facebook, Amazon, Netflix and Google). Continue Reading…