Make & Save: The importance of actionable Personal Finance habits

coins-currency-investment-insurance-128867By Hellen McAdams

Special to FindependenceDay.com

When it comes to actionable personal finance habits, earning more money and saving a good portion of it are near the top of the list. Sadly though, before you can ascend the tower of wealth, many of us need to first dig out of the basement of debt.

Escape Debt in 5 years

Did you know the average American household has approximately $137,063 in debt? (all figures $US.) That’s too much debt. But what if you were to discover it’s possible for the average household to get out from under the thumb of that kind of debt in as little as five years?

There are several ways to do this. Loan consolidation is a practice whereby you reduce the complication of managing debt by combining everything together. If you have a bunch of little debts that individually compound separately from one another, one possible solution could be to take out a small loan, pay them off, then pay off the small loan in a single payment from then on.

There are online loans of this type which can, believe it or not, be secured online, if you’re considering such.

Still, this is just a debt transition; it doesn’t truly get rid of that which you owe: it merely reduces the complexity of paying a dozen little things off in tiny increments; like cellphones, furniture, and medical bills. A better way to get your debt paid off more quickly is to downsize.

Debt Relief Strategy

This is where you have to establish good financial habits. This hypothetical revolves around $3,000 a month in earnings from the primary breadwinner of the household. That comes to $36,000 a year before taxes. Now say you’ve got $137,000 in debt hanging over your head. You need to find a way to pay that off with the money you’ve got.

In five years, you will have made $180,000 through a job that pays $3,000 a month, or $36,000 annually. If you can reduce your annual budget to $8,600 a year, you can pay off the debt in five years: assuming, of course, that the $137,000 figure is an overall projection throughout the time, which includes accumulated interest.

But how is that possible with mortgages at $1,500 a month, gas at $3 or more a gallon, and rising food costs? Well, the first thing you might do is get rid of your mortgage. If you’ve got $70,000 paid in on a $250,000 house, you can sell the house and turn the majority of that $70,000 into paying off your $137,000 debt.

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Stocktrade.ca’s Interview with me about Findependence & Victory Lap Retirement

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By Dylan Callahan, Stocktrades.ca

Special to FindependenceDay.com

We’re constantly reaching out to financial authorities we feel would benefit our audience the most. From Mark Seed, to Xiaolei Liu, to Rob Carrick, we are always looking to compile information and pick the brains of experts in the industry. This is why we were ecstatic to hear that Jon Chevreau was willing to do a little interview with us about his most recent book.

A little bit about Jon before we start

snippetpicture-150x150Jon has long had our attention here at Stocktrades from his writing on Moneysense and the Financial Post. He is the owner of FinancialIndependenceHub, the author of Findependence Day and the co-author of Victory Lap Retirement, which is what this interview will be about. He was a columnist for the National Post from 1993 to 2012 and was the Editor-in-Chief for Moneysense Magazine from 2012 to 2014. If we had to choose some financial authorities on the internet today that we’d follow, Jon would be near the top of the list.

We hope you enjoy this interview, and if you’re interested in purchasing Jons book, head on over Victorylapretirement.com to see what it’s all about or purchase it from Amazon here.

WHAT INSPIRED YOU TO WRITE THIS BOOK?

Jon: Co-author Mike Drak approached me with the idea of a book about Retirement/Victory Laps after he encountered my website, the Financial Independence Hub, and my financial novel, Findependence Day. We thought we could marry the two concepts since Findependence gets you to the point you can launch a proper Victory Lap.

COULD YOU BRIEFLY DESCRIBE THESE FOLLOWING TERMS IN YOUR OWN OPINION, OR AS THEY RELATE TO THE BOOK?

What is Findependence?

JonathanChevreauJon: Findependence is simply a contraction of the phrase Financial Independence. And so Findependence Day is the day you achieve financial independence, which we define as the moment when all sources of passive income (pensions, investments, royalties etc.) exceed your monthly expenses nut (rent/mortgage, food, clothing, utilities etc.)

Explain a Victory Lap Retirement?

Jon: Victory Lap Retirement can be described variously as semi-retirement, self-employment, an encore career or launching a creative career (writer, artist, musician) that lets you monetize what was previously a hobby. Normally, the Victory Lap is made possible by first achieving Financial Independence. It differs from traditional full-stop retirement in that you may still be working, albeit not for a single employer.

Rather you have multiple streams of income, some of which may be passive (pensions, investments) and some of which may be active (part-time work, contracts, an online business). This allows you to pursue the inner creative dreams you may have harbored when you were young, and which you may have put aside during the decades you worked in a traditional “Job” and raised a family. In your Victory Lap, you work because you want to, not because you have to (financially speaking).

Lastly what is an Encore Career?

Jon: An Encore Career or Legacy Career is a late-life reinvention of your career, as described by the website encore.org and the book Encore by Marc Freedom. Its subtitle says it all: Finding Work that Matters in the Second Half of Life.

snippetpicture-150x150IN YOUR OPINION, HOW IS A VICTORY LAP RETIREMENT MORE BENEFICIAL THAN THE TRADITIONAL RETIREMENT?

Jon: We think it’s crazy to go from the 100% work mode of traditional salaried employment to 100% non-stop leisure, which is the traditional “full-stop” retirement that often occurs at age 65. By the way, I turn 65 next April and don’t expect to slow down much if at all. I’m in the fourth year of my own Victory Lap and am as productive as ever, and probably in much better physical and mental health.

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How to reach your Victory Lap Retirement

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By Richard Eisenberg, Work Editor, Next Avenue.org

Special to FindependenceDay.com

Mike Drak and Jonathan Chevreau, authors of the new book, Victory Lap Retirement, are on a crusade to change the way society thinks about retirement. Their book is actually, as Drak says, “a retirement book about not retiring.”

A Victory Lap Retirement — Drak, 62, coined the term — means spending years combining work and leisure between the time you quit a full-time job and stop work entirely. In the book, the authors say a Victory Lap Retirement lets people change from a “surviving mentality” to a “thriving mentality.” The Toronto-based duo would know: They’re both taking Victory Laps right now.

Previously, Drak spent nearly 40 years working in commercial banking. He quit in 2014 to protect his health and personal well-being. Now, when he works, he  is a retirement coach, public speaker and writer (next up: a retirement transition guide). Chevreau, 64, is a veteran financial columnist, blogger and author of the book Findependence Day; I interviewed him for Next Avenue in 2013 about “findependence” — his term for having enough money so you can work because you want to, not because you have to. He still writes about personal finances, but on his schedule.

I recently spoke with Drak and Chevreau about how and why to have a Victory Lap Retirement. Highlights: Read more

Get ready for these 3 big corporate tax changes

Business man request taxes payment from the small man

“We see these approaches to managing people’s affairs through a private corporation as creating an unfair playing field … We’re trying to tighten these loopholes to make sure that it’s fair.”

By Graham Bodel

Special to FindependenceDay.com

Doesn’t sound like taxes for small business owners are going down, does it?  The above is from federal finance minister Bill Morneau’s July 18 announcement outlining some of the measures the government is proposing to help level what they perceive to be an unfair playing field.

Since the announcement we’ve been thinking about the potential implications of these changes and digesting comments from a variety of different tax experts.  We agree with one expert who opined that “fairness is subject to personal interpretation.”

Unfortunately adhering to these proposed changes won’t be subject to personal interpretation so the bottom line is that we encourage all small business owners, especially those using private corporations in conjunction with saving for retirement or for the benefit of their families as a whole, to seek expert tax advice ahead of these changes coming into effect.

How did this come about?

Taking a step back, the reason that small businesses were given preferential tax treatment in the first place was to encourage them to reinvest in growth opportunities, employ more people, contribute to the Canadian economy in a more meaningful way and that would be good for Canada – hard to argue with that.

Of course all rules, especially tax rules, end up with unintended consequences.   The current government feels many small business owners and their families have been taking advantage of opportunities (loopholes) in the legislation that allow for further savings when it comes to their personal taxes. Furthermore, they seem to be particularly concerned about the increased “corporatization” of certain professions that has taken place over the last 10 to 15 years in order to reduce tax bills. As not everyone is a small business owner, the tax advantages are deemed to be unfair to those who aren’t.

What are the specific areas that are deemed to be unfair?

1.) Income sprinkling

Income sprinkling is a strategy where a business owner looks to save tax by distributing income, dividends and capital gains to other members of his or her family in order to take advantage of multiple sets of graduated tax rates (i.e. pay other family members who are in a lower tax bracket) or exemptions, in order to lower the overall family tax bill.   Read more

Is Canada’s housing market starting to cool?

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By Gordon Powers, Zoocasa.com

Special to FindependenceDay.com

Canadians’ confidence in the housing market hit an all-time high less than a month ago, but the mood across the country seems to have shifted significantly in recent weeks.

Home sales across Canada fell by 6.2 per cent in May 2017, largely due to a sharp drop in Toronto, according to the most recent figures from the Canadian Real Estate Association. The month-over-month percentage decline was the largest since August 2012.

In nearly two-thirds of all local markets across Canada, sales were off. The decline was led by a 6.7 per cent drop in the GTA, where potential home buyers seem to be moving to the sidelines, delaying their purchase decisions in the hope of a drop in runaway home prices.

Prices beginning to shift slightly

The national average price for homes sold in May was $530,304, up 4.3 per cent from where it stood a year ago. While that number has been pulled sharply upward by transactions in the GTA and Vancouver – excluding these two markets trims more than $130,000 from the national average price of $398,546 – there’s no question that prices have dropped off in certain areas of the country

Prices in the GTA declined in May for the first time in years, according to recent figures from the Toronto Real Estate Board.

While home prices in and about Toronto rose 14.9 per cent year over year, they were actually 6.2 per cent cheaper between April and May, the first full month-long period following the implementation of the Ontario Fair Housing Plan rules.

The TREB May resale numbers reveal GTA sales dropped 20.3 per cent year over year with detached home sales leading the slide at 26.3 per cent, Toronto condo sales backing off 6.4 per cent, and Toronto townhouse sales declining at 18.1 per cent. Read more

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