Financial Independence Hub (.com) launched

HubLogoJerryOn November 7th, 2014 a new spin-off website to this one was launched, devoted to the topic of Financial Independence.

The philosophy behind the new site was explained in the previous post about reframing the “Retirement” discussion as the emerging alternative paradigm of “Financial Independence.” That blog featured two prominent U.S.-based financial planners, Michael Kitces and Roger Wohlner (aka The Chicago Financial Planner.)

Click here to find the introductory post for what we’re calling “The Hub.” In addition to www.financialindependencehub.com there is a mirror site, www.findependencehub.com. They are the same but the latter takes fewer syllables to verbalize and fewer keystrokes to enter into your browser. Another reason to adopt the term “Findependence,” right?

This site will continue to exist

To clarify, the existing site will continue to exist, but chiefly as a vehicle to sell the two existing Findependence Day books, the new e-books and any other spin-off products that may be developed over the years. The new “Hub” attempts to look at the entire topic of Financial Independence from a North American perspective, so will (hopefully) range far beyond the particular books featured on this site.

A prominent feature of the new site will be reviews of other books on Financial Independence, both by me and by guest reviewers I would love to hear from. It will also feature all the other blogs out there on the topic, even those that still bill themselves as personal finance, frugality or retirement blogs. We started with the list of Plutus award-winners that Roger Wohlner featured on his site recently.

We will also have a monthly email newsletter free to anyone who enters their email on the home page of the new site. Better get over there now, and thanks for reading!

The Apple Watch and Findependence

Smart watch isolated with icons on white background. Vector illustration.My friend the inimitable Norman Rothery posted a blog at MoneySense.ca Thursday that was inspired by a Twitter exchange last weekend: the post is titled Apple Watch Delays Findependence.

On Twitter, I had publicly disclosed that I had pre-ordered the new Apple Watch, even though delivery is several weeks away. Norm made a query about the possible impact on Findependence, then followed up in his blog by suggesting that young people buying these gadgets might seriously be delaying the arrival of their Findependence Day (that is, the day they reach Financial Independence) by 17 days for the cheapest model and for as much as two years for the expensive glitzy gold model.

I have no great problem with the blog, a typically contrarian piece by a great value investor: it’s all grist for the mill, as they say and I’m happy to see an influential writer like Norm use the term Findependence. Even so, let me assure readers out there who may have fancied me to be a frugal kind of guy that I quite definitely did NOT purchase the expensive gold-banded version. For the curious, I picked one of the simple entry-level models with a black band and the smaller watch-face, roughly the model illustrated above.

I entirely agree with Norman that the first generation of technology tends to have kinks and it’s never a bad idea to wait for a few releases and let the pioneers suffer the slings and arrows of outrageous technology fortune.

Three reasons why I pre-ordered

Read more

A murder mystery — who will kill the global economy?

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Andrew Busch (Twitter.com)

By Jonathan Chevreau

One of the more entertaining financial presentations at this week’s BMO investing conference in Chicago was a keynote talk by author and broadcaster Andrew Busch on who killed the global economy. (I qualify this with the phrase financial presentations because Rick Mercer’s talk was also highly entertaining but could hardly qualify as being financial).

By contrast, Busch had worked at BMO Capital Markets for 22 years earlier in his career and grew up in Chicago. His financial research is available free here.

Billing his talk as a “Murder Mystery,” he ran movie clips from various Film Noirs to illustrate his points.

Among his suspects; the ECB’s Mario Draghi, Japan prime minister Shinzo Abe, China president Xi Jinping and the Federal Reserve’s Janet Yellen. Busch played the role of “Private Economic Investigator.”

Resemblance to Greece?

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Suspect 1

Starting with Yellen, he submitted clue number 1 as the unemployment rate. With 3 million Americans underemployed, this fact shows up in sluggish wage increases so “we’re not seeing an acceleration in wealth gains so are not seeing inflation.” What jumps out from the latest job numbers is where they are located; 14 million Americans are employed in local government, another 2.7 million in the federal government and 5 million more in the states. “Now we know why it’s important to look at government spending,” Busch said, “We have to pay tax to have them employed.” Sequing to Greece he asked rhetorically “Are we more like them than we realize?”

Clue # 2 pointing to Yellen is GDP, which slowed down from 5% in the third quarter to 2.3%. “This quarter will be bad and earnings won’t be good.” So far, markets are ignoring pre-warnings as the S&P500 stalls around 2100 but the earnings hit will be “substantive,” Busch said. However, “Most are ignoring it for good reason: we will snap back in the second quarter with GDP growth close to 3% as warm weather comes and things return to normal but we will hear lots about potentially negative GDP in the first quarter.”

The slump in energy prices has curbed inflation, which is “short-term bad but medium-term good because of more money in consumer’s pockets.” Cheap oil helps middle-income earners heat their homes and fill their cars’ gas tanks. That should translate into a pickup in consumer spending and accounts for the recent strength of consumer discretionary stocks.

The Fed’s motive is to normalize interest rates and its first opportunity to raise them will be in June. But the Fed itself is still not sure when inflation and average hourly earnings will go up.  “We don’t know what the Fed will do because they don’t know.” The process has begun with hikes in the minimum wage at major retailers like Walmart, Target and even McDonalds. “At some point the Fed will act and I believe it will be in June.”

Dead Man Walking

Mario Draghi-euro
Suspect 2

Busch then moved to Suspect #2 (Mario Draghi) by rolling another film clip. Clue #1 in Europe is that employment rates are just starting to tick down. Clue #2 is the GDP growth rate, which is above zero. “We’re starting to see some acceleration. That’s great but I’m not sure it will last.”

Clue #3 is a major problem: the “sinking feeling” on Europe’s inflation numbers. To avoid Japan’s fate of 15 years of deflation, Europe has mimicked the Fed’s Quantitative Easing program by launching its own QE program in March, lowering rates to zero. It’s bought 60 billion worth of Euros and added 1.1 trillion Euros to the balance sheet, moving beyond 3 trillion. The difference is that when it started its program, the Fed only had US$800 billion on its balance sheet, with QE eventually taking it to US$4.4 trillion. “I expect the ECB will mimic that and do it in three or four tranches.”

Suspects 3 & 4: Japan & China

Busch moved on to Shinzo Abe and Xi Jinping, showing a photograph of the two shaking hands and clearly uncomfortable with each other. Clue 1 is their unemployment rates but these can be safely ignored because the numbers are clearly unknowable. China’s unemployment rate has “magically” stayed at almost exactly 4% since 2012. Japan has horrendous productivity numbers and are “like zombies in the Walking Dead: they should be firing people.”

Clue #2 is GDP. China can force its banks to lend, which it did in 2009, when its high-velocity money stimulated economic growth in areas like infrastructure and housing. This resulted in inflation heating up and commodity inflation but the country is attempting to shift to more US-like consumer spending.

In the US, consumer spending accounts for 70% of GDP, while it’s only 40 to 45% in China. “They want it higher,” Busch said, so it relies less on infrastructure spending. In both countries, politicians “tell central banks what to do.”  Abe shot the three arrows of huge fiscal stimulus, massive QE and economic reform in a bid to generate 2% inflation within two years. But last month inflation in Japan was “zero, so they missed the target. It’s vastly different from QE in the ECB and US. … It’s not surprising to see their (Japan’s) stock market reach 15-year highs this week as they reaffirm the QE path, and it won’t end any time soon.”

China wants to keep its currency weak relative to the US dollar and has cut rates twice. The results have been dramatic: Chinese stocks have been on fire since September.

And the murderer is:

In his finale, Busch concluded “the dame did it.” (Yellin). While he expects the Fed will start to raise rates in June, “Nothing is going to happen.” Busch said what happens next may be similar to the 1930s, when the Fed moved rates up several times aggressively. At first, nothing happened but they kept doing it until “eventually they killed the recovery. That’s analogous to what will happen here.”

Here, Busch ran a movie clip from Sunset Boulevard. “The first time the Fed shoots the guy nothing will happen. He’ll keep walking. But the third time they shoot you, you end up face down in the pool.”

So far, they’ve not yet killed the global recovery but central banks everywhere “want all of us in this room to go as far out on the risk curve as possible.” The Fed “won’t screw up this year or the first half of 2016,” Busch predicted, “My guess is that by the second half of 2016 or first half of 2017, as Europe and China stabilize they will feel good enough to act more aggressively.”

No April Fool’s — time to get serious about filing taxes for 2014

Tax Due DateHere’s my latest MoneySense blog. Now that it’s April and Easter is almost here, you know what that means! It’s tax-filing time: April 15th for Americans, April 30th for Canadians.

As the piece recounts, even if you’ve been staying on top of inputting tax slips and receipts, if you have taxable income you’re better off waiting a few days before filing.

But the good news is that once you file, the onerous task is over for another year, and many can also expect a refund. Plus, of course, winter is finally all but over.  Read more

Family Income Splitting and choosing more leisure over work

family drawing money house clothes and video game symbol on theHere’s my latest MoneySense blog, which looks at recent criticisms of Income Splitting for Families with children under age 18: aka the Family Tax Cut.

Its headline is Can the Family Tax Cut Entice Families to Work Less? Read more

The Single Best Investment

 singlebestThe Single Best Investment: Creating Wealth with Dividend Growth, is the title of a classic investment book first published in 2006 by Lowell Miller, who heads Miller/Howard Investments.

It came to my attention via Wes Moss, who I interviewed for an upcoming MoneySense column, whose book You Can Retire Sooner Than You Think we reviewed here at the Hub. I mentioned the book in passing last week in this MoneySense blog last week. That blog focused on asset allocation but provided a big hint about Miller’s philosophy: there’s no place for bonds in Lowell’s investment worldview.

The book’s first chapter sets the tone in its title: Say goodbye to bonds and hello to bouncing principal. Like many stock believers and bond haters, Miller takes it as a given that the investing environment generally includes inflation. Since “safe” investments like t-bills, bonds, money market mutual funds and CDs (Certificates of Deposits in his native USA; known as GICs in Canada) are all “poor investments because what they give is less than inflation takes away.” Read more

Work because you’ll live longer or will work help you live longer?

Here’s my latest MoneySense blog, which they’ve titled Working to Live Better, LongerSince it’s based on a reading of books about Longevity and even Immortality, we’re housing it in the Reviews, Encore Acts and Longevity & Aging blog categories of our sister site, the Financial Independence Hub.

Click on the blue link above to reach the MoneySense version or if you want to see images of the book covers discussed, they are in the version posted below. (The two sites tend to use different images to illustrate): 

By Jonathan Chevreau

Whenever I suggest in a blog that investors might want to rethink Early Retirement, I usually hear from a few readers who insist that after 30 or 40 or more years in the workforce, they have a “right” to spend their last decade or so in the pursuit of leisure.

Readers are of course perfectly free to reject exhortations to “just keep working” but if I end up in email correspondence with them, I may reply that my stance is not predicated on the desire to give the financial industry still more assets to place under management.

immortalitybookRather, it’s based on my growing perception that life expectancies are on the rise and the pace of medical breakthroughs in biotech and gene therapy does not appear to be slowing. Read more

A longevity guru’s tips on Happiness

ThriveHappiness, longevity, health and money are all (as you might expect) intertwined. In his book, You Can Retire Sooner Than You Think (also reviewed at the Hub), Wes Moss focuses on the five money secrets of the happiest retirees.

One of the books he mentions is Dan Buettner’s The Blue Zones: Lessons for Living Longer From the People Who’ve Lived the Longest. We will review that book, first published in 2008, in due course.

In the meantime, we’re going to look at Buettner’s followup book on happiness: Thrive: Finding Happiness the Blue Zones Way, originally published by National Geographic in 2010.

To research the book, Buettner travelled to four of the world’s allegedly happiest countries, two of which I’ve visited myself: Denmark and Mexico, and two I haven’t: Singapore and San Luis Obisco (in California). In each locale he contacts local elders known for their wisdom about happiness and how the city or country built its infrastructure to maximize it.

He then wraps it all up by summing up what these nations have in common with a chapter entitled Lessons in Thriving.

He concludes there are six “life domains” that can be shaped to boost one’s chances for happiness. These six “thrive centers” are:

1.) Community

Where you live is hugely important to happiness and the happiest spots tend to promote economic freedom, a high employment rate, tolerance, quality government, more community space, limited shopping hours, a limited workweek (37 hours in Denmark), support for the Arts, walkability, quiet surroundings and plenty of sidewalks and bike lanes.

2.) Workplace

The happiest workers are in jobs that don’t have long commutes, limit the workweek to 40 hours, take six weeks of vacation a year, socialize with co-workers and have the right boss. However, the self-employed and business owners report higher levels of well-being.

3.) Social Life

The wider your social network, the happier you’re likely to be. Buettner suggests joining clubs, creating your own Moai (a group of mutually committed friends), reconnecting with your faith, marrying the right person (someone similar to you with similar tastes and earning ability).

4.) Financial life

The book quotes Ed Diener to the effect “the key to greater well-being is to have money but not to want it too much.” (author’s emphasis). He recommends paying off your house (consistent with the Hub’s stance that the foundation of financial independence is a paid-for home, something Wes Moss also advocates), enrolling in automatic savings programs, avoid credit cards, create a giving account and invest in experiences rather than stuff. (also consistent with the motto in Findependence Day: “Freedom, Not Stuff!”).

5.) Home

The happiest homes have fewer television screens, ideally only one, they cancel their cable TV, own a pet, create a meditation space, create a “pride shrine” of family awards and trophies, grow a garden, maximize sunlight and reserve bedrooms for sleep, not electronic distractions.

6.) Self & Purpose

To yield well-being benefits for the long run, the book suggests you “recognize your values, strengths, talents, passions and gifts.” Once you do, this should help you realize your life purpose: determining “your reason for getting up in the morning.” He mentions Richard Leider’s bestselling The Power of Purpose, which uses the simple formula G+P+V=C. That is, Gifts plus Passion plus Values equals Calling.

How my novel harness-race betting strategy relates to investing

Harness racing. Racing horses harnessed to lightweight strollers.

Go horse #5!

Here’s my latest MoneySense blog, which bears the headline When dividend investing trumps a balanced portfolio.

That’s an accurate depiction of the content but here at the Hub we’re sticking with the more offbeat headline used above. Because this column really does begin with a true story about harness racing in Florida.

How can that possibly relate to asset allocation and dividend investing? Click the above link to find out, or the Hub’s version below. And yes, the happy winner depicted below clutching a winning ticket is my wife, Ruth Snowden.

She’s known in her industry by that name. When we got married more than a quarter century ago she was concerned I might take offence that she didn’t want to use my surname in business circles. My response won’t surprise those who know us: “Honey, you can call yourself whatever you want as long as you pay half the mortgage!”. Of course, the mortgage has long been paid off, consistent with the Hub’s philosophy that “the foundation of Financial Independence is a paid-for home.” Read more

Life after Employment: What’s your Encore Act?

EncorecoverI’ve been reading several books on Encore Careers, second acts and the like. A few weeks ago, we reviewed Marc Freedman’s The Big Shift. Over a one-week break in Florida, I read Freedman’s earlier book, Encore, subtitled Finding Work That Matters In the Second Half of Life.

Last year, on this site, we also reviewed Stephen Pollan’s 2003 book on the same topic:  Second Acts.

Work that matters

If you believe that living to 100 is a distinct possibility rather than a one-in-a-thousand outlier event, then it follows that financial planning needs to take these extra years into account.

All these books start with the premise that the baby boom generation may end up living a lot longer than they may have once imagined, which goes double for their own children and the generations coming after them.

Freedman’s Encore does suggest that a lot of American boomers (that’s the book’s focus) may need to keep working in part because of limited financial resources, but as the subtitle suggests, it’s mostly about finding “work that matters” in the second half of life.

There’s a lovely quote Freedman uses at the outset, attributed to Marge Piercy in the book “To be of use”:

The pitcher cries for water to carry and a person for work that is real.

A new stage of life

Freedman suggests there’s an entire new life stage between MidLife and what used to be called Full Retirement. This phase may begin after either an involuntary or voluntary departure from paid employment in giant corporate or government organizations. It could last 20 years, meaning there’s enough time to reinvent oneself and find an entirely new career, even if that means going back to school to qualify for it.

“The emerging reality looks like this: Retirement as we have known it is in the midst of being displaced as the central institution of the second half of life. It is being supplanted by a new stage of life opening up between the end of midlife and the arrival of true old age, a period that essentially amounts to the second half of life, at least adult life. And that’s just the half of it: The new phase under development is every bit as much a new stage of work.”

Funding Encore Careers

Freedman describes some Encore acts that were funded by raiding 529 plans, which are the equivalent of Canadian RESPs (Registered Education Savings Plans). Canadian RRSPs (like IRAs in the US) are similarly well-suited since the government has made it possible to tap retirement savings for higher education, as long as the money is eventually repaid.

All this also is strongly connected to the other blog category over at our sister site, The Financial Independence Hub,  which we call Longevity & Aging. Read this post from last week on Why Longevity Changes Everything: Why you should think twice about Early Retirement.

Great online resources

But back to Encore. This is one book I’d suggest buying as an e-book because the appendix contains many pages of useful web links to useful resources in government, education, health, the non-profit sector and much more. I’ve touched on a few here:

Retirement Jobs: http://www.retirementjobs.com

Nonprofit Times: http://www.thenonprofittimes.com

USAJOBS: https://www.usajobs.gov

Exploring Careers in Aging: http://www.exploringcareersinaging.com

Troops to Teachers: http://www.proudtoserveagain.com

The American Medical Association: http://www.ama-assn.org/ama

The Career Key: http://www.careerkey.org/

2Young2Retire: http://www.2young2retire.com/

 

Couple celebrate silver anniversary of their Findependence

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Billy and Akaisha Kaderli, currently in Guatemala

By Billy and Akaisha Kaderli,

Special to FindependenceDay.com

At the age of 62, we are beginning our 25th year of financial independence. That is quite a feat!

From the beaches on Nevis, West Indies, to the shores of Phuket, Thailand we have travelled extensively through these decades, and what a ride it’s been!

Young and strong in those early years, we were willing and able to tackle just about anything. Now we tend to be a bit more cautious but we’re not letting up. We still climb into the backs of pickup trucks, ride the chicken buses and soak in volcanic hot pools. The time has passed quickly from when we were the youngest, grayless couple in a group of retirees, to now where we blend in with the retiree crowd.

Still, no one can take away the dance we danced and we are filled with gratitude for all the miles and smiles.

You can do it too!

How do you want to live the next five, ten, twenty years or more? Only you can decide what is best on your path and how to get to your goal.

We were often told retiring early couldn’t be done successfully and that we would fail. These self-supported 24 years have proven the naysayers wrong, and we believe that since we have done it, you can too. In our books and on our website we share the tools we have used to get us here so that you, too, can create your own successful retirement, early or not.

We maintain that one must keep one’s dreams alive. No one will do it for you. Besides, it’s much more fun to be led by one’s dreams instead of being pushed by one’s problems.

Time-tested tools

No matter where you are on your path to Retirement (Findependence?), here are some time-tested tools we have used. Take advantage of what we know.

Track spending

This is basic and oh-so-essential. When you track what you are spending you know exactly where your money is going and you are able to make decisions clearly and in real time about your cash outlay. This one habit will change your financial life.

Manage cost per day and annual net spending

Once you track your spending, you are able to figure out the yearly amount of money you are devoting to live the lifestyle you are currently enjoying. Divide your yearly amount by 365 days a year and you have your Cost per Day. Manage these figures assertively and you will be in control of your money. We have been retired for a full 24 years (beginning our 25th year January 14, 2015) and our annual spending for these years has been well under $30K per year.

4 categories of spending

In any household, there are four major spending categories: housing, transportation, taxes and food. If you make adjustments here – and there are lots of ways to do so – you are on your way to financial independence. Open yourself up to options such as house sitting, moving to a less costly area to live, paring down the number of vehicles you own, and being aware of your entertainment outlays.

Positive attitude and mental flexibility

Some people think having a positive and flexible mental attitude is small stuff and inconsequential. But without a sense of wonder, an open mind to new things and even to Change itself, making the transition into a satisfying new life of retirement is more difficult. There are so many opportunities and different ways to live, travel and experience life! Why get in your own way? Embrace your retirement and get a mitt and get in the game!

So, as we begin our 25th year we encourage you to dust off that dream and create a clear vision. Strengthen your will to move into your new life and put your solid financial plan into action. If you do these simple things, you, too, can live the life of your dreams.

Editor’s note: On the date of our retirement, January 14, 1991, the S&P 500 was at 312.49. It has averaged better than 8% yearly plus dividends over these decades. Our average annual spending is well below $30K yearly.

About the Authors

Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance and world travel. With the wealth of information they share on their popular website RetireEarlyLifestyle.com, they have been helping people achieve their own retirement dreams since 1991. They wrote the popular books, The Adventurer’s Guide to Early Retirement and Your Retirement Dream IS Possible.

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