If you already happen to own the original print edition of Findependence Day (now called the Canadian edition), is there any reason to also buy the new e-book edition of the just-published US edition? Perhaps there is, considering that at $3.99 or less for all but the Kindle edition, the e-books are only a quarter of the price of print editions.
The two main features in the e-book that are new are the glossary at the end, and the end-of-chapter summaries of what Jamie and Sheena learned. The latter may be useful for those who have already read the story and now just want to be reminded of the basic principles of financial literacy covered.
For example, you can view the summary after Chapter 1 by clicking the sneak preview of the Amazon Kindle version here. (Amazon charges US$7.63 for it). For convenience, I’ve reposted that page below. Most of the bullet points apply to either edition, although some are focused on US-specific financial content like IRAs or Roth plans. This isn’t the case for the excerpt below, though. At some point, I will likely do an all-Canadian ebook edition but until then, readers of the original book may still find the US ebook useful.
There are also some subtle differences most wouldn’t notice unless you compared the editions side by each. The original was finished just as the financial crisis was hitting, while the new edition benefits from the insights investors have gained since 2008. There are minor changes in the technology devices: in the original, Jamie has a cell phone, in the new one, it’s an iPhone and there are more references to social media in the subplot about Jamie’s troubles with his business partner. Some names and places have been changed but the story itself and the financial lessons imparted remain pretty much the same.
Kindle, Nook, iPad & other formats
If you want the Kindle version, access the Amazon.com link shown under the Buy American edition button. For the Nook e-book, access the Barnes & Noble link under the same button or click here. For most other e-book formats, go to the Trafford.com site here, select the e-book edition and you’ll get a list of formats from which to choose.
What Jamie & Sheena learned this chapter (Chapter 1):
• You can’t start building wealth until you’ve eliminated debt.
• To save, you must stop spending.
• To stop spending, you must embrace “guerrilla frugality” and be willing to make small sacrifices.
• The foundation of Financial Independence is a paid-for home.
• Findependence Day is simply a contraction of Financial Independence Day.
• The key to manifesting your Findependence Day is to pick an actual date in the future and visualize it happening.
• To reinforce the idea that saving is more important than spending, take to heart the motto “Freedom, Not Stuff!”
Tonight is the official launch party for the new U.S. edition of Findependence Day. The two main ingredients of the cover are fireworks and balloons, and here they are ready to be unleashed. It also happens to be the actual day I turn 60. I’m billing this as the world’s first Findependence Day party. Since we coined the term, we’re entitled to make that claim, right?
Does this mean I’m now financially independent enough not to show up to work on Monday at MoneySense magazine? In theory, yes, since in Canada you can collect the Canada Pension Plan (CPP) as early as age 60. In practice, however, it will be business as usual. But as I say in the book, the key point about Findependence is that you may choose to keep working, but because you want to, not because you perceive you must.
With many North American baby boomers turning 60 and 65 in the coming months and years, I expect there to be many Findependence Day parties — at least if the term catches on and the US edition of the book gets any traction. Here’s how you can help: please use your social media to spread the word, especially if you have American friends you think would benefit from the book if they just knew it existed.
And exist it does, as you can find elsewhere on this site. The paperback and hardcover editions are now available at Amazon.com, Barnes & Noble and Trafford. An e-book edition selling for $3.99 will be released in a few weeks. And of course, the first or “Canadian” edition is also available directly from me by clicking on the Buy Canadian edition button.
A belated Happy New Year to all readers and a reminder that every adult Canadian can take a big step this week towards their ultimate financial independence. I refer of course to the fact we can all contribute another $5,500 to our Tax Free Savings Accounts (TFSAs), bringing the total cumulative room to $25,500 (going back to the program’s launch in 2009). For the benefit of any American readers, Canada’s TFSA is the equivalent of the U.S. Roth plans, albeit with different rules.
In other words, if you acted at this time each year, you’d have contributed $5,000 in each of 2009, 2010, 2011 and 2012. Now that it’s 2013, the annual limit has been raised to $5,500, the first time the limit has been adjusted to accommodate inflation.
Of course, assuming you invested wisely in each of those years, your balance should by now be well north of $25,500, and in some cases may have grown past $30,000.
TFSAs a particular boon for young people
I truly believe that maximizing the TFSA is the single biggest step Canadians can take in their quest for financial freedom. As we noted in Julie Cazzin’s “Make Your Child a Millionaire” feature in the current issue of MoneySense, the TFSA is especially a boon to young people because they have such a long investment time horizon ahead of them.
Unlike RRSPs, which require earned income the prior year, an 18 year old can qualify for the full TFSA $5,500 limit this year (they may need parental assistance to come up with the money, but that’s permitted by the rules. Think of it as a tax-effective early inheritance!). Not only that, but they can contribute to TFSAs well into old age, unlike RRSPs, which end after age 71. You better believe that half a century of maximizing TFSAs and investing wisely will mean multi-millions down the road.
Do this right from the get-go and you may not even have to worry about RRSP contributions, although those in higher tax brackets should probably do both.
But how to invest wisely? For the young in particular, but also older people seeking income, I think equities are the only way to go in TFSAs, especially with interest rates being so low as they are now.
I’m all for international investing but if you already have lots of RRSP contribution room, I’d use the RRSP for US dividend-paying stocks, since the tax treaty shelters Canadians from the 15% foreign withholding tax.
Despite the “tax-free” moniker, TFSAs won’t stop you from being dinged by that tax on foreign securities. For this reason, I like TFSAs for Canadian dividend-paying stocks. Yes, I realize the dividend tax credit makes Canadian dividends a good choice for non-registered (taxable) accounts, since the tax is roughly half what it is on interest income. However, Canadian dividends also result in the annoying “gross-up” calculation come tax-time, and such phantom dividend income can ultimately hurt you on the OAS clawback. And to me, zero tax is preferable to even a “low” rate of tax, especially if you plan to reinvest those dividends.
Canadian Dividend ETFs are my choice
For all these reasons, my personal choice for TFSAs this year are Canadian dividend-paying ETFs. A year ago, when it was part of the Claymore family, I publicly stated that the iShares S&P/TSX Canadian Dividend Aristocrats Index Fund (CDZ/TSX) was a tempting choice, at least for those who already have plenty of exposure to the big Canadian banks. To be included in that index a stock has to be a common stock or income trust listed on the TSE and have increased dividends for at least five consecutive years.
This year, there is a valid new alternative from Vanguard Canada: the Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY/TSX). The management fee on VDY is just 0.30%, half the 0.60% of CDZ. (MER is 0.67%, we don’t yet know what VDY’s MER will be). But keep in mind that VDY amounts to a big bet on the major banks: a whopping 59% of the ETF is in Canadian financials and in fact the top four holdings are all the big banks. CDZ has much less exposure to financials (just 21%) and minimal exposure to the big six banks in particular.
Half and half is one compromise
One way to go might be to split your contribution between both ETFs: say $2,750 in each. Remember, though, this assumes you have plenty of US and foreign stock exposure in your RRSP. Younger people for whom the TFSA comprises the lion’s share of their wealth should strive for plenty of US and foreign stock exposure through similar types of ETFs. We’ll be looking in depth at these in the next issue of MoneySense, currently in production.
As I noted in a recent MoneySense blog, age 62 seems to be the magic age for some prominent Canadian members of the financial industry (banking and pensions respectively) to “retire.” Of course, we prefer to say they’ve reached their “Findependence Day,” since I doubt either BMO’s outgoing chief economist, Sherry Cooper, or Mercer partner and actuary Malcolm Hamilton, will be moving from full-time employment to full-stop traditional retirement.
As I say at the bottom of the blog, more boomers are leaving center stage but I expect many will linger in the theatre for some time yet, whether they embark on writing, public speaking, consulting or shift more to volunteering and charitable work.
So is 62 a “good” age to declare one’s Findependence? As always, comments welcome below.
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After a bit of a hiatus, the Investor Education Fund has resumed publishing of my blogs within its Masters of Money platform, now well into its second year. Here’s one of two recent posts on Early Retirement, which include some personal reflections on this topic in light of my recent job change to become Editor of MoneySense Magazine.
We’re now ramping up for a new series of blogs at IEF. Meantime, I’m also blogging at moneysense.ca. Last week, I reviewed a book — Managing the Bull — which also made the distinction between Retirement and Financial Independence. As I note in the blog titled “Another Vote for Financial Independence” there seems to be a growing recognition of the distinction between the two terms.
And just as you can distinguish between Findependence and traditional full-stop Retirement, similarly you can distinguish between Early Retirement and Early Findependence. As I’ve noted before, Findependence can often occur much earlier than traditional retirement: sometimes decades before. In fact, it’s never too early to establish financial independence: if you can pull it off in your teens so much the better. Of course, few of us have the good fortune of the Miley Cyruses of the world so most of us will have to settle not for Early Findependence but Findependence somewhere between mid-life and the traditional retirement age.
Retirement overrated, Findependence underrated?
In the current issue of MoneySense Magazine now on newsstands (Retire in Luxury for Next to Nothing), we include a story asking whether traditional Retirement is Overrated. One person who has retired at 59 insists that to the contrary, Retirement is UNDER-rated, but we also include two professionals who continue to work in their chosen fields well past their mid 60s.
Personally, I’m coming around to the view that it’s quite possible and perhaps desirable to aim for the seemingly contradictory goals of both Early Findependence but Delayed Retirement. Think of any rich and famous artist, musician or business person, be it Steven Jobs, Mark Zuckerberg, JK Rowling or Mick Jagger. All these people experienced early success and therefore Early Findependence.
But it’s telling what they chose to do with that Early Findependence: in almost every case, they continued to do what they loved and that had been the source of their worldly success and accompanying financial independence. Jagger is still rocking, Jobs was designing the next generation of Apple devices until his last few months of life, Zuckerberg is a billionaire but still engaged in his 20s at the social media giant he founded and Rowling has now branched out beyond her 7-part Harry Potter novels to pen a new adult novel that’s reviewed in the current New York Times Book Review.
Findependence as means, not end
This also tells us something important about the nature of work and wealth. If you’re really passionate about something and doing work that satisfies the soul and that the world benefits by, then wealth is merely a byproduct of that activity. Let’s not confuse the means and the ends. Financial Independence should not be viewed itself as the goal (or end) but merely the means to an end, which is whatever vocation, business or creative pursuit you are called to do.
Thanks to Sheryl Smolkin of Moneyville and the Saskatchewan Pension Plan for the following 10-minute audio podcast about Findependence Day. Among the many insightful questions Sheryl asked was whether the “Didi Quinlan” character was modelled after Gail Vaz-Oxlade, Suze Orman or other financial reality TV shows. She also probes about the origins of the Vinyl Museum and other aspects of the novel drawn from real life.
You can access the podcast by clicking here. Note that to get to the actual audio you need to click the blue segment entitled Jonathan Chevreau Podcast. Those who prefer to simply read an abbreviated (but not verbatim) transcript can just keep reading the text that follow’s Sheryl’s link.
My latest Financial Independence blog at moneysense.ca looks at BMO Retirement Institute’s study showing there is a big discrepancy between the retirement aspirations of young Canadians and their savings habits to date. Click here for my take on it.
– 59 –
Further to the weekend’s post here and as promised, my first MoneySense blog on Financial Independence has just been published. Click here to view and note that three copies of Findependence Day are up for grabs — but only two days remain to take advantage of it. After that, you’ll need to procure a copy via this web site.
– 59 –
Apologies for a hiatus blogging here but the new position as editor of MoneySense magazine has not permitted a lot of blogging. Since joining five weeks ago, we have put out the June issue of the magazine, now available on newsstands and the iPad.
I’m happy to report that I will soon be blogging at MoneySense.ca, though it’s unlikely the frequency will be anything like the old Wealthy Boomer blog housed at the Financial Post.
The new blog will likely be titled simply Financial Independence, which is of course the ongoing theme of this site here at FindependenceDay.com. One of the things I’ll be doing on the blog is reviewing any books that touch on this theme: publishers and book publicists take note! My email at the magazine is firstname.lastname@example.org.
By the way, the first piece I’ve written for the print edition of the magazine (June issue on news stands now) is the Editor’s Note at the front. There I note what this site often sets out: the difference between “Retirement” and “Financial Independence.” It also introduces a new writer to the magazine: Preet Banerjee and announces acting editor Dan Bortolotti is now our Editor at Large. Dan’s cover story on “Renovate your portfolio” presents three low-cost ETF portfolios of the “Couch Potato” genre he and the magazine are famous for.
Change a life for 20 bucks
MoneySense publishes seven issues a year and costs about $20 a year to subscribe, or less if you’re a Rogers customer. I’d say that’s pretty good value. Click here for details on how to subscribe or better yet, provide a gift subscription to a loved one. (Change someone’s life for 20 bucks!)
In addition to the new blog, I continue to “tweet” (@JonChevreau) and Moneysense.ca will also start scrolling my Twitter feed and other feeds associated with the magazine.
Lots of other stuff to come!
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