Business

6 tips to achieve financial independence in Canada

Published

2 years ago

November 28, 2022

Approximately 30.5 per cent of Canadian households are financially resilient enough to withstand a sudden financial setback, according to a 2021 report from Statistics Canada. Being financially resilient is far different from being financially independent, though.

Today, I’ll explain what it means to be truly financially independent and share a handful of helpful tips on how to potentially achieve this.

WHAT DOES IT MEAN TO BE FINANCIALLY INDEPENDENT?

Financial freedom can mean different things to different people. When most people think of the term financial independence, they visualize a life of financial freedom without having to worry about how they’re going to pay their bills. This is a relatively true statement, but the true definition provides a bit more clarity.

Financial independence is when an individual has accumulated enough wealth or has a passive income stream capable of covering all of their living expenses for the rest of their natural life without needing a paycheque or salary.

Essentially, it is the same as having the ability to retire without having to work again.

A privileged few are born into financial independence thanks to automatic income streams, investments, and assets allocated to them through inheritance. However, most financially independent Canadians can only succeed through hard work, planning, and consistent action.

TIPS TO ACHIEVE FINANCIAL INDEPENDENCE

Wouldn’t it be nice to never have to work again?

While this may sound like a dream to many, it is entirely possible. To achieve it, you’ll need to:

Make smart financial choices
Have clear goals
Create a roadmap to success

1. Increase your savings rate

Your savings rate is the percentage of your total after-tax income that you save. Do an audit of your current spending and see the areas where you might be splurging too much money on. Focus on the big three expenses of shelter, transportation, and food to see if there is one major area you can cut back on. By saving more money, you’ll be increasing your savings rate.

2. Start investing early

Investing your money is one of the most common ways to achieve financial independence. You likely won’t get rich overnight by investing, and all investments do incur a risk on your part. Some popular investments for Canadians include exchange-traded funds (ETFs), stocks, mutual funds, and real estate. The earlier you start, the better, due to the magic of compounding returns.

There are many ways to start, depending on how much involvement you want to have. You can start by using a robo-advisor or consulting with a financial advisor if you have less knowledge or want to spend less time investing. Another option is you can learn how to invest on your own and purchase investments from a discount brokerage.

3. Maximize your tax-advantaged accounts

Canada’s tax-free savings account (TFSA) program is an incredible resource that allows Canadians to save money in a tax-free account. TFSA accounts are best used as investment accounts, and none of the earnings within the account are taxable, providing that your total savings are within the contribution limit of your account.

Also, maximize the value of popular tax-advantaged accounts available to Canadians, such as the registered retirement savings plan (RRSP) and the registered education savings plan (RESP).

4. Increase your income

Rather than saving money, look at ways to increase how much you can earn. Find different ways to increase your income, such as:

Dividend income from investments such as ETFs or stocks
Freelancing services on the side
Rental income from residential properties
Starting a business
Negotiating higher salaries at your current position
Finding higher-paying companies to work for

5. Live below your means

If you spend all the money you make, it will be difficult to achieve financial independence. Living below your means can be one way to spend less. For example, if you get a promotion at work and your salary increases, try to keep your spending at the same level instead of immediately increasing your living costs. The value of delayed gratification will mean reaching your financial independence goals earlier.

6. Find a like-minded partner or spouse

While it is not entirely necessary, having a partner with the same financial independence goals as you can go a long way in achieving your goals quickly. You can essentially double your salary and halve your costs if you find the right partner who is willing to work with you toward your financial independence.

HOW LONG DOES IT TAKE TO ACHIEVE TRUE FINANCIAL INDEPENDENCE?

Achieving financial independence usually doesn’t happen overnight. Unless you win the lottery or inherit a fortune, you’re likely going to have to work for it. The amount of time it takes depends on where you’re starting from, what your personal goals are, and how much you’re willing to invest.

There are some extreme examples of people achieving financial independence in their 20s and 30s. However, it will be a struggle for most Canadians to do this, and most will still retire and achieve financial independence in their 50s and 60s.

With rising inflation and the costs of housing, gasoline, and food going way up, early financial independence will be even harder to achieve in the future. But with hard work and careful planning, anything is possible.

Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.

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Business

Carry On Canadian Business. Carry On!

Published

13 hours ago

October 22, 2024

Steven Kaszab

Human Resources Officers must be very busy these days what with the general turnover of employees in our retail and business sectors. It is hard enough to find skilled people let alone potential employees willing to be trained. Then after the training, a few weeks go by then they come to you and ask for a raise. You refuse as there simply is no excess money in the budget and away they fly to wherever they come from, trained but not willing to put in the time to achieve that wanted raise.

I have had potentials come in and we give them a test to see if they do indeed know how to weld, polish or work with wood. 2-10 we hire, and one of those is gone in a week or two. Ask that they want overtime, and their laughter leaving the building is loud and unsettling. Housing starts are doing well but way behind because those trades needed to finish a project simply don’t come to the site, with delay after delay. Some people’s attitudes are just too funny. A recent graduate from a Ivy League university came in for an interview. The position was mid-management potential, but when we told them a three month period was needed and then they would make the big bucks they disappeared as fast as they arrived.

Government agencies are really no help, sending us people unsuited or unwilling to carry out the jobs we offer. Handing money over to staffing firms whose referrals are weak and ineffectual. Perhaps with the Fall and Winter upon us, these folks will have to find work and stop playing on the golf course or cottaging away. Tried to hire new arrivals in Canada but it is truly difficult to find someone who has a real identity card and is approved to live and work here. Who do we hire? Several years ago my father’s firm was rocking and rolling with all sorts of work. It was a summer day when the immigration officers arrived and 30+ employees hit the bricks almost immediately. The investigation that followed had threats of fines thrown at us by the officials. Good thing we kept excellent records, photos and digital copies. We had to prove the illegal documents given to us were as good as the real McCoy.

Restauranteurs, builders, manufacturers, finishers, trades-based firms, and warehousing are all suspect in hiring illegals, yet that becomes secondary as Toronto increases its minimum wage again bringing our payroll up another $120,000. Survival in Canada’s financial and business sectors is questionable for many. Good luck Chuck!. at least your carbon tax refund check should be arriving soon.

Steven Kaszab
Bradford, Ontario
skaszab@yahoo.ca

Business

Imperial to cut prices in NWT community after low river prevented resupply by barges

Published

16 hours ago

October 22, 2024

Anne Joseph

NORMAN WELLS, N.W.T. – Imperial Oil says it will temporarily reduce its fuel prices in a Northwest Territories community that has seen costs skyrocket due to low water on the Mackenzie River forcing the cancellation of the summer barge resupply season.

Imperial says in a Facebook post it will cut the air transportation portion that’s included in its wholesale price in Norman Wells for diesel fuel, or heating oil, from $3.38 per litre to $1.69 per litre, starting Tuesday.

The air transportation increase, it further states, will be implemented over a longer period.

It says Imperial is closely monitoring how much fuel needs to be airlifted to the Norman Wells area to prevent runouts until the winter road season begins and supplies can be replenished.

Gasoline and heating fuel prices approached $5 a litre at the start of this month.

Norman Wells’ town council declared a local emergency on humanitarian grounds last week as some of its 700 residents said they were facing monthly fuel bills coming to more than $5,000.

“The wholesale price increase that Imperial has applied is strictly to cover the air transportation costs. There is no Imperial profit margin included on the wholesale price. Imperial does not set prices at the retail level,” Imperial’s statement on Monday said.

The statement further said Imperial is working closely with the Northwest Territories government on ways to help residents in the near term.

“Imperial Oil’s decision to lower the price of home heating fuel offers immediate relief to residents facing financial pressures. This step reflects a swift response by Imperial Oil to discussions with the GNWT and will help ease short-term financial burdens on residents,” Caroline Wawzonek, Deputy Premier and Minister of Finance and Infrastructure, said in a news release Monday.

Wawzonek also noted the Territories government has supported the community with implementation of a fund supporting businesses and communities impacted by barge cancellations. She said there have also been increases to the Senior Home Heating Subsidy in Norman Wells, and continued support for heating costs for eligible Income Assistance recipients.

Additionally, she said the government has donated $150,000 to the Norman Wells food bank.

In its declaration of a state of emergency, the town said the mayor and council recognized the recent hike in fuel prices has strained household budgets, raised transportation costs, and affected local businesses.

It added that for the next three months, water and sewer service fees will be waived for all residents and businesses.

This report by The Canadian Press was first published Oct. 21, 2024.

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Business

U.S. vote has Canadian business leaders worried about protectionist policies: KPMG

Published

16 hours ago

October 22, 2024

Anne Joseph

TORONTO – A new report says many Canadian business leaders are worried about economic uncertainties related to the looming U.S. election.

The survey by KPMG in Canada of 735 small- and medium-sized businesses says 87 per cent fear the Canadian economy could become “collateral damage” from American protectionist policies that lead to less favourable trade deals and increased tariffs

It says that due to those concerns, 85 per cent of business leaders in Canada polled are reviewing their business strategies to prepare for a change in leadership.

The concerns are primarily being felt by larger Canadian companies and sectors that are highly integrated with the U.S. economy, such as manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications.

Shaira Nanji, a KPMG Law partner in its tax practice, says the prospect of further changes to economic and trade policies in the U.S. means some Canadian firms will need to look for ways to mitigate added costs and take advantage of potential trade relief provisions to remain competitive.

Both presidential candidates have campaigned on protectionist policies that could cause uncertainty for Canadian trade, and whoever takes the White House will be in charge during the review of the United States-Mexico-Canada Agreement in 2026.

This report by The Canadian Press was first published Oct. 22, 2024.

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