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.
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.
HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.
Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.
Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”
Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.
The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.
Those delays forced Nova Scotia Power to spend more on generating its own electricity.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
