As a business owner, one of the major challenges you face is figuring out how to spend, save and invest the money you take out of your company.

Will you pay down debt? Will you buy a house? Will you save for retirement? How can you minimize taxes? How will you invest your savings?

Yet those decisions are all secondary to one of the most important decisions you face (which also happens to be one of the hardest). How will you live? Your lifestyle choices have a huge impact on your ability to reach financial independence and live with the lowest stress possible.

Every person living through an increase in their personal income faces the risk of falling into lifestyle creep– gradual (or not so gradual) increases in your cost of living that lead you to become accustomed to a more lavish lifestyle.

During my 25 year career advising business owners about their personal finances, I have seen dozens of situations where my clients ended up saddled with debt and struggling to achieve financial independence. Lifestyle creep and less-than-ideal decisions about their spending took over their lives.

But I haven’t just seen it professionally. I have lived it personally.

Early on in my career, my wife and I bought a BIG house that led to mortgage payments and additional costs (like furnishing five bedrooms and managing property taxes and utilities) that were a huge source of stress for nearly a decade. At the same time, I got a case of FOMO (fear of missing out) and spent significant amounts of money trying to keep up with the Joneses. I got into a luxury vehicle (or two), we started going on expensive vacations, and we frequented popular restaurants in the city.

The result? A decade of stress in my life and marriage, as well as a significant delay in my ability to achieve financial independence.

It doesn’t have to be that way. When your business starts to generate serious cash flow, you have choices.

Here are 5 major financial mistakes and lifestyle creeps for you to avoid that will help you keep your stress down and help you arrive at financial independence sooner.

Mistake #1 – Assume a BIG mortgage

Your company finally takes off, the cash flow is coming in and there is every indication you can count on a steady – and substantial – personal income for the foreseeable future. So you start looking for a house in that neighbourhood you have always admired and buy one that’s much larger than you need. Your bank happily approves a large mortgage and you happily accept it – after all, interest rates are low and you are confident that this is only the beginning for your business.

Let’s say you are making $250,000 from your business and decide to buy a $1.5M house in a nice area of Toronto. You could end up with monthly principle and interest payments of $5,335[1]. Once you add in monthly expenses like property tax and utilities, you will have a monthly bill over $6,000, which is half of your monthly disposable income.

What if you did this instead? Buy a $750,000 condo or home that is only 3X your income. With your down payment of $375,000, you only need a mortgage of $375,000, which would give you payments of $1,778 per month. After additional costs, your monthly housing expenses will be around $2,500.

The lower payments give you a cushion in the event your business goes through a tough period. They also give you less stress and more flexibility. And you are now on the fast train to financial independence.

Take this one seriously. It was THE major financial mistake I made in the early years of my business.

Mistake #2 – Purchase an expensive vehicle

I love cars. What’s not to love? There is nothing quite like the experience of a luxury vehicle – especially a new one. When you drive off the lot, you feel like you are on top of the world. You have also played right into the car company’s hand.

Having been through the process of buying or leasing a luxury vehicle more than once (yes, I learned these lessons the hard way), I can tell you that there is a way to drive something you enjoy while hanging on to more of your money.

Let’s say you went out right now and bought yourself a high-end SUV for almost $100,000. If you drop down $17,500 on delivery, you will be left with monthly payments of $1,082 for 96 months. Add that to the ongoing expenses of your BIG house and you are well over $7,000 per month.

Instead of a new car, buy a good second hand car. If you spend $30,000 and pay it off over four years, your payments will be $677 per month.[2] Now you are driving something you enjoy while knowing that you are really moving toward financial independence.

There is a significant mental shift required to change how you think about cars. But it’s really worth it. In any book, article or blog that gives advice about how to achieve financial independence, you will find that not buying a new or expensive car is one of the top recommendations.

Mistake #3 – Not preparing for an emergency

We have all been there. Things are going well and we assume that the good times will just keep on rolling. That’s natural. It’s also not how life works. Things happen. Downturns come. Businesses falter. Personal emergencies arise. Unexpected expenses crop up.

Yet again, this is a lesson I learned the hard way. When I started making solid money from my business, I didn’t see the need to build up an emergency reserve because I assumed my business would continue to grow. Besides, I had already committed myself to other major expenditures and setting aside money for a reserve fund would have been a challenge.

Guess what happened? A massive recession and a huge spike in interest rates. How’s that for a hard lesson in “prepare for the worst and hope for the best?”

The new economic climate wasn’t just a problem for my personal finances; it also presented major challenges for my business. Low economic growth and high interest rates are disastrous for a financial planner and investment advisor.

Clients were losing their jobs and could not invest because they needed their savings for basic expenses. And those still working who did have some extra money were buying guaranteed investments that had yields of +10% interest. No one needs a financial planner and investment advisor to help them buy a GIC or Canada Savings Bonds.

My emergency came in the form of a two-year recession that was a 40% hit to my savings and a 50% hit to my business’ revenue.

What’s the emergency that is coming in your life?

Take the time to think about potential risks and set yourself up with the funds you need to weather those storms. You will be glad you did.

Mistake #4 – Not budgeting properly for the birth of children

Ask any parent and they will say they had no idea what they were getting into. Parenting is one of the most challenging and complex roles a person can take on yet there is no manual, no training and very little you can do to prepare. Good thing it is so wonderful and rewarding!

One of the ways that becoming a parent can catch you off guard is how much it costs. Kids are expensive. Period. The costs start on day one and they continue long after your children go to college or university.

When they are young, you are faced with the costs of food, diapers, day care, clothing and all kinds of baby-related equipment. But you are also faced with days off work when the kids are sick and the ongoing additional strain of being a working parent. It all takes a toll.

If you are thinking about having children – or have a young family – consider how you can scale back on your lifestyle to set aside money for the kids. Those costs aren’t going anywhere, so reduce stress by having the funds you need to cover them.

Mistake #5 – Hanging out with the rich kids

I can’t speak for all business owners, but my intuition and experience tell me that the following statement is true: there is a direct correlation between ego and cash flow.

In my case, as the cash flow increased, so did my ego and my need to “improve” my friends. I started looking for rich kids to play with. And though I was completely unaware of it at the time, the shift in who I hung out with led me to start living a much more lavish lifestyle.

I know some wonderful people who also happen to have lots of money. But spending a lot of time with them got me into spending much more money. I was often swept up in the euphoria of being in the fast lane and gladly paid for expensive dinners, hockey games or elaborate weekend getaways.

Don’t let your ego get the upper hand. Stay humble, focus on your objectives. That way you can give yourself the financial freedom to be in control of how you live – now and in the future.

That’s it.

My advice? When your business is doing well, give yourself a conservative increase in spending (because you deserve it!) and direct all additional income to your financial independence pool.

Today, when my business produces extra cash flow, I increase my spending by 10% of the extra cash flow and invest the balance. It’s a great formula that allows me to live large and be cautious!

Be smart. Take the extra income and build wealth. Your future self will thank you.

Does thinking about never retiring resonate with you? What did I miss? Send me a note and let’s start the conversation.

Call  or email me at richard.dri@scotiawealth.com or connect with us in the following ways:

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Read more by Dri Financial Group

• The difference between earned income versus income statements
• 7 tips for a successful partnership with your wealth advisor
• Does saying “I do” mean “yes” to a joint bank account?

[1] At this rate of personal income (according to neuvco.ca), your net annual income in Ontario will be $149,718 or $12,476 per month. Let’s also assume you make a $375k down payment so your mortgage is $1,125,000 and you opt for a 5-year-fixed rate mortgage at 3%, amortized over 25 years.

[2] Assumptions: the first car is a Tesla model S 75D purchased from the Tesla Canada website. The second car is a 2018 Honda accord sport, financed at 4% and bought from autotrader.ca.

source https://richarddri.ca/5-financial-mistakes-that-business-owners-should-avoid/

September 15 was the eight-month anniversary of Mary’s death. Although eight months isn’t a number with any specific significance, it feels like the right time to share my experiences of this period.

I never imagined writing a blog on this subject, but life isn’t fair and here I go.

Many clients and friends have asked how I am doing and if my children are okay. I am grateful for their kindness and hope this blog helps to relieve their concerns—and also helps me look forward to the future with hope.

My regularly scheduled financial planning blogs will return next week. But if you read this blog, you will notice several important life lessons that I can offer from personal experience.

Let’s start with my children

My youngest daughter was and is my biggest concern, since she was only 17 when her mother died. But her resilience and positive attitude have surprised me.

Just before the pandemic hit, she participated in a volunteer mission in Belize. Ten youths from Canadian schools were responsible for helping local doctors and nurses provide free medical services to rural families. They also had an opportunity to mingle with local Belizeans and learn about their history and culture.

After 10 days away, she arrived back on an adrenalin high and couldn’t stop talking about returning next year to continue her work. Even the early days of the pandemic quarantine couldn’t wipe the smile from her face. She was transformed and started making future plans around social causes and medical assistance in developing countries.

But she also had several low points. Her school’s Grade 12 prom and sports activities were cancelled, and her social interactions with friends were limited. Increased isolation directed her thoughts to life before January 15, which made her sad and lonely.

Fortunately, she had good friends who communicated often, first virtually and then our patio. In addition, and possibly most important, she spoke with a grief counsellor every two weeks which helped her handle her loss.

My middle child, who lives and works in Denver, initially spent many hours in his old bedroom looking through family photos and listening to recordings of himself and his mother. I was worried that he was obsessing on his loss and would have trouble moving forward. We spoke for hours, and I could tell he was hurting. But I didn’t know what I could do.

Again, we turned to a counsellor and, over time, I noticed that the hurt was still there but the obsession started to fade.

Today, he has a wonderful and talented girlfriend, has recently earned a job promotion, and has moved into more accommodating housing. He still hurts but has found his own way to move forward while carrying his mother’s memories.

My oldest son works for a major bank in Toronto. Last year, he was offered a promotion and an opportunity to move to New York City. Unfortunately, the pandemic postponed his transfer indefinitely, but he continues to work with US clients and hopefully, in time, will travel to NYC in person.

He has a supportive, smart partner who practices law and has helped him work through the hardship of losing his mother. Together, they are classic HENRYs: High Earners Not Rich Yet.

He took a different approach to his loss. Always the most social member of our family, he constantly spoke with his many friend groups by phone, text and Zoom calls. When quarantine lifted, he visited friends as safely and as often as possible and arranged trips to Quebec City, Montreal, and Muskoka.

He saw a grief counsellor as well, but I think the biggest part of his healing came from his interactions with his friends.

So what lessons did we learn as a family during this tragic time?

Lesson #1: When dealing with any loss, the support of friends and professionals is essential. Don’t try to recover alone.

As for me, I have been working with a psychologist to help make sense of Mary’s death and deal with the substantial changes to my life. Many of you no doubt appreciate that losing someone close is perhaps the hardest thing to endure.

During the last eight months, I kept sane by doing many little things that gave me pleasure.

1. Three to four times per week, I rode my bike. First on the indoor trainer and then outside when the weather improved. Recently, I began riding with small groups of friends. Exercise has kept the extra pounds off and clears my mind of negative and limiting beliefs. I’m proud to say that I have ridden almost 6000 kms so far this year, a personal best.
   Every Friday morning, I joined my oldest son at Sud Forno for espresso and croissants. We discussed Mary, our grief, our work, and our futures.
2. Almost every week, I met one or two close friends to discuss how I felt and parenting issues.
3. I worked every day answering client questions, writing blogs, recording podcasts and completing my latest book, Live Well, Stay Rich, Never Retire, which is now available.
4. Monthly, I participated in a virtual meeting with my psychologist where we discussed anything on my mind.
5. I read several great books on death and grief which helped me cope: The Year of Magical Thinking by Joan Didion, Finding Meaning by David Kessler, and Option B by Sheryl Sandberg.
6. I watched a few Netflix series with my daughter, such as Suits and Narcos (I know Mary wouldn’t be happy with this parenting choice!).

I have also had to complete many difficult and sad tasks.

1. I applied for CPP Survivor benefits for myself and my daughter. Surprisingly, I now receive a CPP survivor pension of approximately $500 per month and my daughter receives about $300 per month until she finishes her full-time studies. The pension will be integrated with my own pension when I turn 65 and will be capped at the maximum personal amount, which is approximately $1200 per month (no doubling up of CPP is allowed).
2. I received a one-time $2000 CPP death benefit.
3. I closed many accounts, including one we opened just after we were married. I now deal only with Scotiabank.
4. I cancelled Mary’s credit cards and driver’s license.
5. I rerouted our pre-authorized cheques to my bank account.
6. I transferred the ownership of our house and Mary’s car to just me.
7. I ordered a tombstone.
8. I began paying all household expenses and tracking my cashflow.

In addition to managing so many tasks, I experienced several difficult milestone dates, such as Mary’s birthday, Mother’s Day and Easter. I also continued to suffer from survivor guilt, constantly asking myself what else I could have done for Mary, and I still have trouble praying.

Incidentally, Mary and I never thought she needed life insurance. I was the main wage earner, and I couldn’t imagine her dying first, so we allocated all our insurance funds toward protecting my income. This decision could have been a very big mistake.

When Mary died, most of our children were financially independent, we had no debt, and my business was profitable. So I didn’t experience a financial setback. But had her death occurred earlier in our lives, it would have caused financial hardship because of the additional expenses of replacing Mary’s contribution to the family (her income, child raising, house chores, etc).

The only death benefit came from my employer’s default spousal life insurance of $30,000.

However, during the almost five years of chemo, immunotherapy, surgeries, MRIs, PET and CAT scans, and medical appointments, costs were covered by OHIP and by my employer healthcare provider. I am grateful that we live in a country of universal healthcare regardless of financial status and that I work for a company with excellent health coverage. I have no idea how I would have covered these costs personally.

Lesson #2: Do not assume that tragedy or illness only happens to others. Instead, address your financial risks.

During this past eight months, I also learned that my friends and family had different ways of speaking with me.

I divided them into three groups: the avoiders, who didn’t address the elephant in the room; the self-absorbed, who compared their loss to mine; and the empathizers, who asked how I was feeling and brought up Mary during our discussions.

Needless to say, I have been incredibly grateful for the empathizers in my life.

Lesson #3: People who are grieving want to talk about their pain. As a friend, ask how they are doing and, when appropriate, talk openly about their loved one and acknowledge their grief.

Silence can be crippling and leaves the impression that you don’t care or can’t acknowledge their loss. Please don’t turn away from a friend during their difficult times.

Where do I go from here?

In Plan B, Sheryl Sandberg explains an interesting concept called Post-Traumatic Growth (rather than stress). She explains that it is possible to grow and become a better person despite a strong pull in the opposite direction.

Sandberg lost her husband in 2015 and writes that, in time, PTG can

• Increase the appreciation of life and all the little things.
• Put things into perspective.
• Generate a deeper purpose in work.
• Reveal new opportunities.

For me, I find passion with my family and in my work.

One of my mentors, Ray Dalio, writes in his book Principles that one of his is to “find meaningful relationships and meaningful work.” Despite the enormous loss in my life, I still jump out of bed every day, looking forward to speaking and interacting with clients/friends/family, and I am still challenged by the daily task of helping clients make better financial decisions.

Lesson #4: My principle can be summarized as Live Well, Stay Rich and Never Retire, and I intend to practice what I preach until my time on this earth expires.

In closing, my grief has not left (and I don’t expect it ever will), but my sadness is slowly being replaced with hope: hope for my kids, hope for my clients, and hope for a positive future for me.

If you have experienced a personal loss (death, career, divorce, bankruptcy, deception, etc) and want to share the experience with me, please call anytime or shoot me an email. I want to hear how others have managed a tragic loss. We can be there for one another. It’s important.

Never Retire Profile of the Week

Shigeaki Hinohara (1911-2017)

It’s never too late to learn about changemakers around the world who have much to teach the rest of us about living well. Dr. Shigeaki Hinohara—who lived to the age of 105—was such a person. A medical doctor who began his long career during the firebombing of Japan in 1941, Hinohara often shared his philosophy of life that he credited for his own longevity. His number one tip? Don’t retire. Or, if you must, do so much older than 65. He also believed strongly in having a clear purpose in life that matters deeply to you, moving your body regularly, eating a healthy diet, and finding joy in the various forms of art in the world (music, painting, dance, and so on). Finally, watch out for stress: a busy and productive life doesn’t have to be a stressful one. According to Hinohara, if we focus equally on the mind, body and soul—and never retire—we’ll live the best and longest life possible.

Shigeaki Hinohara

The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier. Dri Financial Group’s proprietary Wealth Navigator Process is designed with you in mind. Its structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the Wealth Navigator Process or our team, call me any time at 416.355.6370 or email me at richard.dri@scotiawealth.com.

Beyond helping you manage your finances, we take pride in motivating, educating and helping you expand your financial literacy. We are here to answer any questions you have and to help you feel in control of your financial destiny.

If you are ready to dive deeper into your financial literacy journey, we have a wide range of free tools and educational resources available.

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source https://richarddri.ca/4-lessons-learned-since-becoming-widowed/

N.A. markets got off to a strong start Monday as a rebound in technology shares lifted U.S. and Canadian stocks, helping major indexes recover after last week’s pullback. By Monday’s close, the Dow was up nearly 330 points, while the TSX added 128.

Global equities turned in another fairly strong performance on Tuesday, on upbeat Chinese data and positive numbers on U.S. factory output, although there are signs that the U.S. manufacturing sector is slowing. The TSX also gained on Tuesday as domestic factory sales rose 7% in July from June, signs that Canada’s economic recovery was on track.

Although N.A. markets started strong, stock gains slipped away late Wednesday–despite the Fed’s assurance it was ready to keep interest rates near zero for three more years. Fed Chair Jerome Powell went on to add that the U.S. economic outlook was “highly uncertain,” while stressing the need for additional fiscal support from Congress. While the Dow held on to a small gain, all three other major N.A. indexes finished in the red. The TSX closed 136 points lower, even though oil prices jumped more than 4%, following a reduction in U.S. crude inventories.

In economic data released Wednesday, U.S. retail sales climbed just 0.6% in August, prompting further concerns of a stalled recovery. Conversely, data released this week showed Chinese industrial output jumped the most in eight months in August, up 5.6%, while retail sales in China also grew for the first time this year, beating forecasts.

Lingering concerns over the Fed’s statement Wednesday weighed on markets again Thursday. Investor optimism also waned on news that U.S. jobless claims held nearly steady at 860,000 last week, dashing hopes for a speedy labour- market recovery. By Thursday’s close all four N.A. markets were in the red, with the Nasdaq losing 140 points.

Read more…

source https://richarddri.ca/mixed-week-for-stocks-as-fed-underscores-uncertainty-in-u-s-economy/

What is FIRE and why does it matter to a business owner?

(No, I don’t mean the combustion of a material or building, though you should have insurance for that.)

In the financial space, FIRE stands for Financial Independence, Retire Early, and it represents a philosophy of living and earning so popular it has come to be known as a movement.

Popular? Yes.

A principle business owners should adopt? In my opinion, it’s not a wise choice for the majority of business owners. Let me explain why.

The originating premise of the FIRE movement was presented in Vicki Robin and Joe Dominique’s bestselling 1992 book Your Money or Your Life.

The book’s premise is that you should quantify the value of your time and compare the cost of everything you buy to the time it took to earn that money. Following this metric, you adopt a minimalist lifestyle in which you only purchase things you need.

The logic goes like this: the less you need, the less you have to work. The less you work, the more you can enjoy your life.

The authors argue that a person’s time is their most important resource, and if we don’t live deliberately, we will be stuck in a cycle of trading time for stuff, causing us to live unfulfilled and frustrating lives that we end up regretting.

I want to give you my reasoning for why this approach falls short, but let’s first look at some numbers to illustrate the implications of the FIRE approach. (What would a Dri blog be without some numbers?!)

Let’s say I earn $50k per year. Should I buy a car worth $50k?

According to FIRE, the answer depends on whether I feel the cost of the car is a fair trade off…

How would I know?

I take the price of the car – $50k – and divide it by the number of years I will drive the car – let’s say eight. That comes to $6,250 per year, which is 12.5% of my annual income. Following the FIRE metric, I am giving up 12.5% each year, for eight years to buy a car. That’s 46 days per year.

Is it worth it?

Or is there a better trade off out there and I should keep the money in my account?

Pulling back from specific examples, let’s look at how the FIRE mindset would guide me toward achieving financial independence. 

FIRE suggests extreme savings of up to 70% of yearly income, with a target of quitting work once you have saved approximately 30 times your yearly expenses.

So, if your annual expenses in retirement will be $50k per year, you will need to accumulate roughly $1,500,000 to retire, which you then withdraw as slowly as possible.

The essence of FIRE’s retirement planning paradigm is to live frugally while you are working and then live frugally in retirement.

With due respect to anyone who embraces this approach to living, my suggestion is that business owners avoid FIRE and adopt my model instead: Live Well, Stay Rich and Never Retire.

Here are 6 reasons why.

1. FIRE ignores work as a primary source of joy, identity, passion and purpose

The fundamental premise of the FIRE ideology is that work is something you should try to get out of as soon as possible. I could not disagree more with this idea – especially when it comes to business owners.

People who start their own business tend to both love their work and build businesses they are passionate about. The idea that they should try to wrap it up as soon as possible doesn’t make much sense to me.

In fact, the Never Retire philosophy is exactly that – a mindset built on working as long and as late in life as you want, while checking every single item off your personal bucket list because you also Live Well and Stay Rich.

2. FIRE focuses on expenses when you should focus on income

To me, the FIRE strategy puts the cart in front of the horse. Building your lifestyle around expenses limits you to the choices and opportunities that come with a frugal approach to spending.

In my life and work, I have always focused my energy on increasing my earnings rather than obsessing about expenses.

I never understood – or supported – the premise that you can control your expenses but you cannot control your earning. I don’t believe that is true. You can earn whatever you set your mind to, especially by owning your own business, which is one of the best ways to generate and sustain wealth.

In his book Think and Grow Rich, Napoleon Hill suggests we need a “burning desire” to become rich. He argues that when we have a burning desire, the universe will present us with a way to achieve that goal. That isn’t possible if you focus your energy on limiting expenses.

3. FIRE invokes a limiting mindset that may hinder your personal growth

Focusing on expenses creates a mindset that centres around limiting, while focusing on income creates a mindset that emphasizes abundance and opportunity.

Steve Jobs would never have invented the iPhone if he had only worried about controlling his expenses or getting to retirement as quickly as possible.

That’s exactly the case for a business owner. We are builders, NOT savers.

Personally, I monitor my personal and professional expenses (it would irresponsible to ignore them), but I spend my time obsessed with growth, and how I can add value for my customers. By adding value and improving my customers’ lives, I’m adequately compensated.

4. FIRE may strip the enjoyment out of the present

Bill Keane said “Yesterday’s the past, tomorrow the future but today is a gift, that’s why it is called the present.”

How painful would it be to avoid experiencing today because you have made a decision to restrict your lifestyle so you can stop working as soon as possible?

I appreciate that we all have to balance today’s needs with the future – that’s an essential element of my work as a financial planner. But planning – and saving – should enable you to Live Well and Stay Rich, rather than restricting your choices.

Since I was young, I have been obsessed with and anxious about how decisions today impact the future. (Yes, becoming a financial planner came naturally to me!) Over time, I have learned that the point of planning and saving is to enable us to Live Well.

My approach to addressing any anxieties I have about the future isn’t to reduce expenses. Instead, with the help of mindfulness meditation, I have learned to plan for the future but live in the present. I find this approach enables me to relax, live without fear and fully love myself, my family and my work.

My point is that there are many ways to Live Well that I think are more effective and energizing than the restrictive lifestyle advocated by the FIRE philosophy.

5. FIRE may not be sustainable

Having been a CFP and investment advisor for 25+ years, I have seen almost everything the economy can offer.

Euphoric market highs and devastating market crashes. Unsustainably high interest rates and negative real interest rates. Record employment levels and stifling economic contractions. Not to mention the personal and professional ups and downs of business owners thriving and struggling through variations in the health of their business, their families and themselves.

These extremes have taught me one thing: nothing is for sure and things change very quickly.

How can an individual who is planning for a retirement that could start at age 40 and last until age 100 possibly take into account – or accurately predict – every possible economic and personal event? They can’t.

The FIRE movement relies on a series of economic assumptions about the future that fly in the face of historical evidence.

Here’s one example: is it realistic to assume that inflation over the next 50 years will be equal to the historic lows we have seen in the last 20 years? Or is it fair to assume we will see a return to high levels of inflation at some point in the next half century?

If there is a higher inflation rate in the future, it will undercut current estimates about living expenses, which will make it easy to underestimate the necessary pool of retirement funds. Higher inflation may also mean that anyone who raced to achieve FIRE is forced back to work at a time in their lives when their skills and interest are no longer at their peak.

6. FIRE may cause loss of camaraderie

As I get older, I am more and more clear about what I like and dislike, and I use this knowledge to make decisions faster and with more accuracy.

For example, I find athletic apparel very comfortable and low maintenance, so when I’m relaxing at home, I usually wear something from a sports retailer, like Under Armour or Lululemon. I have no interest in a wearing a polo or button-down shirt. I also have favourite shoes, restaurant, vacation spot, car, etc. I find that if I stick to my list of “favourites,” I’m usually very happy with every purchase and experience.

This may seem odd, but I also have a favourite type of friend. My best relationships are with other business owners, and since my practice consists mainly of business owners, some of my clients have become very good friends. If I were to retire, I might lose some of the close friendships that took years to develop and the interactions that fuel those relationships, many of which have to do with supporting each other in the wonderful struggles of business ownership.

I’m sure many of you can relate to this one.

What’s the takeaway?

My personal and professional motto is Live Well, Stay Rich and Never Retire.

I believe successful business owners can arrange for their businesses to be self-managed, so they can live the life they want.

This approach reduces the business owner’s daily involvement in the operations of their business. It enables them the personal freedom they need to pursue every item on their bucket list while remaining involved in what they love to do – envision the future of their business and make it happen.

Aside from any unforeseen health issues, I will Never Retire. My plan is simply to adjust the way I live and work so I can achieve my goals. And it’s entirely possible because my burning desire to support my clients has enabled me to build a thriving practice and achieve financial independence.

What do you think? FIRE or not to FIRE?

source https://richarddri.ca/6-reasons-business-owners-should-not-play-with-fire/

Although markets in the U.S. and Canada were closed for Labour Day, the tech sell-off that began late last week continued Tuesday as some key tech names surrendered further ground. Their declines hit the tech-heavy Nasdaq especially hard, which slumped more than 4%, entering correction territory. The S&P 500 fell nearly 3%, and the Dow lost 2.3%. The TSX also closed lower by 118 points, as a big drop in oil prices pressured the energy sector. Brent crude fell more than 5% to $39.78 a barrel–dropping below $40 for the first time since June. Declining oil prices also dragged the loonie to a near-two- week low against the greenback.

N.A. markets bounced back on Wednesday as investors waded back in to take advantage of the three-session tech wreck. By Wednesday’s close, the Dow was up 440 points, while the Nasdaq added nearly 300. Despite being down more than 7% over the past week, the Nasdaq, as of Wednesday, was still holding on to a 24% gain for the year.

Gold prices rose to their highest level in nearly a week on Wednesday, as the U.S. dollar weakened and doubts over a timely vaccine in the U.S. began to grow. Oil also rebounded from Tuesday’s hard slide, which helped propel the TSX 284 points higher. Also, the Bank of Canada held its overnight rate steady Wednesday at 0.25%, pledging to keep rates low for as long as necessary.

While U.S. markets started strong in early trading Thursday, positive sentiment wavered as U.S. unemployment claims remained elevated at 884,000 last week–further evidence the labour-market recovery has lost precious momentum. Also weighing on sentiment was news that U.S. lawmakers have yet again failed to make any headway on a coronavirus relief bill. By Thursday’s close, the Dow was down over 400 points, while the TSX dropped nearly 200.

Read more…

source https://richarddri.ca/n-a-markets-unsteady-after-tech-sell-off/

College and University looks a little bit different now but one thing remains the same – you have to pay for it…The cost of post-secondary tuition is increasing at an alarming rate, and the cost of post-graduate degrees (i.e. an MBA) in Canada can exceed $100K, while medical school can be in the $200-300K range. As a result, student debt is becoming an ever-present reality for many business owners and their children, some of whom are faced with a level of debt that is life-altering.

Here are some of the most common questions we get as financial planners: How should I pay for my child’s post-secondary education? Is it worth dipping into our retirement savings to pay tuition? Is student debt the new normal? As a business owner should I be paying for university tuition differently? Let’s clear a few things up.

Like many parenting decisions, it’s complicated when a business owner tries to determine how much assistance to offer their children for post-secondary expenses. Speaking for myself, I don’t want my children to be buried under debt into their 30s, 40s, and even 50s, but I also want them to feel the pride of making their own way in the world and becoming self-reliant.

Looking back on my early financial experiences, I see that paying my own way for high school and four years of university paved the way for my future successes. I know that tuition, when I was a student (which, contrary to my children’s belief, was not before the invention of the printing press!), was lower relative to today, and I didn’t have to fund a graduate degree. But I also know that funding my education gave me fundamental confidence in my ability to achieve my goals, which has been an important factor in my ability to build a successful business.

Funding my education required me to work part-time during the school year and full-time during the summer months. I also lived at home until the age of 24. (Saving money was also partly a side effect of how quickly I learned that it’s a lot harder to spend your own money than other people’s!)

The first step

Before you enter into a conversation with your children about how much of their education you will fund, I think there is an important decision to consider making together: selecting a cost-effective post-secondary destination. Universities in Ontario and Toronto always place high in international rankings, yet are relatively inexpensive compared to their peers in other countries because of the substantial government funding for education in this province. As a result, schools right here at home deliver incredibly high value-to-cost ratio versus out-of-province or international schools.

I mention this because I often meet parents who are willing to send their children to very expensive schools in the United States. Some have their eye on elite Ivy League schools like Harvard. Others prefer colleges that are less well known, such as Pepperdine in Malibu, California or many of the small liberal arts colleges in the Northeast like Bates. 

Assess the full financial impact

To assess the financial implications of these decisions, consider a comparison between tuition for a science student who goes on to medical school at the University of Toronto (UofT), the top university in Canada, or to Harvard. Tuition for a year of undergraduate study at UofT costs less than $7,000, while the equivalent at Harvard is approximately $70K USD per year. That means that if you support your child through four years of undergraduate education, you will be paying roughly $28K at UofT and $280K at Harvard.

Certainly, there are arguments to be made in favour of attending a prestigious institution for graduate or professional education, but I can’t help but wonder how much of a difference it makes for undergraduate education. If money is no object, I can see pursuing whatever option appeals. But for many business owners, huge payments for education are not realistic and will burden the child and the parents for many years to come. These costs also limit a child’s ability to contribute a significant portion of the funds for their education.

I’m not saying that some universities that charge 10 times the cost of Toronto schools are not worth the tuition. I’m saying that these schools may burden one’s financial future for many years and create a long-term struggle with student debt.

Here are 6 creative solutions for how the costs of their learning could be covered:

1) Scholarships

I motivated my children to work very hard in high school and apply for scholarships that offered them an opportunity to obtain full or partial funding for their tuition. Both of my older children had approximately 50% of their tuition covered and my daughter, who is still in high school, is currently on track to make it three for three. (Does that make me a perfect dad?!)

2) Working During School

As students, both my wife and I worked during the school year and generated funds for discretionary expenses such date nights and clothing. Unfortunately, I have seen too many kids live in mom and dad’s basement, play video games during the day and party at night, which is easy to do when you are spending other people’s money!

3) Summer Work

A big portion of tuition can be paid by working during the summer months, which usually starts in mid-April and runs until the end of August.

4) Registered Education Savings Plan (RESP)

For many years, I have invested money into a Registered Education Savings Plan (RESP) for my children’s post-secondary education. The rules governing these plans have changed many times over the past decade, but at this point, annual contributions of $2,500 per year are permitted and lead to a 20% government grant – or $500. (It is almost like receiving free money).

The current maximum that can be invested in a RESP is $50,000, and the maximum lifetime grant is $7,200 per child. In addition to the annual grant, the portion withdrawn in excess of the amount invested is taxed in the hands of the child, who is typically in a low-income tax bracket because they are a student. So the plan provides up to $7,200 of grants and tax-deferred growth, for up to 36 years (under certain conditions).

5) Parents’ personal savings

I have paid a portion of my sons’ tuitions from my personal savings and cash flows, and I expect to do the same for my daughter. The percentage I paid was less than 50% of undergraduate tuition and about 25% for graduate school.

6) My children’s student loans

Both my older children didn’t accumulate debt for their undergrad degrees but did accumulate a small and manageable loan for grad school.

If you’re unsure how you will pay for your children’s education, contact us and we can run the math and help create a plan with you.

The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier. Dri Financial Group’s proprietary Wealth Navigator Process is designed with you in mind. Its structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the Wealth Navigator Process or our team, call me any time at 416.355.6370 or email me at richard.dri@scotiawealth.com.

Beyond helping you manage your finances, we take pride in motivating, educating and helping you expand your financial literacy. We are here to answer any questions you have and to help you feel in control of your financial destiny.

If you are ready to dive deeper into your financial literacy journey, we have a wide range of free tools and educational resources available.

• Subscribe to our Never Retire Newsletter
• Contact us to order a complimentary e-book
• Check-out our latest Wealth Navigator podcast
• Follow us on social!

source https://richarddri.ca/how-is-paying-for-university-tuition-different-for-a-business-owner/

U.S. stocks on Monday wrapped up their best month since April, continuing a rally fueled by Fed stimulus, signs of economic revival and hopes for a coronavirus vaccine. As of Monday, the benchmark S&P 500 had surged 35% since March, its largest five-month percentage gain since 1938. The index advanced 7% for August but finished off by 8 points on Monday. The TSX Composite closed down 191 points, weighed down by the energy sector, which fell by 3%.

Canadian and U.S. stocks ended higher on Tuesday with tech stocks once again leading the charge. Positive sentiment was fueled by data from the Institute for Supply Management, which showed U.S. manufacturing activity accelerated in August, growing for the third straight month.

A broad rally in U.S. stocks Wednesday sent the Dow above 29,000 for the first time since February, along with new closing records for the S&P and Nasdaq Composite. The rally was fueled in part by data showing the U.S. nonfarm private sector added more than 425,000 jobs in August, still well below an expected gain of more than 1 million jobs. By Wednesday’s close, the Dow was up more than 450 points, while the TSX added just 53, as energy shares weighed on the index.

However, any weekly gains in U.S. markets were erased Thursday, driven by a steep decline in U.S. tech shares, many of which have led the market higher in recent months. On the economic front, new U.S. jobs data released Thursday showed that 881,000 Americans applied for unemployment benefits last week. Unemployment claims have continued to drop but remain near historic highs. Also weighing on sentiment was news that U.S. lawmakers still remain at an impasse over a new coronavirus relief package, further hampering hopes for a timely recovery. By Thursday’s close, the Dow dropped more than 800 points, the S&P surrendered 126, while the Nasdaq lost 598, or nearly 5%. In Canada, the TSX lost 249.

Read more…

source https://richarddri.ca/u-s-markets-start-week-strong-but-lose-ground-thursday-in-tech-sell-off/

Investor optimism over a potential treatment for coronavirus sent N.A. stocks climbing on Monday. The S&P 500 and Nasdaq both hit new closing highs, while the TSX added more than 100 points, as the energy sector rallied more than 4%.

It was another record close Tuesday for the S&P and Nasdaq, as U.S. and Chinese officials affirmed their commitment to the phase-one trade accords signed in January. The Dow, however, ended the session lower, while the TSX was fairly flat, despite spiking oil prices in light of hurricanes barreling down on the U.S. Gulf Coast. In U.S. economic data, the Conference Board’s Consumer Confidence index hit a six-year low this month, while new home sales surged to a 13-year high in July.

U.S. stocks set records again Wednesday, buoyed by a rally in mega-cap tech shares and data showing that orders for durable goods in the U.S. surged 11% in July. By Wednesday’s close, the Nasdaq was up nearly 200 points, while the TSX added 172, thanks in large part to the tech and financials sectors.

However, U.S. stocks wavered Thursday after Fed Chair Jerome Powell said the central bank would abandon its policy of pre-emptively raising rates to head off inflation. The takeaway for many is that it may be quite a while before the Fed even considers raising interest rates. The news sent 10-year Treasury yields up to 0.736%, extending this week’s selloff in U.S. government bonds. By Thursday’s close the Dow and S&P finished in positive territory, while the Nasdaq and TSX were slightly down.

Finally, the number of Americans applying for jobless benefits fell a bit last week to 1 million, however, the number of unemployed remains historically high.

Read more…

source https://richarddri.ca/sp-500-nasdaq-keep-climbing-fed-revamps-inflation-policy/

Last week, I wrote about my financial plan during COVID-19. If you have not had a chance to read the blog, I invite you to read it here. This week, I want to share how the observations I’ve made during this pandemic have reshaped my views regarding my post-COVID financial plan.

But first, an update on how my family and I are doing.

The restaurant that Lina, Evan and Ally work for has reopened and stayed afloat through all the government restrictions put in place. Lina was called back to help manage it, and Evan and Ally resumed their shifts.

My family is back to work. But the shifts are shorter to keep everyone safe, and the wages are a fraction of what they were before the pandemic. Still, we are all relieved and grateful. And we remain vigilant about our budget and will continue to be so for the foreseeable future.

As my family and I adjust to life in the midst of COVID-19 and then after, questions still plague me during sleepless nights.

Am I crisis proof? And, by extension, is my family?

By now, we all recognize that COVID-19 has caused not only a global health crisis, but a global recession that may take several years to recover from. Though there are signs of recovery from this unforeseen tidal wave of loss, I wonder when our society will experience another crisis of such magnitude.

When will the next recession happen? Because as history has shown, a chaotic event comes at least once in every generation that shifts humanity on its axis.

This may all be post-traumatic stress. I may be bracing for life-changing events that will not appear again for quite some time. But still I must ask, am I crisis proof? Will my family and I remain resilient during the next recession (which, in my mind, will undoubtedly happen)?

But I AM optimistic, because as I consider these questions, there are three areas in my financial plan that I can strengthen to sleep well at night again:

• Our “rainy day” fund must be increased to cover at least two years’ worth of expenses.
• Our future medical and disability expenses must be covered.
• We must always be prepared to help our children.

What areas should you look at when trying to make your finances crisis-proof?

1. Your Rainy Day fund
2. Medical and disability insurance
3. Financial support fund for dependents and family

1. Bolstering our “rainy day” fund

One of the first observations I made when the pandemic arrived was how vulnerable some industries and businesses were.

Those employed in the restaurant, hospitality, airline, or entertainment industries were almost immediately furloughed. And so many small businesses have not survived the economic shutdowns and will never be able to hire back their employees.

Though governments all over the world have done much for their citizens, it may not be enough to support families until the recession is over.

As I wrote last week, my current rainy day fund holds approximately six months’ worth of rent payment savings. Most financial planning literature suggests that a fund like this should hold approximately three to six months’ worth of major household or business expenses.

But the current recession is already proving to last longer than six months, which means that a typical rainy day fund could potentially run out before an unemployed person finds a new job or a business reopens.

If we agree that the current recession may last two years or longer, then I think we should consider updating the rule of thumb from six months to at least two years’ worth of savings.

So, the first adjustment I must make is to increase our six months of rental savings to two years of all household expenses, rent included. That should keep our family afloat in case I lose my job or Lina must stop working because the restaurant closes permanently.

I plan to encourage my children to also increase their savings from the current 10% to 20-30% and even more when they truly launch their independence away from home.

Increasing our savings requires that we keep to our current strategy of living on one source of income and adding all the wages that Lina earns to our rainy day fund. Then, if we add those savings into a tactical dividend investment strategy, we should meet our goal of covering two years of expenses within five years.

2. Medical and disability expenses

The second observation I made in the early days of the pandemic is that many small businesses do not provide medical and/or disability coverage to their employees for various reasons.

I am fortunate to be working for a large company that has made it possible for me to purchase affordable medical and disability insurance. However, my family does not have those same benefits in their current employment. While Lina is covered under my drug and disability insurance plan, my children are now adults not covered by my benefits.

In order to receive medical and disability coverage, my children would have to purchase their own private policies directly from one of the Canadian insurance companies.

In Ontario, a basic health plan for a young adult, which includes dental, vision care, and travel, could cost approximately $125 to $170 per month. In addition, depending on the earned income, benefit amount, waiting period and any other selected provisions (for example, cost of living adjustment), a young adult is looking to potentially pay approximately $25 to $50 per month for disability coverage.

For older adults in their forties or fifties, the combined cost of private health and disability insurance is significantly higher and could potentially be as much as $500 to $600 per month.

To ensure that our family has sufficient health and disability insurance coverage, we will have to make adjustments to our current budgets to set aside an additional sum to cover potential future expenses.

3. Taking care of family

My third observation during these difficult times is how important it is to stay connected and be supportive of family.

Despite all the challenges of the pandemic, my children are looking to launch their independence in Vancouver next year. My son Evan is even thinking of changing careers, since he too has made some observations about the industry he’s currently employed in.

I am concerned about their move, as it will take them further away from their support systems at home in Toronto. I also worry that finding work in a new city during times of recession may be even more difficult.

But my kids have shown that they are resilient in the face of challenge and were saving for the move to Vancouver even before the pandemic began. And they know that no matter what, they can always come home if they need to reset and start fresh.

Still, as a parent, I always want to be able to help my kids. In the recent past, it has been our policy to give them monetary gifts for birthdays and Christmas, earmarked for their RRSP savings. Lina and I plan to maintain this policy, which means we will have to deliberately set aside a yearly gift fund.

We further plan to help Ally and Evan sharpen their financial planning skills through continued family discussions, so they too can budget for a bolstered rainy day fund and for health and disability insurance coverage. I believe that if our family is responsible and deliberate with finances, we will not burden each other financially in the future.

I urge you to review financial plans and ask yourself, am I crisis proof? If the answer is not a confident yes, then it is time for an adjustment. It may not be easy and there may be sacrifice, but you will sleep better at night.

Never Retire Profile of the Week

Larry King

It’s unlikely that you’ve never seen a Larry King interview. During his 60-year career, he’s conducted over 40,000 of them—and continues to do so on his current show, “Larry King Now,” which airs on Ora TV, a production company he co-founded. He is best known for “Larry King Live” on CNN, which ran from 1985-2010. Born in Brooklyn, New York in 1933, King has worked as a disc jockey, radio show host, newspaper journalist, sports commentator and, of course, television talk show host. The prolific conversationalist tells a funny story about how, having been born Lawrence Harvey Geiger, he came to be King: “I changed my name at the insistence of the general manager of the radio station I worked at. He happened to be looking at an ad for ‘Kings’ Wholesale Liquors’ in the newspaper at the time and Voilà! from that day forward, I was Larry King. I’m just glad he didn’t come across an ad for Vaseline.” Having interviewed countless politicians, actors, musicians, athletes and other notable people—from JFK and Vladimir Putin to Paul McCartney and Lady Gaga—King has long been a household name.

David Suzuki

The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier. Dri Financial Group’s proprietary Wealth Navigator Process is designed with you in mind. Its structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the Wealth Navigator Process or our team, call me any time at 416.355.6370 or email me at richard.dri@scotiawealth.com.

Beyond helping you manage your finances, we take pride in motivating, educating and helping you expand your financial literacy. We are here to answer any questions you have and to help you feel in control of your financial destiny.

If you are ready to dive deeper into your financial literacy journey, we have a wide range of free tools and educational resources available.

• Subscribe to our Never Retire Newsletter
• Contact us to order a complimentary e-book
• Check-out our latest Wealth Navigator podcast
• Follow us on social!

source https://richarddri.ca/is-my-financial-plan-crisis-proof/

U.S. tech stocks turned in another powerful performance Monday, helping the Nasdaq to a record-high close, while the S&P 500 approached its own record. In Canada, the TSX rose 141 points, powered by a 5% jump in the materials sector, as gold stocks rallied.

It was another strong showing for the S&P 500 on Tuesday, as the index closed at its highest level ever. The S&P’s stunning turnaround, in just 126 trading days, marked the index’s fastest-ever recovery from a bear market. As of Tuesday, the S&P was up 5% for the year, while the Dow was still down more than 2% in 2020. One reason for the day’s optimism was a strong showing from the U.S. housing sector, with new construction hitting levels not seen in four years. By Tuesday’s close, the S&P and Nasdaq finished in positive territory, while the Dow and TSX retreated.

All four major N.A. markets lost ground on Wednesday, however, as the Fed released the minutes of its July meeting, which underscored the deep uncertainty regarding the U.S. economic recovery. The TSX finished down by nearly 50 points as declining gold prices weighed down the materials sector.

Hopes for a quick recovery waned even further Thursday as the number of new U.S. jobless claims increased by 135,00 to 1.1 million for the week ended August 15. Despite the jobs data, U.S. markets ended the day in positive territory, with the Nasdaq hitting another record high. In Canada, the TSX was up slightly, while the loonie declined against the greenback on Thursday after hitting a seven-month high on Wednesday.

Read more…

source https://richarddri.ca/sp-500-nasdaq-hit-new-closing-highs-u-s-jobless-claims-increase/