The SECRETS to Financial INDEPENDENCE In Canada!

If you're going to be financially independent, one of the principles that you're going to have to be comfortable, especially as you get started off in this journey, is you have to spend less than you make. If you don't, you know, you put yourself in a predicament that you're so much dependent on how things are going to happen around you and less control.

What are the secrets to financial independence? It's something that's talked about a lot and certainly something that most people are seeking in their lives is to have that final financial independence so you can choose how you spend your time. I'm here with my colleague, Dan Allen. I'm Liz Lamond, and we're going to talk about five secrets to financial independence. The last one is the best. We're going to save the best for last. We want to talk about first, like, when you think about what you currently have, we're wondering, are you actually truly free? So we want you to do a bit of a deep dive into what you've already created and think about what would it take to actually be truly free. So, for example, people who have assets in one particular asset class, there may be some limitations around what could happen if the lever swings in a different direction. So what are the limitations around liquidity, even in using those assets? Limitations around borrowing all sorts of pieces that might change should you need to access cash more than you're expecting? And just looking at what assets can you create that actually give you that level of flexibility?

You know, we've always heard this. It's kind of a cliche to say it, but, you know, do you have your eggs all in one basket, or what type of baskets do you have your eggs in? And really, do you have a certainty of freedom that comes around that? So as you were speaking, I thought of an example that I lived through. So it was back in the winter of 2009. Yes, I'm old. So I did live through the winter of 2009. In fact, I was pretty fortunate to spend time in the Hawaiian Islands during that winter. And the thing that I remember from that experience was I ran into this couple from the US and we got to chat with them, got to talking to them about where they're from and all those good things. And they go, well, normally we're here with a bunch of our friends and colleagues, but, you know, this year a lot of them couldn't come. So he started to explain how, you know, that stock correction in 2008, 2009, really impacted people's ability to do what they were normally doing. So when you think about it, were they truly free? They had everything that they were dependent on in a position that changed some of their freedom for them. So I just thought that was a real eye opener for me.

That ties really nicely into point number two, which is, I'm sure you've heard the old adage of speaking spend less than you make. But the really important part of that is preserving your capital. So there's a certain amount of money that you're going to allocate towards creating investments that are going to provide cash flow for you. Many structures that are out there are relying on the strategy that you're going to start spending down on that capital or life happens and you need to spend down on that capital. That's the thing that's really going to hamper your financial independence because if you erode that primary capital, your returns will be very different. So Dan's story before was really good illustration of that, is that people had to start drawing on their primary capital to actually survive that downturn. And that in itself created a different situation for them where they were no longer financially independent.

Yeah. As you were speaking to you and I got thinking about spending less than I make. And to me that's a fundamental. If you're going to be financially independent, one of the principles that you're going to have to be comfortable, especially as you get started off in this journey, is you have to spend less than you make. If you don't, you put yourself in a predicament that you're so much dependent on how things are going to happen around you and less control. And if you don't have control and one thing about spending less than you make gives you some element of control. And I think it's really important that as you think about financial independence, it's a key element. I go through a multitude of books that I've read in the past and they all talked about you have to develop that habit of saving. What I always encourage people is to think about it first and foremost. Like you should be paying yourself first and right off the bat instead of hoping that if this is a good month, I'm going to have something to put away. I think we need to change our mindset to ensure that we are spending less than we make by taking it right off the top and making it something that you don't even miss because it's just something you always do.

I think another component of that is when people get an increase in their income, they may be an increase in their salary. Or a bonus or a tax return or some other kind of money coming into your life. Very carefully think about what would be the cost if you just spent it. Now, sure, you might enjoy getting that, that toy, but what if you could do something else with that money? So people who are already used to living on a certain amount of income and their income increases, way to fast track your financial independence. Goal is to continue to still live on the same amount of money. And that additional money that's coming into your household now goes towards accelerating that goal, towards your financial independence.

All of you that are watching this, you probably have experienced that at some point in life. Just what Liz was talking about, which, you know, you got a pay increase and you go, okay, well that's nice. And then after a little bit of time goes by, you go, okay, so where did all that money go? And it's just human behavior. And it's just like, you know, Parkinson's Law, one, we speak about lots. And that's where you know, your expenses will rise to find that new level of income. And as Liz explained, boy, what a great time to get control of making a difference is when you happen to get some increase in pay. Just utilize that as a great way to start changing an outcome for you and your family.

So, Dan, change is inevitable. I think most of us try and pretend that it's not, but if you look at our lives over the last while pandemic changed things in ways that we couldn't have imagined. Change happened in 2008, 2009, as we spoke about, and having a strategy that actually allows for that change to happen. So previously people would expect to be retired for probably five or so years before they passed on, whereas now people are looking at retirement timeframes of 20, 30 plus years. And so I think most people would agree that there is likely to be a change in the market over a 20 to 30 year time frame. So just being aware that whatever you're setting up, you need to be able to cater for the fact that that change is inevitable. There will be a change. We're not saying whether it's going to be up or down, but either way there will be a change. And that change, how are you able to adapt to that? How is your asset base able to cope with those changes that are coming along at some point during the time that you're relying on this passive income?

And sometimes history is not a good thing to consider, but a lot of times it is. And I can remember in my adult life when interest rates were over 20% well, you can imagine if that change happened today, not saying it's going to, but if that happened today, how would that change things across our country? I just recently heard a podcast, and the gentleman that was speaking on that podcast, he mentioned that in Canada, when you look at where the debt levels are getting higher and higher, it's in our homes. So prices of homes go up, interest rates have been really, really low for a long period of time, and people are spending more and more on their homes and they have to just to get into them. And at what point does that change? I think it's inevitable. Rates will go up, rates will go down, the home prices will go up, there'll be a correction. If you look back at the stock market and you really study how many corrections have happened over the last 20 or 30 years, there's been a multitude of corrections and it's like timing. When is that going to change, going to hit? We don't know. And how will it impact you if you're really focused on financial independence? So, yeah, change is something you should plan for because it will happen. Just all you have to do is think back and you know that that's going to repeat itself in the future.

That brings up our next point, which is the need for constant adaptation and education. Strategies that worked a couple of years ago may not work now. So there has been changes in how different industries have been impacted, businesses that have been unable to operate. There's been all sorts of changes and things that have occurred. And the ones who've actually done well during these times are the ones who've been willing to adapt. That adaptation has happened, had to happen very fast in some cases. But those businesses have pivoted and changed what they're doing. It's no different without passive income. So there is a possibility that whatever strategy that you might be using may need to be adapted or changed or moved in a slightly different direction so that you're still able to be financially independent and continue to receive the passive, the level of passive income you need to manage your expenses.

As you spoke, I thought of one word, and that's nimble. So is what you have financially set up? Is it nimble enough to be able to change as things change? So I thought that was a great point that you made, Liz. And I think for all of us, as we look at this and we think about it, how does it impact us? Like, how does it impact you? Are you nimble with what you've got sent up so that if something, you know, God forbid, something like a pandemic comes along, how much is it going to impact you and have you got it set up in a way that you could easily enough change and still have that independence that you're looking for financially?

So everyone's been very patient, Dan, and thank you for sticking with us. We're up to our big reveal of our final piece which is having that foundational asset. So Dan, please let people know, what is that foundational asset that's going to help them weather all these things that we've talked about in the previous four.

What we believe in is that if you have a platform that can, you know, a prop firm that really allows you to have control and to, you know, basically put yourself in a position that you're not going to suffer through a bunch of uncertainty because you've got this foundation for your financial well being. And it's all based on a very interesting concept and this is the book that we use to explain it. It's all based on the concept called becoming your own banker, the infinite banking concept. And in that particular concept we use dividend paying whole life insurance as the platform. So you say, well, why would you use something like that? Well, first it's proven and true. It's been in Canada longer than Canada has been a country and it has continued to do what it does all those years without fail. And it's kind of a great place to have your financial foundation. So whatever else you want to do, if you build your wealth in dividend paying whole life insurance and then you invest in real estate or you buy some other investment, you're in the market, whatever you believe you could be in to really make a difference for your family, you've got this foundation that's underneath that and it's going to give you certainty, your value, your cash value, because it has to in your dividend paying whole life insurance policy, it's going to go up, it has to by contract, it will continue to grow. So even if you have money that you have pulled out of your banking system through a dividend paying whole life insurance policy loan and something happens to your investment and it drops, you're being cushioned because of the leveling effect you can get because your cash value in your dividend paying whole life insurance policy has to go up every day by contract. So I like certainty and I like guarantees and I really love this one guarantee that comes with that platform that the cash value has to equal the death benefit by age 100. That's right in the contract. And those life companies are extremely good at doing that. They have been doing it for hundreds of years in Canada. And it just gives me certainty and it gives me control over a lot of elements that I couldn't control before. So I just love it. For a platform and whatever else you're doing financially in your life, if you can start to transition to a point where you have a foundation that you can build on to build those other investments, those other things you're doing with your life, it ups the certainty that when we get into troubled times, if you want to call them that, or changes, that you're going to have something that you can depend on for passive income. As I look at my system now and I go, okay, well, even if we had this major correction in the market, I'm still going to be okay because I've got this other foundation, source of passive income that I could use to level things off for me and my family.

I encourage you to go back and re watch what we've gone through and think about your asset base. Do you have a foundational asset? Do you have a diversity of different asset types? Types such that you can weather the different changes that we talked about that inevitably will come so that you can really, truly achieve financial independence.