Debt & Frugality

As Didi says in the novel (Findependence Day), “There’s no point climbing the Tower of Wealth when you’re still mired in the basement of debt.” If you owe credit-card debt still charging an usurous 20% per annum, forget about building wealth: focus on eliminating that debt. And once done, focus on paying off your mortgage. As Theo says in the novel, “The foundation of financial independence is a paid-for house.”

5 ways post-secondary students can save money

By Brandon Silbermann

Special to the Financial Independence Hub

When it comes to education, there are important financial lessons to be learned by post-secondary students outside of class.

According to Statistics Canada, there are currently more than two million full and part-time students at Canadian universities and colleges, and for those who leave home to study, a four-year university education could cost as much as $90,000. The road to responsible money management is a lifelong journey and many post-secondary students would benefit from ongoing practice: no matter their financial situation.

As a millennial financial advisor with freedom to provide impartial advice to helps young adults and parents prepare for life on campus, here are my top five tips and tricks to help students save money and put themselves on a solid financial footing throughout the school year.

1.) Look for scholarships and bursaries

There are many different scholarships out there available to students based on factors such as their choice of major, financial need, academic performance and community involvement. Surprisingly, however, many scholarships and bursaries go unclaimed each year. Although it may be time-consuming to find all the options available to you, contacting your school to get a directory is a great start and may be well worth the effort. You can also access Canada.ca’s student financial assistance section to learn what is available to you and how to apply for help to pay for your post-secondary education.

2.) Hone your cooking skills and save big

Buying food at restaurants every day can quickly add up and put a damper on a limited student budget. Shopping at a local market or on student discount days at a grocery store is a smarter route. For example, Zehrs – a Loblaws brand grocery store – offer 10 per cent discounts off students’ groceries on Tuesdays if they present their student cards in Waterloo. You can also order a basket of ugly but delicious produce via second-life.ca or browse through your local grocery store for discounted fruits and vegetables nearing expiry. Certain supermarkets, such as Loblaws, Sobeys or Metro, now offer a range of “imperfect” fresh products at affordable prices.

3.) Pay down highest interest rate debt first

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Will investing in your child’s business endanger your retirement?

By Dave Faulkner, CLU, CFP

Special to the Financial Independence Hub

Your son or daughter just asked you for a short-term loan to help them start a business. If everything goes well, they will pay you back with interest in a few years. But what if they never pay you back? How much will it impact your ability to enjoy your retirement?

RediNest is a personal financial planning application that you can use to get answers to your retirement planning questions.

How RediNest can help

John and Joan plan to retire in 10 years. Although they do not have a pension plan, they have $300,000 in RRSP and $100,000 in TFSA investments. With no mortgage, they are able to contribute the maximum each year to both RRSP and TFSA.

Using RediNest they calculated their Retirement Potential™ at $73,900 of after-tax retirement income, slightly more than the Canadian average* of $69,000.

Their son has asked them to invest $100,000 in his business. He has prepared a business plan, and expects to repay the full amount over five years. John and Joan want to fully understand the risks before loaning their son the money, so they modified their RediNest plan and reduced their TFSA balance to zero.

Assuming a worst case scenario where they never get their money back, John and Joan re-calculated their Retirement Potential to be $67,800, a reduction of over $6,000 / year for life! A significant amount when you consider it is after-tax and fully indexed for inflation. If they never get their money back, John and Joan want to understand the options available to them to restore their Retirement Potential, as they do not want to have less disposable income in retirement.

Using RediNest, John and Joan discovered they would have to increase their monthly savings by over $900/month for the next 10 years: something they feel they cannot do.

Deferring retirement by a year

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6 types of loans for people with poor Credit

By Emily Roberts

(Sponsored Content)

Even if you’re used to getting rejected because of your bad credit, there’s no need to panic. There are plenty of lenders offering solutions for people such as yourself. You just need to make sure you know all of your options and understand what each offers. The following are the main types of bad credit loans you should be considering when a traditional loan is simply not an option.

1.) Guarantor Loans

Guarantor loans are unsecured loans that can help you borrow as little as £100 [£1 = US$1.33] and as much as £15,000 even with a poor credit history. They are among the most popular types of loans because they’re cheaper and more flexible than other forms of borrowing with a bad credit.

As a matter of fact, the credit history and score of the guarantor will be more important, making them one of the best for people with poor credit or with blemishes on their report. They’re also ideal for people with no credit history. Furthermore, guarantor loans can also help borrowers improve their credit rating after successfully repaying them.

2.) Personal Loans

The great thing about personal loans is that you can borrow large sums over one to five years, all this without providing any collateral or security. Less than perfect credit scores are accepted by many lenders and you don’t need a guarantor either. Opal Loans, for example, offers unsecured loans to people with bad credit provided they have a salary of at least £800 per month.

3.) Secured Loans

Secured loans allow borrowers to borrow even larger sums than regular unsecured loans, and the sum can be repaid up to 25 years in some cases. Poor credit plans are available, which makes them a viable option for those with a not-so-perfect credit score. However, you do need to own a home and have a mortgage in order to be eligible for secured loans because they are secured on the value of the property.

4. Logbook Loans

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How mortgage rule changes impact affordability

By Alyssa Furtado

Special to the Financial Independence Hub

The mortgage market in Canada is heavily regulated. Both the federal government and the Canada Mortgage and Housing Corporation (CMHC) control almost every aspect of residential mortgage lending.

The government decides what criteria people must meet when getting a mortgage in Canada. Rules apply to almost every aspect of the mortgage, ranging from the maximum amortization to the minimum down payment required when buying a home.

In the last few years, the government has taken action in response to rapidly rising house prices in an effort to keep people from taking on mortgages they can’t afford. A number of changes have been made to mortgage rules since 2012. Dry descriptions of the changes make it difficult to understand their true effect.

Instead, let’s take a look at some examples of how some recent mortgage rule changes affect their ability to borrow.

Sarah and Rachel

Even though Sarah and Rachel are choosing a three-year fixed mortgage with a rate of 2.39% for their condo purchase, new “stress testing” rules introduced in October 2016 mean they have to qualify at a substantially higher mortgage rate than they’ll actually get. The qualifying rate is set by the Bank of Canada (BoC), and is currently 4.84%. When checking a mortgage payment calculator, they find that even though their monthly payment will be $2,352 at their chosen rate, they’ll need to prove they can afford payments of $3,043.

A new rule pertaining to minimum down payments that came into effect in February 2016 will apply to Sarah and Rachel as well. The minimum down payment on a home sold for over $500,000 was raised to 5% of the first $500,000, and 10% of any amount thereafter. For their $540,000 purchase, Sarah and Rachel have to save a little longer: the minimum down payment went up to $29,000 from $27,000. They’ll also need to pay for CMHC insurance since their down payment is less than 20%. Continue Reading…

6 unexpected expenses you need to prepare for

By Lidia Staron

Special to the Financial Independence Hub

“Life is like a box of chocolates. You never know what you’re gonna get.”

Truer words were never spoken. We all know how life can be full of surprises: some of them happy while others can be a huge pain in the backside.

We’re talking about unexpected expenses here. Even when you’ve already set your budget,  you’re sticking with it, and you’ve got some savings set aside, you can still get knocked off your financial track due to a cost you never anticipated paying for. While you were patting yourself on the back for your financial savviness, life was preparing to throw you a curveball. To help you expect the unexpected and plan your savings accordingly, we’ve listed six of the most overlooked costs that are just waiting for you around the corner.

1.) Home repairs or replacements

It’s a fact of life that everything breaks down eventually, especially if it experiences everyday wear and tear. Your home won’t last forever, especially since you and your family are living inside it everyday. Anything that breaks down will need to be taken care of right away. Plumbing, electricity, a leaking roof, a flooded kitchen, a broken oven, termites …  all  these are things you never think of saving for when you plan your budget.

2.)  Health-related bills (Dental and vision care)

We all know you need to save up for those emergency room visits and prescriptions you may need to fill. But have you ever considered that you may suddenly need to pay your dentist or eye doctor a visit? If you’ve ever had a really bad toothache that turned out to be a root canal in your future, then you know this is something that needs to be placed in your “health budget” right away. Continue Reading…