All posts by Financial Independence Hub

Debt Review: How Debt Relief options affect your Credit

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By Jackson Maven

Special to the Financial Independence Hub

“Debt,” though a small word, has a deeper impact. Settling debt makes people worried and sometimes may even disturb their entire finances. There are numerous ways by which one can settle debt, but the concern remains to find a way that would not cause any negative impact on Credit.

This article we will discuss ways in which the debt relief plan may affect your credit.

1.) Is Debt Settlement a good idea?

Debt settlement may cost a fortune for some; whereas, others may end up paying less than what they owed.

Non-payment of credit-card bills or other amounts due to the creditors for six months or more, worries creditors. In such a situation, you can make a debt settlement offer to your creditors. Here you can offer to pay the minimum amount that you can easily pay, against the total amount due. If your creditors want to close your account and are looking forward to getting whatever amount possible, they might accept the offer. On the contrary, if they demand full repayment, they may either transfer your case to a collection agency or may even take you to court.

2.) A few things to remember

Debts constitute a third of the credit score. Paying off debts helps in improving this part of the credit score. Impact of debt on the credit score depends on many factors. Hence, if you want to know the impact of debt on your credit score, you need to have a complete understanding of your credit history. Based on this, you can select the debt relief option that has the least impact on your credit score. Hence before selecting the credit relief option, a credit check is a must.

3.) Credit Utilization Impact

Credit utilization = Ratio of Pending credit card payment/Total Credit Card Limit *100

Lower ratio of credit utilization is always welcome. Higher credit utilization ratio results in lower credit score. In addition to this, it also reflects that lending you money can be quite risky as you are already overextended.

Debt Relief Options

i) Counselling

You can opt for credit counselling. In this, you can discuss your debt situation with a professional counsellor. A counsellor can advise you the best way to pay off your debts. The best part is these counselling sessions would have no impact on the credit score. But, if your counsellor registers you in a management or repayment plan, then that plan may have some effect on your credit score. Continue Reading…

Retirement planning software and the 70% Rule

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By Ian Moyer

(Sponsor Content)

Individuals who are following conventional retirement-planning may be in disbelief as they approach retirement and discover that they cannot afford to retire just yet or are likely to outlive their retirement funds.

The 70% Rule

Common practice is to save enough so that your annual retirement income equals about 70% or more of your current income. Of course, many Canadians are not aware of such information entirely and have saved little or not enough for their retirement.

With this being said, there are still some fundamental issues with this understanding. One, few people have a complete understanding of their retirement resources or a realistic view of their retirement funds. In some cases, 70% retirement pay usually isn’t enough to sustain them in retirement.

Example

We’ll use the fictitious name Tom for this example. Tom is making $60,000 annually living a modest lifestyle. Tom will qualify for CPP and OAS. Tom only contributes through his employer-directed contribution program, which is $2500 a year.

Tom also saves $13,000 in a regular checking account, an additional $3,000 in non-registered savings and $12,000. Tom is a conservative investor and he thought he was doing pretty well saving what he can and living a modest lifestyle.

Using Cascades to do retirement planning at the age of 54 using the above figures. Tom discovers his annual income will only be approximately $38,250. After taxes per year. Going back to the common practice of 70% Tom needed minimum $42,000 per year as retirement income. This leaves Tom needing to find a way to make an additional $3750 a year. Tom would need a part-time job, choose not to retire or drastically change his lifestyle in retirement.

For a lot of individuals, they will have to work longer than they planned or seek part-time employment during retirement. This could be a problem for retirees and employers. In order to navigate this issue before it starts employers need to assist their employees with retirement planning.

Sample Cascades recommendations for maximizing an estate

How can we change this?

The first step would be for employers to become more effective at helping employees realistically prepare for and manage their retirement. For example, this could include a process or program to build up wealth accumulation prior to retirement, which could be a mix of LIRA, Capital Gains or RRSP just to name a few.

A second step would be for employees to change their behaviours and thoughts around retirement savings. Employees can make changes by becoming more proactive when it comes to saving. When some individuals think about saving for retirement after they attend school, buy a home, raise children and send them to college sometimes it can be too late. Continue Reading…

3 ways to start Real Estate investing and build Passive Income

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By Catherine Way

Special to the Financial Independence Hub

Real estate investing has never been easier. With the surge of house-flipping success stories flooding social media, no wonder more people are looking to invest.

With more ways to start real estate investing, starting is the hardest step many face.

Building passive income is a necessity for any successful real estate investor, but owning and managing rentals with no experience can end badly for some.

Luckily there are a few easy ways to start investing to try out which investment style is best for you.

If you don’t know where to start for your first investment, read on!

Airbnb rentals

“Many investors are using the convenience of this app to start building their passive income. Airbnb is a great tool to have short term tenants, and to learn the basics of being a good landlord. With the app doing all the work to find tenants for you, as long as you are in a rea that sees travels, you can start making passive income with little to no investment. In fact some investors are creating only Airbnb rentals spaces because of the demand and profit from it.” – Loren Howard, Prime Plus Mortgages: Hard Money Lender Arizona.

Airbnb is a great app for first-time investors wanting to make passive income. In fact, there are many resource articles online on how to build an Airbnb business. Most people rent out spare rooms or guest houses to Airbnb guests to stay in, and operates like a mini-hotel service.

For those yearning to be real estate investors who do not have whole homes dedicated to investments, this is a great way to start building up your passive income to pursue other projects, or just learn the basics of taking care of tenants.

Airbnb is all over the world and their popularity is still on the rise. The app makes it simple to find tenants for properties, whether short or long term, and it only requires having a good space to start hosting. That means spare rooms or guest houses can begin to make you money, with little to no investment on your end. Continue Reading…

Part-time job options for Seniors

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Photo Credit: Unsplash.com

By Sharon Wagner

Special to the Financial Independence Hub

Retirement is your time to relax. You don’t have to report to a full-time job and the kids are all grown up, so it can be tempting to simply kick your feet up and do absolutely nothing. Staying busy during your retirement years will help keep you healthy, however, and is even shown to improve happiness. A part-time job provides a challenge and gives you purpose.

Getting a part-time job also has obvious financial benefits. Many Americans [and Canadians!] fear running out of money in retirement. With a steady income flow, you will have to rely less heavily on savings or pension accounts. You will also have more money to spend on hobbies you enjoy, such as traveling or trying out new restaurants. Discover three part-time jobs for retirees below.

If you love culture: work in a museum

If you have an appreciation for art, a gig at a museum may be the perfect choice for you. Working as a tour guide or customer service rep will require you to interact with visitors regularly. Responsibilities might include handling inquiries, answering questions, and ringing up purchases. You’ll also learn and memorize new facts. Challenging your brain like this is important to stave off the mental decline that may otherwise come with age.

As people age, they also lose muscle mass due to a condition known as sarcopenia. A museum job will require you to be on your feet, standing and walking around, and can fight such decline. Research has further shown that attending cultural events improves health among seniors, resulting in lower blood pressure, for instance. You can scout out possible positions via an online museum job search platform.

 If you enjoy working with kids: become a teacher

According to a Stanford University study, both kids and seniors benefit when they come into contact. Older adults who work with kids have been seen to welcome the sense of purpose the interactions give them. The intergenerational relationships also benefit little ones, who can learn from an older person’s life experiences, patience, and emotional stability. Continue Reading…

Leveraging life insurance: a smart financial planning strategy

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By Michael Pilz

Special to the Financial Independence Hub

Life insurance policies can represent a significant, untapped source of capital. While life insurance is often strictly thought of as a death benefit, many permanent policies also have a cash component. This cash component can be leveraged to secure a line of credit that can be used for a variety of purposes, such as a means of supplementing retirement income or to access upfront capital quickly, perhaps to take advantage of an investment opportunity.

An insurance policy that has cash value should be on the table as an option for those who either need or want to access cash by using some of the assets built up over their lifetime. Thinking of insurance differently – and communicating how it can be used to create a living benefit – can open up a world of possibilities.

Rethinking Whole Life Insurance

Insurance policies are great investment vehicles for those who have an immediate need for death benefit coverage, and would also like to park and protect capital in a tax-sheltered vehicle during their working years. But what happens when those who are older, a sizeable chunk of cash has accumulated over the years, and there’s a better use for this cash now instead of passing it on to beneficiaries down the road? And what if they want to leverage the cash value of their policy while also leaving their policy intact?

The Equitable Bank Cash Surrender Value (CSV) Line of Credit enables borrowers to convert the value of their insurance policy into cash. It is a non-amortizing loan product secured against the cash surrender value of a whole life insurance policy. Unlike a traditional loan or line of credit, the interest from the CSV Line of Credit capitalizes and is typically repaid through insurance proceeds at the time of policy redemption. However, a borrower can also opt to make ongoing payments or to repay the entire loan at any time without incurring a penalty.

Does a CSV Line of Credit make sense?

Leveraging a life insurance policy’s cash value can help fulfill a variety of different needs or wants.

Many can benefit from tapping into the cash value that has built up within their policy during their working years to supplement retirement income later in life. High-income earners who run out of RRSP and TFSA contribution room and have excess cash may find their insurance policy especially valuable for this purpose. Think of it as killing two birds with one stone: during prime working years, a whole life insurance policy meets an immediate death benefit need while serving as a mechanism for building up a nest egg that can be leveraged in the future when there’s a need for cash. Continue Reading…