All posts by Financial Independence Hub

How to save money through home warranties

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It’s a line often touted by lenders. “Mortgages are cheaper than rent,” they say. On the surface, it’s usually true. In some urban cores, many properties are grossly overpriced. However, like most sales pitches, there’s something they aren’t telling you.

Home ownership carries with it substantial financial responsibilities. In addition to your monthly mortgage payments, you’ll owe property taxes to your municipality. Do you live in a condominium? If so, you’ll also owe building fees, which pay for the upkeep of shared systems, common areas, and landscaping.

And then there is household maintenance. Every year, Americans spend an average of US$2,000 per year just to keep their homes intact. And that’s just an average: the average American household is now 37 years old. As a result, many spend more than US$2K a year on their house.

These expenses would only be mildly annoying if the economy were genuinely thriving. However, despite the stock market reaching record highs, more Americans than ever are struggling financially. 40% of us can’t cover a sudden $400 expense, and a whopping 78% live paycheck-to-paycheck.

More than ever, we’re looking for ways to rein in costs. Misguidedly, some opt to forego maintenance. This approach always backfires, though. A famous maxim says it best: pay me now or pay me (a lot more) later.

Instead, we recommend you investigate home warranties. Depending on your circumstances, they could save hundreds or even THOUSANDS per year. In this blog post, we’ll explain what home warranties are and if it is the right solution for you and your family.

What are home warranties, and how do they work?

Home warranties have been around since the 1970s. Until recently, though, most Americans had no idea what they were. Rodney Martin, CEO of America’s Preferred Home Warranty, says only 3-4% of households had them as of 2015.

There’s a simple reason why home warranties haven’t caught on. In earlier generations, the age of the average home was younger. As a result, maintenance costs were lower. Fast forward to 2018: that year, the average house in America was pushing 40 years old.

Maintenance costs are steadily rising. People are looking for answers. Accordingly, interest in home warranties is increasing.

So, what exactly are home warranties? In a nutshell, they are contracts that cover the repair/replacement cost of appliances and systems. All machines eventually break. Because it’s an expected outcome, though, homeowner’s insurance doesn’t cover them. Home warranties fill in this gaping hole, providing their holders with badly-needed peace of mind.

Let’s say your dishwasher grinds to a halt. Stepping over a river of leaking water, you grab your phone and call your home warranty provider. After confirming they cover your issue, they dispatch a repair technician. Apart from a nominal service fee, you pay nothing more out-of-pocket.

How can a home warranty save me money?

You might still be skeptical. After all, getting a home warranty means investing significant capital in something you’re unfamiliar with. Think of it like this: right now, the average American spends US$2,000 per year maintaining their home. Some years it’s less, but in others, it’s more. Continue Reading…

Cascades retirement planning software: a case study

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By Ian Moyer

(Sponsor Content)

The task of retirement income planning can be overwhelming for Canadians as they get closer to leaving the workforce. Making the right decisions can be difficult with all the possible sources of income they might have, including Old Age Security (OAS) and Canada Pension Plan (CPP), and of course, Canada’s complex tax codes don’t make it any easier. People need help.

Cascades is a Canadian retirement income calculator that takes the difficulty out of retirement income planning. In many cases it saves retirees hundreds of thousands of dollars in income tax, while showing a year-over-year road map guiding them through retirement. Who wouldn’t want to save money? But in some cases, like the one highlighted below, it’s not about extra tax savings: it’s about having enough money to last your entire retirement.

Bob and Ann’s story is based on a real-life case we came across last week, and it’s a great example of why proper retirement income planning is so important.

Meet retiree Bob, 65, and Ann, 56, still working

Bob is currently 65 and has been retired for 2 years. He was self-employed as a cabinet maker and still has his shop at home where he works part time bringing in $12,000 annually. Because he was self- employed, Bob has no defined benefit or defined contribution pensions. He currently holds about $250,000 in his RRSP, $15,500 in his TFSA, and $50,000 in a non-registered account. Bob receives close to max CPP at $12,600 and $7,248 from OAS.

Ann is originally from the United States and met Bob while he was vacationing in Florida. She is currently 56 and plans on retiring at 63 from her job as a logistics coordinator for an auto parts manufacturer. Ann brings in $57,500 annually and has a defined contribution pension currently worth about $140,000. Ann has no other savings apart from her defined contribution pension, but will receive $4,800 in CPP that she plans to start receiving as soon as she retires at 63. Because Ann hasn’t been in Canada for 40 years since the age of 18, she will only receive $3,500 annually from OAS.

Continue Reading…

Small changes that have a big impact on your Credit Score

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By Amanda Huon

Special to the Financial Independence Hub

If your goal is to boost your credit score then it’s important to know what factors affect it. There are a lot of variables that come into play when it comes to getting your perfect credit score. These variables range from payment history to credit utilization. It’s important to always be aware of your credit score because it plays a significant role in weighty decisions, such as purchasing a house, earning an amazing career, and having financial independence!

These quick tips will help you improve your credit score:

Level of Debt 

If you have a high level of debt, you’ll most likely suffer from damaged credit in one way or another. The amount of debt that you owe affects 30 per cent of your overall credit score. That’s a large chunk! However, all hope is not lost. There are always opportunities for you to repair your credit. In fact, there are credit repair companies out there that use personalized methods to help fix damaged credit score.

Payment History 

Another critical determinant of your credit score is your payment history. If you have a long history of on-time payments then your credit score is more likely to be in good condition.  However, missing a payment will negatively impact it. Of course, the longer the bill goes unpaid the greater effect it has on your credit. This is why it is extremely important to always pay your bills on time. 

Credit Usage

This tactic can yield speedy results. It can either quickly boost your credit or quickly slash it. Credit usage mainly focuses on the ratio between the balance you owe and your total credit limit on all you revolving accounts. This ultimately means that using your credit card at a lower rate can result in a better credit score.  Continue Reading…

Eight questions to ask when evaluating a stock

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By Aman Raina, SageInvestors.ca

Special to the Financial Independence Hub

The process of trying to determine what stocks to buy and sell is a very repetitive and iterative experience. I’ve analyzed thousands upon thousands of stocks and the process I’ve used for each one has been the same. For any company being evaluated, an investor must ask the same fundamental questions over and over again in order to truly assess the investment opportunity.

The level of detail required to answer these questions are a function of time you have. If you have lots of time, you can dive more deeply into the nuances and intricacies of the company’s business model. For most investors, all that is needed is an understanding of the core elements of the business.

Make no mistake; these questions have to be answered at a basic level at a minimum in order for you to have complete understanding of the company before you commit your hard earned money to buying into it. Most people I’ve had the pleasure to work with and teach often buy stocks without even knowing what the company does or sells yet they can tell you all the specs of about their vacuum cleaner they have researched for 4 months. In my Everyday Investing course I teach, I help investors answer these questions. Below I’ve listed what I’ve determined to be the 8 questions you have to ask each time when evaluating a stock.

As we go through the questions I will put them into practice by using a stock I recently purchased as an example to illustrate. I recently made a decision to buy shares in CVS Health (Ticker: CVS).

1.) What do they sell?

Stocks are pieces of paper representing ownership of businesses. Companies are not created because nature dictated they should be. Profit-generating businesses are created to sell something, be it a product and/or service that the owners perceive society will want in large quantities. When you look at companies, it is the first fundamental question to ask. What are the core products and services that the company sells? Often in larger companies this can be answered by looking at how the company is structured with products and services often having their own separate divisions. In other cases if a company is structured by geography, the product lines will be found under each regional umbrella.

There are many sources from which you can get quick sysnopsis of a company. Here’s one I pulled from Valuentum Securities that describes CVS.

“ … The 2007 merger of CVS Corp and Caremark created the largest pharmacy health care provider in the US. The company has more than 7,800 retail locations and operates in 98 of the top 100 US drugstore markets. Its PBM business serves more than 60 million plan members. The company was founded in 1892 and is headquartered in Rhode Island.

CVS recently acquired Target’s pharmacies and clinics and it will operate the acquired pharmacies in a store-within-a-store format. The deal expands its footprint of pharmacies by ~20% (adding more than 1,660) and clinics by ~8% (adding ~80 clinics)…”

CVS also purchased Aetna Insurance, one of the largest healthcare insurance providers in the US.  With this CVS aims to become a one-stop shop for health care services in the US using their drug stores as the prime distribution point.

2.) Who do they compete with?

Chances are the company is not the only one selling the same product or service. There are likely to be other companies offering a similar or slightly similar product at higher or lower price points. Understanding or being aware of the level of competition the company faces can give us insight into how large the demand is for their product and potentially how much revenue, profit and market share they can be expected to take in the future.

In the case of CVS, the company competes with other major pharmacy chains such as Walgreens, as well as the big retailers like Walmart and Costco. The acquisition of Target’s pharmacy footprint essentially makes them de facto direct retailers. With the purchase of Aetna, their competitive universe has now expanded to include the health care insurers, like United Health.

3.) Who buys their products and services?

You know what the company sells. Now you want to know who would actually buy their goods and services. Who are the main customers for the company? What are their characteristics and background? Why do they buy the product?

For CVS, their target market is anyone that is not well or anybody that is well and wants to stay that way. I’m being very simplistic here. Again, you could do a whole market research analysis or market segmentation of their client base if you have the time.

4.) Will they buy it over and over again?

How often will a company’s client base buy their products? Can they be counted on to be repeat customers? Repeat customers mean repeat revenues and the greater the repetition, the greater for long term sustainable cash flow which will ultimately bode well for the stock price. Continue Reading…

The Back Page 2020 Energy Surprise

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By Jeff Weniger, WisdomTree Investments

Special to the Financial Independence Hub

If the term “IMO 2020” doesn’t resonate with you, pay attention: it could be front-page stuff soon.

The International Maritime Organization is putting fuel cleanliness standards in place on January 1, 2020. But the shipping companies have been caught flat-footed, despite years of forewarning. Their scramble could have a bigger effect on 2019–2020 petroleum markets than OPEC deliberations.

According to the U.S. Energy Information Administration, the shipping industry used 3.9 million barrels of crude oil per day in 2016, about equivalent to Canada’s total output. The fuel supply chain could be upended, because the “light sweet” crude oil that you find in Texas is going to be in demand, while the portion of Canada’s production that is “heavy” will want for bids.

That’s because of the pollution dynamics of the oil varieties. Think about what ships use: “bunker fuel.” Filthy, thick and viscous—one step above the tar-like stuff used to pave roads. An important component of this fuel — the enemy — is sulphur, which leads to acid rain, the destruction of ocean ecosystems and respiratory ailments. And the full-scale attack on this generation’s Big Tobacco is underway.

The regulations weren’t decided yesterday, but you wouldn’t know it from the shippers’ snail-like efforts at preparedness. Outside the “Emissions Control Area” standard for areas such as the coastal waters of North America and Europe, sulphur content must fall to 0.5% by January 1, 2020, for a ship to be allowed to set sail. In some jurisdictions, violators will even face jail time.

Figure 1:  Sulphur Content: “IMO 2020” 

Figure 1_Sulphur Content IMO 2020

Heavy Western Canada Select oil, with all that thick, sticky, high-sulphur bitumen, is exactly the variety of oil that, when refined, results in the kinds of fuels the IMO is essentially banning.

Remember when Canadian oil reached a US$50 discount to light sweet West Texas Intermediate oil last year (figure 2)? Alberta was gushing oil with no easy route to buyers. The province’s OPEC-like production cuts of 325,000 barrels per day, recently reduced to 250,000 barrels, are a temporary solution. It works, as long as nothing unexpected wallops the supply/demand dynamic. Continue Reading…