All posts by Financial Independence Hub

Which came first: the Chicken or the Egg?

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By Kevin Flanagan, WisdomTree Investments
 
Special to the Financial Independence Hub
A funny thing happened recently when I walked into the office. No, this is not the setup for some joke; rather, I’m referring to what I heard regarding movement in the stock and bond markets. Specifically, the narrative was that the decline in U.S. equities resulted from the drop in the U.S. Treasury (UST) 10-Year yield.
Because I’ve been a “bond guy” for quite some time now, the rhetoric was fascinating to me and brought to mind this age-old question: Which came first: the chicken or the egg?

In my experience, the bond market typically reacts to developments in the stock market, not the other way around. Being a baby boomer (right at the tail end, mind you), I thought: Am I missing something here? Could the paradigm have shifted? Thus, I decided to do a little bit more investigating, and what I found was that, in my opinion, no, the paradigm had not shifted. The recent decline in the UST 10-Year yield had its genesis in the latest sell-off in the stock market, which began in early May and continued throughout the month.

Dow Jones Industrial Avg. vs. UST 10-Year Yield

UST vs Stock Market

Take a look at the graph. The UST 10-Year yield was essentially straddling the 2.50% threshold in the opening days of May until the Dow Joes Industrial Average (DJIA) took a nearly 475-point nosedive on May 7. This began the downward trend in which we find ourselves now. Remember, that trend was in response to the breakdown in U.S./China trade talks and the attendant escalation in “tariff talk.” Then round 2 hit as the DJIA plunged 617 points on May 13, leading the UST 10-Year to break through the 2.40% level, ultimately falling down to 2.37% —which, at that time, matched the 2019 low watermark set back in March. Notice how stocks rebounded somewhat after this episode: and what did the 10-Year yield do? That’s right, it moved back up as a result. Continue Reading…

7 tips for speeding up the day you burn your mortgage

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By Barry White

Special to the Financial Independence Hub

Mortgage payments can be a huge drain on your budget, particularly if it accounts for a significant part of your income. Apart from the interest you will be paying on the principal, mortgage repayments can be a hindrance to your other long-term financial goals. Not only can paying off a home mortgage early help you save thousands of dollars but it will also help you to gain your financial freedom earlier. If you have made up your mind and eager to pay off your mortgage early, here are seven helpful tips you can implement.

1.) Pay extra on your repayment each month

Making extra payments each month is the easiest way to help lower your debt on the property. Whenever you make your monthly mortgage repayment, most lenders allow borrowers to make an extra payment and mark it as “principal only.”  This implies that the extra payment pays down only the principal instead of both the mortgage principal and the loan interest.

Assuming you have a monthly loan repayment amount of $1,346, you can decide to round it up to $1,400. The extra $54 is dedicated as a repayment on the principal. This simple act of extra payment can save you lots of interest charges as well as helping you clear your loan ahead of schedule (since the principal payments will add up faster than you’d think). Therefore, plan to add as much as possible to these payments to help with the principal plus lower the amount of total payments owed. Looking for ways to find extra cash to put on your mortgage? You can use bonuses or apply raises from your job.

2.) Pay more than Monthly, bi-weekly

A bi-weekly mortgage is when you make a payment that equals exactly half of the total monthly repayment every two weeks. This consequently shortens the time to pay off. For instance, if your normal mortgage repayment per month is $1,000, you would instead pay $500 every two weeks. This has almost a similar impact on your budget as one monthly payment. But with the 52 weeks in one year, a bi-weekly payment schedule will bring about a grand total of 13 full monthly payments each year instead of the usual 12. You’ll conveniently be making an extra payment yearly without scrounging around for the extra money.

3.) Make one big extra payment each year

Another great way to repay your mortgage early is to deliberately make an extra payment in a month every year. This helps you settle your mortgage faster, and chances are you wouldn’t miss it.  You can schedule the payment for a month when you hardly have any larger expenses, like during holidays. Of course, this technique requires extra discipline from you since you will need to save that payment. To be on the safe side, you can automatically transfer a little amount every month into a dedicated account for an extra mortgage payment.

4.) Divert “free” money towards your mortgage

Did you receive a tax refund or Christmas bonus from work? Divert that extra money that cannot be accounted for in your budget to your mortgage pay-off fund. Continue Reading…

How Property Investment can help you reach Findependence (Financial Independence)

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By Rebecca Lee

Special to the Financial Independence Hub

Financial Freedom is a way for anyone to escape the grind of the 9-5 work life to live the life they desire without relying on anyone else for money. Almost all of us trade our time for money to pay our bills, eat, travel and live in general. Without trading our time, it would be impossible to pay for the things we need and want. Many of us are stuck doing this until we have just enough to retire late in life.

Those who find financial freedom, AKA Findependence, do so by acquiring assets that generate wealth on their own. As the saying goes, “don’t work for your money, make it work for you.” One of the most popular types of these assets is real estate. Here’s how you can achieve financial freedom through real estate investment.

Have a strategy

Financial freedom, what it is and how to achieve it is different for everyone. Everybody has their own needs and wants and will require a different amount of cash flow to live on. Therefore, you must have a personalised strategy based on your income, savings and liabilities.

Without a plan, you won’t know what opportunities to take advantage of and what ones to pass up on. A strategy that’s designed for you will help take the emotions out of your decisions, avoid making mistakes and minimise risk.

Get the mindset

Wealth creation and investing requires a certain mindset to be successful. A lot of people are selling “Get rich quick” schemes but unless you get super lucky, this is not a realistic approach. Real estate in particular is a long-term investment game.

Real estate investors understand that their wealth will grow not overnight, but over years of gradual growth. Understanding this and knowing yourself enough to be able to commit to such a long-term plan is key to reaching financial independence. Investing in real estate isn’t as simple as buying property and waiting for its value to grow. Continue Reading…

Could the First-time Home Buyer Incentive be used in Canada’s largest markets?

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

When the federal government announced in March that it would be wading into the shared equity mortgage market in efforts to improve home buyer affordability, it stirred up some controversy.

The program, called the First-Time Home Buyer Incentive (FTHBI), was teased in the budget as a ground-breaking approach to helping buyers get into the market by providing interest-free down payment loans of 5% for resale homes, and up to 10% on brand-new builds.

In exchange for the upfront funds, which are designed to reduce the overall size of the mortgage and monthly payments, the Canada Mortgage and Housing Corporation (CMHC) will take an equity percentage the homes’ value, which must be paid off when either the mortgage matures, or the home is sold.

This paid-back amount fluctuates along with appreciation and depreciation in the market. For example, let’s say the CMHC provides a 5% loan of $25,000 for a home purchase of $500,000. The homeowner sells the home several years later, and its value has increased to $550,000. The homeowner would then need to pay the CMHC back $27,500 to reflect 5% of the increased value of the home.

Critics say FTHBI too restrictive to be effective

Mortgage analysts have called the effectiveness of this equity sharing program into question, as the total amount owed to the government could be significantly more than what was loaned in the first place, especially in a market that experiences rapid price growth.

However, the most contested features of the FTHBI are its mortgage and purchase price restrictions, which critics say render the program useless in markets like Toronto and Vancouver where home buyers arguably need the most help. Continue Reading…

Small Business: 5 tips to help protect your customers’ data and keep their trust

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Photo Credit: Unsplash

By Gloria Martinez

Special to the Financial Independence Hub

When it comes to running a business, trust is key. If a customer cannot trust your company with the information they provide, they will eventually stop coming back, and your reputation will suffer.

Data protection is one of the most essential qualities of any successful company, whether it’s a small online clothing boutique or a Fortune 500 company. Though keeping data safe can be challenging in a time where cyber crime is rampant, there are practices you can implement in your business that will decrease the likelihood of an attack. If you’re a small business owner, these 5 tips will help you protect your customers’ data while ultimately benefiting your profits:

1.) Understand your obligations

While keeping your customers’ data safe is a key element of building and maintaining your company’s success, there’s another important reason you should prioritize it: you could be legally obligated to do so. Take the NYDFS Cybersecurity Regulation, for instance, to which many companies in New York must adhere. One of the requirements of the regulation is that certain businesses operate with an infrastructure that protects customers from cyber security threats. If you’re not sure whether or not your state has regulations like this, this article may provide you with more information.

2.) Use encryption

A lot of cyber attacks happen through emails. This is because a company’s email account is a prime target for hackers, and you need to make sure that any emails that are exchanged between your company and another party (including promotional ads) are protected from these attacks. That’s where encryption comes in. Using a modern email encryption service should work seamlessly into your email platform, and will help keep the business information contained in your emails (including customer data) from getting to anyone but the intended recipient.

3.) Develop a security policy

While software is indispensable in the battle against cyber crime, your efforts can’t stop there. Your business also needs a data security policy in place, whether you have one employee or 1,500. It’s critical that employees become familiar with the policy, as well as the roles played by all people and systems involved. Also, ensure that each employee completes any necessary training with software and/or security professionals. That way, everyone will understand how to adequately handle company data. Continue Reading…