Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

Book Review of Beyond Brochures: an insider’s guide to the Travel Business

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By Ruth Snowden

Special to the Financial Independence Hub

Hopefully by summer’s end, travel will start to return.

In this little gem of a Traveller’s guide readers will find dozens of precious nuggets, gleaned from the experience of a ‘well-seasoned’ Traveller, written with a light touch, a definite opinion and a good sprinkling of humour.

A bit skeptical at first, I wasn’t sure how anyone could write a book targeted to two different readers, the Traveller and the Travel Advisor, as announced in the introduction.  Within a few pages, though, it was evident that Picken honestly believes that although Travellers and Travel Advisors are on different sides of the same transaction, mutual understanding is a good thing and ‘the more people travel intelligently the better the world should be.’

He then proceeds to draw his readers into the joy of travelling, in 98 chapters: each a succinct one or two pages, divided into three distinct parts: Travellers, Travel Advisors, Travelling.  In every section are valuable hints and suggestions to help Travel Advisors make their customers’ experiences favourable and unforgettable, in a good way.

Building trust is not easy, especially in this world of virtual engagement and digital communication. In Beyond Brochures Picken provides readers with such solid insights that the Traveller reader naturally trusts him and Travel Advisors who follow his advice will be better able to create trust with their customers.

I am another seasoned traveller, having logged thousands of miles on business and leisure travel over many decades, much of which I’ve booked myself and some for which we needed a Travel Advisor.  For both the neophyte Traveller and for someone who has been there and done that, Section A is chock-a-block with important information: government websites; the regulatory environment and jurisdictions governing air travel; demystifying how airlines price seats; and agreeing that in many cases it is easy to book your own hotel room, without the assistance of a Travel Advisor.

Even when booking your own hotel rooms, the author shares great tips on how to use the ubiquitous on-line booking engines and suggests additional actions you can take to save money. Beyond Brochures will make me a better customer of a Travel Advisor and will make my self-directed and self-booked travel more enjoyable.

The philosophy behind why we travel

Early in this section he looks at what we look for in travel that is interesting and enjoyable to us: the philosophy behind why we travel. Continue Reading…

Setting them up for success: Financial Advice for new parents

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By Veronica Baxter

Special to the Financial Independence Hub

Are there some things that you wish you knew before you became a parent? Parenting comes with lots of financial responsibilities, and it’s a life-changing experience for many. Suddenly, life is about taking care of yourself, but another person solely depends on you for everything.

Preparation is critical to get ready for this exciting and, perhaps, scary new adventure. It is more helpful to be prepared for the many financial alterations to come. It is estimated that a middle-income American parent spends at least $284,570 (US$)  till the child turns 18 years old.

Most people tend to focus more on their finances after a significant life event. Making the necessary financial plans will save you the stress as you embark on this journey.

Here are vital planners to get you started:

1. )  Make a Household Budget

Having a baby can be expensive. A household budget prevents you from being a spendthrift and also saving for the future. Please write down your steady monthly sources of income and compare them to your monthly expenses.

Adjust your expenses to cover the baby’s needs like diapers, furniture, formula, and other unexpected costs that come up. Also, set some spending limits and do your best to stick to them.

2.)   Get a Life and Disability Insurance Policy

Many new parents question the worthiness of buying life insurance. After all, most don’t think of death. Life insurance comes in handy during such situations to protect you during such worst-case scenarios financially. Life insurance has three different choices:

1.   Whole Life Insurance

This one is lifetime guaranteed. It offers a specified benefit given to your spouse or other beneficiaries upon your death. It accumulates cash value over time and provides the opportunity to earn dividends.

2.   Term Life Insurance

This policy provides coverage for a certain number of years, mostly 15, 20, or 30. If you live longer than the plan, no benefits are paid out since the coverage automatically expires. However, most term policies allow for a continuation after the initial term though at higher charges.

3.   Universal Life Insurance

This policy is a hybrid of the two. It also allows you to set your premiums and death benefits.

Disability insurance becomes a significant refuge when one or both parents cannot work during a disabling injury or illness. No specified amount can never be enough for anyone. That’s why it’s essential to consult a financial expert to help you explore the best option that will fit your financial capability and excellent financial standing.

3.) Write A Will

Thinking about writing a will can be pretty uncomfortable. In a case of untimely death, the state decides how and with whom your assets are shared. The state’s decisions may probably go against your preferences. This is why a will comes in handy to name the guardian to your kids and who will manage your asset distribution when they become adults.

Have the hard conversations of when they are allowed to chip in, to make healthcare and financial decisions. An attorney will give a good outlook that will help you set up a financial trust that aligns with your situation and goals.

4.) Adjust your Emergency Fund

An emergency fund is essential to ensure your household runs smoothly in the event of unforeseen financial circumstances. The amount set aside varies from family to family but should start with three to six months of living expenses. Your emergency fund should now reflect the cost of having a child versus what you initially saved for.

5.)   Include your child in your Medical Insurance Cover

Having a baby is a qualifying life event that allows you to adjust your health plan to enroll your child.  Most of these plans require you to add your child within 30-60 days post-delivery. Try and add up your child as fast as possible to prevent those recurring cash expenses during pediatrician visits.

6.)   Don’t rush to make a Home Upgrade

Some couples equate good parenting to owning a home. However, financial planners advise couples to wait until 3-4 years to make a move. It would be best to have a better outlook of what you want the future to be like within that time.

7.)   Tax Breaks

Childcare can be expensive for many parents. The [US] government offers tax breaks to reduce the tax burden on individuals, allowing them to keep more of the money that they have worked for. Tax breaks are awarded either from claiming deductions or excluding income from your tax returns. Continue Reading…

How to raise money-smart kids

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By Gaurav Kapoor, Founder, Mydoh

(Sponsor content)

Financial literacy isn’t an innate skill. Like most skills in life, financial literacy must be learned – the problem is who teaches it? Parents know they play a part, but they may lack the confidence, or the knowledge.

Helping your children develop good money habits as they enter their teen years is a great place to start their financial literacy journey. Teenagers are eagerly seeking out financial independence and may be earning money through an allowance or an after-school job.

As they look to spend their hard-earned money, it’s crucial to set them up for success. After all, money isn’t just about dollars and cents, it’s about the choices we make with it. Parents want to teach their children to be money-smart – to have skills to earn, budget and spend, but they also want to share the value, emotions and experiences that come with money.

This notion of early financial literacy is what motivated me to create Mydoh, the Smart Card for kids.

Check out my best tips below for raising money-smart kids with the help of Mydoh:

Leverage technology that helps your kids learn how to save, and spend, their money

Kids today are more tuned in to technology than ever before – so why not use tech to teach them financial literacy?

Mydoh is a Smart Card for kids that comes with a money management mobile app, available on iOS and coming soon to Android. Kids gain financial skills by earning money through tasks and an allowance (set up by their parents) and by making their own purchases (wherever Visa is accepted) using their Smart Card issued by RBC through the app, with a physical card coming soon. This gives kids the autonomy, competency, and confidence to make their own earning and spending decisions – learning values that help build a strong foundation for the future.

Through the app, kids can manage their own money in the real world, making decisions to spend and earn, while parents get visibility to their spending and can have better money conversations. Continue Reading…

Fine Wine: The Alternative Asset for today’s challenges 

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By Atul Tiwari

Special to the Financial Independence Hub

The current market backdrop is making the case for alternative assets, such as fine wine, even stronger. Traditional financial asset classes have grown expensive and concentrated, and initiating or increasing an exposure to fine wine can provide important diversification and enhance potential returns.  

It is no secret that equity valuations are stretched. The massive levels of fiscal and monetary stimulus globally have propped up asset prices despite ongoing disruption from the COVID-19 pandemic. The S&P 500 price/earnings ratio exceeded 30 in mid-April, its highest level since the 1990s dotcom bubble, which did not end well for investors. With a potential economic recovery following vaccine rollouts largely priced in, prices appear to leave limited upside in the near term. 

Investors will also struggle to find attractive returns in the bond market. Even before the pandemic, yields globally were low, or even negative. Again, the downside appears to outweigh the upside as the recent selloffs in government bonds indicate.  Both fixed income and equity markets remain susceptible to a shift in the economic outlook or macro policy, which should prompt investors to consider alternative ways to diversify their portfolios.  

The increasing concentration of equity markets forms another reason why alternative assets make sense in the current backdrop. The sky-high equity returns of the past year have come overwhelmingly from the tech sector with the FAANG stocks — Facebook, Amazon, Apple, Netflix and Google (Alphabet) — significantly outperforming the wider market. Consequently, ETFs and other index-linked investments may not be as diverse as they might appear.  

This is where fine wine can help. As a real asset, fine wine prices are primarily driven by their own market dynamics, meaning they have low correlation to traditional asset classes and can help de-link an investment portfolio from swings in the wider markets.  

Fine wine’s limited and decreasing supply over time (as wine is consumed) alongside demand that goes beyond wine’s immediate benefit as a financial instrument can support wine prices regardless of the wider macro environment. Indeed, prior to the recent tech stock surge, fine wine often delivered better performance with significantly lower volatility over a range of backdrops going back to before the financial crisis.  

Healthy returns with low volatility  

Comparison of volatility and annualised return across financial assets 

 

Source: S&P, Bloomberg, Liv-ex & ishares. Data as of 31 Mar 2021  Continue Reading…

CRA can now compel Oral Interviews

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By Anna Malazhavaya

Special to the Financial Independence Hub

I  never met anyone who said they enjoyed being interviewed by an auditor with the Canada Revenue Agency. For sure, CRA audits can be stressful and disruptive to a business, but this is the price we pay to maintain the integrity of our tax system. The CRA’s audit powers are already quite broad and now they are about to expand even further. Anyone who must file a tax return in Canada (and, therefore, can be audited) should pay attention.

The 2021 Federal Budget announced on April 19th includes a proposal that gives CRA officials a new power to compel oral interviews of “persons.” This means you, me, your employee, your neighbour and virtually anyone else who may have information relevant to determining and enforcing someone’s Canadian tax liability.

The current rules

How are the proposals different from the existing rules? The CRA already wielded the power to examine taxpayers’ documents or property that may be relevant to determine one’s tax obligations. As the CRA examines the documents or property, they have the power to ask questions about the documents or property. However, there is no general power for the CRA to compel oral interviews. In practice, this meant CRA auditors still used oral interviews when conducting selected types of audits, but it didn’t happen often.

In fact, a good portion of CRA audits were handled without much face-to-face interaction at all between auditors and taxpayers and/or their employees. Taxpayers’ authorized representatives, which means accountants and tax lawyers, handled most of the audit “heavy lifting” on behalf of their clients: they attended on-site meetings, had phone calls, answered questions, and provided documents. Taxpayers generally had the opportunity to answer the auditor’s questions in writing. This means that people had time to review their records, consult with their representatives, and keep a record of their specific answers. This trend of written audit questionnaires has become more pronounced during the COVID-19 pandemic as the CRA auditors tried to minimize in-person contact with taxpayers for safety reasons.

What prompted the Federal Budget change?

The most likely cause of the proposed change is a two-year-old Federal Court of Appeal decision in MNR v. Cameco Corporation (2019 FCA 67). On its website Cameco calls itself “one of the largest global providers of the fuel needed to energize a clean-air world.” That fuel is uranium. Based in Saskatoon, Saskatchewan, Cameco has offices in Canada, the United States, Switzerland, Kazakhstan, and Australia.

As part of the audit of Cameco, the CRA asked upwards of 25 employees of Cameco (including those of foreign subsidiaries) to attend oral interviews.

Notably, that was the CRA’s second time requesting to interview Cameco’s employees. The first came as part of another, earlier audit and Cameco complied with the earlier request. Later, it found that the auditor’s notes of the interview differed from the recollections of Cameco employees. The dispute over results of that earlier audit was about to reach the Tax Court of Canada.

So, when the CRA asked for oral interviews again during a subsequent audit, Cameco refused, offering to provide only written answers. Cameco argued that the CRA has no general power to compel oral interviews. Cameco was concerned that the oral interviews can prejudice the upcoming Tax Court litigation relating to the previous audit.

The CRA brought an application seeking a compliance order first to the Federal Court, and then to the Federal Court of Appeal. Both those courts sided with Cameco, stating that the CRA had no general power to compel oral answers to its questions. Fast forward to 2021, and the Federal Budget proposes to override the Cameco decision.

What’s next?

 If the proposal is adopted, we will see more oral interviews with CRA auditors and the scope of interviews will be much broader. Of course, it’s too early to tell exactly how the CRA plans to use its newfound powers, but the following concerns are already obvious:

First, taxpayers’ answers during oral interviews can expose them to penalties or criminal prosecution. There are several tax rules where the taxpayer’s experience, knowledge of certain information, or taxpayer’s intentions are important. Some questions may trick you into admitting something that it is not entirely true, but your answer can later be used to impose penalties or even initiate criminal proceedings. Continue Reading…