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.

Top 10 tips on becoming Financially Independent (or “Findependent”)

Posted By |

Financial independence is something for which everyone strives. But most of us never get to a stage of financial independence by choice and we reach this stage when we are very old and can no longer work anymore. And although it is not easy to achieve financial independence (aka “Findependence,”) it can be done if you know how to manage your money effectively.

1.) Develop a budget

The first thing that you need to do when you are trying to save money is to develop a budget. To develop a budget, you need to start by figuring out how much money you need to live on each month and then giving yourself an appropriate amount of money to use over the course of the month.

2.) Get a financial planner

If you have had trouble managing your finances in the past, you should consult a financial planner so that you can get the most out of your money. He or she can help you to plan out what you need to spend, so you will be able to figure out how much money you need to save in order to get where you want to be financially.

3.) Create financial goals

Setting financial goals ensures success, because it helps you to get a sense of what you want to achieve and where you want to go on your financial journey. Giving yourself short term and long term goals is usually the most effective way to achieve financial goals, because it allows you to plan and amend your plans as you go.

4.) Pay off your debts

If you have a lot of debt looming over your head, you should make sure that you pay it off before you start actively trying to save. Start by paying off your smaller debts that have the highest interest rate first, so that you won’t have to pay so much later on when the debt has increased.

5.) Get rid of student loans

When most people think of paying off their debts, they forget about paying off their student loans because they are a different kind of debt to your standard credit card debt or loan repayment. There are a few different options when it comes to repaying your student loan, from paying a fixed amount each week, to contributing a percentage of your average income every pay-day. Continue Reading…

Ways to re-plan your Finances during Covid-19

Posted By |

By Donna Johnson

Special to the Financial Independence Hub

COVID-19 certainly has made 2020 a year to forget for some, and as it wraps up with the holidays and new year, many people are assessing their financial situations and determining the next steps. The good news is it does appear a vaccine and more medicines are on the way. But still, getting these treatments out to everyone and getting the virus under control will still take time, so reopening the economy completely may not happen for several months yet. In the meantime, Americans are trying to manage holiday expenses and future budgets until the tide turns.

Covid-19 savings reallocation opportunity

While it may be no fun to miss out on going to your favorite movie theater on Friday nights, or visiting your favorite theme park during vacation, consider the upside of this. The money you may have spent on all those activities is money you can tuck away for better use. Money you don’t spend as disposable income is money you can turn into either savings or investments. There are ways to use it that can be a return on investment if you do your planning right.

Building a emergency savings fund

The worst thing that could happen to you during a pandemic is getting laid off; in which case you will need savings to get by. Unemployment during the pandemic hit a high of about 14.4% back in April. But even if you’re still employed, sudden expenses like HVAC repairs, car repairs, and doctors’ visits still happen. When they do, you’re better off not putting all of those expenses on your credit card, or borrowing money from high-interest loans to pay for them. Instead, consider setting aside about $20-50 per week or per paycheck, let that money sit in a savings account untouched, and over time you’ll see it grow to potentially hundreds if not thousands of dollars in savings. And these savings should not be used for regular expenses like gas or rent, unless you’ve lost your job. But instead, prioritize sudden emergencies like car accident expenses or pipe burst repairs for these savings.

Use the time to refinance and tackle debt

Another thing you can do with extra savings is apply them to any outstanding debt accounts you have. Now one thing to note is that some debts such as federal student loans had payments suspended and interest rates set to zero. Continue Reading…

Time to add $6,000 to your TFSA but consider holding off investing it until after Jan 6th

Posted By |

Happy New Year! However, this first business week of the new year promises to snap investors rudely out of their holiday moods, given political events south of the border.

As of last Friday, January 1st, Canadians could add another $6,000 to their TFSAs, taking their total cumulative lifetime contributions to $75,500. As I outlined in my latest MoneySense Retired Money column, it’s generally a good idea to do this early in January just to maximize the time value of money.

However, I’d hold off committing to particular equity investments until the dust settles, given that this morning’s headlines no doubt focus on the incredible political drama taking place in Georgia on Tuesday, Jan. 5th and then in Washington on Wednesday, Jan 6th.

After this weekend’s dramatic capturing on tape of soon-to-be-ex President Trump’s attempt to persuade the State of Georgia to “find” (aka steal) almost 12,000 votes, both the Georgia runoffs and Wednesday’s supposedly ceremonial formal certification of the state electors votes confirming Joe Biden’s victory promise to be full of fireworks.

Fireworks almost inevitable in Washington this Wednesday

Things were simmering even before Sunday’s saturation TV coverage of what seemed yet another impeachable offence from Trump. Violence from far right-groups fomented by Trump’s fanning the flames in anticipation of Wednesday’s ceremony in Washington already seemed to be in the cards even before this weekend. That can be hardly good for stock markets although pre-market Monday futures were strongly up in the three major US indices.

Add in the ongoing stress of the still-raging pandemic and recent euphoria over vaccines, and the fact US and many global stocks have been hovering near record highs: not to mention cryptocurrencies and Bitcoin, which this weekend smashed through US$30,000 for the first time.

So it hardly seems like there’s a need to rush to invest new TFSA money when all these portents mean prices could be cheaper later this week. Whether this creates yet another proverbial buying opportunity remains to be seen.

Some ideas for how to invest new TFSA money

Those in doubt who would rather invest sooner than later on any anticipated market downturns Monday could always hedge their bets with value-oriented balanced mutual funds or the Asset Allocation ETFs often mentioned on this site, from BlackRock iShares, BMO ETFs, Horizons ETFs or Vanguard Canada. Hard to believe it was just three years ago that the Hub published this blog about these “game-changers”  and they seem to me to make a lot of sense for the large “core” of most portfolios.  Continue Reading…

A smart guide on how to invest in 2021

Posted By |

By Alex Barrow

Special to the Financial Independence Hub

2020 was a difficult year in markets and the economy. There remains a high level of uncertainty heading into the new year. Below we’re going to walk you through some time-tested practical steps on how to prepare for the coming year, in order to make sure you’re financially set for whatever may unfold. 

1.) Assess your personal balance sheet

When planning your finances for the new year it is critically important to know and understand the strength of your current financial position. You can do this by running through the exercises below. 

• Understand your financial obligations relative to your income: 

Are you carrying high levels of debt relative to income? What is the composition of this debt: is it mostly in high-interest credit cards or a low fixed-rate mortgage? The 36% Rule states that your debt to income (DTI) should never surpass 36%. When your DTI rises above 36%, your personal balance sheet is fragile and you become more exposed to financial risk. In these difficult times of uncertainty, it’s important to keep your DTI low so as to maintain financial flexibility. 

• Upcoming big-ticket expenses: 

Do you plan to make any big purchases or financial outlays in the coming year? Perhaps you’re planning to buy a home and purchase a new car or pay the tuition for your child to attend their first year of college … These are big expenses that can stress the strongest of personal balance sheets if one doesn’t plan properly. That’s why it’s important to note these at the start of the year so you can start preparing for the expense. 

  • Nonessential spending: 

Frequent dinners out and vacations at the beach are fun but if they come at the cost of putting a strain on your financial security, they can cause more stress than they’re worth. A good exercise for planning for the coming year is to look back at your expenses from the year before and see where you’re maybe spending a little more money than you’d like. Those $6 lattes every morning add up! 

2.) Set your personal financial goals 

To cite the oft-quoted baseball sage, Yogi Berra “If you don’t know where you’re going, you’ll end up someplace else.” Financial planning and goal setting are critically important to protecting your resources and securing the future you want. From a practical standpoint, this means doing a number of key things at the start of each year. 

  • Set a target retirement savings amount: 

Retirement might be a ways off for you, or not. Regardless, it’s never too early or too late to start planning for it. The rule of thumb is that you should aim to stash 10%-15% of your pretax income into a retirement savings account each year. The earlier you can start doing this the better because that puts the power of compounding in your favor.  

  • Invest, invest, invest: 

The best way to grow your wealth over time is to start investing early and often. This means putting a percentage of your income into low-cost stock and bond indices, on a consistent and regular basis.  

  • Take control of your debts: 

Turning back to keeping your DTI below the key 36%, debt is a financial burden that has to be dealt with before it grows out of hand. This takes time and planning. Just like how the power of compounding works in your favor in investing, it works against you when you carry large amounts of debt if you’re just paying the minimum. Continue Reading…