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.

Don’t let Credit Card debt take over your life: 4 tips for paying it off quickly

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By Shiv Nanda

Special to the Financial Independence Hub

Credit cards are great, aren’t they? We can use them to pay bills, buy stuff online or in stores, and travel, even if money’s tight right now. Of course, the ability to buy now and pay later also means it’s easy to get carried away and spend more than we can actually afford!

Many of us have racked up huge credit card bills, and paying them off seems impossible sometimes. If you’re in the same boat, don’t despair. We’ve put together some great tips to help you pay off credit card debt faster.

Here’s what you should do:

1.) Avoid the Minimum Payment Trap: It’s tempting to pay just the minimum due every month, especially when it means paying only a few extra dollars in interest charges.

But have you ever thought about how much this adds up to? Total up the interest you pay in one year, and you’ll know why everyone advises paying in full every month. If full payment isn’t possible, pay as much as you can. It’ll significantly reduce the interest you pay in the long term.

2.) Consolidate High-Interest Debt: Debt consolidation is a good way to reduce the cost of high-interest credit cards, loans and other debt. If you tend to lose track of due dates for multiple cards, it also helps you avoid late payment fees and penalties.

Use a debt consolidation loan or personal loan with affordable interest rates to pay off expensive credit cards and loans, and then make repayments in one place.

3.) Prioritize One Debt at a Time: Speed up debt repayment by focusing on clearing one credit card in full (with minimum payments on the rest). There are two ways to handle this: Continue Reading…

Think you’re the only one without a retirement plan? Don’t press the panic button

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By Jordan Damiani, CFP, TEP, RRC 

Special to the Financial Independence Hub

Like many Canadians with retirement on the short-to-midterm horizon, you may have spent more than one sleepness night worrying that you’re not prepared.

In fact, at least half of Canadians over the age of 50 think they’re not on track with their retirement planning and about the same number of non-retirees don’t have a financial plan.

Experience suggests that people may be afraid that they won’t have enough money to retire, but in reality, they may not even know the true answer. I take the view that not having a formal plan in place doesn’t necessarily equate to not being on track to retire. There are many steps you can take in the critical count-down years to retirement that will reframe your planning and investment approach and alleviate anxiety and stress.

Take inventory of present Financial Situation

I recommend assessing your last six months of credit, debit and cash spending: grouping your expenses into categories. To project for the future it’s important to understand where your money is being spent today. This activity will help to identify where better savings could be achieved. Completing a net-worth statement is also important to determine what you own vs what you owe.

Understanding your pension entitlements is also a key stress reliever. Pension plans will typically offer retirement projections. At 65, CPP has a maximum benefit of $1175.83 monthly and $613.53 for Old Age Security. It’s important to call Service Canada to get an accurate CPP projection to find out what you are eligible to receive. Similarly, OAS is tied to Canadian residency, with 40 years being a requirement for the maximum eligible payout.

Goal Setting and Strategic Planning

After taking inventory, the next step would be determining what income you actually need in order to retire. Completing a pre-and post-retirement budget is an exercise that will help determine the after-tax figure to target. Likely the targeted income would be tiered with a higher spend being projected for the first 10-15 years of retirement ($5000-$10,000 a year for travel) and lower lifestyle costs thereafter, with some planning as a buffer against long-term care costs. Continue Reading…

Here’s what Buyers and Sellers can expect in the 2020 Housing Market

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

The long-awaited new decade is now upon us: but what does 2020 hold for Canada’s real estate market? According to a number of forecasts the year is shaping up to favour sellers, with a return to the type of conditions that prop up home prices.

However, with deeply discounted mortgage rates expected to linger throughout the year, not to mention a potential softening of the controversial stress test, home buyers could see a surge in their purchasing power in the near term. Let’s take a look at what could potentially be in the cards for the housing market as 2020 unfolds.

Slower sales in the rear view

While home sales took a tumble over the course of 2017 – 2018, last year saw sustained improvements in buyer activity in most of Canada’s urban centres. Much of this was due to buyers absorbing the shock of the federal mortgage stress test, which was introduced in January 2018, as well as a number of provincial taxes in Ontario and BC designed to reel in the demand end of the market.

While the Canadian Real Estate Association (CREA) notes that growth is uneven across the nation – the Prairie and Maritime markets continue to struggle with sales volume – transactions surged in Ontario and British Columbia in the second half of the year, which helped drive overall national growth.

This year, CREA expects the upward trend to continue, calling for 530,000 sales in 2020, up 8.9%. The national average home price will also tick higher by 2.3$ to $531,000.

The Canada Mortgage and Housing Corporation (CMHC), Canada’s largest provider of default mortgage insurance, and which acts as an overseer of the mortgage industry, has also called for home sales and prices to “fully recover” this year from their 2018 slump.

“Overall, economic and demographic conditions will remain supportive of housing activity over the forecast horizon, halting the declines in starts, sales, and average home prices that followed the highs of 2016 – 2017,” it states in its most recent Housing Market Outlook.

It forecasts home transactions to total between 480,600 – 497,700 sales in 2020, up 6%, with the average price between $506,200 – $531,000, up 5.6 – 6.7% from 2019.

While sales are on the rise, however, the same can’t be said for new MLS listings in Canada – and the resulting supply-and-demand gap could re-stoke unsustainable price growth. According to CREA, the national housing market was in sellers’ market territory in November with a sales-to-new-listings ratio (SNLR) of 66.3%. New supply declined 2.7% year over year, while the total months of inventory – the length of time it would take to completely sell off all available homes for sale – currently sits at 4.7 months, its lowest level since 2007.

This will be most acute in the hottest markets such as the Greater Toronto Area, which boasted a sizzling SNLR of 81% at the end of the year, indicating just under 20% of newly listed homes remained on the market.

That’s a growing concern for Toronto real estate prices; according to the Toronto Real Estate Board, as their Chief Market Analyst Jason Mercer stated, “Strong population growth in the GTA coupled with declining negotiated mortgage rates resulted in sales accounting for a greater share of listings in November and throughout the second half of 2019. Increased competition between buyers has resulted in an acceleration in price growth. Expect the rate of price growth to increase further if we see no relief on the listings supply front.”

Ontario and BC to Lead the Pack

As was the trend throughout 2019, the Ontario and BC housing markets will see the strongest growth, says CMHC; BC, in particular, is anticipated to experience a dramatic 20 – 22.6% surge as the region recovers from recently implemented foreign buyer and non-resident speculation taxes, totaling between 74,600 – 84,400 transactions. Home prices will rise between 2.8  – 3.6% to an average of $675,000 – $749,500. Continue Reading…

Articles 2 & 3 in my MoneySense mutual fund series: Best Mutual Fund Companies you never heard of; Fixed-Income Funds

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MoneySense.ca: Photo created by freepik – www.freepik.com

MoneySense magazine has now published the entire package of three mutual fund articles they commissioned me to write. You can find the first article by clicking on the highlighted headline: DSC mutual funds and the future of investment advice. It ran on January 16th. The second ran last weekend, around Jan. 25th, while I was away in Cuba for a week.

You can find the second article here: The best Mutual Funds you’ve never heard of.

The first article looked specifically at the gradual decline of the once-ubiquitous DSC sales structure, or Deferred Sales Charge. It recaps recent regularatory developments surrounding DSC, and addresses the related issue of embedded compensation for financial advisors, or so-called Trailer Commissions. These are gradually being eliminated in various Western nations (notably the UK and Australia/NZ) and they are also being phased out in all Canadian provinces, with the conspicuous exception of Ontario.

The lesser-known “Direct-to-Consumer” mutual fund families

The second article looks at two particular “camps” of mutual fund providers: the big-name Embedded Compensation firms you may have heard from (because they can afford to advertise) and a lesser known camp of Direct-to-Consumer managers whose names may be less familiar because they don’t generally have embedded compensation and whose fees are lower and typically mean they don’t have as much money to throw around on big marketing and advertising budgets. The article focusses on four firms in particular you may not have heard of, except through family referrals and word of mouth: Beutel Goodman, Leith Wheeler, Mawer, Steadyhand.

Space precludes mentioning that in the good old days of mutual fund mania (the 90s) there were several other direct-to-consumer firms that either were acquired or are now a shadow of their former selves: the list includes Altamira, Saxon, Sceptre and a few others. We also look at two deep value firms that are still around but get so much publicity about their performance that they can hardly be dubbed as “firms you’ve never heard of.” They are Irwin Michael’s ABC Funds and Francis Chou’s Chou & Associates.

Actively managed mutual funds may also work for Fixed Income space

MoneySense.ca: Photo created by pressfoto – www.freepik.com

The third article, which ran January 30th, looks at the related topic of whether mutual funds can make sense in the fixed-income space, given today’s minuscule interest rates and the relatively higher impact investment management costs can have on active management of fixed-income investments. You can find it by clicking on the highlighted headline: Can Active Management pay for itself in Fixed Income Funds?

Arguably, GICs, direct investments in government and corporate bonds (or strip bonds) is more cost-effective, and if you prefer the “basket” approach that mutual funds provide, fixed-income ETFs. But the article links to some surprising research that even in fixed income, actively managed mutual funds may be able to recoup their fees and “add value” to investment returns.

Those vice presidents’ allegiance is to the bank, not you! The case for DIY investing

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By Ian Duncan MacDonald

Special to the Financial Independence Hub

The most productive new business salesman I ever employed is now a “Vice President” with the investment division of one of Canada’s largest banks. His special skill was in belittling prospects who did not see the benefit of his sales pitch.

Frequently, I got told by his new sales that they would buy but they never wanted to see him again. Not understanding the role of investment advisors employed by a bank, I was surprised when I learned that this strong “closer” could have risen to the “executive” ranks.

With a better understanding of bank investment advisors, I now understand why he has been successful. I learned that the title of Vice President is often given to financial advisors who are great closers. It impresses the naïve. The illusion of trust and knowledge is further enhanced with several impressive designations on their business cards.

Much to my surprise, I learned that investment advisors are hired off the street the same as any sales representative is hired. If they can show they are successful closers, they are well along the way to being hired. With little internal training, they are then set loose on a public full of meek sheep who know even less about investing than this newly hired investment “expert.”

Banks already know if you’re a prime prospect

It is almost impossible to function in our society without being a bank customer. The bank does not have to guess at your net worth and whether you are a prime prospect for their full-service investment advisors. They know.

You will be contacted by phone or during a visit to your bank branch with a seductive pitch that goes like this, “Surely you would appreciate some free advice on how best to manage that great sum of money you have on deposit. It is earning next to nothing. Don’t you want to be rich? Let us make your money work for you. Our fees are so small you won’t even notice them. When can we set up an appointment for you with our vice president? Here is his very impressive business card.” Continue Reading…