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.

What you need to know when applying for an International Student Loan

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By Emily Roberts

(Sponsored Content)

Loans allow students to pursue their dreams even in the midst of financial challenges. While the benefits of student loans are clearly evident, students should approach loans with caution. Otherwise, you can end up sinking in huge debt that can affect your career goals. This article highlights some of the key factors you should keep in mind when applying for a student loan to ensure you get the best deal.

Fixed and variable Interest Rates

Lenders dealing with international student loans normally have two options when it comes to interest rates: the fixed and the variable rates. MPower Financing for instance, offer loans on fixed interest rates. MPower Financing is a US based lender offering student loans without a cosigner, collateral or credit history.

For fixed interest rates, as the name suggests, you will pay a fixed interest amount with no fluctuations regardless of the direction the economy takes. Thus, the key benefit of this option is that you won’t bear the burden when the market rates increase. Also, it can be a good option if you are a person who loves budgeting in advance. For the variable rates, the interest can change over time; it can either increase or decrease. The key benefit is that you get to save some money should the interest rates go down. Remember the key differences when making your decision.

Comparison can save you money

When you look up international loans for students or DACA student loans on the search engines, you will get countless results. This is because there are many lenders targeting international students. Continue Reading…

Retirement planning programs revisited

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More than a year ago I wrote a column for the Financial Post about a handful of Canadian retirement income planning software packages that help would-be retirees and semi-retirees plan how to start drawing down from various income sources: Click on the highlighted text to retrieve the full article: How you draw down your retirement savings could save you thousands: this program proves it.

The focus of the FP piece is Cascades but you can also find a MoneySense piece I wrote from late 2018 that looked at Viviplan, and one I wrote for the Globe & Mail last November that described Cascades, Viviplan and Doug Dahmer’s Retirement Navigator and BetterMoneyChoices.com.

Dahmer has been writing guest blogs on decumulation here at the Hub almost since this site’s founding in 2014. See for example his most recent one, or the similar articles flagged at the bottom: Top 10 Rules for Successful Retirement Income Planning. Dahmer says he’s pleased that others are waking up to the need for tax planning in the drawdown years: “Cascades provides a very good, easy-to-use introduction to these concepts.”

There may be as many as 26 distinct sources of income a retired couple may encounter, estimates Ian Moyer, a 40-year veteran of the financial industry and creator of the Cascades program described in the articles.

When he started to plan for his own decumulation adventure, six years ago, he felt there was very little planning software out there that was both comprehensive and easy to use. So, he hired a computer programmer and created his own package, now called Cascades.

Continue Reading…

Retirement not what many were expecting, and not in a good way: Sun Life survey

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My latest Financial Post column, which is on page FP 3 of Tuesday’s paper, looks at a Sun Life retirement survey released this morning. You can find it online by clicking on the highlighted headline: Canadians finding retirement is not all it’s cracked up to be.

So if you think Retirement is about eternal sea cruises and African safaris, you may be abashed by the Sun Life finding that almost one in four (23%) describe their lifestyle as a frugal one that involves “following a strict budget and refraining from spending money on non-essential items.”

Furthermore, many can expect to still be working full-time at age 66, which just happens to be my own age. And as you can see from this blog, I’m still working, if only on a self-employed semi-retirement basis.

In fact, among the 2150 employed Canadians polled by the 2019 Sun Life Barometer poll conducted by Ipsos, almost half (44 per cent) expect they’ll still be employed full-time at age 66. Among the “frugal” retirees still working after the traditional retirement age, 65 per cent say it’s because they need to work for the money rather than because they enjoy it.

In an interview, Sun Life Canada president Jacques Goulet mentioned most of the main reasons, few of which will come as a surprise to this blog’s readers. Mostly there is a failure to plan for Retirement early enough to save the kind of sums involved. Another familiar culprit is the ongoing decline of employer-sponsored Defined Benefit pension plans, which are becoming more and more rare in the private sector. Most of us can only envy the tax-payer backed guaranteed inflation-indexed DB pensions enjoyed by most government workers, politicians and some members of labor unions: a bulletproof source of income that you can’t outlive.

47% at risk of outliving their money

The alternative for many are employer-sponsored Defined Contribution pensions (DC plans), group RRSPs or personal RRSPs and TFSAs, which means taking on market risk and longevity risk. Both are challenges in the current climate of seemingly perpetual low interest rates and ever volatile stock markets, not to mention rising life expectancy. Even then, Goulet told me Canadians with DC pensions are leaving a lot of money on the table: $3 or $4 billion a year in “free money” that is obtainable if you enrol in a DC pension where the employer “matches” the employee contributions: typically 50 cents for every $1 contributed.

Finally, there is a large group that have no employer pension of any kind, or indeed any steady job with benefits, and these people are unlikely to have saved much in RRSPs or even TFSAs, which they should if they can find the means. This group may account for a whopping 47% of working Canadians, Sun Life finds, and about the only thing they’ll be able to count on in Retirement is the Canada Pension Plan (CPP) as early as age 60, Old Age Security at 65 and probably the Guaranteed Income Supplement (GIS) to the OAS. These people would be better off continuing to work till 70 in order to get higher government benefits, a time during which they can build up their Tax-Free Savings Accounts (TFSA)s. TFSA income does not impact CPP/OAS/GIS, which is not the case for RRSPs and RRIFs.

Finally, a word about continuing to work into one’s 60s and even 70s. I know many who do, and not always for the money. I’m in the latter category myself, even though personally my wife and I could be considered the poster children for maximizing retirement savings, living frugally and investing wisely. There are worse things in life than going to a pleasant job that provides mental stimulation, structure and most of all purpose. Many of these ideas are explored in the book I jointly co-authored with Mike Drak: Victory Lap Retirement.

 

Money: Influencing people and their behavior

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By Steve Barker

For hundreds of years, the American dream has been to become one of the fortunate few that moves from rags to riches. Although many people enter onto United States’ soil believing they will become one of the chosen few to make the dream a reality, statistics show that most people don’t make their millions no matter how hard they try. What is more interesting is what happens to those that do make their fortune and how it often changes them, their perspective on the world, and other people’s view of them. Money can influence people and their behavior in some surprising ways.

Psychology and Money

The way you view yourself, your success in life, and for abilities can all be linked directly to your money, or lack thereof. While you may have been told your whole life that money is the root of evil, you are probably like the majority of the 7 billion people on earth as you try to make more money: ever chasing the currency you should believe is evil. The eternal chase for more money to purchase more things to buy bigger and better items is at the bottom of a social belief system, and though it may not be who you believe you are, it can influence how you see yourself fitting into society and how you react toward others.

Self and Money

Where you fit into your world view is often dependent on money and how much you make. For some reason, people tend to classify themselves into social rankings relating to money, the ability to earn it, and the amount already earned. This is sometimes referred to as class essentialism. In other words, some people believe they have the natural ability and are pre-genetically disposed to have the right to make money, be more intelligent, and be part of a higher social group. Research has found this is especially true of the wealthy groups questioned, while the poor respondents believed it was all about work, rather than ability, genes, or intelligence. That is why it can be difficult for the suddenly rich winners of the lottery or huge sports contracts to fit into a world that sees those individuals as less-than. The split can be intense and derisive.

Values and Money

Money has an influence on how you value your time, actions, and motivations, but most importantly, you may find it influences how you value yourself. If you find yourself as part of a higher social group because of the money you bring in, you may see yourself as happier, healthier, and more giving. On the other hand, some research indicates that the newly rich from the sudden creation and rise of crypto currency were found to be more business-oriented, less trusting, and more suspicious of the world around them. If you set a value of $20 an hour on your time, you can see that someone that values their time at $300 an hour may have a very different world view than you do, whether it is good or bad is all a matter of perspective.

Ethics and Money

While it is unknown why some people have higher ethical values than others from the moment they are born, researchers are finding that wealth has a direct influence on all types of ethical situations. The higher an individual believes his or her class inclusion is, the more unethical he or she believes they have the right to be. Continue Reading…

The problem with Preferred Shares

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By Ian Duncan MacDonald

Special to the Financial Independence Hub

You identify preferred shares by their stock symbols. Their symbol contains a “PR” or a “PF.”  For example, an Enbridge Inc. preferred share is ENB.PR.N.

Preferred shares pay dividends, often in the range of 5 or 6 per cent. This is usually one or two per cent more than what the company pays common share holders.

Like a bond, they are a form of loan; thus they do not share in the capital gain of a corporation, nor do they have any ownership or voting rights. While they rank ahead of common shares in realizing money from a company’s liquidation, they rank behind bondholders. Their ranking is of little benefit.  After the lawyers, bankruptcy trustees and the banks (with their fully secured debentures) are paid off, the chance of anything being left for distribution is just about nil.

While you can conveniently buy and sell preferred shares on the stock market very few investors have any interest in them.  Zero trades in a day is not unusual. There are 654 shares on the TSX pay paying a dividend of 3.5%. or more.  Of these, 364 are preferred shares and of those only 112 had more than 4,000 shares traded in a typical day, despite their high dividends. This is due to the low possibility of preferred shares delivering an increase in share price to speculators.

Preferred shares are issued at a standard price of $25 each. Of the 364 preferred shares only 17  had a share price exceeding $25 and of these only one was greater than $30.  The chance of realizing a capital gain from a preferred share is 1.91% and 183 or (50% of them) had lost at least 20% of their value.  They were now worth less than $20. Five were trading for less than $10.  It is not surprising that not one analyst recommended that investors buy any of these 364 preferred shares. Continue Reading…