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.

Markets to the Fed: Go Fund Me

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By Kevin Flanagan, WisdomTree Investments

Special to the Financial Independence Hub

In an interesting turn of events, we had an FOMC meeting recently, but the results of this convocation were not what captured the lion’s share of Federal Reserve (Fed) headlines. Indeed, the dislocations that were witnessed in the funding markets, and attendant Fed responses, seemed to take center stage. Essentially, the stresses that emerged in this arena created a situation where participants were clamoring for the Fed to step in and provide the necessary funds to potentially alleviate the pressurized conditions.

Let’s do a quick Fed 101. There’s a certain level of reserves in the banking system that can fluctuate on a daily basis. The N.Y. Fed, acting on behalf of the FOMC’s monetary policy directive, is charged with keeping the Federal Funds target within its prescribed trading range, by either adding or deleting reserves via repurchase (repo) agreements with the primary dealer community, depending upon what is needed to achieve the aforementioned goal. Typically, these daily operations from the Fed go essentially unnoticed and don’t garner any headlines. That’s exactly the way it’s supposed to work.

So what happened this time around? Quite simply, there was a shortage of reserves, or think of it as a “cash crunch.” The “repo” market is a part of the financial system where participants borrow and lend money, using Treasury securities (as one example) as collateral within the transaction. It is in this repo market where the stresses became all too evident, for three reasons. Continue Reading…

A short blueprint for starting an e-Commerce business

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By Nelly Murad

Special to the Financial Independence Hub

E-commerce businesses are rapidly thriving. In fact, the 2019 statistics according to US Census Bureau News reveal that: “Over the past ten years, the percentage of retail sales in the U.S. that have come from e-commerce has increased by nearly 300%, from 3.3% to 9.7%.” Moreover, the sales coming from ecommerce sites are predicted to increase around 78% by 2020

For the past decade, the number of people worldwide who patronized e-commerce has increased tremendously. Following the latest survey, 21.8% of the population worldwide now shopped online. And in 2021 retail e-commerce sales worldwide are expected to reach US$4.8 trillion.

These stats show that more people now prefer to transact online than going to a traditional store. And it’s no wonder, owing to the fact that e-commerce has transformed the way we shop: in the most convenient and innovative way. So, if you are not well adept about the specifics of running an ecommerce business or you are not even sure what it is, then keep reading.

Basically, the term e-commerce is the purchasing and selling of goods, which includes the transfer of money and the data needed to complete the operation with the use of an electronic device and the internet. It is simply an activity where business transactions — the buying and selling of goods and services —  occur over the internet.

Currently, there are five recognized e-commerce business models:

  • Business to consumer (B2C)
  • Business to business (B2B)
  • Consumer to business (C2B)
  • Consumer to consumer (C2C)
  • Government / Public Administration Ecommerce

Unique features of e-commerce

The most popular characteristics of e-commerce are: its ability to establish relationships, ability to exchange information, pre and post-sales support, among others. Interestingly, according to UKessays, ecommerce has seven unique features. These are:

  • The ability to transact anywhere at anytime. For example, the ability to order goods online, pay bills or deposit money, which in ecommerce, eliminates the need to go to a physical store.
  • Global reach. It permits commercial transaction easily performed across other countries, which is less tedious and inexpensive.
  • Universal standards. The internet has adopted universally accepted standards on how information is presented in order to level the playing field for businesses, specifically about obtaining information on market entry cost and the price of the item.
  • It refers to the amount of content found on the website such as written content and links that contribute in advertising and branding of merchant’s products, and are useful to enhance customers’ experience.
  • Interactivity. It affords businesses and customers to communicate. Ecommerce businesses have the ability to connect to their customers on an emotional level coupled with their effort to establish trust and confidence.
  • Information Density. It refers to the amount and quality of information found in an ecommerce website like text, pictures and videos.
  • Personalization. Merchants can easily change their products and services according to user preferences. The ability to customize marketing content to cater specific user needs is also possible. Continue Reading…

Debt Review: How Debt Relief options affect your Credit

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By Jackson Maven

Special to the Financial Independence Hub

“Debt,” though a small word, has a deeper impact. Settling debt makes people worried and sometimes may even disturb their entire finances. There are numerous ways by which one can settle debt, but the concern remains to find a way that would not cause any negative impact on Credit.

This article we will discuss ways in which the debt relief plan may affect your credit.

1.) Is Debt Settlement a good idea?

Debt settlement may cost a fortune for some; whereas, others may end up paying less than what they owed.

Non-payment of credit-card bills or other amounts due to the creditors for six months or more, worries creditors. In such a situation, you can make a debt settlement offer to your creditors. Here you can offer to pay the minimum amount that you can easily pay, against the total amount due. If your creditors want to close your account and are looking forward to getting whatever amount possible, they might accept the offer. On the contrary, if they demand full repayment, they may either transfer your case to a collection agency or may even take you to court.

2.) A few things to remember

Debts constitute a third of the credit score. Paying off debts helps in improving this part of the credit score. Impact of debt on the credit score depends on many factors. Hence, if you want to know the impact of debt on your credit score, you need to have a complete understanding of your credit history. Based on this, you can select the debt relief option that has the least impact on your credit score. Hence before selecting the credit relief option, a credit check is a must.

3.) Credit Utilization Impact

Credit utilization = Ratio of Pending credit card payment/Total Credit Card Limit *100

Lower ratio of credit utilization is always welcome. Higher credit utilization ratio results in lower credit score. In addition to this, it also reflects that lending you money can be quite risky as you are already overextended.

Debt Relief Options

i) Counselling

You can opt for credit counselling. In this, you can discuss your debt situation with a professional counsellor. A counsellor can advise you the best way to pay off your debts. The best part is these counselling sessions would have no impact on the credit score. But, if your counsellor registers you in a management or repayment plan, then that plan may have some effect on your credit score. Continue Reading…

Retirement planning software and the 70% Rule

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By Ian Moyer

(Sponsor Content)

Individuals who are following conventional retirement-planning may be in disbelief as they approach retirement and discover that they cannot afford to retire just yet or are likely to outlive their retirement funds.

The 70% Rule

Common practice is to save enough so that your annual retirement income equals about 70% or more of your current income. Of course, many Canadians are not aware of such information entirely and have saved little or not enough for their retirement.

With this being said, there are still some fundamental issues with this understanding. One, few people have a complete understanding of their retirement resources or a realistic view of their retirement funds. In some cases, 70% retirement pay usually isn’t enough to sustain them in retirement.

Example

We’ll use the fictitious name Tom for this example. Tom is making $60,000 annually living a modest lifestyle. Tom will qualify for CPP and OAS. Tom only contributes through his employer-directed contribution program, which is $2500 a year.

Tom also saves $13,000 in a regular checking account, an additional $3,000 in non-registered savings and $12,000. Tom is a conservative investor and he thought he was doing pretty well saving what he can and living a modest lifestyle.

Using Cascades to do retirement planning at the age of 54 using the above figures. Tom discovers his annual income will only be approximately $38,250. After taxes per year. Going back to the common practice of 70% Tom needed minimum $42,000 per year as retirement income. This leaves Tom needing to find a way to make an additional $3750 a year. Tom would need a part-time job, choose not to retire or drastically change his lifestyle in retirement.

For a lot of individuals, they will have to work longer than they planned or seek part-time employment during retirement. This could be a problem for retirees and employers. In order to navigate this issue before it starts employers need to assist their employees with retirement planning.

Sample Cascades recommendations for maximizing an estate

How can we change this?

The first step would be for employers to become more effective at helping employees realistically prepare for and manage their retirement. For example, this could include a process or program to build up wealth accumulation prior to retirement, which could be a mix of LIRA, Capital Gains or RRSP just to name a few.

A second step would be for employees to change their behaviours and thoughts around retirement savings. Employees can make changes by becoming more proactive when it comes to saving. When some individuals think about saving for retirement after they attend school, buy a home, raise children and send them to college sometimes it can be too late. Continue Reading…

3 ways to start Real Estate investing and build Passive Income

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By Catherine Way

Special to the Financial Independence Hub

Real estate investing has never been easier. With the surge of house-flipping success stories flooding social media, no wonder more people are looking to invest.

With more ways to start real estate investing, starting is the hardest step many face.

Building passive income is a necessity for any successful real estate investor, but owning and managing rentals with no experience can end badly for some.

Luckily there are a few easy ways to start investing to try out which investment style is best for you.

If you don’t know where to start for your first investment, read on!

Airbnb rentals

“Many investors are using the convenience of this app to start building their passive income. Airbnb is a great tool to have short term tenants, and to learn the basics of being a good landlord. With the app doing all the work to find tenants for you, as long as you are in a rea that sees travels, you can start making passive income with little to no investment. In fact some investors are creating only Airbnb rentals spaces because of the demand and profit from it.” – Loren Howard, Prime Plus Mortgages: Hard Money Lender Arizona.

Airbnb is a great app for first-time investors wanting to make passive income. In fact, there are many resource articles online on how to build an Airbnb business. Most people rent out spare rooms or guest houses to Airbnb guests to stay in, and operates like a mini-hotel service.

For those yearning to be real estate investors who do not have whole homes dedicated to investments, this is a great way to start building up your passive income to pursue other projects, or just learn the basics of taking care of tenants.

Airbnb is all over the world and their popularity is still on the rise. The app makes it simple to find tenants for properties, whether short or long term, and it only requires having a good space to start hosting. That means spare rooms or guest houses can begin to make you money, with little to no investment on your end. Continue Reading…