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.

Investing in your financial future: how 4 stages of life align with your journey

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By Brian Shinmar

Special to Financial Independence Hub

If there’s truth to the statement that “change is the only constant in life,” your savings goals, habits and risk tolerance should follow closely. The topic of financial planning can be uncomfortable and intimidating for many people, but it doesn’t have to be that way. Having a sound investment strategy that evolves with your stage of life can set your mind at ease, so let’s break it down into four stages and purposefully account for some general changes you should expect along your financial journey.

Early 20s & 30s: Starting your financial journey

In this stage, many clients are just starting their careers, gaining a sense of financial independence and likely have higher risk tolerance. At this early stage of life, we don’t want clients to just invest it and forget it, we want them to build key (healthy) financial habits. The key habits that I stress are:

1.) Finding a balance between paying off debt and saving for your future: A financial advisor can help young clients establish goals and determine the balance between how much and how often contributions to debts and savings should be made.

2.) Goals with a plan: Setting attainable goals, with a clear plan to help meet them, will keep your bank account growing, and debt lowering.

3.) Saving a portion of your monthly income: A general rule is to save 10-15 per cent of your income each month, but given the higher inflation and interest rates in today’s market, that might not be realistic for everyone. The bottom line is to get into the practice of saving a portion of your monthly income. This helps build your nest egg for long-term goals, like retirement or purchasing a home. Continue Reading…

A volatility play for the US bank sector

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Portfolio Manager explains why US banks have struggled, where opportunities might appear, and how investors can benefit from short-term volatility.

Image from Pixabay: Wendy Soon

By James Learmonth, Senior Portfolio Manager, Harvest ETFs

(Sponsor Content)

The US banking sector is facing uncertainty. In the wake of the collapse of Silicon Valley Bank in March of 2023 — and deposit liquidity issues at other regional banks — the whole US banking sector has suffered some significant stock market setbacks.

In those setbacks, however, investors may see opportunities, especially when we consider the scale and importance of the US banking sector. Of the 30 banks included in the global list of systemically important financial institutions, colloquially referred to as “too big to fail,” eight are based in the United States.

With those titans as ballast, investors may be able to find growth opportunities in US banking, if they understand why the sector is struggling now, where the upside could come from, and find a strategy suited to short-term volatility.

For someone seeking to take advantage of the dislocation we’ve seen in the US banking sector, a diversified approach is absolutely something you may want to look at. Adding a covered call strategy would give the opportunity to monetize the high volatility we’re seeing on the market now. It’s hard to say when the upside might come in US banks given all this uncertainty. But, there’s an argument to be made for someone who wants exposure to these US banks that a covered call strategy could make sense.

Struggles and risks in US banking today

The US banks’ stock market setbacks are due in part to a fear reaction from bank-specific failings at institutions like Silicon Valley Bank, but also reflect some structural headwinds for the sector.

The systemic issue comes down to deposit costs. As market-based interest rates rose sharply in 2022 and into 2023, the rates offered by banks to their depositors remained relatively low. Depositors, especially larger businesses, have begun to demand higher interest rates on their accounts, raising the cost of funding for many banks. Some of those depositors started transitioning some capital into other interest-bearing vehicles, such as money market mutual funds, which offered a higher interest rate as well. The whole banking sector is now facing some challenges to profitability growth due to the rising costs of deposits.

Those deposit costs can be more accurately described as a structural headwind, rather than an existential risk. While deposit costs contributed to the fall of Silicon Valley Bank, it’s notable that a range of company-specific factors played a role: Silicon Valley Bank’s high proportion of business clients, meaning its depositor base was concentrated and held high average account balances. When word spread across social media of venture capitalists sounding alarm bells to their investment companies, withdrawals cascaded. Continue Reading…

Managing Tax Season Anxiety

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By Devin Partida

Special to Financial Independence Hub

Tax season can be stressful for most people. Though there are many tools and services to help you manage your finances, they don’t do anything to help your mental state. The truth is much of that stress can be of your own making. Thankfully, there are ways to manage that anxiety and get your taxes done.

To help manage your tax season anxiety, knowing why tax season makes people so stressed might be helpful. A big part of that stress is the simple fact that it has to do with money. Although they say money can’t buy you everything, studies have shown financial troubles can directly affect your mental health.

Is it any wonder? People’s worth is often judged by how much money they earn — not to mention money can affect how high your standard of living is. You are happy when you gain more money and become stressed out when you lose it.

Financial stress has become a more significant part of the world in the last few years. Events like the COVID-19 pandemic and the war in Ukraine have caused global financial difficulties, making it harder for the average person to save.

Fear of the government also causes stress during tax season. While most people are upstanding citizens, the idea of the government swooping in and taking everything you have just because you missed a payment or filled out the wrong form is as prevalent as it is irrational.

How to reduce Stress during Tax Season

The key to overcoming tax season stress is to adjust your mental state. Doing your taxes is the same as any other task you have to complete. Here are some things to remember to make doing your taxes less stressful.

Address Misconceptions about the Government

Contrary to popular belief, the government will not throw you in jail for missing tax payments. In fact, the U.S. and Canadian governments will try to help you make your payments — though there are penalties for not paying on time.

The government also cannot immediately take your property if you’re late in your tax payments.

They can place a lien on your property that they can lift if you set up and commit to a long-term payment plan. The government will also be more lenient if you have a lower income, though they can still audit you.

If you’re living in Canada, there are ways to work with the Canada Revenue Agency so they can accommodate your financial needs. The CRA also encourages you to file your taxes online — it’s easier and faster to process.

Stop Procrastination

Filing your taxes is probably not many people’s definition of fun. However, constantly putting it off can cause even more stress as the due date gets closer and closer. Good time management habits can help you reduce stress and get your taxes done.

A common solution is to break down filing your taxes into smaller tasks and space them throughout the month. This can make your taxes less daunting by letting you finish in increments while giving you more time to do other things.

Use Online Tools

Online tools like TurboTax can make doing your taxes much more manageable. These tools streamline the process, making it quicker to get the job done. In addition, some tax collection organizations like the IRS have partnered with certain companies to offer free e-filing. The IRS free-file system allows you to file with them free of charge.

Filing your taxes online comes with other benefits, such as receiving refunds faster and record-keeping services. Most online tools come with 24/7 support you can contact in case you need help.

Take the Stress out of Tax Season

Stress during tax season is a common problem, but one you can overcome. Practice good working habits to prevent procrastination and get it over with. Remember that the government is not out to get you. Fire up that TurboTax and get to it.

Devin Partida is the Editor-in-Chief of ReHack.com, and a personal finance writer. Though she is interested in all kinds of topics, she has steadily increased her knowledge of the intersection of finance and technology. Devin’s work has been featured on Entrepreneur, Due and Nasdaq.

Fraud was bad during pandemic, but poll finds it could get worse if recession hits

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Image from Unsplash

Kevin Purkiss, vice president, Fraud Management, RBC

Special to Financial Independence Hub

While we don’t always want to think about the risk of fraud, it’s never been more important to stay vigilant. During the pandemic we saw a sharp rise in fraud attempts, but it may be about to get worse if we end up in a recession later this year.

Not only have we seen a strong correlation between increased fraud and economic slowdowns in the past, but many Canadians believe a recession will make fraud even more risky, according to new RBC research.

The poll found that 78% of Canadians believe a recession will increase everyone’s fraud risk and 42% think it will be harder to spot scams during a recession than in the pandemic. Three quarters (75%) also believe that it’s easier to fall victim to a scam when you’re struggling financially and 36% are simply too worried about other issues to be concerned about fraud.

While it’s understandable that Canadians have a lot on their minds and don’t want to think about fraud, scams are getting harder to spot and fraudsters are becoming more sophisticated. This is why we all need to continue to stay aware and take steps to protect ourselves.

Missing the signs of fraud is costing us money

Our research also found that 32% of respondents are concerned they are already starting to miss the signs of potential fraud and 71% are worried it will be harder to spot the signs of fraud as they get older.

Almost a quarter (23%) have been a victim of fraud or fallen for a scam, with 14% saying they lost money because of a scam. While the average lost was $400, 6% of respondents say they lost more than $10,000.

Apathy about fraud risk among Canadians 18-34

More than half (53%) of adult Canadians under the age of 35 say they share more information online than they should and 44% say they are quick to share personal data to get access to an offer, website, app or service. Thirty-five per cent of this age group also perceive fraud as something that happens to others, but not to them, and 33% have never been worried about falling victim to a scam. Continue Reading…