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 Is a Credit Utilization Ratio and why does it matter?

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By Mihika Ghosh

Special to the Financial Independence Hub

Credit agencies use the credit utilization ratio to understand your credit score. The credit utilization ratio is your total credit to your total debt amount expressed in a percentage format. In simpler terms, it refers to the amount of debt you carry in all your credit cards.

Your credit utilization ratio increases and decreases based on the payments and purchases you make. It is one of the factors that help credit bureaus calculate a credit score and makes up 30% of your credit score. Hence, it is vital to keep your credit utilization ratio as low as possible to avoid debts and maintain good credit scores.

Why does your Credit Utilization Ratio matter?

A high credit ratio negatively impacts your credit score rating process and indicates that the borrower is not great at managing their credit. At the same time, a low credit ratio implies excellent credit management skills.

There are two important factors in maintaining a good credit score – first is your payment history. Late payments and abundant due payments can negatively impact your credit score. The second factor that lays of great importance is your credit utilization ratio. If you are trying to land in the good books of the lender, you need to build good credit by keeping your credit ratio as low as possible.

Most credit experts recommend you keep your credit ratio below 30% to maintain a good credit balance.

How to Calculate your Credit Utilization Ratio 

First and foremost, start by pulling up all your credit cards together, then add up all of your outstanding balances along with your credit limits. Take this figure and then divide it by your total credit limit and multiply it by 100. Your answer will be your total credit utilization ratio which will come out in percentage.

Note that your credit ratio is not the sum total of each of your credit card’s credit utilization ratios. Hence, it is important to calculate the total credit of all your credit cards.

However, if this calculation method is still too complicated for you, or you would just want to let calculators do the math, there are plenty of online credit utilization calculators that can assist you.

How to Improve your Credit Utilization Ratio

Lowering your credit utilization ratio is easy and one of the quickest ways to boost your credit score. Here are a few ways in which you can get started:

  1. Pay All Your Debts

The best way to improve your credit ratio is by paying off any pending credit card balances. Every dollar you pay reduces your credit ratio and total debts, in turn getting you one step closer to a good credit utilization ratio. This even reduces the baggage of interest you had to pay on those balances. Continue Reading…

What to do if you are Wrongfully Terminated

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Image by Pexels

By John Moran

For the Financial Independence Hub

If you are ever fired from a job it can set your financial goals back quite a bit. Sure, you may receive a handsome termination and severance package, but you had planned on working for more years to reach your goals. Getting fired means you may have no money coming in for a while. What really makes that sting is when you feel you were wrongfully terminated.

If there was retaliation against you for doing something that you felt was right, such as calling out discrimination or a hostile workplace, then you were wrongfully terminated as that is illegal. You would definitely have a case for some DC employment lawyers but to make sure your case is successful you’ll need to take some measures. In this article, we will go over what you should do if you feel you were part of a wrongful termination.

Get an explanation from the company

 Most jobs these days are at-will, meaning that you can actually be fired as long as you are not part of a protected class of workers. That doesn’t mean that any reason at all is valid justification. Even in states where employees are at-will you still can’t be fired for no reason.

You should get a written explanation from your company as to why you were fired. If you were wrongfully terminated then you should be able to rebut their reasons for firing you as long as you have some evidence to back it up. Continue Reading…

Three in four Canadian Women want to start a Side Hustle

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Side hustling is on the minds of a majority of Canadian women, according to a survey conducted by Angus Reid for Simplii Financial.

Fully 90% of Canadian women aged 18 to 34 are interested in exploring opportunities to earn money outside their day jobs, the survey found. And across all age groups, 76% are interested in starting a side hustle.

Most of these women are hoping to find more ways to save for major life events, including early retirement, making a down payment on a home, and growing overall savings for their futures.

This Tuesday, March 8th is International Women’s Day, and to celebrate, Simplii Financial will be hosting a special virtual event: the #SimpliiSideHustle panel [Link below.] It brings together three barrier-breaking Canadian women who have launched successful businesses, and who will offer their advice to those looking to start their own side hustles.

The panel features Canadian entrepreneurs Abby Albino (@abbyalbino on Twitter), Avery Francis (@averyfrancis), and Zehra Allibhai (@zallibhai), who will share the challenges they faced in starting their sneaker, consulting and fitness businesses, respectively. They’ll also share how they’ve challenged gender stereotypes that disempower women, to support a more equitable future.

Start-up capital a barrier for women seeking side hustles

Despite the high number of women looking to launch side hustles, more than a third of all women surveyed, and nearly half of those aged 18 to 34, indicated that lack of start-up capital was a barrier to pursuing their side hustles. Continue Reading…

Innovation & Crypto ETFs: A Wild Ride

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By Danielle Neziol, Vice President, BMO ETFs

(Sponsor Content)

In 2021, the Canadian ETF market once again showed its ability to innovate as the first jurisdiction to allow crypto-currency ETFs.

This reaffirms one of the core benefits of ETFs, as access to vehicles for harder-to-trade asset classes, where — just like gold and other commodities — ETFs have brought cryptocurrencies to the mainstream by providing efficient trading over the exchange.

We’ve now seen the listing of over 30 tickers across providers, with over $5 billion in assets.1 Starting in February 2021, and quickly followed by further products, Purpose Bitcoin ETF (ticker: BTCC) captured global attention and earned outsized trading volumes. For investors who can stomach the volatility, crypto-currencies via an ETF have provided another portfolio tool, with the benefit of low correlation to traditional asset classes.

A small crypto allocation can have meaningful impact on returns

Crypto-currencies provide quite a ride, from the sell-off in the summer, to the rapid rise in the fall, and now a further correction late in the year, they have experienced volatility of around 70% standard deviation since market entry, showing that a small allocation can still have a meaningful impact to portfolio returns.

Another ETF trend where we are seeing volatility right now is within innovation stocks. After a gangbuster run for innovation in 2020, many of these stocks reversed course, moving into correction territory by the end of 2021. This is due to several factors: the market rotated into value and out of growth, rising interest rates and yields added pressure on growth stocks’ future cash flows, and inflation fears pushed investors towards more defensive industries. Continue Reading…

Inflation and the new ways of diversification

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Photo Credit: CCL Private Capital Ltd.”

By Duane Ledgister, vice president, Connor Clark & Lunn Private Capital

Special to the Financial Independence Hub

Inflation has moved to its highest level in decades, with higher prices resulting from strong economic growth led by pent-up demand for goods and record levels of government spending.

At the same time, strong demand is leading to supply shortages. When we look at the components of inflation, we see recent price increases are largest in industries hurt the most during the pandemic, such as energy. These industries are cyclical and are pulling inflation readings higher as prices recover after a period of decline.

Higher prices in the short term are expected to be tempered as supply adjusts and demand returns to more normal levels, and while policy actions such as higher spending and larger debt levels have increased short-term inflation, the same forces are deflationary long-term. This is because more money goes to paying down debt as opposed to future investment. The caveat is that higher debt levels encourage policymakers to allow inflation to move higher than it has been in recent cycles. Accordingly, inflation will be higher but not at the disruptive levels we saw in the 70s and 80s.

Impact of inflation on your investment allocation

Now is a good time to consider its effect on different asset classes that make up a portfolio. Real diversification is much more involved today than you would have been told before.

Stocks can generally do well in a period of moderate inflation, whereas fixed income is hurt the most. Alternative asset classes — which most investors have little exposure to, and should begin evaluating — also have some natural protection from inflation.

Equities

Moderate inflation is a double-edged sword for stocks: increasing corporate cash flows while decreasing the real value of investment returns. Companies with high valuations tend to underperform as their valuations are based on future earnings growth long into the future. In a period of higher inflation, these future earnings are now worth less today. Companies with lower valuations, called value stocks, do better in a period of above-average inflation. Strategically it makes sense to hold both growth and value styles within your equity allocation.

Fixed Income

The bond allocation of a portfolio is the one that is hardest hit by inflation, because most bond coupon payments do not increase with inflation, and bond yields tend to rise when inflation is moving higher. The result is both a temporary decline in the price of bonds and lower long-term real return. The negative effects of rising inflation and yields can be managed by holding short-term bonds and higher coupon bonds. The former is less sensitive to changes in inflation and yields. This protects capital when inflation is rising. The latter have more income to offset price declines.

Having a view of the economic backdrop and managing a bond portfolio’s sensitivity to changes in yields and inflation is important to delivering risk-adjusted returns, particularly true when inflation is on the rise.

Alternatives

This is where real diversification can pay off. The alternative asset classes in a portfolio are attractive since they generate strong levels of income relative to traditional equities and bonds. They also tend to be the least sensitive to risks in the broader economy, including inflation. Private market investments (real estate, infrastructure, and private loans) should have natural inflation stabilizers. For real estate, rental income tends to rise with inflation and infrastructure contracts may have ongoing inflation adjustments. Finally, private loans income rises as yields and inflation move higher. Continue Reading…