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.

Book Excerpt: Lessons on Mastering Money

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By Fred Masters

Special to the Financial Independence Hub

We are in the midst of a personal financial crisis in this country from coast to coast to coast.  The Bank of Canada has been sounding the warning alarm for years that Canadians are taking on way more debt than they can afford.  Many are suffering in silence since we just don’t talk about money, and we certainly don’t teach about it.

The goal of my book Lessons on Mastering Money is to empower you – Canadian adults in their 20s and 30s ─ with the core personal financial literacy knowledge needed to control your money on your life’s personal financial journey.

No one should care about your financial well-being more than you.  Delegating your financial decision-making to another person, such as a family member or an advisor, leaves you financially blind.  You need to be able to ask the right questions and stay involved in the conversations; you need to be at the table so as to understand the decisions.

Success in any organization can often be traced back to strong leadership.  Surely, you have witnessed this in your life in countless settings.  Once you view your financial life as a very, very important business, then you will instantly recognize that you must put steps in place to financially prosper. Look in the mirror: the person staring back at you owns your financial success.

Mere Hope isn’t going to cut it

By the way, ‘hoping’ for the best financial outcome isn’t going to cut it; you need to understand the financial game because you play it every day of your adult life, and this is one game that we can all win!

There are many personal financial hurdles to overcome in life.  Three of the biggest financial tests are saving enough for retirement, saving for the kids’ education and solving the housing-affordability puzzle successfully.  These three are crucial.  You MUST pass all three of these major financial tests or you will struggle mightily with your financial life: getting just one right or even two of the three right is just not good enough.

You need to get 100% right on this test, and this book provides help with all three of these pieces.  Saying that Canadians struggle with debt is a total understatement; there’s help here for this too.  A recurring mistake that many Canadians make financially is leasing a brand-new car: there’s guidance around this also.  Getting a handle on how you think about and approach your personal finances – your money mindset ─ is really bedrock learning; all good financial decisions lead right back to this. The book begins by teaching you these key money mindset lessons.

6 major thematic sections

The format of the book aligns with the biggest personal financial hurdles that Canadians face.  It is broken down into six major thematic sections: Continue Reading…

How Millennials have shifted Homeownership Trends

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By Beau Peters

Special to the Financial Independence Hub

Many millennials prioritize homeownership. And today’s real estate market presents myriad opportunities for millennials to make their homeownership dream come true.

Research indicates U.S. home sales rose 7% month over month in September 2021. Meanwhile, the total housing inventory fell 0.8% month over month. In addition, the median existing price for homes totalled US$352,800, which represented a 13.3% year-over-year increase.

The aforementioned data highlight the rising demand for U.S. homes in 2021. They also illustrate home prices are increasing, which is making it difficult for millennials to pursue their homeownership dream.

At least one study shows some North Americans under the age of 40 have given up on their dream of homeownership. However, it is not too late for millennials to update their homeownership goals. With a clear understanding of home buying trends, millennials can fine-tune their approach to the real estate market. From here, millennials can work diligently to make their homeownership dream a reality.

Now, let’s look at four notable home buying trends and what they mean for millennials.

1.) Most Millennials are pursuing a Home for the first time

Most millennial homebuyers are entering the real estate market for the first time. As such, they may rely heavily on a real estate agent who can help them find a residence that matches their expectations.

When it comes to partnering with a real estate agent, millennials should choose carefully. It helps to select an agent who has extensive real estate industry experience and expertise and knows the ins and outs of the local housing sector. Plus, this agent should have no trouble negotiating on behalf of a millennial homebuyer.

Of course, it pays to work with a real estate agent who values communication. This agent can respond to a millennial homebuyer’s concerns and questions at any point during their quest to acquire their dream home. That way, the agent can help a buyer make an informed home purchase.

2.) Millennials are open to buying “Fixer-Upper” homes

“Fixer-upper” homes tend to be more affordable than other properties. Thus, they frequently generate significant interest among millennial homebuyers.

For millennials who pursue fixer-uppers, buyers beware. There are many reasons why fixer-upper homes are available, so it pays to conduct comprehensive research before purchasing one of these houses. This ensures a millennial home buyer can weigh the pros and cons of a fixer-upper and decide if it is worth investing their time, energy, and resources to upgrade the home.

If a millennial home buyer moves forward with buying a fixer-upper home, purchase the right tools for house improvements. For instance, waterproof wood glue, wall spackle, and other home improvement tools make it simple for a buyer to upgrade a residence without breaking their budget. These tools are generally easy to use and won’t require a buyer to hire a home improvement professional to upgrade their house, either.

3.) Millennials want to limit their Carbon Footprint

Research shows most millennials feel personally responsible for having a positive impact on the environment. As part of this responsibility, many millennials are committed to owning and maintaining sustainable houses.

There is no shortage of opportunities available to millennials who want to buy a house and minimize their carbon footprint. For instance, millennials can compost at home. They can set up home compost piles where fruits, vegetables, and other food products can decompose. Continue Reading…

Here’s to 2022: Surely it will be better than 2021?

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A quick note to say Happy 2022 to all the Hub’s readers and supporters. We’ll be back to our regular blog-a-day rotation on Tuesday.

In the meantime, I’ll point readers to Dale Roberts’ excellent year-end market wrap for MoneySense, which was published Friday.

Click on the highlighted headline to access, but settle down with a coffee before you do: it’s quite a long read: Making Sense of the Markets: 2021.

It’s a thorough long read that looks at all the major market developments each month in 2021 and you’ll also see a number of prescient market calls made by Dale over the last few years, including an early call on Covid-19 itself, an early call on the Energy and Commodities recovery, and several others.

I’ve followed Dale for some years now: he famously tweets as @67Dodge and I now help edit his weekly MoneySense market wrap, seeing as I became MoneySense’s Investing Editor at Large a few months ago.

Don’t forget to contribute to your TFSA ASAP

Oh, while on the subject of MoneySense New Year’s content, I may as well point those to my own column that ran a few days ago: Why contributing to a TFSA is a good (New Year’s) resolution.

In normal years, I would move new money into the TFSA on January 1st but there’s probably no rush this year until Tuesday, Jan. 4, seeing as the Canadian market is closed Monday. (The US will be open that day though).

I’ve not decided exactly what to invest in but it will likely be inflation-related. Going back to Dale Roberts, you can glean a few ideas from his 2021 market wrap: things like short-term TIPS ETFs, or the Purpose Real Assets ETF, or energy/commodity plays.

Personally, I’ve been researching Ray Dalio’s All-Weather portfolio (google it for videos and articles, or try this Seeking Alpha link on it). I’ve concluded that our own family has sufficient US equity exposure but not enough in commodities or TIPS [Treasury Inflation Protected Securities] plays.

Dalio is a bit heavier on fixed-income than most, with a mix of long-term and short-term bonds. His recommended equity exposure is a bit lower, and he suggests 7.5% commodities and 7.5% in gold. Readers may therefore find Friday’s Hub article on gold of interest: A perfect storm for gold.

Every case is different of course. IF I were looking to boost US equity exposure, I’d certainly be considering the new Canadian Depositary Receipts (CDRs), more on which you can read on the Hub early in the new year. If we didn’t already own Berkshire Hathaway, I’d be tempted to add to it with the CDR version of Berkshire, seeing as it pays no dividends and would be a good value counterbalance to high-priced US tech stocks.

So by all means get your $6,000 (if available) into your TFSA early in 2022 but take a few days to figure out how to invest it.

The wild card is certainly Omicron. If you’ve not yet gotten your booster, I highly recommend it.

So again, have a happy, healthy and profitable 2022!

Your first New Year’s resolution: Maximize your TFSA contribution for 2022

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My latest MoneySense Retired Money column describes the first New Year’s Resolution most of us can accomplish on or soon after January 1, 2022.

And unlike resolving to go to the gym or to buy (and use) that new Peloton, this is one you can tick off your to-do list within minutes of changing the calendar to 2022.

I refer of course to making your annual TFSA contribution — $6,000 this year — and you can read all about it by clicking on the highlighted text here to go to the full MoneySense column: Why contributing to a TFSA is a Good Resolution.

Every year since the program commenced in 2009, as close to January 1st as possible, each member of our family faithfully adds the maximum contribution amount (initially $5,000, briefly $10,000 and currently $6,000) to our TFSAs. And because we view them not as tax-free savings accounts but as tax-free Investment accounts, they have all grown substantially: to the point my family members do not wish the exact balances to be divulged to this broad readership. Arguably, TFSA is a misnomer: they should have been called TSIAs.

The column describes Robb Engen’s blog, titled “A sensible RRSP vs TFSA comparison” which reprises David Chilton, who said it all depends on:

  1. If you go the RRSP route, don’t spend your refund.
  2. If you go the TFSA route, don’t spend your TFSA.
  3. Whatever route you go, save more!

 

How about the Cash Flows & Portfolios blog entitled Can you retire using just your TFSA? It begins with this glowing commendation for the TFSA: “The opportunity for Canadians to save and invest tax-free over decades could be considered one of the greatest wonders of our modern financial world.”

The blog’s authors (known only as Mark and Joe) conclude that if you start early enough (like our daughter) you could indeed retire using just a TFSA.

To recap the rules: the cumulative contribution amount as of Jan. 1, 2022 is now $81,500. If you believe in the time value of money, it follows that you should contribute the full $6,000 the moment the new year begins, which is why I always call it “New Year’s Resolution Number 1.” Unlike joining fitness clubs, you can tick this one off your To-do list moments after you sing Auld Lang Syne (assuming you use an online discount brokerage).

Because of the long time horizon, young people could well put only equities into their TFSA, and if they do so from the get-go they will far outstrip the performance of the sadly all-too-common default option of parking TFSA funds in GICs that pay almost nothing relative to inflation.

Not only does an 18-year old have a good 47 years until the traditional retirement age of 65, keep in mind that unlike RRSPs, you can keep contributing to TFSAs well into your 90s or 100s, if you live that long. I knew a lady who was contributing to hers past age 100! Those near retirement could ratchet it down to a conservative Asset Allocation ETF like VBAL, ZBAL or XBAL, all of which cover the world of stocks and bonds in C$ in a traditional 60/40 asset mix of stocks to bonds.

I do try to avoid putting US-based dividend paying stocks or ETFs in the TFSA: put those in your RRSP or RRIF. Canadian dividends and interest belong in a TFSA, as do speculative US or foreign stocks that don’t pay dividends.

Speaking of RRSPs, what about the perennial question of which to fund first: TFSA or RRSP? My short answer is to do both but if you really have to choose, I’d pick the TFSA in most situations. Certainly, young people in a low tax bracket and older folk who are in danger of seeing OAS or GIS benefits clawed back should prioritize the TFSA.

Those in top tax brackets by virtue of high employment income should maximize their RRSPs but if you’re in the top tax bracket then you can probably also afford to maximize your TFSA. If despite such a high income you are encumbered by a lot of mortgage debt and/or credit card debt, I’d even suggest liquidating some of your TFSA to eliminate some of that debt: you can always regain your lost TFSA contribution room in future years and once you are debt-free there should be few obstacles to maximizing retirement savings in all such tax-optimized vehicles.

 

What Time Magazine person of the year Elon Musk has to say about Cryptocurrency

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LONDON, UK – June 2021: Bitcoin cryptocurrency on a Tesla electric vehicle logo.

By Sia Hasan

Special to the Financial Independence Hub

Time Magazine’s Person of the Year Elon Musk — chief executive officer of Tesla, The Boring Company and founder of SpaceX — has helped bring cryptocurrency into the public spotlight. He supports cryptocurrency and has made people more aware of what it is and how it works.

What is Cryptocurrency?

Cryptocurrency, also known as crypto, is a digital currency traded for goods and services. Many companies issue their own cryptocurrencies to be spent specifically for the service or product they provide. A company’s crypto is comparable to arcade tokens or poker chips. People must exchange real currency for cryptocurrency to buy the product or service.

A type of decentralized technology called Blockchain is what powers cryptocurrency. Different organizations (none of which have absolute control of the data) can trace the data through the processes of multiple computer systems. Blockchain manages and records transactions with an online ledger that is very secure. It can be shared and used by anyone with the proper credentials.

Blockchain allows businesses to use shared and protected information for collaboration. It is starting to emerge in almost every industry. It is a good fit for CRM for small business because it provides a secure place to store certified data.

Why do people use Crypto?

Because cryptocurrency is decentralized — not regulated by an authority or issued by a government — it offers autonomy to its users. Crypto is not subject to the boom and bust cycles in a country’s economy. Theoretically, it promises more control to the owner.

Cryptocurrency offers low transaction fees for international payments. Foreign purchases and wire transfers have associated costs and can be expensive. There are no banking fees related to cryptocurrency, such as minimum balance fees or overdraft charges. Continue Reading…