Debt & Frugality

As Didi says in the novel (Findependence Day), “There’s no point climbing the Tower of Wealth when you’re still mired in the basement of debt.” If you owe credit-card debt still charging an usurous 20% per annum, forget about building wealth: focus on eliminating that debt. And once done, focus on paying off your mortgage. As Theo says in the novel, “The foundation of financial independence is a paid-for house.”

Top 5 Credit Card myths Busted

Posted By Financial Independence Hub | September 20, 2016

by Kevin Chu, RateHub.ca

Special to the Financial Independence Hub

Credit cards, much like any financial product, seem to create anxiety for many. With so many rumours surrounding credit cards, we decided to turn to top influencers in the community for help on busting these myths and sharing the facts.

Here are your top 5 credit card myths busted once and for all:

Myth #1: Having a credit card means you are financially irresponsible

Credit cards are a great way for you to start building credit and earn rewards from everyday purchases. If you’re spending wisely and are paying off your balance each month, credit card debt won’t be an issue.

Myth #2: Getting a credit card will hurt your credit score

The exact opposite is actually true here. The best way to establish credit is to start by getting a credit card. By paying off your debt in full each month, there’s nowhere but up for your credit score. Be wary of credit utilization though. A high utilization ratio will affect your credit score negatively.

Congratulations – Your credit score has just gone up!

Posted By Financial Independence Hub | September 12, 2016

Richard Moxley

By Richard Moxley, eCreditFix.ca

Special to the Financial Independence Hub

Congratulations – Your credit score has just gone up!

I would love to say it increased just because you are reading this article but in reality it is because Equifax has implemented a change in its algorithm (the computer scoring system that banks use to predict the chances of you paying on time).

These changes have had a huge impact on the report and 80 per cent of Canadians have seen a jump in their personal credit score. So if you were declined for financing previously, you might want to try again.

Here are some of the main changes that have been made:

Mortgage Payments now affect your credit score

As of June, your mortgage payment history now affects your credit score. If you are like most Canadians and paying your mortgage is top priority, then this will be one of the main reasons why your score has jumped.

Lines of Credit report different than your Credit Card

Before the recent changes, a high balance (any balance over half of the limit) on a line of credit or a credit card would lower your score the same amount. Now, a high balance on your line of credit will not hurt your score as much as if you have a high balance on a credit card. Continue Reading…

The search for yield ahead

Posted By Financial Independence Hub | September 9, 2016

By Kevin Flanagan, Senior Fixed Income Strategist, WisdomTree

Special to the Financial Independence Hub

Unfortunately for fixed income investors, the search for yield remains an ongoing challenge. Without a doubt, a primary culprit behind the historically low-rate backdrop in the U.S. are overseas developments, as developed world sovereign debt yields have been hitting their own new lows throughout the summer.

The low-rate phenomenon does not necessarily have a “center of the universe” aspect to it, either, as yield levels on a global scale are all part of this spectacle. As the graph below clearly illustrates, low sovereign debt yields can be found throughout the G7 group of nations, ranging from Japan and Europe (Germany, France, UK, Italy) to North America (U.S., Canada).

Indeed, as of this writing, the bellwether 10-year maturity ranges from a low of -0.11% in Japan and Germany to a high of only 1.51% here at home. In between, France is barely above the zero threshold, while Canada and Italy post readings around the 1% level. The UK had been the second-highest-yielding sovereign rate, but the recent Brexit fallout has 10-year gilts back into the middle of the pack, making the UK a full-fledged member of the “negative and sub 1%” club.

10-year Treasury Yields

The reasons behind the current — and more than likely upcoming — environment have been well documented: slow global growth, low inflation, flight-to-quality/event risks and the monetary policy responses associated with these developments.

When to buy an ETF for maximum return

Posted By Pat McKeough | September 6, 2016

To determine when to buy an ETF, some investors use technical analysis and other tools. But you need to dig deeper.

Investors often wonder: what is a good entry point when purchasing a stock or an ETF?

The first question before asking when to buy an ETF is whether an exchange traded fund investment is right for your portfolio. An ETF investment is one of the most popular and most benign investing innovations of our time. ETF investments are a little like conventional mutual funds, but with two key differences.

First, ETF investments trade on a stock exchange throughout the day, much like ordinary stocks. So you can buy them through a broker whenever the stock market is open, and generally you pay the same commission rate that you pay to buy stocks. In contrast, you can only buy most conventional mutual funds at the end of the day. What’s more, commissions vary widely, depending on negotiations with your broker or fund dealer.

Second, the MER (Management Expense Ratio) is generally much lower on ETFs than on conventional mutual funds. That’s because most ETFs take a much simpler approach to investing. Instead of actively managing clients’ investments, ETF providers invest so as to mirror the holdings and performance of a particular stock-market index.

ETFs practice this “passive” fund management, in contrast to the “active” management that conventional mutual funds provide at much higher costs. Traditional ETFs stick with this passive management—they follow the lead of the sponsor of the index (for example, Standard & Poors). Sponsors of stock indexes do from time to time change the stocks that make up the index, but generally only when the market weighting of stocks change. They don’t attempt to pick and choose which stocks they think have the best prospects.

This traditional, passive style also keeps turnover very low, and that in turn keeps trading costs for your ETF investment down.

When to buy an ETF

Employee Savings Plans: why say no to free money from your employer?

Posted By Financial Independence Hub | September 3, 2016

The September long weekend is upon us and, for many, it’s the last chance to spend some quality family time before the transition back to school and work.

The post-Labour Day shift into a more productive mindset offers a good time to review your Employee Savings Plan (ESP), a benefit that can be a great way to save money but can also add some risks.

An ESP is a program set up by an employer that allows employees to contribute a portion of their income into an investment the employer has provided. In some cases, the employer may also match all or a portion of the contribution made by the employee.

Benefits: free money!

By participating in your ESP you’re basically getting free money. Whether an employer matches part or all of your contributions, you will be hard pressed to find any other investment out there that provides immediate returns. Say, for example, that your employer will match 50% of your contributions, up to 6% of your salary (a typical scenario). All growth and other earnings aside, your investment immediately grows by 50% and your 6% turns to 9%.