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.”

Renewing your Mortgage this year?

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By Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

Our mortgage is up for renewal later this year. That’s a shame because I’m enjoying the ultra-low 1.90 per cent interest rate on our five-year variable mortgage (prime minus 0.80 pe rcent). It’s a near certainty that I’ll have to renew at a higher rate this summer.

My bank is offering five-year variable rates at prime minus 0.10 per cent, which means a mortgage rate of 2.60 per cent. That’s not much of a discount off of the five-year fixed rate they’re advertising, which comes in at 2.94 per cent.

Five years ago, when the deeply discounted variable rate was 1.50 per cent lower than the five-year fixed, it was a no-brainer to go variable. Now it’s not so cut-and-dried.

What is clear is that we’re living in the golden age of low mortgage rates. Remember three years ago when BMO introduced its controversial 2.99 per cent ‘no frills’ mortgage?

Now it’s rare to see mortgage rates ABOVE 3 per cent – and most come with all the bells and whistles; from 120-day rate holds and pre-approval, to double-up monthly payments and lump sum payment privileges.

For nearly a decade we heard how interest rates couldn’t possibly get any lower and that the smart thing for homeowners to do was lock in their mortgage with a five or even a 10-year fixed rate.

It turns out the best advice was to do what has almost always saved Canadians the most money over the last 50 or 60 years. Go variable.

Renewing your mortgage

Continue Reading…

Our values about money are changing and millennials are leading the evolution

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Jay Acharya

By Jay Acharya,  Capital One Canada

Special to the Financial Independence Hub

When my wife and I bought our house, it felt like a massive achievement for us as we had diligently saved our money for the down payment.  When we told people about it, they were full of questions about the neighbourhood, the kitchen and how many bedrooms there were.

We were so proud of ourselves for accomplishing this milestone that we eagerly shared pictures and every detail about our new home.  The funny thing is, no one asks you to tell them the story about how you saved up to buy the house in the first place.  That is where the real drama and the value of the conversation is – then again, you can’t take pictures of the restaurant meal you skipped or the stay-at-home vacation you took and post them on social media.

New car, new house, new clothes – the idea that owning bigger, more expensive things has traditionally been valued by our society as a symbol of status and accomplishment.  Now enter the millennials: the demographic that is challenging the status quo in many areas, including what we value.

Capital One Canada recently hosted the C1NDX, a consumer index roundtable and study that included six of Canada’s leading journalists and industry experts. With a specific focus on the impact of the sharing economy, we dove deep into how the financial values and spending habits of consumers have changed and are continuing to evolve.

We discovered that when it comes to how and why consumers spend their money, the values of many Canadians, particularly millennials, are shifting.

Experiences Are the New Luxury

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Q&A with North America’s first subscription-based Robo Adviser service

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Randy Cass, NestWealth.com

Jon Chevreau: Most robo advisers in North America seem to use a model of charging a fee based on assets. As one of Canada’s original robo-adviser services, NestWealth.com uses a quite different model, based on subscriptions, correct? One, I might add, that you say is also unique in all of North America?

Randy Cass: Nest Wealth’s members pay a flat monthly price for access to a customized portfolio and a dedicated portfolio manager. Our subscription model doesn’t incentivize or commission sales people based on how much of a product they sell. We’re enabling Canadians to sidestep high fees and outdated banking practices that take a percentage of everything they invest throughout their lives.

Nest Wealth’s subscriber community understands that our subscription service fundamentally challenges the model banks, and even newer robo-advisors, have used to charge investors. Not only are we able to deliver a proven investment service capable of saving Canadians up to half of their potential wealth, but we’re continuously improving that service by listening and adapting to our members’ needs. This is a transformational advantage of the subscription model, and it’s one important reason why we see so many industries adopting it as a revenue model.

JC: Is this unique, both in Canada and the US and rest of world?

RC: Nest Wealth is the first and only subscription-based investing service that handles everything from end to end. Investors of all ages can subscribe to our service for $20 a month — less than the cost of a gym membership. And their subscription is capped at $80 no matter how much their assets grow overtime. We want to help Canadians do the math and recognize that our low, flat subscription payment can leave them with 100 per cent more savings than a traditional fee structure that charges based on assets.

The good news is we’re witnessing a clear shift in how Canadians want to pay for and access financial services. A new report by business consultancy EY says that the adoption of fintech services among Canadians will triple over the next 12 months. The report also shows that although consumers trust technology, they still lack awareness of its benefits. We are passionately committed to helping consumers understand and seek out a better way to build wealth. Broader awareness and education will lead to more informed choices about how families plan for their future. There’s quite a bit at stake here.

JC: Where did you get the idea in the first place?

RC: The ‘Aha’ moment came when I was watching Netflix with my youngest son and I recognized that the principles of subscription services like Netflix, Spotify, Salesforce and Zipcar were much more in line with how investors needed to be treated than the status quo.

Continue Reading…

EQ Bank: Your new High-interest No-fee Banking Solution

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eqbankbanner_HISABy Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

Over the last decade or more Canadian banking customers have had to accept two inevitable truths:  interest rates on savings deposits would plummet and stay at historic lows, and banks would continue to raise fees on everyday bank accounts and services. All of this occurred while Canada’s big five banks hauled in record profits.

Savvy bank customers had to invent complicated workarounds to keep their hard-earned money safe, free of fees, and to earn a decent interest rate. That meant limiting transactions, maintaining high minimum balances, and bouncing from bank-to-bank chasing the latest short-term high-interest rate promotional offers.

If only there were a bank that offered one solution: a hybrid chequing-and-savings account that paid market-leading interest rates with no monthly fee, and no extra charges for moving your money around via e-Transfer or for paying bills.

EQ Bank

Enter EQ Bank – a new digital bank and offshoot of Equitable Bank – with its unique EQ Bank Savings Plus Account. Launched on January 18th, 2016 Continue Reading…

FWB video: Investors are often their own worst enemy

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The latest video from FWB TV is available now by clicking here. You can also view all the FWB and SensibleInvesting.TV videos at this new link at Findependence.TV.

 

If you’re an investor, there’s a good chance the real enemy is the face you see every morning while shaving (or applying makeup!). The pithy quote in the screen shot is of course from legendary value investor Benjamin Graham.

The main point of this 4-minute video is that successful investing is about controlling what you can. You can’t control what the market does, but you can control what you do in response. In our experience, a person’s returns depend less on whether they pick great investments than on whether they can manage their emotions.

One of the experts in the video describes the physiology of stress that investors suffer during — well, times like the past few weeks! In the heat of volatility, particularly the downward variety, our emotions can get the better of us. There’s a reference to a Cambridge University study of 142 students, all male, who were invited to play a game about trading stocks. They found that the more testosterone they found in the subjects, the greater the risks they took on. Such surges of chemicals and emotion can actually affect your perception of the future, and seldom for the better!

Implications for actively managed funds

Since the Evidence-based Investor Videos largely sing the praises of passive or index investing, you might not be too surprised by a statement that this research may have some implications for investors who use actively managed funds. One source asserts that the investment industry is a stress competitive arena and many fund managers tend to be young males. The decisions they make under pressure and stress may cause them to be overconfident about the stock bets they place on your behalf.

The video concludes that investors may benefit by doing business with a rational, use unemotional advisor.

After watching the video if you want to learn more, download the free guide, 12 Essential Ideas For Building Wealth.

How to Win the Loser’s Game, Part 7

Screen Shot 2016-02-09 at 4.17.07 PMIn addition, SensibleInvesting.TV has put up part 7 of the How to Win the Loser’s Game series of videos. While indexing is a relatively simple way to invest, there are still important questions index investor need to ask. Crucially, they need to ensure they are invested in a diverse range of assets that reflects their attitude to risk. They might also want to “tilt” their portfolios to particular risk factors — small-cap or value stocks, for example. While more volatile, these have been shown to deliver higher returns over the long term.