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.”

It’s Blue Monday, and we’re ashamed of credit-card debt, study finds

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Borrowell Blue Monday InfographicThe holidays are over, the weather is cold and dreary and credit-card bills are rolling in—it’s no wonder the third Monday in January is considered the most depressing day of the year, known as Blue Monday.

We know that Canadians carry a lot of credit-card debt, but beyond the numbers we wanted to understand how Canadians feel about their debt. So the team at Borrowell commissioned a survey of 1,500 Canadians to understand our emotions around credit-card debt.

To see Borrowell’s Blue Monday video, click on the red/white button in the centre of the video image above.

Shame can affect our relationships

It turns out Canadians feel a lot of shame around carrying debt, and it’s not only affecting how we feel and what we can do, but our personal relationships as well, as the infographic to the left shows.

Like many issues, shame can prevent us from seeking solutions. Feeling shame may be a factor in explaining why so many Canadians carry expensive credit-card debt – even those who have good credit and could get a lower interest rate somewhere else!

Take control of your finances

Although Blue Monday is supposed to be depressing, let’s not just wallow in self-pity with a tub of ice cream. Take control of your finances, take a step in the right direction and if you’re carrying a balance on your credit card, look into a lower-interest loan to pay it off.

For more information on Blue Monday, including more on the survey, check out www.borrowell.com/bluemonday.

 

Video: How to Win the Loser’s Game, Part 5

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UntitledThe fifth video instalment in SensibleInvesting.TV’s How to Win the Loser’s Game has been posted here and at Findependence.TV.

Often we hear say someone ask us the question, “Do you play the market?” The answer should be a resounding no, as the market is not a game. In fact, it’s quite scientific. A trio of Nobel Prize winning economists each have created a model that better helps us to understand the science behind the market.

This 8-and-a-half minute video features interviews with various executives from DFA and Vanguard and reviews the groundbreaking academic research on modern portfolio theory spearheaded by Harry Markowitz, William F. Sharpe and Eugene Fama. The screen shot above shows Eugene Fama on the left and DFA board member Ken French on the right. Continue Reading…

16 Financial Habits for a Prosperous New Year

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MarieEngen
Marie Engen

By Marie Engen, Boomer & Echo

Special to the Financial Independence Hub

A Fidelity Investments study discovered that setting specific financial goals does help get your fiscal house in order. 56% of those surveyed said their finances had improved, a much better result than most New Year’s resolutions.

Give yourself a financial checkup and see where you can improve your savings and spending habits.

  1. Increase your savings. Save 16% more than you would normally on all your savings, including your employee pension if you are not contributing the maximum amount already. By making modest adjustments, you won’t miss the money as much.
  1. Automate your savings. One of the easiest and most effective ways to save is to automate the process, and yet less than 40% use this technique. Set up regular transfers with your bank. Some employers will take money directly of your paycheque to invest in RRSPs, Canada Savings Bonds and other savings vehicles. Set up savings for specific expenses such as a new car, home renovations and vacations, as well as children’s education and retirement savings.

Continue Reading…

David Trahair’s contrarian stance: Be a loaner, not an owner

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125_Enough_Bull_High_Res_Cover_FinalBy Jonathan Chevreau

Financial Independence Hub

In this summer’s series on the 7 eternal truths of personal finance, one of the articles was entitled Be an Owner, Not a Loaner, which reflects the usual financial industry advice that stocks are more likely to generate long-term investment returns than cash or bonds.

There is of course a contrary view to this eternal truth and it’s best contained in the new second edition of David Trahair’s book, Enough Bull, originally published early in 2009, right at the bottom of the financial crisis..

Trahair, a chartered accountant and author, could as easily have titled his book Be a Loaner, Not an Owner, because he’s adamant that stocks (i.e. equities), whether individual or pooled through mutual funds or ETFs, are just too risky for the average person.

The book cover includes a small image of a bull (as in a steer), so clearly the title Enough Bull is a double entendre: as in no more bullish prognostications on the stock market, as well as no more bovine excrement, whether dispensed by the animals or financial advisors.

Skeptical about the financial industry and its central belief in stocks Continue Reading…

What’s your car buying strategy?

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 986b71380a0d028a001c660083788ce8By Robb Engen, Boomer & Echo

Special the Financial Independence Hub

When it comes to buying a car, most of us generally fall into two camps: those who buy new for the latest technology and safety features, and those who buy used because they believe that buying new is a waste of money.

We know cars are depreciating assets and lose the most value in the first year or two of ownership – hence the old saying that a car loses 20 to 30 per cent of its value the minute you drive it off the lot.  That’s why, historically, the best deals can be found on used cars that are one or two years old.

The problem is that both car sellers and buyers have figured this out and so supply and demand have caused the prices of used cars to rise accordingly.

New cars, on the other hand, have become increasingly more affordable as car dealer incentives, creative financing, and low interest rates drive prices down.  It’s common to see loans at seven or even eight years today to help buyers take home a new car.

I bought a new car in late 2012.  Being acutely aware of the pitfalls of buying new, I made a few rules before taking the plunge. Continue Reading…