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.”

The Hub’s Weekly wrap: Bag lady fears, fast-casual dining stocks & more

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Woman in povertyLaunched last week, the Hub’s Weekly Wrap aims to be a weekend read with brief commentary and links to some of the more interesting items touching on Financial Independence that appeared in North American cyberspace in the past week or two.

We aim to split these roughly half from American blogs and online media and half from Canadian. (That roughly corresponds to current traffic levels at the Hub.)

We’ll begin with this piece from Next Avenue: Unemployed, 55 and Faking Normal. This blog about the common fear of becoming a bag lady (financially speaking) was widely tweeted, including by a few women I suspect were in similar circumstances. No doubt about it, a combination of divorce and job loss can add up to a tough go, especially if you’re still not old enough to qualify for Social Security or the Canadian triad of CPP/OAS/GIS.

Fast-casual dining

Moving on to the more fortunate comes this piece from the Washington Post, mentioned on the Motley Fool’s Market Foolery podcast on Tuesday. The Chipotle effect: Why America is obsessed with fast casual food is an analysis of the trend to “Fast Casual” dining and the stocks of the major players capitalizing on this change (Chipotle and Panera to name two.) This is a threat to the old-time fast food joints like McDonald’s: ironically, McDonald’s incubated Chipotle in its early days.

4 reasons to pay your credit card bill early Continue Reading…

The case for unhitching trailer fees on mutual funds

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robb-engenBy Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

One of the strongest arguments made by investment industry groups against banning embedded commissions – or the trailer fees paid to advisors when you purchase mutual funds – is that investors don’t want to pay up-front for financial advice.

xboomerandecho2-12.jpg.pagespeed.ic.3_5T_n6dOWjFMaguzvlI Advocis, which represents financial advisors across Canada, as well as the Mutual Fund Dealers Association, believe things are fine just the way they are, claiming, “investors prefer to pay for financial advice through fees that are part of their mutual funds.”

These arguments are used to convince regulators that a ban on trailer fees would only hurt investors, with potentially “devastating consequences” for those who are just starting out and don’t have the means to pay directly for advice.

I’ve tried to debunk this argument in a recent post, stating that it’s up to the investment industry to adapt and deliver new service (and cost) models to meet the needs of consumers.

But a recent study by Morningstar India shed further light on the gap between investor expectations and what advisors perceived to be investors’ expectations.

How Do Mutual Funds Work?
Hub Extra for Newcomers: Primer on how mutual funds work

A third of investors don’t seek professional advice

The study found that over one-third of investors do not seek out professional advice when it comes to their finances, instead relying on their own knowledge or help from family, friends or colleagues.

Continue Reading…

Robb Engen, you’re no longer alone in being a 100% “pure” indexer

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By Jonathan Chevreau

Here’s my latest MoneySense blog, which is a followup to Robb Engen’s article here at the Hub about his conversion from stock-picking to 100% “pure” indexing.

After Robb revealed his “conversion” and I appealed for other readers with similar stories, readers started to come out of the woodwork. In one of the cases, the “confession” appeared first at MoneySense and now The Hub.

In addition to the two readers profiled in the MoneySense blog, I’ve already started to receive more emails from other “pure” readers. Please let me know by emailing me at jonathan@findependence.com. Hopefully, we’ll discover that there are a lot more than the half dozen I’m so far aware of.

I’ve republished the original version of the blog below and included photographs of the two readers that were not included in the MoneySense version:

Pure indexers step forward

robb-engen
Boomer & Echo’s Robb Engen

Early in January, popular blogger and fee-only financial planner Robb Engen announced on Twitter and his Boomer & Echo site that he had finally bitten the bullet – he’d liquidated his portfolio of individual dividend-paying stocks in order to become a 100% “pure” indexer. Continue Reading…

Ominous trend in Millennials’ use of credit cards

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Here’s my latest MoneySense blog, which looks at what I perceive to be a developing problem in the abuse of credit cards by a few Millennials with whom I am acquainted. I name no names but the guilty know who they are! More’s the pity, because the book Findependence Day starts with an opening scene built around a young couple’s similar credit-card problem!

For archival one-stop-shopping purposes and convenience, here’s the original version:

Young Woman on a Shopping SpreeBy Jonathan Chevreau

With some reluctance, I feel compelled to return to the age-old topic of excessive credit-card debt. I do so because lately I’ve had chats with some of my nephews and nieces, all in the age range of 23 to 24. These kids have now all graduated from university or community college, have made a first stab at being in the workforce, and have already racked up what I consider to be excessive credit-card debt. Continue Reading…

Expect mortgage price war to be sparked by today’s interest-rate cut

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RomanaKing_322
Romana King (MoneySense.ca)

Good news for homeowners today with the surprise announcement interest rates in Canada are being cut by 0.25% (to 0.75%).

In her MoneySense.ca column today, real estate columnist Romana King predicts there will be an imminent price war among financial institutions offering home mortgages.

That can only be good for those renewing mortgages or about to buy their first home. One of the charts Romana describes shows five-year fixed rates could even fall below 5%.

Of course, as someone who preaches that the foundation of Financial Independence is a paid-for home, I’d still rather have no mortgage at all. But rock-bottom rates are the next best thing and it seems they will continue for as long as the eye can see.

My only caveat: be wary of buying more house than you really need. Use the gift of continued low rates as a way to accelerate the paydown of your mortgage.  Because ultimately we value Financial Independence more than having a monster home in which to store more “stuff.” Don’t we?

As I say in my book, “Freedom, Not Stuff!”