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.”

65% of Americans say partner having too much debt is a marital dealbreaker

Posted By |

65% of Americans say their partner having too much debt is a dealbreaker in deciding to get married. Little wonder that the national marriage rate in the United States has declined 60% over the last 50 years.

Source: Clever Real Estate — Marriage Survey, May 2023

According to the Marriage Survey of 1,000 American adults conducted by Clever Real Estate in May (see graph above), financial stability is a primary purpose for marriage, as reported by 1 in 5 Americans (20%). In fact, 19% admit they would marry solely for money reasons (19%). Entering into the calculation are factors like high inflation, escalating living costs, and an expensive real estate market.

While marriage positively impacts finances for 66% of couples, only 54% of married couples discuss finances regularly, and 7% never broach the topic.  53% favor separate bank accounts. However, married women are 10% less likely to manage finances in their marriage than men.  Money-related issues contribute to about 1 in 6 divorces (16%). Looking back at their lives, 10% of married respondents wish they chose a partner more financially responsible.

For more on Americans’ views on marriage, read the full report: 2023 Data: 1 in 4 Americans Think Marriage Is an Outdated Concept

Here are other highlights:

Why digital transformation is critical for the smooth transition of newcomers to Canada

Posted By |

By Hamed Arbabi, VoPay

Special to Financial Independence Hub

Canada welcomed over 400,000 new immigrants in 2022, and that number is only expected to increase in 2023 with up to 505,000 new permanent residents.

These record immigration goals require critical planning from a workforce management perspective and should prompt employers to consider how digital transformation and embedded payment processing services can support the transition.

Organizations that intend to set new employees up for success must understand the responsibility to create a structure that supports financial inclusion: a vital consideration, especially amidst ongoing concerns of recession and inflation. If you are unfamiliar with the term financial inclusion, think of it as ensuring individuals have access to the tools and resources which enable them to have control over their financial health: a passion of mine as both a company founder and advocate for easy, affordable and accessible financial services.

Understanding the payment gap

For some of us, we have forgotten (or never experienced) the days of manually paying bills and waiting in line to cash a bi-weekly pay cheque; we’ve discounted the luxuries we have adapted to over the years thanks to automated technology. However, there is a disproportionate number of individuals in Canada, including newcomers, who still need faster and easier access to funds.

It is estimated that 10 to 20 per cent of Canadians are “unbanked” or “underbanked,” meaning they are not accessing the banking services available to them. These Canadians are often from low-income households, specifically those living in remote communities, including Indigenous peoples, people with disabilities and newcomers to Canada.

This means that some newcomers are still relying on cheque-cashing services and payday loans to fund purchases, minimize time gaps between pay periods, and manage their finances. While this is a short-term solution, it poses long-term challenges as cheques are sometimes difficult to deposit, easy to lose and prone to theft. Further, funds are not available immediately, do not allow for online purchases and are heavily reliant on slow payment processing practices such as mail delivery.

How organizations are advancing payments

Across all sectors and businesses, the goal is to ensure all Canadians have control over their financial health. Savvy employers recognize that outdated payment methods, such as cheques, are slowing down economic operations and can cause challenges for the unbanked and the underbanked. In response to this, these organizations are ensuring they welcome new immigrants with real-time payments to help newcomers get “banked” and join the economic ecosystem in Canada.

Continue Reading…

11 Strategies to Reduce Debt and Improve your Credit Score

Posted By |

To help you take control of your finances and improve your credit score, we’ve gathered advice from 11 professionals across various industries. From embracing the snowball method to celebrating debt reduction milestones, these experts share their top strategies for reducing debt and boosting your credit standing.   

  • Embrace the Snowball Method
  • Develop a Debt Repayment Plan
  • Make Incremental Financial Changes
  • Dispute Credit Report Errors
  • Diversify Your Credit Accounts
  • Use the Debt Avalanche Method
  • Avoid Excessive Hard Inquiries
  • Cut Expenses to Pay Off Debt
  • Seek Professional Credit Counseling
  • Request a Higher Credit Limit
  • Celebrate Debt Reduction Milestones

Embrace the Snowball Method

Debt can feel like a mountain, but there’s a strategy I’ve found effective called the snowball method. Here’s how it works:

Start by listing all your debts from smallest to largest. Forget about the interest rates for now, just focus on the amounts. Then, aggressively pay off the smallest debt while making minimum payments on the rest.

Years ago, I was juggling a couple of credit card debts alongside a student loan. I knocked off the smallest credit card debt first. Seeing that zero balance gave me such a boost, like a minor victory. This momentum propelled me to tackle the next one. I was making consistent payments, which positively affected my credit score. So, it’s a two-pronged approach: reducing debt while improving credit. It’s about gaining momentum and keeping it rolling, just like a snowball!  –– Evander Nelson, NASM-Certified Personal Trainer, evandernelson

Develop a Debt Repayment Plan

Creating a debt repayment plan is one strategy for reducing debt and improving your credit score. So here you go. Make a list of all your debts, including outstanding amounts, interest rates, and minimum monthly payments. This will give you an idea of where to start.

Identify which debts have the highest interest rates or the largest balances. You should focus on paying off these debts first, as they cost you the most in the long run.

Develop a budget that allows you to allocate a portion of your income toward debt repayment. Cut unnecessary expenses and use that money towards repaying your debts. Pay more than the minimum monthly payment on your debts. By paying more, you’ll reduce the principal balance faster.

If you have multiple high-interest debts, you may opt for debt consolidation, where you combine your debts into a single loan with a lower interest rate. You can also negotiate with creditors for a lower payoff amount through debt settlement. –– Lyle Solomon, Principal Attorney, Oak View Law Group

Make Incremental Financial Changes

You probably didn’t suddenly fall deeply into debt. That means you’re unlikely to suddenly get out of it. Changing your spending and payment habits will gradually reduce your debt load while improving your credit score. 

The first step is to not miss any payments. This can be easier said than done, but it’s key. You might not pay your credit card bills in their entirety each month in the beginning, but you should do whatever you can to exceed the minimum payments. 

For other types of bills, it’s helpful to reduce your costs by lowering your level of service, for example by getting a cheaper cell phone plan.

None of these changes by themselves will magically get you out of debt, but they are all steps along the right path that will meaningfully lower your debt. — Temmo Kinoshita, Co-founder, Lindenwood Marketing

Dispute Credit Report Errors

One strategy that has proven quite effective in reducing debt and improving credit scores is disputing credit report errors. A couple of years ago, I noticed an unfamiliar charge on my credit report. Instead of ignoring it, I took prompt action to dispute it with the credit bureau.

I gathered all the documentation and, after some back and forth, they acknowledged the error and corrected it. This removal of an erroneous charge not only reduced my debt but also led to a significant improvement in my credit score. It reminded me that keeping a vigilant eye on your credit report and challenging any inaccuracies can play a significant role in maintaining financial health. –– Hafsa Unnar, Executive Assistant, On-Site First Aid Training

Diversify your Credit Accounts

One effective strategy I will recommend is diversifying your accounts. The idea is not to concentrate on a single type of credit but to have a mix of credit types, like mortgages, credit cards, and loans. 

This approach shows your ability to manage different credit responsibly. I once faced a period of financial strain with overwhelming credit-card debt. Instead of sticking to paying off just that, I took out a small, manageable personal loan. 

While it might seem counterintuitive to borrow more, the fresh line of credit actually improved my credit mix and overall score. Over time, this strategy, combined with prompt payments, helped me significantly reduce my debt and boost my credit score. –– Ben McInerney, Director and Founder, Home Garden Guides

Use the Debt Avalanche Method

Allow me to share the debt avalanche method and how it’s been my trusted ally on my journey toward financial freedom.

The secret is to prioritize your debts based on their interest rates. Identify the debt with the highest interest rate and focus all your extra resources on closing it. Do this while you continue to make minimum payments on your other debts. Continue Reading…

How to Invest your way to Findependence

Posted By |

 

By Devin Partida

Special to Financial Independence Hub

Today’s economic and job-growth landscape might have you turning to investing as a prominent option.

It takes patience and effort, but anyone can save up enough through intelligent investments.

How do you begin the Investment Process?

As of 2023, the average American makes around US$57,000 annually, which is lower for minority groups. Even if you’re careful with your spending, becoming financially independent with that salary can take a long time.

The average person from the United States only has about $5,000 in savings. Before beginning the process, you must consider how much money you can invest. The ultimate goal is financial independence [aka “Findependence” on this site], but getting there can take a while. Only put in what you’re willing to lose because things might not pan out as expected.

The formula for Findependence takes your yearly spending and divides it by your safe withdrawal rate to calculate your goal savings figure. Then, it subtracts the amount you’ve already saved and divides that amount by how much you can save each year. It’s only an estimation, but it can help you know how much your investments need to make.

What Investments should you Consider?

There are plenty of investment types. The stable ones often have lower returns and you usually need to take some risk to see a high reward quickly.

1.) Real Estate Investment Trust

A real estate investment trust (REIT) receives money from investors to purchase and manage property. Most generate revenue through rental income and pay dividends in return for the initial payment you made. It’s similar to owning by yourself, but you pool funds for the purchase and let someone else take care of the tenants. There are also other REIT types, so you have more options than rental properties.

2.) Stocks

The stock market usually requires more attention to detail because you must keep up with it. Anything from an upcoming brand deal to an overseas political event can affect this investment type. You should frequently check the stocks you hold and the businesses they belong to so you can quickly respond to changes.

The Canadian stock market differs from the United States version. Firstly, you need a brokerage account. Most brokerages charge about $5 to $10 per trade, with average commission fees of $6.95. It might seem minor, but paying to invest or shift your stocks around puts you at a loss before you begin. The flat rate cut you must pay can also make investing smaller amounts challenging because it takes a higher percentage the less you put in. Continue Reading…

Gen Z and beyond leaning on debit to spend in times of economic uncertainty

Posted By |

By William Keliehor, Interac Corp.

Special to Financial Independence Hub

Gen Z Concerns

Generation Z (Gen Z) is feeling the brunt of economic uncertainty in Canada as they enter the workforce and take on a whole host of financial ‘firsts’ – such as paying rent, saving for a vacation and purchasing groceries. More than any other generation, Gen Z is more likely to feel stressed (42 per cent), anxious (37 per cent), and overwhelmed (31 per cent), according to new research from Interac Corp.

Inflation is one of many factors serving as a hurdle for Gen Z and Canadians alike in their ability to stay on top of their money. In fact, 78 per cent of Gen Z respondents agree inflation and everyday essentials (75 per cent) are two external causes throwing a wrench in their ability to manage their finances.

Leaning on Interac Debit and Interac e-Transfer

Canadians will likely continue to contend with inflationary pressures for many months to come and it’s critical they’re equipped with tools that can help them stay in control.

Building healthy money habits such as creating a budget and using your own money are two ways to help navigate personal finances amid the current economic landscape. We’re hearing that Gen Z is doing just that – leaning on debit to take charge of their finances. Gen Z told us they are more likely (70 per cent) to frequently use debit, compared to 55 per cent of non-Gen Z Canadians polled in the Interac survey.

From the survey findings, we discovered that nearly half of Gen Z say they prefer to spend with debit so they’re only spending the money they have. Gen Z also told Interac that they feel more in control of their spending when using debit (46 per cent) and half of this generation of debit users (50 per cent) also say it’s easier to track their spending when using debit versus credit.

While there are many external factors that make it difficult to manage your finances, there are tools to help you stay in control of your day-to-day spending. For example, making Interac Debit the default payment in your mobile wallet or merchant app can help you spend the money you have in your account. Using debit for essential purchases can also help you stay on track and build good financial habits.

Canadians can also take charge of their financial well-being by using Interac e-Transfer to pay instantly or to split costs with others, making shared experiences more affordable and easier to track. This is a trend we began to see last year, as Interac e-Transfer hit one billion transactions. We’re seeing that Gen Z continues to rely on this tool, with nearly eight in ten (78 per cent) saying Interac e-Transfer is the simplest way for them to split costs so they can still get the most out of life and spend the money they have.

Essential spending continues

In times of uncertainty, debit remains an important and empowering tool, helping all generations across Canada stay in charge of their finances. While we’ve seen Canadians react to inflation and shift their spending accordingly, essential spending has continued. Canadians continue to spend the money they actually have in their accounts, as evidenced by year-over-year growth in Interac Debit (5 per cent) and Interac e-Transfer (11 per cent) volumes.

Additionally, year-over-year, Interac transaction data shows an increase in the number of transactions with InteracDebit at grocery stores and supermarkets as average basket sizes have decreased. Continue Reading…