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.”

Can you Invest solely in ETFs?

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 Special to the Financial Independence Hub

As regular readers of MillionDollarJourney know, we are big fans of Exchange Traded Funds (ETFs) which are one of the fastest growing products in the market.

Were it not for the fact that financial firms and advisors have less incentives to sell ETFs than other investments such as mutual funds (that provide them with annual fees), the growth would probably be even more spectacular.

Having said that, ETFs don’t always have the best performance, and are sometimes outperformed significantly by other investment options. This also means that over years, the standard composition of most ETFs has shifted – with fixed income, commodities and FX now representing a much larger piece of the pie.

For most investors, ETFs represent the easiest and cheapest way to gain exposure in a variety of different sectors or asset classes. Investing in currencies or commodities was done by pension funds or hedge funds only a few years ago but it is now just as easy to do so for individual investors.

It might not be 100%, but a very large majority of individuals and professionals believe that portfolio diversification represents an important way to gain the same return but with lower risk. 20 years ago that meant buying bonds, private investments, etc. The major problem with that strategy is illiquid investments are often very expensive if you are not pouring a major amount of capital.

A prime example is looking at the prices of a bond when you are buying $50,000 worth. It is understandable of course that sellers will give better prices to buyers of millions of dollars as it is an easier trade for them. Take a few percentage points here and there and you will see just how much of an impact it can have over a life of savings and investing.

Investing in ETFs – Pros and Cons

So, should you invest mostly (or only) in ETFs? Here are some of the common pros and cons to help you decide:

ETF Investing Advantages

  • Most diversified
  • More tax efficient (read our article on capital gains in Canada)
  • Easiest and quickest way to invest

ETF Investing Disadvantges

  • Costs can be high, depending on the broker you use
  • Still has some investing risks

Should Canadians invest only in ETFs?

In many ways, ETFs provide a viable alternative as they offer the opportunity to get broad (corporate bonds) or specific (1-3 year treasuries) positions that will not cost you much in terms of commission.  Furthermore, ETFs will get you much better pricing and potentially much improved returns over the long term. Continue Reading…

10 Tips to help save Money on Healthcare Expenses

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From taking advantage of tax deductions to keeping a healthy sleep schedule, here are the 10 answers to the question, “What are some tips to help save money on personal healthcare expenses?”

  • Take Advantage of Tax Deductions
  • Keep a Healthy Diet
  • Opt For Services In Your Network 
  • Save With Pre-Tax Accounts
  • Ask Questions and Advocate for Yourself
  • Get Robust Health Insurance
  • Compare Quotes to Get the Best Deals
  • Buy Generic Drugs
  • Use Free Screenings
  • Just Sleep It Off

Take Advantage of Tax Deductions

Make sure you are taking advantage of the tax deductions you are eligible for when paying for your healthcare. These include deducting the costs of your health insurance premiums, medical expenses, and dependent care expenses. You can also deduct the costs of travel for medical care and the cost of child care for medical appointments. 

While the healthcare costs are high, you can save money by simply keeping track of the expenses you are already paying and ensuring you itemize your deductions to get the most out of them. –– Matthew Ramirez, CEO, Rephrasely

Keep a Healthy Diet 

Invest in quality nutrition now to save money on health care later. Many people give in to the convenience and comfort of fast food, but it really shouldn’t be a regular part of anyone’s life. Eating whole, colorful foods is the best way to keep your body healthy, and yes: it can be quite expensive to eat healthily.

While organic produce, free-range eggs and meats with no added hormones may bump up your grocery bill, it’s far less expensive than managing a chronic condition like diabetes or cardiovascular disease. My best advice is to take care of your body now so you can save money on health care expenses later. — Jae Pak, MD, Jae Pak MD Medical

Opt for Services in your Network 

Finding strategies to pay for medical expenses without going bankrupt is a daily effort for persons with chronic diseases and long-term treatment demands. Fortunately, the news is not all negative. 

The clever consumer may find big discounts in many typical healthcare circumstances if they know where to search. It is tempting to visit the first care facility with an open appointment when you’re feeling under the weather. However, the costs of various provider alternatives vary. 

Do you need to go to an emergency room? You may see physicians who are in-network or out-of-network depending on your health insurance. Because in-network providers have an agreement with your health plan, you pay less to see them. This translates into reduced prices. — Isaac Robertson, Fitness Trainer & Co-Founder, Total Shape

Save with Pre-Tax Accounts 

Using Health Savings Accounts (HSAs) or Flexible Savings Accounts (FSAs) is a great way to save money on healthcare expenses. You can put money into an HSA or FSA each year and use it to pay for qualified medical expenses, including doctor visits, prescription, and over-the-counter drugs, home medical supplies, and even mental health services. 

These accounts can cover a variety of personal daily products related to first aid, feminine care, family planning, skincare (such as acne treatment and sunscreen), respiratory health, and pain relief. 

The money you put into an HSA or FSA is not taxed, and any money you spend on qualified medical expenses is not taxed either. You can use the money in your HSA or FSA to pay for medical expenses, even if a health plan does not cover you. — Michaela Ramirez, MD, Founder, O My Gulay

Ask Questions and Advocate for Yourself

Sometimes being in a healthcare setting can be overwhelming, especially if you aren’t feeling your best. However, it’s important not to get railroaded into agreeing to things that don’t serve you in the long run. 

For example, a medical professional may suggest a test, treatment, or procedure which you’re uncertain you can afford. Don’t be afraid to ask questions. Why is this necessary? Is there a cheaper alternative? 

Make sure you’re informed about all your options before agreeing to anything. There can be pressure to make snap decisions, but this is your health, nobody else’s. 

“Can I just take a moment to consider this?” is a great phrase to use in order to gain some breathing space. If a medication is recommended, it’s always worth asking whether there is a generic equivalent. These are often cheaper than brand-name products and just as effective. A curious, considered, and calm approach should help you make the best choices. — Alex Mastin, CEO & Founder, Home Grounds

Get Robust Health Insurance

One of the best ways to save money on personal healthcare expenses is to have a robust health insurance plan. Many people think health insurance plans with low premiums are workable. But that’s not true. 

Health insurance plans with low premiums come with other liabilities. They have higher deductibles, and you may get a higher co-pay. Also, low-premium plans don’t cover many things. These plans don’t include particular procedures or tests. 

As a result, your medical expenses can get out of control. Sometimes health plans offer discounts and valuable services. They deliver services that give a boost to your health. You can get all the details from the health insurance company or your health insurance card. — Sean Harris, Managing Editor, FamilyDestinationsGuide

Compare Quotes to get the Best Deals

One great tip that has increased my savings on personal healthcare expenses is to compare the costs of service providers. 

When I was shopping around for a primary care physician, I called various medical offices and asked about their appointment fees. Even though each office listed different pricing, one stood out because it was lower than the other options. 

By taking the time to shop around, I could save money in the long run. Compare-and-save strategies can be used not only with doctors but also with many other areas of healthcare, such as medications and lab tests.  Continue Reading…

Are your Online Shopping habits compromising your Financial Security?

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Image: Unsplash

By Beau Peters

Special to the Financial Independence Hub

Incredible advancements in technology have made it so we don’t ever need to leave the house to buy the stuff we like. You can buy anything from food to video games from the comfort of your home and have it delivered the next day. However, while convenient, the rise of online shopping has also made it easier than ever to overspend and put our information in the hands of hackers and cybercriminals. It is important to know your limits and shop responsibility.

Today, we will talk a bit about the dangers of shopping online and what you can do to protect your data and your pocketbook.

Awareness of the Risks

If you watch the news, then you have likely heard reporters talk about the criminals that use online spaces to steal the money of consumers. The reality is that if you do anything online, then hackers can get to it. According to Help Net Security, 62% of consumers believe that online shopping fraud is a real threat, yet, most people continue to use e-commerce sites for their needs. The reason is likely because they don’t really understand how bad stolen data can be.

The fact is that if a hacker is able to get ahold of your credit card or debit card numbers, they can steal and retain that information and use it to take out fraudulent loans on your behalf. Even the personal data that you put online, like email addresses and birthdays, can be sold to other hackers for profit.

There are several threats to be aware of, including unencrypted websites. When you shop on any site, you must look at the web address and ensure that it says HTTPS before the website name. The “S” in this case stands for secure, and it means that the website automatically encrypts your payment information so it cannot be read by hackers even if it is stolen.

You must also be cautious when you are shopping on your phone, especially when you are out in public. Hackers can set up fake Wi-Fi networks that can look like the real deal, but when you connect, you are really connecting directly to the hacker. From there, they can steal your data and log into your bank accounts. This is why it is so important to be vigilant about online security wherever you go.

Before you buy anything at a website that you have never shopped at before, take a look around the site for red flags. For instance, if the website does not have a returns policy that you can easily find and review, then it may mean that it is a scam. Also, be aware of spelling mistakes. It is human nature to make a spelling error here and there, but if the website is littered with errors, then it may mean that it was put up in a hurry and the site is not legitimate.

Be Smart about Payment Info and Documentation

It is essential that you are aware of how you use and store your payment information as you do your online shopping. Many companies give you the option to store your payment information on their website for the sake of convenience. But you should know that if that store is not secure, then your financial security could be in jeopardy. So, if you must keep your card information saved at that company, then ensure that they are encrypted, and if you are unsure, then shop elsewhere.

If you do decide to keep your payment information on a website, you must make it a habit to routinely check your debit and credit card statements. If that website is hacked and your card information is stolen, then hackers can continue to use your payment info to make fraudulent purchases. By checking your statements, you can spot false charges right away and file a dispute with the bank.

Also, consider how you store and access those statements. If you view them online at your banking or credit card website, then ensure that you protect your data by adding a complicated password complete with letters, numbers, and special characters. Make your password hard to guess and change it regularly.

Some people choose to download their statements and save them to their computers for future review. If you do the same, then you still need to be cautious because hackers can also get into your device and read the information you have on those statements. Once the documents are on your computer, consider redacting your personal information off of those PDF files, so it cannot be read by others. Doing so will black out your name, address, account number, and other sensitive information so you can keep your files without fear of theft.

Be Smart about your Money

The other potential downside to online shopping is that the instant access makes it too easy to give into temptation and buy more than you need. It can only take a few seconds to find that you have spent the money that you need to pay the bills. That is why it is always a smart idea to create a budget so you can ensure that you stay within your limits.

It is important to consider your wants and needs when budgeting. You may want to buy that new sweater or television set, but are there expenses that you absolutely need to pay before you can splurge? Sit down and write down all of your monthly expenses, including childcare, food costs, utilities, and rent. Compare those necessary costs with the money you have coming in each month. If there is anything left over, then you can dedicate some of that to your online shopping desires.

Part of financial security is not letting your debt get so out of hand that you dig yourself into a deeper hole. If you have debt on credit cards, then it is important that you focus on eliminating it before you spend more unnecessary money. You can do that by adding your credit card payments into your budget, paying more than the minimum each month, and if you have more than one card, then pay off those with the highest interest first. Then, once you pay off your debt, reward yourself with something nice.

As you can see, it is important that you are smart about how you shop online. By shopping with a plan, you can avoid scams and improve your financial situation so you can have a brighter future.

Beau Peters is a creative professional with a lifetime of experience in service and care. As a manager, he’s learned a slew of tricks of the trade that he enjoys sharing with others who have the same passion and dedication that he brings to his work. When he is not writing, he enjoys reading and trying new things.

Canada’s Real Estate Affordability Battle

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By Dale Roberts, cutthecrapinvesting

Special to the Financial Independence Hub

In my latest for MoneySense, I look at the affordability battle in Canada. Home prices are falling at the fastest clip in the last 20 years. But borrowing costs are also increasing. Mostly, it’s a wash. Even from the bubble peak in February of 2022 to July 2022, things have not improved for homeowner wannabes. Real estate is the most interesting and ‘exciting’ sector in 2022. Have a read of the real estate affordability battle in Canada.

Higher rates take on falling home prices on MoneySense.

In this post I will offer up a few of the important charts, but check out that MoneySense post for the wider perspective.

Average home prices down 22% in July

Home prices are falling fast. After a strong COVID-inspired real estate run, prices are now in a free fall. After peaking at $816,720 in February 2022, the national average house price fell 18.5% to $665,850 in June. The average price fell again in July, settling at $629,971—nearly 22.9% below the peak.

The average national home price in August increased to $637,673.

CREA

The national average price is heavily influenced by sales in Greater Vancouver and the GTA, two of Canada’s most active and expensive housing markets. Excluding these two markets from the calculation cuts $114,800 from the national average price.

Real estate ridiculousness

And here’s some longer term history using average Toronto home prices as an example. It was a crazy run.

  •  Average Toronto home price in 2000: $243,255
  •  Average Toronto home price in 2010: $431,262
  •  Average Toronto home price in 2021: $1,095,336

Rates are going up, up, up

In that battle against runaway inflation, central bankers are raising rates. Borrowing costs mostly follow suit. Here’s the path in Canada for fixed and variable rates mortgages.

And of course, on Wednesday September 7, the Bank of Canada increased rates another 75 bps, or 0.75%. Variable is getting more expensive.

  • A 5-year fixed will now run you about 5.04%.
  • A 5-year variable will increase to about 4.90%.

The B0C offers that they’re not done yet. There are more rate hikes to come.

Given the outlook for inflation, the Governing Council still judges that the policy interest rate will need to rise further. Quantitative tightening is complementing increases in the policy rate. As the effects of tighter monetary policy work through the economy, we will be assessing how much higher interest rates need to go to return inflation to target. The Governing Council remains resolute in its commitment to price stability and will continue to take action as required to achieve the 2% inflation target.

Bank of Canada

Variable rates will automatically follow Bank of Canada rate hikes. Fixed rates will follow the bond market, and the bond market will make a guess about the near and future path of rate hikes. The rate hike on September 7 was mostly already priced into the bond markets.

The money chart on affordability

In the MoneySense post you’ll find the telling table comparing costs for variable and fixed rate mortgages, for 10% and 20% down payment scenarios. Here was the working copy table. Continue Reading…

12 unique ways to Change your Spending Habits

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What is one unique way someone can change their spending habits for the better? 
To help you improve your spending habits, we asked CEOs and business leaders this question for their best tips. From trying to not purchase anything online for one month to trying the envelope method, there are several unique tips to help you change your spending habits for the better.

Here are 12 unique ways to change your spending habits: 

  • One Month No Online Purchases
  • Check How Long You Can Go Without Something
  • Change Paid Activities to Be Cost-effective
  • 30-day Challenge
  • Track Your Spending for One Week
  • Buy from Your Local Market
  • Reduce Impulsive Purchases
  • Shop With Lists Only
  • Ask a Friend
  • Use Cash as a Payment Option
  • Set Savings Milestones and Rewards
  • The Envelope Method is One Way to Change Spending Habit

 

A Month with no Online Purchases

My wife and I recently did a one-month challenge on not purchasing anything online. The breaking point was coming home after a long weekend and finding over 10 packages on our doorstep between the two of us ordering online. We heard of a challenge where you don’t purchase anything for a month, but knew that wouldn’t work for us. We decided just not to purchase any items online. If we needed something we had to go to the store and purchase the item. We realized we didn’t have to buy as much stuff as we were previously ordering online. After the challenge month was over, we did both change our spending habits and don’t buy nearly as much as we previously did online. We also found out that the physical store tends to be less than purchasing your items online. –– Evan McCarthy, President CEO, SportingSmiles

Check how long you can Go without Something

When you’re contemplating buying something, the best way to evaluate your intentions is to check how long you can go without it. If you decide on a date until which you believe you will not need this product or service, postpone your spending until that date. Once the new date arrives, ask yourself the same question and set another date. Do this thrice, and chances are the futility of adding it to your list of purchases will finally hit. It’s also highly probable that you won’t even choose to remember the later dates and forget all about spending your hard-earned money on something you never required in the first place. —Riley Beam, Managing Attorney, Douglas R. Beam, P.A.

Change Paid Activities to be Cost-effective

Going out for drinks, going bowling with friends, dancing at the club: these are all fun activities that are definitely worth your time and money. These expenses, however, add up in the long run and one way to still enjoy yourself but save a little money in your wallet is to substitute some activities with cost-effective alternatives. For example, instead of going to a bar for drinks, create a makeshift bar at home. Try hiking or scope your community newsletter for other free, public events. — Adam Shlomi, Founder, SoFlo Tutors

30-day Challenge

One unique way someone can change their spending habits for the better is by doing a 30-day challenge. One of the most significant barriers to saving money is impulsive buying. It’s easy to fall for an online advertisement that claims to anticipate your needs and wants. But there is a workaround:
– Take a screenshot of the ad rather than clicking on it.
– Create a folder on your desktop to store all these screenshots.
– Check the folder after 30 days to see if you still wish to purchase that item.


The 30-day challenge is also applicable to offline purchases. Write down what you want to buy, give yourself 30 days, and then decide if you still wish to purchase. After a 30-day wait, you may be shocked by the items that no longer interest you. —Tiffany Homan, COO, Texas Divorce Laws

Continue Reading…