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.”
Millions of Americans have lost their jobs, experienced furlough and applied for unemployment during the COVID-19 pandemic. As a result, many are struggling financially, and some must even choose between buying food to feed their families and paying the bills. If you find yourself in the same predicament, you may wonder how you’ll be able to afford your mortgage payments in the coming months.
While rethinking your budget may help you scrounge up a few extra dollars here and there, it likely won’t be enough to pay your mortgage without a steady stream of money coming in. If you’re unable to make payments any longer, mortgage forbearance may be the route you need to take. Here’s what you need to know as you pursue this option.
Pros of Mortgage Forbearance
While mortgage forbearance shouldn’t be your first option when seeking financial assistance, it can be helpful, especially as you cope with short-term financial emergencies. Here are a few advantages of pursuing mortgage forbearance.
1.) Suspends mortgage Payments
If and when you agree to mortgage forbearance with your servicer, they will likely temporarily defer your payments for a specified period or allow you to skip some. This setup will help you avoid foreclosure or damaging your credit score.
Most importantly, a temporary suspension of payments gives you time to find a job, recover from the pandemic and begin saving money and eventually making payments again.
2.) Protection under the CARES Act
Under the CARES Act [in the United States], homeowners can receive certain protection benefits if they have a federally backed mortgage. One such benefit is that your lender or servicer may not foreclose on you until June 30. Another advantage includes having the right to request mortgage forbearance for up to 180 days, plus an additional 180-day extension.
Moreover, lenders don’t require documentation proving you qualify for forbearance. Speak with your servicer and answer a few questions about your financial hardship to qualify.
3.) Better Alternative to Foreclosure
The alternative option to forbearance is foreclosure: which often goes hand in hand with bankruptcy. This combination can easily sink your credit score for years and result in months, and even years, of legalities and paperwork. It’s also incredibly expensive for lenders to foreclose on a home, so allowing borrowers forbearance is a more affordable option.
Cons of Mortgage Forbearance
All of those benefits may make mortgage forbearance sound like a great deal. However, there are consequences to pursuing this option, even if it does solve your financial problems in the short-term.
1.) Possible Credit penalties
Pursuing forbearance during the coronavirus pandemic should not affect your credit score. In fact, the CARES Act states that no negative credit reporting or late charges will occur during your forbearance agreement. However, credit penalties and dips may still happen as your lender reports your account information to credit bureaus. Continue Reading…
Pursuing a post-secondary degree marks a significant chapter in one’s life: and it’s being dramatically rewritten for millions of students across Canada in the wake of COVID-19. Campuses on lockdown, classes gone digital, and increasingly gloomy job prospects are just some of the new realities students face.
But while these times pose new challenges, there’s some silver lining as many schools have made moves to ease grading criteria and the federal government has stepped in a big way to launch new financial aid programs. If you’re a post-secondary student who’s looking to better manage your money during COVID-19 but aren’t sure where to start, you’ve come to the right place.
Below is a list of what I consider to be the key first steps students should take to get a better grip on their finances during COVID-19:
1.) Apply for CESB
Whether you’re a freshman whose paid summer internship was abruptly cancelled or a recent grad struggling to land a position due to the very real impact COVID-19 has had on the job market, you can seek financial support from the federal government by applying for CESB.
CESB – which is short for Canada Emergency Student Benefit – is a form of unemployment insurance and is the single-most impactful form of financial support you can receive as a student during COVID-19.
Here are some things you need to know:
How much support can you get?
If you qualify for CESB, you can receive one of the following amounts for a set four-week period:
$1,250 either because you’re: 1. unable to work due to COVID-19, 2. actively on the job hunt but can’t successfully land a position, or 3. currently employed but only earn a monthly income of under $1,000 before taxes
Up to $2,000 if you tick off any of the three boxes above and you also have a disability or you’re a parent with a child under the age of 12.
Who does (and doesn’t) qualify for CESB?
While CESB is mostly geared towards students currently enrolled in a post-secondary institution, you can also receive support even if you’re not technically in college or university right now. For instance, you can receive CESB if you’re a recent post-secondary grad and completed your education in December 2019 or later. Additionally, if you’re in high school and applied for a post-secondary program set to start by February 2021, you also may qualify.
You must also be a Canadian citizen, permanent resident, registered Indian, or in very rare cases, recognized as a person in need of protection by the Refugee Board of Canada.
Unfortunately, that rules out international students.
The type of program and institution you’re enrolled in matters too. You’ll need to be in (or applying to join) a program that’s at least 12 weeks long, working towards a certificate or degree, and a student in one of the post-secondary institutions recognized by the government (the good news here is the list of designated schools is long and widely encompassing).
Aside from just being an eligible student and ticking all of the boxes above, you must also be actively looking for a job and unable to find employment due to COVID-19. You’re not eligible to get any CESB payments if you aren’t actively looking for work, have a job that earns over $1,000 per month before taxes, or already receiving support from the Canada Emergency Relief Benefit.
How to apply
CESB is available for up to a maximum of 16 weeks; however, you’re not guaranteed to get payments for that entire length of time and must apply for CESB every 4 weeks. The idea being you can keep reapplying and receiving support until you no longer need it.
The 4-week application periods aren’t arbitrary and follow a strict schedule based on the following dates:
May 10 to June 6, 2020 (no longer available)
June 7 to July 4, 2020
July 5 to August 1, 2020
August 2 to August 29, 2020
As long as your SIN is registered on the CRA website and you’ve filed your 2018 tax return, you should be able to apply online straight from CRA’s My Account. If you don’t, you can call 1-800-959-2019 or 1-800-959-2041. Phone lines are open seven days a week between 6 am to 3 am. You’ll also want to set up direct deposit on your CRA My Account so your CESB payments can be sent straight to your bank account digitally.
Remember, CESB isn’t intended as a free subsidy for all students but is temporary financial support for those who are actively looking for a job and can’t get one. The Government of Canada may even require you to submit proof you’ve been searching for a job, so be sure to keep records of your emails and other communications with potential employers.
2.) Set a budget and cut discretionary spending
A well-maintained budget can help you save hundreds of dollars every month – and in an unprecedented time like this – every dollar counts.
The first step of creating a budget is to start tracking how much you spend in the first place.
List out every purchase you make by amount and by type. And yes, I’m talking about every purchase. Spent $10 on
Lunch? Track it. Bought $50 worth of groceries? Track it. Use your smartphone or scribble down in a small notebook, it’s up to you, just track it.
While you can use apps to automate the process, I recommend noting down every purchase manually since it’s the best way to put your spending habits under the microscope, spot your biggest money wasters, and discover how even small nondescript purchases can add up. Nothing can get you more motivated to start meal prepping at home than seeing exactly how much you spend on takeout.
Once you have a grasp of your spending habits, start separating needs from wants and cutting out any discretionary purchases. Next, set strict spending caps for every category (i.e. no more than $100 on groceries per week) to ensure your monthly income can cover those essentials.
If you’ve got any money left over at the end of the month, don’t splurge and instead set aside the money in a high-interest savings account to gradually build up some cash reserves.
3.) Check if you can receive relief from your biggest bills
If you own a car, reach out to your insurance provider. In the wake of COVID-19, many are offering either rebates, discounts, or deferrals that can help cut down your monthly insurance payments. The same goes for utility bills. For instance, both Toronto Hydro and BC Hydro are offering support to customers who may be under financial pressure with options like payment deferrals or flexible payment plans with no penalties.
Banks are also stepping up in their own way. If you currently owe credit card debt, reach out to your bank and ask to receive payment deferrals and a temporary drop in your card’s interest rates. That can help postpone your minimum payments and ensure more of your money can go towards covering your more immediate essential expenses. Ratehub has provided a breakdown of how credit card minimum payment deferrals work and how terms differ by bank. Continue Reading…
Everyone who owns a car or truck knows that there are regular maintenance and not so regular repair costs. For some vehicle owners, it seems their car is always breaking down. But what if you could cut the overhead on your vehicle significantly? The good news is you can! In the following paragraphs, we’ll discuss ways in which you can dramatically reduce the money it costs you to operate your vehicle.
Maintain, Maintain, Maintain
The first thing you want to do is to read your owner’s manual. If you don’t have one, then look online for one, or check with your dealer. The reason this is so important is that the manufacturer will tell you exactly how and at what intervals to perform or have services performed on your vehicle. Changing the oil at regular intervals is just part of it. Are you using the right kind of oil for your vehicle? It is wrong to assume that the more expensive oils are right for your vehicle. Read what the manufacturer recommends and adhere to their standards.
This doesn’t just go for oil, but for all the fluids and tires too. Not all tires require the same amount of air pressure. Use the kind recommended for your vehicle, and keep them inflated to the recommended psi.
Use only OEM parts
When you need to replace a part on your vehicle, insist on only OEM parts. Original Equipment Manufacturer parts are guaranteed to fit, and they will likely last longer, saving you from replacing the same part over and over. Make sure only certified technicians work on your vehicle, so you can rely on stellar work and new parts. While it is actually fun for some to go to a parts cemetery and find your own parts at a substantial savings, you won’t have the peace of mind you will have when you stick to the manufacturer’s recommendations.
Be mindful of the way you drive
Do you really need to beat the next guy to the red light? Often, that’s what happens when a car weaves in and out of traffic. Nothing is gained, and when you drive that way, you risk getting pulled over or injuring or killing innocent people or yourself. Expressing road rage is another way that some people carelessly treat their cars and their fellow citizens on the road. Just driving the speed limit and driving defensively will help protect you and your car. Many insurance companies offer cheap car insurance for safe drivers and those discounts and savings alone could be worth a lot.
Don’t ignore squeals and other sounds
You wouldn’t believe the difference in cost between a simple brake pad replacement and an entire brake job, with new calipers and rotors. Continue Reading…
You might only review your car insurance once a year, but in times of financial hardship, exploring all opportunities to cut back is a smart idea. Whether your car is sitting parked, or you’re only driving for essentials like groceries and medicine, you should know two things.
First, the industry is adapting to the current climate in COVID-19 by offering some payment deferrals and flexible payment options. Second, there are things you can do, be it in a pandemic or not, to save money.
Auto insurance industry response to driving less
The industry’s initial response, almost unanimous in nature, was to offer payment deferral options allowing individuals to delay their monthly premium payments for a defined period of time: ideally once your income returns to expected levels. In addition to this, some providers are waiving non-sufficient funds charges (NSF fees), but be mindful that your bank could still charge you the fee, so it’s best to check with them.
In a more surprising move, many insurers have relaxed their rules about using your vehicle in the shared economy: e.g. uber, lyft, etc. Depending on your provider, you may also be able to get a coverage extension at no additional charge allowing you to drive your car for commercial reasons to make ends meet. Typically, you’d need a special coverage addition or endorsement on your policy to drive and make money from services like Uber Eats.
More recently, the provincial government announced they will allow the Ontario auto insurance industry to provide premium rebates in the otherwise regulated environment. Now, we’re seeing some more tangible reductions being offered to Ontario drivers. The various relief options can be unique to each provider, so make sure you contact your insurer to find out what potential discounts and flexible payment options are available to you.
Automatic discounts
A number of insurers are applying automatic discounts, which don’t require the policy holder to do anything. Allstate, Pembridge, Pafco, and Travelers are issuing a one-time payment equal to about 25% of your monthly premium. Gore Mutual decided to give a payment worth 20% of 3 months of premium payments. iA insurance is offering the same 20% premium discount, but over 2 months, and used as a credit on your account. L’unique, SSQ, and LaCapitale are both offering a 20% rebate applied as a credit for one month. Unica is offering a 15% break on premiums for April, May, and June.
Passive discounts
Other insurers are taking a more passive approach, which requires the policy holder to initiate the conversation about discounts. Aviva, Economical, Sonnet, and Family will reduce your car insurance premium by 75% if you aren’t driving anymore, or 15% if you’re driving less. They still don’t want you driving for commercial purposes, though. CAA is offering a 10% base rate reduction, Unica is doing the same by 15%. Desjardins and The Personal are calculating their discounts by looking at 3 months of premiums and reduced driving to figure out your unique discount.
Actions you can take to save on car insurance
Deferral should be a last resort, as you will still have to pay the premiums owing eventually on top of future payments. But don’t fret, there are some other ways to save on car insurance.
Reducing the kilometres on your policy
You may not remember, but when you first get car insurance quotes, you’re asked how many kilometres you drive in a year and your daily commute to work. Continue Reading…
By Billy and Akaisha Kaderli, RetireEarlyLifestyle.com
Special to the Financial Independence Hub
First, let me say Billy and I don’t really use the word “fail.”
We believe every situation offers learning opportunities and calling that experience a failure just doesn’t jibe with who we are. In our lives, we want to move forward with the knowledge and wisdom we’ve gained : not benchmark it emotionally by calling it a failure.
We read Financial Samurai’s Sam Dogen’s piece on how he claims to have failed at early retirement.
We have great respect for anyone who puts their personal life out there to the public as a source of education and benefit for others, and Sam has done that.
Sam retired at age 34 with 3 million dollars (US$): six times more than we had, 30 years ago. Now, at age 42, he claims that he “failed” at early retirement (even with $250k passive annual income: 5 times what the average retiree has, for the following reasons:
They had a child (with all the costs involved including education at kindergarten level at $2k month)
He underestimated how low interest rates would go (he’s invested in bonds, real estate and dividend-producing stocks)
Rising health insurance premiums for his healthy family (which continue to rise in order to subsidize those who are less healthy)
The bliss of early retirement didn’t last as long as he thought it would, or in other words, he now wants to do more than play tennis and sleep in. (This statement is bewildering to us.)
Options, Choices, Opportunities
We at Retire Early Lifestyle have always focused on providing our readers with options. There is no one-size-fits-all for anything, so why try to fit into a limited description of your retirement?
We don’t believe Sam has “failed” at early retirement; we think he is locked into his own personal version of “limited thinking.”
Eliminate your Stinkin’ Thinkin’
For the continuing education of our readers, let’s look at his reasons one at a time. Continue Reading…
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