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.”

Retirement not what many were expecting, and not in a good way: Sun Life survey

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My latest Financial Post column, which is on page FP 3 of Tuesday’s paper, looks at a Sun Life retirement survey released this morning. You can find it online by clicking on the highlighted headline: Canadians finding retirement is not all it’s cracked up to be.

So if you think Retirement is about eternal sea cruises and African safaris, you may be abashed by the Sun Life finding that almost one in four (23%) describe their lifestyle as a frugal one that involves “following a strict budget and refraining from spending money on non-essential items.”

Furthermore, many can expect to still be working full-time at age 66, which just happens to be my own age. And as you can see from this blog, I’m still working, if only on a self-employed semi-retirement basis.

In fact, among the 2150 employed Canadians polled by the 2019 Sun Life Barometer poll conducted by Ipsos, almost half (44 per cent) expect they’ll still be employed full-time at age 66. Among the “frugal” retirees still working after the traditional retirement age, 65 per cent say it’s because they need to work for the money rather than because they enjoy it.

In an interview, Sun Life Canada president Jacques Goulet mentioned most of the main reasons, few of which will come as a surprise to this blog’s readers. Mostly there is a failure to plan for Retirement early enough to save the kind of sums involved. Another familiar culprit is the ongoing decline of employer-sponsored Defined Benefit pension plans, which are becoming more and more rare in the private sector. Most of us can only envy the tax-payer backed guaranteed inflation-indexed DB pensions enjoyed by most government workers, politicians and some members of labor unions: a bulletproof source of income that you can’t outlive.

47% at risk of outliving their money

The alternative for many are employer-sponsored Defined Contribution pensions (DC plans), group RRSPs or personal RRSPs and TFSAs, which means taking on market risk and longevity risk. Both are challenges in the current climate of seemingly perpetual low interest rates and ever volatile stock markets, not to mention rising life expectancy. Even then, Goulet told me Canadians with DC pensions are leaving a lot of money on the table: $3 or $4 billion a year in “free money” that is obtainable if you enrol in a DC pension where the employer “matches” the employee contributions: typically 50 cents for every $1 contributed.

Finally, there is a large group that have no employer pension of any kind, or indeed any steady job with benefits, and these people are unlikely to have saved much in RRSPs or even TFSAs, which they should if they can find the means. This group may account for a whopping 47% of working Canadians, Sun Life finds, and about the only thing they’ll be able to count on in Retirement is the Canada Pension Plan (CPP) as early as age 60, Old Age Security at 65 and probably the Guaranteed Income Supplement (GIS) to the OAS. These people would be better off continuing to work till 70 in order to get higher government benefits, a time during which they can build up their Tax-Free Savings Accounts (TFSA)s. TFSA income does not impact CPP/OAS/GIS, which is not the case for RRSPs and RRIFs.

Finally, a word about continuing to work into one’s 60s and even 70s. I know many who do, and not always for the money. I’m in the latter category myself, even though personally my wife and I could be considered the poster children for maximizing retirement savings, living frugally and investing wisely. There are worse things in life than going to a pleasant job that provides mental stimulation, structure and most of all purpose. Many of these ideas are explored in the book I jointly co-authored with Mike Drak: Victory Lap Retirement.

 

Money: Influencing people and their behavior

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By Steve Barker

For hundreds of years, the American dream has been to become one of the fortunate few that moves from rags to riches. Although many people enter onto United States’ soil believing they will become one of the chosen few to make the dream a reality, statistics show that most people don’t make their millions no matter how hard they try. What is more interesting is what happens to those that do make their fortune and how it often changes them, their perspective on the world, and other people’s view of them. Money can influence people and their behavior in some surprising ways.

Psychology and Money

The way you view yourself, your success in life, and for abilities can all be linked directly to your money, or lack thereof. While you may have been told your whole life that money is the root of evil, you are probably like the majority of the 7 billion people on earth as you try to make more money: ever chasing the currency you should believe is evil. The eternal chase for more money to purchase more things to buy bigger and better items is at the bottom of a social belief system, and though it may not be who you believe you are, it can influence how you see yourself fitting into society and how you react toward others.

Self and Money

Where you fit into your world view is often dependent on money and how much you make. For some reason, people tend to classify themselves into social rankings relating to money, the ability to earn it, and the amount already earned. This is sometimes referred to as class essentialism. In other words, some people believe they have the natural ability and are pre-genetically disposed to have the right to make money, be more intelligent, and be part of a higher social group. Research has found this is especially true of the wealthy groups questioned, while the poor respondents believed it was all about work, rather than ability, genes, or intelligence. That is why it can be difficult for the suddenly rich winners of the lottery or huge sports contracts to fit into a world that sees those individuals as less-than. The split can be intense and derisive.

Values and Money

Money has an influence on how you value your time, actions, and motivations, but most importantly, you may find it influences how you value yourself. If you find yourself as part of a higher social group because of the money you bring in, you may see yourself as happier, healthier, and more giving. On the other hand, some research indicates that the newly rich from the sudden creation and rise of crypto currency were found to be more business-oriented, less trusting, and more suspicious of the world around them. If you set a value of $20 an hour on your time, you can see that someone that values their time at $300 an hour may have a very different world view than you do, whether it is good or bad is all a matter of perspective.

Ethics and Money

While it is unknown why some people have higher ethical values than others from the moment they are born, researchers are finding that wealth has a direct influence on all types of ethical situations. The higher an individual believes his or her class inclusion is, the more unethical he or she believes they have the right to be. Continue Reading…

5 apps to help get your personal finances on track

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By Julia Faletski (Sponsor Content)

For many people, managing your money means simply checking your bank account every month and paying your bills. That’s a great starting point. But if you want to get on a strong financial footing and maybe even retire a millionaire, you’ll need to set goals and have a plan for how to get there. That means budgeting, saving, building a strong credit score, and more.

Fortunately, today’s technology means you don’t need to be a math wiz to make these smart money moves. In fact, you don’t even have to look at a spreadsheet. There’s an app for that.

To help you get started, we’ve curated a list of apps that will help you automate —  and dominate — your personal finances:

Budgeting

To start out your financial journey, you’ll want to know how you’re doing today. Budgeting is probably the most fundamental aspect to personal finance. There are lots of budgeting apps out there, but Mint is one of the more well known ones for a good reason. Mint allows you to manage your finances from beginning to end: you’re able to link banks accounts, credit cards, investment accounts (like WealthBar!) and bills. You can track your spending, create a budget, and see a complete picture of where your money is going, all in one place. It’s great for both keeping track of your day-to-day transactions and long-term goals.

If you want more of a step-by-step guide to creating and following a budget, take a look at You Need A Budget (YNAB). Not only are you able to link accounts and track expenses, but you can also get advice on how to pay down debt, manage monthly expenses, and accumulate savings. It’s always a bonus when a company infuses their features with financial education. Knowledge is power!

Taxes

We get it, tax season probably isn’t your favourite time of the year. Luckily, apps like TurboTax aim to make filing your taxes painless. The app will take you through a number of easy-to-answer questions — prompting you to provide the pertinent information — and then it will do the calculations for you. No need to go through all the tedious steps yourself! The goal is making sure no money is left on the table in unclaimed deductions.

Credit score

Having healthy credit goes a long way when you need to borrow money for a big purchase like a house or even get a credit card. Credit Karma allows you to take the guesswork out of understanding your credit score. They make it easy to access your credit rating for free, understand what is positively or negatively affecting the rating, and see how you can improve it. Continue Reading…

Loaning, Leasing and Owning: Know the Differences

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By Sia Hasan

Special to the Financial Independence Hub

The terms “lease” and “loan” are often used in conversations about personal finance, and you may not be sure of the difference between them. You may have even less confidence about when you should take out a loan, lease an item or just buy whatever you need out of pocket. By finding out the differences between these options, you can figure out which choice is best for your situation.

Loan

A loan is an amount of money that you borrow from a bank or another financial group. They give you the money and you agree to pay it back over time, almost always with interest. A loan is right for you if you need to make a payment on something that you cannot afford all at once or that involves education or another kind of service.

Within this broad term are many specific kinds of loans. Loans can be classified as secured or unsecured based on whether the recipient has to provide a piece of property for collateral. Loans can also be closed or open. If a loan is closed, the person borrows a certain amount of money and then pays it back without taking out more money from the same lender in the process. Student and mortgage loans are often closed. If a loan is open, the person can continue to borrow more money from the same lender. Credit cards are a common type of open loan.

Another type of loan is a solar loan. If you want solar panels but cannot afford to buy them flat-out, you can borrow money that is specifically for your solar panels. When you take out this kind of loan, you can have solar panels installed without having to have all the money necessary to purchase them flat-out. Using this kind of loan does not prevent you from participating in any incentive program the government creates to promote reusable energy. All you have to do is remember to make your monthly payments so that eventually you can own your solar panels without having to repay the money you initially borrowed.

Lease

While loans involve one party lending money to another, leases involve a lending of possessions between two people. One person gives another a certain sum of money and in return, he or she receives the right to use a piece of property. Farmers may lease equipment from larger corporations that own their land. If you have rented an apartment or another dwelling place owned by a landlord, you have participated in a lease before. Leases are less open-ended than loans because they cannot be used to pay for any expense but instead involve a specific piece of property. Continue Reading…

Trick or Treat: How much does the average consumer spend on Halloween?

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By Mike Brown

Special to the Financial Independence Hub

LendEDU’s third annual study also included price comparison research that found consumers can save a good chunk of money by shopping for Halloween on Amazon rather than Walmart.

 

While our level of involvement may differ, most of us will be taking part in Halloween festivities in some capacity.

For the youth, enthusiasm for Halloween begins in September when costume ideas start taking shape. Once it starts, the fun doesn’t end until the candy-induced stomach ache kicks in roughly three hours after that last Twix.

While young adults may bypass the trick-or-treating, Halloween still offers a great excuse to dress up, look silly, and have a night out on the town.

Adults, who are often less excited than children, play an integral role when it comes to Halloween. Without them, who would chaperon the trick-or-treaters, hand out candy, cover houses in spooky decorations, or design the outfits that win the school costume competitions?

Like most holidays, Halloween will always have naysayers, but for the most part, it is seen as an enjoyable night that kicks off the holiday season. And according to LendEDU’s third annual Cost of Halloween survey, it is actually a day that will be forcing many to cough-up a decent-sized chunk of change.

Average American will spend US$162.29 on Halloween in 2019

With Halloween just hours away, LendEDU wanted to figure out how much families are spending on this holiday characterized by candy, costumes, and scary decorations.

​To do this, we asked 1,000 Americans that were planning on celebrating Halloween in 2019 the following question: “How much do you expect to spend celebrating Halloween this year?”

After averaging together all 1,000 responses, we found that in 2019 the average American is expecting to spend US$162.29 on Halloween. (All dollar amounts below, including graphics, are in US$).

It turns out that all of the fun brought on by Halloween comes at a price that may scare a few people away before the haunted houses even have a chance. $162.29 for a few hours of spirited and spooky celebrations is nothing to sneeze at.

>> Read More: How to Save on Halloween

​So, what is making the cost of Halloween so unexpectedly high? Continue Reading…