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.”

How to be frugal and save money this holiday season

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By Hari Subramanian

Special to the Financial Independence Hub

Knock knock! Who’s there? Holidays! Holidays who? Holidays that make your savings go boohoo! The holiday season is upon us. Thanksgiving is just around the corner (Nov. 28th in the US) and before you know it, people will be lighting the Christmas tree again.

I don’t mean to be a party pooper, but the holiday season can make a large dent on your savings and could even leave you with a sizable credit card debt. Constantly worrying about your dwindling bank balance can dampen your festive spirit. Thankfully, there are a few frugal ways to ensure that your savings don’t take a hit while you enjoy the holidays with loved ones.

Plan the holiday budget and stick to it

Sit down with your family and make a list of all the things you need to buy for the holidays: food, drinks, sweets, decor, party accessories, gifts and more. Don’t forget to include an estimated cost for every item on your shopping list. Cut down on a few things if you feel that the budget is overshooting the acceptable expense limit. Now comes the difficult part: once the holiday budget is ready, try and stick to it as much as you can. Use budgeting apps like Mint that allows you to set a budget, track your expenses by linking to your debit and credit cards, and notify you when you are about to exceed your budget limit.

Go easy on the sale

Come holiday season and a barrage of online/offline sales line up to woo consumers by offering competitive discounted pricing. Black Friday sale, Christmas sale, and Boxing Day sale are ready to pounce on us with massive discounts. Before you hop on the sale-crazy bandwagon, put your credit card aside and think about whether you really need those pair of boots or the new iPhone. Once you compartmentalize your wants from your needs, you would eventually go easy on the sale. Let necessities and not sale pricing be the driving force for shopping.

Rewards card to the rescue

Christmas rings an ominous bell for credit-card debts. While shopping excessively on credit cards could spell doom, not all credit-card expenses are bad, especially if you have a credit card that dishes out good rewards or cash back. A smart way to use credit cards is to accumulate reward points throughout the year and redeem them during holiday shopping. If your credit card gives you good cash back returns when you purchase at a specific store, ensure that you do a bulk of holiday shopping from that store. Continue Reading…

What you need to know when applying for an International Student Loan

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By Emily Roberts

(Sponsored Content)

Loans allow students to pursue their dreams even in the midst of financial challenges. While the benefits of student loans are clearly evident, students should approach loans with caution. Otherwise, you can end up sinking in huge debt that can affect your career goals. This article highlights some of the key factors you should keep in mind when applying for a student loan to ensure you get the best deal.

Fixed and variable Interest Rates

Lenders dealing with international student loans normally have two options when it comes to interest rates: the fixed and the variable rates. MPower Financing for instance, offer loans on fixed interest rates. MPower Financing is a US based lender offering student loans without a cosigner, collateral or credit history.

For fixed interest rates, as the name suggests, you will pay a fixed interest amount with no fluctuations regardless of the direction the economy takes. Thus, the key benefit of this option is that you won’t bear the burden when the market rates increase. Also, it can be a good option if you are a person who loves budgeting in advance. For the variable rates, the interest can change over time; it can either increase or decrease. The key benefit is that you get to save some money should the interest rates go down. Remember the key differences when making your decision.

Comparison can save you money

When you look up international loans for students or DACA student loans on the search engines, you will get countless results. This is because there are many lenders targeting international students. Continue Reading…

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…