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.”

Those TV ads about financial advisors

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By Darren Coleman

Special to the Financial Independence Hub

There is an Oscar Wilde quote that goes like this: “A cynic knows the price of everything and the value of nothing.” I think of it every time I see one of those Questrade TV commercials where the client meets with their wealth-management advisor so they can tell the person they are fired. Why? The fees are too high.

The commercials drive home the point that advice costs more than doing things yourself, which is no surprise. I’m also flattered because in one of the ads, the character has my name – Darren – and it makes me think I might be in that seat. But that’s as far as the similarity goes because in all the years I have been in this business no client has ever told me they are leaving because of my fees. Not one.

This is where I think those TV ads miss the point. The issue at hand should not be about price. It should be about Value.

All those ads focus on the price of advice and the implication is clear: that advisors are gouging their clients. The advisor gets to retire early because of fat fees while the client, according to the ads, loses up to 30% of their retirement savings to fees. While the math in these ads may be  questionable, the ads also ignore any benefit that the Advisor’s advice may bring.

The ads showcase clients not experiencing true value

Let’s explore what these ads are really about. What they showcase is that the client is not experiencing true value in the relationship. So, the client decides to go it alone and hire Questrade’s robot to do things for them. Questrade, and ‘robo-advisors’ as they are called in the industry, offer a discounted trading commission to do-it-yourself traders, along with pre-built portfolios for more passive investors. As there is no personalized advice on any financial matters for the client, the fees are much lower. Which is as it should be.

I, for one, would never use such a service. I don’t even like those robot vacuum cleaners; the one my wife bought always gets caught under the couch because it can’t find its own way out, which is annoying. I also dislike those robot attendants which more and more companies are using for navigating their telephone systems. And I use these analogies for good reason.

As far as handling your investments and financial matters, does going it alone or going with a pre-built model portfolio actually work? The evidence shows this is not the best solution for most people.

Behavioural mistakes rob people of bulk of their returns

Every year Dalbar, North America’s leading independent expert for evaluating, auditing and rating business practices, produces its annual Quantitative Analysis of Investor Behaviourstudy, which shows that most investors underperform their own investment portfolios. Year after year, investors buy and sell at the wrong times. They do this because they allow their emotions to get in the way. Consider it part of the human condition. Believe me, professional advisors know all about these tendencies: that behavioural mistakes rob people of the bulk of their returns.

For example, in March 2019, Dalbar calculated that the average investor lost more than twice as much as the market in the previous year! The average investor saw their portfolio drop by more than 9% while the market was down only 4%. And this was no fluke. Over a 20-year time period, these mistakes have continued and investors, on average, underperformed the broad market by about 4% annually. Continue Reading…

How much are your old Mobile Phones worth?

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By Charles Duke

Special to the Financial Independence Hub

Selling a used smartphone is an excellent way to make some extra bucks and buy recently released phones. Today, phone prices drop drastically (sometimes by 50% in a month) as soon as new devices are released. This rapid depreciation allows buyers to find flagship smartphones at modest prices when they appear on the used market. Buyers are even more likely to find better bargains when they buy phones that are a couple of years old when new devices are launching. 

There are numerous sites to help users sell their old smartphones, including sellmymobile.com. Here are the prices buyers should expect when selling different phone models:

Apple iPhone

The price of an old iPhone depends on the model and where you want to sell it. Sites like sellmymobile.com should provide a range within which you can sell the device. Generally, private sales make more cash than shops or online retail stores since they need to mark up their sale prices. Sellers can expect more when selling the iPhone 6S, max models and high capacity phones (i.e. more than 16GB of storage). Other features that increase the value of an old iPhone include: 

  • The condition of the Apple device
  • An unlocked handset (Apple phones tired to a network). Users whose devices are tied to a network should consider unlocking it before selling.
  • If the battery has been replaced. Apple offers to replace batteries on iPhone models from version 6 and above for £25-£29 only.

Samsung

Samsung is known for its flagship Galaxy Note and Galaxy S series. The manufacturer develops high-end devices that can be out of reach for most people. As a result, many users opt to sell past generation Galaxy phones, which are often still in demand in a bid to purchase the latest phones. Prices vary from one site to another, and the longer the user waits to sell the device, the less money it attracts. Galaxy S4 for example retails at £133 on AT&t (black), £78 on Sprint (blue) and £151 (white) on T-Mobile.

OnePlus 

The manufacturer is known for making smartphones with high-end components and features without charging high prices. However, smartphones have lost popularity over time with prices plunging to as low as £ 40 for the OnePlus 3.

LG

Most LG users sell their old phones using the manufacturer’s buy-back program. The program allows users to earn cash and buy the latest devices. It also supports all carriers, i.e., AT&T, T-Mobile, US Cellular, Virgin Mobile, Boost Mobile, Cricket and MetroPCS, among others. The flagship smartphone series for this company is the G2, G3 and G4 models. Additionally, unlocked T-Mobile, Verizon and AT&T smartphones hold value longer than Android phones on carriers. Users should also ensure the IMEI or ESN of the phone is clear for activation on new wireless plans. As such, it can’t be reported stolen or lost and should not have an outstanding balance.

Oppo

Oppo is ahead of the curve when releasing new devices. It was the first company to introduce 5MP and 16 MP front cameras, 5x dual zoom technology and rotating cameras. As such, buyers of used devices are likely to find a pretty good bargain for used models. Find X, the company’s latest phone retailed at £1099, but users can now find a second-hand version at only £220. The smartphone has 8GB of RAM and 256 GB memory and is powered by a Qualcomm Snapdragon 845 processor.

Huawei

The market for used Huawei smartphones recently took a plunge since the US suspended the use of Android OS on its mobile phones. As such, buyers can take advantage of potential bargains as phones have dropped by £200-£300 since the ban. The P30 Pro, the manufacturer’s latest phone, now retails at £100.

Charles Duke is a content writer, covering topics relating to technology, investing, business and finance. He specialises in online article copywriting and has produced work for countless blogs over his 6 years of writing for the online community. He has a particular interest in psychology and behaviour when it comes to people and money and enjoys looking to the past for lessons that can be learnt from history.  

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No surprise: living beyond our means is why 38% are in Debt

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Talk about cause and effect: 38% of Canadians admit that living beyond their means resulted in their being in debt. That’s according to a survey being released this week by Manulife Bank of Canada. It also found a third of Canadians aged 20 to 69 with a household income of at least $40,000 say their spending growth outpaces their income, and 19% of those who went into debt cited not being able to break the debt habit. Almost half (49%) on indebted Canadians between the age of 20 and 34 and a majority of those aged 35 to 54 report carrying credit cards with a balance.

No surprise then that one in ten (9%) admit to being “clueless” about how much they are spending each month on average.

Blame YOLO and FOMO

Apparently cultural attitudes like “You only live once” (YOLO) and “Fear of Missing Out” (FOMO) are starting to take their toll on indebtedness. Apart from the 38% who admit their debt arose because of living beyond their means, 12% directly correlated their indebtedness to the outcome of too many costly outings with friends or family.

While 19% of debtors say they can’t break the habit, the survey also reveals that seeing debt paid off can result in joy, which is what 36% of Canadians say.

Manulife CEO Rick Lunny

And once again (see yesterday’s post on the HSBC study), Canada’s high housing prices are seen impacting this country’s Millennials. Millennials are now at the age many want to get on the property ladder and start families, two areas where Manulife is seeing expenses grow. “Housing affordability remains at near-historic highs across the country and child-care costs have risen faster than inflation for Canadians,” said Manulife Bank president and CEO Rick Lunny in a press release, “We have a financial wellness crisis in Canada.”

Obviously debt can limit one’s social life but the survey quantifies this. it found that debt limits activities with family and friends (22%), makes it impossible to spend money on entertainment (18%) and negatively impacts mental health (in 17% of cases.)

Manulife says Boomers feel less affected by debt: one would hope so since any Boomer contemplating retirement should by now have a healthy positive net worth rather than a negative one! In which case, they will be less constrained in spending on entertainment or meeting with family and friends.

Manulife finds that those under 55, women, and those with high levels of debt are most likely to feel stressed by these circumstances. It also found a “gradual yet significant” decline in the proportion of Canadians with mortgagers who express comfort with the payments. “There has been a sharp year-over-year decline in the proportion who claim to feel very comfortable about both the payments (28%, down 8 from Spring 2018) and the amount owing (21%, down 9) on their mortgage.”

The Joy of getting out of Debt

Asked to rate the perceived joy they would get from various financial accomplishments, two thirds of Canadians put getting out of debt (“escaping”) first or second overall, with having a hefty retirement nest egg a distant third.

Of course, reducing debt is easier said than done. Manulife suggests a clear “area of opportunity” is making adjustments to non-essential spending but there are demographic differences. Millennials are much more willing to sacrifice dining out compared to those who are over 35. Women are twice as likely as men to stop shopping for non-essential goods and services. Men and those who are 35 or older are most willing to give up travelling (which I’d say is certainly a non-essential spending activity!)

There are some positives in the survey. it found that three in ten say their debt is under control and they don’t need any help to control it. Others believe there are more effective ways to track debt and curb spending. Manulife cites its own Manulife All-in Banking Package, which includes Saving Sweeps that automatically moves excess funds into savings accounts each night. For more on the Debt Survey, click here.

Millennials value property more than looks when it comes to dating: HSBC study

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HSBC.com

It seems Canada’s soaring real estate market has started to affect Millennial dating patterns. According to a survey coming out today from HSBC Bank Canada 61% of Millennials feel anxious about buying a property, so much so that shared financial (39%) or property (33%) goals are considered more important than looks when daters are considering a potential future partner.

HSBC adds that this obsession with shared property has a downside for Canadian millennials: “They are far more likely to say they had stayed in a bad relationship due to property (16%) than Canadians on average (6%).” Sounds like a possible basis for a new Millennial situation comedy!

All this is contained in Beyond the Bricks, an HSBC-sponsored annual global survey of almost 12,000 adults in ten countries, including 1,077 in Canada.

HSBC says that getting on the property ladder can be both exciting and stressful for Canadian millennial once they’ve found their perfect partner.  Most (62.8%) Canadian millennials said financial considerations drove their last house move, and the top two reasons for the move were getting more house for their money (25.5%) or a lower cost of living (23.4%). And the biggest source of tension was accepting money from parents for the purchase (in 14% of cases.) Continue Reading…

Which came first: the Chicken or the Egg?

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By Kevin Flanagan, WisdomTree Investments
 
Special to the Financial Independence Hub
A funny thing happened recently when I walked into the office. No, this is not the setup for some joke; rather, I’m referring to what I heard regarding movement in the stock and bond markets. Specifically, the narrative was that the decline in U.S. equities resulted from the drop in the U.S. Treasury (UST) 10-Year yield.
Because I’ve been a “bond guy” for quite some time now, the rhetoric was fascinating to me and brought to mind this age-old question: Which came first: the chicken or the egg?

In my experience, the bond market typically reacts to developments in the stock market, not the other way around. Being a baby boomer (right at the tail end, mind you), I thought: Am I missing something here? Could the paradigm have shifted? Thus, I decided to do a little bit more investigating, and what I found was that, in my opinion, no, the paradigm had not shifted. The recent decline in the UST 10-Year yield had its genesis in the latest sell-off in the stock market, which began in early May and continued throughout the month.

Dow Jones Industrial Avg. vs. UST 10-Year Yield

UST vs Stock Market

Take a look at the graph. The UST 10-Year yield was essentially straddling the 2.50% threshold in the opening days of May until the Dow Joes Industrial Average (DJIA) took a nearly 475-point nosedive on May 7. This began the downward trend in which we find ourselves now. Remember, that trend was in response to the breakdown in U.S./China trade talks and the attendant escalation in “tariff talk.” Then round 2 hit as the DJIA plunged 617 points on May 13, leading the UST 10-Year to break through the 2.40% level, ultimately falling down to 2.37% —which, at that time, matched the 2019 low watermark set back in March. Notice how stocks rebounded somewhat after this episode: and what did the 10-Year yield do? That’s right, it moved back up as a result. Continue Reading…