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.”

Credit Card users tired of complex points programs & value ability to redeem points flexibly: Survey

Posted By |
A J.D. Power survey found President’s Choice Financial are the most popular credit cards in Canada

By Hyder Owainati

Special to the Financial Independence Hub

Canadians value their credit card rewards programs. According to a recent consumer survey from J.D. Power, over 87% of the country’s credit card holders are enrolled in a rewards program, while 48% of those who switched their primary credit card in the past year did so in active pursuit of better rewards.

The survey, which polled over 6,000 credit card holders, also found that of the credit cards Canadians were satisfied with the most, the President’s Choice Financial series of cards took the top spot. American Express credit cards ranked second while Canadian Tire’s credit cards rounded off the top three. The rankings were based on customer responses to questions on a spectrum of factors that included benefits, rewards, credit card terms and customer interactions.

While the study offers an insightful look into consumers’ opinions about credit cards, it’s important to note the results were categorized based on credit card companies and don’t offer a breakdown of the individual best credit cards in Canada.

Take a brand-agnostic approach to credit cards

Consumers in search of the best credit card should adopt a brand-agnostic approach and identify the individual cards that offer the rewards tailored to their lifestyle and personal financial goals. For example, a person looking to minimize their credit debt would make a more informed decision by searching for a low interest credit card rather than limiting their card options to those offered by an individual bank or credit card issuer.

Credit cards aren’t one-size-fits-all. It’s important to never lose sight of the fact that there’s a range of options out on the market – from cash back credit cards and travel rewards cards to student cards and more. While an individual credit card, company or bank may rank high on one category or list, it doesn’t necessarily mean it’s universally the best option for everyone.

Therefore, picking the right credit card should almost always start by analyzing personal spending habits and your financial standing. That’s why at Ratehub.ca, we feature built-in calculators that allow you to compare the credit cards that offer the highest value based on where and how you spend your money.

Ask yourself these questions

A smart way for consumers to identify which type of credit card is best designed to meet their needs is to ask a few self-directed questions: How do I spend my money? How often do I travel? How quickly can I earn rewards? Do I ever carry over unpaid balances from month to month? Do I have any current debts? Continue Reading…

Have you considered Shared Housing during Retirement?

Posted By |

 

By Steve Barker

(Sponsored Content)

Anyone who is approaching the age of retirement or planning for their eventual retirement is likely to give a lot of thought to just how much they’ll need to enjoy their golden years. While affordable life insurance policies are something else to add to the retirement list, so, too, is whether it would be a good idea to look into living with other people in shared housing: not only to reduce living expenses, but for a host of other reasons as well. Ready to learn more?

High cost of living combined with diminished resources

No matter where you live, chances are good that the cost of living has gone up in the past couple of years, a trend that is likely to continue. While you can control how much you save for retirement, you cannot control how expensive everything from food to medication will be when you’re ready to retire. Additionally, there may not be government or federal financial resources available when you reach the age of retirement, cutting off another source of income. Living with roommates can help immensely in cutting down the cost of living without the need for you to go to great financial and personal lengths to make your living situation work.

You have a built-In social circle

Many seniors grow lonely as they age because they aren’t able to get up and about as much as they used to when they were younger. When you live with people you get along with, being social is as easy as walking down the hall. Elderly individuals who have mobility issues don’t have to worry about making special transportation arrangements to spend time with other people, and being social can be mentally and emotionally beneficial for everyone, no matter their age or health.

Share common house chores

Keeping an entire house clean can be quite a task even for married seniors. Rather than hiring house cleaning services, which can drain your retirement funds, you may find it’s better to divide the chores between the people you live with. Besides saving money, chores allow you to move around and keep somewhat active, which senior citizens need to remain healthy. Continue Reading…

5 ways Real Estate boosts Financial Independence

Posted By |

By Sia Hasan

Special to the Financial Independence Hub

Gaining financial independence is one of the most difficult propositions. Life is expensive, particularly if you live in a metro area, which is where most of the higher paying jobs are located. As a result, most people save only small amounts of their paychecks or none at all. Clearly, this is not the path to financial independence (aka “Findependence.”).

Thankfully, you don’t have to make a massive salary to become financially independent. There are several methods for building wealth, including starting a business, investing in securities, and investing in real estate. Even if you do the first two already, you need to consider these five ways of increasing your financial independence through real estate.

Real estate investment offers the highest returns for the lowest risk when compared to starting a business or investing in stocks. The reason is that real estate offers five surefire ways to grow your money, known by the acronym IDEAL. By setting a long-term plan to benefit from these five methods of making money in real estate, you are on your way to financial independence.

The IDEAL investment

IDEAL stands for income, depreciation, equity growth, appreciation, and leverage. To succeed in making real estate work as an investment, you need to look beyond your principal residence. Though owning your own home provides appreciation and tax benefits, most people can’t produce income from their principal residence, owners of duplexes and people who rent out spare rooms aside.

1.) Income

When you purchase a rental property, you generate income, provided that you collect enough rent to exceed expenses. With a cash purchase, this is easy. If you finance the purchase, you need to analyze the numbers carefully. Provided you finance the right rental property, you earn a much higher rate of return on the financed property than if you purchased it with cash.

2.) Depreciation

To increase your rental income profits, you need to bone up on the IRS depreciation rules. Because the property is a business investment, you get to deduct all depreciation off of your profits. This saves thousands of dollars in income taxes every year. Continue Reading…

6 smart ways to clear Credit Card Debt as quickly as possible

Posted By |

By Shiv Nanda

Special to the Financial Independence Hub 

Credit cards can be a saving grace in time of financial need, but if abused can ruin your financial health. Most Americans have a love-hate relationship with their credit cards and the stats seem to agree.

Total US credit card debt is over $830 Billion.

 Of the more than $1 Trillion of revolving debts, Americans are carrying the vast majority of debt in 2018.

 Let’s break down these troubling credit card debt statistics by category:

Studies have found an average of 39% of credit cardholders pay their credit balances in full. And only 29% make low or minimum payments. This is an alarming finding because cardholders who make the minimum payments 20% of the time are the ones with a credit score of 800 and above. While cardholders with credit score of 700 and above are more likely to make full payments towards their credit-card balance. However, there are other factors that contribute to the credit card payment pattern:

1.) Income and Employment

 It is quite surprising that high income doesn’t guarantee freedom from debt. Ironically, the debt seems to be increasing with increase in annual income. And the highest credit card balances are seen with people with the highest income.

2.) Age and Gender

Studies reveal that older customers are more likely to pay their credit-card balance in full whereas middle-aged consumers may pay in full or pay the minimum amount due. Middle-aged consumers have high home expenses as they have dependents to take care of. Gender of the consumer is also a contributing factor of credit card debt. Data shows that men and women have a revolving debt of 29.9% with women having 3.7% less than their male counterparts.

3.) Region

Location has proved to be an interesting influence on credit-card debt. The Midwest and the Great Lakes regions seem to have responsible credit cardholders. They have the highest average credit score and lowest average credit card debts: while Alaska seems to have the highest credit card debt and average credit score stuck somewhere in between the high and the low.

6 smart ways to clear credit-card debt ASAP

1.) Have a plan and stick with it

It is essential that you take a stock of the situation. Continue Reading…

Retired Money: How to beat the banks at their own game

Posted By |

My latest MoneySense column reviews the new book by ex banker Larry Bates, titled Beat the Bank. As the headline suggests, it’s all about how to beat the banks at their own game, which ironically can mean owning the big bank stocks themselves! The full column can be retrieved by clicking on the highlighted text here:  Tips for DIY investors on beating the Big Five banks.

The formal launch date for the book is this Thursday: September 13, 2018. I first met Bates over lunch in March as his manuscript was nearing completion, where he expounded on what he called the “two Bay Streets.” Old Bay Street and its secrets are the focus of chapters 4 and 5, and New Bay Street is chapter 6.

Old Bay Street is not the investor’s friend

Most experienced investors will have encountered Old Bay Street at some point. This is the traditional investment industry: the commission-based mutual fund and brokerage industry, insurance company reps, investment “specialists” in the bank branches and various salespeople who call themselves “advisors.”

New Bay Street = Discount Brokerage, ETFs & fee-for-service planners

The New Bay Street includes providers of low-cost index funds or Exchange-traded Funds (ETFs) or online robo-advisers that automate the purchase and rebalancing of ETFs along with setting asset allocation.

At 62, Bates is well into his own “Victory Lap,” leaving employment for self-employment. Actually, his New Bay Street model isn’t all that new, as it describes models similar to what I myself described back in 1998 in my own financial book, Findependence Day. My version consists of buying ETFs at a discount brokerage and using a fee-for-service financial planner. The same year, similar principles were also described in Stop Buying Mutual Funds!, by Mark Heinzl, now a Globe & Mail stock market columnist.

Dinosaur banks have the lowest T-REX scores

Bates has fashioned something he calls T-REX scores  This is an acronym for Total Return Efficiency Index Score. A T-REX score of 100% would be paying absolutely no fees at all, no matter how long your time horizon.

Mutual funds with 2% annual fees would have T-REX scores of 54% over 20 years and true fees of 46%, but the longer you hold, the worse the performance; thus, over 40 years the T-REX would be 41% and the true fee 59%. Fees of 3% inflict even more damage. This is the basis for his statement that long-term customers of Old Bay Street lose half their money to fees. You can find more at his website at www.larrybates.ca.

The pure DIY model of buying individual stocks or bonds at a discount broker yields the highest scores: a T-REX of 96 to 99%. (Remember, the higher the better, with 100 being perfect).

Continue Reading…