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.”

Make & Save: The importance of actionable Personal Finance habits

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By Hellen McAdams

Special to the Financial Independence Hub

When it comes to actionable personal finance habits, earning more money and saving a good portion of it are near the top of the list. Sadly though, before you can ascend the tower of wealth, many of us need to first dig out of the basement of debt.

Escape Debt in 5 years

Did you know the average American household has approximately $137,063 in debt? (all figures $US.) That’s too much debt. But what if you were to discover it’s possible for the average household to get out from under the thumb of that kind of debt in as little as five years?

There are several ways to do this. Loan consolidation is a practice whereby you reduce the complication of managing debt by combining everything together. If you have a bunch of little debts that individually compound separately from one another, one possible solution could be to take out a small loan, pay them off, then pay off the small loan in a single payment from then on.

There are online loans of this type which can, believe it or not, be secured online, if you’re considering such.

Still, this is just a debt transition; it doesn’t truly get rid of that which you owe: it merely reduces the complexity of paying a dozen little things off in tiny increments; like cellphones, furniture, and medical bills. A better way to get your debt paid off more quickly is to downsize.

Debt Relief Strategy

This is where you have to establish good financial habits. This hypothetical revolves around $3,000 a month in earnings from the primary breadwinner of the household. That comes to $36,000 a year before taxes. Now say you’ve got $137,000 in debt hanging over your head. You need to find a way to pay that off with the money you’ve got. Continue Reading…

Should buyers make a move in slower Autumn housing market?

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

Depending on where you live in Canada, purchasing real estate in recent years hasn’t exactly been a cakewalk. Tight supply and rampant buyer demand (and alleged speculative investing) have pushed home prices to what some experts argue are unsustainable levels in the nation’s hottest markets.

However, following a slew of new policy changes introduced over the last year — such as Metro Vancouver’s foreign buyer tax and the Ontario Fair Housing Plan — those red-hot conditions have changed, with real estate boards from both markets reporting slower sales in the months following.

That’s made a dent in the national numbers, reveals the latest analysis from the Canadian Real Estate Association: with a 11 per cent drop in sales from last September. This is despite the typically busier autumn market, which is often the last chance for buyers to make a serious go of it before the snow — and holiday season — sets in. Seasonally adjusted activity was up slightly month over month at 2.1 per cent.

Too soon to call for market stability: CREA

While this could indicate market conditions are starting to settle after what has been a turbulent spring and summer market, it’s too soon to call it a trend, say CREA’s analysts.

“National sales appear to be stabilizing. While encouraging, it’s too early to tell if this is the beginning of a longer-term trend,” stated CREA President Andrew Peck.

Calmer sales activity hasn’t translated to greater affordability, though: home prices continued their ascent, with benchmark prices rising in 13 of MLS’s tracked markets. It’s the first time in seven years that all markets have seen simultaneous growth, with the national average price coming to $487,000.

However, prices are increasing at a slower pace than at the market’s peak, and that’s mainly due to the lost steam in the detached house segment since March. One- and two-storey single family homes appreciated by 7.9 and 7.2 per cent respectively, compared to the sizzling condo market, which saw 19.8 per cent appreciation, and townhouses at 13.5 per cent.

Continue Reading…

Why are boomers slow to embrace DIY online investing?

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My latest Financial Post column has just been published, which you can retrieve  by clicking on the highlighted headline: Boomers slow to embrace online investing but, surprise, it’s not a technology thing.

(Added Thursday: The article has also been published in the print edition of Thursday’s paper, on page FP8, under the headline Boomers ‘fearful’ of online investing: advisor. This Hub version of the column elaborates on a few points, adding the important distinction that newer online do-it-yourself [DIY] investors do NOT have to go without human advice or guidance, which they can get through fee-for-service planners, fee-only money coaches or investment coaches.)

According to a TD Bank Group survey titled Too shy to DIY, 79% of Canadian baby boomers use the Internet for banking but only a paltry 16% are DIY online investors.  The poll of 2,000 Canadian adults was conducted late in July.

Since the Boomers have embraced most aspects of the Internet and are just as addicted to smartphones as Millennials and Generation X, it’s clear (as the headline notes) that “it’s not a technology thing.”

Rather, the main reason for low Boomer use of online investing is lack of investment knowledge: TD says 79% of those surveyed don’t manage their money online because they simply don’t know enough about investing, while 22% say they don’t have enough time to invest on their own.

When I asked Jeff Beck, Associate Vice President at TD Direct Investing, why the disparity he replied with this email:

“The gap between Boomers who bank online and those who invest online can be attributed to the fact that many say they are unfamiliar or uncomfortable with online investing tools. There’s a misperception that online investing is a complicated, time-consuming activity. That’s why TD Direct Investing offers a range of educational resources, tools and support to help investors get off to a great start, whether their goal is active trading, long-term investing, or both.”

So too do the other major discount brokerages as far as I’m aware: TD is one of the discount brokerages our family uses and there’s certainly no dearth of information on investing there or indeed most other major financial institutions.

As a boomer myself I was a tad surprised by the findings. Continue Reading…

5 ways post-secondary students can save money

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By Brandon Silbermann

Special to the Financial Independence Hub

When it comes to education, there are important financial lessons to be learned by post-secondary students outside of class.

According to Statistics Canada, there are currently more than two million full and part-time students at Canadian universities and colleges, and for those who leave home to study, a four-year university education could cost as much as $90,000. The road to responsible money management is a lifelong journey and many post-secondary students would benefit from ongoing practice: no matter their financial situation.

As a millennial financial advisor with freedom to provide impartial advice to helps young adults and parents prepare for life on campus, here are my top five tips and tricks to help students save money and put themselves on a solid financial footing throughout the school year.

1.) Look for scholarships and bursaries

There are many different scholarships out there available to students based on factors such as their choice of major, financial need, academic performance and community involvement. Surprisingly, however, many scholarships and bursaries go unclaimed each year. Although it may be time-consuming to find all the options available to you, contacting your school to get a directory is a great start and may be well worth the effort. You can also access Canada.ca’s student financial assistance section to learn what is available to you and how to apply for help to pay for your post-secondary education.

2.) Hone your cooking skills and save big

Buying food at restaurants every day can quickly add up and put a damper on a limited student budget. Shopping at a local market or on student discount days at a grocery store is a smarter route. For example, Zehrs – a Loblaws brand grocery store – offer 10 per cent discounts off students’ groceries on Tuesdays if they present their student cards in Waterloo. You can also order a basket of ugly but delicious produce via second-life.ca or browse through your local grocery store for discounted fruits and vegetables nearing expiry. Certain supermarkets, such as Loblaws, Sobeys or Metro, now offer a range of “imperfect” fresh products at affordable prices.

3.) Pay down highest interest rate debt first

Continue Reading…

Will investing in your child’s business endanger your retirement?

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By Dave Faulkner, CLU, CFP

Special to the Financial Independence Hub

Your son or daughter just asked you for a short-term loan to help them start a business. If everything goes well, they will pay you back with interest in a few years. But what if they never pay you back? How much will it impact your ability to enjoy your retirement?

RediNest is a personal financial planning application that you can use to get answers to your retirement planning questions.

How RediNest can help

John and Joan plan to retire in 10 years. Although they do not have a pension plan, they have $300,000 in RRSP and $100,000 in TFSA investments. With no mortgage, they are able to contribute the maximum each year to both RRSP and TFSA.

Using RediNest they calculated their Retirement Potential™ at $73,900 of after-tax retirement income, slightly more than the Canadian average* of $69,000.

Their son has asked them to invest $100,000 in his business. He has prepared a business plan, and expects to repay the full amount over five years. John and Joan want to fully understand the risks before loaning their son the money, so they modified their RediNest plan and reduced their TFSA balance to zero.

Assuming a worst case scenario where they never get their money back, John and Joan re-calculated their Retirement Potential to be $67,800, a reduction of over $6,000 / year for life! A significant amount when you consider it is after-tax and fully indexed for inflation. If they never get their money back, John and Joan want to understand the options available to them to restore their Retirement Potential, as they do not want to have less disposable income in retirement.

Using RediNest, John and Joan discovered they would have to increase their monthly savings by over $900/month for the next 10 years: something they feel they cannot do.

Deferring retirement by a year

Continue Reading…