Family Formation & Housing

For young couples starting families, buying their first home and/or other real estate. Covers mortgages, credit cards, interest rates, children’s education savings plans, joint accounts for couples and the like.

The rising cost of owning pets

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By Ted McCarthy

Special to the Financial Independence Hub

People are spending more on their pets than ever. No matter the pet type (hamster, dog, snake, etc.), people are willing to pay a pretty penny on their pets. The APPA reported that US$72 billion was spent on pets in 2018.

People are spending so much on their pets, LendEDU wondered if people were willing to go into debt for their pets, or spend more on their pets’ wellbeing than their own?

Pet insurance is becoming more popular with pet owners, with 2.1 million pets insured in 2017.

LendEDU surveyed 1,000 adult American pet owners to see how much they spend on their pets, with or without pet insurance.

Spending breakdown on pets

The survey showed the breakdown of pets:

  • 24% of expenses go to healthcare/vet costs
  • 55% of expenses go to food
  • 13% of expenses go to toys & accessories
  • 8% of expenses go other

These statistics are about in line with the APPA’s statistics, as over US$30 billion out of the US$72 billion spent on pets in 2018 was food alone.

The pet business is massive in America and will continually grow according to the APPA. As consumers treat their pets better and more as part of the family than before, spending per pet will increase, and people are willing to spend that money.

Pet types

Out of the six pet types surveyed, dog owners spent the most acquiring their pet at an average of US$327.13, and fish owners spent the least at an average of $53.58.

Monthly expenses stack up to about the same. Dog owners spend an average of US$157.39 per month, bird owners, an average of $127.38, and cat owners an average if $95.11. Continue Reading…

How to save money through home warranties

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It’s a line often touted by lenders. “Mortgages are cheaper than rent,” they say. On the surface, it’s usually true. In some urban cores, many properties are grossly overpriced. However, like most sales pitches, there’s something they aren’t telling you.

Home ownership carries with it substantial financial responsibilities. In addition to your monthly mortgage payments, you’ll owe property taxes to your municipality. Do you live in a condominium? If so, you’ll also owe building fees, which pay for the upkeep of shared systems, common areas, and landscaping.

And then there is household maintenance. Every year, Americans spend an average of US$2,000 per year just to keep their homes intact. And that’s just an average: the average American household is now 37 years old. As a result, many spend more than US$2K a year on their house.

These expenses would only be mildly annoying if the economy were genuinely thriving. However, despite the stock market reaching record highs, more Americans than ever are struggling financially. 40% of us can’t cover a sudden $400 expense, and a whopping 78% live paycheck-to-paycheck.

More than ever, we’re looking for ways to rein in costs. Misguidedly, some opt to forego maintenance. This approach always backfires, though. A famous maxim says it best: pay me now or pay me (a lot more) later.

Instead, we recommend you investigate home warranties. Depending on your circumstances, they could save hundreds or even THOUSANDS per year. In this blog post, we’ll explain what home warranties are and if it is the right solution for you and your family.

What are home warranties, and how do they work?

Home warranties have been around since the 1970s. Until recently, though, most Americans had no idea what they were. Rodney Martin, CEO of America’s Preferred Home Warranty, says only 3-4% of households had them as of 2015.

There’s a simple reason why home warranties haven’t caught on. In earlier generations, the age of the average home was younger. As a result, maintenance costs were lower. Fast forward to 2018: that year, the average house in America was pushing 40 years old.

Maintenance costs are steadily rising. People are looking for answers. Accordingly, interest in home warranties is increasing.

So, what exactly are home warranties? In a nutshell, they are contracts that cover the repair/replacement cost of appliances and systems. All machines eventually break. Because it’s an expected outcome, though, homeowner’s insurance doesn’t cover them. Home warranties fill in this gaping hole, providing their holders with badly-needed peace of mind.

Let’s say your dishwasher grinds to a halt. Stepping over a river of leaking water, you grab your phone and call your home warranty provider. After confirming they cover your issue, they dispatch a repair technician. Apart from a nominal service fee, you pay nothing more out-of-pocket.

How can a home warranty save me money?

You might still be skeptical. After all, getting a home warranty means investing significant capital in something you’re unfamiliar with. Think of it like this: right now, the average American spends US$2,000 per year maintaining their home. Some years it’s less, but in others, it’s more. Continue Reading…

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…

7 tips for speeding up the day you burn your mortgage

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By Barry White

Special to the Financial Independence Hub

Mortgage payments can be a huge drain on your budget, particularly if it accounts for a significant part of your income. Apart from the interest you will be paying on the principal, mortgage repayments can be a hindrance to your other long-term financial goals. Not only can paying off a home mortgage early help you save thousands of dollars but it will also help you to gain your financial freedom earlier. If you have made up your mind and eager to pay off your mortgage early, here are seven helpful tips you can implement.

1.) Pay extra on your repayment each month

Making extra payments each month is the easiest way to help lower your debt on the property. Whenever you make your monthly mortgage repayment, most lenders allow borrowers to make an extra payment and mark it as “principal only.”  This implies that the extra payment pays down only the principal instead of both the mortgage principal and the loan interest.

Assuming you have a monthly loan repayment amount of $1,346, you can decide to round it up to $1,400. The extra $54 is dedicated as a repayment on the principal. This simple act of extra payment can save you lots of interest charges as well as helping you clear your loan ahead of schedule (since the principal payments will add up faster than you’d think). Therefore, plan to add as much as possible to these payments to help with the principal plus lower the amount of total payments owed. Looking for ways to find extra cash to put on your mortgage? You can use bonuses or apply raises from your job.

2.) Pay more than Monthly, bi-weekly

A bi-weekly mortgage is when you make a payment that equals exactly half of the total monthly repayment every two weeks. This consequently shortens the time to pay off. For instance, if your normal mortgage repayment per month is $1,000, you would instead pay $500 every two weeks. This has almost a similar impact on your budget as one monthly payment. But with the 52 weeks in one year, a bi-weekly payment schedule will bring about a grand total of 13 full monthly payments each year instead of the usual 12. You’ll conveniently be making an extra payment yearly without scrounging around for the extra money.

3.) Make one big extra payment each year

Another great way to repay your mortgage early is to deliberately make an extra payment in a month every year. This helps you settle your mortgage faster, and chances are you wouldn’t miss it.  You can schedule the payment for a month when you hardly have any larger expenses, like during holidays. Of course, this technique requires extra discipline from you since you will need to save that payment. To be on the safe side, you can automatically transfer a little amount every month into a dedicated account for an extra mortgage payment.

4.) Divert “free” money towards your mortgage

Did you receive a tax refund or Christmas bonus from work? Divert that extra money that cannot be accounted for in your budget to your mortgage pay-off fund. Continue Reading…