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Are your Online Shopping habits compromising your Financial Security?

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Image: Unsplash

By Beau Peters

Special to the Financial Independence Hub

Incredible advancements in technology have made it so we don’t ever need to leave the house to buy the stuff we like. You can buy anything from food to video games from the comfort of your home and have it delivered the next day. However, while convenient, the rise of online shopping has also made it easier than ever to overspend and put our information in the hands of hackers and cybercriminals. It is important to know your limits and shop responsibility.

Today, we will talk a bit about the dangers of shopping online and what you can do to protect your data and your pocketbook.

Awareness of the Risks

If you watch the news, then you have likely heard reporters talk about the criminals that use online spaces to steal the money of consumers. The reality is that if you do anything online, then hackers can get to it. According to Help Net Security, 62% of consumers believe that online shopping fraud is a real threat, yet, most people continue to use e-commerce sites for their needs. The reason is likely because they don’t really understand how bad stolen data can be.

The fact is that if a hacker is able to get ahold of your credit card or debit card numbers, they can steal and retain that information and use it to take out fraudulent loans on your behalf. Even the personal data that you put online, like email addresses and birthdays, can be sold to other hackers for profit.

There are several threats to be aware of, including unencrypted websites. When you shop on any site, you must look at the web address and ensure that it says HTTPS before the website name. The “S” in this case stands for secure, and it means that the website automatically encrypts your payment information so it cannot be read by hackers even if it is stolen.

You must also be cautious when you are shopping on your phone, especially when you are out in public. Hackers can set up fake Wi-Fi networks that can look like the real deal, but when you connect, you are really connecting directly to the hacker. From there, they can steal your data and log into your bank accounts. This is why it is so important to be vigilant about online security wherever you go.

Before you buy anything at a website that you have never shopped at before, take a look around the site for red flags. For instance, if the website does not have a returns policy that you can easily find and review, then it may mean that it is a scam. Also, be aware of spelling mistakes. It is human nature to make a spelling error here and there, but if the website is littered with errors, then it may mean that it was put up in a hurry and the site is not legitimate.

Be Smart about Payment Info and Documentation

It is essential that you are aware of how you use and store your payment information as you do your online shopping. Many companies give you the option to store your payment information on their website for the sake of convenience. But you should know that if that store is not secure, then your financial security could be in jeopardy. So, if you must keep your card information saved at that company, then ensure that they are encrypted, and if you are unsure, then shop elsewhere.

If you do decide to keep your payment information on a website, you must make it a habit to routinely check your debit and credit card statements. If that website is hacked and your card information is stolen, then hackers can continue to use your payment info to make fraudulent purchases. By checking your statements, you can spot false charges right away and file a dispute with the bank.

Also, consider how you store and access those statements. If you view them online at your banking or credit card website, then ensure that you protect your data by adding a complicated password complete with letters, numbers, and special characters. Make your password hard to guess and change it regularly.

Some people choose to download their statements and save them to their computers for future review. If you do the same, then you still need to be cautious because hackers can also get into your device and read the information you have on those statements. Once the documents are on your computer, consider redacting your personal information off of those PDF files, so it cannot be read by others. Doing so will black out your name, address, account number, and other sensitive information so you can keep your files without fear of theft.

Be Smart about your Money

The other potential downside to online shopping is that the instant access makes it too easy to give into temptation and buy more than you need. It can only take a few seconds to find that you have spent the money that you need to pay the bills. That is why it is always a smart idea to create a budget so you can ensure that you stay within your limits.

It is important to consider your wants and needs when budgeting. You may want to buy that new sweater or television set, but are there expenses that you absolutely need to pay before you can splurge? Sit down and write down all of your monthly expenses, including childcare, food costs, utilities, and rent. Compare those necessary costs with the money you have coming in each month. If there is anything left over, then you can dedicate some of that to your online shopping desires.

Part of financial security is not letting your debt get so out of hand that you dig yourself into a deeper hole. If you have debt on credit cards, then it is important that you focus on eliminating it before you spend more unnecessary money. You can do that by adding your credit card payments into your budget, paying more than the minimum each month, and if you have more than one card, then pay off those with the highest interest first. Then, once you pay off your debt, reward yourself with something nice.

As you can see, it is important that you are smart about how you shop online. By shopping with a plan, you can avoid scams and improve your financial situation so you can have a brighter future.

Beau Peters is a creative professional with a lifetime of experience in service and care. As a manager, he’s learned a slew of tricks of the trade that he enjoys sharing with others who have the same passion and dedication that he brings to his work. When he is not writing, he enjoys reading and trying new things.

Get more out of giving: The benefits of a philanthropic strategy

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Image from Unsplash: Amy Hirschi

By Christine Van Cauwenberghe

Special to Financial Independence Hub

December ignites the spirit of giving and most affluent Canadians are continuing to spread the wealth, despite the current economic climate.

A survey conducted by Pollara Strategic Insights on behalf of IG Private Wealth Management found that 96 per cent of high-net-worth Canadians (those with at least $1 million in investible assets) give to charities, with more than half (57 per cent) stating that the volatile economy will not impact their philanthropic priorities. However, only 26 per cent have a charitable giving strategy.

There’s good reason to give, particularly at year’s end, as many can pair supporting the causes they care about with financial incentives. However, with increased capital comes complexity – it’s important that wealthy Canadians speak with a financial advisor to understand when, and how, to give to maximize the benefits for themselves and the causes they champion.

A carefully constructed giving strategy can enhance tax efficiency and optimize the impact of donations. Below are three key considerations to keep in mind when making a charitable donation:

  1. Tax benefits
  • Prior to making a gift, it’s helpful to understand the tax benefits associated with your donation. An organization can issue a tax receipt following a donation if it meets the criteria under the Income Tax Act.
  • A charitable donation claimed personally on your tax return generates non-refundable donation tax credits. The value of these credits reduces the taxes you owe.
  • When claiming donation tax credits on your tax return, the credit rate you receive and amount of tax savings for each dollar donated will depend on your specific circumstances. The value of the donation tax credit is determined by the amount of donations you wish to claim, your taxable income level, and your province or territory of residence.
  • If this is a high-income year, it may be beneficial to increase donations in the year to take advantage of the potentially higher donation tax credit rates available to you.
  1. Deciding what to give
  • Your donation decision should align with your overall financial plan – when deciding on the amount to give, consider your short- and longer-term goals, retirement and estate plan. Continue Reading…

5 key themes that will shape the Canadian and global economy in 2023

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Vanguard Group

 

Vanguard has released its 2023 forecast. You can access it by clicking on this link to a PDF.

We first looked at this in this Hub blog on December 12: Vanguard says Balanced portfolios still offer best chance of success as Inflation gets beaten back.  

In this follow-up blog, we’re looking in more depth on the Canadian portion of the report, which begins on page 23. We have reproduced some of the text and charts from that section in the second half of this blog.

“Generally, we are calling for a global recession next year, including a milder recession for Canada with economic growth pegged at 0.7% (for Canada),” says Matthew Gierasimczuk, spokesperson for Vanguard Investments Canada Inc.

Vanguard expects five key themes will shape the Canadian and global economic environment as we move into 2023:

  1. Central banks’ vigilance in the fight against inflation
  2. Spillover effects of global economy, energy, and real estate markets on the Canadian economy
  3. Economic effects of the energy crisis in Europe
  4. China’s long-term structural challenges as it aims to end its zero-COVID policy
  5. Last, but not least, a more positive outlook for long-term investors across bonds and equities

 Fighting inflation: Central banks maintain vigilance

 Vanguard says 2022 has proven to be “one of the most rapidly evolving economic and financial market environments in history. Across the globe, central banks have responded with coordinated monetary policy changes that have outpaced anything we’ve seen for several decades.”

A globally coordinated monetary tightening regime

 “This is the greatest inflation threat we’ve seen since the 1980s,” it continues, “Central banks have a difficult path ahead that will require being more aggressive with policy, making additional rate hikes, and maintaining vigilance as the inflation situation shifts.In the U.S., the Federal Reserve has adopted the position that there is still work to be done, and it appears to have the resolve to stick with it.”

For the balance of this blog, we’ll drill down on the report’s prognosis for Canada, which starts on page 23 of the forecast. We’ve selected large chunks of text, which is as it appears in the report, with minor excisions such as references to some charts not reproduced here. Therefore, we are not using quotation marks. An ellipsis (3 dots as here: …) is used to indicate sections excised between passages. With one or two exceptions, most subheadings are from Vanguard. Readers who want the full report should of course click on the PDF link above.

Canada: Reining in an overheating economy

The year 2022 has seen persistent global inflation followed by rising policy rates as central banks across the world played catch-up. Over the course of 2022, inflation in Canada continued to tread higher driven by a combination of rising demand, tightening labor markets, and volatile energy and food prices as a result of ongoing supply constraints and geopolitical events. Heading into 2023, there are growing signs that inflation will moderate due to recovery in global commodity supply and slowing economic growth driven by tightening monetary policy.

In 2022 we discussed how policy tightening will be a crucial risk behind a lower growth environment among other factors such as high inflation, further supply disruptions, and new virus variants. Looking back most of these risks occurred throughout the course of 2022. The unexpected Russian invasion of Ukraine added to supply disruptions and pushed headline CPI inflation to its historically highest level of 7.9% YoY. Continue Reading…

Accelerating your Legacy Planning by Gifting In Advance

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LowrieFinancial.com

By Steve Lowrie, CFA

Special to the Financial Independence Hub

Most posts about legacy, wills, and estate planning focus on how to settle your estate after you pass: ensuring your intentions are met, your family is cared for, charitable gifts are fulfilled, taxes are minimized, and so on.

Estate planning is important; we help clients with it all the time. But today, I’d like to offer a valuable twist on the theme of estate, life, and legacy planning:

Instead of your excess wealth being distributed after you die, you may find even greater value in giving some of it away while you’re still around.

Properly managed, making gifts and charitable donations while you’re alive can offer solid tax-saving benefits to you and your estate financial planning. In particular, targeted charitable giving can be a powerful tool for business owners and similar professionals who are approaching retirement and facing high-tax events, such as selling their business, or exercising highly appreciated stock options.

As importantly, it can be incredibly rewarding to witness the results of your generosity. Don’t underestimate the value this intangible benefit can add to your life and legacy planning.

Legacy Planning for Quality Living

First, what is “excess wealth?” Is there such a thing as too much money??? Not really.

This is where legacy planning is essential. If you’re thinking about spending, gifting, or donating significant wealth, don’t just guess at the dollar amounts. Instead, you and your financial advisor should periodically crunch the numbers to determine how much you and your loved ones conservatively need to remain well-positioned, even under worst-case scenarios (such as, say, a global pandemic).

After that — if you and your loved ones are indeed set for life — any extra resources become the financial equivalent of gravy on your entrée. How will you use your excess wealth to add flavour to your life and to the lives of others so that you are leaving a legacy you can be proud of?

An anecdote about Lifetime Charitable Giving

To envision what it would be like to make one or more significant charitable donations during your lifetime, consider the story of “John and Jane,” an earnest couple in their 60s who came to me for advice a few years ago. John came from meager roots, but he was determined to make his own way. With a boost from some financial aid, he put himself through college, where he met Jane. Together, they worked hard, scrimped and saved, and raised two kids. Along the way, John started his own business, which prospered.

Fast forward to 2020, when John was able to sell his business for a substantial sum of money. After we ran all the numbers, it was clear he, Jane, and even their kids would be able to live comfortably for their remaining days. Both personally and in a holding company, the couple also owned some taxable investments that had appreciated nicely.

So far, so good. However, there was one challenge (even if it was a nice “problem” to have): even with extensive planning in the anticipation of an eventual sale (purified operating company, multiplying the lifetime capital gain exemption, etc.), the business buy-out would generate hundreds of thousands of dollars in taxes in the year of the sale. As the saying goes, when you’ve incurred taxable gains, you can choose who’s going to benefit the most from the taxable portion: the government, or your favorite charities. I suggested to John and Jane, they could reduce their taxes owed in the year of the sale by instead fulfilling some of their existing charitable intents that same year.

To manage the significant donation they had in mind, we established a Donor-Advised Fund (DAF) in their name. They then donated into their DAF an equal amount to the taxes incurred from the sale of John’s business. This helped them accomplish several goals:

  1. They were able to fully offset the taxable buy-out gains with their charitable contribution.
  2. John was able to fulfill a lifelong dream by using some of the DAF assets to establish a scholarship at his alma mater. By doing so during his lifetime, he has been able to see others benefiting from a solid education, just as he had when he was young. On a personal level, he and Jane have found the experience highly rewarding.
  3. Moving forward, they can donate highly appreciated assets to their DAF to wash away those gains as well.

A DAF offers a few other benefits as well. For example, you can direct how to invest undistributed DAF dollars in the market, potentially increasing your giving power over time. You can also keep your charitable giving anonymous if you’re so inclined. Continue Reading…