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How to put your vehicle on a Budget

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By Gary Bordeaux

Special to the Financial Independence Hub

Everyone who owns a car or truck knows that there are regular maintenance and not so regular repair costs. For some vehicle owners, it seems their car is always breaking down. But what if you could cut the overhead on your vehicle significantly? The good news is you can! In the following paragraphs, we’ll discuss ways in which you can dramatically reduce the money it costs you to operate your vehicle.

Maintain, Maintain, Maintain

The first thing you want to do is to read your owner’s manual. If you don’t have one, then look online for one, or check with your dealer. The reason this is so important is that the manufacturer will tell you exactly how and at what intervals to perform or have services performed on your vehicle. Changing the oil at regular intervals is just part of it. Are you using the right kind of oil for your vehicle? It is wrong to assume that the more expensive oils are right for your vehicle. Read what the manufacturer recommends and adhere to their standards.

This doesn’t just go for oil, but for all the fluids and tires too. Not all tires require the same amount of air pressure. Use the kind recommended for your vehicle, and keep them inflated to the recommended psi.

Use only OEM parts

When you need to replace a part on your vehicle, insist on only OEM parts. Original Equipment Manufacturer parts are guaranteed to fit, and they will likely last longer, saving you from replacing the same part over and over. Make sure only certified technicians work on your vehicle, so you can rely on stellar work and new parts. While it is actually fun for some to go to a parts cemetery and find your own parts at a substantial savings, you won’t have the peace of mind you will have when you stick to the manufacturer’s recommendations.

Be mindful of the way you drive

Do you really need to beat the next guy to the red light? Often, that’s what happens when a car weaves in and out of traffic. Nothing is gained, and when you drive that way, you risk getting pulled over or injuring or killing innocent people or yourself. Expressing road rage is another way that some people carelessly treat their cars and their fellow citizens on the road. Just driving the speed limit and driving defensively will help protect you and your car. Many insurance companies offer cheap car insurance for safe drivers and those discounts and savings alone could be worth a lot.

Don’t ignore squeals and other sounds

You wouldn’t believe the difference in cost between a simple brake pad replacement and an entire brake job, with new calipers and rotors. Continue Reading…

Reopening after lockdown: Switching from Defense to Offense

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By Del Chatterson

Special to the Financial Independence Hub 

Do you know your Basic Defensive Interval? I was asked that question as I left a failed business venture and wandered off into the wilderness of between engagements. For entrepreneurs it’s an important question to answer, “How long can we survive without income?” For a business start-up, it’s the number of weeks or months before you get to break-even cash flow. For an operating business, it’s how long can you survive a disaster without any revenue.

For an individual, it means how long can you continue to cover your living expenses if your monthly income suddenly stops. How much cash do you have set aside to carry you through such an event? We always knew there were unpredictable economic and financial risks that we could not prevent or avoid. Maybe we maintained insurance coverage and had a contingency fund, just in case. But none of us were prepared for a global pandemic that would shut down normal business activity for two or three months. It may be six months to two years before we get back to anything approaching normal business activity.

Tactics for the next phase

We have all found a way to get through this temporary shutdown and contributed to slowing the spread of infection to allow health care workers and facilities to handle the case load. We are now entering the end of phase one of the 2020 coronavirus pandemic, we hope. Is it time to start switching from defense to offense? Caution and constant monitoring will be appropriate as businesses reopen and people go back to work, but it’s time. Continue Reading…

Slaughter on the High Seas: Time to bottom fish Cruise Line Stocks?

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Photo by Ian Duncan MacDonald

By Ian Duncan MacDonald

Special to the Financial Independence Hub

Did you ever try to defend investing in the stock market when the risk averse shouted that no one can foretell the future and investing is just a crap shoot?

The Canadian Pension Fund’s purchase of several million more shares of Royal Caribbean Cruises Ltd in the fourth quarter of 2019 is an example of our inability to foretell the future.  Due to COVID-19, Royal’s shares dropped a billion dollars in the first quarter of 2020.  With assets of $420 billion, our pensions are not in jeopardy, but it may well be years (perhaps decades) before Royal Caribbean share price recovers to its former glory.

“Capital value is going to fluctuate over time,” was the pension fund’s response to the hit.  They are right. As long as the pension fund does not sell these depreciated shares, they will technically never take the billion-dollar hit.

Not having to sell is the joy of investing with the public’s money. The next time you lose a few thousand on your stock pick you can tell your spouse, who is questioning your investment skills, “It’s a long-term play. At least it wasn’t a billion dollars like those professionals at the Canadian Pension Fund.”

Until COVID-19, investing in cruise lines looked like the safest of investments.  Every year their boats were full of more and more baby boomers with the time and money to splurge on the non-essentials of life.

The $46 billion-dollar cruise industry is dominated by Miami based Carnival Corporation (CCL/NYSE), Royal Caribbean Cruises Ltd (RCL) and Norwegian Cruise Line Holdings (NCLH).  In 2019, these three gave boat rides to 80% of the 26 million cruise passengers in the world.  Between them they employed 272,000 in 200 ships.  These now under utilized assets are tied up at docks with only a hope that some of them might tentatively begin cruising again August 1, 2020.

Would cruise shares make a good edition to now add to your portfolio?  The following chart gives you an idea of how speculative an investment they might be:

Do you find it interesting that despite the pandemic, analysts are rating all these stocks as buys and strong buys?  Based on this limited data, did the pension fund choose the best one to add to their portfolio?  Interestingly Royal paid a dividend in April; this appears to be the last dividend they will be paying for the foreseeable future.  The other two have not paid dividends this year.

Supply 20 times more than Demand

The book values of these three companies are well ahead of their current share price, which indicates a bargain.  Admittedly, “book values” are calculated by accountants and are not the same as the “market values” that might be realized if the company’s assets were liquidated.  Currently, the supply for cruise ships is probably 20 times greater than the demand.

The price to earnings ratio is low confirms that the shares are not overpriced.  The operating margins for the three reflects their historical sales minus the expense to realize those sales.  With little new revenue now coming in, their operating margins will probably be a minus figures when more current financial information is released.

The IDM score at the bottom of the chart is a measuring stick and summary to quickly evaluate stocks. It is based on the data currently available to the public.  It does not reflect the dire straights that these businesses are now in.  The scores reflect those of the profitable well-run companies that these three once were just a few months ago. Normally any score over 70 indicates a very desirable stock to own.  Anything over 50 is normally a safe stock purchase. (You can learn more about the IDM score at informus.ca). Continue Reading…

Podcast on Squeezing All the Juice out of Retirement

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Earlier this week, financial planner and author Riley Moynes featured me on his weekly podcast, Squeezing All the Juice out of Retirement. You can find the 24-minute interview here, using any number of podcasting platforms.

I have written about Moynes’ books in the past (such as The Four Phases of Retirement) as well as his son Chris Moyne’s book about the Retirement of pro athletes: After the Game.

While both those books come up in the podcast, Riley Moynes starts by asking me about why I coined the term Findependence instead of using the more traditional term Retirement.

Most readers of the Hub will by now be familiar with this topic. In fact, one of the first blogs we published when we launched the site in November 2014 was this one on “Which is the better goal: Findependence or Retirement?”

However, for the sake of more recent subscribers, I’ll recap that Findependence is merely a contraction for Financial Independence. And Findependence Day is the day you estimate  you will reach your Findependence. All this is explained in the Hub’s sister site and processor, FindependenceDay.com. There you can purchase the Canadian edition of Findependence Day or find a link to the Trafford site to buy the U.S. edition. (The book is a financial novel.) There is also a button at the top right of this site that will take you to the site.

Moynes elicits a fair bit of my recent history since leaving full-time employment in 2014. As i said, I was working from home long before the Covid-19 crisis hit! What is different — and is also discussed in the podcast — is that a year ago, my wife also left her full-time job in the transportation industry, so we’re experiencing the joys and challenges of Findependence together, albeit aided by two well-equipped home offices.

The 4-hour workday

Another topic that we spent some time during the podcast is the concept of the four-hour day. I used to write about this back in my days at the Financial Post, and it also comes up in the book I co-authored with Mike Drak: Victory Lap Retirement. The 4-hour day concept was brought to my attention by a former employer and friend:  published in 1955 by William J. Reilly it was titled “How to make your living in Four Hours a Day Without Feeling Guilty About It.” (not to be confused with the more recent Tim Ferris book, The 4-Hour Workweek).  Continue Reading…

How to save on auto insurance during COVID-19

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By Matt Hands, RateHub.ca

Special to the Financial Independence Hub

You might only review your car insurance once a year, but in times of financial hardship, exploring all opportunities to cut back is a smart idea. Whether your car is sitting parked, or you’re only driving for essentials like groceries and medicine, you should know two things.

First, the industry is adapting to the current climate in COVID-19 by offering some payment deferrals and flexible payment options. Second, there are things you can do, be it in a pandemic or not, to save money.

Auto insurance industry response to driving less

The industry’s initial response, almost unanimous in nature, was to offer payment deferral options allowing individuals to delay their monthly premium payments for a defined period of time: ideally once your income returns to expected levels. In addition to this, some providers are waiving non-sufficient funds charges (NSF fees), but be mindful that your bank could still charge you the fee, so it’s best to check with them.

In a more surprising move, many insurers have relaxed their rules about using your vehicle in the shared economy:  e.g. uber, lyft, etc. Depending on your provider, you may also be able to get a coverage extension at no additional charge allowing you to drive your car for commercial reasons to make ends meet. Typically, you’d need a special coverage addition or endorsement on your policy to drive and make money from services like Uber Eats.

More recently, the provincial government announced they will allow the Ontario auto insurance industry to provide premium rebates in the otherwise regulated environment. Now, we’re seeing some more tangible reductions being offered to Ontario drivers. The various relief options can be unique to each provider, so make sure you contact your insurer to find out what potential discounts and flexible payment options are available to you.

Automatic discounts

A number of insurers are applying automatic discounts, which don’t require the policy holder to do anything. Allstate, Pembridge, Pafco, and Travelers are issuing a one-time payment equal to about 25% of your monthly premium. Gore Mutual decided to give a payment worth 20% of 3 months of premium payments. iA insurance is offering the same 20% premium discount, but over 2 months, and used as a credit on your account. L’unique, SSQ, and LaCapitale are both offering a 20% rebate applied as a credit for one month. Unica is offering a 15% break on premiums for April, May, and June.

Passive discounts

Other insurers are taking a more passive approach, which requires the policy holder to initiate the conversation about discounts. Aviva, Economical, Sonnet, and Family will reduce your car insurance premium by 75% if you aren’t driving anymore, or 15% if you’re driving less. They still don’t want you driving for commercial purposes, though. CAA is offering a 10% base rate reduction, Unica is doing the same by 15%. Desjardins and The Personal are calculating their discounts by looking at 3 months of premiums and reduced driving to figure out your unique discount.

Actions you can take to save on car insurance

Deferral should be a last resort, as you will still have to pay the premiums owing eventually on top of future payments. But don’t fret, there are some other ways to save on car insurance.

Reducing the kilometres on your policy

You may not remember, but when you first get car insurance quotes, you’re asked how many kilometres you drive in a year and your daily commute to work. Continue Reading…