The term “wellness” — including emotional, physical, and mental wellness — is finding its way into more and more conversations these days. However, there’s one aspect of general wellness that is often overlooked despite its significant impact: financial wellness.
Given the current economic environment, financial concerns among Canadians are one of the largest sources of stress. According to a recent study by FP Canada, forty-nine per cent of Canadian adults have lost sleep because of financial worries, which may impact their overall wellness.
Just like physical and mental wellness, there is no one formula to create financial wellness for everyone.
Luckily, there are strategies we can all take to improve our financial wellness. It starts with acting in the present while planning for the future. The path to financial wellness is a personal journey, and a qualified financial advisor can help you take the first step and make important progress.
Prioritizing financial wellness for today
Before working on your financial wellness, it’s important to ask, “What does financial wellness look like for me?”
It can be as simple as creating (and sticking to) a budget or making a realistic and actionable plan to pay off your current debts. Your path to financial wellness can even begin by getting a better understanding of a familiar term: tax.
Whether we like it or not, tax is inevitable, and it impacts nearly every financial decision we make. Therefore, gaining an understanding of your tax situation can provide you with confidence and can help improve your financial wellness.
Depending on your circumstances and stage of life, contributing to your Registered Retirement Savings Plan (RRSP) or First Home Savings Account (FHSA) are two options that may help you prepare for your future, while also reducing your taxable income, meaning you’ll get taxed less come tax season.
Being knowledgeable about the different types of accounts (including RRSPs, FHSAs and Tax-Free Savings Accounts), as well as tax deductions and tax credits available to lessen your tax liability, can also help build financial knowledge and reduce financial stress.
Planning financial wellness for the future
Part of financial wellness is proactive planning so you can feel comfortable and confident in your future. Saving is an important part of building a strong financial future, but financial wellness goes beyond that. Continue Reading…
Becoming debt free is, for many people in the country, virtually a dream. It’s basically impossible if we’re barely living from paycheck to paycheck, and the debts we accumulate aren’t always unavoidable. However, there are definitely a few things that we can do as individuals to reduce our debts and eventually become debt-free.
In fact, it’s a life goal for many people to just get rid of their debts. Once that happens, they can finally enjoy a life of financial security and be more free with their hard-earned money. So without further ado, let’s take a look at some simple life changes you can make to become debt-free.
This all starts by actually looking at your incoming and outgoing money and creating a budget. Start by looking at what you spend your money on, where you can cut down, and also look at how much you’re paying in subscription fees. A lot of people bleed money because they’re not aware of how much they’re actually spending, and this can be an incredibly dangerous habit.
Aim to actually pay off your debt
Lots of people will see the long debt repayment terms and just let it go. They’ll wait several years just to pay off something, and in that time, they’ll have paid a huge amount of interest that could’ve been avoided.
So aim to actively pay off your debt. Reduce expenses from other places (such as entertainment costs) and put all of that into your debt. Continue Reading…
In the quest for financial stability amidst major life milestones, we gathered wisdom from Finance Experts to CEOs, compiling twelve diverse strategies.
From establishing a safety net to applying the 50-30-20 budgeting rule, these professionals share how they’ve successfully built and maintained emergency funds while pursuing family formation and homeownership.
Establish a Safety Net
Adopt Frugal Living Practices
Set Achievable Saving Goals
Automate Savings Allocation
Implement Disciplined Saving
Live Below Your Means
Reduce the Temptation to Spend
Diversify Income with Side Hustles
Maintain Emergency Fund While Home Owning
Strategize with Automatic Transfers
Manage Spending, Build Runway
Apply the 50-30-20 Budgeting Rule
Establish a Safety Net
As a seasoned finance expert, I understand the critical importance of establishing and maintaining emergency funds, especially when navigating major life milestones like family formation and homeownership. Here are some strategies I recommend for achieving financial security while pursuing these goals:
Building the Safety Net: We suggest a reserve that equals three to six months’ worth of living costs, which acts as a buffer for matters like falling sick, fixing a car, or losing employment. You can begin by making small deposits into a high-interest savings account and then building on it gradually. Save everything!
Goal-Oriented Saving: After setting up an emergency fund, the next step is to save towards your dream house. Consider putting money into Fixed Deposits or Recurring Deposits, as they have guaranteed returns and help inculcate discipline, too. Remember to stay consistent! — Arifful Islam, Finance Expert, Sterlinx Global LTD
Adopt Frugal Living Practices
My husband and I have built and maintained emergency funds by continuing to employ financial tactics we had to use early on in the pandemic, when COVID-19 lockdown-related issues resulted in his salary being temporarily reduced and my hours being cut back.
We were adamant about the need to continue adding even a small amount to our emergency fund since we had purchased a home only the year before. Thanks to friends’ and family’s experiences, we were well aware of the ever-present chance of a home-related emergency.
We decided on a two-pronged approach: We lived beneath our means by greatly curtailing our travel, cultural, and dining-out budget, finding free and low-cost alternatives to enjoy closer to home, as well as cooking new items at home.
We also became savvy consumers. We started comparison shopping for budget items, both big and small. Our biggest savings came from comparing car and home insurance companies: When we switched to a new company, we saved over $700 a year.
The strategy I followed for building my emergency fund took a decent amount of time. My plan was to cover three to six months of living costs. I was well aware that saving that much money would take time. So, I started with simple goals like saving $10 a day.
I somewhat understood that the savings goal depends on income and expenses. So, I tried to cover essential expenses first, rather than transferring all my income to savings. I paid off costs such as housing, utilities, transportation, food, and credit-card/loan payments before anything else. Then, I added up my monthly spending and multiplied it by six months. I got the estimated total amount I need to save as an emergency fund.
I decided to keep my funds in a high-yield savings account. These types of accounts are convenient to access and offer good interest rates. As a result, your funds will grow gradually. However, I suggest choosing banks and credit unions insured by the National Credit Union Administration (NCUA) or the Federal Deposit Insurance Corporation (FDIC).
Last but not least, it is better to use a direct deposit service to transfer your money into your bank or savings account. Contact your bank and activate the direct deposit service. It would be wise to split direct deposits and put a certain amount in your emergency fund and the rest in your checking account. — Loretta Kilday, DebtCC Spokesperson, Debt Consolidation Care
Automate Savings Allocation
I’ve always prioritized building an emergency fund because it’s crucial for my family’s financial security and peace of mind. Early in my career, I adopted a simple yet effective strategy: automate and allocate.
I set up automatic transfers from my business income to a separate high-yield savings account every month. Initially, I aimed to save at least six months of living expenses, which I gradually expanded to cover an entire year.
Treating this fund as untouchable for everyday expenses became a safety net that allowed my wife and me to comfortably pursue family goals like buying a home. To balance this security with growth, I also invested in low-risk, highly liquid bonds and money market funds for a portion of the emergency fund. — Michael Sena, CEO and Lead Analytics Consultant, Senacea Ltd.
Implement Disciplined Saving
Building and maintaining an emergency fund has been a cornerstone of ensuring my family’s financial security, especially as we pursued significant goals like family formation and homeownership. From my experience, the key has been a disciplined, proactive approach to saving, paired with a clear understanding of our financial priorities and potential emergencies.
Initially, I established a strict budgeting process where setting aside money for an emergency fund became a non-negotiable monthly expense, similar to mortgage or utility bills. I targeted saving at least three to six months’ worth of living expenses, a common benchmark that provided a safety net capable of covering unexpected events such as medical emergencies or job loss.
To stay disciplined, I automated the transfer of funds from our checking account to a high-yield savings account specifically designated for emergencies. This automation ensured that the savings occurred without requiring active management on my part each month, reducing the temptation to skip or divert these funds toward other uses. Choosing a high-yield account also helped the fund grow faster through interest, maximizing the efficiency of our savings.
As our family grew and our financial situation evolved with goals like buying a home, we reassessed our emergency fund needs regularly. For example, when planning for homeownership, we increased our emergency savings target to account for potential home repairs and maintenance, which are typically more costly than many renters anticipate. This adjustment was crucial in maintaining our financial security after transitioning to homeownership.
Throughout these phases, maintaining open communication about our financial goals and progress has been vital. Regular discussions with my spouse ensured that we were both aligned on our savings goals, understood the reasons behind them, and could track our progress together. — Michael Dion, Chief Finance Nerd, F9 Finance
Live below your Means
The secret to building wealth is living below your means. You need to be clear on the income coming in and the expenses going out. Pay yourself fi rst. The results of compound interest are powerful.
As your income increases, lifestyle inflation creeps in. Lifestyle creep occurs when an individual’s standard of living improves as their discretionary income rises and former luxuries become new necessities.
Avoid the urge to spend more as you make more. Instead, save more. Invest the difference. As you get a raise, give yourself a raise. Increase your 401(k) contribution. Add to your emergency fund. Your future self will thank you. — Melissa Pavone, Director, Investments CFP, and CDFA, Oppenheimer & Co. Inc. Continue Reading…
Investing advice when Putin’s at war against Ukraine. Plus, Putin and the Israel-Hamas War
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Russia launched the war in 2014, during the second Obama term, when it invaded Ukraine’s Crimean Peninsula. At the time, the U.S. and NATO were still unsure about how to react to Russia’s aggression toward its former possessions. Many observers felt Russia was just trying to retrieve some of the stature it lost with the collapse of the Soviet Union in the early 1990s.
When Russia invaded Ukraine in 2022, it expected Ukraine to collapse right away (the way France collapsed under the 1940 German invasion, say). The U.S. and other observers feared/expected the same. They still began sending security aid to Ukraine before the invasion. They also used threats of trade and financial sanctions to try to scare Russia off. These steps failed. However, Ukraine fought back surprisingly well and attracted additional aid from the West.
Putin soon saw that he had guessed wrong. But he assumed the West would quickly lose interest. Instead, the West stepped up its aid. Russia then began a series of veiled threats of military escalation, all the way up to tactical nuclear weapons.
My sense is that after its initial stumble, Russia still hoped/believed that if it kept up the military pressure and escalation/nuclear threats long enough, Ukraine and its supporters would agree to a lengthy ceasefire that would work in Russia’s favour.
It seemed to me and many other people that this was unlikely. In April of that year, I wrote that “Russia could launch a nuclear war, but it would find itself fighting against most of the advanced countries of the world. Putin is vain and may be deranged, but he isn’t stupid.”
Later I voiced the off-the-cuff view that any nuclear attack on Ukraine would spark a much more lethal response from NATO forces, which vastly outnumber Russia’s.
Just recently I came across the actual NATO-versus-Russia figures (below) from veteran Toronto journalist Diane Francis, writing in her Substack.com publication. (Note: her chart refers to a Military Asset as a “Characteristic.”)
The numbers show an even greater numerical advantage for NATO than I imagined. That’s just the start.
The West is also way ahead of Russia in technology, sanctions, finances, morale, global support and pretty much anything else. Russia’s main advantage in war is its ruthlessness in throwing untrained soldiers — mostly from prisons or Russian-speaking racial/cultural minorities — onto the front lines, until the other side runs out of ammunition.
Putin can only hope that Biden or a successor loses his grip and abruptly pulls out of Ukraine the way the U.S. pulled out of Afghanistan in August 2021, after two decades of hostilities.
As the sarcastic one-liner goes, that’s not likely.
Nobody can predict these things, of course. My sense is that we are seeing the last gasps of Europe’s last empire. I’d guess the outcome won’t be pretty or quick, but it may turn out to be a historical milestone. A worldwide swing back toward democracy and away from authoritarianism just might follow.
Putin and the Israel-Hamas War
My guess is that the Israel-Hamas war is just getting started and will last a long time. I also suspect that Putin had something to do with getting it started, and will do what he can to keep it going. After all, when it comes to running his country, Putin takes a grasping-at-straws approach.
Putin may think that bringing the longstanding Mideast conflict back into the headlines is going to improve his chances of conquering Ukraine and bringing the Soviet Union back from the dead.
He thinks taking a long shot is better than no shot at all. Who knows? He might get lucky.
Early on in his war on Ukraine, Putin seemed to think that Chinese dictator Xi Jinping was going to take pity on him and his country, and offer free money and/or weapons to shore up Russia’s Ukraine invasion. Instead, Xi insists on staying out of the war, while paying discount prices for Russian oil. He takes special care not to let his country get caught up in the economic sanctions that the U.S. and NATO countries and allies are directing against the Russians.
It’s not that Putin is stupid. If a war between Israel and Hamas turns out to be a big drain on the U.S. budget, the U.S. might have less money available to arm Ukraine.
Up until lately, however, Israel has had little to say about Russia’s treatment of Ukraine. Israel may soon take a more active role in helping Ukraine defend itself.
Any war is a terrible thing, and this one is no different. Meanwhile, the stock market seems to be creeping upward. Maybe it knows something that Putin hasn’t figured out. If you’re looking for investing advice related to the wars around us, spend more time learning about the wars themselves.
Meantime, if your stock portfolio made sense to you a week or two ago, we advise against selling due to Mideast fears
No matter what the state of the world, here are three rules you can follow for maximum portfolio success:
Our first rule will help you stay out of high-risk, low-quality investments. These investments are always available, in good and bad markets. They come with hidden risks due to conflicts of interest and other negatives. Every year, they lead many inexperienced investors to substantial losses. Continue Reading…
Index investing, a strategy adopted by cost-conscious investors and passive investing aficionados, is continuing to gain in popularity across individual investors, advisors and institutions alike.
The S&P 500 Index is widely regarded as a gauge of the overall large-cap U.S. equities market. The index, which dates back to the 1920s, includes 500 leading companies and covers approximately 80% of available market capitalization.1 Other popular indices for U.S. equities include the Dow Jones Industrial Average (covering a smaller number of companies: ~30), and the Nasdaq 100 Index (tracking the largest 100 companies listed on the Nasdaq Stock Market).
ETFs make index investing more efficient, helping investors save time and money relative to holding all the constituents of their favorite market index. Take the S&P 500, for example. Not only would you need to buy 500 companies, you would need to make sure they maintain the appropriate weight in the portfolio over time: requiring a lot of time, and money in trading those securities.
ETF units are primarily bought and sold between different investors. This means there are typically fewer realizations of capital gains and losses with ETFs than with other investment products. Similarly, as passive ETFs track the performance of a specific benchmark, they tend to have lower overall portfolio turnover. Fewer transactions within the ETF again means fewer realizations of capital gains and losses that may flow through to ETF holders.
Investing in the S&P 500 Index has been made simple with ZSP2 – BMO S&P 500 Index ETF. Also available in hedged and USD (ZUE/ZSP.U)2, these ETFs give you exposure to this broad market index at a low cost of 0.09% 6(MER – Management Expense Ratio) and can be used as a core in your portfolio. Index based ETFs like ZSP provide broad market exposure and diversification across various sectors and asset classes according to their underlying index. It’s not about timing the market with index-based ETFs, it’s about time in the market and these solutions provide a long-term strategy for investors.
What does the research show?
Another reason index-based investing is becoming a staple in investors’ portfolios is the increase in available research showing passive outperforming active over the long term. The best known of this research, the SPIVA report, which coming from S&P Dow Jones Indexes research division has been looking at this phenomenon for 20 years, measuring actively managed funds, against their index benchmarks worldwide.
Looking at the data as of Dec 31st 2023, and focusing on Canadian Equity Funds, 96.63% of active fund managers underperform the S&P/TSX Composite over 10 years. Put another way just 3.37% of funds outperformed the S&P/TSX composite over that time period.3 This research holds across time periods and geographies, with the numbers changing year to year but the story remaining compellingly in favor of passive. While there are active managers that out-perform their benchmark, this can be challenging to do consistently over time, even for the professionals.
Innovation in Index Investing
“Losses loom larger than gains.” – Daniel Kahneman & Amos Tversk4
Famed researchers in behavioural finance, Daniel Kahneman and Amos Tversky, once hypothesized the psychological pain of loss is about twice as powerful as the pleasure of gaining. After strong performances from U.S. stocks over the past two quarters, some may find themselves dusting off the pair’s work and asking, is now the time to lock in gains and take some downside insurance?
We have seen a remarkable run from stocks such as Nvidia, lifting the S&P 500 Index to all-time highs. This may cause some valuation concerns among investors. The S&P 500 is currently trading at a price-to-earnings ratio9(P/E) of about 25 times, which from a historical perspective can be considered rich relative to the average of 17.5 Continue Reading…
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