Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

3 ways to start Real Estate investing and build Passive Income

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By Catherine Way

Special to the Financial Independence Hub

Real estate investing has never been easier. With the surge of house-flipping success stories flooding social media, no wonder more people are looking to invest.

With more ways to start real estate investing, starting is the hardest step many face.

Building passive income is a necessity for any successful real estate investor, but owning and managing rentals with no experience can end badly for some.

Luckily there are a few easy ways to start investing to try out which investment style is best for you.

If you don’t know where to start for your first investment, read on!

Airbnb rentals

“Many investors are using the convenience of this app to start building their passive income. Airbnb is a great tool to have short term tenants, and to learn the basics of being a good landlord. With the app doing all the work to find tenants for you, as long as you are in a rea that sees travels, you can start making passive income with little to no investment. In fact some investors are creating only Airbnb rentals spaces because of the demand and profit from it.” – Loren Howard, Prime Plus Mortgages: Hard Money Lender Arizona.

Airbnb is a great app for first-time investors wanting to make passive income. In fact, there are many resource articles online on how to build an Airbnb business. Most people rent out spare rooms or guest houses to Airbnb guests to stay in, and operates like a mini-hotel service.

For those yearning to be real estate investors who do not have whole homes dedicated to investments, this is a great way to start building up your passive income to pursue other projects, or just learn the basics of taking care of tenants.

Airbnb is all over the world and their popularity is still on the rise. The app makes it simple to find tenants for properties, whether short or long term, and it only requires having a good space to start hosting. That means spare rooms or guest houses can begin to make you money, with little to no investment on your end. Continue Reading…

Leveraging life insurance: a smart financial planning strategy

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By Michael Pilz

Special to the Financial Independence Hub

Life insurance policies can represent a significant, untapped source of capital. While life insurance is often strictly thought of as a death benefit, many permanent policies also have a cash component. This cash component can be leveraged to secure a line of credit that can be used for a variety of purposes, such as a means of supplementing retirement income or to access upfront capital quickly, perhaps to take advantage of an investment opportunity.

An insurance policy that has cash value should be on the table as an option for those who either need or want to access cash by using some of the assets built up over their lifetime. Thinking of insurance differently – and communicating how it can be used to create a living benefit – can open up a world of possibilities.

Rethinking Whole Life Insurance

Insurance policies are great investment vehicles for those who have an immediate need for death benefit coverage, and would also like to park and protect capital in a tax-sheltered vehicle during their working years. But what happens when those who are older, a sizeable chunk of cash has accumulated over the years, and there’s a better use for this cash now instead of passing it on to beneficiaries down the road? And what if they want to leverage the cash value of their policy while also leaving their policy intact?

The Equitable Bank Cash Surrender Value (CSV) Line of Credit enables borrowers to convert the value of their insurance policy into cash. It is a non-amortizing loan product secured against the cash surrender value of a whole life insurance policy. Unlike a traditional loan or line of credit, the interest from the CSV Line of Credit capitalizes and is typically repaid through insurance proceeds at the time of policy redemption. However, a borrower can also opt to make ongoing payments or to repay the entire loan at any time without incurring a penalty.

Does a CSV Line of Credit make sense?

Leveraging a life insurance policy’s cash value can help fulfill a variety of different needs or wants.

Many can benefit from tapping into the cash value that has built up within their policy during their working years to supplement retirement income later in life. High-income earners who run out of RRSP and TFSA contribution room and have excess cash may find their insurance policy especially valuable for this purpose. Think of it as killing two birds with one stone: during prime working years, a whole life insurance policy meets an immediate death benefit need while serving as a mechanism for building up a nest egg that can be leveraged in the future when there’s a need for cash. Continue Reading…

 How to improve the financial wellness of the Canadian workforce 

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By Jean-Philippe Provost, Mercer Canada 

Special to the Financial Independence Hub

For Canadians, wealth management and financial decisions can represent an endless source of stress: whether putting money aside for an important purchase, paying off debt, or saving for retirement. Increasingly, this stress is interfering with workplace health and productivity. 

A company’s most productive asset is their people: when employees are unhealthy, financially or physically, the organization as a whole suffers. Helping employees feel confident about wealth management matters and guiding them towards financial wellness is not just a nice to have: it is a need to have. A healthy workforce means a healthy company: and a healthy bottom line. 

The impacts of financial stress on the workforce 

At Mercer, we have spent years studying the workplace trends, the evolving realities and the challenges faced by workers in Canada. Our most recent research into Canadians’ financial wellness found that if employers help employees achieve financial wellness, they too will reap the rewards, in terms of increased productivity, reduced absenteeism and improved morale. 

For example, our study showed that financial and physical health are tightly intertwined. With only 39% of employees with a low level of financial wellness reporting being in excellent or very good health (compared to 81% at the highest level), it is easy to see how this impacts entire organizations. 

Additionally, employees who don’t feel financially confident also often spend much of their time worrying, including while at work and are also less likely to pay attention to the features of their workplace benefits and the importance of their employee compensation package. 

Employers can and should help their employees successfully manage the steps towards achieving financial confidence. Providing easy-to-access resources to help to their workforce secure retirement savings and manage investments can lead to greater employee satisfaction. It can also strengthen their employee value proposition and help to attract and retain talents. 

Reducing employees’ financial stresses 

The most effective resources should be flexible enough to help all levels of employees meet their financial goals and milestones throughout their careers. Continue Reading…

Bitcoin Blues: How new cryptocurrencies are disrupting Tax Reporting obligations (to IRS and CRA)

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By Elena Hanson

Special to the Financial Independence Hub

The latest buzzword is “disruption” and nothing has caused more disruption in the investment world than virtual currency, most commonly referred to as cryptocurrency. If you’re considering cryptocurrency as an investment option, there are a few things to know.

In a nutshell, cryptocurrency is a digital asset that can work as a medium of exchange. It uses cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.

The main difference between virtual currencies and traditional currencies is the decentralized control system. Cryptocurrencies like Bitcoin, which has been around since 2009, and Ether use distributed ledger technology such as block chain as a public database for transactions. Distributed ledgers are virtual ledgers that are decentralized across multiple locations, resulting in multiple copies of a transaction. While there is no central authority governing these transactions, the public nature of the ledger serves as a check and balance. However, having a currency that isn’t tied to any country or banking system can make regulation a challenge.

Just ask the 10,000 U.S. taxpayers who recently received letters from the Internal Revenue Service informing them that they may have improperly reported transactions involving virtual currencies and may owe back taxes on unreported cryptocurrency earnings.

The letters were accompanied by a stern warning from IRS Commissioner Chuck Rettig, who issued a press release on the matter. He said: “Taxpayers should take these letters very seriously by reviewing their tax filings and, when appropriate, amend past returns and pay back taxes, interest and penalties. The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations.”

The IRS treats cryptocurrency like physical property and taxes it the same way. For example, if you receive a virtual currency as compensation from an employer, it is considered income subject to withholding and payroll taxes. And if you sell it, you could face capital gains tax. According to the IRS: “If you sold, exchanged, or disposed of virtual currency, or used it to pay for goods or services, you have engaged in a reportable transaction.”

CRA treats virtual currency much like the IRS

So, how does the Canada Revenue Agency treat virtual currency? Unfortunately, much like the IRS.

As far as the CRA is concerned, when cryptocurrency is used to pay for goods or services, it is subject to the rules for “barter transactions” or transactions that don’t involve legal tender. When accepted as payment for goods or services by a GST/HST registrant, the GST/HST portion must be calculated based on the fair market value at the time of the transaction. Continue Reading…

Canadian ETFs versus US ETFs

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By Michael J. Wiener, Michael James on Money

Special to the Financial Independence Hub

When it comes to investing, we should keep things as simple as possible. But we should also keep costs as low as possible. These two goals are at odds when it comes to choosing between Canadian and U.S. exchange-traded funds (ETFs). However, there is a good compromise solution.

First of all, when we say an ETF is Canadian, we’re not referring to the investments it holds. For example, a Canadian ETF might hold U.S. or foreign stocks. Canadian ETFs trade in Canadian dollars and are sold in Canada. Similarly, U.S. ETFs trade in U.S. dollars and are sold in the U.S. Canadians can buy U.S. ETFs through Canadian discount brokers but must trade them in U.S. dollars.

Vanguard Canada offers “asset allocation ETFs” that simplify investing greatly. One such ETF has the ticker VEQT. This ETF holds a mix of Canadian, U.S., and foreign stocks in fixed percentages, and Vanguard handles the rebalancing within VEQT to maintain these fixed percentages. An investor who likes this mix of global stocks could buy VEQT for his or her entire portfolio without having to worry about currency exchanges. It’s hard to imagine a simpler approach to investing.

Investors who prefer to own bonds as well as stocks can choose other asset-allocation ETFs offered by Vanguard Canada, BlackRock Canada, or BMO. But the idea remains the same: we own just the one ETF across our entire portfolios. For the rest of this article we’ll focus on VEQT, but the ideas can be used for any other asset-allocation ETF.

Why would anyone want to own a set of U.S. ETFs instead of just holding VEQT? Cost. It’s more work to own U.S. ETFs and trade them in U.S. dollars, but their costs are much lower. To see how much lower, we need to find a mix of U.S. ETFs that closely approximates the investments within VEQT. Readers not interested in the gory details of finding this mix of U.S. ETFs can skip the end of the upcoming subsection. Continue Reading…