Kim Lowrie

Kim Lowrie

1 (905) 605 1427

Financial Professional

8787 WESTON ROAD
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Vaughan, ON L4L 0C3

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December 12, 2018

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Allowance: Is it still a good idea?

December 3, 2018

Allowance: Is it still a good idea?

Perusing the search engine results for “allowance for kids” reveals something telling: The top results don’t seem to agree with each other.

Some finance articles quote experts or outspoken parents hailing an allowance, stating it teaches kids financial responsibility. Others seem to argue that simply awarding an allowance (whether in exchange for doing chores around the house or not) instills nothing in children about managing money. They say that having honest conversations about money and finances with your kids is a better solution.

The average allowance is $11 per week, which is about $570 per year.[i] That’s not too shabby! But if your child is consistently out of money by Wednesday, how do you help them learn the lesson of saving so they don’t always end up “broke” (and potentially asking you for more money at the end of the week)?

There’s an app for that.
Part of the modern challenge in teaching kids about money is that cash isn’t king anymore. Today, we use credit and debit cards for the majority of our spending – and there seems to be an ever-increasing movement toward online shopping and making payments with your phone using any of the apps that are available.

This is great for the way we live our modern, fast-paced lives, but what if technology could help us teach more complex financial concepts than a simple allowance can – concepts like how compound interest on savings works, or what interest costs for debt look like? As it happens, a new breed of personal finance apps for families promises this kind of functionality. Just look at your app store!

Money habits are formed as early as age 7.[ii] If an allowance can teach kids about saving, compound interest, loan interest, and budgeting – with a little help from technology – perhaps the future holds a digital world where the two sides of the allowance debate can finally agree. As to whether your kid’s allowance should be paid upon completion of chores or not… Well, that’s up to you and how long your Saturday to-do list is!


[i] https://www.cbc.ca/news/canada/allowance-apps-are-the-modern-piggy-banks-and-they-could-really-help-your-kids-1.4926286
[ii] https://to.pbs.org/2GBrjuI

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Got debt? Throw a snowball at it!

November 21, 2018

Got debt? Throw a snowball at it!

Most of us wish we could be debt free, but it seems like a dream reserved for a few financial wizards.

After all, it’s hard to find a family that doesn’t have debt hanging over them. In this day of easy credit and deferred interest, it’s not hard to accumulate sizable financial obligations.

It is possible, however, to become debt free. One method, the so-called “snowball” method, can be an effective way to get on top of those seemingly never-ending payments.

When you think about tackling your debt, it might make sense to pay off the obligation you have at the highest interest rate first, when you look at it mathematically. But sometimes the highest interest rate debt may also be the largest amount you have to deal with, which might create frustration if the balance is going down too slowly. The debt snowball method can seem counterintuitive because it doesn’t always follow the math, since in most cases, the math favors paying down the debt with the highest interest rate first. The snowball method instead focuses on building momentum – the idea that small successes can lead to larger successes. Paying off the smallest balance first can build momentum to plow through the next largest balance, then the next one and so forth – like a snowball gaining size and speed as it rolls down a hill.

To restate, once you’ve paid off the smallest balance, more cash is available to put toward the next smallest amount. After the second smallest amount is paid off, the cash you freed up by paying off the first two debts can now be applied to the third largest balance.

The snowball method of debt repayment is intended to help simplify the process of becoming debt free. Because you’re starting with smaller balances and working your way up, your mortgage (if you have one) would be one of the last balances to tackle. Some financial experts might recommend leaving the mortgage out of your snowball payments altogether, but that’s up to you and how ambitious you are!

Ready to start?
First, remind yourself it may take some time to get your debt to zero, but hang in there. If you stick to your strategy, you can make great strides toward financial freedom!

Second, make a list of your debts and sort them by size from lowest to highest.

Then, pay the minimum on all the balances except the smallest one, and put as much as you can towards that one. Let’s say the payment you’re making on the smallest balance is $20. Once that balance is paid off, add that $20 to whatever you were paying toward the next smallest balance. Let’s say that balance has a minimum payment of $30. That means you can now put $50 a month toward it to knock it out faster. When the second balance is paid off, you’ll have an extra $50 a month you can put towards the third highest balance.

See the snowball? Keep going! Over time, you should have enough momentum and freed up cash available to really make a dent in your debt.


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What to Do First If You Receive an Inheritance

What to Do First If You Receive an Inheritance

In many households, nearly every penny is already accounted for even before it’s earned.

The typical household budget that covers the cost of raising a family, making loan payments, and saving for retirement usually doesn’t leave much room for spending on daydream items. However, if you’re fortunate, you might be the recipient of some unexpected cash – your family might come into an inheritance, you could receive a bonus at work, or you might benefit from some other sort of windfall.

If you ever inherit a chunk of money or receive a large payout, it may be tempting to splurge on that red convertible you’ve been drooling over or book that dream trip to Hawaii. Unfortunately for many though, newly-found money has the potential to disappear with nothing to show for it, if there is no strategy in place ahead of time to handle it wisely.

If you do receive some sort of unexpected bonus – before you call your travel agent – take a deep breath and consider these situations first.

Taxes or Other Expenses
If a large sum of money comes your way unexpectedly, your knee-jerk reaction might be to pull out your bucket list and see what you’d like to check off first. But before you start making plans, the reality is you’ll need to put aside some money for taxes. You may want to check with an expert – an accountant or tax advisor may have some ideas on how to reduce your liability.

If you suddenly become the owner of a new house or car as part of an inheritance, one thing to consider is how much it might cost to hang on to it. If you want to keep that house or car (or any other asset that’s worth a lot of money), make sure you can cover maintenance, insurance, and any loan payments if that item isn’t paid off yet.

Pay Down Debt
If you have any debt, you’d have a hard time finding a better place to put your money once you’ve set aside some for taxes or other expenses that might be involved with an inheritance. It may be helpful to target debt in this order:

  1. Credit card debt: This is often the highest interest rate debt and usually doesn’t have any tax benefit. Pay your credit cards off first.
  2. Personal loans: Pay these next. You and your friend/family member will be glad you knocked these out!
  3. Auto loans: Interest rates on auto loans are lower than credit cards, but cars depreciate rapidly (very rapidly). Rule of thumb: If you can avoid it, you don’t want to pay interest on a rapidly depreciating asset. Pay off the car as quickly as possible.
  4. College loans: College loans often have tax-deductible interest, but there is no physical asset with intrinsic value attached to them. Pay these off as fast as possible.

Fund Your Emergency Account
Before you buy that red convertible, make sure you’ve set aside some money for a rainy day. Saving at least 3-6 months of expenses is a good goal. This could be liquid funds – like a separate savings account.

Save for Retirement
Once the taxes are covered, you’ve paid down your debt, and funded your emergency account, now is the time to put some money away towards retirement. Work with your financial professional to help create the best strategy for you and your family.

Fund That College Fund
If you have kids and haven’t had a chance to put away all you’d like towards their education, setting aside some money for this comes next. Again, your financial professional can recommend the best strategy for this scenario.

Treat Yourself!
NOW you’re ready to go bury your toes in the sand and enjoy some new experiences! Maybe you and the family have always wanted to visit a themed resort park or vacation on a tropical island. If you’ve taken care of business responsibly with the items above and still have some cash left over – go ahead! Treat yourself!


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The effects of closing a credit card

November 5, 2018

The effects of closing a credit card

Canadians owe over $599 billion in credit card debt[i], and credit card interest rates are on the rise – now over 19 percent.[ii]

So if you’re on a mission to reduce or eliminate your credit card debt (go you!), you may be thinking you should close out your credit cards. However, you need to know that doing that may have several effects, some of which may not be what you’d expect.

There are times when canceling a card may be the best answer:

  1. A card charges an annual fee
    If you’re being charged an annual fee for the privilege of having a certain credit card, it may be better to cancel the card, particularly if you don’t use it often or have other options available.

  2. You can’t control your spending
    If “retail therapy” is impacting your financial future by creating an ever-growing mountain of debt, it may be best to eliminate the temptation of buying on credit.

Then there are times when closing a credit card may not make much difference, or could even hurt your score:

  1. Lingering effects: The good and the bad
    Many of us have heard that credit card information stays on your report for 7 years. That’s true for negative information, including events as large as a foreclosure. Positive events, however, stay on your report for 10 years. In either case, canceling your credit card now will reduce the credit you have available, but the history – good or bad – will remain on your credit report for up to a decade.

  2. The benefits of old credit
    Did you know that one aspect factored in to your credit score is the age of your accounts? Canceling a much older account in favor of a newer account can actually leave a dent in your score, and we know that canceling the card won’t erase any negative history less than 7 years old. So it may be best to keep the older credit account open as long as there are no costs to the card. Another point to consider is that the effects of canceling an older account may be magnified when you’re younger and haven’t yet established a long enough credit history.

Credit utilization affects your credit score
Lenders and credit bureaus not only look at your repayment history, they also look at your credit utilization, which refers to how much of your available credit you’re using. Lower usage can help your credit score while high utilization can work against you.

For example, if you have $20,000 in credit available and $10,000 in credit card balances, your credit utilization is 50 percent. If you close a credit card that has a credit limit of $5,000, your available credit drops to $15,000 but your credit utilization jumps to 67 percent if the credit card balances remain unchanged. Going on a credit card canceling rampage may actually have negative effects because your credit utilization can skyrocket.

If unnecessary spending is out of control or if there is a cost to having a particular credit card, it may be best to cancel the card. In other cases, however, it’s often better to use credit cards occasionally, and make sure to pay them off as quickly as possible.


[i] https://business.financialpost.com/personal-finance/debt/equifax-says-canadian-delinquencies-will-probably-rise-this-year
[ii] https://www.creditcardscanada.ca/education-centre/credit-card-basics/credit-card-interest-rates-high/

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Avoid these unhealthy financial habits

October 29, 2018

Avoid these unhealthy financial habits

As well-intentioned as we might be, we sometimes get in our own way when it comes to improving our financial health. Much like physical health, financial health can be affected by binging, carelessness, or simply not knowing what can cause harm. But there’s a light at the end of the tunnel – as with physical health, it’s possible to reverse the downward trend if you can break your harmful habits.

Not budgeting
A household without a budget is like a ship without a rudder, drifting aimlessly and – sooner or later – it might sink or run aground in shallow waters. Small expenses and indulgences can add up to big money over the course of a month or a year. In nearly every household, it might be possible to find some extra money just by cutting back on non-essential spending. A budget is your way of telling yourself that you may be able to have nice things if you’re disciplined about your finances.

Frequent use of credit cards
Credit cards always seem to get picked on when discussing personal finances, and often, they deserve the flack they get. The good news is that with a little discipline, you can start to pay down your credit card debt and help reduce your interest expense.

Mum’s the word
No matter how much income you have, money can be a stressful topic in families. This can lead to one of two potentially harmful habits.

First, talking about the family finances is often simply avoided. Conversations about kids and work and what movie you want to watch happen, but conversations about money can get swept under the rug. Are you a “saver” and your partner a “spender”? Is it the opposite? Maybe you’re both spenders or both savers. Talking (and listening) about yourself and your significant other’s tendencies can be insightful and help avoid conflicts about your finances. If you’re like most households, having an occasional chat about the budget may help keep your family on track with your goals – or help you identify new goals – or maybe set some goals if you don’t have any.

Second, financial matters can be confusing – which may cause stress – especially once you get past the basics. This may tempt you to ignore the subject or to think “I’ll get around to it one day”. But getting a budget and a financial strategy in place sooner rather than later may actually help you reduce stress. Think of it as “That’s one thing off my mind now!”

Taking the time to understand your money situation and getting a budget in place is the first step to put your financial house in order. As you learn more and apply changes – even small ones – you might see your efforts start to make a difference!


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How to save for a big purchase

October 22, 2018

How to save for a big purchase

It’s no secret that life is full of surprises. Surprises that can cost money. Sometimes, a lot of money.

They have the potential to throw a monkey wrench into your savings strategy, especially if you have to resort to using credit to get through an emergency. In many households, a budget covers everyday spending, including clothes, eating out, groceries, utilities, electronics, online games, and a myriad of odds and ends we need.

Sometimes, though, there may be something on the horizon that you want to purchase (like that all-inclusive trip to Cancun for your second honeymoon), or something you may need to purchase (like that 10-years-overdue bathroom remodel).

How do you get there if you have a budget for the everyday things you need, you’re setting aside money in your emergency fund, and you’re saving for retirement?

Make a goal
The way to get there is to make a plan. Let’s say you’ve got a teenager who’s going to be driving soon. Maybe you’d like to purchase a new (to him) car for his 16th birthday. You’ve done the math and decided you can put $3,000 towards the best vehicle you can find for the price (at least it will get him to his job and around town, right?). You have 1 year to save but the planning starts now.

There are 52 weeks in a year, which makes the math simple. As an estimate, you’ll need to put aside about $60 per week. (The actual number is $57.69 – $3,000 divided by 52). If you get paid weekly, put this amount aside before you buy that $6 latte or spend the $10 for extra lives in that new phone game. The last thing you want to do is create debt with small things piling up, while you’re trying to save for something bigger.

Make your savings goal realistic
You might surprise yourself by how much you can save when you have a goal in mind. Saving isn’t a magic trick, however, it’s based on discipline and math. There may be goals that seem out of reach – at least in the short-term – so you may have to adjust your goal. Let’s say you decide you want to spend a little more on the car, maybe $4,000, since your son has been working hard and making good grades. You’ve crunched the numbers but all you can really spare is the original $60 per week. You’d need to find only another $17 per week to make the more expensive car happen. If you don’t want to add to your debt, you might need to put that purchase off unless you can find a way to raise more money, like having a garage sale or picking up some overtime hours.

Hide the money from yourself
It might sound silly but it works. Money “saved” in your regular savings or checking account may be in harm’s way. Unless you’re extremely careful, it’s almost guaranteed to disappear – but not like what happens in a magic show, where the magician can always bring the volunteer back. Instead, find a safe place for your savings – a place where it can’t be spent “accidentally”, whether it’s just a cookie jar for small purchases or a special savings account you open specifically to fund your bigger goal.

Pay yourself first
When you get paid, fund your savings account set up for your goal purchase first. After you’ve put this money aside, go ahead and pay some bills and buy yourself that latte if you really want to, although you may have to get by with a small rather than an extra large.

Saving up instead of piling on more credit card debt may be a much less costly way (by avoiding credit card interest) to enjoy the things you want, even if it means you’ll have to wait a bit.


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4 easy tips to build your emergency fund

October 8, 2018

4 easy tips to build your emergency fund

Nearly one quarter of Canadians have no emergency savings, according to a recent report.[i]

Without an emergency fund, you can imagine that an unexpected expense could send your budget into a tailspin.

With household debt at an all-time high and no meaningful savings for many Canadians, it’s important to learn how to start and grow your emergency savings.2 You CAN do this!

4 tips to building your emergency fund

  1. Where to keep your emergency fund
    Keeping money in the cookie jar might not be the best plan. Mattresses don’t really work so well either. But you also don’t want your emergency fund “co-mingled” with the money in your normal checking or savings account. The goal is to keep your emergency fund separate, clearly defined, and easily accessible. Setting up a designated, high-yield savings account is a good start that can provide quick access to your money while keeping it separate from your main bank accounts.3

  2. Set a monthly goal for savings
    Set a monthly goal for your emergency fund savings, but also make sure you keep your savings goal realistic. If you choose an overly ambitious goal, you may be less likely to reach that goal consistently, which might make the process of building your emergency fund a frustrating experience. (Your emergency fund is supposed to help reduce stress, not increase it!) It’s okay to start by putting aside a small amount until you have a better understanding of how much you can really “afford” to save each month. Also, once you have your designated savings account set up, you can automatically transfer funds to your savings account every time you get paid. One less thing to worry about!

  3. Spare change can add up quickly
    The convenience of debit and credit cards means that we use less cash these days – but if and when you do pay with cash, take the change and put it aside. When you have enough change to be meaningful, maybe $20 to $30, deposit that into your emergency fund. If most of your transactions are digital, try a mobile app that lets you set rules to automate your savings.4

  4. Get to know your budget
    Making and keeping a budget may not always be the most enjoyable pastime. But once you get it set up and stick to it for a few months, you’ll get some insight into where your money is going, and how better to keep a handle on it! Hopefully that will motivate you to keep going, and keep working towards your larger goals. (It might even be kind of fun!) When you first get started, dig out your bank statements and write down recurring expenses, or types of expenses that occur frequently. Odds are pretty good that you’ll find some expenses that aren’t strictly necessary.

Look for ways to moderate your spending on frills without taking all the fun out of life. By balancing your expenses and eliminating the truly wasteful indulgences, you’ll probably find money to spare each month and you’ll be well on your way to building your emergency fund.


[i] https://business.financialpost.com/personal-finance/savings/only-a-quarter-of-canadians-have-a-rainy-day-fund-but-more-than-half-worry-about-rising-rates
[ii] https://business.financialpost.com/personal-finance/debt/canadian-household-debt-hits-1-8t-as-report-warns-of-domestic-risk
[iii] https://www.canada.ca/en/financial-consumer-agency/services/savings-investments/setting-up-emergency-funds.html
[iv] https://www.theglobeandmail.com/globe-investor/mylo-turns-spare-change-into-investments/article36661517/

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Sizing them up – how do four generations compare financially?

September 24, 2018

Sizing them up – how do four generations compare financially?

It’s probably safe to say that how we see the world financially is partly due to our age, but also a product of how we see the world itself, including our prospects for the future.

Perspectives drive financial decisions just as much as the math – and may perhaps have an even greater effect than we realize.

Here’s a quick breakdown on how recent generations are grouped by birth year:

Boomers: 1946 to 1964
Generation X: 1965 to 1976
Millennials: 1977 to 1995
Generation Z: 1996 or later

With Boomers leading other generations by up to 50 years – or even longer – it’s not surprising that there are some stark differences in financial statistics – including net worth, savings rates, home ownership, and household debt.

When it comes to savings, nobody does it better than Boomers. A 2017 survey found that Boomers had more stashed away in savings than younger generations, with people age 65 and over having the highest amounts saved.[i] Nearly 40% of seniors surveyed had over $10,000 saved. Older GenXers followed, with nearly 25% having over $10,000 saved. By contrast, only 13% of young Millennials had over $10,000 in savings, with 67% having less than $1,000 saved, and nearly half having nothing saved at all. (It should be noted that older generations have had more time to save, which may give some insight into the weaker stats for younger generations.)

It’s early in the game, but GenZ, the youngest generation, may end up showing everyone else how it’s done when it comes to savings. Over 20% of this tech-savvy and financially prudent generation has had a savings account since age 10.[ii]

Renting versus home ownership is another area of wide divergence. Millennials outpace older generations when it comes to the nation’s population of renters. Of the nearly 46 million households that rent, 40% are headed by Millennials.[iii] However, 93% of Millennials state that they’d like to own a home – someday. Evidence suggests that some Millennials who have been biding their time are starting to see opportunity in real estate. In recent years, Millennials have been the largest group of home buyers, representing 40% of the buyers. This has been fueled in part by investment real estate purchases.[iv]

Younger generations have the benefit of seeing the household effects of debt in a financial downturn. They have witnessed that debt doesn’t go away when unemployment goes up or family members lose jobs. Although credit utilization is up, credit card debt for Millennials is only about half of the amount carried by Boomers and GenXers, and GenZ is even lower at just over a quarter of the credit card debt carried by Boomers and GenXers, both of which have similar credit card debt burdens.

Conventional wisdom tells us we learn from our elders. But perhaps the truth is that we can learn from every generation, each with its own perspectives driving their financial decisions.


[i] https://www.gobankingrates.com/saving-money/savings-advice/half-americans-less-savings-2017/
[ii] http://3pur2814p18t46fuop22hvvu.wpengine.netdna-cdn.com/wp-content/uploads/2017/04/The-State-of-Gen-Z-2017-White-Paper-c-2017-The-Center-for-Generational-Kinetics.pdf
[iii] http://www.pewresearch.org/fact-tank/2017/09/06/5-facts-about-millennial-households/
[iv] https://www.forbes.com/sites/christinecarter/2017/07/26/how-real-estate-investing-is-spurring-millennial-home-ownership/#5931ba68d445

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5 Things You Can Do With A Bonus

September 17, 2018

5 Things You Can Do With A Bonus

It’s your lucky day and you’re flush with cash. Maybe you just got a bonus at work, or a tax refund, or won that scratch-off lottery ticket.

Hold up. Don’t spend it all just yet. There are some great ways you can put that windfall to work for you before it disappears during a spontaneous shopping spree.

1. Pay off those credit cards. This may not seem like quite as much fun as the island vacation you were daydreaming about – but paying down debt is like finding money every single month. Every $100 you pay in interest equals about $130 you’d have to earn when you consider taxes. Paying down debt is the fastest way to give yourself a monthly raise if you come into some unexpected cash.

2. Save it. Experts recommend that you have enough savings to cover at least 3 to 6 months of expenses. In reality, nearly half of all households won’t make it more than a week without borrowing or selling something.1 This is the perfect opportunity to break away from the statistics and get prepared. Consider a high-yield checking account that allows easy access to your savings.

3. Put it in the college fund. If you have kids, this is a great time to contribute to the college fund or to start one if you haven’t already. Depending on whether your kids attend an in-state or out-of-state school, tuition can easily range from $10,000 per year to over $30,000 per year for a 4-year school. Books and boarding are extra on top of that. It’s never too early to give your kids a head start!

4. Invest in yourself. This might be the perfect chance to finish off those last few credits for a degree or to earn that certification you’ve been wanting but couldn’t justify spending money to complete. If you choose carefully, the right degree or certification can open doors in your career, potentially enhancing your earning power and helping you break out of the holding pattern.

5. Take a vacation. Maybe it’s a trip to that island or maybe it’s someplace else you’ve always wanted to go. If all the above are in good shape, go ahead and treat yourself. You deserve it!

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https://www.forbes.com/sites/markavallone/2018/08/12/5-things-to-do-with-your-raise-or-bonus/#29b8643b1d95

Why You Should Pay Off High-Interest Debt First

August 13, 2018

Why You Should Pay Off High-Interest Debt First

The average U.S. household owes over $5,500 in credit card debt,¹ and the average Canadian household owes over $8,500 in consumer debt.²

Often, we may not even realize how much that borrowed money is costing us. High interest debt (like credit cards) can slowly suck the life out of your budget.

The average APR for credit cards is over 16% in the U.S.³ and around 19% in Canada.⁴ Think about that for a second. If someone offered you a guaranteed investment that paid 16-19%, you’d probably walk over hot coals to sign the paperwork.

So here’s a mind-bender: Paying down that high interest debt isn’t the same as making a 16-19% return on an investment – it’s better.

Here’s why: A return on a standard investment is taxable, trimming as much as a third so the government can do whatever it is that governments do with the money. Paying down debt that has a 16% interest rate is like making a 20% return – or even higher – because the interest saved is after-tax money.

Like any investment, paying off high interest debt will take time to produce a meaningful return. Your “earnings” will seem low at first. They’ll seem low because they are low. Hang in there. Over time, as the balances go down and more cash is available every month, the benefit will become more apparent.

High Interest vs. Low Balance
We all want to pay off debt, even if we aren’t always vigilant about it. Debt irks us. We know someone is in our pockets. It’s tempting to pay off the small balances first because it’ll be faster to knock them out.

Granted, paying off small balances feels good – especially when it comes to making the last payment. However, the math favors going after the big fish first, the hungry plastic shark that is eating through your wallet, bank account, retirement savings, vacation plans, and everything else.⁵ In time, paying off high interest debt first will free up the money to pay off the small balances, too.

Summing It Up
High interest debt, usually credit cards, can cost you hundreds of dollars per year in interest – and that’s assuming you don’t buy anything else while you pay it off. Paying off your high interest debt first has the potential to save all of that money you’d end up paying in interest. And imagine how much better it might feel to pay off other debts or bolster your financial strategy with the money you save!


Sources: ¹ Frankel, Matthew. “Here’s the average American’s credit card debt — and how to get yours under control.” USA TODAY, 1.25.2017, https://usat.ly/2LkHX4n. ² Kalvapalle, Rahul. “The average Canadian owes $8,500 in consumer debt, excluding their mortgage: Ipsos poll.” Global News, 12.27.2017, https://bit.ly/2CfckW0. ³ Dilworth, Kelly. “Rate survey: Average card APR remains at record high of 16.73 percent.” creditcards.com, 11.21.2017, https://bit.ly/2Hpxf9T. ⁴ Murphy, Paul. “How Does Credit Card Interest Work in Canada?” 4 Pillars, https://bit.ly/2fL2y13. ⁵ Berger, Bob. “Debt Snowball Versus Debt Avalanche: What The Academic Research Shows.” Forbes, 7.20.2017, https://bit.ly/2x9Q1lN.

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Headed in the Right Direction: Managing Debt for Millennials

Headed in the Right Direction: Managing Debt for Millennials

Three simple words can strike fear into the heart of any millennial:

Student.

Loan.

Debt.

The anxiety is not surprising: In 2015, US college graduates had an average of $30,100 in student loan debt.

Nearly $30 grand? For that you could travel the world. Put a down payment on a house. Buy a car. Even start a new business! But instead of having the freedom to pursue their dreams, there’s a hefty financial ball and chain around millennials’ feet.

That many young people owing that much money before they even enter the workforce? It’s unbelievable!

Now just imagine adding car payments, house payments, insurance premiums, and more on top of that student debt. No wonder millennials are feeling so terrible: studies showed that Canadian students who had to take out large loans were in a state of poorer mental health report that paying for essentials alone is a “somewhat-to-very-significant” source of stress.

Now is the time to get ahead of your debt. Not later. You have the potential to manage that debt and get out from under it!

So how do you do that? Sometimes improving your current situation involves more than making smarter choices with the money you earn now. Getting out of that debt ditch means finding a way to make more.

There are 2 things you can monetize right now:

  • Your education
  • Your experience

Both have their own challenges. You may not have spent much time in a particular field yet, so not a lot of experience. And what if you’re working a job that has nothing to do with your major? There goes education.

Two speed bumps. One right after the other. But you can still gain momentum in the direction you want your life to go!

How? A solid financial strategy. A goal you can see. A destination for financial independence.

Debts can become overwhelming – remember that stat up there? But with a strategy in mind for the quick and consistent repaying of your loans, so much of that stress and burden could be lifted.

Contact me today. A quick phone call is all we need to help get you rolling in the direction YOU want to go.

How Much Life Insurance Do You Really Need?

July 30, 2018

How Much Life Insurance Do You Really Need?

Whenever you’re asked about choosing a new life insurance policy or adding additional coverage, do you have any of the following reactions?

1. “No way. We took care of this years ago. Having some kind of life insurance policy is what you’re supposed to do.”

2. “Well, it is only a few more dollars each month… But what if we never end up using the benefits of that rider? What if I could spend that extra money on something more important now, like getting that new riding lawn mower I wanted?”

3. “ANOTHER RIDER FOR MY POLICY?! Sign me up!”

Even though there might be some similar responses when faced with a decision to upgrade what you already have, with the right guidance, you can finance a policy that has the potential to protect what is most important to you and your family, fit your needs, and get you closer to financial independence.

The most honest answer I can give you about how much life insurance you really need? It’s going to depend on you and your goals.

General rules of thumb on this topic are all around. For instance, one “rule” states that the death benefit payout of your life insurance policy should be equal to 7-10 times the amount of your annual income. But this amount alone may not account for other needs your family might face if you suddenly weren’t around anymore…

  • Paying off any debt you had accrued
  • Settling final expenses
  • Continuing mortgage payments (or surprise upkeep costs)
  • Financing a college education for your kids
  • Helping a spouse continue on their road to retirement

And these are just a few of the pain points that your family might face without you.

So beyond a baseline of funds necessary for your family to continue with a bit of financial security, how much life insurance you require will be up to you and what your current circumstances allow.

If you’ve had enough of a guesswork, reactionary approach to how you’ll provide for your loved ones in case of an unexpected tragedy, give me a call. We’ll work together to tailor your policy to your needs!

You'll Still Need This After Retirement

July 30, 2018

You'll Still Need This After Retirement

Ask anyone who’s had a flat tire, a leaky roof, or an unexpected medical bill – having enough money tucked away in an emergency fund can prevent a lot of headaches.

It may seem obvious to create a cushion for unexpected expenses while you’re saving up for retirement, especially if you have kids that need to get to their soccer games on time, a new-to-you home that’s really a fixer-upper, or an injury that catches you off guard. But an emergency fund is still important to keep after you retire!

Does your current retirement plan include an emergency fund for unexpected expenses like car trouble, home or appliance repair, or illness? Only 41% of Americans surveyed that they are less than $200 from being unable to meet their current monthly bills. That means over 50% of Canadians and nearly 60% of Americans may need to turn to other methods of coverage like taking loans from family or friends or accruing credit card debt.

After you retire and no longer have a steady stream of income, covering unexpected expenses in full (without interest or potentially burdening loved ones) can become more difficult. And when you’re older, it might be more challenging to deal with some of the minor problems yourself if you’re trying to save some money! You’re probably going to need to keep the phone number for a good handyman, handy.

Don’t let an unexpected expense after retirement cut into your savings. A solid financial strategy has the potential to make a huge difference for you – both now and during your retirement.

Contact me today, and together we can put together a strategy that’s tailored to you and your needs.

A "Lotto" Bad Ideas

A "Lotto" Bad Ideas

A full third of Americans believe that winning the lottery is the only way they can retire.

What? Playing a game of chance is the only way they can retire? Do you ever wonder if winning a game – where your odds are 1 in 175,000,000 – is the only way you’ll get to make Hawaiian shirts and flip-flops your everyday uniform?

Do you feel like you might be gambling with your retirement?

If you do, that’s not a good sign. But believing you may need to win the lottery to retire is somewhat understandable when the financial struggle facing a majority of North Americans is considered: 78% of American full-time workers are living paycheck-to-paycheck.

When you’re in a stressful financial situation like this, saving for your future may feel like a gamble in the present. But believing that “it’s impossible to save for retirement” is just one of many bad money ideas floating around. Following are a few other common ones. Do any of these feel true to you?

Bad Idea #1: I shouldn’t save for retirement until I’m debt free. False! Even as you’re working to get out from under debt, it’s important to continue saving for your retirement. Time is going to be one of the most important factors when it comes to your money and your retirement, which leads right into the next Bad Idea…

Bad Idea #2: It’s fine to wait until you’re older to save. The truth is, the earlier you start saving, the better. Even 10 years can make a huge difference. In this hypothetical scenario, let’s see what happens with two 55-year-old friends, Baxter and Will.

  • Baxter started saving when he was 25. Over the next 10 years, Baxter put away $3,000 a year for a total of $30,000 in an account with an 8% rate of return. He stopped contributing but let it keep growing for the next 20 years.
  • Will started saving 10 years later at age 35. Will also put away $3,000 a year into an account with an 8% rate of return, but he contributed for 20 years (for a total of $60,000).

Even though Will put away twice as much as Baxter, he wasn’t able to enjoy the same account growth:

  • Baxter would achieve account growth to $218,769.
  • Will’s account growth would only be to $148,269 at the same rate of return.

Is that a little mind-bending? Do we need to check our math? (We always do.) Here’s why Baxter ended up with more in the long run: Even though he set aside less than Will did, Baxter’s money had more time to compound than Will’s, which, as you can see, really added up over the additional time. So what did Will get out of this? Unfortunately, he discovered the high cost of waiting.

Keep in mind: All figures are for illustrative purposes only and do not reflect an actual investment in any product. Additionally, they do not reflect the performance risks, taxes, expenses, or charges associated with any actual investment, which would lower performance. This illustration is not an indication or guarantee of future performance. Contributions are made at the end of the period. Total accumulation figures are rounded to the nearest dollar.

Bad Idea #3: I don’t need life insurance. Negative! Financing a well-tailored life insurance policy is an important part of your financial strategy. Insurance benefits can cover final expenses and loss of income for your loved ones.

Bad Idea #4: I don’t need an emergency fund. Yes you do! An emergency fund is necessary now and after you retire. Unexpected costs have the potential to cut into retirement funds and derail savings strategies in a big way, and after you’ve given your last two-weeks-notice ever, the cost of new tires or patching a hole in the roof might become harder to cover without a little financial cushion.

Are you taking a gamble on your retirement with any of these bad ideas?

Which Debt Should You Pay Off First?

July 9, 2018

Which Debt Should You Pay Off First?

Nearly every type of debt can interfere with your financial goals, making you feel like a hamster on a wheel – constantly running but never actually getting anywhere.

If you’ve been trying to dig yourself out of a debt hole, it’s time to take a break and look at the bigger picture.

Did you know there are often advantages to paying off certain types of debt before other types? What the simple list above doesn’t include is the average interest rates or any tax benefits to a given type of debt, which can change your priorities. Let’s check them out!

Credit Cards
Credit card interest rates now average nearly 17% in the US¹ and around 19% in Canada.² For most households, credit card debt is the place to start – stop spending on credit and start making extra payments whenever possible. Think of it as an investment in your future!

Auto Loans
Interest rates for auto loans are usually much lower than credit card debt, often under 5% on newer loans. Interest rates aren’t the only consideration for auto loans though. New cars depreciate nearly 20% in the first year. In years 2 and 3, you can expect the value to drop another 15% each year. The moral of the story is that cars are a terrible investment but offer great utility. There’s also no tax benefit for auto loan interest. Eliminating debt as fast as possible on a rapidly depreciating asset is a sound decision.

Student Loans
Like auto loans, student loans are usually in the range of 5% to 10% interest. While interest rates are similar to car loans, student loan interest is often tax deductible, which can lower your effective rate. Auto loans can usually be paid off faster than student loan debt, allowing more cash flow to apply to student debt, investment accounts, or other needs.

Mortgage Debt
In most cases, mortgage debt is the last type of debt to pay down. Mortgage rates are usually lower than the interest rates for credit card debt, auto loans, or student loans, and mortgage interest may be tax deductible if structured properly. If mortgage debt keeps you awake at night, paying off other types of debt first will give you greater cash flow each month so you can begin paying down your mortgage.

When you’ve paid off your other debt and are ready to start tackling your mortgage, try paying bi-monthly (every two weeks). This simple strategy has the effect of adding one extra mortgage payment each year, reducing a 30-year loan term by several years. Because the payments are spread out instead of making one (large) 13th payment, it’s likely you won’t even notice the extra expense.


Source: ¹ Dilworth, Kelly. “Rate survey: Average card rate climbs to all-time high of 16.92 percent.” creditcards.com, 7.5.2018, https://bit.ly/2Hpxf9T. ² Murphy, Paul. “How Does Credit Card Interest Work in Canada?” 4 Pillars, https://bit.ly/2fL2y13.

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The Advantages of Paying with Cash

The Advantages of Paying with Cash

We’re using debit cards to pay for expenses more often now, a trend that seems unlikely to reverse soon.¹

Debit cards are convenient. Just swipe and go. Even more so for their mobile phone equivalents: Apple Pay, Android Pay, and Samsung Pay. We like fast, we like easy, and we like a good sale. But are we actually spending more by not using cash like we did in the good old days?

Studies say yes. We spend more when using plastic – and that’s true of both credit card spending and debit card spending.² Money is more easily spent with cards because you don’t “feel” it immediately. An extra $2 here, another $10 there… It adds up.

The phenomenon of reduced spending when paying with cash is a psychological “pain of payment.” Opening up your wallet at the register for a $20.00 purchase but only seeing a $10 bill in there – ouch! Maybe you’ll put back a couple of those $5 DVDs you just had to have 5 minutes ago.

When using plastic, the reality of the expense doesn’t sink in until the statement arrives. And even then it may not carry the same weight. After all, you only need to make the minimum payment, right? With cash, we’re more cautious – and that’s not a bad thing.

Try an experiment for a week: pay only with cash. When you pay with cash, the expense feels real – even when it might be relatively small. Hopefully, you’ll get a sense that you’re parting with something of value in exchange for something else. You might start to ask yourself things like “Do I need this new comforter set that’s on sale – a really good sale – or, do I just want this new comforter set because it’s really cute (and it’s on sale)?” You might find yourself paying more attention to how much things cost when making purchases, and weighing that against your budget.

If you find that you have money left over at the end of the week (and you probably will because who likes to see nothing when they open their wallet), put the cash aside in an envelope and give it a label. You can call it anything you want, like “Movie Night,” for example.

As the weeks go on, you’re likely to amass a respectable amount of cash in your “rewards” fund. You might even be dreaming about what to do with that money now. You can buy something special. You can save it. The choice is yours. Well done on saving your hard-earned cash.


Sources: ¹ Steele, Jason. “Debit card statistics.” creditcards.com, 1.2.2018, https://bit.ly/2JB9cGE. ² Kiviat, Barbara. “Going Shopping? How You Pay Can Affect How Much You Spend.” Consumer Reports, 11.20.2017, https://bit.ly/2sNQiG7.

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Improve Your Love Life... With a Financial Strategy?

Improve Your Love Life... With a Financial Strategy?

Who knew that having a financial strategy in place has the potential to improve your love life?

Here’s the proof: 84% of Americans surveyed think it’s important to discuss the financial future before they say “I do.”

So what does it mean to be financially stable and ready for the Big Financial Talk?

Here’s a simple 5-point checklist to let you know if you’re on the right track:

  1. You aren’t worried about your financial situation.
  2. You know how to budget and are debt-free.
  3. You pay bills on time – better yet, you pay bills ahead of time.
  4. You have adequate insurance coverage in case of trouble.
  5. You’re saving enough for retirement.

If you didn’t answer ‘yes’ to all of these, don’t worry! Chances are this checklist won’t come up on the first date – or the second or the third. But when you have the “money talk” with someone you’ve been seeing for a while, wouldn’t it be great to know that you bring your own financial stability to the relationship? It’s clearly a bonus – Remember the stats up there?

Everyone could use a little help on their way to financial stability and independence. Contact me today, and together we can work on a strategy that could strengthen your peace of mind – and perhaps your love life!

Handling Debt Efficiently – Until It’s Gone

Handling Debt Efficiently – Until It’s Gone

It’s no secret that making purchases on credit cards will result in paying more for those items over time if you’re paying interest charges from month-to-month.

Despite this well-known fact, the average American now owes over $6,000 in credit card debt.* For households, the number is much higher, at nearly $16,000 per household. Add in an average mortgage of over $200,000, plus nearly $25,000 of non-mortgage debt (car loans, college loans, or other loans) and the molehill really is starting to look like a mountain.

The good news? You have the potential to handle your debt efficiently and deal with a molehill-sized molehill instead of a mountain-sized one.

Focus on the easiest target first.
Some types of debt don’t have an easy solution. While it’s possible to sell your home and find more affordable housing, actually following through with this might not be a great option. Selling your home is a huge decision and one that comes with expenses associated with the sale – it’s possible to lose money. Unless you find yourself with a job loss or similar long-term setback, often the best solution to paying down debt is to go after higher interest debt first. Then examine ways to cut your housing costs last.

Freeze your spending (literally, if it helps).
Due to its higher interest rate, credit card debt is usually the first thing to tackle when you decide to start eliminating debt. Let’s be honest, most of us might not even know where that money goes, but our credit card statement is a monthly reminder that it went somewhere. If credit card balances are a problem in your household, the first step is to cut back on your purchases made with credit, or stop paying with credit altogether. Some people cut up their cards to enforce discipline. Ever heard the recommendation to freeze your cards in a block of ice as a visual reminder of your commitment to quit credit? Another thing to do is to remove your card information from online shopping sites to help ensure you don’t make mindless purchases.

Set payment goals.
Paying the minimum amount on your credit card keeps the credit card company happy for 2 reasons. First, they’re happy that you made a payment on time. Second, they’re happy if you’re only paying the minimum because you might never pay off the balance, so they can keep collecting interest indefinitely. Reducing or stopping your spending with credit was the first step. The second step is to pay more than the minimum so that those balances start going down. Examine your budget to see where there’s room to reduce spending further, which will allow you to make higher payments on your credit cards and other types of debt. In most households, an honest look at the bank statement will reveal at least a few ways you might free up some money each month.

Have a sale. To get a jump-start if money is still tight, you might want to turn some unused household items into cash. Having a community yard sale or selling your items online can turn your dust collectors into cash that you can then use toward reducing your balances.

Transfer balances prudently.
Consider balance transfers for small balances with high interest rates that you think you’ll be able to pay off quickly. Transferring that balance to a lower interest or no interest card can save on interest costs, freeing up more money to pay down the balances. The interest rates on balance transfers don’t stay low forever, however – typically for a year or less – so it’s important to make sure you can pay transferred balances off quickly. Also, check if there’s a balance transfer fee. Depending on the fee, moving those funds might not make sense.

Don’t punish yourself.
Getting serious about paying down debt may seem to require draconian measures. But there likely isn’t a need to just stay home eating tuna fish sandwiches with all the lights turned off. Often, all that’s required is an adjustment of old spending habits. If your drive home takes you past a mall where it would be too tempting to “just pick a little something up”, take a different route home. But it’s important to have a small treat occasionally as well. If you’re making progress on your debt, you deserve to reward yourself sometimes. All within your budget, of course!


Sources: El Issa, Erin. “2017 American Household Credit Card Debt Study.” NerdWallet*, 2017, https://nerd.me/2ht7SZg.

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Creating Healthy Financial Habits

Creating Healthy Financial Habits

When it comes to building wealth and managing finances well enough to live comfortably, it’s up to your participation in a long-term financial strategy, which – more often than not – depends on creating healthy financial habits NOW.

Check out these ideas on how you can do it!

Automate it
Fortunately for us, we live in the electronic age, which can make streamlining financial goals a lot easier than in decades past. Whether building savings, investing for the future, paying down debt, or any other goals, take advantage of the apps and information available online. Savings can be put on autopilot, taking a fixed amount from your bank account each month or each pay period. The same can be done for IRAs or other investment accounts. Many mobile apps offer to automatically round up purchases and invest the spare change. (Hint: Compare your options and any associated fees for each app.)

Be mindful of small purchases
It can be much easier to be aware of making a large purchase (physically large, financially large, or both). Take a physically large purchase, for instance: it’s difficult to go into a store and come out with a washing machine and not have any memory of it. And for large financial purchases like a laptop or television, some thought usually goes into it – up to and including how it’s going to get paid for. But small, everyday purchases can add up right under your nose. Ever gone into a big box store to grab a couple of items then left having spent over $100 on those items… plus some throw pillows and a couple of lamps you just had to snag? What about that pricey cup of artisan coffee? Odds are pretty good that the coffee shop has some delicious pastries, too, which may fuel that “And your total is…” fire. $100 here, $8.50 there, another $1.75 shelled out for a bottle of water – the small expenses can add up quickly and dip right into the money that could go toward your financial strategy.

Paying with plastic has a tendency to make the tiny expenses forgettable… until you get that credit card bill. One easy way to cut down on the mindless purchases is to pay in cash or with a debit card. The total owed automatically leaves your wallet or you account, perhaps making the dwindling amount you have to set aside for your financial future a little more tangible.

Do what wealthy people do
CNBC uncovered several habits and traits that are common among wealthy individuals. Surprisingly, it wasn’t all hard work. They found that wealthy people tend to read – a lot – and continue learning through reading.¹ Your schedule may not allow for as much reading time as the average billionaire – maybe just 30 minutes a day is a good short-term goal – but getting in more reading can help you improve in any area of life!

Another thing wealthy people do? Wake up early. This may help you find that extra 30 minutes for reading. You’ll get more done in general if you get up a little earlier. A 5-year study of self-made millionaires revealed that nearly 50% of this industrious group woke up at least 3 hours before their work day started.²

Making these healthy financial habits a part of your regular routine might take some time and effort, but hang in there. Often, success is about the mindset we choose to have. If you stay the course and learn from those who’ve been where you are, you can experience the difference that good habits can make as you keep moving toward financial independence!


Sources: ¹ Paine, James. “5 Billionaires Who Credit Their Success to Reading.” Inc., 12.5.2016, https://bit.ly/2LvAM94. ² Elkins, Kathleen. “A man who spent 5 years studying millionaires found one of their most important wealth-building habits starts first thing in the morning.” Business Insider, 4.7.2016, https://read.bi/2aXjejh.

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How to Avoid Financial Infidelity

How to Avoid Financial Infidelity

If you or your partner have ever spent (a lot of) money without telling the other, you’re not alone.

This has become such a widespread problem for couples that there’s even a term for it: Financial Infidelity.

Calling it infidelity might seem a bit dramatic, but it makes sense when you consider that finances are the leading cause of relationship stress. Each couple has their own definition of “a lot of money,” but as you can imagine, or may have even experienced yourself, making assumptions or hiding purchases from your partner can be damaging to both your finances AND your relationship.

Here’s a strategy to help avoid financial infidelity, and hopefully lessen some stress in your household:

Set up “Fun Funds” accounts.

A “Fun Fund” is a personal bank account for each partner which is separate from your main savings or checking account (which may be shared).

Here’s how it works: Each time you pay your bills or review your whole budget together, set aside an equal amount of any leftover money for each partner. That goes in your Fun Fund.

The agreement is that the money in this account can be spent on anything without having to consult your significant other. For instance, you may immediately take some of your Fun Funds and buy that low-budget, made-for-tv movie that you love but your partner hates. And they can’t be upset that you spent the money! It was yours to spend! (They might be a little upset when you suggest watching that movie they hate on a quiet night at home, but you’re on your own for that one!)

Your partner on the other hand may wait and save up the money in their Fun Fund to buy $1,000 worth of those “Add water and watch them grow to 400x their size!” dinosaurs. You may see it as a total waste, but it was their money to spend! Plus, this isn’t $1,000 taken away from paying your bills, buying food, or putting your kids through school. (And it’ll give them something to do while you’re watching your movie.)

It might be a little easier to set up Fun Funds for the both of you when you have a strategy for financial independence. Contact me today, and we can work together to get you and your loved one closer to those beloved B movies and magic growing dinosaurs.