Ricardo McRae

Ricardo McRae

(647) 885-4121

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Mississauga, ON L4W 2R9

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New Year, New (Financial) You!

January 23, 2019

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New Year, New (Financial) You!

January 23, 2019

New Year, New (Financial) You!

The new year is best known for resolutions. The trouble is that many new year’s resolutions don’t survive past the first month or so.

Why is that? You might suspect it’s because we set unrealistic goals or lack the proper motivation.

If you’ve got some financial resolutions you want to stick to, the key is to set realistic goals and have the proper discipline to hang in there, especially when the going gets tough.

Consider the following tips. Everyone can improve their finances and – as a bonus – you won’t end up with a basement full of barely-used exercise equipment that’s standing in for clothes drying racks.

Put away your credit cards
Do you have a fireproof box at home? (You probably should to store your extra-important documents, like the title to your car or your will.) This might be the perfect place for your credit cards. Many families struggle with credit card debt and in many cases, they aren’t even sure where the money actually went.

Credit can be a crutch that only ends up helping us postpone healthy financial habits. The frequent result is years of accumulating interest payments and growing balances that may prevent you from maximizing your savings. (Debt also may lead to household friction.) Lock the credit cards in the strongbox and make a pact with the rest of your household to use a credit card just for when you have a real emergency – and this would only occur if you’ve depleted your normal emergency fund.

Get your own life insurance policy
It’s great to see families insured by at least an employer-sponsored policy, but how insured are they really? Employer plans usually don’t follow you to the next job, and the benefit for your family is typically limited to a fixed amount, such as $50,000, or in some cases up to one to two times your salary.[i] That’s probably not enough coverage for your family – and it might disappear at any time if you were to change jobs. Get a quote for your own life insurance policy that better meets your needs and that you can control.

Make a budget
Many of us think we know where our money goes, but making a budget will illuminate your spending in vivid, full-color detail. You might startle your family with loud exclamations as you realize how much you actually spend on gourmet coffee stops, eating out, clothes, golf accessories, etc. It can add up quickly. A budget may not only help you cut spending, but it may also help you build your emergency savings (yes, this should be a budget item) and start piling away more money for retirement (another necessary budget item).

Know your number
Nope, not the winning lottery number. In this case, your number is the one that can help you reach a financial goal. Saving for retirement without knowing how much you’ll need or how much you can put away each month is like running a race blindfolded. You need to see the course and the finish line ahead. That’s your number. Whether saving, paying down debt, or accomplishing any other financial goal, you need to identify the number that will define your short-term targets and help you reach your ultimate destination.

If you need help with your goals or aren’t sure how to find the number you need to know to prepare for your future, reach out. I have some ideas we can discuss.


[i] https://www.policygenius.com/life-insurance/group-life-insurance/

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You don’t have to be a rocket scientist

January 14, 2019

You don’t have to be a rocket scientist

The best way to make sure your insurance is working well for you is to conduct an insurance review.

It might sound complicated, but you can do it!

Around the beginning of the year, many of us might be prompted to consider our financial health. Maybe we’re setting new financial goals. We could be re-adjusting our budgets or strategizing about how we’re going to pay for our summer vacation. But whatever’s on your mind as far as finances go, don’t leave out insurance, an integral part of your financial health.

What is an insurance review?
An insurance review takes a deep dive into your insurance protection to make sure you’ve got the coverage you need at the best rate. You’re going to want to take a look at all your insurance policies and the premiums you’re paying. Examine your life, health, auto, and home insurance policies. Don’t forget to include any insurance provided by your employer.

If you come across something that you’re not sure about or don’t understand, just jot it down. At the end of your review you can contact your insurance representative with your questions.

Why do you need an insurance review?
Every insurance consumer needs an insurance review. When your life changes, your insurance should change with it.

Here’s a simple example. Let’s say you treated yourself to a new entertainment system. You used your year-end bonus and finally bought that huge 4K OLED TV and wireless sound system you’ve been dreaming of all year. You’ll want to find out if the new system is going to be covered on your home insurance policy. Also, you’ll need to add the new system to your personal property inventory.

If you forget to make these updates, you could come up short come claim time. An annual insurance review catches situations such as this and helps make sure you’re fully covered.

An insurance review may save you money
Another benefit of an insurance review is it may save you money. Life changes may affect our insurance coverage and rates. Sometimes though, we don’t change but our insurance company does. Insurance companies change rates and offerings regularly. It’s essential to conduct an annual review to make sure you’re getting the best possible rate from your insurance company.

Your insurance agent or carrier can review your policies and underwriting factors to make sure you’re still getting the best policy rate.

When you need an insurance review
Keep in mind that anytime your life changes in certain ways you may need an insurance review – moving, purchasing a new car, getting married, starting a family, buying a home, etc.

As a rule of thumb, an annual insurance review is part of good financial health. Take a close look at your policies to make sure you’re getting comprehensive coverage at the best price. Insurance coverage and costs change as your life changes, so make a regular insurance review part of your financial strategy.


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Budgeting 101: Where should I start?

January 2, 2019

Budgeting 101: Where should I start?

It’s the new year so there are bound to be some new resolutions you want to stick to.

If one of them is improving your budgeting skills – or maybe just creating a budget in the first place – read on for some guidelines that may help reduce some of your expenses (including what you might call the essentials).

Start with debt and interest rates If you have any loans in your name, rest assured there will be interest associated with those loans, unless you’ve got a really nice aunt who loaned you some money interest-free. From the borrower’s perspective, interest is simply the expense of receiving money from a creditor which you’re required to pay back over time. No one wants to pay higher interest than necessary.

In contrast to other expenses, like rent, food, or entertainment, interest itself produces absolutely no value for the borrower. The borrowed money may produce value, but the interest itself does not. For that reason, you’re going to want to pay as little interest on your loans as possible.

One strategy is to transfer credit card balances to lower APR credit cards – just beware of transfer fees. Read the fine print to make sure the new card actually carries a lower interest rate, as sometimes the rate after the introductory period may go up. If you can refinance any of your loans, like student, auto, or home, consider it. For example, there’s no reason to pay 5% if you can pay 4%. (Again, make sure you understand the terms and any fees involved.)

Slim down the essentials
This is the time when all items in your budget are going to come under consideration. Everything is on the table. For transportation, any reduction in cost you can make is going to depend on your location. If you live in a high-density urban area and you normally drive yourself or use public transit to get to work or other destinations, ask yourself if you can walk or cycle instead. These options often provide health benefits as well.

The key? Look at the essential sections of your budget and mentally run through how you obtain those essentials, like driving to the nearest grocery store or who your landlord is. Then brainstorm alternatives for paying for these items or services – anything is fair game! (For example, would your landlord reduce your rent if you help out with yard maintenance?) Finally, do a little research and analysis to see if those alternatives are cheaper (and feasible).

Eliminate non-essentials
The next step is to look at each non-essential and determine its utility to you. If you barely think about the actual purchase, you might have simply developed the routine of purchasing that item or service (think: “monthly movie subscription service you never use anymore”). In that case, the hardest part might be combing through your credit card statement and nixing the services you never use. Another example of routine, autopilot spending might be the soda you buy with your lunch. Do you really need it? Maybe not. Switching to tea or coffee that you can brew at home may be cheaper. And water is (usually) free.

Repeat this process with every non-essential. Are you really using your 10GB/mo mobile internet plan? If not, look for a lower, more cost-effective GB plan. The key here is to try to distinguish between convenience and necessity.

Don’t discount the discount
There are discounts everywhere, from loyalty programs to manufacturers’ coupons to seasonal specials. If there is an essential that burns your budget, it may be worth checking to see if you’re eligible for a government program.[i] Some credit cards offer rewards programs, but be very careful to pay off the full amount each month to avoid accruing interest, otherwise your rewards could be negated.

Keep the big picture in mind
Sometimes it can be hard to justify the time and effort that might be involved to save $2 per day. It’s just two dollars, right? But look at the accumulated savings. Saving $2 per day for a year translates to over $700, or about $60 per month. If you choose to brew that tea instead of buying the soda, maybe you can afford the 10GB plan instead of the 1GB plan.


[i] https://www.canada.ca/en/services/benefits.html

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Royal Wedding or Vegas? Keeping your wedding costs under control

December 19, 2018

Royal Wedding or Vegas? Keeping your wedding costs under control

The average cost of a wedding in Canada is over $42,000.[i]

That’s an expensive day by any standard!

That amount might be enough for a down payment on a first home or for a well-equipped, late-model minivan to shuttle around your kids. (But no pressure! Let’s get through the wedding first!)

If you’re having cold feet about shelling out that much cash for one day’s festivities – or even worse, if you fear you might have to go into debt to pay for it – here are a few ideas on how you can make your wedding day a special day to remember, and still save some money for other things (like that minivan).

Invite Close Friends and Family
Many soon-to-be newlyweds dream of a massive wedding with hundreds of people in attendance to honor their big day. But at some point during any large wedding, the bride or the groom – or maybe both – look around the well-dressed guests and ask themselves, “Who are all these people, anyway?”

You can cut the cost of your wedding dramatically by simply trimming the guest list to a more manageable size. Ask yourself, “Do I really need to invite that kid who used to live next door to our family when I was 6 years old?” Small weddings are a growing trend, with many couples choosing to limit the guest list to just close friends and immediate family. That doesn’t mean you need to have your wedding in the backyard while the neighbor’s dog howls during your vows – although you certainly can. It just means fewer people to provide food and drink for and perhaps a less palatial venue to rent.

Budget According to Priorities
Your wedding is special and you want everything to be perfect. You’ve dreamed of this day your entire life, right? However, by prioritizing your wish list, there’s a better chance to get exactly what you want for certain parts of your wedding, by choosing less expensive – but still acceptable – options for the things that may not matter to you so much. If it’s all about the reception party atmosphere for you, try putting more of your budget toward entertainment and decorations and less toward fancy food. Consider trading the seven-course gourmet dinner with full service for a selection of simpler, buffet-style dishes catered by your favorite restaurant.

Incorporate More Wallet-Friendly Wedding Ideas
A combination of small adjustments in your plan can add up to big savings, allowing you to have a memorable wedding day and still have enough money left over to enjoy your newfound bliss.

  • Consider a different day of the week. If you’re planning on getting married on a Saturday in June, you might pay more for a venue than you would on another day of the week or time of the year. So if you can plan your special day for, say, a Friday in April or November, this has the potential to trim the cost of the venue.
  • Rent a vacation house – or even get married on a boat. The smaller space will prevent the guest list from growing out of control and the experience might be more memorable than at a larger, more typical location. Of course, both options necessitate holding the reception at the same location, saving money once more.
  • Watch the booze costs. There’s no need to have a full bar with every conceivable drink concoction and bow-tied bartenders that can perform tricks with the shakers. Odds are good that your guests will be just as happy with a smaller-yet-thoughtfully-chosen selection of beer and wine to choose from.
  • Be thrifty. If you really want to trim costs, you can get creative about certain traditional “must-haves,” ranging from skipping the flowers (chances are that nobody will even miss them) to purchasing a gently-used gown. (Yes, people actually do this.) Online outlets may provide beautiful gowns for a fraction of the price of a new gown.

There’s a happy medium between a “royal wedding” and drive-thru nuptials in Vegas. If you’re looking for a memorable day that won’t break the bank, consider some of the tips above to keep things classy, cool – and within your budget.


[i] https://www.statista.com/statistics/807306/cost-of-wedding-in-canada/

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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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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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How inflation can affect your savings

October 1, 2018

How inflation can affect your savings

Even before we leave childhood behind, we become aware of a decrease in buying power.

It seems like that candy bar in the check-out lane has doubled in price without doubling in size. Unlike the value of stocks, real estate, or similar assets, candy doesn’t appreciate in value. What has happened is that your money has depreciated in value. Inflation has a sneaky way of eating away our money over time, forcing us to either find a way to earn more – or to get by with less. Even for the youngest of Generation Z, now in their early teens, consumer prices have increased about 30% since they were born.[i]

In 2018, the average new car costs $33,464 – up $1,034 since the previous year, or about 3.2%.[ii] While a $1,034 increase in a single year might seem high, the inflation rate (as a percentage) is lower than for many other items. And some other items may not have gone up as much as you would expect. For example, in 1935, a dozen eggs cost about 31 cents. By 2008, the average cost was about $2.57.[iii] But if eggs had followed the average rate of inflation, the price for a dozen would be nearly $6.00 by now. Supply, demand, and more efficient production and distribution all contribute to a lower price than expected with the egg example. The Canadian government uses what is called a Consumer Price Index (CPI) to measure inflation, but many say it still does not truly reflect the modern cost of living[iv] – making the true rate of inflation more difficult to determine.

Inflation is due to several reasons, all with complex relationships to each other. At the heart of the matter is money supply. If there is more money in circulation, prices go up. Under the current monetary system, which utilizes a Central Bank to govern monetary policy, inflation rates have been as low as 0% annually in 1961 to 12.2% in 1981.[v] That means something that cost $10 in 1980 cost $11.22 just a year later. That may not seem like a big increase on $10, but if you’re like most people, your pay probably doesn’t go up 12.2% in a year for doing the same work!

How does inflation affect my savings strategy?
It’s a good idea to always keep the current rate of inflation in the back of your mind. As of July, 2018, it was about 2.99%.[vi] Interest rates paid by banks and GICs are usually lower than the inflation rate, which might mean you’ll lose money if you leave most of it in these types of accounts. Saving, of course, is essential – but try to find ways for your cash to work a bit harder to outrun inflation.


[i] https://www.bankofcanada.ca/rates/related/inflation-calculator/
[ii] http://canada.autonews.com/article/20180208/CANADA/180209785/average-price-of-new-car-rose-again-last-year-but-at-slower-pace
[iii] https://www150.statcan.gc.ca/n1/pub/11-402-x/2011000/chap/prices-prix/prices-prix02-eng.htm
[iv] https://globalnews.ca/news/3478535/why-is-canadas-inflation-rate-so-low-when-life-is-so-expensive/
[v] & [vi] https://www.inflation.eu/inflation-rates/canada/historic-inflation/cpi-inflation-canada.aspx

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Should you buy or lease your next vehicle?

September 17, 2018

Should you buy or lease your next vehicle?

Behind housing costs, transportation costs are often one of the top expenses in most households.

Auto leasing has been popular for several decades, but many people still aren’t sure about the sensibility of leasing vs. buying a car, how the math works, and which is really the better value.

Should you lease a car?
In many cases, you can lease a car for less than the monthly payment for financing the exact same car. This is because with leasing, you never build any equity in the vehicle. Essentially, you are renting the vehicle for a predetermined number of miles per year with a promise that you’ll take good care of it and won’t let your kids spill ice cream on the seats. (After all, it’s not really your car.)

At the end of the lease – most often 2 or 3 years – you’ll have the option to buy the car. At this point, in many cases you would be able to find a comparable car for a few thousand less than the residual value on the car you leased. After the lease has expired, most people choose to lease another newer car, rather than buy the car they leased.

If you don’t drive many miles, there may be some advantages to leasing over buying, particularly if you prefer to drive something newer or if you need a late-model car for business reasons. As a bonus, for short-term or standard leases, the car is usually under warranty for the duration of the lease and maintenance costs are typically only for minor service items.

Should you buy a car?
If you’re like most people, when you buy a car, you’ll probably need to finance it rather than plunk down a lump sum in cash. Rates are relatively low, but you can still expect to pay a few thousand dollars in interest costs over the course of the loan. Longer loans have higher rates and more expensive vehicles can make the interest costs add up quickly. Still, at the end of the loan, you own the car.

Older cars usually have higher maintenance costs, but it may be less expensive to keep a car with under 150,000 miles and pay for any repairs, rather than make payments on a new car. Cars are also running reliably much longer now. The average age of cars and light trucks on the roads currently is up to 12 years, which means if you had a 5-year loan, you could be driving for 7 years (or more) without having to make a car payment.[i]

So a big part of the savings in buying a car vs. leasing can occur if you keep the car for several years after it’s paid off. Cars depreciate most rapidly during the first 5 years of ownership, meaning you could take a big hit on the trade-in value during that time. Keeping the car for a bit longer puts you into a period where the car is depreciating less rapidly and you can benefit financially from not having a car payment. But if you think you might be tempted to trade the car in after 5 years (and you typically drive under 15,000 miles per year), you may want to take a closer look at leasing.

Keeping your car for 10 years
How would you like to “make” an extra $28,000 over the next 10 years? That’s enough to buy another car! All things being equal (you make the same modest down payment on a leased car as a financed car), and assuming an average auto loan rate for a $30,000 vehicle, you can save nearly $28,000 in a decade by buying and keeping your car for 10 years instead of leasing a car every 3 years. And that savings applies to each car you own.[ii] (This calculation also assumes maintenance costs.)

Your savings will vary based on the type of car and its price of course, but buying a car and keeping it for a while after it’s paid off can “yield” handsome dividends.

Getting behind the wheel
It’s really up to your personal preference whether you buy or lease. If you like to rotate your vehicles so you can enjoy a new car every few years and not have to worry so much about maintenance, then leasing may be a better option. However, if you like the idea of not having to make a car payment for a good portion of the life of your car, then buying may be the right choice.

Either way, before you take the keys and drive off the lot, make sure to ask your dealer any questions you have, so you can fully understand all the terms and any underlying costs for your situation.

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[i] https://www.energy.gov/eere/vehicles/articles/fact-997-october-2-2017-average-age-cars-and-light-trucks-was-almost-12-years
[ii] https://www.moneyunder30.com/buy-vs-lease-calculator

Is This the One Thing Separating You from Bill Gates?

Is This the One Thing Separating You from Bill Gates?

Well, a few billion things probably separate you and me from Bill Gates, but he has a habit that may have contributed to his success in a big way: Bill Gates is a voracious reader.

He reads about 50 books per year. His reason why: “[R]eading is still the main way that I both learn new things and test my understanding.”

On his blog gatesnotes, Gates recommended Hillbilly Elegy by J.D. Vance, the personal story of a man who worked his way out of poverty in Appalachian Ohio and Kentucky into Yale Law School – and casts a light on the cultural divide in our nation. Gates wrote,

Melinda and I have been working for several years to learn more about how Americans move up from the lowest rungs of the economic ladder (what experts call mobility from poverty). Even though Hillbilly Elegy doesn’t use a lot of data, I came away with new insights into the multifaceted cultural and family dynamics that contribute to poverty.

We all have stories about our unique financial situations and dreams of where we want to go. And none of us want money – or lack thereof – to hold us back.

What things, ideas, or deeply-ingrained habits might be keeping you in the financial situation you’re in? And what can you do to get past them? I have plenty of ideas and strategies that have the potential to make big changes for you.

Contact me today, and together we can review your current financials and work on a strategy to get you where you want to go – including some reading material that can help you in your journey to financial independence.

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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A New Season of Life Insurance

A New Season of Life Insurance

Does it seem like only yesterday that you were welcoming your first child into your family? How quickly the years go by…

How amazing it is to see your children growing and maturing as they hit milestone after milestone! Before you know it, that kindergarten diploma will be traded in for a high school one! In every new season of life, your family’s needs change and evolve as quickly as your kids do.

A really big need to consider while the kids are still young? Financing college tuition. In Canada, citizens can expect to pay an average of $6,571 per year.

And College Board reported that the average 2016-2017 tuition plus room and board for an American in-state, 4-year public college was $20,500, whereas the same for the average private college cost $46,150. No one can guess what those costs might be in 5, 10, or 15 years.

If you choose to help finance your child’s tuition, make sure you’re not doing it at the expense of saving for your own retirement. It can be a challenge to save for a college education and your own future. Here’s a thought. If it gets difficult, imagine the look on your child’s face if she gets into her dream college and doesn’t have to turn it down because of the cost. You can also imagine the feeling of serenity that you and your spouse could experience with a well-funded retirement. With a solid financial strategy, the potential you create for both of these scenarios is worth all the sacrifice you might need to make now.

How can you protect this sacrifice? Life insurance is more important now for your family than ever. As you and your loved ones take new steps – whether that’s winding down into retirement or revving up into adult life – life insurance can help make sure everyone stays on track with their goals in the event of a sudden death or other unexpected life event.

The proper life insurance policy can help cover expenses including your child’s college tuition and replace income for your spouse to continue down their road to retirement. One quick phone call with me is all you need to get the ball rolling. Let’s review your existing policy or get you started on one that can help your family meet their needs – in all seasons of life.

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!

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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You Can’t Take It With You

July 2, 2018

You Can’t Take It With You

Sixty-four percent of surveyed professionals are in favor of job-hopping.* That’s up a whopping 22% from 4 years ago!

So if you’re feeling the itch to leave your current job and head out for a new adventure in the workforce, the experience you’ve gained along the way will absolutely go with you. You may have made some great business connections, too, and gotten some fabulous on-the-job-training. All of these things will “travel well” to a new job.

But there’s one thing you can’t take with you: An employer-supplied life insurance policy. While the price is right at “free” for many of these policies, there are several drawbacks that may deter you from relying on them solely for coverage.

1. An employer-provided policy turns in its two weeks notice when you do. Since your employer owns the policy – not you – your coverage will end when you leave that job. And unless you’re walking right into another employment opportunity where you’re offered the same type and amount of coverage, you might experience gaps or a total loss of coverage in an area where you had it before. When you’re not depending on an employer to provide your only life insurance coverage, you can change jobs as often as you please without the worry of the rug being pulled out from under you.

2. The employer policy is touted as ‘one size fits most.’ But it’s not likely that a group policy offered through an employer will be tailored to you and your unique needs. There may be no room for you to chime in and request certain features or a rider you’re interested in. However, when you build your own policy around your individual needs, you can get the right coverage that suits who you are and where you’d like to go on your financial journey.

3. An employer policy may not offer enough to cover your family. What amount of coverage is your employer offering? When you’re first starting out in your career, a $50,000 or even a $25,000 employer-provided policy might sound like a lot. But how far would that benefit really go to protect your family, cover funeral costs, or help with daily expenses if something were to happen to you?

Whether or not your 5-year plan includes 5 different jobs (or 5 entirely unrelated career paths), with a well-tailored policy that you own independent of your employment situation – you have the potential for a little more freedom and security in your financial strategy. And you won’t be starting from square one just because you’re starting a new opportunity.


Source: “Does Job Hopping Help Or Hurt Your Career?” Robert Half*, 4.5.2018, https://bit.ly/2zThWYo.

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Common Financial Potholes

June 25, 2018

Common Financial Potholes

A medical emergency. Your refrigerator giving out. Car trouble.

These scenarios are some common potholes on the road to financial independence. When you’re driving along and see a particularly nasty pothole through your windshield, it just makes sense to avoid it.

Here are some common potholes to avoid on your financial journey.

Excessive or Frivolous Spending
A job loss or a sudden, large expense can change your cash flow quickly, making you wish you still had some of the money you spent on… well, what did you spend it on, anyway? That’s exactly the trouble. We often spend on small indulgences without calculating how much those indulgences cost when they’re added up. Unless it’s an emergency, big expenses can be easier to control. It’s the small expenses that can cost the most.

Recurring Payments
Somewhere along the line, businesses started charging monthly subscriptions or membership fees for their products or service. These can be useful. You might not want to shell out $2,000 all at once for home gym equipment, but spending $40/month at your local gym fits in your budget. However, unused subscriptions and memberships create their own credit potholes. If money is tight or you’re prioritizing your spending, take a look at your subscriptions and memberships. Cancel the ones that you’re not using or enjoying.

New Cars
Most people love the smell of a new car, particularly if it’s a car they own. Ownership is strange in regard to cars, however. In most cases, the bank holds the title until the car is paid off. In the interim, the car has depreciated by 25% in the first year and by nearly 50% after 3 years.*

What often happens is that we trade the car after a few years in exchange for something that has that new car smell – and we’ve never seen the title for the first car. We never owned it outright. In this chain of transactions, each car has taxes and registration fees, interest is paid on a depreciating asset, and car dealers are making money on both sides of the trade when we bring in our old car to exchange for a new one.

Unless you have a business reason to have the latest model, it’s less expensive to stop trading cars. Think of your no-longer-new car as a great deal on a used car – and once it’s paid off, there’s more money to put each month towards your retirement.

To sum up, you may already have the best shocks on your financial vehicle (i.e., a well-tailored financial strategy), but slamming into unnecessary potholes could damage what you’ve already built. Don’t damage your potential to go further for longer – avoid those common financial potholes.


Source: Lewerer, Greg. “Car Depreciation: How Much Have You Lost?” Trusted Choice*, 4.14.2018, https://bit.ly/1LtV7aP.

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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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Money Woes Hurt More than Your Bank Account

Money Woes Hurt More than Your Bank Account

How do you handle job stress?

Sticking to a solid workflow? Meditation? A stress ball in each hand?

Whichever way you choose to lessen the stress (that 80% of American workers experience), there’s another stress-relieving tactic that could make a huge difference:

Relieving financial stress.

Studies have found that money woes can cost workers over 2 weeks in productivity a year! And this time can be lost even when you’re still showing up for work.

This phenomenon is called ‘presenteeism’: you’re physically present at a job, but you’re working while ill or mentally disengaged from tasks. Presenteeism can be caused by stress, worry, or other issues – which, as you can imagine, may deal a significant blow to work productivity.

So what’s the good news?

If you’re constantly worried and stressed about financing unexpected life events, saving for retirement, or funding a college education for yourself or a loved one, there’s a life insurance policy that can help you – wherever you are on your financial journey.

A life insurance policy that’s tailored for you can provide coverage for those unknowns that keep you stressed and unproductive. Most people don’t plan to fail. They simply fail to plan. Think of a well-thought out insurance strategy as a stress ball for your bank account!

Contact me today, and together we’ll work on an insurance strategy that fits you and your dreams – and can help you get back to work with significantly less financial stress.