Life on Credit

The art of borrowing money

Doing a Reno? What Are the Best Ways to Finance It?

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There are different ways to finance a reno, whether you want to upgrade your kitchen or dining room or have another home improvement project in mind. You can use cash or apply for a secured or unsecured loan, home equity line of credit, or another financial solution depending on your project requirements, amount of cash, scope, etc. Large products require more cash and fortunately, banks have plenty on offer. Solutions to look into include reverse mortgages, home equity loans, and more.

Use Cash

If you need a small amount of money and have an emergency fund, then you can use cash for your project. If you are short of money, then you may want to go through your assets and belongings and sell items that you no longer need.

Use Low or Zero Interest Card for a Small Reno Project

If you want to reinvent a room or remodel the kitchen, one idea is to use a low or zero interest card with a large limit. The same goes for things like repainting the interior, replacing the plumbing, routine maintenance, and other basic, less expensive updates. If this is the case, a low interest card can be a good choice to benefit from the low promotional rate. Keep in mind that the promotional period is usually over in 6 – 12 months, and a standard rate applies afterwards. The main benefit is the low cost. However, there are no tax benefits and the payback period is much shorter than conventional credit.

Apply for a Personal or Unsecured Loan for a Medium-Sized Project

Examples of medium-sized projects include roof repairs, adding energy-efficient insulation, deck or bathroom addition, etc. You may want to apply for a personal or unsecured loan to finance your home improvement project if you need between $15,000 and $50,000. Credit unions, banks, peer to peer lenders, and other providers offer unsecured financing. The main advantage for borrowers is that this is a low-risk solution compared to secured loans, which require collateral. Unsecured loans usually go with higher rates because of the added risk for financial institutions. At the same time, you benefit from quicker approval compared to secured options. The reason is that with secured financing banks require a validation of the security or collateral, which takes time.

When it comes to interest rates, customers with spotless credit and steady, high income are offered better terms and rates of about 7 – 9 percent. Those with tarnished credit may actually see their application rejected.

The main benefits include a longer repayment period, lower rates compared to credit cards, and no processing fees and closing costs. On the downside, there are no tax benefits that you normally get with a home loan.

Apply for a Secured Loan for a Large Home Renovation Project

A secured loan is a good choice if you need $50,000 or more. If you have a major home renovation project in mind, then you may want to apply for a secured loan. This is especially true for properties that are not habitable, homes in need of conversion, and derelict properties. In this case, you will need money for things like design and survey fees, purchase costs (materials), and the renovation work itself. A large home renovation project can cost a lot of money. Many banks offer large loans but require collateral to ensure repayment. Depending on the amount requested, your credit score, and other factors, the collateral can be in the form of real estate, vehicle, home, vacation home, etc. While you risk losing the asset in case of default, you benefit from more affordable payments and a lower interest rate of 3 – 4 percent.

Cash-Out Refinance

This is a type of mortgage refinancing and another way to pay for your renovation project. Borrowers refinance to obtain more money, and equity is extracted as a result of this. People usually resort to cash-out refinance to buy assets of value or pay down personal loans, cards, and other types of consumer debt. How does it work? Suppose you owe $60,000 on a property worth $320,000. If you need $40,000, then you are free to refinance for $100,000. You will get $40,000 in cash while $60,000 is the outstanding balance. To prove that you qualify, you will be asked to provide information about your debts, assets, income, and so on.

While this is one way to free up cash, there are downsides to consider such as higher than average interest rates.

Home Equity Line of Credit

This is a type of adjustable mortgage whereby the interest rate moves up and down with rate fluctuations. If the rate suddenly skyrockets, you will end up paying a lot of money. The main benefit is the fact that there are no closing costs, and you are free to draw on the line as many times as you need to. Still, there is risk involved if you opt for a HELOC.

Reverse Mortgage

A reverse mortgage is an alternative to consider if you are 62 years old or older. In this case, borrowers are free to draw cash to finance projects, make purchases, go on vacation, or anything else. There are no monthly payments to worry about, but owners are still required to pay homeowner’s insurance and property taxes.

The Small Business Tax Reform in Canada

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The proposed reform aims to introduce changes and eliminate tax loopholes that allow self-employed people to pass income to spouses and other family members. This is a hot topic in Canada as a recent Ipsos poll shows that 55 percent of respondents support the reform while 44 percent oppose the changes, especially small businesses. Making changes to the tax law to deal with vague and obscure language sounds like a good idea, but is it so in reality?

Justifications to Implement New Measures

The reform targets self-employed Canadians and the loopholes they use to reduce their tax burden. The focus is on investment portfolios and capital gains. Proponents claim that the new tax reform can help reduce income sprinkling. Income sprinkling enables self-employed persons to divert income to children and other family members by way of paying dividends, wages, and salaries. According to a report by the Department of Finance, this is a common practice, and about 50,000 small businesses in Canada use sprinkling to pay less in taxes. This is also a way to benefit from passive investments, a practice that the proposed measures aim to limit. This can be done by means of a reasonable test to find out whether children, spouses, and other family members participate and actually contribute to the family business. The pay, whether in the form of wage or salary, is reasonable only if it is comparable to the pay another person would get for the work done. When it comes to capital gains, profits generated through the sale of real estate, stocks, and securities fall in this category. In the view of liberals, diverting income in the form of capital gains gives unfair tax advantage to CCPCs. At present, businesses are free to sell shares to another company and thus avoid taxation. Passive investment is also an issue for Liberals. Income generated through an investment portfolio falls in this category. It is different from active income generated through business operations. The problem with passive investments is that businesses benefit from a significantly lower corporate tax compared to active income.


In addition to small business owners, certain professions take advantage of this to reduce their tax burden. These include physicians, lawyers, farmers, and others. The planned reform is targeted at farming families that distribute profits and work responsibilities to pay less in taxes. Physicians also oppose the new measures, and this can be explained by the fact that most of them are incorporated. A report by the Canadian Medical Association proves this. Again, this is a way to pay less. Some physicians support the tax reform but believe that the best way to implement it is through a transition plan.

Proponents note that the goal of the new measures is to establish a fair tax system for everyone. This can be done by closing gaps that offer tax advantages to those incorporated as a Canadian controlled private corporation. At present, the tax system encourages well-paid Canadians in the high-income bracket to use CCPC to reduce their tax rate and increase their net income. The new measures are also expected to increase government revenue to help vulnerable members and communities and citizens marginalized at the fringes of society. And while Prime Minster Justin Trudeau and Finance Minister Bill Morneau noted that this is not the main goal, a tax reform is one way to increase government revenue.

What Opponents Say

Opponents, on the other hand, point to the fact that the proposed changes place an undue burden on small businesses, especially those planning to expand or invest in new products, services, or operations. And many businesses would be affected as figures by Statistics Canada show. Out of 1.17 million employers operating in the country, small businesses account for 98 percent of employers or 1.14 million. More than 50 percent operate in Quebec and Ontario. Opponents also point to the fact that the new tax reform targets small businesses such as corner stores, garages, bakeries, and florist shops, and not just lawyers, doctors, and other professionals in the high-income bracket. Small businesses such as coffee shops, landscapers, family restaurants, roofing businesses, electricians, and plumbers would be affected. And while the proposed reform is not expected to destroy small businesses, the new measures might discourage many from starting a business. At the same time, small businesses are the backbone and driving force of the Canadian economy.


Opponents also warn that cutting tax benefits means less revenue for small businesses. This often goes hand in hand with fewer benefits, basic or reduced health insurance, longer working hours for employees, and layoffs. The government counters this argument by pointing out that businesses with an annual income of $150,000 CAD would be impacted the most. The same goes for self-employed individuals with extra income after making the maximum contribution to their tax-free savings account or registered retirement savings plan.

Salaried Employees vs. Small Business Owners

Proponents believe that the way things are, small businesses get unfair tax advantage over persons working regular salaried jobs. Opponents to the reform, on the other hand, argue that running a business is a costly endeavor. A lack of paid leave is also an argument in favor of more lenient taxation for small businesses. They suffer further disadvantages such as no guaranteed salary, no guaranteed vacation and pension income, etc. To sum it up, the main downsides of running a small business are fewer free benefits, less security, and lack of regular income stream. Proponents to the tax reform counter this argument by explaining that entitlement to state benefits is not a justification to offer tax advantages. Self-employment also offers advantages in the form of financial rewards, especially when it comes to independent contractors. Many large businesses choose to work with independent contractors instead of hiring employees, which is, by itself, a long-term commitment. Basically, it is less expensive to hire a contractor than an employee. To this, contractors are required to supply their own equipment, tools of trade, mobile devices, computers, laptops, software, etc. Independent contractors are also allowed to deduct business-related expenses for taxation purposes. This is yet another way to increase financial rewards.

Finally, whether the new measures are fair or not is a difficult question to answer. Tax experts draw attention to the fact that there are too many exemptions and exceptions in the current tax code. Even if the new measures come into effect, there is plenty of room for improvement.

Will Millennials Ever Be Able to Buy a House in Toronto?

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Some millennials definitely want to buy a home but the reality is that housing affordability is a source of concern for both, homebuyers and policy makers.

Why Millennials Are Reluctant to Buy a House?

Today demand exceeds supply and this is the reason why housing prices keep going up. In light of this fact, more than 50 percent of millennials believe that they will never be able to buy a home, whether a detached or semi-detached house. Many of them simply can’t afford it, especially in Toronto and other big cities. What is more, according to a recent survey, about 63 percent of owners plan on selling their homes because they find it increasingly difficult to carry a mortgage.  Some 57 percent of respondents believe that rising interest rates add to the cost of owning a home, and they find it difficult to keep up with payments. This makes renting a property a more attractive option for many residents. Figures prove this – today some 42 percent of millennials rent while 38 percent own a house. Some Canadians plan on selling their home to downgrade as well.

Тhe Angus Reid survey shed light on perceptions and beliefs about price movements. Only 40 percent of respondents were positive about home prices within a 5-year period. This explains why millennials are reluctant to buy a home. And those who plan on buying a house or a condo have important decisions to make. Home prices are high in neighborhoods that are attractive and safe to live. It is difficult to find an affordable home in a good neighborhood, however, which means that many millennials either choose to rent or find it hard to live within their budget.

Contributing Factors: College Loans and Low-Paid Jobs

There are factors that magnify the problem. Many college students borrow heavily to pay for tuition and cover school-related expenses such as rent or board, textbooks, supplies, and so on. This means that many students are forced to borrow heavily, whether in the form of a student loan, personal loan, credit card, etc. College graduates often have one or more loans or cards to repay and to make things worse, some young people land low-paid jobs. The problem is that a low-paid job makes it more difficult to qualify for a low-cost mortgage loan. Many banks are actually reluctant to offer mortgage financing to graduates who are knee-deep in debt and have a low income. To add to the problem, the wages in some industries and sectors have been stagnant over the last couple of years, and many young Canadians worry that they may end up in a dead-end, low-paid job. With interest rates on the rise, this means that they would find it increasingly difficult to make mortgage payments in a timely manner.

Is Home Ownership an Attractive Option for Millennials?

Some share the opinion that home ownership is not an attractive option for young people who are more flexible and mobile than the old generation. Home ownership security is not a priority for many millennials. Young people travel more than the old generation and often change jobs. This means that many of them relocate every couple of years and the purchase of a high-priced property is not an attractive option. On the other hand, there are housing markets in Canada that are millennial-friendly, and some young people choose to relocate and buy an affordable home. The average price for a house in Atlantic Canada is around $254,000, and the average down payment stands at around $34,000. This means that borrowers have a monthly payment of about $995. In Quebec, the average home price stands at around $235,000, and the monthly mortgage payment is $927. Home prices for condos, bungalows, and two-story homes are affordable in places like Montreal Southshore, Montreal Northshore, Laval, Gatineau, and elsewhere. Thinking small and buying a small condo or a tiny house is also a good way to find an affordable alternative for those who prefer to live in Toronto. Some people choose to rent a small house first to see whether they feel comfortable and then buy a small-size condo or house.

More and more young people in Canada have begun to share former hotels and mansions, making community homes increasingly popular. This is one alternative to high-priced homes in Toronto and the GTA. On one side, these millennials are mortgage debt-free, and it is easier for them to relocate to a region where wages are higher and unemployment rates lower. On the other side, people who choose to rent won’t build home equity, which is definitely an asset.

What Can Be Done?

It is true that local authorities and territorial governments have few tools to control the housing market. At the same time, there are some possible solutions so that more millennials and Canadians in general have the chance to buy affordable housing. To this end, it is important to build a good transport and transit infrastructure to encourage building and increase the housing supply. Target infrastructure is also an important component and requires local planning approvals. They allow builders to secure water supply, sewers, and other facilities. Improving and speeding up the approval process is one way to secure affordable housing. An important step to help millennials find low-cost homes is to change existing zoning laws. This is one way to deal with the current shortage of land and build more homes to increase supply so that property prices go down. A good way to encourage more homeowners to list their properties is to reduce the land transfer tax in Toronto. A high land transfer tax discourages people from listing and many of them prefer to make home improvements and renovations.

Budget March Break Ideas for a Romantic Beach Getaway or Winter Vacation

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There are myriads of unique and exciting travel destinations for an unforgettable March break vacation away from home. Even if you are a budget traveler, inexpensive holiday and travel spots abound. Just pick a destination and pack your suitcase!

Caribbean All-Inclusive Vacations

If you are looking for a budget-friendly destination and a beach holiday at the same time, how about a sunny vacation on a Caribbean island? There are plenty of great resorts for a March break vacation to enjoy delicious food, warm weather, and superb service. Caribbean resorts are luxurious and inexpensive and offer a variety of activities for your leisure time, including golf, scuba diving, land sports, and watersports. Adventure tours are also offered. From off-road excursions and mountain biking to canopy tours and catamaran sails, you are sure to have a memorable vacation. Entertainment venues also abound, offering unlimited spirits, theme nights, limbo dancers and fire eaters, acrobats, and a lot more. The islands in the Caribbean are also the perfect choice for a romantic getaway and candlelight dinners now that weather is nice, with daily highs of 30°C. Whether you choose to travel to Grenada, Antigua, Barbados, the Cayman Islands, Cuba, or Jamaica, you will love it. All-inclusive resorts offer concierge and butler service, free wifi and land sports, and plenty of entertainment for free – beach parties, costume and theme parties, bonfire parties, live shows, and a lot more.

Mexico

Mexico is also a good deal for your spring vacation as weather warms up in March, with average daily averages of about 25°C. You will find great deals away from the traditional tourist zones. All-inclusive resorts offer plenty of entertainment for your entire family, from theatre shows and water parks to teen’s and kids’ clubs, mini-Olympics, and handicrafts. Tourists also enjoy dance instruction, mariachi music, golden beaches, and superb food. In some resorts, kids stay for free. The best part is that you can choose from a great variety of package deals, from deep dive packages and luxury vacation packages to flight and hotel and hotel only packages, and more. There is plenty of choice when it comes to holiday destinations – Riviera Maya, Riviera Nayarit, Mazatlan, Los Cabos, Cozumel, Cancun, and many others. You will enjoy gorgeous, palm tree-lined, sunny beaches, underwater activities, nightlife, fishing activities, and a lot more.

Florida

Florida is nice and sunny at that time of the year. And there are all-inclusive resorts, too, offering world-class accommodation, superb food, spa, and family-friendly games and activities. Many resorts offer activities such as paddle boarding, kayaking, and fishing. Some resorts even feature shopping villages. Recreation activities abound, from parasailing, jet skiing, and boating and scuba diving to live entertainment and cruises.

Indonesia

Indonesia is also a great choice for Canadians, especially for budget travelers. There are plenty of ways to stretch your dollar here. If you don’t mind staying in a guest house in Jakarta, for example, you can find accommodation for as little as $8 per night. A double room on Lake Toba or the island of Sumatra costs as little as $3 per night. Food is also inexpensive. A good single plate meal costs between $0.50 and $1.70 if you don’t mind eating streel-style food. You will pay around $2,50 – $5,50 a meal at a restaurant. Entry tickets for museums and other attractions are also inexpensive. A visit to the Indonesia National Museum will cost you just $0.23. When it comes to all-inclusive resorts, there is plenty of choice, whether travelling solo or with kids. Resorts offer cultural and artistic activities, sports, beach and ocean views, windsurfing, sailing and golf schools, and a lot more. Sports such as cardio, tennis, squash, snorkeling, kayaking, and water polo are often included in the price. Some resorts offer golf at extra cost. Gourmet dining is always a plus.

The Philippines

Also a great destination for budget travelers, this is a good choice for your spring vacation, especially if you plan to fly from the West Coast. Plus weather is nice in March (the high season ends in April) as opposed to June – September when typhoons and storms hit. Accommodation is more expensive but you will find plenty of good deals for your holiday. There are all-inclusive resorts that offer spas, private beaches, beauty salons, shopping arcades, swimming lessons and fitness training, billiards tournaments, snorkeling safaris, and a lot more. When it comes to budgeting, the cost of living depends on location and season. At the same time it is 50 percent cheaper to live in Manila than in cities such as Tokyo, London, and Sydney. To give you a basic idea, a combo meal (burger, Big Mac, etc.) will cost you around $3 at a fast food joint. Domestic beer (0.5l) costs around $0.90 in the store. If you prefer Coca-Cola, you will pay around $1.30 for a 2l-bottle. Prices are affordable. Taxi trips are also inexpensive, i.e. around $11 per 5 miles.

Ski Vacation

Whistler

Whistler is a popular spot and ski resort to spend your March break vacation away from home. Ski packages are available, including snow school, equipment rentals, lift tickets, accommodation, and more. Some hotels also offer event lodging deals as well as golf vacation packages and last minute deals. Whistler also features Olympic tracks, snow peaks, diverse wildlife, and glaciers.

Slovenia

If you are up for a vacation away from Canada, why not visit Slovenia? The country takes pride in having nice skiing resorts which are quite affordable. In fact, there are many low-cost hotels and other accommodation options to go skiing or snowboarding. Check ski resorts such as Kranjska Gora, Vogel, and Mariborsko Pohorje, for example. There are pistes for beginners, intermediate, and expert skiers.  Mariborsko Pohorje is one of the largest skiing centers in the country, situated close to downtown Maribor. Visitors enjoy the mountainous landscape and first-class ski slopes and pistes. There are wellness and spa centers, restaurants and cafes, and excursions and guided tours on offer. You can join a wine tour or culinary tour, for example. Hiking and cycling tours are also available to visit the Botanical Garden and Pohorje forests. Another option is to visit the Organic Urban Center which is situated in Maribor and illustrates the importance of healthy food choices.

Mont Tremblant

If traveling to Slovenia looks like too much, how about a ski vacation at Mont Tremblant? There are plenty of good deals and packages for your March break, including Scandinavian spa packages and snow and ski packages. If coming over with children, what they get is lunch boxes, snowboard and ski lessons, and equipment such as helmets, boots, poles, skis, etc.

When it comes to accommodation, prices depend on time of the year but there are package deals to look into. In any case, you can find a decent hotel for about $70 (breakfast included). It is also a good idea to book in advance. Some resorts offer lift tickets as well (included in the package). Many hotels also have game rooms fitted with consoles, foosball, air hockey, table hockey, and a lot more.

Money and Motivation: Is Your Consumer Behaviour Driving You into Debt?

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There are a number of strategies you can make use of to find out what your “financial” personality is like, so that you can get out of debt and start learning some responsibility. Statistics show that household debt is skyrocketing, reaching new and new heights year after year. Consumer debt comprises around 30% of the total debt.

Market Principles vs. Individual Principles

We live in an age when supply is almost endless. We can buy practically anything we can imagine, and in wondrous variety at that. When you think of the traditional supply and demand graph, you would expect demand to plummet. Perhaps this can be seen as a challenge to the age-old economic principle. Not only is demand not plummeting, it is rising and rising and the state of debt testifies to this. It seems we want things so much that we no longer care that we can’t afford them. However, we should be careful when we assume that macroeconomic principles transfer to microeconomic ones. In other words, market principles do not always reflect individual ones.

Personality Balance Sheet

Experts advise debt-ridden consumers to create what they call a personality balance sheet. The idea is to make a list of your personality traits as they relate to your behaviour as a consumer and define them as advantageous or disadvantageous. What motivates most of your purchases? Granted, this is a difficult question to answer. There are many factors that motivate purchases apart from personality traits, such as age, sex, even location. Naturally people in sparsely populated areas will have a whole different set of criteria when it comes to purchasing goods or services compared to people from big cities.

How Commercials Influence Behavior

Before you can understand how your personality may be driving you into debt, you have to understand the psychology of advertising. What are producers actually going for when they advertise their products? You may have wondered how they possibly get returns on commercials, what with there being so many. Advertising’s main function is informative, true, but it also serves to educate. By advertising expensive luxury products, they work on your system of values, artificially creating demand for something costly and prestigious that you don’t need. If you are especially vulnerable to that sort of “propaganda”, as would be someone with low self-esteem who wants to be respected and admired, you’ll fall for this. You may take out a loan to get the latest BMW or Mercedes model instead of sticking with your trusted Volvo or Pontiac.

If you tend to be on the impulsive side, make sure you stay far from temptation. Take all your credit cards out of your wallet, do not go into stores if you don’t actually NEED anything, and even curb window-shopping. This is not going too far. Do you want to get out of debt or don’t you?

Main Money Personality Types

According to experts, there are several money personality types – the spender, hoarder, avoider, and amasser.

  • Spenders tend to buy on impulse and buy things they don’t need, whether jewelry, groceries, or anything else. They find it difficult to prioritize and save for a rainy day. Spenders are often knee-deep in debt.
  • Hoarders, on the other hand, usually have a budget and prioritize their purchases and long-term and short-term financial goals. For hoarders spending on travel, dining out, magazine subscriptions, and entertainment is a waste of money (and time). Hoarders usually have an emergency fund and prefer to save for college education, retirement, or just in case.
  • The avoider tends to put off things like paying bills on time or doing taxes. He has a hard time saving, planning, budgeting, and dealing with financial matters. This money personality type has a nonchalant attitude towards financial planning and things like retirement income, investment, or insurance. If you are an avoider, it is a good idea to talk to a professional to get in control of your financial life. Always shop with a list, create a budget, and stick to it.
  • The amasser is a different story – for him money means power and enhanced self-esteem. Lack of money, on the other hand, may result in depression and poor self-esteem and feelings of worthlessness and failure. The money monk is the exact opposite, feeling that money and consumption are the root of all evil. A steady paycheck or inheritance money will actually make him feel insecure.

There are three more personality types – the flyer, security seeker, and risk taker. The risk taker, for example, tends to make risky investments such as real estate investment trusts, options, currency trading, and high yield bonds. Risk takers aren’t too worried about financial matters and details. They actually get excited about potential returns, risk, and possibility. Security seekers, on the other hand, prefer low-risk investments such as bonds, savings accounts, and certificates of deposit. They like to be prepared for anything, be it a natural disaster, depression, or apocalypse and humankind vanishing from the Earth. Security seekers usually have an emergency fund for a rainy day. For them, life is about careful planning, budgeting, and saving for the future. The flyer also has a distinct way of thinking. He feels content and happy with life as it is. The flyer has a nonchalant attitude toward financial matters and as long as he is independent, free, and making his own choices, that’s all that matters.

A Final Word to the Wise

At its core, consumption is a social habit. We buy what others buy or encourage us to buy, even though we may not realize it. It follows that you should surround yourself with positive people who realize that there is more to life than shopping.

Canadian Dollar – Post-Election Strategies for Making Money Trading USD/CAD Currency Pair

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Experts warn that the Canadian dollar will remain weak over the coming months, with oil prices going down and revenues falling. Canada is one of the world’s largest oil producers, and lower oil prices certainly pressure the currency down. Another reason why the dollar is sinking further is the business unfriendly policies adopted by the liberal government. Truly, the government is committed to investing in waste water treatment, building bridges, repairing roads, and infrastructural improvements that will benefit engineering companies and the construction industry as a whole. At the same time, the government’s decision to run a deficit means a weak dollar, and experts warn that more debt also means larger interest payments and a weaker currency.trading

Making Money Trading USD/CAD

How to make money from Forex trading is a question that many investors ask post election and given the weakened external demand. The first thing to do is to learn more about Forex rates, current stock market trends, and how perceptions of government policies affect rates. If investors see the liberal party as spend-progressive, then they will be confident that the market is doing well. But this is just part of the puzzle. When it comes to currency trading, many believe that the loonie has further to weaken and fall due to falling gold prices and revenues of giants such as Kinross, Goldcorp, and Barrick. The economy of China, one of Canada’s trading partners, is also slowing down. As a commodity currency, the loonie has been affected by a combination of factors, among which risk sentiment, commodity prices going down, and China’s economy.

Investing in Assets and Currency Hedge Funds

Some Forex experts recommend buying into USD/CAD as long as most investors continue to sell. At the same time, a falling Canadian dollar, combined with low oil prices means that US assets increase in value if priced in CAD. The opposite is also true – US assets are worth less when the loonie is rising. Investors who are worried about the fact that the Canadian dollar will increase in value may want to look into currency hedge funds like iShares S&P 500 Index ETF CAD-Hedged. Others choose not to hedge and limit their US exposure to no more than 10 percent. Still others choose to invest in healthcare, technology, and consumer-oriented companies in the US and hedge their currency exposure. The goal is to reduce potential risk when investing abroad. Currency hedge funds promise significant payoffs and to this end, they follow market trends through computer algorithms. In some cases, currency hedge funds take bearish or bullish positions and report gains at a time when companies trading emerging-market assets report losses. In any case, the ultimate goal is to realize consistent returns. To this, currency hedge funds that focus on CAD to USD usually use advanced strategies and algorithms to follow the movements of currencies with significant trading volumes.

loonie

USD/CAD Trading and Other Instruments to Make Profits

Crude oil is an important factor that affects the Canadian dollar. The reason is that oil prices are denominated in USD. The fact is that there is a strong USD – CAD negative correlation and the same goes about the price of oil. This means that when oil prices go down, USD/CAD goes down and USD weakens. The opposite is also true – USD/CAD rises when oil prices go down and USD strengthens. If you think that oil is going to rally more than USD/CAD will go down, then you may want to purchase both. By the same logic, sell both if you think that USD/CAD is going to decline compared to oil. Another idea is to invest in options on the futures and spot markets. This is a low-risk type of investment.

When there is no clear up or down trend, one option is to rely on hit and run trading in the hope of making small profits. In this case, you may want to pay close attention to trends and look for a small pull back and a bullish trend. When you spot a reversal pattern, then it is time to buy. Such strategies could be useful when the situation on the Forex market is unclear. When there is uncertainty about the direction in which the market will go, some experts recommend using Nadex spreads and the Iron Condor strategy to trade options. Nadex spreads can be used in a flat or downwards market while an upwards market requires credit spreads. Note that when you use Nadex spreads, there are time limits as well as a ceiling or floor level. Investors who use the Iron Condor technique buy the lower spread and sell the upper in the hope of making significant profits.

If You Have $10,000 Would You Put Them in a TFSA

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A tax-free savings account is a flexible and convenient savings solution that helps Canadians to earn tax-free income. This product can be used together with other investment vehicles such as registered education and registered retirement savings plans.

The Basics

There are multiple benefits to opening a TFSA, one being that consumers’ savings grow in a tax-free way while withdrawals and investment income are also tax-free. The fact that TFSAs allow flexible withdrawals is a further benefit for individuals. Another benefit is that there are no lifetime contribution limits to worry about provided that you are eligible. Finally, contributions to your TFSA account will have no effect on other government-provided benefits such as the Goods and Services Tax credit, Old Age Security, and others. With lifelong eligibility, this investment solution can be used at any age, whether you are a young professional or close to retirement.

What if You Are in the Middle Tax Bracket

Canadians with a high income level benefit from the new threshold or contribution limit ($10,000). Those who contribute the maximum will save about $3,800 in taxes over a 10-year period. With savings of about $5,000, those who fall in the middle tax bracket are making contributions of about 1/5 of their pre-tax income. At the same time, finance and tax experts point to the fact that the new contribution limit offers more flexibility, whether you are in the middle income bracket or have a more limited income. Even an income of $50,000 or lower makes the tax-free savings account a better alternative to the RRSP because TFSAs help save on taxes. Canadians who are about to retire may want to look into this option as well provided that they trim other investment solutions such as RRSPs and RRIFs.

In fact, the new limit is designed to benefit middle class couples. A couple in their early 40s, for example, is expected to accumulate savings of over $1 million over their lifetime, plus estate worth over $650,000. This is provided that both partners have an annual income of about $80,000 and aim to retire at the age of 58. Finance expects base estimates on a 3.5-percent real estate growth and 2.2-percent inflation. In general, a tax-free savings account is a good solution for young couples and professional in their early 30s if they are saving toward retirement or big-ticket items and other major purchases. Upper-class individuals will obviously benefit from the new limit, but the new measure is also designed for public service employees and teachers with defined benefit pensions and contributions they rely on. Young adults, on the other hand, may choose not to use RRSPs to save toward retirement altogether because of the tax issues associated with RRIF and RRSP withdrawals.

Is This Good News for Retirees?

Statements by the federal government indicate that retirees will be the major beneficiaries of the new contribution limit. To this, seniors may want to move cash from their RRSP or registered retirement income fund to a tax-free savings account. There are multiple benefits to doing this, one being that higher contributions reduce income tax. While many Canadians believe that it is not advisable to make RRIF withdrawals before the age of 71, this is not the case, especially for consumers with a registered retirement income fund. The fact is that individuals may benefit from early withdrawals by reducing their tax bill. In addition, there are estate planning benefits.

Some people are concerned that additional income will trim the benefits because they will be left with more taxes to pay. The good news is that this would be so only during the first couple of years once they retire. Then their taxable income becomes lower. The reason is that less cash in a registered retirement income fund means less money to which the minimum withdrawal applies. And while retirees pay more in taxes during the first couple of years, experts point out that there are several mitigating factors to take into account. One is that account holders pay at a 31-percent marginal tax rate which is lower compared to contributions from previous years. Thus Canadians benefit from the fact that they pay less in taxes on withdrawals.

Conclusion

There are plenty of benefits to opening a TFSA now that the contribution limit is set higher. All Canadians who are at least 18 years of age are allowed to contribute up to the limit and thus accumulate significant balances. These balances are not only conserved in a tax-free way but grow with time. Finance experts also point to the significant estate planning benefits offered by TFSAs. If one of the spouses was a RRIF holder and passed away, then the other spouse would suffer a major tax hit if they made RRIF withdrawals. With tax-free savings accounts, holders face less risk even if they make withdrawals early in retirement. And if you have $10,000, it is worth opening a TFSA and contributing up to the limit because this is a sheltered account. Some finance experts even advice customers to contribute to their grandchildren’s and children’s TFSAs in case they’ve already maxed out their own accounts. This is perfectly legal to do and yet another way to maximize your savings.

Low-Cost Alternatives Amidst Fee Hike-Ups by Major Banks

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Canadian Banks Hiking Fees for Account Holders

Major Canadian banks plan to increase their fees or have already hiked up their ATM, debit, and purchase fees and charges on other transactions to make up for profit losses due to falling interest rates. Because of profit squeezes, banks increase their rates on services such as check certifications, credit card payments, and fees on savings accounts. Charges add up while the cost of living constantly rises, from higher bank fees and insurance premiums to rising property taxes and commodity and food prices. Given the fact that Canadian household debt has already hit new high, fee hikes are a source of concern for many, especially borrowers with excessive debt load.

Fees and Accounts Affected

Banks review their services and products annually, including fees, terms, surcharges, and earn rates. The explanation they offer is that they are forced to adjust the pricing to stay in business and keep ahead of the competition. Banks also point to the fact that account fees are adjusted to reflect market conditions. At the same time, this is a sensitive topic for many Canadians, and some are already looking for alternatives to save on fees and charges. The good news is that while banks hike up their fees, pricing adjustments are negligible for some services. For example, the current fee for items deposited at RBC is $0.20 per item while the new fee is $0.22. This is not the case with other services and accounts. The current dishonored payment fee is $40 and the new fee – $45. RBC plans to tweak rates across an array of services and accounts as of June 1, including mortgage payments, debit purchases, and other transactions.

Toronto-Dominion already introduced new fees on business transactions, higher savings accounts’ transfer fees, and higher minimum balances. The new fees apply as of April 1. The Bank of Montreal also plans to adjust the pricing as of May 1 to increase debit transaction fees, bank plan fees, and charges on paper statements. The Bank of Nova Scotia also hiked up fees and charges across transactions and accounts. A report compiled for the Canadian Financial Consumer Agency concludes that fee increases on some accounts are moderate while others are more significant. Last year alone, variable fees and associated payments have increased substantially, with reported increases of up to 46 percent. The fees on checking accounts, on the other hand, increased by close to 14 percent.LOC38

Alternatives to Bank Accounts and Services

While major banks are in the process of updating and adjusting their charges and fees, there are other alternatives to consider, among which finance companies, credit unions, bank subsidiaries, and others. Credit unions, for example, offer affordable fees and rates to union members. Some unions assess no fees on ATM withdrawals and debit card purchases. Fees and charges vary from one establishment to another, however.

Meridian

While Meridian assesses monthly fees, their checking account goes with multiple features and perks and allows users to make ATM withdrawals and deposits, in-store purchases, and bill payments. There is an option to deposit paychecks as well. Meridian’s exchange network allows consumers to make transactions, and they benefit from optional overdraft protection. Telephone, in-branch, mobile, and online banking is also offered to access cash. Automatic transfers to and from accounts are free. Self-service transactions cost $9 a month while official and AMEX travelers checks cost $12 a month. Meridian offers a rebate for up to 4 interac fees for those who maintain a balance of at least $1,000.

Vancity

Vancity features basic accounts with no maintenance fees. If you are a union member, you also benefit from lower credit card rates and fees. The average interest rate on credit cards is around 15.20 percent while banks charge 18.8 percent on average. The average rate on balance transfers is about 14.5 percent for credit unions and 20.1 percent for banks. The e-package checking account is a flexible and convenient option for unlimited debit card transactions. Everyday transactions are free of charge, including debit purchases, transfers, and ATM withdrawals. In-person transactions include account transfers, bill payments, and account withdrawals. They cost $0.70 each, and there is no monthly fee provided that customers maintain a balance of at least $1,000. The monthly fee is $7 for balances lower than $1,000. Check and preauthorized payments are offered at no added cost.

Desjardins

Desjardins features free line-of-credit repayments, summary of transactions, passbook updates, deposits, and more. There are fees for other transactions through regular savings, build-up savings, and checking accounts. Payments of bills, transfers, and deposits cost $1 each. Checks, direct withdrawals, and direct payments in the U.S. and Canada cost $1. Fees apply for teller services as well – $2.25 per bill payment and $1.25 per transfer, withdrawal, or cashing.

More Options to Avoid High Rates and Fees

LOC37Tangerine

Tangerine is a good example. The bank offers a no fee checking account and free withdrawals through Scotiabank’s ATM network. In addition, customers benefit from free online statements, ATM deposits, email money transfers, and online daily banking. Debit purchases and bill payments are also offered at no added cost. The same goes for the first checkbook and Interac e-transfers. One free card replacement and stop payment are allowed. Additional checkbooks cost $12.50, and Interac e-transfers – $1. A late fee of $2.50 applies after thirty days. The current earn rate is 0.25 percent for balances up to $49,999.99 and 1 percent for balances of $100,000 and higher. Customers are paid interest on a monthly basis. Added benefits include mobile-banking for tablets and smartphones, bank drafts, 30-day protection, email alerts for deposits and payments, and more.

PC Financial

PC Financial also advertises a no fee account and offers the option to earn bonus points. They can be used toward free groceries and other purchases. The main benefit for customers of PC Financial is that they are offered no fee daily banking as well as unlimited free checks, free transactions, and no monthly fees. Transactions are free at CIBC bank machines and PC Financial, and account holders save up to $200 annually. Customers are also offered a high interest savings account with no monthly fees, no minimum balance requirements, and an attractive earn rate. Some fees apply to certain banking services. Customized account confirmation letters, for example, cost $16.50 each. Other fees include:

• $20 per inter-branch payments
• $10 per wire transfers from other banks
• $7.50 per bank draft and money order
• $50.00 per GIC, TFSA, and RRSP transfers to other establishments

Downsides and Issues to Keep in Mind

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While some banks and other financial establishments offer safe and convenient solutions with low or no monthly fees, geographic availability is one of the major problems. Some banks have a few branches across Canada while others operate locally. This means that most transactions, including transfers, bill payments, and others, are online transactions. Product availability is another issue. Major banks such as RBC and TD offer a wider range of products and services compared to credit unions and small banks and have many branches across Canada.

Is It a Good Idea To Save Money?

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There are plenty of reasons to save for a rainy day, especially if your income is low or average. If you don’t have a stable job but are paid commissions or bonuses or have a seasonal job, this is yet another reason to save to be financially independent. The unfortunate truth is that bad things and emergencies can happen to everyone.

Why Save Money

It is a good idea to have an emergency fund to meet unexpected expenses and pay for basic necessities in case of loss of income or loss of employment. At the same time, the decision to save or not also depends on the current economic situation. When rates are at historic lows, which is the current situation, savers are literally punished and pay to keep money in their checking and savings accounts. At the same time, inflation is eating away their savings and many choose to keep their money under the mattress.LOC27

Is Borrowing Better Than Saving

Again, this depends on the current economic situation and interest rates. In some cases, taking out a low rate loan is a cost effective solution and more people can afford to borrow. They have more cash to spend on everyday and big-ticket purchases and improved purchasing power results in higher inflation and economic growth. The recent drop in oil and gasoline prices is one of the main reasons for the current state of affairs. When the pace of inflation eases over a longer period and interest rates are still low, this is a good time to borrow at a low cost.

Is It Always Good to Have an Emergency Fund

This depends on your income level, whether you have additional sources of income, number of children and household members, your age and short- and long-term financial goals, retirement goals, and other factors. There are some arguments against having an emergency fund, and one is that most financial institutions which advertise savings accounts offer a low rate of return. In this case, having an emergency fund is a particularly bad idea if you hold multiple, high-interest debts. Debt balances sitting at 15, 20, or 30 percent will cost you dearly, regardless of the earn rate on your savings account. Holding cash in a savings account may make sense but this depends on the amount deposited, the earn rate, and the state of the economy. Many consumers opt for a savings account because of the fact that this is a liquid, low-risk product. There are other ways to invest free cash such as bonds, stocks, certificates of deposit, money market accounts and riskier investment strategies such as Forex trading. In general, consumers save money to meet unforeseen expenses, pay for home and car repairs, and other major repairs. It is also a good idea to have an emergency fund in case of a sudden job loss due to an accident or another unfortunate event. Many people save for retirement, but there are better ways to grow your money than opening a savings account. Some people also use their emergency fund to pay for vacations and to make a down payment for a vehicle or house but again, this depends on inflationary pressures and rates and this is not what emergency funds are meant for.

How to Make Sure Your Savings Are Not Eaten Away by Inflation

LOC26There is no straightforward answer to this question but basic investing tips can be of help. When inflation is high, your savings are menaced because interest rates are also low. Unless you are offered a high-interest savings account, the purchasing power of your money is steadily declining. One way to protect your savings against inflation is to take more risk with the goal of getting higher returns. Financial advisers recommend investment strategies that are medium-risk and bring higher returns. One option is to invest in inflation-bearing bonds and the best part is that you benefit from tax-free returns. The rate also increases over time. Another option is to invest in stock but this is a riskier solution for seasoned investors. You may want to look at alternatives, for example, stock and shares ISA which is one way to secure income from shares and stock. It is also a relatively safe investment vehicle that brings inflation-beating returns. Basically, this is a type of ISA that allows some degree of flexibility. The returns depend on the types of investments customers choose to buy. Some businesses pay regular dividends and offer the opportunity to get decent returns. There are other investment vehicles such as annuities, mutual funds, commodities, equity, and others. Other options to protect your savings against inflation include money market mutual funds, savings bonds, corporate stocks and bonds, state-sponsored tuition plans, and education IRAs. You can also look into investment vehicles such as treasury notes, bills, and other securities and exchange-traded funds.

Conclusion

Whether it is a good idea to save or borrow depends on many factors, including your personal and financial circumstances and the state of the economy and global financial trends. One way to protect your savings when inflation is high is to use different investment strategies such as dollar cost averaging, portfolio diversification, and allocation of investments. Some investment instruments are safe and low-risk but bring low returns. They are also more liquid meaning that customers are allowed to withdraw their money without penalty and at any time. Other instruments are riskier or less liquid and offer higher returns. Whether it is a good idea to save depends on your financial goals, i.e. early retirement, buying a new vehicle, a college fund for your kids, and so on. Think of your mid-term and short-term goals as well (holiday purchases, travel, paying off debt faster, etc.) Saving can also help become financial independent and live a stress-free life.