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Rich Dad Poor Dad, What the Rich teach their kids about money that the poor and middle class do not.
One of my all time favourite books that I think everyone should read at least once in their life.
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With less than 30 days until Londoner’s vote, I thought it would be a good time to release my municipal election picks for 2018. As a city we are guinea pigs for rank balloting which will play an interesting role in determining winners this time around. Taking that into consideration, I’ve selected more than 1 candidate if I feel both could do the job.
For a complete list of candidates in each Ward, please click here.
When you think of the cost of buying a home, expenses like the down payment, realtor commission and moving costs probably come to mind. While these expenses usually make up most of your spending, there are other costs associated with home buying that people often overlook. Check out this list of costs you might encounter at different stages of the home-buying process.
Down payment deposit
It’s important to consider all additional expenses before beginning the home-buying process to stay within your budget.
Legal or notary fees
Property survey and/or title insurance
Land transfer tax
Mortgage default insurance
Managing the cost and logistics of buying a home can be a big job. It’s important to consider all additional expenses before beginning the home-buying process to stay within your budget. Don’t forget that home ownership also often involves repairs and renovations as well the cost of furniture and décor. You may also want to evaluate which type of insurance coverage is right for you.
If the thought of buying a home makes you anxious about your finances, I can help you prepare and assess your financial readiness for home ownership, and lead you through setting goals towards owning the house you dream of.
When you’re starting your home buying journey, it can be hard to know where to begin. For one thing, mortgages aren’t always easy to understand, especially with regulatory changes over the past two years. If you’re looking to buy a home, it’s important to get up to speed on these rules so you can select the right mortgage for you. To help you understand these changes, let’s look at some of the basic requirements for buying a home.
Down payment requirements
Home down payments are usually expressed in percentages. They’re calculated by dividing the dollar value of the down payment by the home price. In Canada, the minimum down payment depends on the purchase price of the home:
If you make a down payment of at least 20% of the purchase price, you’ll hold a conventional or low-ratio mortgage. If you put down less than 20%, your mortgage is considered a high-ratio mortgage. By law, high-ratio mortgages require you to buy mortgage default insurance.
Mortgage default insurance
This type of insurance protects mortgage lenders if homeowners can’t pay their mortgage. Your mortgage lender can arrange a default insurance policy through Canada Mortgage and Housing Corporation (CMHC), Genworth Canada or Canada Guaranty. In most cases, the additional cost is factored into your mortgage payment.
Financial stability requirements
Your lender will use two ratios – gross debt service (GDS) and total debt service (TDS) – to assess your ability to make monthly payments. These are used to determine how much you can spend on housing without risking your financial stability.
Regardless of where you are in your home buying journey, brushing up on mortgage basics and the current rules is a good place to start when thinking about your next move.
Changes to mortgage default insurance
What is it? In October 2016, the Department of Finance implemented new stress-testing requirements for all mortgages that need mortgage default insurance. In other words, if you need mortgage default insurance, you’ll have to be able to afford a higher mortgage rate than the promotional rate for the term you selected. This helps ensure Canadians aren’t taking on bigger mortgages than they can afford.
Who’s it for? Homebuyers applying for a high-ratio mortgage that requires mortgage default insurance, or where low-ratio mortgage insurance is required.
How does it affect me? All homebuyers applying for mortgage default insurance (high- or low-ratio) must qualify at the greater of their lender’s standard rate 5-year mortgage rate and the Bank of Canada’s 5-year conventional mortgage rate, regardless of the term chosen. For an insured mortgage, the GDS can’t exceed 39% and the TDS can’t be more than 44%.
How much mortgage default insurance costs
What is it? From time to time, Canada Mortgage and Housing Corporation (CMHC) changes the cost of insurance. Under new guidelines, CMHC increased the cost on March 17, 2017.
Who’s it for? Homebuyers applying for a high-ratio mortgage that requires mortgage default insurance, or where low-ratio mortgage insurance is required.
How does it affect me? The cost of mortgage default insurance is based on the loan-to-value (LTV) ratio of the mortgage you’re applying for – it’s calculated by dividing the size of the loan you’ll need by the purchase price of the home. The higher the LTV ratio, the more insurance will cost. The cost depends on the LTV ratio. For current rates, refer to the CMHC website.
With housing price fluctuations and changing mortgage rules, it can be overwhelming to navigate the housing market. If you need a little help to get started, I can assess your financial security plan to make sure you’re on track towards your home ownership goals.
I can also put you in touch with a mortgage planning specialist who can guide you through each step of the mortgage process. Regardless of where you are in your home buying journey, brushing up on mortgage basics and current rules is a good place to start when thinking about your next move.
Saving money can be a challenge at the best of times. But did you know that with a regular savings plan in place, and an early start, you could be much further ahead when it comes time to consider retirement?
That’s because when you start saving early, your money has more time to grow, allowing it to benefit from compound growth. Compounding can help your money grow, in most cases, far beyond the amount you originally invested. So, how does it work?
Compound growth is similar to compound interest. With compound interest you’re essentially earning interest on interest – you earn interest on the money you put in at the start, as well as the money you add later, plus on all the interest that collects over time. This gives you a larger total amount to earn future interest on, leading to even more growth. Over time, you have a powerful recipe to help you grow your money.
The concept of compound growth is similar to growing a forest of trees. The forest can grow in two ways – trees can be planted by hand (like your regular investment contributions), while others may grow on their own through seeds that fall from mature trees (like compound growth on your contributions). In time, a few trees planted early can grow into an entire forest without much effort.
To understand how this could affect your savings, consider the journey of $240,000, saved two different ways. If you save $500 per month with an annual return rate of six per cent compounded monthly, beginning at age 25, you would have $1,000,724 at age 651. Conversely, if you tried to catch up on your savings, contributing $1,000 with the same annual rate of return beginning at age 45, you would only have $464,361 at age 652. Under both scenarios, you’ve invested the same amount with the same growth rate, but in the first scenario, your money has twice as long to grow, and you end up with more than twice as much.
The beauty of saving early and relying on the power of compounding is it doesn’t take a lot of money to get started. Relatively small amounts consistently invested regularly, especially when you are young and early into your career, can make a significant difference in the total size of your savings down the road. Those small deposits can be the difference between being confident with your investment success and having to worry about it much later in your life. It can be as easy as sitting back while you let your money do all the work and grow into something much bigger.
The strategy for compounding:
Whether it’s through a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA), saving early and saving often can give you a head start on planning for retirement. And that planning may allow you to reach your financial goals sooner. I can help you review your financial goals and prepare for the future.
If you’re addicted to social media networks, could you be suffering from FOMO? The abbreviation for fear of missing out, FOMO is the virtual equivalent of “keeping up with the Joneses,” or competing with your friends and acquaintances for material accomplishments. Caution: if you’re a millennial (between the ages of 25 and 34), you might be particularly susceptible to FOMO. According to a recent study, 26 per cent of Canadians admitted to having it. Of those, 48 per cent are millennials.* The good news: there are practical ways to deal with the condition.
Besides the psychological pressure of measuring your life based on the content your friends share online, FOMO can make a serious dent to your wallet. Here’s how:
Your friend posts amazing photos from her latest cruise in the Mediterranean; another snaps a video of his fine wine sipping in Napa; your cousin Instagrams photos from a book launch – your favourite celebrity releasing her novel. No matter who is in your social media circle, someone will always seem to have a more interesting life than yours at any given time. Without set physical boundaries, the virtual space becomes an open and endless exhibition arena for flaunting material success, teasing you to indulge in your own.
You know your friends’ Facebook life is not their real life, at least not the whole picture. People post selectively, often highlighting the good in their lives. Despite knowing this, it’s easy to get carried away by the projected lifestyles of your social media contacts. You may feel lacking, not based on facts but on your perception of how everyone else on your social media feed is having a good time. From there, it doesn’t take too long to hop on the bandwagon to pay for your own social media promotion. See how the cycle works?
The more you remain glued to your tablet or phone screen, the more you expose yourself to shiny new things to aspire to – the designer clothes and accessories a friend posed in; the luxurious Hawaii trip the co-worker can’t stop raving about; the gourmet food photos another friend keeps tempting you with. As things take precedence over the people in your life, the winner is often retail therapy. The losers? Your wallet and your relationships.
Spurred by instant notifications and alerts flashing on digital screens, FOMO can easily lead to impulse spending. Many, if not most of these expenses are unplanned and unaccounted for, and over time, can add up to a lot of money – money that could have grown through investments.
If you think you might be suffering from FOMO, try these steps:
Earmark a portion of your budget towards fun expenses, triggered by FOMO or not. Being conscious of how much you’re allowed to spend will help you be more realistic and cause less stress to your wallet.
Leave your cards at home. Every time you pay in cash, you will be forced to live within your means and not be tempted to overspend.
Many, if not most of FOMO-triggered expenses are unplanned and over time, can add up to a lot of money – money that could have grown through investments.
Knowing when you’re going out with your friends for a movie or with your partner for dinner takes the randomness out of it. You can plan better and allocate the right amount for each scheduled expense.
If your FOMO is really serious, try and get away from the blitz of social networks all together for a while. You can have a weekly social media fast; deactivate your Facebook account for a period of time, turn off your phone for a couple of hours daily, or use blocking tools to restrict your access to specific social networks. You might be surprised by how you can use up all that time productively while also preventing yourself from potential splurging.
If collecting antiques is your weakness, put some funds aside for it in your budget. If you like to eat out, allocate money towards that. Identifying one or two key areas you’re passionate about can help limit you from spreading your finances too thin in trying to respond to every big and small FOMO attack.
In the end, it’s all about perspective and staying grounded. Make sure your FOMO isn’t stemming from a sense of lack in some other area of your life. Remaining conscious of your spending behaviour and focusing on the non-material things that bring you joy can help you live a full life without creating a hole in your pocket.
Bonus tip: Talk to me to learn how you can grow the money you saved using the tips listed above.
Your employer may offer group insurance coverage – for example, life insurance, critical illness insurance or disability insurance as part of a benefits plan.
It’s a basic way to help protect you and your loved ones.
But what if you could do more than just cover the basics? Your lifestyle is important to you and your family, so what if you could complement your group benefits coverage with individual insurance and help keep the lifestyle you’d want for your family, if you died or became too sick or injured to work?
Knowing the details of your group insurance plan is crucial. You want to make sure you have the right type of insurance, and the right amount of coverage, to cover all your bases when dealing with the unexpected.
Individual insurance, such as life, critical illness and disability insurance is coverage you can get outside of work. They typically offer more control and choice based on the needs of you and your family. And it’s all about you: you own it and you choose the products and options you want that are customized for your needs.
Together with your group insurance, they can help protect you, your family and your lifestyle from unexpected events that could jeopardize your financial goals and keep you from meeting your obligations.
Does group insurance cover your needs? Consider the following questions:
1. If something were to happen to you or a loved one would you be able to:
2. Does group insurance coverage include the types of insurance you and your family need?
For some people, group insurance is enough, but an individual insurance plan can complement your group insurance benefits. I can help sort out the details and fill in any existing gaps.
Do you remember when your parents sat you down for the talk? Back then, it likely included some anxious moments and uncomfortable feelings.
It could be time to think about another talk, but this time you’d be initiating a conversation your parents may have been avoiding – about how they want their final wishes carried out.
Here are a few suggestions when it comes to discussing their legacy:
1. Take advantage of the time you have. You’re on the right track by helping your parents think about this now as opposed to reacting in the moment. Taking the time now helps your parents put the right plans in place to protect what matters most to them.
2. Get organized and help ensure your parents’ wishes are maintained. Help your parents understand the value of getting organized early on so their wishes are understood and carried out according to plan.
You’re on the right track by starting to think about this now, as opposed to reacting in the moment.
3. Ensure they choose someone as their power of attorney. Encourage your parents not to wait too long to select their power of attorney. A lot of important decisions may end up in this person’s hands, and the more time they have to understand your parents’ preferences, the better.
Figuring out your parents’ wishes can take time. When you’re having the talk, it’s important to keep in mind how you can work with a financial security advisor to help protect their estate. Some things to think about when developing a plan are how to help:
Work with a financial security advisor to include an Estate Protection policy on their financial security plan. It combines potential growth with protection for the beneficiaries of the policy to help make sure the estate is secured.
Start with the basics and learn about:
While you’re helping your parents develop a plan, encourage them to provide their banking information to their power of attorney.
I can help your parents ensure their wishes are carried out. Whether you’re having the talk for the first time or revisiting the subject, you can feel a sense of relief and security knowing you’re helping them carry out their final wishes.
We’re all different when it comes to our perspectives on spending. Some people have no problem saving all their extra pennies, and some people spend what they have without thinking about the future. While differences make the world go round, conflicting thoughts on money matters can lead to tension in relationships. If you and your partner find yourselves at opposite ends of the saving versus spending spectrum, these tips can help you meet in the middle.
You’re buying a new car together. The spender wants all the upgrades, while the saver is just fine with the base model. When emotions run high, it can be difficult to see where your partner is coming from. The truth is, our attitudes about money are deeply rooted. Perhaps you or your partner is stingier with spending because there was less to go around growing up. Perhaps the person who is free with money gets an emotional reward from spending. Try to take a step back and discuss the reasoning behind your behaviour. It’s always easier to negotiate when you try to validate each other’s feelings, instead of assigning blame.
As a saver, it can seem irritating if your partner is constantly making purchases you deem frivolous. Creating a spending plan as a couple – with shared goals in mind – can help bring you together around common values. For example, say you agree that taking a trip overseas or buying a home is your biggest priority. You may want to consider how much you’ll need for that expense and factor how long it will take you to save that amount. With that savings goal in mind, it will probably be a whole lot easier to pass up unnecessary indulgences.
It is possible for partners with different spending styles to find a middle ground.
When your bills roll in each month, avoid the last-minute scramble by setting parameters on who will pay each bill if you manage your finances using separate accounts. Perhaps you each cover half of your mortgage or rent, one of you pays the auto insurance and the other covers hydro. Since these expenses are generally fixed, setting up a system for handling bills up-front gives you one less thing to worry (fight) about.
Every couple has a different way of structuring their finances, and sometimes, it takes a bit of trial and error. Some people keep separate accounts and split everything down the middle, while others pool all their resources. Other couples have four accounts between them: one joint for savings, one joint for everyday expenses and two individual accounts for whatever’s left (fun money). Whichever system you decide is best for you, you may want to consider setting a limit on the amount you can spend on a joint purchase without consulting each other. Discussing big-ticket purchases with your partner before you take the plunge is an easy way to avoid a disagreement.
Sometimes, reaching out to an impartial third party is the best way to solve financial disputes. I can help by talking to you about your goals and determining the best way to structure your finances to suit your needs. With a customized financial plan in tow, you’ll have a solid foundation for the decisions you make about your money.
With a common vision for your future and the right financial action plan, it’s possible for partners with different spending styles to find a middle ground.