19 Jan

5 key factors to assist you in ensuring you are on the right track to a solid financial future

General

Posted by: Tracey Robinson

Financial Check-Up

Financial Check-Up

Welcome to your free financial check-up, discussing 5 key factors to assist you in ensuring you are on the right track to a solid financial future.

Credit

Ensuring you are using credit wisely will pave the way to making sure you have options available to you if or when you need them. One thing we can all do is check our credit report on a regular basis – at least once each year – so you know where you stand and whether your credit score has been compromised in any way, especially through fraud. You can contact Equifax at 1-800-465-7166 or go to the website at www.equifax.ca for more information.

There are many people who believe that it is more responsible to not use credit at all but, in fact, if you don’t have any credit accounts reporting to the credit bureau, financial institutions have no way of knowing how responsible you are with credit and you will likely be turned down if you need a loan or credit card in the future.

Making payments on time is critical to maintaining a good credit score but also keeping your account balances below 75% of the maximum limit is another way of boosting your credit score. If you have multiple accounts, spreading the balances evenly among them using balance transfer methods can help to bring some accounts in line.

It’s wise to pay off your higher interest credit accounts first but that decision needs to be balanced with whether to pay down the higher-payment accounts.

Savings

The old adage, “10% of the money you earn should be tucked away into savings” is a good one. Although it may be difficult to be disciplined enough, if you “pay yourself” every month, the savings will start to build and you may find you don’t need to rely on credit to handle those unexpected expenses.

I personally have a monthly allotment that I transfer to my savings account the same day each month. I have a reminder in my phone to physically do the transfer and it is built into my budget as if it were another utility payment I have to make.

Taking advantage of a Tax Free Savings Account (TFSA) is a great way to earn higher interest on your savings as opposed to the low rate you are paid for a standard bank savings account. If your TFSA is managed by a Financial Planner you can see very good returns on your investments. Any money earned within your TFSA is tax-free and can be withdrawn at any time.

Retirement

Part of the savings picture is, of course, planning for retirement. If you can, work an RRSP contribution into your budget as soon as possible so you will be much further ahead when you want to put your feet up and enjoy.

I follow my Financial Planner’s recommendations when it comes to how much I contribute each year. As I am self-employed, the amount I contribute each year varies but I always make a contribution.

Contributing to an RRSP also gives you a tax break at the end of the year and you can use your tax return money to put towards paying down your mortgage or put it towards a vacation. Both of those are win-win scenarios.

Mortgage

Being the largest loan most Canadians will ever have, your mortgage deserves attention and regular check-ups. Choosing the right mortgage structure for you and taking advantage of today’s historically low rates, can put you on track to huge savings.

Take a look at your debt-structure. If you are making high monthly payments on high-interest loans and/or credit cards, you could easily restructure your circumstances by refinancing your credit accounts into your home. In most cases, this reduces the amount of interest you are paying overall and lowers your monthly payments. At the same time, if you take advantage of an accelerated payment structure (bi-weekly or weekly) and bump up your minimum required payment by the 15-25% that your institution allows, you can pay down your principal and be mortgage free much sooner!

In today’s mortgage climate, if you currently have a mortgage rate anywhere over 4% you should do yourself a favour and have me do a Free Mortgage Analysis for you so you can see apples to apples whether there are any financial advantages to breaking your existing mortgage for a better rate. When you can see the costs vs. benefits in black and white, the answer as to whether to refinance will be crystal clear.

Insurance

Making sure you have adequate insurance is essential in protecting yourself and your family in the event of a crisis or emergency. Whether it be home, health, life or disability insurance, it is always a good idea to review all of your insurance coverage at least once a year to make sure you are fully covered.

Mortgage insurance is a great idea but most clients benefit more from having independent mortgage insurance coverage as opposed to taking the insurance coverage offered by the institution that has your mortgage. The average Canadian makes a change to a mortgage every 38-42 months, you may have to re-apply for the same coverage at an older age and higher premiums. If your mortgage insurance is through a company that is independent of the bank, you would have the ability to keep the coverage and premium you initially had even if moving your mortgage to another institution at a better rate works better for you.

Another way to go is Term Life Insurance. Securing a policy that will cover all costs and pay out all obligations should anything happen to you will give your family peace of mind in the worst circumstance.

Critical Illness Insurance offers protection should you become affected by one of the approved conditions and is often paid in a lump sum amount once you have survived the specified waiting period. It gives you the assurance that the costs of a serious medical condition, as well as living expenses, will be covered.

Wrap Up

I recommend talking to your Dominion Lending Centres mortgage professional to make sure you make the best decision on all insurance needs.

I hope you have found some value in the information provided. As always, I recommend seeking out the experts and gaining knowledge before making any important decisions that will affect your future.

11 Jan

A Great article from our Chief Economist on job strength

General

Posted by: Tracey Robinson

U.S. Job Strength Vindicates Fed Rate Hike, But Canada Still Weak

U.S. Job Strength Vindicates Fed Rate Hike, But Canada Still Weak

Once again, the Canadian economy showed signs of struggle as the December jobs report showed gains only in Ontario, while jobs were flat or down in every other province. In marked contrast, payrolls in the U.S. rose more than projected as the unemployment rate remained at a low 5%. U.S. strength vindicated the Fed’s recent rate rise.

Canada added 22,800 jobs in December, rebounding from a loss of 36,00 in November, but the unemployment rate remained at 7.1%–posting a rise of 0.4 percentage points over the course of 2015. While today’s employment report surpassed expectations, most of the job gains were in part-time positions. December’s gains capped a rocky year for job growth as the natural resource sector shed thousands of jobs. Employment increased among people aged 55 and older last month and was little changed for the other demographic groups.

Provincially, Ontario was the lone province posting job gains, up 35,000, lowering the unemployment rate to 6.7%.The hard-hit resources sector took its toll again in Alberta, which lost 3,900 jobs and in Saskatchewan, where there were 4,600 fewer people working in December.

For 2015 as a whole, the fastest employment growth was in British Columbia, up 2.3% compared to just under 1% for the country as a whole. Despite this, the jobless rate in B.C. increased to 6.7% as more people looked for work. Job growth in Alberta was flat last year as declines in full-time jobs were offset by gains in part-time work, but the unemployment rate rose to 7%, its highest level in nearly six years. Employment declined in Newfoundland.

By sector, the biggest job losses last year were in natural resources–down 6.8%. Most of the decline was in Alberta, although there were smaller declines in Saskatchewan, Newfoundland and Nova Scotia. The service sector outperformed goods producers, led by employment in professional, scientific and technical services. There were also significant gains in health care and social assistance. Employment in manufacturing increased just over 2%–the first increase since 2012–mostly in British Columbia.

While the Canadian employment report in December surpassed Bay Street expectations, the underlying story is that the private sector remains weak, especially the energy and mining sectors. Given the recent global market rout and a deepening oil market slump, the Canadian economy is vulnerable to further weakness and Alberta, in particular, has yet to see the worst of it.

There is fresh pain for producers of the world’s cheapest crude as the Canadian heavy grade oil prices reached a record low, raising the prospect of more production coming offline. Northern Alberta’s vast oil sands hold the world’s third-largest crude reserves but carry some of the highest production costs globally — up to US$50 a barrel — because of the energy-intensive production process. The spot price for Western Canadian Select fell below US$20 a barrel earlier this week, its lowest level since tracking began in 2008, according to Bloomberg. The decline was precipitated by the report of a surge in U.S. gasoline inventories to its highest level in 22 years and the climb in crude supplies at the American storage hub in Oklahoma to a record high.

Canadian oil producers are cushioned somewhat by the weak loonie, as they are paid in U.S. dollars and most of their costs are in loonies. Most Canadian companies will likely keep producing to pay bills and loans, even if the crude price does not cover cash operating costs.

We are likely to suffer continued weakness in the Canadian dollar and the underperformance of the Canadian stock market. Mortgage rates are rising and government actions to cool the housing market will also contribute to downward pressure on the economy. However, the weak loonie will help to spur exports and to attract foreign capital. Tourism will no doubt rise. The New York Times today deemed Toronto the top tourist destination for 2016. Government fiscal stimulus will help and cannot come too soon and Governor Poloz is ready to use unconventional monetary policy tools if needed.

The United States is leading the global economy as weakness in China, Russia, Brazil and other emerging economies is driving down commodity prices and stock markets. The U.S. December jobs report confirmed the strength in the economy as payroll growth surged, capping the second-best year for American workers since 1999. While U.S. employers continue to add to the head count, wages have yet to show a sustainable pickup.

Hence, monetary policy will continue to diverge in Canada and the U.S.

U.S. Job Strength Vindicates Fed Rate Hike, But Canada Still Weak