10 Aug

TFSA vs RRSP – No Losers in This Battle!

General

Posted by: Frank Fik

The worst financial mistake you can make is believing that a Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA) is something to look into when you are a little older and more able to set some money aside. The fact is, you don’t use these accounts for saving at all, you use them for investing. Your retirement fund could grow to seven figures, even if you only contribute a fraction of the allowable yearly maximums. They also come with huge tax-saving benefits.

A lot of people get discouraged by the sheer amount that you are allowed to contribute to these registered accounts and the mere pittance they may be able to come up with — don’t fall into that mindset!

If you make 60,000/year from your job, you could contribute over $10,000 to your RRSP and another $6000 to your TFSA every year. Considering you are only going to have about $45K in your jeans after taxes, finding a spare $16K would require more than 30% of your take-home pay!

The good news is that your yearly contribution limits can be carried over and as you grow older (and theoretically have more disposable income) you can catch up. The bad news is that playing catch up isn’t going to happen unless you are very disciplined with your spending. Sure, you may earn more, but you will spend more… kids, cars, vacations, even the cat is going to cost you $800/year!

That extra disposable income you were envisioning may not materialize until you are in your mid 50’s, if ever! You need to scrape together whatever investment savings you can now, even saving just 5% ($200/month) of a $60K salary would make a huge impact.

Putting off getting started is going to cost you way more than you ever imagined in lost investment returns. Ignore the pitiful interest rates you see on bank savings accounts, holding cash will actually cost you money at current interest and inflation rates. However, the average annual return on many stock indexes (S&P, TSX, DSJ) over the past 40 years is around 7%. If you do a little math, you are soon going to realize that even on a relatively small investment of $200 month, the difference between starting when you are 18 versus starting at age 28 is jaw dropping.

Investing $200/month from age 18 to 65 at 7% would give you $790,139. The same $200 at the same rate from age 28 to 65 would yield just $384,810. Sure, you would be contributing $24,000 more over that extra 10 years, but your nest egg at 65 would be double — more than enough to keep you poolside at a nice resort every winter while those late starters are stuck in the snow!

There are plenty of rules, regulations and strategies to consider and every angle of the TFSA vs RRSP debate has been extensively written about. While you do need to understand the basics of how they work, the simple goal for the vast majority of us should be to put something, anything, into one (or both) of these accounts on a regular basis and start investing — you can’t go wrong!

Published by DLC Marketing Team

3 Aug

Residential Mortgage Commentary – Despite challenges, desire to own is still strong

General

Posted by: Frank Fik

The current situation in the Canadian housing market has both buyers and sellers stepping to the sidelines.  But underneath all of the recent shuffling there still seems to be a firm, foundational desire to own a home.

The annual affordability survey conducted by RE/MAX suggests rising interest rates have become a significant, growing concern for those looking to get in to the housing market.  Twenty-four percent of respondents cite rising rates as a barrier to entry, up 6% from the last survey.  Closely related to interest rates, 24% say “market volatility” is keeping them out.

The survey suggests, though, that the biggest barrier to entry remains high prices.  Forty-three percent pointed to high cost, an increase of just 1% from last year.

Other key factors:

35% – higher cost of living

24% – a shortfall in salary.

But the survey also suggests Canadians remain determined to have their own home with 68% saying they are willing to make at least one sacrifice in order to realize that ambition.  Of those, 64% say they are prepared to relocate to get a home they can afford.  Half of those people, though, are not prepared to move more than 100 kilometres from their current location.  (RE/MAX speculates that this may be related to the decline in “work from home” opportunities.)

Other common sacrifices:

56% – adjusting the type of home they would purchase

29% – co-ownership with family or friends

27% – renting a portion of their home to generate income

Published by First National Financial LP

29 Jul

Residential Market Commentary – Cautious economic optimism

General

Posted by: Frank Fik

Crystal-ball gazing to predict the economic future can be a murky business.  And some of the latest polling of Canadian economists shows just how opaque the view can be.  The Globe and Mail surveyed 15 prominent Canadian economists about what, they think, is going to happen.

There is general agreement that a slowdown is coming.  But when it came to the likelihood of a recession, expectations covered a very broad range from 25% at the low end to 90% at the high end.  One of those economists sees the country sliding into recession next year.  Some of the others are estimating longer timelines, stretching out to 24 months.  Certainly, a less than clear picture.

The Bank of Canada has lowered it forecast for economic growth significantly to 1.8% for next year.  Back in April the Bank was forecasting 3.2% growth.

Rampant inflation continues to be named as the culprit as the central bank pushes up interest rates in an effort to cool domestic demand.  Highly indebted Canadian households are particularly sensitive to rising rates.  That became apparent very quickly in the real estate market.

Demand for homes is easing, as illustrated by declining sales.  There is a growing inventory and price increases are returning to historical norms.  The moderation is largely welcome news; a hopeful sign of stability and predictability returning to the market.

Overall, the broad expectation from the economists is that the country can avoid a sustained economic contraction.  They point to rising commodity prices that tend to benefit the Canadian economy and high, COVID-era savings that could stave-off a collapse in consumer spending even in the face of higher prices.

There is cautious optimism that any recession will be relatively shallow and relatively short.

Published by First National Financial LP

11 Jul

Residential Market Commentary – Inflation and the “R” word

General

Posted by: Frank Fik

COVID variants.  Inflation.  Interest rates.  And now, recession.  It seems as though we are being exposed to a new crisis with every cycle of the moon.  No wonder consumer confidence is, at best, ambivalent.

The latest round of chatter from the nation’s economists says Canada will likely see an economic downturn toward the end of this year.  It has happened before as the central bank fought to control inflation.

But the news is not all bad.  The Canadian economy is strong.  Unemployment is at a historic low and GDP growth is the best in the G7.  Even the key items driving inflation have an upside.  High fuel prices are boosting Canada’s important energy sector and high food prices are bolstering the country’s agriculture industry.

None the less, the economists point out that, inflation is eating away at the spending power that was accumulated during the pandemic.  Sharply rising interest rates have already cooled the demand for housing and softened real estate prices, while increasing the burden on debt-laden Canadians.

The current debt-to-income ratio shows the average Canadian household owes $1.83 for every dollar of disposable income.

The expectation is, GDP will contract through the middle quarters of next year.

Generally, though, the economists seem to agree that any possible recession will be relatively moderate and short.  And they continue to use the phrase “soft landing” when talking about the economy returning to normal.  And once inflation is in check the Bank of Canada will be able to start reducing interest rates.

Published by First National Financial LP

4 Jul

Simple Home Technology Upgrades.

General

Posted by: Frank Fik

It’s an excellent time to be alive if you’re an early adopter of technology; it’s slightly less excellent if you’re a well-meaning-but-late-anyway adopter (like myself). The breakneck pace of technological innovation can easily leave you behind the curve, with new startups, apps, and devices appearing on an almost daily basis. Trying to catch up to the pack can be daunting and expensive even if you’re willing to get with the times. On the other hand, if you’re not interested in having the newest, shiniest toys, you’re likely wondering—what’s the point anyway?

The good news is: you’re not at a disadvantage if you’re late to the tech-savvy party. There are quick, reasonably-priced steps you can take to bring your home a step closer to the future. Here are four upgrades you can acquire right away, in order of practicality and ease of integration.

USB wall outlets

Oh yes, we’re starting off with real cutting-edge stuff here: clearly, combination power outlets are the most electrifying innovation to hit the market in recent years! I know this is a pretty tame entry point, but I’d argue the practicality makes up for the lack of sizzle. If you’ve owned an electronic device in the past twenty years, you likely have firsthand knowledge of the annoyances that come with charging the things. Not only do you need to have the right cable, you also need an appropriate adaptor, and all that comes before finding a free (and conveniently located) power outlet to plug into.

The USB (Universal Serial Bus) standard for connections, communication, and power supplies has been around and in use worldwide since 1996. Some companies do their own thing with proprietary cables just because they can, but there are almost no brands that bypass the USB connector altogether. Given their ubiquity, it was only a matter of time before they appeared on power outlets themselves. In one neat package, wall outlets with USB charging ports have solved the adaptor and free socket issue. You still need a compatible cable, but those are a lot easier to come by and less annoying to cart around. Plus, dedicated USB ports mean you aren’t required to unplug other devices, which is a big plus when you have multiple users who all need a charge.

These combo outlets go for as low as $30 per piece, and are fairly easy to install even with no experience!

Smart appliances

There’s a good chance that either you or someone you live with talks to their phone/watch/tv/magic speaker box thing already. A large majority of the technologically-inclined have embraced Alexa, Google, Siri, or Cortana, and are happily integrating them into their homes. Basic smart home setups are getting more affordable by the minute, and you likely own at least three of the foundational pieces already (smartphone, digital assistant, smart TV).

Which brings us to upgrade option number two: “smart” appliances. If you’re already on your way to having a connected home, why not consider upgrading to appliances with smart home functionality? At best, you can enjoy a greater degree of convenience and control; at worst, you’ll have a feature that you can safely ignore if you so choose. The fact is, smart functionality will likely become standard issue sooner or later. Even big-ticket appliances like fridges, dishwashers, washing machines have begun to include wifi-connectivity and apps that let you monitor and control how they operate remotely.

Digital assistants are here to stay, so why go out of your way to avoid them? While compatibility isn’t generally an issue, certain appliances work best when paired with specific assistants, so we recommend getting ahead of the problem and planning for the ecosystem you might like to have.

Obviously, we’re not saying you should toss out all your stuff right this second just to get with the times. Rather: whenever you reach a natural point for upgrading in the home renovation or sales process, give some careful thought to acquiring a smart appliance.

Smart locks

Smart locks, like the smart appliances mentioned above, are also part of the Internet of Things, but they get their own category because of how useful they are.

There are two kinds of people in the world: those who have lost their keys at least once, and liars. We’re all familiar with timeless questions like “Where on earth are my keys?” and “Uh oh, did I lock the door?”. Traditionally, this meant upending your house until you find them in your pocket or suffering in mild annoyance till you get back home. However, the modern answer is: who cares? You have a smart lock!

What exactly is a smart lock? It’s an evolution of the traditional mechanical lock, using electronics to allow for keyless entry. Smart locks are easy to install, and either replace or upgrade the existing locking devices on your doors. Once that’s done, you can wirelessly unlock your door with a smartphone, combination code or key fob.

To be clear: while there are some security benefits to using smart locks (such as logs that list every time your door was opened, etc.), they’re not necessarily more secure than a standard lock. Really, you’d be upgrading for the convenience they provide, and an improvement to your quality of life. Features like remotely locking or unlocking your door, temporary access codes for guests and digital assistant integration all make the switch worthwhile. Moreover, almost all smart locks can still be unlocked with a traditional key as a failsafe (in case of power outages or depleted batteries).

It’s a small change for your home and the closest thing we have to futuristic Star Trek doors that swoosh open. It’s hard to find a downside here!

Electric vehicle chargers

For those of you trying to be more eco-friendly, there’s a simple argument to be made for installing electric vehicle chargers in your home: pretty soon, you’re going to need one. While Tesla may have shot the idea of electric cars into the mainstream, plenty of car manufacturers read the writing on the wall and developed their own electric cars. It’s no longer a question of if electric will replace internal combustion engines, but when. Fossil fuels are a finite supply, and a new wave of ecological awareness will likely move the world away from dependence on them. The future of automotive technology is electric, and it’s easier than ever to join the revolution.

Electric vehicles (EVs) rely on high-powered chargers to refuel and are consequently most common among people living in or very close to major cities. Drivers have to plan around access to chargers when they’re away from home, although we’re trending towards increasing EV charger infrastructure. However, until these charging stations become as common as (or replace) conventional gas stations, folks will still rely heavily on their own homes to get a full charge for day-to-day use.

So how does this fit it into the home upgrade conversation? Admittedly this is the most speculative of our recommendations, but here’s the gist of it: if we assume either you or the people you know are soon going to be driving electric vehicles, it makes sense to start planning for the means to support them. Powerful EV chargers for the home aren’t exorbitantly expensive at the moment, are reasonably straightforward to install, and will serve as a source of convenience or potential income.

Charger systems are currently available in plug-and-play or integrated models, which differ in terms of price, portability, and power. Plug-and-play chargers are less expensive, very easy to install (you literally just plug them in), and can move with you if you change homes. Integrated chargers offer faster and more powerful charging, but are fixed once installed and come with a higher price tag. In either case, many provinces offer hundreds of dollars in incentives to folks purchasing EV chargers, which makes the price range a lot more palatable!

Bottom line

Fortunately for those of us frantically running behind the curve, we’re still a good number of years away from having truly crazy things like robot assistants/housekeepers that will need their own docking cradles or flying cars. Our recommendations above aren’t from the bleeding edge of tech development, but they don’t need to be. They’re practical, accessible upgrades that could improve your life with minimal intrusiveness. Though we’re looking ahead to the future, there’s no time like the present for the technologically-tardy!

Published by DLC Marketing Team & FCT

27 Jun

5 Tips to Stay Cool & Save This Summer.

General

Posted by: Frank Fik

To maximize your enjoyment, we have some great tips for staying cool this summer AND saving money while you do:

1. Cook in the Great Outdoors

Summer is all about enjoying the sunshine, spending time with your friends and family, and relaxing in your own personal backyard oasis. We suggest the grill masters take their place for a few months of BBQ-fuelled meals. By avoiding cooking in the house, not only do you reduce the heat from the kitchen, you are also naturally relaxing in your extended outdoor living space.

2. Take Advantage of Fans

Instead of cranking the A/C (and your electricity bill), consider cooling down with portable fans. Not only are these great options if your home is not equipped with air conditioning, but they can help ease the stress on your unit when used together! Portable fans work by creating a breeze, helping to circulate the air and causing a wind-chill effect that hits your skin and helps keep you cool.

PRO TIP: For an extra blast of coolness, place a bowl of ice in front of the fan to create a refreshing mist of air!

3. Shut Out the Heat

We wait for summer all year but, as nice as it is to have that bright light streaming though, it can also increase the heat in your house and cause extra stress on your A/C unit and fans. On especially hot days, keeping the curtains drawn can help reduce the heat input and allow your home to stay cooler and more comfortable!

4. Maintain Your Air Filters

An often-overlooked aspect of home maintenance are air filters. With summer in full swing, we suggest you check the filters in your home. Dirty or jammed up filters slow airflow and make the system work harder, thereby reducing airflow and causing the heat to build up in your home. Plus, ignoring the maintenance on these can lead to expensive repairs down the road. Replacing your air filters every three months is ideal to keep dirt and dust out of your system and ensure they are working optimally.

5. Swap to Energy Efficient Lighting

You have probably heard some of the reasons why LED lights have become so popular, but did you know that they also produce 75 percent less heat than incandescent bulbs, and can help keep room temperature down? This cannot only help keep your home cooler during those toasty summer months, but it can also help reduce monthly bills!

Whether you implement one or all of these handy cool-down tips, we hope you have an amazing summer season filled with backyard memories and enjoy your home to the fullest!

 

Published by DLC Marketing Team

21 Jun

Fighting fear about fighting inflation

General

Posted by: Frank Fik

The outsized interest rate hike by the American central bank, last week, is sending ripples through Canada’s housing market.

The U.S. Federal Reserve took the very rare step of boosting its trend-setting rate by 75 basis points at its June 15th setting.  Federal Reserve Chair Jerome Powell also set the stage for more, bigger-than-normal, increases in the future.

The U.S. increase follows a 50 basis point rate increase by the Bank of Canada on June 2nd.  Both central banks are engaged in a serious fight to bring inflation back to a 2% target.  Right now, inflation is nearly 7% in Canada, and almost 9% in the U.S.  This month’s hike by the Fed is fuelling speculation the BoC might also go for a three-quarter of-a-percentage point increase sometime this year.

None of this will do anything to relieve anxieties expressed by Canadian homeowners in a recent survey by Manulife.

The poll was conducted in April before this month’s rate hikes.  It suggests more than 20% of Canadians expect rising rates to have a negative effect on their mortgage, debt, and financial situation.  Fewer than half of those surveyed “feel prepared for rising rates.”

However, these fears may be the result of a lack of knowledge rather than any real risk.  The survey also reveals that nearly a third of respondents admit that they do not understand how inflation or interest rates work.  Many do not have a household budget or a written financial plan.

That suggests there are plenty of opportunities for brokers to provide sound information, so their clients can get on the path to secure home ownership and the financial benefits that can come with it.

Published by First National Financial LP

19 Jun

BC Real Estate Market Slows as Mortgage Rates Rise

General

Posted by: Frank Fik

BRITISH COLUMBIA – The British Columbia Real Estate Association (BCREA) reports that a total of 8,214 residential unit sales were recorded by the Multiple Listing Service (MLS) in May 2022, a decrease of 35.1 per cent from May 2021.

The average MLS residential price in BC was $1 million, a 9.3 per cent increase from $915,392 recorded in May 2021. Total sales dollar volume was $8.2 billion, a 29.1 per cent decline from the same time last year.

“Canadian mortgage rates continue to climb,” said BCREA Chief Economist Brendon Ogmundson. “The average 5-year fixed mortgage rate reached 4.49 per cent in June. That is the highest mortgage rates have been since 2009.”

Provincial active listings were 4.4 per cent higher than this time last year, the first year-over-year increase in active listings since 2019. However, active listings still remain below what is typical for a balanced market, though current market conditions have a high degree of variation across regions and product types.

Year-to-date, BC residential sales dollar volume was down 14.5 per cent to $46.7 billion, compared with the same period in 2021. Residential unit sales were down 26.3 per cent to 43,921 units, while the average MLS® residential price was up 16 per cent to $1.06 million.

Published by Business Examiner

(post note…..one must remember that May 2021 recorded an all time high in sales – so keep this in mind when comparing data – Frank Fik)

14 Jun

Collateral damage in the inflation fight?

General

Posted by: Frank Fik

There is a growing sentiment among market watchers that the Bank of Canada’s current fight against inflation is putting home prices in the crosshairs.

In the release of the Bank’s annual Financial System Review, Governor Tiff Macklem mentioned a desire for “moderation” in the housing market several times.  But he made the Bank’s priority clear.

“The housing market, it’s an important part of the economy,” he said.  We are watching it closely, but our focus ultimately is on the whole economy and in getting inflation back to target.”

That has some analysts speculating that the central bank may be willing to let housing prices and the general economy take a hit in the effort to tame inflation

With interest rates on the rise, the housing market has already seen a downturn in sales and prices, especially in the hottest markets.  While a 10% reduction in prices would reverse several months of gains, it would not be devastating to long-term homeowners or the economy as a whole.  But some recent reports have predicted a 15% decline in prices.  That could be particularly hard on those who bought at the height of the pandemic market.

The central bank is also warning that those buyers could be facing a 30% increase in their mortgage payments when they renew in 5 years.  The Bank’s current projections put fixed rates at 4.5% in 2025-26 with variable rates at 4.4%.

Debt-strapped Canadian households could find themselves forced to cut other spending to service their mortgage.  Taking that money out of the broader economy could slow, or reverse, the on-going recovery.

Published by First National Financial LP

6 Jun

When Was Your Last Credit Check-Up?

General

Posted by: Frank Fik

A few simple steps to healthy credit…

Just like you should have a physical every year to make sure you’re healthy, you should do the same for your credit report and score.

Don’t wait until you go to buy something and you are turned down. And don’t worry… chequing your own credit does not affect it. So, what should you be looking for?

MISTAKES

Make sure your personal information is correct and upto- date. Also check that your date of birth and any other identifying information is correct as well.

ERRORS

Even creditors make mistakes sometimes so carefully look over any negative information appearing on your credit that isn’t true. Creditors are required to change any errors that you find on your report.

HINT: Send a letter to the credit bureaus, as well, to let them know there was an error and send a copy to the credit agency who incorrectly reported to motivate them to take care of it in a timely manner.

OUTDATED INFORMATION

Credit agencies are required to remove certain information from your credit after a certain number of years. For example, if you got behind on your payments but then went back to your normal payment schedule, that late history is to be removed after 6-7 years. Don’t assume it will be. Be proactive and follow up to make sure it was done.

FRAUD

We all know someone who has had their identity stolen and nothing wrecks a credit score and report more than someone hijacking it. It doesn’t necessarily have to be a stranger either. Family and friends have been known to “borrow” someone’s credit. Be smart and make sure to protect your credit from the known and the unknown.

Why do errors matter?

Even minor errors like a misspelled name or a wrong address can keep you from getting a loan or even lower your credit score. Keep your credit as healthy as possible by checking it every year. Choose a day that will be easy to remember like your birthday or the day you file your taxes.

 

Published by DLC Marketing Team