Should You Pay Off Your Home Buyers Plan Early?

Spring is upon us (though the weather sure doesn’t feel like it) and real estate is just about to boom. That means home sales and purchases will be on the rise. In the mix will be a number of first-time home buyers. Buying a home for the first time is one of the most exciting and completely terrifying life moments. It’s thrilling to experience looking at homes, horrifying to see the inside of some homes and inspiring to see others. When you find the right home for you, you want to make sure you have everything in place to make it yours – and still do it right. There have been recent changes to the down payment requirements in Canada and this can make it challenging. This is where the government actually offers some assistance in the form of the Home Buyers’ Plan (HBP). Using this plan, you can use up to $35,000 from your RRSP for purchase of your home. If you’re buying with a second first time buyer, they can also withdraw the same amount giving you up to $70,000. That can make for a pretty nice house! Using the HBP may allow you to avoid paying CMHC fees. Mortgage default insurance is required for any home buyer who has a down payment equal to less than 20% of the purchase price. This is meant to protect the lender but it also opens up the purchasing option for those who don’t have the funds. The Home Buyers’ Plan is a great program, especially if you understand the parameters. You have 15 years to pay the funds back into your RRSP and this is an important number as any amounts not paid back are considered income and taxable. Now the question of paying it back should you come into some money. There are a couple of ways of looking at it. Say you’re required to pay back $500/year but you find yourself with $1000. You could put $1000 on your HBP and it will decrease the length of time for complete payback. This will improve your returns as you will start earning on those amounts. The other way to look at it is to take the $500 and put it towards your HBP and take the other $500 and claim it as a RRSP contribution which will benefit your tax return. Both are good options, it depends on your goals. Sometimes it helps to discuss these options with an independent party to get a better understanding of what this all means. As a Financial Planner, we can help clarify the best way to approach this exhilarating moment in time. Not to mention we can also help with setting up your mortgage based on our years of experience and contacts.

School’s Out, Time to Pay

Graduating school, whether it’s high school, College or University should be one of the most exciting times in your life. Post-secondary education is a milestone which should open doors to your new future. You spent years putting in hard work with late night study session, writing papers and finishing assignments and you should be proud. Now, as you’re walking up to accept your diploma to the applause of your friends and family, instead of celebrating, all you can think about is the task of paying off your student loans. According to the National Student Loan Centre, it takes an average of nine years for Canadian students to pay off their student loans. With the average student debt around $25,000, it is becoming more important to create a plan for repayment. It can be overwhelming to think about what you owe, to whom and how you’ll repay it while still having a life. We’ve put together some suggestions for your plan:

1. Determine Who You Owe You may not even know what you owe and when it is due. The first step in the process is to determine who you owe money to.
   
2. Read the Fine Print Some people are aware of the grace period when it comes to student loan repayment however the interest on the federal portion starts on day one of graduation.
   
3. Compare Interest Rates and Rank Loans Each student loan has a different interest rate and payment schedule. Be sure to compare all the loans and the fine details to determine which loan to start with. Obviously start with the one with the highest interest rate.
   
4. Create a Budget It’s easier than you think; it’s not as scary as it sounds. Go through all your accounts and look for regular expenses. Go six months back at a minimum to ensure you capture quarterly payments. From there you can map out monthly, quarterly and annual bills to give you a clear indication of what you have left to spend and what you can put towards your debts.
   
5. Pay Yourself First Once you have secured employment, review your budget again and slide that debt payment up. Most students don’t make adjustments to their repayment plan in relation to their income. For bonuses and tax returns, as tempting as it is to spend it, you are better off making a lump sum repayment.

Long story short, repaying debt takes sacrifice and compromise. In order to retain your sanity and life quality, decide what you can and can’t live with and be reasonable with yourself. Chip away at it and celebrate your successes instead of wallowing. Don’t be afraid to ask for help, from your family or reach out to us. We’d love to help.

Struggling with Finances? You’re Not Alone

When you’re sitting at the table shuffling through a stack of bills, or you’re scared to check your email for fear of finding new bills, it’s easy to think you’re all alone.  It’s natural to become overwhelmed and believe there is no way to dig yourself out of your current position. This type of thinking plays directly into your perception of yourself and your self-worth.
Manulife has been studying the link between health and wealth since 2014. What they’ve found was in 2015, financial wellness was connected to productivity. In 2016, it showed that 40% of Canadians are financially unwell. I guess you’re not so alone after all…
In 2017, what has come to light through speaking with professional counselors is there are emotional barriers to financial wellness. People are embarrassed to share their financial woes, are ashamed and feel like they’ve failed. More than half the time people seek help, financial troubles are a part of it and only 1/3 of them see the connection between their financial struggles and their other challenges.
Financial worries can lead to physical manifestations of stress and create or amplify mental health concerns. This level of stress impacts the ability not only to be productive in the workplace, but sometimes to attend the workplace at all. In an average week, 500,000 Canadians miss work, and a whopping 30% of disability claims and 70% of disability costs are associated with mental health issues and illnesses.¹
Organizations have the opportunity to provide resources to help. With the right group benefits plan and provider, employees can have access to comprehensive health benefits which include both physical and mental programs. Many of these plans also promote financial well-being and preparedness.
YourStyle Financial is an independent group benefits consulting firm. We offer a range of services geared to help our clients maximize the strength of the dollars they spend on benefits. Schedule a lunch and learn today or contact us.

Divorce Debt and Next Steps

We’ve covered how to financially survive a divorce and dividing assets, now it’s time to get down to the brass tacks – debt. Some couples come into a marriage with debt, as we talked about in one of our blogs “So You’re Getting Married”, and some couples accrue debt during their marriage. Either way, when a marriage comes to an end, that debt must be dealt with. One approach to addressing marital debt is to pay it off before filing for divorce. This requires a couple who can speak candidly to each other regarding this topic as well as two people who are willing to accept that debt is generally mutually created and accept joint responsibility. More often than not, this situation is just not a reality. Debt is quite often a major instigator of marital breakdown.

Why Is Credit So Easily Accessible?

Doug chatted with CTV’s Morning Live to discuss a growing problem with students and credit being so accessible. Students particularly are graduating with more debt and have no idea how to deal with it. Institutions are focusing on future earning potential. Learn how a Financial Planner can help secure that.

A painless way to cut back on expenses

With the current economic uncertainty, many people are looking for ways to reduce expenses. A relatively painless way to reduce your monthly expenses is to have a second look at the way you’re managing your debt. Over time, most of us take out a variety of loans for different purposes. These can include things like credit card debt, car loans, home renovation loans and, of course, the mortgage. And if you have more than one loan, you’re most likely paying a different interest rate on each loan. One of the easiest ways to reduce your monthly interest costs is to consolidate your debt at the lowest rate. Typically, your lowest-rate debt will be a loan that is secured by an asset, such as your home. If you have sufficient equity built up in your home, consider switching to a product that allows you to access your equity, such as a home-equity line-of-credit. Then, use this line of credit to repay your higher-interest loans. In this way, you’ll be bringing all of your debts together into a single account, at a single rate. Some line-of-credit products even allow you to track debts separately within the account so you can continue to keep track of interest costs and repayment separately. Not only will debt-consolidation save you interest but it will make it easier for you to keep track of what you owe and how you’re progressing in paying it down. Reducing your monthly expenses is one way to deal with economic uncertainty – and it doesn’t have to be painful. By borrowing smarter you can reduce your interest costs and increase your cash flow each month. If you’d like to learn how to reduce your monthly interest costs, give me a call and I can discuss some options with you.

Women need to take an active role in financial planning

When it comes to money, women’s main concern is working on a budget to lower debt and save more money. The second concern is to develop better skills in investing, and third is to create a financial plan and investment strategy. It’s imperative for women to take an active role in financial planning.  There is a very high probability of women being solely responsible for their finances at some point in their lifetime due to divorce or outliving a spouse. Nearly one-quarter of women say they don’t partake in financial decision making. “Women can make changes to their finances such as lower debt, save money and become good investors.  Making changes to your financial plan doesn’t have to be as difficult as it is perceived to be,” says Doug Buss, President, YourStyle Financial.

Is there Such a Thing as “Good Debt”?

financial sense. Let’s go back to the car payment for example. As we see from time to time, dealers and manufacturers will offer as much as 0% interest over a given period. You don’t outright own your car at this point, but you’re also not “losing” money by paying out the additional fee associated with an interest rate. Thus, the final cost for your car will be $30,000, whether you pay a lump sum now or spread it out over the payment cycle, say of 60 months (or 5 years). While you pay this down, meanwhile, your set-aside $30,000 for the car can be making money for you. Putting the money into a monthly or annual payout situation means that at the end of those five years you’ll have made some extra cash on your investment. Ultimately, debt in some circumstances can work for you rather than against you, but it’s knowing all the parameters in advance and being prepared. If, as in the scenario above, you aren’t a big car person and aren’t loyal to a particular make or model and a 0% offer comes up, you may want to look a little deeper at taking advantage of this situation. For more tips from Doug Buss and the experts at YourStyle Financial, check out our newsletter archive.