Reorganizing Your Debt

You’re not having any problems paying your debts on time, but it would be nice to simplify the budget a bit. Fewer debts to manage is one way of making things simpler. You could look into options for Ontario loans that would allow you to borrow enough money to pay off all of those credit card and other debts. That would leave you with one obligation to manage rather than several. 

One of the perks of this approach is that loan’s interest rate could be better than the rates applied to all or most of your debts. Along with making it easier to manage your debt, a lower interest rate will mean you can retire the obligation sooner rather than later. Think of the amount of money you will end up saving along the way. 

Remember that if you want to enjoy the maximum benefits from this strategy, avoid incurring any new debt. The only exception is some type of emergency like a car repair. Even then, pay off that new debt in one to two months. When your loan is settled, you get to enjoy some time being truly debt-free. 

Avoiding Interest on a Bill

You have a bill that needs to be paid in full as quickly as possible. If it rolls over for another month or two, the interest will be significant. You may find that personal loans offered by Magical Credit help you avoid the higher interest charged by some creditors. While you do still pay interest on the loan, the fact that the rate is lower saves you money. That’s always a good thing. 

Taking Care of a Pressing Need

There are times when you need to take care of something before it turns into an obligation that’s more complex and expensive. For example, you need new tires for the car now if you want to avoid the possibility of a blowout at the worst possible time. Keep in mind one of those older tires could blow out when you’re driving at a faster speed. The risks to you and to the vehicle itself are significant without those new tires. 

In this situation and similar ones, taking action now helps avoid worse issues later on. Obtain the loan and buy the tires now. While you may never know how much you save in terms of repairs and possibly medical costs, knowing you can drive the car safely makes the loan worth it. 

Emergency Funds At Your Disposal

Something unexpected happened and you need money right this minute. Perhaps it was a dental issue that had to be corrected without delay. Maybe you needed travel funds to get to a sick relative or friend. The nice thing about personal loans is that they can often be obtained in a short amount of time. That makes it easier for you to handle the emergency expenses without having to wait. 

Take Advantage of a Good Deal

It’s not so much that you need something right now or that you want to take care of a pressing debt or pay off several debts at one time. You’ve come across some type of deal that is not likely to repeat itself later on. It could be a one-time chance to purchase a second vehicle at a great price. Maybe it’s the opportunity to pick up something that one of the kids will need for a college dorm room next year, and the price is too good to pass up. Unfortunately, you don’t have the spare funds to grab that great deal. 

A personal loan can supply the cash needed to claim that deal and save a lot of money over time. Buy the car and use it whenever you like, even as you look around and notice that the great price for that make and model is not found anywhere else. You can also smile with satisfaction when the item you purchased for your child ends up costing a lot more when he or she does finally head for college. 

The post 5 Simple Ways That Personal Loans Help You appeared first on Canadian Personal Finance Blog.

The following are some things that you can do within a short period of time to help improve your credit:

1.      Pay off any overdue payment

Since your payment history contributes to a significant portion of your credit score—35%—it is critical to pay any account that is past its due date. The more days that pass after your payment’s due date, the more damage is being done to your credit rating. You should talk with your lender or credit card issuer to sort out any overdue accounts before they are shared with the credit bureaus. Your card provider may even be willing to re-age your accounts if you approach them, so that your credit report would show timely payments throughout.

2.      Seek professional assistance

Your debt burden may be too overwhelming to the extent that you cannot handle it. In this case, you need to look for professional help, for example from a credit counseling agency or from a financial analyst, to help you see how you can cut your expenses and repay some loans. Additionally, you can engage a professional in improving your credit, to work with you on improving your score by using tradelines.

3.      Stop further credit card purchases

Consider avoiding any more credit card purchases, as they make your credit utilization go up. Credit utilization is the ratio of the amount you owe on a card to its credit limit. For example, if your card has a limit of $3000, and the outstanding balance is $2000, the credit utilization is 0.67. For the same limit, but with a balance of $1000, the credit utilization is 0.33. High credit utilization hurts your credit score. Avoid further purchases with your card to stop raising the credit utilization, and instead, pay with cash or even minimize your cash purchases to only what is necessary, and use the rest of your money to pay off your card balance.

4.      Check your credit report

Get a free copy of your credit report from the major credit bureaus and go through it to check for any errors. If you spot an anomaly, like late payments reported by mistake, get in touch with your lender and the credit bureau to rectify it. Though the effect may not be instantaneous, the corrections will be visible on subsequent reports, and you will have started to correct the wrongs. If need be, pay a fee for the report, since the benefit of correcting any error that could be hurting your score or using the report to strategize how to improve your score far outweighs the cost.

5.      Put any new credit card application on hold

Hard inquiries on your credit score, necessitated by the application of a new credit card, will hurt your score, so avoid applying for a new card when working on boosting your score.

The bottom line

You have many redemptive measures you can do right now to help your credit, like paying overdue debts and reducing the usage of your credit card, so make wise decisions to help improve your score.

The post 5 Measures You Can Take Now to Help Your Credit appeared first on Canadian Personal Finance Blog.

Of course, before you can actually improve your credit score, you need to know what your contemporary credit standing is. The three digit score is all you need. While you can opt for the traditional method of mailing which requires some patience, with a small fee you can receive an online report immediately. Refer to the online portals of the largest Canadian credit bureaus such as TransUnion and Equifax for further info. If you need a bit of exposition to make heads or tails of what the report entails, the Canada Government site has a nifty article that covers just that.

1. Take responsibility

The important thing to realise is that you need to be responsible for your credit score. Keep existing debts running and slowly pay them off demonstrates your accountability as a credit user, and it will slowly improve your score. Even just making timely bill payments help. Ensure that you stick with the credit account for a long period too, as it’s reassuring to loaners when you have a long history of responsible credit usage to refer to.

2. Be practical

If you’re still afraid that you might forget about the payment, even after proper budgeting, set up automatic payments. Punctuality is a virtue anywhere, including in paying debts. It’ll also help if you actually use your credit more often, as counterintuitive as it feels, as you’ll actually have more opportunity to improve your credit score.

3. Don’t Bite Off More Than You Can Chew

Crucially, if you don’t have any present financial dedication, consider getting a car loan that’s within your monthly expenditures. As long as you stick with reputable dealerships that liaise with major lenders that can potentially aid you in regaining credit score. Revolving credit with prompt payments that gets reported to the credit bureau can really boost your credit score. If you can’t quite afford new cars, try to look for used cars a few years older, as long as it fits into your monthly allocation, it will raise your credit score.

4. Track your spending

Perhaps most critically is to actually manage your credit spending. Understand credit isn’t actually there for you to buy all the things you want, rather it’s just a convenient alternative to purchase items you really need. In fact, you should try to avoid brimming your credit limit, sticking to around 30% is a good idea. If you can bear the higher expense, request to raise it to keep your overall credit utilisation low.

Credit loans are incredibly handy, as long as the consumer using it actually knows what it’s for. Staying rational plays a major role here, since being able to use more money than you actually have is a tempting prospect. If you still have any lingering doubts, please let us your comments below.

The post 4 Ways to Improve your Credit Score in Canada appeared first on Canadian Personal Finance Blog.

To help young professionals get started, here are a few tips to help begin the savings process.

Savings Account

While most individuals open a saving or checking account prior to graduating high school, many do not. Aside from a RRSP and other saving accounts, open a separate account to begin stashing away for the future. Perhaps this money will serve a purpose like help buy a car or use for a down payment for a first home. Have a goal in mind so that you’re able to turn a “want” into reality. Perhaps this savings account will help pay off any student loans. Whatever the desired savings account is used for, make sure to save realistically. For example, setting aside less than $100 a week will quickly add up. If you think this amount is too much, consider how much lunch and coffee runs cost you as you might find both add up quickly to more or less the same amount.

Budgets

It is impossible to prepare a good budget and stay within spending limits if a budget is not implemented. Working a full time job has highs and lows with receiving a paycheck ranking pretty high up. Using programs like Excel or creating a free bank account online on Mint.com, young professionals can begin creating a realistic budget dividing “must have” items like rent, bills and food verses “wants” like new clothes, dinners out and entertainment. Creating a budget is helpful to track any and all spending to view how much is absolutely spent in order to avoid dipping into the negative. Your budget may also include future savings such as retirement and emergency funds.

Credit Card Caution

Once a budget is in place, now it the time to figure out how to pay for items. If a credit card is in question, make sure to consider APR rates and research awards and benefits to you. Prior to selecting a credit card, consider a free credit report to determine what percent tile you land to help determine which card is best suitable for you. If you’re in the early stages of building credit, credit cards help create and increase a fantastic credit report. However, make sure to watch spending limits as the amount spent is due monthly. Carrying over hefty credit card bills might cause problems later down the road.

In The Know

Family and friends are great influences but maybe not necessarily all the time. If deciding upon what financial budget is right for you and want an industry professional opinion or additional insight to how to go about saving money properly, consider reading financial publications covering important financial topics such as: Forbes, Fortune, MoneySense Magazine, Fast Company, The Economist and Wire.  Taking time to speak with a financial planner or adviser is highly beneficial to discuss and smooth out any uncertainties one may face while determining a financial plan.

Planning for your future as a young adult might seem overwhelming and a bit intimidating so take some time to focus and think what it is you want tomorrow, today. Being able to track expenses and budget wisely keeps you in financial shape for months and hopefully years to come.

The post Young Professional Personal Finance Tips appeared first on Canadian Personal Finance Blog.

Life insurance comes in many different forms: whole, variable, term, permanent, just to name a few. The variations are endless, and the additional riders which can be added to a policy can make a person’s head spin. The important thing to remember when it comes to life insurance, is that the purpose is usually to replace lost income (or duties) in the event of a death. By keeping that in mind, it becomes easier to wade through some of the noise when it comes to life insurance offerings.

Term Life Insurance Defined

Term life insurance is perhaps one of the easiest products to understand because it operates similar to other insurances which people are accustomed to. There is a period of time which a policy is in force (the term), and a person pays a fee (the premium) every year that they wish to maintain coverage. A typical term policy will be written for a specific time period, such as 5, 10 or 20, and the premium payment will stay the same the entire time.

Term Life Insurance Cost

The cost of a term policy is typically related to the age, gender and health of the applicant, as well as the length of time for which the policy will be written. Healthy young people are less likely to pass away, so their policy amounts will be lower. In comparison to other life insurance products, term life insurance almost always provides the most insurance coverage per dollar.

Term vs. Other Life Insurance Types

As stated before, life insurance is designed to replace lost income or duties of a particular person in the event of their death. Term life insurance works exactly in this way. For example, a married couple where each person makes $50,000 a year may take out a $500,000 policy on each person to help cushion the financial blow to the household should one person pass away. The insurance payout could then be invested and drawn upon to help replace the deceased’s income.

Since insurance premiums for term life insurance are some of the lowest around, the additional savings can then be invested for long-term retirement or other goals, while still maintaining adequate insurance coverage.

Other insurance products such as whole life and variable life policies cost a substantial amount more than term. These types of policies use some of the excess premiums and invest them on the policy owner’s behalf. That means down the road they will have funds available through the policy, but the returns are often sub-par compared to a typical investment portfolio.

The cost of these other types of insurance products can often be 5-10x that of term, and many times offer less coverage in the event of a death. While there certainly are scenarios when these products make sense for individuals, it is very important to speak with a financial planner before signing up for one. The commissions on these other types of life insurance products are tremendous, so sales agents are very eager to get their clients into them.

The post Why Term Life Insurance is the Best Choice for Many Individuals appeared first on Canadian Personal Finance Blog.

Well, my thoughts are that RRSP contributions come from Canadian’s disposable income. This means that Canadians will contribute to their RRSP with their after-tax dollars after they paid for their cars, shelter, food, and entertainment.

Here is a chart that shows the average home prices in Canada (even one line excludes Vancouver and Toronto).  This was provided by RBC (January 2012)

You do not have to be an economics expert to see that prices have shot up in little time (almost doubled).

After you pay all your bills Canadians are finding little money to contribute to retirement. I understand many people will try to say that:

[quote]A main reason given is that as the country ages, a smaller proportion of people are in the peak-contribution age range of 45 to 54. [/quote]

That is still a small cohort compared the rest of the population that should be contributing (18-45 years old). In order to take advantage of compound interest, you need to contribute as early as possible.

Here is a chart that shows the family income (from Human Resources and Skills Development Canada)

Median after-tax income, by family unit, Canada, 1976-2007 (2007 constant dollars)

You can see from the chart that household income has not risen enough to support this major boost in housing.

Another reason, is that the TFSA has gained in popularity and people with defined pension benefits are making contributions to their TFSA instead of RRSP to avoid the potential clawback.

I see that the reason Canadians without a pension aren’t contributing more to their RRSP is that there is no more money left to contribute. 

The post Why RRSP contributions are low in 2012? appeared first on Canadian Personal Finance Blog.

Tax preparation is really a crucial reason to keep an in depth set of books; however there are other aspects at play. It is vital that you understand how much money your company is generating as well as how and where the cash is being invested. Make a comparison of your results to industry standards to figure out where you have to improve your business. You must also compare this year’s product sales and costs to the prior years to make a note of your improvement in the business world. Critiquing the balance sheet accounts of this year (liabilities, cash, receivables, and so on ) to earlier years will even help establish revenue and product sales objectives.

Why Outsource?

Outsourcing your business’s bookkeeping to a certified bookkeeping provider can help you save operating costs, staffing overhead, administration time, clearing up important capital and boosting your abilities so you can operate your business more proficiently.

Your full-time bookkeeper will perform the tasks that you do not have the time, skills or wish to do. Those irritating bookkeeping jobs that keep you from the core of your business can become the burden of your bookkeeper instead.  These jobs include:

• Documenting and reconciling banking activity
• Documenting and reconciling charge card activity
• Preparing product sales return
• Documenting payroll
• Printing financial statements

A typical misconception is that a company proprietor will lose control when they delegate their bookkeeping. With the correct techniques in place, the business owner keeps all administration decisions and the bookkeeper just tracks and correctly records the accounting activities.Having a certified bookkeeper on your side, your company could be much more profitable, more effective and more competitive. You will get precise reports highlighting your company activities so that you can make choices which will keep your company moving forward. Not to mention, all those deadlines you have will be fulfilled without you having to give them a second thought.

As a business, you have to be really careful of the money and income flow. Likewise, the costs too should be documented and regulated. In this circumstance, you will find the job of a bookkeeper to be very useful. If you are not in a position to maintain a record of your transactions in your financial ledgers, you will most likely end up with false earnings statements as well as an unmatched balance sheet. This should be prevented no matter what.

In addition, the professionals you will be employing from the bookkeeping services are usually well qualified. What this means is the overall efficiency of the worker will be a lot more than any other conventional full time bookkeeper. For that reason you have to consider getting bookkeeping services from the specialists as quickly as possible.

It is one thing to have a precise and updated snapshot of your business’s financial records. It is another to comprehend just what it means when it comes to your company’s development. With regards to analyzing cash flow statements, determining burn rate and knowing other essential monetary information, a financial bookkeeper will help a start-up company stay in front of competitors.

The post Why Outsourcing to a Bookkeeper is a Good Idea appeared first on Canadian Personal Finance Blog.

We all know that house insurance is made to cover the entire property, and if you rent, renters insurance covers various things within your unit like furniture, jewelry, and other valuables. But with a condo, what do you really need when you’re in the market for condo insurance? Here are some questions you should ask in order to fully understand what is your responsibility to replace and what is not.

What is Not Your Property?

Unfortunately, there is no set standard from what you own and what you don’t own in your condo property. All complexes can have a different policy, so it’s important to read yours and understand it. Typically, the exterior is not yours, which includes the shingling, the outside of your exterior walls, and the yard (and any communal perk like a swimming pool, tennis courts, etc.). Since you don’t own these things, then you really don’t have to insure them. They should be insured through your association.

What’s Commonly Yours to Insure

As a rule of thumb, most associations believe that the property that is within your four walls are yours to insure, which actually includes the drywall as well. So, if you accidentally set fire to your kitchen, the repair cost is coming out of your pocket, not out of your association’s.

Insuring the interior of your condo can be done through an outside insurance agency, or it can most likely be done through your association as well. Just be sure to understand exactly what’s covered within the policy though. Here are two policies that are very similar, but have their distinct differences.

• Bare Walls In – this policy covers all real property from the exterior framework inward, but does not include fixtures such as lights, countertops, or faucets. These extras will need to be covered by a separate policy.
• All-in – this policy covers fixtures, installation, and even additions within the interior walls. If you have this coverage, you most likely won’t need much else.

How Much Coverage Do You Need?

Once again, there isn’t one standard answer for everyone. What you should do is take an assessment of the interior value of your home, including the valuable non-fixed contents as well. So, you have the current value, but you should also research how much it would cost to replace these items as well? More than likely, the replacement cost is higher than the appraised value of all your items. If I were choosing an insurance policy, I would most likely go with the one that would pay me the replacement cost, since that’s what it’s actually going to take to make my home seem like home again.

Another factor in your insurance could be the amount of money you have sitting in the bank. After all, if you have $10,000 in the bank, then perhaps it’s not as important for you to get the best coverage for the inner contents of your condo. The less value you insure, the less you’re going to pay each month for the coverage.

The post What Do You Need to Insure For Your Condo? appeared first on Canadian Personal Finance Blog.

Yet, prior to purchasing a policy, it is important to know how much coverage will be necessary, as having too much or too little life insurance can turn out to be an irreversible financial mistake. This is something that survivors don’t want to discover after it’s too late.

Evaluating Your Life Insurance Needs

The proceeds that are received from a life insurance policy can be used in a variety of ways, depending of the purpose of the coverage. With that in mind, it is wise to estimate how much would be needed for survivors or beneficiaries going forward.

Unfortunately, many people far underestimate how much their loved ones may need in the event of their death. While there are several “rules of thumb” such as simply purchasing a policy that is double the amount of your annual income, this typically has nothing at all to do with the amount of coverage that a person actually requires.

Rather, when determining an appropriate amount of life insurance, you will be much better off considering actual financial needs of what it is you are covering. For example, if the policy will be purchased to cover final expenses, it’s a good idea to do some research on just how much you may need. In this case, the average funeral today is estimated to cost around $9,000. (1)

Likewise, if the policy will be purchased to replace income for a spouse and children in the event of a breadwinner’s death, there are a number of factors to keep in mind, such as the amount of annual income to replace, as well as how long that income would need to be replaced. In addition, rising future inflation must also be considered.

As Your Life Changes, So Should Your Life Insurance Coverage

It is also important that as your life changes, so should your life insurance coverage. This is especially the case as your family expands and your current – and future – expenses tend to increase. Future college and wedding expenses should be allocated for, as should ongoing living costs like maintaining the family home, utility payments, and the cost of food and clothing. It all adds up.

By reviewing your current coverage at least once per year, you can determine whether or not any additional life insurance should be purchased in order to cover your expanded business or personal needs.

Taking the Next Step

While coming up with an approximate amount of necessary coverage is a good start, it is always a good idea to meet with a life insurance professional prior to actually purchasing a policy. This way, you will be able to obtain a more accurate figure, as well as determine what type of life insurance protection may be best for your specific situation and needs.

The post What You Need to Consider When Buying Life Insurance appeared first on Canadian Personal Finance Blog.

Canadian Car Buyers Look to Lower Monthly Payments

When looking for the reasons to explain why these recent trends have emerged, many of these changes are seen stemming from recent moves by the Bank of Canada to reign-in excessive borrowing practices. Most of the Bank’s focus has been directed at mortgage debt but there have been indications that suggest this could extend to into the auto-lending sector as well.

The increased popularity in long-term loans when purchasing new vehicles in Canada has shown dramatic increases in recent years, as potential buyers look for ways to cut back on a central component of the family budget – the monthly car payment. At this stage, reports from J.D. Power and Associates are showing that a majority of the Canadian car buyers who borrow money in order to finance their automobile purchases are taking out loans with contract periods that are longer than six years. This is a massive difference from what was seen just 5 years ago, when less than 15% of Canadian car buyers had loan periods of this length

Recent Trends Get the Bank of Canada’s Attention

In fact, these trends in consumer debt have been so volatile that Bank of Canada Governor Carney has issued public warnings suggesting that personal debt in Canada has reached unacceptable levels, and these warnings have picked up in terms of urgency this past year.
In the first quarter of 2012, personal debt in Canada rose to 152% of disposable income, which is an all time record for the country. Carney’s warnings were echoed by recent statements from the IMF and the Canadian Finance Minister (Jim Flaherty), who moved several times to enact tighter mortgage rules as a means for slowing down a potential bubble in the housing market. But these moves ultimately increases the total costs of buying a home, and when taken into consideration with stalling income growth, many Canadians have found themselves looking for ways to reduce monthly payments in other areas.

Rise in Interest Free Loans

With all of these factors coming together at once, automakers and financial institutions looking to increase sales have begun to offer more interest-free loans with contract periods lasting up to eight years. This essentially means that consumers are being offered free money for the first seven years at neighbourhood car dealerships – a key indication that automakers are using any and all means available for luring potential buyers into their showrooms.

The recent surge long-term car loans shows that households are experiencing added financial pressures in other areas and consumers are looking for ways to either extend their payments or to simply lower their monthly burdens in order to free additional disposable income.

When seeing “easy money” loans of this type, it will not be a major surprise to see large growth in non-mortgage related debt in the coming year. In 2007, 17%of car buyers traded in a vehicle that was attached to a loan which was not fully paid. This year, the number has risen to 26%, so trends in rolling debt have picked up speed.

It appears, at this stage, that Canadian car buyers do not think about car costs in terms of their total values, but rather in terms of monthly payments. Canadian car owners are finding themselves in a position where the main objective is maintaining lower payment obligations in the near term. Additionally, we have seen declines in the use of lease agreements as a means for purchase. Monthly payments for vehicles that are based on leases tend to be much lower than the monthly payments that are associated with loans. Prior to the 2008 financial crisis, over 40% of Canadian consumers leased their vehicles instead of financing these cars or purchasing the cars outright. Since the recession, leasing has seen dramatic decreases, representing a mere 17% of total car transactions over the last year. Looking forward, these trends could prove critical in determining the level of personal debt accumulated by Canadian consumers.

The post Why are Canadian Consumers Opting for Long Term Car Loans? appeared first on Canadian Personal Finance Blog.