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Money Tips
Money Tips

Judging the Enactus Regional Exposition

Earlier this month, I had the privilege of judging at the Enactus Regional Exposition in Western Canada. Alyssa from Mixed Up Money and I were invited to be part of the judging panel for the Capital One Financial Education Challenge, in which student groups from post-secondary education institutions across Canada present projects they created that use financial literacy to improve the livelihoods of people in their community.

About Enactus

Enactus is a community of student, academic, and business leaders that are committed to making the world a better place through entrepreneurship. They focus on empowering students to take entrepreneurial action to improve the lives of those around them. Enactus currently operates in 36 countries at over 1,700 post-secondary institutions. They host a series of regional, national and global competitions, which provide teams an opportunity to showcase the impact of their outreach projects.

About the Capital One Financial Education Challenge

The 2017 regional competition for Western Canada was hosted in my city, Calgary, Alberta, on March 2nd and 3rd. It consisted of four separate team-based competitions focused on financial education, environmental sustainability, youth empowerment, and entrepreneurship.

Both Alyssa and I were judges in the Capital One Financial Education Challenge, where student groups presented the unique and creative ways they were using financial literacy to empower people in their communities. The challenge is just one of the initiatives Capital One is involved with to help empower Canadians to make smart financial decisions.

We heard from 13 different Enactus teams, each with an innovative way of using financial literacy to improve the livelihoods of people in their community. Each team was judged on their ability to see an opportunity, take action through financial education or inclusion programming, and improve livelihoods in an economically, socially, and environmentally sustainable way. No two teams presented the same solution, and all of them showed both ingenuity and passion in making the world a better place.

Since 2012, the Capital One Financial Education Challenge has engaged 6,316 students across the country, resulting in 620 financial education outreach projects, and directly impacting the financial futures of 69,826 people. Their simple, sustainable solutions to big challenges result in lasting change, both in their communities and beyond.

The Impact of Financial Literacy

One of my favorite parts of the competition was seeing teams who focused on specific groups, such as at-risk youth or teen mothers. When we talk about financial literacy, we usually focus the conversation on people that already enjoy significant financial privilege. For example, if you have student loans, it means you had good credit and were able to attend a post-secondary institution. Likewise, if you’re trying to determine whether a TFSA or RRSP is better to save for retirement, it means you have money left over from each pay cheque to put towards long-term savings. We tend to forget that, for many people, the financial challenges they face in their day-to-day lives are things we never even think to worry about.

My favourite Capital One Financial Education Challenge project was Count on Me by the Enactus team from Simon Fraser University. These students recognized that many young people were spending too much of their income on cheap, nutritionally deficient take-out meals. Over the course of eight weeks, they taught workshops that shared both financial literacy and cooking skills to disadvantaged youths. The financial workshops included topics like Budgeting, Banking & Saving, and Income & Taxes. The cooking classes gave students hands-on experience in how to make delicious, healthy, affordable meals. The combination of financial savvy plus life skills made the Enactus SFU program stand out above the rest in the competition. I love that they addressed two significant problems at once.

Related Post: Achieving Financial Stability Through Entrepreneurship

The Enactus student teams that most impressed me were those that found solutions to uplift and empower people who need it the most, but all of the student teams did an extraordinary job. Not only were their projects creative and inspiring, they were all passionate young entrepreneurs and expert presenters. I loved seeing entrepreneurship in action to make a lasting difference in the world!

Final Thoughts

To say judging the Capital One Financial Education Challenge for Western Canada was inspirational is selling it short. The student groups showed just how significant the long-term impact of financial literacy can be.

Money Tips

How To Use The RRSP First-Time Homebuyer’s Plan

Home ownership is still a cornerstone of the financial plan of most Canadians but with the average house price in Canada nearly $500,000, it’s not always easy to get a foothold in the real estate market.

One of the ways the Government of Canada has made home ownership more accessible is through the RRSP First-Time Homebuyer’s Plan. But how do you actually make use of this great tool to buy your first house?

What is an RRSP?

The Registered Retirement Savings Plan (RRSP) is a tax-advantaged saving or investment account for your retirement. Your individual contribution room is proportional to your taxable income and works out to be approximately 18% of your gross income earned.

Unlike the Tax-Free Savings Account (TFSA), money in your RRSP is simply tax-deferred, not tax-free. This means you won’t pay taxes on it the years you make your contributions, but your withdrawals from you RRSP in retirement will be subject to income tax then. Because the majority of people will have a lower income in retirement than in their working years, you can save a whack of income taxes by contributing to you RRSP now and make the withdrawals in the future when you stop earning an income. Want to learn more? Check out my video: The RRSP Explained in 3 Minutes

What is the RRSP First-Time Homebuyer’s Plan?

The RRSP First-Time Homebuyer’s Plan (HBP) lets you withdraw up to $25,000 from your RRSP without penalty for a down-payment on your first home. If you’re buying a home with your partner, they are also eligible to withdraw up to $25,000 from their RRSP under the HBP for the downpayment, giving you $50,000 altogether for a down-payment on your home.

The RRSP First Time Homebuyer’s Plan is an awesome way to unlock funds you have saved up in your retirement accounts without penalty. Normally, a withdrawal from your RRSP would be subject to income taxes. However, under the HBP, you’re withdrawing the money as a tax-free loan to yourself. You will be required to repay the amount beginning one year after you’ve purchased your house.

You will be required to repay the amount you withdrew from your RRSP under the First-Time Homebuyer’s Plan over 15 years, beginning one year after you’ve purchased your house. If you withdrew the full $25,000 under the HBP, your repayment amount will be $139 per month ($1,667 per year). You can — and should — continue to contribute more to your RRSP on top of your HBP repayments, and these will be counted as new RRSP contributions.

You have to have money in an RRSP to use the Homebuyer’s Plan

This is an obvious statement but I want to emphasize it anyway: you need to actually have $25,000 in your RRSP if you want to withdraw $25,000 for a downpayment on a house. To save this amount, you’d need to set aside approximately $400 per month for 5 years.

It’s easier to save money in your RRSP than you might think. Because this is a tax-advantaged account designed to let you contribute pre-tax income to your retirement savings, doing so can really give you a break when you file your income taxes. If your income is greater than $50,000, it can make sense to make contributions to your RRSP and claim these contributions when you file your taxes. This will usually result in an income tax refund, which you can further use to top up your RRSP.

To use the First-Time Homebuyer’s Plan, simply withdraw your money from the account

Most people know about the First-Time Homebuyer’s Plan and why it’s a great idea, but when it comes to actually withdrawing the funds to buy their first home, they worry they might be missing a step.

Utilizing the HBP is as simple as taking the money out of your RRSP, and moving it to your chequing account to pay your down-payment.

If your RRSP is in investments like mutual funds, ETFs or stocks, you will need to sell those first, then transfer the cash from your investment account to your chequing account.

There’s no special paperwork you need to fill out, you don’t even have to notify your bank or the CRA that you’re making the transfer. You don’t have to document the withdrawal in any way until you file your income taxes. When you file your income taxes, there is a checkbox that asks plainly if you made a withdrawal from your RRSP under the First-Time Homebuyer’s Plan. It’s important for you to select “yes”, as this is necessary to track and allocate your future RRSP contributions as HBP repayments going forward beginning the following year.

Most people are surprised by the ease of withdrawing funds from their RRSP under the First-Time Homebuyer’s Plan. Because withdrawals from your RRSP are typically subject to a tax penalty, taking money out without consequence gives you the weird feeling of getting away with something you’re not supposed to! But I assure you, it really is that simple.

A word of caution before you choose the HBP

The RRSP First-Time Homebuyer’s Plan is an awesome tool if you use it correctly, but most people don’t. Research shows that as many as one-half of Canadians don’t stick to the HBP repayment schedule, which means they’ve fallen behind on payments or stopped paying altogether. The consequences of not repaying your RRSP First-Time Homebuyer’s Plan loan on time are serious: you lose that RRSP contribution room forever and you need to pay income taxes on the amount you failed to repay.

The reasons people are not able to make the repayments on their HBP are predictable. Most of them boil down to homebuyers seriously underestimating the costs of home ownership. Many people are so focused on scraping together that down-payment as the biggest financial hurdle, they forget to take into account that having a home also means having property taxes, higher utility bills, and home maintenance costs. If you don’t factor these expenses into your monthly and annual budgets, you will find yourself short on cash, and one of the things likely to suffer is your savings.

From a purely mathematical standpoint, saving up your house down-payment in your RRSP is better than saving it in your TFSA, because it’s always better to spend tax-deferred money and let tax-free money continue to grow. However, if the repayment schedule of the HBP is going to cause you financial stress, you might want to think twice about withdrawing from your RRSP to fund your house down-payment!

Money Tips

How to Afford to Live in an Unaffordable City

One of the biggest challenges facing millennials today is enjoying any semblance of a comfortable lifestyle while underemployed (or unemployed) and saddled with student loan debt.

For all the crap Boomers give the generation of their adult children, millennials do really have it harder than their parents did. Virtually everything is more expensive, but the two things that have become the most expensive remain the measuring sticks of success: post-secondary education and home ownership.

For many, home ownership isn’t even on their radar because they’re trying to afford rent in an unaffordable city.

How much should you be spending on housing?

A general rule of thumb is to spend no more than 35% of your net income on all your housing costs. This includes rent/mortgage plus utilities, insurance, repairs & maintenance, homeowners dues, and so on. This comes from a suggested (but not mandatory) budget breakdown that looks like this:

For people living in pricey cities like Toronto, Vancouver, San Francisco, New York, or others, 35% of your net income might not even cover your average rent, let alone your other housing costs. If you live in an unaffordable city, it is permissible and necessary to spend more than 35% of your net income to keep a roof over your head.

If you forego car ownership, you can comfortably accommodate spending up to 50% of your net income on housing costs.

This is because as you can see from my suggested budget above, 15% of your net income is a good rule of thumb to spend on transportation. However, if you can eliminate or significantly reduce your transportation costs by choosing to live near your work and nightlife, then you can feel good about allocating these savings to increased housing costs.

Focus on reducing your largest expense: housing

If your happy place is the centre of a concrete jungle, I feel you. I’ve always loved to live smack dab in the centre of a city, particularly within a 3 block radius of a grocery store, my favorite coffee shop, and my work. I’m lucky I’ve never called Vancouver or Toronto home otherwise this would take more serious financial gymnastics and creativity to accomplish. However, I have lived in a few less desirable places only to stay on budget and still live in the neighborhoods I’ve wanted. Roommates, walk-ups, old buildings, balconies that faced parking lots, no balconies whatsoever, closet-sized bedrooms, and screeching water pipes have all been part of the “sacrifices” I’ve made to live where I wanted and within budget.

The secret to living in the city you want (and the neighborhood you want) is finding the most affordable option in that location. There are a few different ways to do this:

  • Share space by getting roommate(s)
  • Settle for smaller space, like a bachelor or a studio
  • Choose an older building
  • Give up “must-haves” like a dishwasher or ensuite laundry
  • Look 10 to 25 minutes outside our ideal area (that is NOT a bad public transit commute or Uber ride)

When it comes to finding the home of your dreams, sometimes you have to choose between whether that constitutes the actual “home” of your dreams, and when it means the lifestyle or neighborhood of your dreams. You can’t always afford both.

Pay off your debt to free up your disposable income

There are the apartments I had as a debt-laden student, and there are the apartments I had otherwise. I’ll tell you: it’s way easier to live where you want when it’s the only real bill you have to pay. Every $100 you’re spending on student loans is $100 that could be going to a swankier apartment — and when it comes to housing, $100 goes a long way.

Many people accept student loan payments as a necessary evil, but they don’t have to be. You can (and should) pay off your debt sooner rather than later, if for not other reason it gets rid of the monthly payments from your budget. The difference of becoming debt free in 3 years instead of 10 is more than simply saving money on interest costs, it’s also about the opportunity cost of having flexibility in your budget 7 years sooner.

If your debt is holding you back from being able to live where you want to, then pay it off.

Or at least pay part of it off. Getting rid of your consumer debt and/or 1 or 2 student loans can mean the difference between staying in your parent’s basement and living downtown. Start seeing your debt as a very real barrier keeping you out of the home you want — because it is. Get rid of it and you can live wherever you want.

Increase your income with a side hustle

Hands down the easiest way to afford anything extra in your budget is to dedicate a specific income stream to pay for it. Chances are it probably would take as little as $200 or $300 more per month to be able to afford to live where you want, so now this becomes a matter of where can you find this extra money to pay your inflated rent.

A single half-day shift at a coffee shop would easily bring in an extra $50 per week. So now the question becomes:

Are you willing to make lattes for 4 hours on Saturday mornings in order to keep your apartment?

If the answer is no, you don’t really want to live there.

For the love of god, MOVE

This is an unpopular opinion, but it’s worth considering. I know no one that lives in Toronto wants to leave Toronto, but if living in an unaffordable city is killing your bank account and compromising your future financial security, nothing about living in the centre of the universe is worth it.

You need retirement savings more than you need to be close to your favorite coffeeshop.

You need to be debt free more than you need to call a certain zipcode home.

You can do your job elsewhere.

Regina, Saskatchewan really isn’t that bad.

The fact of the matter is, it doesn’t matter how amazing the nightlife in Toronto/Vancouver/New York/San Francisco is if you can’t afford to participate in it. Sometimes the fact of the matter is, you really can’t afford to live in an unaffordable city, and you’d be better off leaving.

I know it’s blasphemy to say this, and many people never come around to the idea, but you can have a really beautiful life filled with fulfilling work, fun nightclubs, and good restaurants outside of the biggest and most expensive cities in North America. In fact, you’ll likely find living somewhere cheaper frees you from anxiety and stress that was putting a serious damper on enjoying life in the big city.

And let’s imagine for a second what your life could be like if you were able to spend only 35% of your income on housing, and free up that extra 15% for travel. Nice, right?

Money Tips

The Secret Life of the Payday Loan Borrower

Payday loans are the dirty little debt secret no one talks about, but as many as 2 million Canadians borrow these from these high-interest short-term loans every year.

What is a payday loan?

A payday loan is a loan for an amount less than $1,500 with a term ranging from 14 to 90 days. They typically have interest rates north of 300%, making them some of the most toxic financial products available to consumers.

Payday lenders have been criticized and labeled as predatory since they typically target the economically vulnerable and trap them in a cycle of debt. These loans are marketed as “alternative financing” for people who do not have or cannot get more traditional forms of credit, like a credit card or line of credit. Payday lenders typically set up shop in low-income neighborhoods, where they prey on new immigrants or the working poor who are both low income and have low financial literacy.

If you have never borrowed or do not know anyone who has ever borrowed from a payday lender, consider yourself financially privileged. Or, more accurately, blissfully ignorant. In the province where I live (Alberta), as many as 1 in 3 people have borrowed from a short-term high-interest lender.

Why do people seek out payday loans?

The general assumption of why someone would take out a high-interest short-term loan is the same for why someone would take on any form of debt: to buy things they cannot afford. But the real reason is actually quite depressing.

By and large, most payday loan borrowers are trying to cover the costs of expected necessities like groceries, or avoid late charges on regular bills, like rent, utilities, and car payments. – The Government of Canada

Others are taking out the loans for unexpected necessities, like emergencies. Payday loan borrowers typically have no savings to draw from, and without credit cards, this is their only option when crisis strikes.

The unfortunate reality is someone that did not have the cash on hand to pay for a necessary expense, expected or otherwise, likely won’t have the cash to pay back the amount borrowed plus interest. As a result, it’s not uncommon for a person to take out another payday loan to pay off the first when it comes due. 52% of borrowers use a payday lender more than once per year, with more than 1 in 5 borrowers using the service monthly.

Once you’re trapped in the payday loan cycle, you’re likely to stay there unless an unexpected cash windfall pulls you out.

How much do these loans actually cost?

How much interest a payday lender can charge on their loan varies by region, but 300% to 400% or more is not uncommon. However, these short-term loans are never marketed with their true APRs. Instead, payday lenders sell their loan fees as being “only $25 for every $100 borrowed”, but there can be additional fees and taxes, and this amount quickly compounds if the borrower does not pay back the loan within 7 to 14 days.

The high-interest combined with the short repayment terms drives up the cost of payday loans to astronomical levels. When we talk debt in the personal finance, most vilify consumer credit card debt as the most dangerous, but the cost of borrowing from a payday loan makes even the most expensive cash advance on your credit card look ridiculously affordable.

Here’s a comparison of borrowing costs of payday loans to other types of credit:

Who borrows from payday lenders?

Payday loan borrowers are typically identified as the “working poor”. They are a typically a low or minimum wage worker, earning less than $15 per hour, and still unable to make ends meet even though they often work more than 40 hours per week.

Most payday loan borrowers are men, aged 18 to 34 who have some post-secondary education and incomes less than $30,000 per year – Momentum

But it’s not only the working poor. As many as 20% of payday loan borrowers have incomes greater than $80,000, which means even if the economically vulnerable are being taken advantage of the most, the better off aren’t getting off scot-free.

Most people who borrow from payday loans don’t actually know what they’re getting into. The deceptive marketing combined with the desperation of needing to cover essential bills and expenses in a very short time, lead people to overlook the high borrowing costs. Desperation is a nasty master, particularly when it comes to money, so you can’t really blame someone for turning a blind eye to the hole they’re digging for themselves when they’re out of options.

Usually payday loan borrowers don’t get out of their debt cycle until they resort to the financial last-ditch-resort resources they tried to avoid in the first place, like borrowing from friends and family.

What can you do instead?

If you find yourself in dire financial straits and your local cash store is starting to look appealing, stop. Understand that virtually any other means of covering your financial obligations is a better option, including taking a cash advance on your credit card or taking out a personal loan.

If you have good credit, you have options. It means you can find a low-interest credit card or move money around to cover your bills. If your credit is poor, you have to shove your pride aside and go ask for money from someone who can help you, like a friend or family member. Or you even let your bills go overdue. It might suck to get an angry red envelope in the mail, but a late fee on your cellphone bill is a fraction of the interest a payday lender would charge you, so don’t sweat it too much.

When it comes to helping others avoid the trap of payday loans, it’s a matter of spreading the word of just how toxic and expensive these are loans. Financial literacy is not a silver bullet, but helping people understand the dangers of these high-interest short-term loans and the options that are otherwise available to them can go a long way in helping them avoid falling into the debt trap.

While regulation is getting stricter in limiting these “alternative lenders” from preying on the economically vulnerable, we have a long way to go until they’re gone. In the meantime, Canadian households will unfortunately remain enslaved by their debts until things change.

Money Tips

Celebrate Tangerine’s 20th Birthday By Helping Them Give Away Over $20,000

Giving is an integral part of personal finance, and belongs in everyone’s budget.

Allocating part of your budget to charitable giving can help improve both your finances and your perspective. The first reason is because allocating a certain dollar amount or percentage to giving will force you to live on less for yourself. The second reason is because there’s a good chance some of your extra dollars can do better work somewhere other than your miscellaneous spending.

How far do your charitable dollars go?

It doesn’t take a lot of money to make a big difference. As little as $25 might not even be missed by you, but can have a major impact on an organization in your community.

Think of the way you spent your last $25: a dinner out? A new t-shirt? Can you even remember? (I can’t!) Now think of what a $25 donation could do for…

  • A community garden
  • A homeless shelter
  • A school lunch program
  • A pregnancy care centre
  • A food bank

If you’ve ever experienced financial hardship (or just a really, really tight budget) you already know the difference a few dollars can make. If you want to improve your local community and the world, giving your money to causes you care about is a great way help.

Giving makes you healthier & happier

Not only does donating to a worthy cause help out people in need, it can also make you happier. Research shows time and time again that giving really is better than receiving.

In addition to boosting your mood, giving can actually improve your health. Giving has been shown to increase health benefits in people with chronic illness, as well as increase longevity.

The benefits aren’t restricted to cash donations though, so if you really can’t afford to allocate even a small amount to a good cause, give your time instead. A few hours every week or month can be as or even more valuable than a cash donation, and you get to witness the positive impact on your community firsthand!

Tangerine is celebrating their 20th anniversary by giving back

Tangerine Bank is giving away thousands of dollars in cash prizes to help community organizations across Canada who could use a financial boost to meet their savings goals.

Five communities will receive up to $20,000 in cash. There’s one grand prize of $20,000, one $10,000 prize, two $5,000 prizes and one $2,000, altogether helping 5 different organizations across Canada positively impact their communities.

Nearly 400 community initiatives were nominated by Canadians for the prize, and the list of entrants has been narrowed down to 20 finalists. Some of my favorites are:

Dress For Success Calgary. Since I call Calgary home, I can’t help but have a soft spot for the nonprofit serving my community. Dress For Success helps women succeed in the workplace and achieve economic independence by providing interview and employment outfits to women in need.

Lonny’s Smile – Camp For Sick Kids With Special Hearts. The Sick Kids foundation provides a summer camp for children with congenital heart disease. As an expecting mom, I have a soft spot in my heart for children’s charities!

Community Garden Society of Inuvik. Their motto is “fostering community through gardening” and the greenhouse provides plots to grow fruits, vegetables and flowers, as well as hosts the Arctic Market through the summer months.

But these are only a few of the great organizations in the running for Tangerine’s prizes, so make sure to view the full list at www.tangerine.ca/tangerine20 to find your favorite!

How you can help with one-click

Vote for your favorite community initiative to help them get closer to winning Tangerine’s grand prize of $20,000! Also, help share the news of the Top 20 on social media with the hashtag #Tangerine20 and encourage other Canadians in your community to vote for an initiative in need. As they saying goes, every little bit (or click) counts.