**

Many Canadians are aware that you can open a U.S. dollar bank account at most Canadian financial
institutions. But did you know that you can also open a U.S. dollar investment account through many
different investment companies? The following are reasons why you may wish to consider opening a
U.S. dollar investment account.

Reduce the cost of U.S. dollar conversion

Every time that you convert Canadian dollars to U.S. dollars (or vice versa), you will pay a fee to the
financial institution that makes the conversion for you. That fee is known as the currency spread, and
can usually be noticed by looking at the difference between the “bid” and the “ask” prices displayed by
the financial institution. For example, if the current spot exchange rate is quoted as $1.35 Canadian for
each U.S. dollar, the bid (or price that you will receive for selling U.S. dollars) might be $1.32 and the ask
(or price that you must pay to purchase U.S. dollars) might be $1.38. So, every time you buy or sell U.S.
currency you lose 3 cents per dollar. If you are regularly converting currency, that becomes very
expensive!

Buying or selling U.S.-listed securities in a Canadian dollar investment account is a common example of
Canadians paying unnecessary currency conversion costs, allowing the broker to pocket the currency
spread on buys and sells, dividends or interest paid. The more that you buy and sell, the more that you
lose. These costs can be eliminated by simply owning your U.S.-listed securities in a U.S. dollar
investment account, since there is no need to convert currency on every transaction.

Hedge the impact of currency exchange rates

Have you ever felt like you had to limit your spending on travel to the U.S. because the value of the
Canadian dollar was depressingly low? Or how about not ordering that item located in New York on
eBay because it was priced in U.S. dollars, which made it too expensive? The value of the Canadian dollar
relative to the U.S. dollar has fluctuated greatly over time. In the past few decades alone, the exchange
rate has ranged from more than $1.60 Canadian per U.S. dollar to less than $1.00 – yes, the Canadian
dollar has, on occasion, been worth more than the U.S. dollar!

But why leave it to chance? If you have a portion of your investments denominated in U.S. dollars, you
can always draw from it when you need it. You won’t pay conversion costs, and the current exchange
rate should not matter because you don’t have to convert anything. For folks who require the frequent
use of U.S. dollars for business, travel, or shopping, a U.S. dollar investment account can make a lot of
sense.

For a simple illustration, consider a shrewd Canadian investor who vacations in Orlando, Florida for one
week in February every year. The typical expense for this trip each year is about $5,000 U.S. dollars. If this
investor opened a U.S. dollar investment account and invested $100,000 U.S. dollars in an income-
oriented investment portfolio that consistently earns 5% per year. This investor should never have to
worry about exchange rates or conversion costs since $5,000 U.S. dollars can easily be withdrawn every
year!

Eliminate PFIC reporting (for U.S. citizens living in Canada)

Unfortunately for U.S. citizens living in Canada, Uncle Sam requires you to continue filing U.S. income tax
returns. Also, unfortunately, the I.R.S. requires additional reporting requirements for Passive Foreign
Investment Corporations (PFICs), which may result in additional taxes owing. If you own any mutual fund
or exchange traded fund issued by a Canadian company, it is considered a PFIC. Regulations require that
all mutual funds purchased in Canada, must be issued by a Canadian company. Unless you enjoy the
extra reporting requirements, this can be problematic for some investors.

Fortunately, however, this is a reasonably easy solution to the problem: invest in U.S.-traded exchange
traded funds in a U.S. dollar investment account. While you cannot buy U.S. mutual funds in Canada,
you can buy U.S. exchange traded funds and they are not considered PFICs. Problem solved!

Not all investment firms will offer U.S. dollar investment accounts, or have expertise in managing U.S.
dollar-based investments. Justwealth is able to offer U.S. dollar accounts for just about every account
type: RRSP, RRIF, LIRA, TFSA, and non-registered. Furthermore, Justwealth offers more U.S. dollar
portfolio options than most firms have available in Canadian dollars!

One of the most common questions I get is what happens to your deposited money if a bank fails? Well the good news is that you’re covered up to $100,000 thanks to the Canada Deposit Insurance Corporation (CDIC). To explain what deposit insurance is, I partnered directly with CDIC who provided this guest post on how your money is protected.

We all work hard to save money for our future – to buy a home, to pay for our children’s education, for retirement or for a dream trip. And we keep these savings in banks and other financial institutions across Canada. But have you ever stopped to wonder what would happen to your money if the financial institution holding it were to fail? Enter the Canada Deposit Insurance Corporation, a federal Crown corporation that protects deposits in all its member banks in the event of a failure.

If you’ve never heard of CDIC or deposit insurance, you’re not alone. Just over half of all adults in Canada are aware of CDIC, and even fewer millennials are aware. But deposit insurance is an integral part of our country’s economic system and it contributes to our overall financial stability. Those who know how deposit insurance works can trust CDIC to make sure their hard-earned savings are there when they need them.

Here are 6 things you need to know about CDIC deposit insurance:

It’s free and you don’t need to sign up

CDIC protects eligible deposits in its member institutions, up to a maximum of $100,000 per coverage category. You do not need to sign up or pay any premiums. Anyone with eligible deposits in one of CDIC’s member banks is protected, as long as these deposits are in Canadian funds. Citizenship or country of residence of the depositor doesn’t impact coverage.

Banks can fail and they have

In CDIC’s 50-year history, they’ve handled the failures of 43 of their members! These failures affected over 2 million Canadians, but not a single dollar under CDIC protection was lost. The most recent failure was in 1996. While it hasn’t happened in decades, it can happen and CDIC works hard to be ready for this possibility.

CDIC has over 80 members

From Canada’s biggest banks, to small trust companies across the country, over 80 financial institutions are members of CDIC. This means that savings in each of these members are protected separately from the other members. Curious if your bank is a member? You can see the full list here. Alternatively, you can look for CDIC’s membership sign on your bank’s web site. Note: some CDIC members have trademark companies which are not distinct members, but which may fall under the coverage of their parent company (Such as EQ Bank falling under Equitable Bank). If your financial institution isn’t on this list, you can contact them and inquire about their CDIC membership.

Not everything is covered

While deposit insurance protects eligible deposits in your own name, joint accounts, trust accounts, TFSAs, RRSPs, RRIFs and more; not everything is covered. CDIC does not protect investment products like stocks, bonds and mutual funds. Here is a full breakdown of what is and isn’t covered.

The “limit” really isn’t the limit

CDIC protects up to $100,000 (including principal and interest) per deposit category in each member. There are 7 categories. For example, deposits in your own name are protected separately from joint accounts. Deposits in RRSPs, TFSAs and more also each receive their own coverage. If you have a chequing account, a joint savings account with a spouse, a joint account with a parent, a TFSA and an RRSP, you could have protection of up to $500,000 – and this assumes all these accounts are with the same member. If you also have a TFSA and a savings account in another member bank, that’s another $200,000 of protection! So there are endless ways to ensure your money is protected by CDIC. Here’s a detailed breakdown of how CDIC covers various accounts.

You can calculate your coverage

So you have several financial products in one or more member banks. Now you want to know how much of your money is safe? No problem. CDIC has an online estimator to help you calculate your coverage. Try it out!

Learn more about CDIC

Now that you’ve learned a little about CDIC and deposit insurance, you’ll be better informed when making financial decisions for yourself and your family. You can follow CDIC on Twitter, Facebook and LinkedIn for more coverage info, helpful tools and videos. Happy saving!

According to the most recent edition of The Giving Report, which offers data insights into charitable giving, Canadians responded generously last year through online giving to help charities meet the unprecedented demands of Canadians in need. We have worried for years about the growing giving gap, characterized by a shrinking pool of older donors making the bulk of gifts and a shrinking participation rate, but in 2020 we were inspired by the way Canadians (particularly younger people) rallied around the causes they care about through gifts to Cause Funds, which support the collective work of many charities responding to an issue in a single transaction.

For many people who are new to giving, knowing where to start can be a challenge. But even for well-established donors looking to expand their giving, the sheer number of charities in Canada can be a bit daunting. Everyone can benefit from taking a strategic approach to giving to increase their impact.

Who (or what) do you want to support?

Taking the time to determine which causes you want to support should be the first part of your charitable giving strategy. Are you passionate about a particular cause, like anti-racism, women’s health, or the environment? Do you prefer to support work that you have a personal connection to or that is very different from your own life? Would you like your money to be spent locally, nationally, or internationally? Would you like to give to research or frontline services?

If all these questions seem overwhelming, that’s ok. Giving to a Cause Fund, for example, can be an excellent gateway to giving that only asks you to answer the question of which cause you want to support. From there, you can take your time to learn more about individual charities and refine your giving if you choose, or continue to give in broader ways.

How will you give?

There are several ways you can make a financial donation to your favourite charity.

One of the most strategic ways to give is through a monthly donation. When you set up a monthly donation, you control how much you give each month, which makes your expenses more predictable and makes you feel great giving throughout the year. Plus, monthly donations help charities by providing them with reliable income throughout the year that enables better planning.

If you’re looking to make a larger donation and have financial investments, a donation of securities may be right for you. Since the elimination of the capital gains tax on securities donations in 2006, a donation of securities or mutual fund shares is one of the most tax-efficient ways to support your favourite charity and reduce your tax bill.

Have you decided how much you will give per year?

While we saw an increase in online giving in 2020 following the onset of the pandemic, the drop in total donations to charities is predicted to be 10%. There is a great risk to Canadian society if the services provided by charities cannot be maintained. At the same time, many Canadians have lost jobs or reduced their incomes. If you’re financially stable, giving generously is more important than ever. But no matter your income, giving an amount that you feel comfortable with makes a difference.

Generally, a good starting place is to determine a percent of your income you are comfortable giving. Deciding to give a percentage of your income allows you to give what you can, even if your income changes. Generally, one percent of income is a starting point for many. If you already give and live comfortably, you can challenge yourself to give a higher percentage of your income.

Have you researched charitable tax benefits?

When making or re-evaluating your giving plan, remember to factor in the tax credits you’ll receive when you claim your charitable donations on your annual tax return. Take into account how the money you’ll save on your tax bill can allow you to give more throughout the year.

At the end of the day, giving back to your community and those in need is a great feeling because you’re helping to make a positive change in the world, and an impact on individual lives. No matter how you choose to do it, you’ll be part of making your community stronger.

Marina Glogovac is President & CEO of CanadaHelps, a leader in providing powerful fundraising and donation technology to charities and donors since 2000. Marina has been a technology and media executive for more than 25 years, including roles at Kobo, Lavalife Corp. and St. Joseph’s Media. www.canadahelps.org

As fun and fulfilling as travelling is, it can get expensive fast. Flights and accommodations hog the majority of the budget, while experiences like sightseeing and trying delicious new food takes care of the rest.

Fortunately, travelling on a tight budget isn’t a pipe dream — if you know a few tricks.

Choose an awesome but cheap destination

When it comes to saving money on travel, where you go matters. Are London and NYC incredible cities? Absolutely, but they’ll cost you.

Thankfully, there are some excellent travel destinations you can explore for less money without sacrificing on experience. In fact, many of these places are bucket list worthy anyway.

Explore exotic beaches, waterfalls, and volcanic mountains in Jeju, South Korea. Wander through dozens of museums, churches, and historic sites in St. Petersburg, Russia. Or take in the majesty of the Giza Pyramids and the Great Sphinx in Cairo, Egypt.

There are plenty of cheap places to travel around the world that offer unparalleled opportunities. You just need to know where to go!

Shop for the best travel insurance rates

Spending money on something you hope you’ll never need hurts. And many people are tempted to forego travel insurance for this reason. Everyone’s needs are different, but in general, most people shouldn’t skip it.

For one thing, the price of medical care outside your home country can be so staggering that taking a chance just isn’t worth it. If you have non-refundable trip deposits, you risk losing that money if your plans change.

On the smaller (but more likely) scale, small annoyances that come with travel can end up costing you more than you think — things like travel delays and lost luggage.

That said, travel insurance adds to the cost of your trip, so you want to be selective. A sound approach is to compare travel insurance plans and choose one that delivers the coverage you need for a price you’re comfortable with.

Book off season

The time of year you choose to travel can have a large impact on the prices you pay for flights and especially accommodations. It’s a supply and demand thing.

Generally speaking, if you’re okay with travelling during a destination’s off season or even shoulder season, you’ll pay lower prices. As a bonus, things will also be less crowded.

You need to be sensible with this one. What are you comfortable with, and what are the goals of your trip?  If you’re after a relaxing beach vacation, it doesn’t make sense to take it during monsoon season, no matter the savings.

On the other hand, if you’re planning a museum-heavy sightseeing trip, visiting during the winter may not bother you too much.

Score a cheap flight

In addition to booking off season, there are all sorts of tools you can leverage to find great deals on flights.

Google Flights is a meta search engine that offers powerful price tracking. Use it to find the best deal on a flight, discover the cheapest destinations for your travel dates, or track price trends. Get notified when a flight you’re watching drops in price.

Online travel agencies like Expedia or Orbitz can help you find and book flights and hotels. I typically prefer to book directly with the airline or through a credit card rewards travel portal, but if a deal is available through an online agency, it’s worth considering.

One benefit worth mentioning is that some cash back rewards apps such as Rakuten feature offers for online travel agencies, so you can double up on savings. Drawbacks might include limited flexibility, so be sure to read the fine print.

Maximize credit card rewards

What’s better than a cheap flight? A free flight! Same goes for hotels.

Anyone with the discipline to use a credit card responsibly should use a good rewards card for all their expenses. The best travel credit cards in Canada often come with generous sign up bonuses and lucrative earn rates, allowing you to save hundreds on travel when you redeem your points. When using cash, be sure you’re keeping it safe.

Consider alternative accommodations

When it comes to accommodations, hotels aren’t your only option.

Especially if you’re travelling with a companion or group, an Airbnb split between friends can be a much cheaper way to go. Having a kitchen at your disposal means you can save money on food, too, since you’ll have the option of cooking rather than eating out for every meal. As an added bonus, Airbnbs are usually in local neighborhoods, which have a different vibe than hotel districts. (Just make sure the neighborhood is safe!).

Hostels are also an option for the budget traveller if you’re just looking for a place to sleep. Female dorms are available in most hostels, and some boast single rooms. If you’re a solo female traveller, a women’s hostel can be a great place to meet like-minded travellers. 

Research the transit situation before you go

Transportation is a major cost that some newer travellers fail to consider when planning a trip. If you’re visiting a walkable city where most of the main attractions are close together, it may not be an issue.

But if that’s not the case, or if you’re staying outside the city center, you need to understand the transit situation before arriving. What’s available? Is it safe and accessible? Can you buy a pass that suits your needs and saves you money?

The last thing you want to do is book cheap accommodations on the city’s outskirts only to discover the transit system is cumbersome or inconvenient. If you do that, you’ll end up spending all your savings on taxis.

Grab a sightseeing pass

If you’re planning a sightseeing adventure, take a few minutes to see if there are any sightseeing passes for your destination. Many cities have them, and the savings can be impressive — sometimes more than 50% compared to paying at the gate!

There are two basic types of sightseeing passes. The first offers all-inclusive access to a bunch of attractions for a set number of days, while the other grants admission to a set number of attractions over a longer period of time.

The all-inclusive type is great for someone who wants to experience as much as possible in a short period of time. Travellers who prefer a more flexible and relaxed pace get better value from the second type.

Either way, it’s worth checking your options and crunching some quick numbers to see if a sightseeing pass will save you money.

Bonus tip: Passes frequently go on sale. Sign up for their newsletters and watch for a good deal.

Be prepared to haggle

Most Westerners aren’t accustomed to it, but in some places, negotiating prices is the norm — especially in market-type situations. Experienced vendors know this but aren’t in a hurry to volunteer the information to foreigners. In fact, they usually count on visitors paying full price.

I recommend learning a bit about the culture of the destination you’re visiting so you know what to expect. If you’re likely to be in situations where negotiation is the norm, be prepared to get outside your comfort zone and try your hand at haggling. Who knows how much you’ll save?

Sandra Parsons is a professional freelance writer and personal finance expert who writes about all things money. She also adores travelling on a budget. You can find her on LinkedIn and Twitter.

How many assets do you actually have?

What I mean by assets is things like bank accounts, investments, trading accounts, insurance policies, retirement savings plans. There are also online accounts to consider such as a PayPal account, revenue streams from a blog, an Etsy store, a Shopify account, and more.

You may also have other online accounts that have some value such as Wealthsimple, Questrade, PaddyPower, Pokerstars, or digital assets like your domain names.  Typically, when one thinks of assets, they only consider the obvious big ticket items they own – but your digital accounts are also considered assets.

Now, consider how many does your brother-in-law have?

Why is that question relevant? Because your brother-in-law may have named you as the Executor of his Will, or perhaps granted you financial Power of Attorney in the event of his incapacity.

Imagine gathering up all your own assets today, how long would it take to liquidate everything and place it all into one single bank account?

This is exactly what the Executor of your Will is responsible for doing. They are required to locate, secure, and gather all your assets, and then administer your “estate”. Your estate goes beyond financial assets, it also includes your possessions, and extends to family heirlooms and mementos, including family photos.

This task wasn’t as difficult for our parents and grandparents. In previous generations most people would have one or two bank accounts and receive monthly printed statements that would be filed away.

But for our generation, our financial interests have become more diverse. There are even financial assets available today, like cryptocurrencies, that didn’t even exist a generation ago. Perhaps post-war generations were more inclined to keep a secret bundle of money tucked away for a rainy day. But today, more people seem to explore a variety of financial instruments to weather any storms.

Don’t list your assets in your will

If you have written your Will (and I sincerely hope you have), you have probably made general reference to “my estate”. You may have left your entire estate to your spouse, or divided it in equal shares between your children, or grandchildren. A Will is not the place to list your assets for two important reasons.

Firstly, your Will is unlikely to come into effect this week. It will be some (hopefully distant) time in the future. Your assets will change over time, and you don’t want to have to update your Will every time you acquire or lose an asset.

Secondly, once your Will is probated, it’s a public document – anybody can apply to read it. Obviously, you may prefer to keep the extent of your assets between you and your loved ones.

This leaves your Executor with the task to identify and gather your assets. You may think this won’t be an issue because you have named your spouse as your Executor. But according to a number of surveys, around a quarter of couples have a financial secret kept from their partner.

Supposing your spouse isn’t able or willing to serve in the Executor role, and it falls to your backup Executor, consider this – would they have any chance of finding your assets? And how would they know when their task is complete?

How do you maintain an inventory of your assets?

Generally speaking, there are two approaches for documenting your assets; paper-based and software based. Each has their pros and cons. Clearly there are security questions associated with each approach; a logbook in the wrong hands can be devastating. But a software service is only as secure as the User ID and password that you use to protect it.

A paper-based list of bank accounts, investments and digital assets is the simplest approach to documenting your assets, and there are even handbooks that can guide you through this process to ensure that you have captured everything.

You would need to include at least a list of bank accounts, investments, credit cards, key people to contact, subscriptions, and the online accounts that you have (without necessarily including the passwords).

Online inventory services

Many services have been created to help list your assets online such as Everplans, Cake, Lifesite and Clocr. However, you want to pay close attention to how your information is stored. Ideally, you store an inventory of your assets and assign some kind of “Keyholder” who is able to access that information at the right time, and not before. Some companies manually release the information after receiving a death certificate, while others have some level of automation to the process.

LegalWills.ca offers  two services that work in this way: MyLifeLocker is an inventory of your assets, and MyVault allows you to actually upload documents and files to be accessed after you have passed away (or lost capacity).

Regardless of which service you choose, you’ll want to see who is running the site. Research where their head office is located, who runs the company, what their business model is, and even the technology behind their service. You should have no doubts about the company since you’ll be giving them access to some of your private information.

Passing on passwords

Beyond financial assets, there is a range of online accounts that must be managed by your Executor or Power of Attorney. These include access to bank accounts, but also social media accounts, email services, application subscriptions and online shopping accounts.

Most of these services have strict “terms of service” agreements that prohibit the sharing of login credentials, but in practice, it is the easiest way for these services to be managed. Between applications, games and social platforms, you probably have hundreds of online accounts. You could certainly simply just let them persist after you have passed away, but there is something unnerving about all of your loved ones being invited to congratulate you on a LinkedIn work anniversary the year after you have died.

It is unrealistic to expect your Executor to contact each platform to scan your government issued ID and death certificate to close down your account at somewhere like MyFitnessPal. The most effective way to do this is to use a password manager like Roboform, Dashlane or LastPass with a master password, and then keep that password somewhere safe in a place that is known and accessible to your Executor. It should of course be stored in a sufficiently cryptic format so that if it did fall into the wrong hands it doesn’t have catastrophic consequences.

Your list of passwords also extends to physical devices, like access to an iPad and iPhone or other smart devices around the home. There have been many news stories about widows no longer able to access a shared iPad, and Apple refusing to unlock the device. It is certainly not uncommon for a partner to not even know the wifi password in the house!

Be prepared

In Canada there are four critical documents in every adult’s estate plan: A Last Will and Testament makes key appointments like your Executor, Guardians for children and describes the distribution of your estate. A financial Power of Attorney allows you to name somebody to take control of your financial affairs if you are alive but have lost capacity to handle your finances yourself. A “Living Will” is a combination of an Advance Medical Directive where you can express the types of medical treatment you wish to receive if you were in an irreversible terminal condition, and it also allows you to name a medical decision maker.

The final document is an inventory of assets and key contacts; whether paper-based or software-based it is a critical step in your estate planning portfolio, and sadly, a step that is too often overlooked.

It’s a gift for your loved ones, your Executor and your Power of Attorney to take the time to document this information. Without it, you place a huge burden on the people you have left behind, at a time when they are at their most vulnerable.

When my friends used to ask me about how to get started in investing, I used to recommend the online discount broker + ETF(s) route. It’s still the lowest-cost way to build the index investing portfolio that we all know and love.

The math was correct – but the value proposition was wrong.

What many young Canadians want is the simplest way possible to invest their money – without paying the crippling fees that mutual funds charge. If an investing platform is easily accessible online, and offers a transparent easy-to-understand investing strategy, that’s even better.

When robo advisors came out, I started to experiment with recommending this new method of indexing investing. To be honest, I felt kind of guilty about it because I hate recommending products that I don’t personally use. Being an investing nerd, I still prefer to cut my costs to the bone using my discount brokerage account. You can check out my Questrade review for the details on how I essentially invest for free using their no-cost ETF purchases.

But most people aren’t investing nerds. So, the question becomes – at what point does going the DIY route make sense for you?

A breakdown of robo advisor fees

When you invest with a robo advisor, you are essentially paying two levels of fees. (Sometimes, this is obvious, other times not so much.)

1) The fees that the robo advisor will charge for their services – usually in the neighbourhood of .3%-.6% of your entire portfolio.

2) The fees that the underlying ETFs that the robo advisor uses charge for their product – usually about .2% for a balanced portfolio and is referred to as a Management Expense Ratio (MER)

This means that for every $10,000 that you invest with a robo advisor, you will pay $30-$60 in fees each year to the robo company, and then another $20 to the ETF creators.

A breakdown of discount brokerage fees

If you want a complete look at fees and features, check out the complete Canadian online broker comparison that we put together over at Million Dollar Journey.

Some Canadian discount brokerages charge a per-trade fee for all stocks and ETFs. Others allow you to trade for free, but have very limited platforms.

I like to split the difference and look for all-option discount brokers that allow me to purchase ETFs for free. I won’t need to sell ETFs for several years when it comes to portfolio rebalancing, as simply reinvesting dividends and using my monthly contributions will be more than enough to get my portfolio’s asset allocation back to where it should be.

I make sure that I avoid inactivity fees, and if you select the right broker, there are no annual account fees either. This all adds up to my total investing costs basically being the MER of the ETFs themselves – so about $20 for every $10,000 invested.

Reasons to choose a robo advisor over DIY w/ a discount brokerage

• You can create a completely automated solution to your investment dilemma in 15 minutes. Money goes from paycheque-to-diversified-portfolio each month on autopilot, and that’s incredibly valuable because there is no delay in implementing the strategy.

• You get help determining your initial risk tolerance and subsequent asset allocation.

• You have access to personalized help from a Portfolio Manager (someone legally mandated to give you advice that puts your needs first – amazingly this is not the norm for financial advisors across the country).

• You may want to use them for a specific reason such as for your children’s RESP.

• Aesthetically-pleasing platforms that communicate a lot of information at a glance.

When should I change from a robo advisor to a Discount broker?

Answer: Maybe Never

If the simplicity of the robo advisor solution keeps you focused on just systematically adding to your index portfolio with every cheque, then it might never be worth the cost savings to change. It’s not good to overthink a good thing!

In the interest of making the tradeoffs crystal clear for everyone though, let’s take a look at the math involved at different portfolio levels. Here’s a comparison of the annual fees that you would pay as your nest egg grew over the years.

Portfolio Size	Robo Advisor + ETFs	Discount Broker + ETFs
$50,000	$250-$400	$100
$100,000	$500-$800	$200
$250000	$1,250-$2,000	$500
$500,000	$2,500-$4,000	$1,000
$100,0000	$5,000-$8,000	$2,000

It’s entirely possible that the tradeoff for convenience and advice makes sense for you when it only costs a hundred bucks more each year, but not when that difference is $1,500+.

It should also be mentioned that as your portfolio grows in value, most robo advisors charge a smaller percentage of the pie. Consequently, the relevant amount of fees that you’d pay if you used a robo advisor would be closer to the smaller end of that range as you move down the table above.

The bottom line is that there is no one-size-fits-all answer when it comes to making this tradeoff. The underlying investment returns should be very similar to one another, so my rule of thumb would simply be to choose the option that motivates you to save the most. If convenience gives you the juice to live life, plus you find some reassurance in the fact that there is someone there to answer questions – then don’t worry about the extra fees and go with a robo advisor. If the knowledge that you are wringing every last low-cost drop from that lemon to make your portfolio lemonade encourages you to save a little more each month, then go with the discount broker.

As many of you know, I’m not a huge fan of the FIRE movement (financial independence, retire early). However, she focuses on the FI part which is about freedom, security, and options—it does not have to include retirement! Now that’s something I can get behind.

**

Are you new to FI, and overwhelmed by everything you need to learn and do? I’ve been there, and I know that feeling. When it comes your finances, it can take some time to gain confidence, but all it really takes is four steps to financial independence.

Step 1: Calculate your FI number

Before you begin your FI journey, you’ll first need to figure out your FI number. This is the amount you’ll need in investments to become financially independent.

Your FI number is important because it gives you a target to aim for. It’ll help you track your progress and stay motivated. Thankfully, there’s an easy way to calculate it:

Your annual spending x 25 = Your FI number

For example:

• $40,000 annual spending x 25 = $1,000,000 FI number
• $60,000 annual spending x 25 = $1,500,000 FI number
• $80,000 annual spending x 25 = $2,000,000 FI number

It’s really that easy! To figure out your own FI number, follow the action plan below.

Why 25x?

The 25x calculation is based on the 4% rule*, which states: if you withdraw 4% per year from your investments, you’re unlikely to run out of money. Mathematically, 25 is the inverse of 4%. So, the 25x calculation is how much you need invested to cover your annual living expenses—using a 4% withdrawal rate.

Action plan

1. Gather your last 12 months of bank and credit card statements
2. Add up your spending
3. Multiply that number by 25—that’s your FI number

Note: As you advance in your FI journey, you’ll learn there’s a little more nuance to the 25x calculation. Don’t worry about that for now. At this stage of the game, 25x your annual spending is a good-enough assumption.

Step 2: Save

Now that you have your FI number, it’s time to take your first steps towards it. One of the easiest ways to do that is by saving more money. There are plenty of options to accomplish this, but I’m going to focus on tactics that:

1. Are relatively easy to implement
2. Save enough money to actually make an impact

Recurring expenses

• Revisit recurring expenses every 1–2 years
• Cancel subscriptions you no longer need
• Negotiate with your current providers
• Ask for a discount for annual instead of monthly payments
• Shop around for better prices
• Increase insurance deductibles
• Remove extras from insurance policies (e.g. roadside assistance, which you may already get from a credit card)

Food

• Cook at home as much as possible
• Pack a lunch for work
• Make a weekly meal plan
• Plan your menu around sale items
• Make a grocery list and stick to it
• Buy in bulk
• Eat less meat and dairy
• Eat more whole, unprocessed foods

Transportation

• Work from home if possible
• Bike, walk or take public transit—even if it’s only once or twice a week
• Use a carsharing service instead of owning a car
• Carpool with a coworker

Housing

• If you work from home, write off a portion of your utilities
• Minimize energy use (switch to LEDs, hang dry laundry, seal drafts)
• Negotiate a lower rate when renewing your mortgage

Action plan

1. Go through the suggestions above and see how much you can save.
2. For more money-saving ideas, see:
   1. How to Reach FI on One Income
   1. 13 Ways to Reach FI Sooner
   1. My Detailed Flashfood Review (Groceries for 50-70% Off)
   1. FI School Lesson 2: Frugality and saving

Step 3: Earn

Most personal finance experts agree—you can only get so far with frugality and saving. Often, earning more is the faster (or only) way to reach FI. This can be accomplished through passive or active means:

Passive income

• Travel, reward, and loyalty points
• Bank account sign-up bonuses
• High-interest savings accounts

Active income

• Side hustles
• Getting a raise
• Working more
• Being promoted
• House hacking (hosting homestay students is my family’s favourite house hack/side hustle)

Action plan

1. See if you can earn more passive income by making your money work harder
2. Think about the ways you can earn more active income, and start working towards them
3. For more earning tips and resources, see:
   • FI School Lesson 4: Income
   • FI School Lesson 9: Side hustles
   • FI School Lesson 11: House Hacking
   • FI School Lesson 12: Travel hacking

Step 4: Invest

If you save and earn more, you’ll eventually notice something wonderful: a growing pile of extra money! But cash in a savings account won’t get you to FI. It’s time to invest that cash.

One of the FI community’s favourite ways to invest is through the stock market. Here are some popular investing options, starting with the simplest.

Tangerine index funds

While these funds have higher fees than other stock market investments, they’re quick and easy to use. You just need to open an account with Tangerine, deposit your money, then they’ll do the rest.

You won’t have to worry about rebalancing, minimum balances, or trading fees. Read Barry’s Tangerine investment funds review for more info.

Robo advisors

Robo advisors help you invest in low-cost index ETFs and handle all the rebalancing for you. They’re just as easy to use as Tangerine funds, but are cheaper and offer more portfolio options. Some also include additional services, such as financial planning.

Read Barry’s robo advisor reviews to learn more about Canada’s top robo advisors.

DIY investing

While DIY investing requires the most time and knowledge, it’s the FI community’s favourite option. That’s because it’s low-cost, easy enough for most people to learn, and it offers a high level of control.

I recommend DIY investing in index ETFs through a discount brokerage like Questrade. To learn more about DIY investing, see the resources in my free FI School curriculum.

Action plan

1. Learn about each of the investing options.
2. Pick the option which you feel most comfortable with.
3. Get your money invested.
4. Continue building your investing knowledge with these resources:
   1. FI School Lesson 6: Index investing
   1. FI School Lesson 7: Investing

Summing it up

When starting your FI journey, it’s easy to feel overwhelmed. By breaking down the steps and starting with easier tasks, you’ll gain motivation and momentum. Before you know it, your FI journey will be well on its way!

I hope this article has given you some ideas to help you start working towards FI. When you’re ready to further expand your FI knowledge, check out the rest of FI School, my favourite books, and my favourite podcasts.

Let me know in the comments if you have any questions—I’m happy to help!

Well, let’s be realistic, a long layover isn’t the end of the world. Many airports these days have plenty of things to keep you entertained these days such as gardens, viewing decks, movie theatres and more. It just depends on where your layover is occurring and how much money you want to spend. Here are some tips on how to survive a long layover.

Research Your Destination 

One of the most difficult elements of surviving an airport layover is quelling the excitement of reaching your destination and putting it on pause for a few hours. Instead of wrestling with this excitement and trying to tone it down, why not indulge yourself and spend your time researching your destination?

If you haven’t done so already, read up on things such as how to take public transportation and if there are any museum passes or discounted attraction tickets available. Now’s also a good time to quickly locate any supermarkets near your accommodations if you want to save money on eating out.

Go to the lounge

If you’ve got a long layover, hitting the lounge might be the best thing to do. Some of the best travel credit cards in Canada include a free Priority Pass membership and gives you free lounge passes. Heck, the American Express Platinum card gives you unlimited access to lounges so this is a great way to refresh, fuel, and recharge while on a long layover.

Even if you don’t have a credit card with lounge access, consider paying for the access. Sure a 2-hour visit may cost you $50 Canadian, but here’s the thing, no one is timing you. You could easily stay in the lounge for 5+ hours and no one would care. Remember, most lounges also have snacks and drinks so you won’t need to spend any additional on food.

Go see the sights

Let’s assume that your layover is long enough that you have time to leave the airport to see the sights. You’ll need to budget at least 2 hours to arrive before your flight and say an hour each way to get to and from the airport. That means you want a minimum of 6 hours to comfortably leave the airport to see the sights. If you have more time, great, but I wouldn’t leave if you have less than that much time.

You’ll obviously not be able to see everything, so pick one or two attractions that you want to see and head straight for them. If you can, purchase tickets to them in advance so you can skip any lines. Alternatively, some airports such as Taipei, Tokyo, Seoul and Istanbul offer layover tours that you may have enough time for.

Catch up on e-mails or with friends

When you’re travelling, it can be hard to respond to e-mails so why not do it when you’re at the airport and you have nothing better to do? I personally catch up on as much work e-mails as possible since it can be difficult to answer them when I’m travelling. This is also the best time to send e-mails to friends and family or to catch up with them on Whatsapp. What you shouldn’t do though is go on speakerphone or do a loud video chat. Respect everyone else’s space! 

Do some work

If you’re a digital nomad, long layovers are the perfect time to get some work done on your laptop. As mentioned, lounges are the best place to relax even if you have to pay for it since they typically have better Wi-Fi than what’s available in the public areas. When you’re ready to start working, just focus on a few tasks that need your attention, such as answering emails you received on your previous flight. If it’s a really long layover, you can start working on your next project so you won’t have to spend as much time on it when you land.

Get Organized

When travelling, you often find that you spend a great deal of your time running around like a madman. With so much to fit in and the inevitable constant change of plans, it’s hard to find the time to sit down and get yourself organized.

Fortunately, your airport layover could offer you exactly this. If you’re flying out, take this time to double-check reservations and ensure you have all your important documents handy. If you’re flying home, you may want to start doing what you can to get ready such as putting your house or car keys in an easy to access pocket so when you clear customs at home, you’ll be ready to go.

Final word

Many travellers, no matter how experienced, dread airport layovers. Sure, you can sit around and do many things for free, but spending a little money during your layover could be well worth it since it’ll help you save your sanity.

To help you navigate the decision to seek professional help, I reached out to Linda Stern, a licensed insolvency trustee at Crowe Soberman Inc. who wrote today’s guest post.

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You’re worried about not being able to pay your debts that have mounted due to either overspending, poor budgeting, a matrimonial separation, illness or perhaps overseas family assistance. Your situation may be exacerbated as a result of a recent loss of employment due to COVID19. It may be clear to you that you will not be able to pay your debts in a reasonable period of time even when you will return to work.

At this point, you may be looking at all your options. You are anxious, stressed and worried. Perhaps you feel that the current uncertainty due to COVID19 will buy you some time to decide how to deal with your debts. There are relief programs in place now to help individuals through the government and lenders. However, in my experience, where debts are looming, this current relief is temporary and is equivalent to “using a band aid on a wound that needs stitches.” Interest will continue to accrue on outstanding debts over the ensuing months.

Here’s what you should consider when reaching out to a licensed insolvency trustee.

Actions of creditors

Are you receiving calls from your creditors and collection agencies? Have your wages been garnished by either Canada Revenue Agency (CRA) for outstanding income taxes or HST (self-employed individuals) or by your creditors? Has the CRA registered a lien on your property? Are you losing sleep worrying about how to pay your debts?  Are your worries affecting your relationships with your family and friends?

If you answered to one or more of these questions and you want a fresh start, here are some steps to help you get started.

Prepare a monthly budget 

After receiving your income and paying all necessary expenses, how much remains in your bank account? Hopefully you have a surplus, but some people are often just breaking even and sometimes in the negative. If you’re thinking about bankruptcy, you may want to update your budget first to see if you can pay off your debt first. Need help with your budget? The Government of Canada has a great budget planner to help you out.

Making the Decision

If your budget isn’t helping you get out of debt and you think you need professional help, contact a licensed insolvency trustee (LIT) for a free consultation. They’re unbiased and will go over your situation. Through a series of questions such as who do you owe money to? What is your current monthly income and expenses? What assets do you own? What are you up-to-date on your income tax filings? And, what were the reasons that caused your financial difficulties, they can present options to you.

The options available to you

The Bankruptcy & Insolvency Act (the “Act”) is a federal statute that provides relief to individuals or companies who are insolvent (unable to pay their debts). 

The options available under the act for individuals are bankruptcies and proposals which are filed with a LIT since they’re a court officer.

Both options provide the following:

• Protection from legal actions and garnishments by creditors known as a legal stay of proceedings
• Forgiveness of unsecured debts upon either the Debtor’s discharge from bankruptcy or completion of a consumer proposal.

Personal Bankruptcy

Personal bankruptcy is a legal process for an individual who is unable to pay their unsecured debts in full, including outstanding income taxes and business HST but excluding mortgages; leased and financed vehicles. The personal bankruptcy is filed with a LIT, also known as a bankruptcy trustee. Depending on a person’s income and assets, the period that a first-time debtor is bankrupt is either nine or twenty-one months. After that period, most debtors are entitled to an automatic discharge from bankruptcy. 

The act provides for a debtor to assign their non-exempt assets to the LIT. Some examples of non-exempt assets would be real property, Tax Free Savings Accounts (TFSA’s), Registered Retirement Savings Plans (RRSPs) with contributions made in the twelve-month period prior to the bankruptcy, Registered Education Savings Plans, and income tax refunds for the year of bankruptcy and any prior years.

Consumer Proposal

A consumer proposal is an alternative option available to Debtors and it is filed with LIT who acts as the administrator to the consumer proposal. The act provides for debtors to file a consumer proposal to its unsecured creditors who are owed less than $250,000. The term of the consumer proposal is five years comprising of either sixty monthly payments or lump sum payments depending on the debtor’s situation. 

The difference between a consumer proposal and bankruptcy is that the debtor keeps all their non-exempt assets.

For example, Mary is employed as an administrative assistant in an insurance company. Her net monthly income is $4,000. In addition, Mary receives child tax benefits. She is a single mother of two primary school-aged children. Since the birth of her children, Mary has saved for her children’s education and has contributed to RESPs in the amount of $3,500, net of the available government grants. Mary also has a TFSA valued at $2,500. 

Mary has accumulated credit card debt of $30,000 and has an outstanding line of credit of $10,000 for a total debt of $40,000. The reason that Mary has these debts is that she has not received any child support from the children’s father. Between the cost of living, daycare and extra-curricular activities for the children, Mary used her credit cards and lines of credit to supplement her income. 

Mary has decided to reach out to a LIT as she can no longer manage her debts. Should she file a bankruptcy, her RESP’s and TFSA would be assigned to the trustee. In other words, she would lose her investments totalling $6,000.

If Mary chose to file a consumer proposal instead, she will retain her investments and offer a five-year monthly proposal to her creditors such that the return (also knows as the dividends paid to creditors) will be greater than in a bankruptcy. The amount that May can offer may be between $200 to $250 a month, provided her budget can allow for this. These payments are commonly referred to as the proposal fund. Mary’s creditors have 45 days to vote in favour or against the proposal. Once the proposal is accepted, Mary retains her investments.

In summary

If you’re drowning in debt, you still have a few options available to you. The best solution would be to speak with a licensed insolvency trustee who can present you with different scenarios and explain why they may benefit you. Debt and thought of bankruptcy are stressful, but there’s no reason why you have to handle things on your own.

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Linda Stern is a Senior Manager and Licensed Insolvency Trustee at Crowe Soberman Inc. She has over twenty-five years of experience working in Montreal, Ottawa and Toronto, primarily in consumer insolvency matters consulting with individuals overwhelmed with debt and helping them find solutions that work best for their financial and personal situations. She can be reached at linda.stern@crowesoberman.com

COVID-19 has struck the economy and many Canadians are doing the right thing by looking at their budget to see where they can slash their expenses as an economic downturn is a certainty. For many people, their insurance policies are a major monthly expense so they’ve made calls to find out if there are any sort of financial relief available within their plans.

Since insurance really isn’t my specialty, I reached out to Jeff Romansky of SecurePlan Insurance Solutions who explained how your insurance works during this global pandemic and if there’s any way you can unlock some funds or make a claim.

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As a disclosure, the information below is not meant to provide you with specific advice as it doesn’t pertain to your exact coverage. This is more to provide general insight on the matter, and it’s recommended that you discuss the contractual provisions within your policies with your insurance broker or company.

All the information below is based on what we know as of March 17, 2020. As you’re aware, the situation of COVID-19 is changing daily and the policies and procedures that are being implemented are also changing on the regular. Here’s how Coronavirus affects various insurance policies. 

Life insurance

For the vast majority of the individual term life and permanent life insurance policies out there, the only exclusion within the contract is suicide within the first two years of owning a policy. Some clients who disclose high-risk activities may have an amendment excluding such activity as a part of their policy as well. This means that the carrier will very likely pay out a claim if the death is related to COVID-19.

If your life insurance policy has a cash value as a component, you could potentially access some of that cash if your current cash flow has been affected by COIVD-19. Alternatively, you could consider taking a loan out against your policy at this time if you have enough cash value. Mind you, this would put you in debt.

Disability insurance

With disability insurance, you likely will not be entitled to any sort of claim/financial relief unless you have been tested positive for COVID-19 and/or have symptoms that are preventing you from working. This is the case even if you needed to self-isolate on a voluntary basis or at the direction of your employer, or government. If someone does not have signs or has not tested positive for COVID-19 and placed under quarantine, disability benefits will very likely not be payable. However, the government of Canada has already announced that workers affected by Coronavirus would likely qualify for Employment Insurance under the sickness benefit.

Disability contracts are designed to provide clients with an income when they meet the definition of being disabled and satisfy the waiting period. The benefit to most disability contracts is that they look at the result, which is being unable to work due directly to an injury or illness, regardless of the underlying cause. This means that there is typically no exclusion for COVID-19 or any other health issue.  One could have an undiagnosed condition and still be eligible to claim as long as if the symptoms itself are preventing them from working.  Disability insurance is not designed to pay out in the event that someone is unable to work due to losing a job, losing a license required for their job or being in quarantine/isolation.  Although difficult situations, none of these are considered a disability as it is not an injury or illness preventing them from working.

When it comes to long term disability insurance, there would be no relief unless you had Coronavirus itself. Even then, I’m not 100% sure how this will be viewed as the symptoms itself may not prevent one from working. In most cases, claimants will not satisfy the waiting period as typically one needs to be off work for 3 months (or longer) to be eligible for a claim.

Critical illness insurance

Unfortunately, if you’re diagnosed with COVID-19, you will unlikely be able to claim critical illness insurance. This is because COVID-19 is not a listed covered condition within the policy. Critical Illness policies have a specific list of illnesses (and definitions) that need to be met in order to make a claim.

Can you still get insurance?

If you have recently travelled, your policy may be postponed (depending on where you travelled) until you have been back in Canada for a minimum of 14 to 30 days (depending on the carrier). After the quarantine period ends, the insurer may consider reopening the file. That said, a statement of good health will be a requirement. 

If you’re currently diagnosed with Coronavirus, most carriers will not be able to offer coverage at this time. However, it looks like carriers would possibly consider coverage once the applicant has recovered fully. You could get some specialty products for the time being, however coverage will come at a higher cost and certain limitations may apply.

The good thing is that many insurance brokers are set up to work virtually. This means that you do not need to meet in person to start the application process. However, getting your policies in full might be tricky as currently, some paramedical companies are suspending all services. What this means is that if you’re required to provide a blood/urine sample, you may not be able to do so at this time. You can still apply, to get the process started, but most carriers have certain limits of coverage that you can purchase without any blood/urine requirements. Talk to your broker to know your options. 

With that said, you should expect delays in service levels given the increased demand on our health care system and changes to business processes to ensure the safety of their employees.

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Jeff Romansky is an insurance broker based in Ontario and the founder of SecurePlan Insurance Solutions. He has been in the industry since 2006 and works diligently to ensure that his clients are properly informed. Leveraging today’s technology, SecurePlan is capable to work with its clients on a virtual basis.