Blog

By: Shawn Todd CFP

We’ve all heard terrible financial advice at one point or another.

It might have been in the locker room at hockey, around the coffee machine at work, or even from a friend.

“Your most expensive advice is the free advice you receive from your financially struggling friends and relatives.” – Robert Kiyosaki

“Max out your credit cards to build credit.” This advice suggests that fully utilizing your credit limit will enhance your credit score. In reality, high credit card balances can lead to significant debt and negatively impact your credit rating. Terrible quote. Can really start someone off on a terrible foot.

“You don’t need a budget.” Some claim that budgeting is unnecessary. However, without a budget, it’s challenging to track spending and achieve financial goals, often leading to overspending and financial instability. I see this so many times. 80% of people just don’t take the time to write this out.

“Renting is throwing money away.” This advice implies that homeownership is always superior. However, owning a home comes with significant costs like maintenance and property taxes. Depending on individual circumstances, renting can sometimes be the more financially sound decision. A strong belief by many. Last time I did the math – I believe you are fine renting for about 7 1/2 yrs before seeing a crossover on benefit / cost. So no need to rush. Ownership over long term can help with wealth building in most cases though.

“You should buy as much house as possible.” Encouraging individuals to purchase the most expensive home they qualify for can lead to financial strain, especially if unforeseen expenses arise. This is terrible. I had a friend tell me this in my 20’s and all this mantra did was produce stress to buy a big house. This carries no great value to it,

“You don’t need insurance if you’re young and healthy.” Neglecting insurance due to youth and good health overlooks unforeseen events. Accidents and illnesses can occur at any age, and lacking insurance can result in substantial financial burdens. Again terrible advice. Many insurance disbelievers [and there are groups of financial advisers of the same thinking] that minimize needs for insurance, particularly for younger people. Getting approved mid 40’s and 50’s with high cholesterol and heart conditions can be difficult. Having the proper coverage starting young isn’t a bad idea at all.

“Always go for the cheapest option.” Opting for the least expensive choice isn’t always cost-effective in the long run. Investing in quality can lead to better durability and value over time. I see this a lot with investment discussions. I won’t argue the merits of trying to find affordable and cheaper investment options – that’s reasonable. Some believe that cost is the most important part of this conversation on any topic – and this isn’t always true. No matter if you are discussing investment options, insurance, the fee for advice from an accountant, lawyer, or financial planner…or a nice dress shirt. Or flowers for your spouse. And definitely do not take the cheapest rock-climbing course, or scuba diving course. You can see where this is going. If I have an option between a hand made, professionally inspected custom parachute for $500, and a machine made parachute [that everyone else is doing] for $99 that all of the articles assure me do the same thing, sometimes its worth just looking a little deeper at the more expensive parachute. Sometimes.

“You don’t need to save for retirement yet.” Delaying retirement savings can significantly impact your financial future. Starting early allows for compound interest to work in your favor, building a more substantial nest egg. This can really be costly. Delaying too long will back you into a corner that will cost you tens if not hundreds of thousands of dollars more.

“Follow your passion, and the money will follow.” While pursuing passions is fulfilling, it doesn’t always guarantee financial stability. It’s essential to balance passion with practical financial planning. I’m a big follow your dreams guy. I think this speaks to balance. Just opening the door, walking outside and declaring to the world you biggest dream, isn’t going to do it. Passion is important. Paying bills & saving – also important.

“Co-sign a loan to help a friend or family member.” Co-signing makes you legally responsible for the debt if the primary borrower defaults, potentially damaging your credit and financial standing. Scott Terrio – will lose it if I don’t mention this here. This has a small space in the terrible advice section here for a reason. So many make this choice without understanding what this really means. It’s not just a favour.

“You can’t get rich working a 9-to-5 job.” This mindset undermines the potential of disciplined saving and investing. Many individuals have achieved financial success through traditional employment by managing their finances wisely. So wrong. I see lots of manual, very traditional 9-5 job employees have significantly more wealth [monetary, family and life] with their situations. Working endless days does not equal financial freedom. Decision making does.

“Always follow your instincts when making financial decisions.” While intuition can be valuable, relying solely on gut feelings without research or professional advice can result in poor financial choices. We are wrong too often to rely on this. Sometimes the gut check is a big saviour. Sometimes it also will devastate you. This is where all those buying into weed stocks should please leave a comment below.

“You should get a credit card as early as possible to build credit.” While establishing credit is important, obtaining a credit card without understanding responsible usage can lead to debt accumulation and financial mismanagement. Credit is important. Living under debt =not important. Please be cautious.

“Investing is only for the wealthy.” This misconception prevents many from taking advantage of investment opportunities. Starting with small amounts can lead to significant growth over time through compound interest. Growing up, the only people I saw who invested were the ‘wealthy’. I feel this is where good planning, and good advice fits it. There are so many who should be investing, to build their own wealth. It’s often a missed strategy for so many.

“You should always aim to retire with $1 million in the bank.” Setting an arbitrary retirement savings goal without considering individual lifestyle, inflation, and future needs can be misleading. Personalized planning is essential. What will help someone else’s situation, may not help yours. This might work if you have no debt, and a decent lifestyle. If you are a spender, and carry debt, and want to retire earlier – this advice won’t be helpful.

“Borrowing from your retirement fund is a good way to handle short-term financial needs.” Tapping into retirement savings can jeopardize your future financial security and incur penalties, making it a risky short-term solution. Ripping out long term money to pay off the hot tub, vacation, or house reno you just did is terrible decision making, and bad advice all around. That $10,000 you removed from your RRSP at age 30 to do one of the above – will only get you $7,000 in your pocket, and would have potentially grown to $76,122 by age 60. That was costly.

I’d never shy away from listening to advice around the coffee shop. Great friends, great people – they all want you to hear what they have done. Listen, learn, act wisely.

My thoughts on this today –

An Electric Vehicle (EV) is powered by electricity either from a power grid, solar system, or kinetic energy from breaking, for power. In contrast, a Hybrid Vehicle (HV) consists of both an electric-powered feature and the gas-powered feature. It can run on gas and on electricity.

Savings

The rise in gas prices gradually makes EVs an option for people in Canada. The number one advantage you get from an EV is how much you get to save on gas. Instead of branching at a gas station every few days, you can plug your car at home to refuel. Same thing with an HV. Depending on your city or province, the electric feature in a hybrid car will save you cash on gas. For example, Vancouver is known for its high price of gas. Though both cars are expensive, you get to recoup your money from the savings on gas every now and then.

With an EV, you get to save money on maintenance. An EV is known to only have a handful of inexpensive maintenance costs compared to cars with Internal Combustion Engines (ICE). no need for an oil change, belt replacement or other expensive maintenance and repairs that are associated with ICE cars. EV maintenance and repair will run you $949 per year, which is $330 less than a traditional vehicle.

Costs

The upfront payment on an HV is known to be on the high side compared to a gas-powered vehicle. Sometimes the difference could be as high as $10,000. Depending on the brand you buy, an HV could be cost-intensive. You should consider the price of gas in your area, how much time you will be driving and how long it will take you to recoup your expenses in gas savings.

An EV is also the same as the price of a new ICE vehicle. In Canada, it is advisable to go for a used EV as they are cheaper than buying brand new ones. You can also enjoy tax credit in some provinces if you buy an EV. Some of them include:

• Nova Scotia: $2,000 rebate on used EVs;
• Ontario: $1,000 toward the purchase of a used EV and $1,000 toward the purchase of a used EV if you scrap your old ICE vehicle;
• Prince Edward Island: $5,000 rebate for a used EV;
• New Brunswick: $1,000 rebate (PHEV); $2,500 rebate (EV).

Future Trends

The EV and HV market in Canada continues to grow impressively. The world is gradually shifting to green energy and Canada is not far behind. The HV and EV market had total revenues of $1.1bn in 2020, representing a compound annual growth rate (CAGR) of 17.7% between 2016 and 2020. The market consumption volume increased with a CAGR of 14.9% between 2016 and 2020, to reach a total of 40,206.0 units in 2020. Even though the EV and HV market declined in 2020 due to the pandemic, with a decline of about 33.8%. There are strong indications that things are getting back to normal, and the market will continue to grow.

To find out more on Incentives for Purchasing Zero-Emission Vehicles, CLICK HERE for information from Transport Canada.

The Covid-19 pandemic has upset the habits and routines of many people. Staying safe and healthy has become a constant concern. The effects of the pandemic are taking a toll on people’s health, both mental and physical.  It is more important than ever to eat right, stay active, and do things that make you happy. When it comes to creating a healthier lifestyle for yourself, getting started is the hardest part. Here are a few tips to help you navigate all the information available on diet, hobbies, and fitness!

Diets-You Are What You Eat!

Health starts with what you are eating, and it is important to follow evidence-based nutritional sources. Fad diets are running rampant on the internet and it can be easy to get lost in the promises some of these diets make. Paleo diet, Keto diet, Atkins diet, Raw diet, South Beach diet, to name a few, all make promises of results that may be unrealistic. People are always looking for a quick fix so it can be easy to be swooned by the hype of the diet of the moment. Do not fall into fad diet traps that promise immediate weight loss with minimal effort. As a rule, you should avoid any of the following:

•  Diets that promise rapid results
• Diets that claim you can eat whatever you want
• Diets that cut out specific food groups entirely
• Diets that require you to skip meals or replace meals with a product

Eating a healthy diet does not need to be complicated or regimented. Making small and sustainable changes to your eating habits will ensure that you stay on track and meet your goals. Canada’s Food Guide recommends that you simply choose to eat mostly fresh foods that include plenty of fruits and vegetables, whole grains, and protein.

The internet is overwhelmed with nutritional information. Make sure that whatever claims a source is making are backed up by science and that the publication is showing the sources they used to compile the information.

Here are a few evidence-based nutrition sources to check out: Canada Food Guide, Health Canada, Dieticians of Canada, and Nutritional Link Service.

Hobbies

Spending a lot of time at home can be hard on the head if you do not have a hobby or two to occupy your mind.  Covid-19 restrictions have most of us stuck at home and people have gotten creative about keeping themselves busy. People have taken to things such as breadmaking, sewing, gardening, learning an instrument, virtual book clubs, and other do-it-from-home activities.

The internet is rich with tutorials and forums that allow you to become a part of vast communities of likeminded people. Looking for something more local? Most municipalities have a recreation department that are busy keeping people entertained at home; you just must know where to look.  Check out town websites, library websites, and community centers to see what they are offering. In some regions, there may even be opportunities to gather with others to talk about, work on, or develop new hobbies.

Exercise

Starting a fitness routine may be one of the best things you can do for your health. Physical activity, even in small amounts, can reduce your risk of disease, help you lose weight, have profound effects on your mental health, and even improve your quality of sleep! So how do you get started?

Much like dieting, the internet is teeming with fitness pages, accounts, and how-to’s. It can be hard to know where to begin and it is easy to feel overwhelmed.  The first step is identifying what you think you would enjoy. Below are some of the most popular ways people are working on their fitness:

• Cross-fit: Cross-fit is a type of High Intensity Interval Training that focuses on performing functional movements at high intensity level.  That may sound intimidating but many of the workouts are group workouts that include people of all abilities. This may a be a great start for many people as it provides an encouraging group of people that will help you stay on track and stay committed.
• Yoga: Yoga has been popular for a very long time and is a great low impact activity. Yoga focuses on body and mind, with lots of emphasis on breathing and stretching. Yoga is something that you can do at home easily as there is very little, if any, equipment needed!
• Spin: Spin classes are huge right now and do not seem to be going anywhere any time soon.  Usually, spin is taught at a facility in a group setting with an instructor to encourage and lead the class.   If you are unable to attend a spin class due to Covid-19 restrictions, there are stationary bikes on the market now that have spin classes built right into them.
• Running: Running communities are present almost everywhere.  This makes a great starter activity. It is easy to find running groups near you that offer learn-to-run programs to help get you started. Running can be a very social sport which is great for both your physical and mental health.

Bottom Line

Sometimes organized sport and fitness can be a little intense and that is okay, because there are so many ways to get active without having to commit to one thing. Walking, hiking, skating, intermural sports, pickup leagues, tennis… these are all fantastic ways to start moving in a way that is fun and less intimidating. Regardless of what you choose to do, always remember to work within your limits and listen to your body. If you have health concerns, it is a good idea to talk to your doctor before engaging in a new fitness regime.