The Rule of 72

Have you ever wondered how long it takes to double your money? There is a simple formula to calculate how many years you will need to double your money.

The simple formula is called The Rule of 72. This rule only works when you compound your interest annually and do not take out money from your account. To find out how many years you need, divide 72 by your interest rate. Here is an example: Assume your interest rate is 12%, you will double your money in 6 years (72/12=6).

If you add more money monthly to your initial investment, your time to double investment will be less. Investment is a discipline and don’t expect to double your money overnight. Start investing at an early age, keep adding more money on a monthly basis, and stick to it for the long run – you will achieve your financial goals.

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Some Highlights from the Recent RBC Canadian Consumer Outlook (CCO) Index

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The RBC Canadian Consumer Outlook (CCO) Index released on Thursday, February 9, pointed out that Canadians are increasingly worried about their overall personal finance situation and it seems to be deteriorating in some aspects. The RBC CCO looks at Canadian economy, personal finance situation, and consumers expectations annually.

Let’s look at some important highlights:

- 32 percent Canadians are positive about Canadian economy (down from 42 percent last year).

- 36 percent Canadians believe that personal finance situation will improve (down from 38 percent last year).

- Personal debt stands at $11,729 on an average (down from $13,020 last year).

- 57 percent Canadians have no emergency savings fund.

- 53 percent will change timing on major purchases due to economic conditions.

- 31 percent will focus on reducing debt and spending less.

- 22 percent will focus on saving and investing more.

- 30 percent would move to another part of the country or change careers for better jobs.

- 20 percent working in a different field than they are skilled at.

The full report can be accessed here: The RBC Canadian Consumer Outlook (CCO) Index 2012. Where do you you fit in? If you are reading this article now here on Canada Personal Finance Website, it shows that you are someone who would like to build a better financial future and congratulations on that – and don’t forget to read my other personal finance website regularly.   

 

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Close Credit Card Accounts Before Throwing Out

4 Common Credit Card Mistakes

We all have credit card accounts here and there we are not aware of. Sometimes we just throw away credit cards once we don’t use them anymore. But is that the proper way of getting rid of those credit cards you don’t need?

For regular credit card accounts, if you just throw away or destroy your credit card your account remains active with the issuing financial institution. That means on paper you still hold that credit card and your credit account will appear on your credit report, regardless of whether you physically have that credit card or not.

For store credit card accounts, it depends on that store’s policies. Some of them will close your account if you are inactive for some time and some of them will keep it active regardless of whether you are active or not.

So if you were applying for store credit cards at different places just to get the 10 percent off on the first purchase and forgot about it after, you may have many credit cards appearing on your credit report you were not aware of – and when you apply for a new loan or mortgage the lender may not like seeing too many open credit accounts.
The best way to get rid of any credit cards is to call the issuer and close the account. Then shred it or cut it into pieces and trash them separately in separate garbage bags.

So next time, pick up the phone and close your account first before getting rid of those cards you don’t need. 

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Avoid These Common Credit Card Mistakes

Credit cards are a part of our daily living and they are good things, if you know how to manage them. Today, I will talk about how some common and simple mistakes can ruin your credit score. These small mistakes are so negligible that we often forget they can have a big impact on our finances. Learn these mistakes, avoid them, and make them a thing of the past.

Making Late Payments – This is the most common mistake we all make. A late payment can incur late payment charges and bump up your interest rate higher. It can also hurt your credit score, depending on how late it is. Use online tools like Google Calendar or anything that works for you to remind you 3 days ahead of the actual due date so you don’t get caught up making late payments.

Paying Only The Minimum – In Canada, by law, credit card companies now have to show how many years it will take to pay your full balance if you only make the minimum. Add some extra dollars with your minimum, whether it’s $20 or $50 a month, and you can shave off years and save lots interest costs on your credit card balance.  

Using a Credit Card for Cash Advances – Withdrawing cash using a credit card hurt you 2 ways. The first is you pay a high cash advance fee. This fee could run from $20 to $50, depending on your bank. The other bad thing is you start paying high interest the moment you take out cash advances. Never use credit card for cash advances. It’s the worst way to borrow money.

Paying Annual Fees - Many credit cards will try to hook you up offering reward points or cash back in exchange for annual fees. Just to cover these fees, you have to spend more than $20,000 or $30,000 annually. Read the fine print and figure out if it’s really worth it to spend that much money for reward points or cash back after covering annual fees. Use a no annual fee reward or cash back credit card instead; there are lots of them available in the market.

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Canadian Economy and Unemployment Rate

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After an unexpected half-point contraction in the second quarter, the Canadian economy expanded better than expected by 3.5 percent in the third quarter. The U. S. economy expanded by 2 percent in the same period. Increased demand for exports was behind this unexpected growth. Although the economy is expected to grow in a positive pace in the last quarter of 2011, it may not be as robust as the 3rd quarter.

Consumer spending on goods and services rose in the 3rd quarter by 0.3 percent, lower than 0.5 percent of the 2nd quarter. Government spending on goods and services rose in the 3rd quarter by 0.2 percent. Growth was seen in the goods producing industries and service industries by 1.4 and .6 percent. Energy, manufacturing, construction, transportation, and wholesale trade are where growth occurred most.

Canada’s unemployment rate rose to 7.4 percent in November, making it the fifth consecutive month since June in which there was no new job creation. In the U. S. 120,000 jobs were created for the same month. However, the overall pace of job creation in Canada is still higher than the U. S. since the recession. With 13.2 percent unemployment rate, Newfoundland and Labrador has the highest unemployment rate. Conversely, Alberta has the lowest unemployment rate at 5.0 percent.

Bank of Canada states that economic activity will be sluggish in the last quarter of 2011 and the early months of 2012 with a possibility of conditions getting worse if the European debt crisis continues to drag down the global financial situation. However, the Canadian government will remain flexible with its economic policies and will intervene with new stimulus packages if necessary.

Data Source: Statistics Canada

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Condo Buyer’s Checklist/Points to Consider When Buying A Condo

Condo living can be rewarding with minimal headaches. However, it is not for everyone. Today, I am going to present some questions that should be answered and looked at to help you before making any condo buying decisions.

1. Know why you want a condo and if condo living is for you.
2. When you live in a condo, there are rules and regulations you have to live by. Ask yourself if
   you will be fine with these rules and regulations and giving up some freedom when compared to
   living in a house.
3. Condo living is associated with paying ongoing fees (maintenance fees). Make sure you
   understand how these fees work and if you will be paying these every month.
4. Is the location right for you? Is it close to those amenities that are important for you?
5. What types of facilities or amenities is the condo giving you? Is it too much or too little?   
   Beware of condos that offer too much. For example, there are some condos in Toronto with
   their own bus services to the station. However, I won’t live there because maintenance fees
   will be too high for the obvious reasons.
6. Does it come with a parking space and a locker or you need to pay for them additionally?
7. Are there any restrictions on occupants? Will you be able to rent out your unit?
8. How many pets are allowed?
9. Is the condominium price reasonable?
10. Are the monthly condo fees (maintenance fees) reasonable?
11. What the condo fees cover and what the fees don’t cover.
12. How old is the building?
13. Who is the builder and is this builder a reputable company or have they had bad records or  
     problems in the past?
14. Is the building in good shape and durable? Does it look attractive?
15. Does the building and surrounding area look clean, neat, and well maintained?
16. Is the condo corporation in good order and are there no legal claims or judgements?
17. How are the condo finances? It is well managed or is the condo board is wasting money?
18. What is the owner-occupied and renter-occupied units proportion?
19. Is the building energy efficient and is a functional fire protection system in place?
20. Will this purchase make you happy living in your unit so you don’t need to look for another condo after 6 months? How many years you are looking to stay in this building?

The Ontario Student Assistance Program

The Canadian Government does not want any students stop going to college or university because of the lack of financial support. In order to prevent that, the Government provides financial assistance to eligible students in paying for their post-secondary education through various programs and services throughout Canada. OSAP or Ontario Student Assistance Program is the main source of assistance in the province of Ontario. OSAP is a student loan program which is made up of both federal and provincial funding for the eligible post-secondary students living in Ontario.    

OSAP Loan Amount

The amount students receive will be based on their financial need. This amount is designed to cover expenses such as tuition, books, living costs, transportation costs, and so on. There are various factors that determine the loan amount such as parent’s income, marital status, student’s own or spouse’s income, course type (full-time, part-time) course length, and so on. There is a financial aid estimator or calculator available to give you an approximate idea of the amount based on your scenarios. To find out more, check Government of Ontario OSAP website.

OSAP Eligibility

There are many criteria that need to be fulfilled in order to be eligible for OSAP. Some of them are:
- You have to be a Canadian Citizen, permanent resident, or a protected person.
- You have resided in Ontario for the last 12 months
- You academic standing is satisfactory
Visit the OSAP site mentioned above for full eligibility criteria.

How to Apply For OSAP?

There are two ways to apply for OSAP: via paper application and online. Online application is quicker and therefore the preferred way. There is a cost of $10 to apply via paper application.  

OSAP Loan Repayment and Interest

Once students graduate, stop attending school, or reach lifetime maximum, repayment of OSAP will start. Loan repayment starts 6 months after the student ends full-time status. The loan is interest-free and interest is paid by the government as long as students remain full-time.

Last Word

OSAP is no different than any other loan and as such, you should treat it with responsibility and care. Not handling the OSAP properly can affect your credit rating. If you have difficulties paying OSAP, don’t wait for the last moment. Contact the National Student Loan Service Centre (NSLSC) at 1-888-815-4514 or visit their website at NSLSC.

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Canadian Bank Accounts for Newcomers

In a recent article, I talked about Canada being the best country in the world. It’s no wonder immigrants or newcomers from all over the world will be coming to this wonderful country for a better living. Every year Canada welcomes a handful numbers of new immigrants, and not all these newcomers are from third or second world countries. You will find immigrants from other first world, developed, or rich countries coming to Canada. And why not? If you were given the opportunity, why you would not want to be a part of the best country on earth, even if you live in another rich country? If you live in Canada, you will bump into new immigrants from other developed nations like Australia, U.K., U.S.A., France, and so on all the time. When a newcomer first arrives in Canada, the first thing they look for is to have a bank account. And today, I will review some bank accounts for immigrants briefly. I will concentrate on Chequing accounts as majority of newcomers look for a simple chequing account.

HSBC Bank Canada – Although HSBC bank tries to impress by advertising that newcomers can open an account even before you arrive in Canada, their fine print reveals a big catch. Their HSBC Advance Chequing Account requires a minimum balance of $25,000. If you don’t keep this minimum balance, you will be paying $25 monthly fee – which is too much. If you don’t like to waste your money paying banking fees, stay away from HSBC.

RBC Royal Bank – The RBC® Welcome to Canada Banking Package offers free banking for a full one year. This package includes many other products such as a credit card, free safe deposit box, etc. After one year, your monthly fee will be $4 – which is not bad. However, there may be transaction fees depending on how many transactions you do.

TD Canada Trust – TD does not have any separate bank account or any packages for newcomers. To view their products, visit TD’s website.

CIBC – CIBC’s CIBC Newcomers to Canada Plan offers free banking for one year. Also, newcomers get help with purchasing their homes with a CIBC Newcomer Mortgage.

ScotiaBank – Scotiabank offers StartRight Program for landed immigrants. The Scotiabank StartRight Program financial package offers No-fee Powerchequing® free for one year, free small safety deposit box, auto loan program, among many other things.

BMO – BMO Bank of Montreal® offers the BMO Banking Package for Newcomers. This package offers free one year banking, free small safety box, and a secured BMO Term Investments.

Some of these packages offer credit products to build a credit history in Canada. These are the programs offered by Canada’s major banks for newcomers. There may be similar programs offered by other banks or financial institutions. Always do your research before opening a bank account or any sort of account in Canada to get the best deals and to find something that meet your needs. Also, since you are new in Canada, why not broaden your financial knowledge by regularly reading my two financial websites: Canada Personal Finance Blog and Canada Personal Finance Website. Remember, no one cares about your money but you. Only you know how hard it is to earn a dollar, because you are the one who earned it. Save a dollar at every possible opportunity and start investing wisely – you will succeed in Canada.

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Canada – The Best Place on Earth

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I have been contemplating writing about Canada’s being the best country on earth for a while. However, due to the volume of the good things about Canada to mention, I have been putting it off because I would have to write a book if I wanted to cover everything. Finally, instead of writing by myself, I took a short cut and gathered some of the rankings done by well-known and reputable organizations. Here is how it stands:

According to OECD’s Better Life Index, Canada ranks high in all measures of well being and Life in Canada Is Better Than Most Other Industrialized Countries.

According to The Economist Intelligent Unit’s Global Liveability Report, 3-4 Canadian cities are always in the top ten and Vancouver is usually always the world’s most liveable city.

According to Mercer 2010 Quality of Living Survey, several Canadian cities are always on the top and top five North American cities are Canadian – no cities from the U.S. can be found in the top 25.

According to the UN Human Development Index, which measures quality of life in countries around the world, Canada is one of the world’s best places to live and is always in the top ten.

According to The Heritage Foundations’ 2011 Index of Economic Freedom, Canada is the 6^th freest country in the world.

According to the Vision of Humanity’s 2011 Global Peace Index, Canada is the 8^th most peaceful country in the world.

According to The World Economic Forum’s Global Competitiveness Report 2010-2011, Canada is in the top ten.

According to Transparency International’s Corruption Perceptions Index 2010, Canada is one of the least corrupt nations on earth.

These are only a few to mention. Any way you look at Canada, using any reports or indexes, it is in the top ten consistently year after year. A point worth mentioning is that you will not find our big brother in the south in the top in most of these rankings. Canada is a multi-racial, multi-cultural, and multi-linguistic country. Canada’s diversified backgrounds and cultures make it more unique than any other country on earth. Canada is the first country in the world to declare itself a multicultural country and in 1982 Canada added multiculturalism to its constitution. Canada recognizes, values, and protects its citizens’ diversity and human rights and treats each individual with respect, equality, and dignity. Canada is like nowhere else on earth and this is because Canada is the best country in the world.

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Canada Inflation and Economy

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Statistics Canada reports that inflation in Canada reached three year high of 3.3 percent in April, a full one per cent up from the month before. This increase exceeds the Bank of Canada’s target range of 1 to 3 per cent. The main elements that contributed to this inflation are energy, gasoline prices and food costs. Energy rose 17.1 per cent, gas price rose 26.4 per cent (6 per cent over the month), and food rose 3.3 per cent in the year. As the inflation news seems to remain in the spotlight, many consumers wondering whether they should be worried these inflation numbers.

Not so fast. Although the inflation is at 3.3 per cent, core inflation remained tame at 1.6 per cent. Core inflation excludes eight volatile items such as fuel, vegetables, mortgage cost, and so on. To make things brighter, core inflation actually fell to 1.6 per cent from 1.7 per cent; and also, 3.3 per cent inflation rate was lower than 3.4 per cent forecast by analysts.

Bank of Canada predicts that the energy costs would keep the inflation above 3 per cent in the short term. However, it should return to central bank’s 2 per cent target range by mid 2012. Paris-based OECD (Organization for Economic Co-operation and Development) recently recommended that Canada should increase its interest rate by 25 basis points within the next quarter. It is expected that

Bank of Canada will start raising interest rate starting July 2011.

So, coming back to our question, should you be worried about Canada’s inflation? Consider the following facts:

• Unemployment rate is at 7.6 per cent
• 58,000 new jobs were created
• Upgraded growth forecast for 2011 from 2.4 per cent to 2.9 per cent
• Federal government is on track to balance its budget by 2014/2015

The way things are now, there is no need to worry.

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