How Social Payments Are Transforming Financial Transactions As We Know Them

In honor of arrival of the Year of the Dog in February, I sent my nephew in China a gift of money through a chat app on my phone. He pocketed it happily, using the same app to express his appreciation, thanks and best wishes back at me for the new year.

It was another day, another dollar, as they say, or the everyday sort of transaction that people in some countries like China don’t think twice about. For people in most Western nations, though, this sort of payment system is still something of a curiosity.

That’s changing fast, though. And as the social sharing economy continues to evolve, look for such peer-to-peer transactions over people’s social feeds to become the norm. It quite possibly may disrupt the traditional banking system as we know it.

Venmo, PayPal’s free digital wallet, was an early player in Western economies, launched in 2009, but really taking off in 2014 as Android Pay and Apple Pay made their much vaunted debuts. Other entries since – Facebook Pay, Google Wallet, Square Cash – speak to a concept whose time has come. Case in point: Venmo handled $17.6 billion in transactions in 2016; that almost doubled to $34.2 billion last year.

If there’s a model for the rest of the world to follow, it’s China’s. Its system was a response in a country that had no credit card use, and whose banks were inefficient and underused. In less than 10 years, two rival payment services, Tencent’s WeChat and Alibaba’s Alipay, have transformed China’s financial ecosystem by making mobile payments – especially social mobile payments – an easy and accessible option.

As social payments continue to catch on in the U.S., the U.K., Canada and other nations, it’s moving us ever closer to becoming cashless economies. In fact, Sweden may be an example today of how we’ll all be operating in the not-to-distant future. A mere 1 percent of the value of all payments made in Sweden are in coins or notes. Its citizens live for their bank cards, but over half Sweden’s population depends on the leading social payment smartphone app, Swish.

It’s not just the world’s more privileged societies that stand to benefit from this evolving financial ecosystem. Social payments stand to bring much needed financial services to countries with significant populations of unbanked or underbanked people. Financial inclusion, of course, is key to lifting them from poverty.

Even if traditional banking services aren’t available to such populations, mobile phones increasingly are. Their pace of adoption is on a positive trendline, at 37 percent of the populations of underdeveloped economies.

Not surprisingly, both Tencent and Alibaba affiliate Ant Financial (formerly known as Alipay) see an opportunity to make inroads in countries where people may be unbanked, but not unphoned. Both are moving aggressively in Southeast Asia as part of that quest; at the end of last year, the Alipay service reportedly had 280 million users of its four local payment platforms in Thailand, India, Hong Kong and the Philippines.

The sharing economy is real and expanding rapidly. By 2025, a PricewaterhouseCoopers study found, spending in the five components that comprise it (travel, car sharing, staffing, streaming and, no surprise, finance) may hit $335 billion – or half of total spending in those areas.

It’s not just social payments that will help to reshape the financial sector. Cryptocurrencies like Bitcoin will be another facet, a means for settling payments directly and without much hassle or effort.

Either way, though, if this new social order we’re developing can advance those who currently have no access to things the rest of us take for granted like financial services, then it’s all to the good.

Wedding Bells—And Budgets

Congratulations! You’re engaged. Life is beautiful, life is fun, life is—suddenly full of financial worries, organization catastrophes, and endless planning. Don’t worry; you don’t have to spend 2016’s national average of $35, 329 for your day to be perfect. Below, you’ll find financial tips to help you save money and plan ahead, from that princess dress all the way to the guests’ plates.

Value in the Venue

Chances are, someone you know owns property. Why not have your marriage and reception at a relative’s? If this idea doesn’t appeal to you, don’t worry: there are other options.

  • Parks, beaches, museums, and aquariums permit quite a bit of wiggle room for choosier couples. Prices fluctuate, but you can get married at Luthy Botanical Gardens in Illinois for $500.
  • Consider renting a cabin or boat, but be sure to anticipate a night’s stay.
  • Universities, theaters, and local eateries are all fantastic locations for a wedding. For an outdoor event at Ohio State, fees can start as low as $100.

The Dress

Let’s face it, ladies. You’re probably only going to wear it once. Is it really worth thousands of dollars?

  • Search young designer labels and mainstream retailers, such as Dreamers & Lovers or Lace & Liberty.
  • Talk to local seamstresses. Having a wedding dress made by professional design houses can be ruthless on the wallet.
  • Consider a white bridesmaid’s dress, cocktail gown, or secondhand dress.

Photographers, Catering, and Music

Photography and music typically comprise about 20 percent of a wedding’s budget. However, you don’t have to hire a weathered professional to get amazing wedding pictures, groovy music, or splendid service.

  • Students are fantastic choices, as they will work for less and be just as professional.
  • Hire a DJ. DJs can be hired for about $500, but bands typically cost $1000 or more.
  • Create your own music mix and transfer it to a CD. You can always ask someone to start and stop it throughout the festivities.
  • If you choose to have liquor, select a soft bar with limited alcohol or, if the caterer allows, bring your own liquor.
  • Keep the dining experience simple. Three courses are plenty, and savory entrees do not have to be expensive.

Legal Costs Many Do Not Anticipate

The Marriage License: You’re not married without this! Marriage licenses are typically between $20 and $100, but be sure to plan accordingly.

Attorneys: Yes, you read that correctly: attorneys. Prenuptial agreements have seen a fivefold increase in the last two decades. “Prenuptial and postnuptial agreements are becoming very common,” says Simmrin Law Group Attorney Sherry Cross. “If you or your partner are considering a contract, it’s best to have it looked over by a professional.”

 

Don’t let the financial stress hold you back. This article is only the tip of the iceberg; there are many more ways to save money on your wedding. Take it one step at a time, consider cheaper alternatives, and get to your big day with a smile on your face.

3 Ways to Save Money On A Weekend Getaway

For your mental and emotional well being, it’s important that you give yourself a break from your normal routine of going to work and taking care of your home or family. So when this little relaxation time is necessary, many people choose to just take a few days off in the form of a weekend getaway. But if money’s tight, even these few days may not seem financially possible. So to help you take the time you need without breaking the bank, here are three ways you can save money on a weekend getaway.

Take Advantage Of Last Minute Deals

While it usually pays to not wait until the last minute to book your flights or hotel, if you can take advantage of last minute deals, you can save a lot of money for yourself. According to Discover.com, many airlines or hotels will offer bigs savings if you’re able to fill a spot that otherwise wouldn’t have been sold or had been canceled. If they have empty seats or empty rooms, they’re losing money. So if you’re able to help them out by filling a spot for them and they’re able to help you out by offering you a discounted rate, it’s a win-win.

There’s Strength In Numbers

Depending on your personality, you may feel more relaxed when you’re able to go off on your own or with just one other person. However, if you’re able to bring along a larger number of friends to share in your weekend getaway with, you could drastically reduce your own costs. According to Dara Continenza, a contributor to USA Today, splitting the cost for things like gas, hotel rooms, and even group discounts on things like tickets can help keep your costs low for a weekend getaway. Especially if everyone is in a frugal mindset, you can likely have an enjoyable weekend without having to spend too much money for it.

Know Where and How To Drink

When you’re trying to relax and have fun on your weekend getaway, you’re likely planning to break out a few bottles of champagne or at least hit up a bar or club. However, paying for drinks can get expensive very quickly. So to save money in this area, you may want to keep your drinking to a minimum, especially if you plan to be driving around the area. Additionally, Zeke Quezada, a contributor to TripSavvy.com, shares that many casinos will comp drinks if you’re gambling, which could help you save money if you’re visiting a place like Las Vegas or Atlantic City.

If want to have fun on a weekend getaway but don’t want to spend a lot of money, consider using the tips mentioned above to help you keep your expenses low.

Why More Canadians Are Retiring With Debt and What It Means

As Canadians, we live in a country where certain rights and freedoms are expected, hoped for and, some might say, taken for granted. The freedom to retire early is one many of us begin grappling with as we approach middle age. Ironically, many Canadians won’t be ready to retire until they are significantly older.

The reason? Debt.

Unfortunately, too many retired people – 34% — over 55 years old still carry consumer debt, according to Statistics Canada. In fact, a recent Equifax Canada report found that the debt load of seniors is outpacing that of their younger counterparts.

It’s not as though Canadians have always carried a heavy debt burden. In 2012, 42.5% of people over 65 still had debt, a jump of 55% when compared to seniors in 1999.

A number of economic, social and cultural factors are to blame, say experts. They point to divorce, illness and large mortgages as some of the culprits. Experts also explain that children, grandchildren and other family members may also be at fault, as they often look to their parents and grandparents to lend them hand. In fact, a 2015 survey showed that 18% of first-time home buyers are gifted their down payments thanks to relatives, typically parents.

But, children can’t shoulder all of the blame.

Low interest rates have made debt much more attractive. Further, cottages, pricey vacations, fancy cars and other expensive toys may be out of reach for the average pensioner. Paring down and cutting back in your sixties may not seem fair. After all, you’ve worked decades, aren’t you entitled to a little luxury? Your fixed retirement income simply may not support your lifestyle any more. Perhaps it’s time to downsize and sell your 3,000 square-foot home?

If selling isn’t an option, many house-rich, cash-poor seniors can look to their houses for equity. Often by the time a person retires, he or she has either paid off their mortgage or is only owing a small amount. Because house values have increased in recent years, in some markets quite significantly, tapping into a home’s equity may be something to consider.

Still, as a borrower, you need to be aware of how you are intending to pay back the loan. Is it possible to make monthly payments or would you prefer to have your estate pay off the loan after you die?

No matter how the money is borrowed, the process should be well planned out. Know what you need it for. Have a repayment plan in place. Don’t borrow more than you need – that often leads to trouble.

Dwayne Rettinger

Executive Financial Consultant

Investors Group Financial Services Inc.

Rettinger & Associates Private Wealth Management

www.rettingerandassociates.com

This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Dwayne Rettinger is solely responsible for its content. For more information on this topic or any other financial matter, please contact an Investors Group Consultant.

Finding a Solution for ‘Unbankability’ through Blockchain

TORONTOFeb. 28, 2018 /CNW/ – A Change.org petition has been launched by Toronto’s Bo Zou as a means of securing buy-in and, ultimately, funding to counter an issue that plays a significant role in global poverty: a lack of access to banking services.

“Financial inclusion is critical in order to reduce poverty,” says Bo Zou, a specialist in customer experience strategy and design who has worked extensively in financial services. “This shouldn’t be happening in the 21st century. But technology may pave the way to effecting change.”

Lack of access to banking services puts the gap between the world’s haves and have-nots in sharp distinction, Zou points out. Most adults (94 percent) in OECD high income countries have bank accounts, but only 54 percent in developing countries do, with the lowest proportion in the Middle East at 14 percent, according to World Bank data.

The outcome is a reduced capacity for saving to create a cushion to help finance an education, business or home.

Read the full press release HERE.

TFSA or RRSP? Cutting through the Confusion

When it comes to choosing between a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP), there are plenty of details to keep you up at night. It’s important to look at the pros and cons of each plan, so you can develop a financial plan that’s right for you.

Your personal Financial Plan should include the income per year you will need after you retire to have the retirement lifestyle you want. Your Plan should also calculate the amount you will need to contribute to TFSA or RRSP per year to achieve this.

This will help you determine the difference between your current tax bracket and the tax bracket you will experience after you retire. It’s easy to assume your income will be less, so your tax bracket will be less, but that is not necessarily accurate. Many government income programs allow clawback provisions that put many seniors in shockingly high tax brackets!

Clawbacks are just like a tax and they can be an unexpected cost. If you look at the breakdown of the three most common clawbacks, you can see the difference between having a TFSA or an RRSP. Here’s how the three clawbacks break down:

1.      Low income (less than $20,000) – 50% clawback on GIS

2.      Middle income ($35,000-$85,000) – 15% clawback on the age credit

3.      High income ($75,000-$120,000) – 15% clawback on OAS

You can own the same investments in your TFSA as your RRSP. The main difference is that RRSP contributions and withdrawals have tax consequences, while TFSA contributions and withdrawals don’t.

Therefore, the answer to TFSA vs. RRSP is primarily based on your marginal tax bracket today compared to when you withdraw after you retire.

Rule of Thumb

RRSP is better if:

  • You will be in a lower marginal tax bracket during retirement. Example: Today you’re making $100,000 and you will receive $35,000 during retirement, you can get a tax refund of 43% on your current deposits and pay only 20% tax on your retirement withdrawals, giving you a gain on the actual value of your RRSP of 23%.

TFSA is better if:

  • You will be in a higher marginal tax bracket during retirement. Example: Today you’re making $40,000 and you will receive $20,000 during retirement, you can get a tax refund of 20% on your current deposits and pay out 70% when you make retirement withdrawals. This figure includes lost GIS from the clawback. This saves you a 50% loss on your entire RRSP.

You can choose either an RRSP or a TFSA if:

  • You will be in the same marginal tax bracket during retirement.

Other Details to Consider

If you are still unsure if an RRSP or a TFSA is right for you, answer these two important questions:

1.      How will I use my tax refund?

  • TFSA is best if you plan on spending your RRSP tax refunds. Example: if you deposit $10,000 to either a TFSA or an RRSP and then spend the refund, the TFSA will give you a higher retirement income. You need to reinvest your tax refund for RRSPs to provide you the same after-tax retirement income as TFSAs.

2.      Is the withdrawal flexibility from my TFSA a pro or a con?

  • Flexibility is good, but if you are tempted to withdraw before retirement, RRSP might be a better choice.

Sound Financial Planning

It is advisable to plan on retiring with a taxable income in the low-to-mid level tax brackets. Since the cash that you live on can vary from your taxable income, it’s important to remember that TFSA withdrawals that are non-taxable. They can give you cash income that is not taxable income. Other tax deductions must be factored in to figure out the tax bracket you will be in.

Example: Basic government pensions are $20,000. OAS is $7,000 maximum, based on your number of years residing in Canada. CPP can range from $0 to $13,000, depending on how much you’ve deposited in the past. From here, calculate your income from your RRSP and TFSA and any other investments. You can generally withdraw 3-4% (depending on how you invest) of your RRSP or TFSA each year and have it last as long as you live.

This should help you determine which plan is right for you. You can plan to be in the right tax bracket. If you currently earn $80,000 and will retire with $50,000, you may be tempted to think TFSA is best since you will get a refund of 31% today but will pay 34% at withdrawal. However, with only $5,000 per year from non-taxed TFSA, your taxable amount is down to $45,000 which puts you in the 23% category, so RRSP is actually better. In this example, you need enough TFSA for the $5,000 per year but the rest should go into RRSP.

Important Note

Don’t forget to adjust for inflation! All of your retirement calculations need to factor in inflation. It will roughly double your cost of living in 20 or 25 years.

Forgetting to include inflation is the most common error many people and advisors make in estimating retirement income and how large of a nest egg you will need.

What about non-registered investments?

In some cases, non-registered investments may actually be better. Just maximizing TFSA and RRSP is not always the best answer. If your taxable income in retirement will be in a higher tax bracket than now, non-registered investments might be a smarter choice. If using your TFSA to the maximum will still leave you in higher tax brackets, non-registered investments will give you more cash at lower tax brackets than RRSP.

Example: Currently you make $80,000 and you plan to retire with $80,000, you get a 31% refund now but will have to pay as much as 44% when you withdraw because of the OAS clawback. Upon retirement, you can only get $45,000 at lower tax bracket rates than your current tax bracket.

If you plan on getting $20,000 from government pension, then you need to plan now for enough RRSP to give you $25,000 income. The rest should be in TFSAs. However, that won’t be enough. You will still need $35,000 more. That’s when non-registered investments might pan out better for you than RRSPs.

But don’t forget the taxes. Non-registered investments are not always tax free, depending on how they are invested, and the interest is always taxable. Capital gains, however, are only half taxable. Dividends are given preferred tax rates but they also get higher clawbacks because the income for determining clawbacks is the “grossed-up dividend”, which is 38% more than the dividend.

Let’s look at a worst-case scenario for non-registered investments: a senior making $20,000 gets a dividend of $1,000 which has a clawback of $690 (50% of $1,380). In this case, there is no income tax, but you still lose $690 out of the $1,000 in reduced GIS income.

If you sell a bit of your non-registered investments each month, you can get a nice, low tax rate on the cash. My term for this is “self-made dividends.” Since your cash income is made up of your capital gains and your original investment, the tax is very low, often only 10% of your withdrawal.

Bottom Line

1.      RRSP –

  • medium working income $50-80,000 and modest retirement savings
  • high working income over $90,000

2.      TFSA –

  • low working income under $45,000
  • medium to high working income with no retirement savings
  • medium to high working income with large retirement portfolio

How much should I save?

Generally speaking, a modest savings would be $500,000-$700,000 when you retire. Factoring in inflation, this would amount to approximately $1 million to $1.4 million if you plan to retire in two decades.

Plan in Place

Now is the time to prepare a Financial Plan that will help you sift through the options while understanding all the details such as tax brackets, clawbacks and inflation. In my experience, when my retired clients have a portfolio consisting of a good RRSP or pension, a strong TFSA and some non-registered investments, we can come up with a good plan for how much they can withdraw annually while minimizing the amount of taxes that are required.

With a mix of fully-taxed, low taxed and non-taxed sources of income, we can plan effectively for you to receive the cash for the retirement you want, while remaining in lower tax brackets.

A sound financial plan that cuts through the confusion of TFSAs and RRSPs set you up for a comfortable and worry-free retirement. It will have the optimal strategies that are right for you.

6 Ways To Save Money In Your Monthly Budget

Money makes the world go around, and we always seem to need more.  Saving money is the ongoing financial dream, but sometimes it is hard to know where to start.  The demands of your everyday life and the pressures of work are often just about all our minds can handle, and saving money continuously gets pushed to the side.  

Make a point to do better, and read through a few excellent ways to save money in your monthly budget.  You may quickly find that your money-saving goals are more than feasible.  

Reevaluate your insurance plans

We carry insurance for many different emergencies in life, but there may be some wiggle room in pricing.  Optimize your insurance plans, whether its accident insurance, life insurance, renters insurance, or some other form of insurance.  

Things change in your life, and those changes often affect the stipulations of your insurance coverage.  Make sure to keep up with these things, or you could be paying more than necessary for your contract.  

Cut down on those monthly subscriptions

The average American household pays more than $100 per month in subscriptions.  Between apps like Pandora, YouTube, Hulu, and Netflix, your wallet may be feeling the stress.  

It is time to have a serious conversation with the family about what is absolutely necessary.  You may not want to cut out all entertainment, but subscriptions that serve similar purposes could be minimized to save money.  

Pay the yearly price instead

If cutting down on subscriptions and reformatting your insurance policies seems like too much work, try simply paying the yearly price instead of the monthly.  You will always save money by paying the one-time yearly payment rather than the monthly subscription price.  

Use half of what you normally consume

This suggestion is not meant for every part of your life, but when it comes to toothpaste and shampoo, you could probably cut your usage in half.  Purchasing essential items like toilet paper, paper towels, and toothpaste can occur half as often by simply cutting back on your portion sizes.  

Carpool bike or walk whenever possible

It costs a considerable amount of money to maintain a vehicle.  Driving your car every day probably costs you far more than you think.  Carpool, bike, or walk to your destination whenever possible.  Not are these alternatives good for your wallet, they are good for your health.  

Drink more water and less soft drinks

All your body really needs to drink is water.  Paying money for unhealthy sodas and other flavored drinks takes your money and your health.  It makes much more sense to spend twenty bucks on a water filter for your faucet than to spend twenty a week on sodas.

Understanding the Differences Between Financial Advisors and Brokers

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As a fee-only financial advisor, I am surely biased to this type of advisor. I do think everyday investors are much better off if they have someone in their corner who is recommending a particular investment product because it actually is the best product for them, given their circumstances and life stage. Not because there’s a commission on the sale at the end of the day.

That doesn’t mean, though, that you shouldn’t be mindful of possible issues – and that’s for any financial advisor, whether fee-based or full-service brokers. For that matter, you also should be mindful of potential drawbacks to other options that may seem (superficially, at least) appealing.

Let’s look at the options.

Fee-only financial advisors are considered advantageous because there’s no inherent conflict of interest as there can be with full-service or commission-based brokers. Brokers often recommend investments owned by their company, which is an inherent conflict.  You simply have to consider whether the products recommended are going to be best for your personal financial goals.

What you pay for is financial guidance, planning and assistance. This may be a flat fee. Some advisors charge a percentage of your account’s assets. You may be able to negotiate the amount. But, the fees you pay do not fluctuate according to the type of investments that are being recommended. What you get with this approach is objectivity and investment advice that’s unbiased. Your interests and your advisor’s are aligned.

The commission-based approach to financial advisory services is less the norm today than in the past. You open an account or buy a stock or bond and your advisor gets a percentage. Recurrent trading may also be encouraged – which may not be good for investors with a longer-term perspective. This all can pose a conflict with your best interests and goals.

And on the do-it-yourself front? Well, as attractive as this might sound on the surface, consider the relevance of the saying about the attorney who represents himself. For investment purposes, you might find good information online, but it’s just as likely you’ll find speculative information, if not real fake news. Investing is a risky business; if you don’t have the time or the expertise to do an adequate job of qualifying research, get a professional to help. Your future – financial and otherwise – depends on it.

Speaking of your financial future, it’s never too early to start planning for it. That means Millennials – and even the oldest Generation Zs who are just entering the workforce – should be putting money aside as they think about their long-term financial goals. It’s a challenge, of course, especially for those who are still trying to pay off college. Retirement is maybe too much to think about, right?

With that said, I’ve developed a service package to make it less painless. My new Robo-Advisor Professional service package is specifically targeted to the needs of Millennials and utilizes an in-depth financial data collection sheet, as well as a plan discussion with myself, to collect essential information about your financial background and goals.  This provides a strong base of understanding for clients to invest in ETFs through WealthSimple with a superior portfolio manager with a track record of beating the index.

ETFs are ideal for those with more limited resources, as a “wrapper” around a group of securities. They have a cost advantage over individual stocks and can be traded commission free. They’re similar to mutual funds, but with more flexibility as they can be traded throughout the day, not just once.

The Mortgage Broker

The Mortgage Broker
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Mutual Fund Newsletter

Mutual Funds Newsletter Canada

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Mutual Funds Newsletter is proud to join some of Canada’s top investment and finance professionals as a regular writer for MUTUALFUND.CA and the electronic and industry trade publication called ‘Mutual Fund Magazine’ that is an RRSP Season favorite for mutual fund dealers, representatives and advisors.

Mutual Funds Newsletter is at the top positions of yahoo, google, bing and youtube. The monthly Canadian Mutual Funds Newsletter is available in part online and is primarily sent with CASL approved email newsletter systems. The Mutual Fund Newsletter is the one and only premium communique that is completely free of charge. MutualFund.ca the keyword website that best defines Mutual Funds and the mutual fund industry at large. The entire portal of mutual fund sites protects the interest and sentiment of mutual funds and capital markets in Canada with respect to investors, advisors and product manufacturers.

The Mutual Fund Industry is worth well over 1 trillion dollars of Canadians hard earned capital. A concentration of assets under management worth considering in general and investigating further your place in it. Enjoy the monthly Mutual Fund Review the entire mutual fund market at a glance with winners and losers by sector and by category.

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