The month of November is Financial Literacy Month and is dedicated to helping people be smarter about and with their money.
Financial literacy is among the top life skills. Money may not bring happiness, but misadventures with money are a leading cause of unhappiness.
Throughout the month, you'll likely see many big banks putting out videos, polls, interviews, and other information to associate their brands with empowering Canadians to make smarter financial decisions.
However, we need to keep in mind that the top priority of big banks is to raise profits and increase revenue.
You’ll likely see many banks offering budgeting tips that are actually meant to distract us from their true goal which is pushing debt on customers via credit lines and other borrowing products. Keep this in mind with homeownership as well, as banks are often more than happy to mortgage you to the full extent of your financial means.
There are a few things that an extremely honest banker would tell you to keep an eye on throughout your financial decisions, as follows:
Billions of dollars are currently being saved in big bank savings accounts that pay just 0.05 to 0.5 percent interest rates.
Keeping your savings in these accounts is like renting your money for almost nothing for banks to then lend it out at rates of 3, 4, 5 percent, and more.
We suggest looking into alternative banks which can pay as much as 1.35 percent on savings, with deposit insurance, handy apps for your smartphone, and easy transfers to other institutions.
Paying out a Mortgage before Maturity
If you need to break a mortgage before it matures, you’ll find banks often charge staggeringly high penalties that exceed those of alternative lenders. Compare rates, compare breakage penalties.
Having a trusting mortgage broker on your side from the get-go will ensure you’re aware of any and all penalties and charges that may be applicable to you if you happen to sell your home before your mortgage matures.
Banks assess affordability by comparing your income to your housing costs and total debt.
They do not, however, include an assessment of other costs such as child daycare, savings, food, car insurance, and other costs associated with your daily life.
If you land on the right side of their requirements, it simply means that you are not considered a default risk, it in no way means that it’s affordable. Be sure to calculate all your expenses so you have a clear understanding of your financial situation.
Question your ‘advisor’
Assume the term ‘adviser’ means nothing in many big branches unless shown otherwise.
More often than not, the person you're talking to for financial advice at the bank has little to no financial planning background.
Always request an appointment with a certified financial planning (CFP) designation or a personal financial planner (PFP) to ensure you’re receiving the best advice from a qualified advisor.
Home Equity Lines of Credit
These Lines of Credit are designed to keep you in debt.
A standard loan will require a payment each month that covers both interest and principal, however, a home equity line of credit often allows payment of interest only.
If making the minimal interest payments, you could easily carry this debit through your working years right into your retirement without paying anything but the interest.
Market-linked guaranteed investment certificates offer returns connected to stocks or stock indexes with no risk of losing money.
What you may not realize though is that they are engineered to produce profit for the bank mores than yourself.
While they may pay investors returns, they are more often than not less profitable than a regular GIC.
If you have any questions about your finances, JP Real Estate would be more than happy to assist you. Not only are we a real estate company, but we are also long-term investors with a great knowledge of the financial markets across our country.