Category: Moneywise

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For many young Americans, buying a first home is now a dream deferred. The average first-time buyer is 38, up from the historical range of 29 to 33, according to the National Association of Realtors.

“First-time buyers face high home prices, high mortgage interest rates and limited inventory, making them a decade older with significantly higher incomes than previous generations of buyers,” said Jessica Lautz, NAR deputy chief economist and vice president of research.

Meanwhile, existing homeowners use equity to secure dream homes with cash or large down payments.

The aging buyer

Younger buyers have a few factors lined up against them.

Property values of existing homes have risen steadily across the country, making it difficult for new and younger buyers — including many who carry significant student loan debt — to save enough for a down payment. At the same time, higher mortgage rates have increased monthly housing costs, pushing many first-time buyers out of the market.

Then there’s the lack of affordable housing options. Reports show builders are constructing fewer starter homes and more luxury properties, leaving many entry-level buyers with fewer choices. And with sellers holding onto properties for longer due to rising rates, the limited inventory available is snapped up quickly, often at high prices.

Build a plan

Buying a home isn’t just about finding the right property; it’s also about ensuring your financial foundation is solid. Improving your credit score, reducing debt, and building a savings plan can open the door to better loan terms and more favorable interest rates, thus making homeownership more affordable.

Start by working on your credit. Paying down high-interest debt, keeping credit card balances low, and ensuring all bills are paid on time can boost your credit score and increase your loan options.

Many lenders offer lower rates to applicants with higher credit scores, which can make a substantial difference in monthly mortgage payments — and how much you end up paying in interest in the long run. A better credit score is a great way to save yourself thousands over the life of your loan.

Increase your chances

One of the most effective ways to navigate today’s housing market is to expand your search to more affordable areas. Instead of focusing solely on high-demand cities, consider exploring smaller or emerging markets where housing is less expensive and the competition isn’t as fierce.

For remote workers, the flexibility to live farther from traditional business hubs can be an asset. With more companies offering work-from-home options, many buyers have the freedom to prioritize affordability over proximity to an office.

Additionally, some U.S. cities have introduced programs to attract new residents, providing grants or tax breaks that can reduce the cost of buying a home.

Leverage available help

First-time homebuyers can access a range of grants, tax breaks and assistance programs that can make homeownership more attainable. Programs like Federal Housing Administration (FHA) loans, which require as little as 3.5% down, and USDA loans, which offer zero-down options in rural areas, open doors for those who might otherwise struggle with the upfront costs.

Beyond federal programs, many states also provide grants specifically for first-time buyers, helping to reduce the financial burden of down payments and closing costs. Some employers offer home-buying assistance or have partnerships with lenders that provide discounted mortgage rates.

The more money you have saved up, the easier it’ll be to buy a home. Don’t just leave your house fund sitting in your checking account, though. You can make your money do a little work for you by sticking it in a high-yield savings account. And to help keep you on track, you might consider setting up an automatic monthly transfer to your savings account.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Everywhere you turn, from bus stops to your favourite podcast, someone is trying to sell you something.

Even when you take a break to see what your friends and family are up to online, you’re bombarded with images of them enjoying experiences or flashy new things.

It’s hard not to give in to the urge to keep up. And while there’s nothing wrong with a little fun spending, experts say if your retail therapy is just leaving you more anxious about — or avoidant of — your finances, the comfort it offers may not be worth the cost.

It’s all about balance

The most recent RBC Consumer Spending Tracking found that Canada is likely on track for a slight uptick in per-person retail spending for the first time since mid-2022. It’s likely no coincidence that this rise coincides with the steadying of inflation rates.

After being on financial edge, Canadians may want to participate in some revenge spending. In other words, they want to splurge in places where they’ve been pinching pennies previously.

Ed Coambs, a financial therapist in Matthews, N.C., and author of The Healthy Love & Money Way, says online shopping has made it easier — and more enticing than ever — to spend with abandon.

Coambs points out that marketing teams use neuroscience to develop platforms and content that trigger chemicals like dopamine when you shop.

“Their job is to get us to consume as much of their material, their ideas, their services, their goods,” says Coambs. “And often, there’s some unmet psychological need there that shopping is fulfilling for us.”

The trouble, he adds, is that this feeling of fulfilment doesn’t last, because you’re not actually getting what you need. While there’s a time and place for shopping — Coambs himself loves buying himself something new — he always looks for physical cues that he’s not overindulging.

“I want to be able to do it in a way that I don’t start to feel guilt or worry or [have] anxiety,” says Coambs. “If you have those things happening, psychologically, that’s a sign that something is out of balance."

Many Canadians are on the right path

For many Canadians who’ve indulged in a little revenge spending, the occasional spree shouldn’t knock them off track financially. That being said, there’s definitely room to grow for Canadians and their personal finances.

In fact, a study from The Angus Reid Institute in November 2024 reported that only 53% of surveyed Canadians are satisfied with their personal financial situation. If spending is getting in the way of you being satisfied with your finances, it might be time to make some changes.

What to do if your spending is getting problematic

While many are managing to strike a good balance, there are a few red flags to watch for that might indicate your habits are starting to threaten your financial security.

One of the first signs will be if you’re suddenly finding it hard to keep up with your monthly bills.

From a credit perspective, paying your monthly bills is critical. Missing or late payments will be a red flag for future creditors and make it harder for you to get everything from a new credit card to an apartment.

You can combat problematic spending by simply being intentional when you’re making purchases and adhering to a budget so you don’t overspend and end up unable to pay your bills.

“Just be mindful when you go to any checkout,” says Coambs. “Whether it’s digitally or in person, just look at the number and watch what happens to you psychologically — you’re going to have an automatic feeling.”

If your gut says you got a good deal, great. However, if you hesitate for any reason, maybe it’s a moment to reflect on whether this purchase lines up with your goals. Coambs encourages taking a walk to clear your mind.

It might sound simple, but he says the movement of putting one foot in front of the other is proven to help balance and stimulate reflection, It can help most people figure out what they need at that moment.

But Coambs adds that for some who have experienced trauma — especially family conflict around money — they’ll be especially prone to problematic relationships with money. Whether it’s creating a budget in writing or seeing a therapist, Coambs says a little help can make this problem much easier to manage.

“Building in the reflective process of looking at a budget and your spending can help you as you’re trying to find that happy medium of how much to spend,” says Coambs. “The reality is life is more complex and dynamic than our budgets lead us to believe it should be.”

Sources

1. RBC: Consumer Spending Tracker (December 2024)

2. The Angus Reid Institute: Great Expectations or Bleak House? Most Canadians are happy, but life outlooks have worsened over past decade (November 2024)

This article Retail therapy offers a thrill, but how do you know if you’re taking it too far? originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

We adhere to strict standards of editorial integrity to help you make decisions with confidence. Some or all links contained within this article are paid links.

As a co-founder of PayPal and the first outside investor in Facebook, Peter Thiel is widely recognized for his expertise in the tech world. But lately, the billionaire venture capitalist has been sounding the alarm on an entirely different sector: real estate.

During a recent interview with The Free Press, Thiel drew upon the insights of 19th-century economist Henry George to underscore the gravity of America’s real estate crisis.

“The basic Georgist obsession was real estate, and it was if you weren’t really careful, you would get runaway real estate prices, and the people who owned the real estate would make all the gains in a society,” Thiel said.

The core of the issue, Thiel explained, lies in the “extremely inelastic” nature of real estate, especially in regions with strict zoning laws.

“The dynamic ends up being that you add 10% to the population in a city, and maybe the house prices go up 50%, and maybe people’s salaries go up, but they don’t go up by 50%,” he said. “So the GDP grows, but it’s a giant windfall to the boomer homeowners and to the landlords, and it’s a massive hit to the lower middle class and to young people who can never get on the housing ladder.”

Thiel warned that this “Georgist real estate catastrophe” is playing out across many “Anglosphere countries,” including the U.S., Britain and Canada.

‘Incredible wealth transfer’

The surge in U.S. home prices has been nothing short of alarming. Over the past five years, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index has climbed by over 50%.

This sharp rise in home prices creates significant challenges for prospective buyers, but renters aren’t immune to the impact either. It’s all part of the broader cost-of-living crisis gripping many Americans.

Thiel broke it down, stating, “There’s a way you could talk about inflation in terms of the prices of eggs or groceries, but that’s not that big a cost item, even for lower middle class people. The really big cost item is the rent.”

At its core, Thiel argued, the issue boils down to supply and demand.

“If you just add more people to the mix, and you’re not allowed to build new houses because of zoning laws, where it’s too expensive, where it’s too regulated and restricted, then the prices go up a lot,” he said. “And it’s this incredible wealth transfer from the young and the lower middle class to the upper middle class and the landlords and the old.”

Thiel isn’t the only one raising the alarm. Federal Reserve Chairman Jerome Powell has highlighted similar concerns.

“The real issue with housing is that we have had, and are on track to continue to have, not enough housing… It’s hard to find — to zone lots that are in places where people want to live… Where are we going to get the supply?” Powell said at a press conference in September.

The gap in the housing market is significant. A June Zillow analysis estimated the U.S. housing shortage to be 4.5 million homes as of 2022.

‘Get on the housing ladder’

Beyond soaring home prices, elevated mortgage rates are another major obstacle preventing many Americans from “getting on the housing ladder,” as Thiel described.

The good news? The U.S. Federal Reserve has been cutting interest rates, providing opportunities for potential buyers. Freddie Mac recommends shopping around by obtaining quotes from three to five lenders to secure the best mortgage rate possible.

To make this process easier, tools like the Mortgage Research Center (MRC) can help you quickly compare rates and estimated monthly payments from multiple vetted lenders. By entering basic details — such as your zip code, property type, price range and annual income — you can view mortgage offers tailored to your needs and shop with confidence.

Also, these days, you don’t need to buy a house to start investing in real estate. Crowdfunding platforms like Arrived have made it easier for average Americans to invest in rental properties without the need for a hefty down payment or the burden of property management.

With Arrived, you can invest in shares of rental homes without worrying about mowing lawns, fixing leaky faucets or handling difficult tenants. The process is simple: browse a curated selection of homes that have been vetted for their appreciation and income potential. Once you find a property you like, select the number of shares you’d like to purchase, and then sit back as you start receiving rental income deposits from your investment.

Another option is First National Realty Partners (FNRP), which targets necessity-based commercial real estate.

With a $50,000 minimum investment, the platform lets accredited investors own a share of high-quality properties leased by national brands like Whole Foods, CVS, Kroger and Walmart. Investors can enjoy the potential to collect stable, grocery store-anchored income every quarter.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

More than 80,000 Ontarians were unhoused in 2024, a number that has grown by more than 25% since 2022 — this according to a new study from the Association of Ontario Municipalities (AMO).

"The scope and scale of homelessness across Ontario’s municipalities is truly staggering," Robin Jones, AMO President, said in a statement. "Without real and meaningful provincial action, the quality of life and economic prosperity of Ontario’s communities is at risk. We can solve this crisis, but we need to work together."

Without significant intervention, the number of unhoused in Ontario could double in the next decade and reach nearly 300,000 people in an economic downturn, according to AMO.

Homelessness in Ontario

Of the 80,000 unhoused people in Ontario, more than half is considered to be chronically unhoused, meaning they experience prolonged or repeat episodes of homelessness.

Almost half of the chronically unhoused population in some communities are Indigenous, according to the report.

While the vast majority of the province’s unhoused population exists in urban centres in Southern Ontario, the homelessness issue is a province-wide problem. In fact, rural communities and communities in the northern areas of the province have seen significant increases in recent years.

In rural communities, homelessness has grown by more than 150% since 2016, compared to an average of about 50% across all communities in the province. Meanwhile, in Northern Ontario, homelessness has risen by an estimated 204% since 2016, more than four times faster than in southern Ontario over the same time period.

While the majority of those experiencing homelessness are adults, nearly one quarter of chronically unhoused Ontarians are children (0-15) or youth (16-24). Refugee homelessness has also grown more than 600% in four years, while the number of chronically unhoused immigrants has doubled in the same time period.

Ontario’s responsibility

Ontario is the only province where responsibility for social housing is deferred to municipalities.

Municipal funding for housing and homelessness programs has grown significantly in recent years, totalling more than $2.1 billion in 2024. However, AMO says that recent provincial investments represent just a fraction of what’s required, and do not truly help “already overstretched” homeless and shelter programs.

In response, the report suggests an estimated additional $11 billion over 10 years could end chronic homelessness by boosting the supply of affordable housing, improving transitional and supportive services and enhancing prevention programs.

As well, an additional $2 billion over eight years could largely eliminate encampments, the report says.

This study was conducted by HelpSeeker Technologies, in partnership with AMO, the Ontario Municipal Social Services Association and the Northern Ontario Service Deliverers Association.

This article Ontario’s homeless population is at a tipping point originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

The third Monday in January, also known as Blue Monday, is generally regarded as the most depressing day of the year.

While there isn’t much scientific merit behind the reasoning why, there are a few factors that make it feel like an accurate term. The cold weather might prevent you from going outside and enjoying the (little) sunlight there is, plus the holiday bills start rolling in.

As you grapple with the season, you may be feeling the weight of your financial situation. Maybe you have greater credit card debt than you thought. Did you overspend on holiday gatherings and now that’s catching up to you?

According to Equifax Canada, in Q3 of 2024, non-mortgage consumer debt rose to $21,810 per person, a rise of $796 from the same time in 2023. Additionally, combined credit card debt saw a year-over-year increase of 9.4%, which can be attributed to population growth and an increase in average balance for consumers unable to pay their balance in full.

If the lingering anxiety of holiday bills is adding to your Blue Monday doldrums, here are some strategies you can employ to help you from sinking even further.

Take account of your income

If your income is lower or equal to your expenses, then you don’t have any room to pay off your debt. You will need to seriously consider a new job, and maybe even taking on a side hustle while you look for one. While your income remains low, you will need to be strict with any non-essential spending and ensure that the money you’re bringing in is being allocated to necessities such as rent.

If you are in a situation where your income allows you some room for non-essential spending, you may still feel like it’s difficult to set money aside to clear off debt.

However, small changes to your daily habits can have a big impact. If you get takeout a few times a week, you can cut it back to a few times a month, or even cut it out entirely, and put the money you would have spent straight to your debt. These small steps can quickly lead to hundreds of dollars saved over the course of a few months. The important part is to follow through and apply those savings to your debt.

If you aren’t able to forge a path out of debt on your own because of high interest rates, or your inability to service the debt based on increasing gas and food costs, that may be a sign to seek help.

The strategy you use to get out of your debt will depend on your particular situation.

That may look like refinancing a house, a debt consolidation plan or even bankruptcy.

Know your spending type

Before you can come up with a plan of action, it is important to understand how your personality impacts your relationship with money and debt.

For example, if you’re generally a cautious person, you may have little debt to begin with. You’ll also be focused on getting rid of your debt as quickly as possible.

If you’re more of a risk-taker, you may find yourself willing to assume more debt — from investments or other expenses — with the potential for a greater payoff. However, that tendency can also put you at higher risk of getting in financial trouble.

Emotional spending is also a common habit that can be hard to control. Retail therapy, or spending money on yourself, can provide quick hits of endorphins that provide a pleasurable fix. But making purchases as a way to make you feel good can also have long-term repercussions.

If you’re an emotional spender, figuring out the source of your spending issues can help address it in a healthier way. Talking with a financial advisor can help you through this by focusing on attainable methods to get your spending under control.

Envision your future

Creating a long-term goal creates an end game that can help you stay focused and motivated.

Envision what your life is going to be when you no longer have that debt hanging over you, and make choices each day that are consistent with the journey you need to take to get there. Not only will you find yourself making progress towards your financial goals, but you might also find yourself feeling confident and in control.

For instance, if you envision yourself eliminating $500 of your debt in one month, this gives you a tangible objective to work toward. By identifying a goal, and recognizing how you’ll feel when you accomplish this, you fuel yourself to achieve your objective.

Don’t forget to give yourself some grace as you adjust your spending habits to a new reality and focus. If you don’t meet your goal, acknowledge the progress that you make and continue to build on your successes. If you only pay off $300, realize that you still reduced your debt, even if only a little, rather than adding to it.

Try either of these two debt conquering methods

Getting over the hump of Blue Monday is a challenge. With the cold, dark days of winter, you might feel particularly drained as you look at your debt load.

But after every winter comes spring.

In order to climb out of your debt, you could try either the debt snowball or the avalanche method of debt reduction.

Using the snowball method, you pay off your smallest debt first, while only paying off the minimum monthly amount on your other debts. Once the smallest debt is paid off, you start paying off the next. Gradually, all your debts will be paid off in full.

With the debt avalanche method, you tackle the debt with the highest APR first, and pay only the minimum amounts on the others debts. With this method, you ensure that you don’t continue to throw a penny more of your hard earned money than you need to on interest, rather than the principal amount of your loans.

The method of tackling debts that makes the most sense for you will depend on multiple factors that should be considered and weighed before you start on the path to debt repayment. But, with the right guidance and drive, you can get your debt in the rear view sooner than you think.

Consider talking to a company like Credit Canada to create a consolidation plan, or go to your bank to get a lower interest loan, to start your year with a plan in place.

Bottom line

Your financial debt doesn’t have to be crippling, and Blue Monday doesn’t have to colour your year. You can forge a new path this year and get your debt under control and create new habits that will prevent you from feeling the weight of being in debt.

Devise a plan — whether on your own or with the help of an advisor — and stick with it.

Sources

1. CAMH: Blue Monday Survival Guide

2. Equifax Canada: Interest Rate Cuts Begins to Ease Consumer Credit Burden – But Not for Everyone (Nov. 26, 2024)

This article Blue Monday 2025: Avoid the post-holiday financial gloom with these budgeting and saving hacks originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

We adhere to strict standards of editorial integrity to help you make decisions with confidence. Some or all links contained within this article are paid links.

If you feel like buying a home — and paying for the upkeep — has become more expensive than ever, you’ve just nailed the essence of what a new study calls the modern American Nightmare.

Oxford Economics, an independent global economic advisory firm, reported in its November briefing that housing affordability “has dropped significantly over the last five years.” According to data from 173 of American metropolitan areas, a household now needs an average annual income of $107,700 to afford a new single-family home.

This housing affordability crisis presents a daunting challenge compared to past years. Today, only 36% of U.S. households clear this financial hurdle, down from 59% in the third quarter of 2019, just before the pandemic. Back then, a combined household income of $56,800 could buy a single-family home.

In fact, the $108,000 figure doesn’t square at all with real median household income — which was $80,610 in 2023, according to the U.S. Census Bureau figures.

No wonder it feels like a For Sale sign driven straight through your heart.

Why home affordability has plummeted

The affordability crisis isn’t due to one or two factors, but at least four: mortgage interest rates, housing prices, property taxes, and insurance.

While the report acknowledges that mortgage rates have moderated somewhat, volatility remains. This time last year, rates for a 30-year mortgage peaked at 7.79%, compared to the record low of 2.65% in January 2021. Although rates fell to around 6.08% in late September, they climbed again to 6.78% by mid-November.

Meanwhile, U.S. home insurance premiums average $2,377 annually, with a 6% increase expected by year-end, on top of a 20% leap over the previous two years, according to Realtor Magazine.

Home insurance represents a significant percentage of a family’s annual budget — and if you pay the bill annually, it can be difficult to plan for that big expense. One way to make the expense easier to swallow is to cut it down to size — using BestMoney Home Insurance.

Their easy-to-use platform helps you find the best home insurance rates in your area. With a simple process, BestMoney makes shopping for home coverage fast, easy and affordable.

Just answer a few quick questions about yourself and your home, and you’ll find a list of offers tailored to your needs.

Three strategies for navigating the housing market

If these numbers have you doubting your chances of becoming a homeowner, consider these approaches:

Shop around for your mortgage

According to 2023 research from Freddie Mac, borrowers who received at least four rate quotes from different lenders saved up to $1,200 annually on their mortgage payments.

Mortgage Research Center (MRC) can help you save a similar amount.

Quickly compare rates and estimated monthly payments from multiple vetted lenders. All you have to do is enter some basic information about yourself, such as your zip code, desired property type, price range, and annual income.

Minimize property taxes

While major U.S. cities like Chicago and Atlanta face soaring property taxes, many metros offer lower rates — or none at all. Ballwin, Missouri, for instance, hasn’t imposed a municipal property tax in 37 years. With a median home price of $409,000, it ranks among Realtor.com’s Hottest 2024 Zip Codes.

Take advantage of first-time programs

First-time buyers can benefit from loans insured by the Federal Housing Administration (FHA), which require down payments as low as 3.5%. Veterans Affairs (VA) loans often require no down payment.

Additionally, IRS publication 590-B allows couples to withdraw up to $10,000 each from IRAs for a first home without incurring the 10% early withdrawal penalty.

By exploring these strategies, prospective homeowners can better navigate today’s challenging market.

Real estate investing

If you are priced out of the market right now, there are ways to take advantage of the big price jumps without taking on a property and mortgage. Investing in real estate investment trusts (REITs) and real estate exchange-traded funds (ETFs), for example, can help you grow your income — and maybe save for that downpayment.

Income-generating residential investments

Investing in short-term rentals and vacation homes is a great way to profit from the hot real estate markets in the nation’s most desirable (and expensive) cities.

For example, with Arrived, investors of all income levels can access SEC-qualified rentals and vacation homes with flexible investment amounts.

Simply browse their curated selection of homes, choose shares, and start benefiting from the income and appreciation potential for as little as $100 to begin.

You can also invest in private real estate, which can offer higher returns since it can be invested in opportunities that simply aren’t available on the public market. DLP Capital offers tax-advantaged, private REITs through various investment funds. They’re primarily focused on acquiring or developing safe, affordable rental housing for working families across the burgeoning Sun Belt region.

Investors in these funds can earn passive income through monthly, quarterly, or annual distributions — while making a positive impact on communities in need of more housing.

Commercial real estate investing

For those interested in further diversification through commercial properties, First National Realty Partners (FNRP) provides accredited investors with access to necessity-based commercial real estate investments.

As a private equity firm, FNRP acts as the deal leader and offers white-glove service to investors. The team handles all the legwork for you, from the vetting and buying of properties to the leasing and management details.

The firm then distributes its positive cash flows quarterly to investors, so you can increase your income without the hassle of buying and selling property.

These are just a few ways you can benefit from a hot real-estate market without sinking your whole (perhaps nonexistent!) six-figure salary into the costs of buying and keeping a home.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

One of the biggest news stories to come from Donald Trump’s successful reelection bid as the forthcoming president of the United States was the announcement of a 25% tariff being placed on goods from both Canada and Mexico.

Trump’s reasoning for this legislative taxation is to incentivize production of goods within America, effectively making the country more self-sufficient and economically diverse. He has also written on Truth Social how these tariffs are a form of penalization for a supposed crisis of illegal border crossings with neighbouring nations — and can be levied if he notices positive improvement.

However, during a recent press conference, the former Apprentice host admitted to using economic pressure to make Canada cede governing power to its southern neighbour, effectively pushing Canada into becoming what Trump calls the “51st state” of the United States.

Whatever his fluctuating reasoning may be, Trump’s proposed tariffs, alongside Canada’s current economic outlook, will have far-reaching implications for Canadians, especially those with an investment portfolio.

To assess the impact, we spoke with Stephen Johnson, a private equity manager and director of Omnigence, a Canadian private equity firm, about why Trump’s tariffs could accelerate Canada’s descent into grinding economic stagflation, what investment markets will be hit hardest and how to avoid catastrophic losses.

How will these tariffs impact Canadian investors?

According to Johnson, the impact of Trump’s tariffs will be felt by all Canadians, regardless of province of residence or size of portfolio.

“We can expect an increase in inflationary pressures, such as loss of purchasing power from Canadian dollar weakness, and recessionary pressures like increasing current account deficit and GDP contraction,” he said.

“This will be a material exacerbation of Canada’s already challenging stagflation, which is a fusion of inflation and economic growth problems.”

Johnson warns that these tariffs can reduce already low capital inflows to Canada, which, in turn, can reduce the nation’s already low investment in fixed capital. It’s a situation that puts Canadians perilously close to the dreaded state of stagflation.

What is stagflation?

Stagflation combines positive inflation with lower nominal gross domestic product (GDP) per capita growth, resulting in negative real GDP per capita, according to a report conducted by Omigence entitled Addressing Canada’s Stagflation Challenge: A Modest Proposal.

Here are some of the key factors influencing stagflation:

Economic Fundamentals:

• Low GDP growth: Canada’s GDP growth is the lowest among OECD countries.
• Poor labour productivity: Productivity levels are stagnant or declining.
• Capital flight: Net capital outflows (ie: money leaving Canada) increases with average capital flight around ~$40 to $60 billion annually.
• Structural deficits: Persistent fiscal and current account deficits.

Demographic Pressures:

• Aging population: Rising dependency ratio increases entitlement spending and tax burdens.
• Rapid immigration: High immigration rates add to the strain on housing and social systems.

Housing Market Issues:

• Supply-demand imbalance: A shortage of more than three million housing units.
• Over-reliance on housing investment: Crowds out productive capital formation — the process of investing money in goods and services that are meant to maintain or stimulate economic growth.

Energy Costs:

• Increasing energy costs reduces competitiveness.

Savings and Investment:

• Low household savings: Leads to chronic underinvestment in productive capital.

What investment sectors will be impacted the most by Trump’s tariffs?

The sectors most at risk from Trump’s tariffs include: the automotive industry, aviation, and heavy machinery manufacturing sectors. These sectors are the most exposed given Trump’s stated goal of onshoring production and manufacturing — a process of bringing these jobs back onto American soil

However, the widespread uncertainty of whether or not these tariffs will be enacted, coupled with his threat of using economic pressure, can create enough instability that all market sectors are impacted.

And while Canada has already hedged tariffs during Trump’s previous presidential tenure, this time things could get much worse.

“Proposed tariffs will be a very serious issue for the Canadian economy given its already very weak fundamentals versus Trump’s previous presidency,” explains Johnson.

What’s worse is that even if the tariffs are not introduced, the uncertainty of the current Canadian and American political landscapes means the market will react to the uncertainty anyway — meaning a reduction in investments throughout the Canadian economy.

“Even without an imposed tariff, the uncertainty will impact the investment market. Yes – transmission mechanism is likely to be CAD$ weakness and reduced capital inflows in the near term.”

Additionally, Johnson believes that there is nothing that the Canadian government can enact in the short term to soften the blow of tariffs without adding to the nation’s current fiscal deficit.

“Doing so will add to downward pressure on the Canadian dollar and inflationary pressures,” he said.

Are there any investment sectors that may be more resilient?

Tariffs or not, as an investor, it’s important to ask yourself whether your portfolio has the following three things:

1. Recession hedging factors
2. Inflation hedging factors
3. Low reliance on middle-class demand as a return driver

For Johnson, the answer to all three should be a resounding yes to generate alpha — or create excess returns — over the next decade.

This may also result in having to rethink portfolio allocations that have worked in the past as Canada continues to endure an unsavoury economic climate and the threat of tariffs.

“Traditional 60/40 portfolio allocations — 60% equities and 40% fixed income — that have worked well in the last two decades of below-trend inflation and above-trend GDP growth are unlikely to generate the same level of returns in a macro climate of above-trend inflation and below-trend GDP growth that Canada faces,” Johnson added.

However, despite a feeling of economic unease, there are certain sectors where Johnson sees opportunities.

His top pick: farmland, which hedges both inflation as a non-depreciating, real asset, as well as recessions, due to inelastic food demand.

Plus, the production of goods from farmland go beyond our trade reliance on the US.

“Canada exports to markets outside the US, such as China and the Middle East, with strong and growing incremental demand for agricultural products,” Johnson said.

Automotive maintenance is another sector Johnson believes has strong investment potential. Johnson chalks up the strength of this sector to a shrinking middle class and dwindling purchasing power.

“People drive their cars for longer before replacement – this reduces demand for new cars and increases demand for ongoing maintenance,” he said.

“The resulting growth is forecast to be well above overall Canadian GDP growth rates, and could outperform even in a low aggregate GDP growth climate.”

Environmental services are also immune to GDP growth since it is largely driven by regulation, which Johnson believes is worth pursuing for investors looking to create a durable portfolio that can withstand market volatility

Johnson’s final pick is the building products distribution sector. This is due, in part, to the lucrative residential housing shortfall of more than three million homes. This shortfall means that a refresh of the “Canadian infrastructure” will be required as well as “significant increase in domestic investment in fixed productive capital in order to grow the economy,” Johnson said.

This article How Trump’s proposed tariffs will impact Canadian investors originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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Although comparison can really be the thief of joy, knowing where you stand financially is critical to making sure you’re on track to meet your money goals.

2021/22 tax data shows a very wide income range on a state-by-state basis.

Connecticut has the highest threshold required to be considered among the top 1% of earners, at $1.15 million. Massachusetts and California residents require an annual income of $1.11 million and $1.04 million, respectively, to be considered at the top.

Meanwhile, West Virginia has the lowest threshold to be a 1% earner at $420,453. Mississippi has the second lowest threshold, $440,744, with New Mexico ranking third-least, at $476,196.

Knowing the income threshold in your state is just one little piece of the puzzle. To actually join the top 1%, a diversified portfolio is essential. Here’s how the wealthiest Americans are doing it and what you can learn from their approach as we head into a new year.

Invest in real estate

Earning enough to qualify for the top 1% is challenging. But, there are wealth-building strategies you can employ, regardless of your income, to set yourself up for financial success in 2025.

For instance, Bank of America’s 2024 Study of Wealthy Individuals reported that 31% of investors with $3 million in investable assets believe real estate is the “greatest growth opportunity.”

With this in mind, it’s no surprise that the top three states for income listed above also have some of the highest home prices in the country.

Residential real estate isn’t the only growth area, however.

Commercial real estate can also offer lucrative investment opportunities — especially when it comes to necessity-based properties, such as grocers. CBRE, the world’s largest commercial real estate firm, foresees both positive developments and growth for the 2025 commercial market.

Accredited individual investors can invest with First National Realty Partners to access institutional-quality commercial real estate investments without the legwork of finding deals themselves.

The FNRP team has developed relationships with the nation’s largest grocery brands, including Kroger, Walmart and Whole Foods. They even provide insights into the best investment properties both on and off-market.

Consider alternative investments

Bank of America’s report found that younger, wealthy people are increasingly looking beyond the traditional stock market for investment opportunities. ​​

Gold is an example of an alternative asset that behaves differently than the stock market and has proven resilient during times of market volatility. Gold might play an important part in making sure your portfolio is protected for 2025, given that next year could bring about trade wars and economic instability.

For the best direct exposure, you can invest in the physical asset through a gold IRA with a company like American Hartford Gold.

This kind of account lets you enjoy the tax advantages of an IRA and the inflation-hedging properties of gold as you grow your nest egg.

With the help of American Hartford Gold — an industry leader in precious metals with a five-star rating from Trustpilot and an A+ from the Better Business Bureau — you can open a gold IRA and help preserve your retirement dreams with an inflation-resistant asset.

Another alternative asset you may consider is art.

Research from Bank of America shows that 83% of high-net-worth millennials and Gen Z either own or are interested in art collections. Interestingly, California and Massachusetts are home to four of the top 10 ‘art buying’ cities in the country.

You certainly don’t need to be among the top 1% to start investing, though. Masterworks is taking on the wealthy at their own game, enabling everyday investors to join in on multimillion-dollar art investments (such as Banksy, Basquiat, and Picasso). In just the last few years, those investors realized representative annualized net returns like +17.6%, +17.8% and +21.5% (among assets held 1+ year).

Masterworks has over $1 billion in capital raised across 430+ works collectively invested in by everyday investors. When Masterworks sells a painting — like the 23 it’s already sold — investors reap their portion of any profits.

See important Regulation A disclosures at Masterworks.com/cd

Work with a financial advisor

If you are among the top 1% or are working on getting there, you’ll certainly want to make sure your wealth continues to grow throughout 2025 and beyond. The key to making that happen is working with experts.

For instance, 90% of wealthy Americans work with a financial advisor, according to Bank of America.

Finding a financial advisor that suits your specific needs and financial goals is simple with Vanguard.

Vanguard’s hybrid advisory system combines advice from professional advisers and automated portfolio management to make sure your investments are working to achieve your financial goals.

With a minimum portfolio size of $50,000, this service is best for clients who already have a nest egg built and would like to try to grow their wealth with a variety of different investments. All you have to do is set up a consultation with a Vanguard advisor, and they will help you set a tailored plan and stick to it.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Taking the mystery out of how scores work can help you boost your rating.

It’s typically recommended that you check your credit score at least once a year to know your standing and also mitigate the risk of identity theft. That being said, many credit card holders don’t really understand how it all works, but having a good understanding of your credit score is crucial as you prepare to make major purchases, apply for a car loan, or get your first mortgage.

Your score ultimately affects what credit and financing you’re eligible for, which means the better your score, the more favourable your rate will be from lenders.

Here, we debunk seven credit score myths to help you enhance your creditworthiness and ultimately save more money.

1. Checking your score hurts it

Keeping an eye on changes in your score or report can help you detect errors, keep track of your spending habits and figure out how to improve your credit — but few Canadians are taking advantage of this.

In 2019, The Financial Consumer Agency of Canada reported that half of Canadians have never requested a credit report from Equifax Canada Transunion of Canada.

The fact of the matter

Checking your credit score or report counts as a “soft inquiry” — which means that it won’t affect your score. You can check it for free.

It’s a good idea to monitor your credit score and track your bills regularly to avoid missing any upcoming payments which could mean paying late fees and more interest.

However, when you apply for a loan or a new credit card, a lender will want to check out your credit score to determine whether you’re a reliable borrower. This particular check counts as a “hard inquiry” and will dent your score by a few points, temporarily.

2. You only have one score

Contrary to popular belief, you have more than one score and it could waver slightly depending on which credit bureau is providing the information.

When you apply for a credit card or a loan and lenders check your credit score, they could be pulling up any one of your scores. You have no way of knowing which, but checking more than one can give you a better picture of your creditworthiness.

The fact of the matter

The two national credit reporting agencies are Equifax and TransUnion. Typical credit scores range from 300 to 900 and credit bureaus generally consider the same factors — like payment history, utilization rate and how long you’ve had credit for — to determine your score.

However, agencies may use different scoring models and could receive different information when they evaluate your credit.

3. The higher your paycheque, the higher your score

Some people believe a wage increase can directly affect their credit scores — after all, a higher income makes you more attractive as a borrower and you’ll have more funds to pay off your debts.

But, is your income actually included in your credit report, and does it impact your score?

The fact of the matter

The answer is no, your income isn’t included on your credit report, nor is it factored into your credit score. Even if the money’s rolling in, you still want to avoid accruing more credit card debt than you need to — that will affect your score, and not in a good way.

That said, if you’re more financially stable and have been able to pay your bills on time in full without adding up on interest and debt, then yes, you’re more likely to have a better credit score.

And lenders will assess your credit score and your income and employment status when you apply for credit products. A good credit score and a steady income are both key to obtaining lower rates on cards and loans.

If you’re thinking about boosting your income with some good investments, but aren’t sure how to get started, consider trying out a beginner-friendly investing service.

4. Carrying a balance on your credit card improves your score

The average credit card balance for Canadians was $4,499 in the second quarter of 2024, according to TransUnion.

The Bank of Canada also says close to half of Canadians with a credit card carry a balance for at least two consecutive months.

Carrying a balance on your credit card ensures that you rack up on interest and owe more money than if you made your payments in full — does that impact your score?

The fact of the matter

With typical credit card interest rates around 20%, paying your monthly bills in full and on time is the best way to maintain a good credit score and potentially save thousands. The general rule of thumb is to keep your credit utilization rate below 30% across all your accounts if you can.

When you make the minimum payments instead of paying off your balance in full each month, you’ll accrue interest and increase your debt. If you also keep making purchases, your credit utilization rate — which divides your total credit card balance by your total credit card limit — increases as a result, and that hurts your credit score.

A 0% utilization rate won’t help you either — lenders want to see that you’re using your credit responsibly.

If you find yourself bogged down by interest and credit card debt, consider a debt consolidation loan to fold all of your debts into one loan with a lower interest rate or refinancing your current loan.

5. Closing a credit card helps your score

You might be thinking about cancelling one of your credit cards — maybe you never really use it or you think it’ll make your debts more manageable and boost your credit score.

There are plenty of reasons for and against closing a credit card.

The fact of the matter

Here’s the thing. Your credit score improves when you have more available credit, a long credit history and a lower credit utilization rate.

So, when you close a credit card, particularly a high-limit one, or one you’ve had for a long time, you’re more likely to harm your credit score than help it.

This doesn’t mean you should never close a credit card, however. If you haven’t been using it very often and you’re paying high annual fees, there’s little point in keeping it alive. Instead, switching to a card with lower or no fees may be more beneficial.

6. Employers don’t check your score

It may come as a surprise to know that employers can check your credit score when you apply for a job.

A bad credit score can affect more than just your loan or credit approval chances — it could prevent you from landing the perfect job, renting a home or even getting a new cellphone with a good plan.

The fact of the matter

A future employer may want to check whether you’re managing your money responsibly, especially if your job involves handling large sums of money or making major business decisions. This check counts as a “soft inquiry” so it won’t damage your score.

The credit report they pull up will show your name, address, SIN number, date of birth, previous employers and information about your debt, like mortgages, credit accounts and student loans — so it is important to prepare and get your finances in order.

However, they can’t go about this without your consent, so don’t worry about them sneaking around behind your back.

7. You and your spouse share the same score

When you get married, there are several things you might need to jointly do with your spouse, like applying for a mortgage loan, or splitting household bills like groceries and utilities.

As a result, you might believe your credit scores get merged into one as well.

The fact of the matter

You and your spouse will still receive separate credit reports and credit scores, even when you combine incomes or bank accounts. Don’t concern yourself with a partner’s past bankruptcy ruining your credit as soon as you get hitched.

However, if your partner has poor credit and you apply jointly for a loan or open an account together, that information will affect both your credit reports and you could end up with less-favourable rates costing you more money.

For example, you might be denied a good mortgage rate from a mainstream mortgage provider and pay a higher rate with another lender to account for the greater risk you present as borrowers together.

So, it’s still important to be aware of each other’s credit history and spending habits before you tie the knot or buy a home together.

Sources

1. Financial Consumer Agency of Canada: Canadians and their Money: Key Findings from the 2019 Canadian Financial Capability Survey

2. TransUnion: Q2 2024 Credit Industry Insights

3. Bank of Canada: The reliance of Canadians on credit card debt as a predictor of financial stress (July 2024)

This article 7 common credit score myths you should never believe originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

You may be on the same page with your significant other in most ways: your level of commitment, your hobbies or your career paths. However, if you find that your partner isn’t responsible when it comes to finances, this can spell trouble down the line. Your finances as a couple, especially when you’re married or living together, matter a lot more than you might think.

In fact, a 2024 survey by BMO found that 35% of partnered Canadians believe their significant other spends too much money and 36% admit they are not always truthful to their partner and/or spouse about their finances.

When one partner is making major financial choices without their spouse knowing, it’s called financial infidelity, which is not only a sign of a lack of communication and trust in a relationship, but it can also be detrimental to your financial future.

Let’s look at some signs on how to determine if your partner is financially reliable before it’s too late, and what you can do to turn the situation around.

1. They don’t have any future financial plans

It’s one thing to not have any investments, but another thing entirely if your partner doesn’t seem to have any long-term savings plans.

Shopping regularly or spending money lavishly, but not having an emergency fund or any long-term savings for larger purchases, like a down payment on a house, is definitely something you don’t want to find out on your honeymoon, or after you move in together.

If money disappears as soon as payday rolls around, this can be an indication that your partner doesn’t know how to properly save money. Living paycheque-to-paycheque should be the first red flag that there are some deeper financial issues at play.

2. Bills are never paid on time

You don’t necessarily have to be living with your partner to pick up on this one. If they always seem to be scrambling when a cell phone or credit card bill comes around, this can be a sign that they’re not on top of their finances.

However, if you are living together, it can be a lot easier to spot when bills aren’t being paid (hopefully before the electricity gets shut off!), and it’s a lot more frustrating. Don’t always accept when your partner insists they’ll “take care of it.” Financial statements should be open and accessible for both you and your significant other to see so that you can make sure they get paid.

3. They’re secretive about debt

Secret debt is a big one when it comes to financial infidelity.

But it’s not just knowing whether your partner has debt, it’s also important to know the specific kind of debt your partner owes.

The type of debt your partner has will give you insight as to the type of spender your partner is, providing you with even more information about what to look out for, and spending habits to begin curbing. Is it for necessities, like student loan debt or a car loan? Or, is it for luxuries, like multiple pairs of designer shoes or unaffordable property? Assessing the type of debt your partner has is crucial to determine if you’re both financially compatible.

4. They have too many credit cards

There’s no magic number of how many credit cards you should have, as long as you’re using them responsibly. A huge cause for concern is if your loved one seems to have a credit card for every occasion, yet payments aren’t made by the due date, or they’re constantly cancelling and applying for new ones.

If the debt they owe is credit card debt for overspending, this should indicate to you that they’re financially irresponsible.

5. They can’t stick to budgets

When you bring up budgeting to your partner, it should lead to open communication rather than an argument.

A lack of budgeting skills or not being able to stick to one shows that a person is mismanaged and frivolous. This can lead to big issues when you need to create budgets for more important things, like a wedding or your children’s education.

What can you do about your partner’s bad money habits?

Once you’ve understood what to look out for when assessing your financial compatibility, you must think about a course of action, and no, breaking up doesn’t have to be it.

First things first. It’s critical you sit down and voice your concerns to your partner about their financial habits and how it affects your relationship. Try not to be accusatory, but instead offer them concrete solutions for how they can turn their bad habits around. You can even involve yourself in the solution and commit to creating a new financial plan to stick to together.

Regardless of how you approach the situation, there are a few key things you and your partner should do to regain financial stability:

Saving your money

Before your partner tries to tackle rebuilding their credit score or paying off debts, the first step is to start saving money again.

One of the best ways we recommend getting started is by opening a high-interest savings account (HISA). As your partner is likely just starting out on their savings journey, it’s best to start with an account that has no minimum balance.

Minimizing your debt

There’s no quick fix for getting out of debt responsibly, but there are steps you can take to minimize your current debt and avoid unnecessary interest.

Encourage your partner to apply for a balance transfer credit card. These cards allow you to transfer your high-interest debt to a low-interest credit card, ideally with a low balance transfer rate. This will allow your partner to free up money to help pay off debts and get back on track.

Growing your money

Show your partner that growing your savings doesn’t have to be a chore by implementing budgeting apps into your routine. Using apps is quick and easy, and most people are already comfortable doing this regularly, so it shouldn’t be a big adjustment.

‘Til debt do us part

Realizing your partner’s poor money habits can have a serious impact on your future may be scary, but it doesn’t have to mean giving up on your relationship or your financial stability.

It’s extremely important to identify these destructive money habits before they snowball into a larger, more irreversible problem. Financial infidelity is extremely hurtful on more levels than just the disappointment of fiscal irresponsibility.

A healthy relationship goes hand in hand with healthy finances. This is not a topic you can avoid, so it’s best to be open with your partner and show them concrete solutions that will assist them in repairing their financial mishaps.

Sources

1. BMO: Spending a Source of Conflict for a Third of Couples – BMO Survey (Feb 8, 2024)

This article 5 ways you can tell your partner isn’t financially reliable, and what to do about it originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.