Welcome to another edition of weekend reading and I hope you’re all having a terrific May long weekend. Grab a coffee or tea and take some time to enjoy the finest hand-curated selection of Canadian personal finance and investing articles from around the web this week.
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Scotiabank Gold American Express Card offer
My go-to travel rewards credit card is Capital One’s Aspire Travel World Elite MasterCard, but I’m always on the lookout for a secondary card to take advantage of generous sign-up bonuses. My criteria is simple: the new card must offer at least $250 upon approval (or else through an easy-to-earn early spend bonus), and waive the annual fee in the first year.
I haven’t applied for a new credit card in a while but a recent promotion from Scotiabank, via RateSupermarket, fit the bill perfectly.
The Scotiabank Gold American Express Card gives you 4x Scotia Rewards points on grocery, gas, dining, and entertainment spending. The welcome bonus pays a whopping 30,000 points (worth $300 in travel) when you spend a reasonable $750 within the first three months. The $99 annual fee is waived in the first year (sweet!), AND, to top it off, Rate Supermarket will throw in a $75 e-gift card to Amazon, Star Bucks, Best Buy, or The Ultimate Dining Card.
Earn $375 without paying an annual fee for a year? Done! You can sign up for this offer here.
OhmConnect (for Toronto readers)
OhmConnect is a free platform for Toronto Hydro customers which rewards them for saving energy during at specific times. Rewards can be converted into cash, donations, or energy-efficient products.
- Users can earn up to $100-$300 per year
- They earn by saving energy when power plants are at their worst
- Simple sign up process by connecting their Toronto Hydro account
- Sign up here and start saving today!
This Week’s Recap:
Many thanks for Melissa Leong for including me in her Financial Post article on how to get the best deal from your bank.
On Monday I wrote about investing for income in your accumulation years and offered an alternative for young dividend investors.
And on Wednesday Marie explained the five C’s of creditworthiness to help borrowers understand what lenders are looking for.
Canada’s middle-class is on the brink of ruin, according to this article in The Walrus, which looks at why we’d rather binge on cheap credit than live within our means.
An out-of-touch Australian millionaire made headlines this week when he said in an interview that the reason millennials can’t afford to buy houses is because they’re wasting money on $19 smashed avocado toast and $4 coffees.
Millennials like Desirae Odjick gave a giant eye-roll to the idea that avocado toast has anything to do buying houses and that the real reason keeping millennials from buying houses is stagnant wages and rising home prices.
The real answer lies somewhere in between these two viewpoints. The author of the She Picks Up Pennies blog looks at the problem with avocado toast in much the same way I looked at the latte factor – it’s not the odd indulgence that prevents you from reaching your goals, it’s when this type of spending becomes habit or a new normal. Yeah, maybe avocado toast is amazing. So is having your house professionally cleaned. Flying first class is probably amazing, too. The problem is when we feel like we deserve all of these things without first having earned it.
Off topic: Who owns the space between reclining airline seats? Some thoughts on conflict resolution from economists.
An interesting look at why retirees cut back on spending as they age. It seems they lose confidence in markets and their own finances.
Saving isn’t an option, it’s a must-do, says retired personal finance expert Gail Vaz-Oxlade, who makes a guest appearance in The Star to discuss retirement savings.
How do your financial plans get thrown out the window? Have twins! Congrats to A Wealth of Common Sense blogger Ben Carlson on his new arrivals and subsequent journey to buy a mini-van and a bigger house.
This blogger retired at 52 with $3 million in the bank. Here he shares the 10 worst money mistakes anyone can make.
Age 52 apparently isn’t early enough for some extreme savers and here is a look at how to retire on $1 million or less at age 35!
Ben Rabidoux takes a drive in Brampton, Ontario and shows off the astounding number of pay day loan shops on one street. Sad!
Rob Carrick on how dividends came to dominate our investment portfolios since the global financial crisis in 2008.
Hot stocks can make you rich but they probably won’t:
“A mere 4 percent of the stocks in the entire market — headed by Exxon Mobil and followed by Apple, General Electric, Microsoft and IBM — accounted for all of the net market returns from 1926 through 2015. By contrast, the most common single result for an individual stock over that period was a return of nearly negative 100 percent — almost a total loss.”
MoneySense’s David Aston with 4 things to get right when tapping RESP savings. This decision is about a decade away for us, but one that I’m keenly interested in getting right.
Jason Heath on whether you can have RRSPs and RRIFs at the same time, and more importantly, should you?
On the Canadian Couch Potato podcast, Dan Bortolotti interviews a financial planner and expert in socially responsible investing.
Finally, Tim Cestnick says to follow these steps if you get an ‘education letter’ from CRA this tax season.
Have a great May long weekend, everyone!
When I worked in banking, personal and small business lending was a major part of my duties. Customers were often nervous about applying for credit – unnecessarily in most cases. But, sometimes people had really no idea of what we required before we could consider the application.
I had people applying for a mortgage with not one penny of down payment.
Applicant: “I can get the money when I need it.”
Me: “Well, you actually need it right now.”
Some offered leased vehicles for collateral on consolidation loans.
Me: “You know, you don’t actually own that vehicle.”
Applicant: “Yes, I do. I’m making payments on it every month.”
A low credit score was often discounted.
Applicant: “I didn’t know I had to make credit card payments every month.”
And some people didn’t even have a job (or other source of income).
Understand what a lender is looking for
How does a financial institution determine whether a potential borrower is eligible for a loan, mortgage or line of credit?
Most lenders use the five C’s of credit to determine the strength of an application.
This is the most important requirement of any financing application. Your lender wants to know how you have paid your debts in the past and how much you owe in comparison to the limits available to you. Your credit report details establishes a credit score which represents your track record and gauges your creditworthiness.
Sometimes bad things happen to good people and your credit report may show late payments or unpaid collections, etc. Make sure you clean up any past problems, start making your payments on time and work at reducing your credit card balances. You may still be okay if your other C’s are strong.
Capacity is a borrower’s ability to repay the loan. It’s not just your current income, it’s the length of time at your job and your employment stability as well. It also assesses your debt to income ratio. Your lender wants to ensure that your payments will be affordable for you, both now and in the future.
Make sure you are living within your means and don’t overextend your credit. Better yet, pay down, or pay off your credit card debts.
This “C” stands for cash. How much of your own money are you using? A large down payment on a house or car, for example, basically indicates your level of commitment and decreases the chance of default.
Be a saver. Show that you have some liquidity to fall back on in case of hard times.
Collateral is security for the loan or mortgage – an automobile, or your house, for example. It gives the lender the assurance that, in case of default, the lender can repossess the collateral, sell it and repay the loan. It also applies to an outside party who is willing to co-sign or guarantee the loan.
Character represents the overall impression you and your credit application are making on your lender. As well as your past repayment history, employment and residence stability, the lender is “reading between the lines” to determine if there are any underlying risks in lending to you.
The five C’s of credit are widely used by all types of lenders. They are the basic building blocks used when evaluating a potential borrower’s request and determining their chance of approval.
It is crucial that you are honest and forthcoming with your information, and your lender has all the relevant details they need.
Since every situation is unique, a good lender will take the time to review the entire package and ask questions for further details and explanations.