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ESG Funds: Aligning Your Investments with Your Values

Written by kiara on . Posted in Blog.

ESG funds represent the perfect opportunity for investors to put their money where their values are.

ESG funds doing good people and the planet

Alongside heightened public awareness of environmental matters and social issues, the responsible investment (RI) movement is rapidly growing in both Canada and globally. In 2020, investors poured more than $3.2 billion into Canadian-based ESG funds.

ESG stands for Environmental, Social, and Corporate Governance. To be part of an ESG fund, the underlying companies must strive for socially responsible and ecologically sustainable business activities.

What separates ESG Funds?

Investing in ESG Funds is a type of impact investing. Impact investments are investments made to generate positive, measurable social and environmental impacts alongside a financial return.

Impact investing and ESG encourages investors to invest with purpose by incorporating personal values into investment decisions. As a result, investors are empowered with the ability to make a positive impact in the world.

Source: 2020 RIA Investor Opinion Survey, RIA

In the past, impact investing carried the stigma that doing good would compromise financial returns. The underlying fear was that a company’s commitment to prioritizing people and the planet would negatively affect its financial performance and returns for investors.

This perception has shifted as myths about ESG investing are debunked, and more and more investors embrace impact investing. A 2020 survey by the Responsible Investor Association (RIA) revealed that a majority of investors are interested in learning about RI opportunities through their financial advisor.

Breaking down the Acronym

ESG investing takes a holistic approach to investment decisions, looking beyond a company’s positive contributions to society. ESG investing also considers a company’s decision-making process and governance practices. In doing so, investors can get a better idea of the company’s efforts at being sustainable, which in the long run can help reduce a portfolio’s operational or reputational risk.

The three categories ESG funds focus on are environmental, social, and corporate governance; let’s take a closer look at each axis.

Source: Environmental, Social, and Governance Issues in Investing: A Guide for Investment Professionals, CFA Institute

ESG Funds’ environmental vision looks for companies committed to acting in the best interest of the environment, whether by adapting their operations and/or curbing harmful activities. It focuses on companies through the lens of four major themes: energy efficiency, pollution control, waste management, and land use.

The social aspect relates to the companies’ practices when interacting with employees and local communities. ESG funds will seek companies that maintain positive relationships with the groups they interact with, including suppliers, customers, and the communities they operate in. This gives investors the confidence they are not supporting abusive practices. 

Finally, governance relates to a company’s management. ESG funds will closely consider how a company manages itself regarding shareholder rights, financial transparency, and community contributions. It will also look for companies with a high standard of reasonableness and leadership. These can be combined with other issues like diversity, labor inclusion, executive/board experience, and their compensation compared to workers.

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It is worth noting that a fund integrating ESG factors may still incorporate companies with high ESG risks or poor ESG practices. This may be to understand those risks better and then engage with the companies and, through shareholder pressure, improve their ESG-related policies and procedures.

What About the Financial Returns?

Research into ESG funds shows that investors do not necessarily give up returns to invest in ways they are proud of. Out of 2,200 studies on ESG, 90% indicate that there is either a positive relationship to Corporate Financial Performance (CFP) or at least no negative relationship. This undercuts traditional beliefs that investing according to responsible investment criteria, such as ESG factors, adversely impacts financial returns.

According to a 2020 Annual Impact Investor Survey conducted by the Global Impact Investing Network (GIIN), nearly 88% of respondents say their portfolios meet or exceed their expectations for returns. For their part, 35% of investment professionals say that they invest in ESG to improve their financial returns.

Source: 2020 Canadian RI Trends Report, RIA

Generally, ESG funds’ returns have been spread throughout the success quartiles just like regular funds. Hence, their success is neither better nor more vulnerable than traditional non-ESG funds by investing sustainably. Most recently, ESG funds have outperformed the S&P500, although opinion on why this happens remains divided.

The fees for ESG funds are also quite varied, with some fearing ESG Funds carry higher than average fees. However, more than half of all ESG funds carry average or below-average fees. Increased competition has led to lower ESG Fund fees, making them particularly accessible to investors of all stripes.

In conclusion

ESG investing provides us with a way to make a difference with our investing dollars. It isn’t just about good business; it’s also about thinking about the future for our children and leaving a legacy we are proud of.

Are you interested in learning more about investing in ESG funds? Give us a call at 514-934-0586 (Montreal) or 403-228-2378 (Calgary), or email us at inforequest@rothenberg.ca. We will be happy to answer any questions you may have.

How well do you know us?

Written by kiara on . Posted in Blog.

We made this short 10-question quiz for fun to see how well you know Rothenberg Capital Management. Test your knowledge or get to know us (better)!

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Preparing your budget for a post-COVID world: 5 questions to ask yourself

Written by kiara on . Posted in Blog.

Here are 5 questions to ask yourself as you take a closer look at how you’ll manage your finances when things return to normal.

As public health restrictions ease and more and more people are vaccinated, we can expect life to return to something like ‘normal’ soon. The return to a semblance of normalcy will be a gradual process, however. There’s an opportunity here to start thinking about how to prepare yourself for a post-COVID world financially.

Here are 5 questions to ask yourself as you take a closer look at how you’ll manage your finances in a post-pandemic world:

#1: What pre-COVID expenses will return when things go back to normal?

Your spending habits likely changed because of the COVID crisis. You may have noticed you haven’t spent as much on travel, dining out, and going to cultural events. As a result, you may have increased spending in other areas, like online shopping or food deliveries, or saved some money.

Either way, as things reopen, we will soon be faced with a whole host of spending temptations. This may include everything from buying a cup of coffee or a meal out at your favourite restaurant to taking a trip to that dreamy location on your bucket list.

Taking some time to think about how you were spending your money before the pandemic and what you’d like to do when things return to normal can give you an idea of what expenses you will have post-COVID and plan your finances accordingly.

#2: What COVID expenses will remain (or go away) when things return to normal?

You may have reduced or cut back spending entirely on certain things such as vacations and family outings. But the pandemic may have thrown extra expenses your way as well, increasing your spending in a given category or resulting in new costs altogether.

It could be that your entertainment costs or monthly utilities increased because you purchased additional digital subscriptions or used more bandwidth. You may have taken out a loan to do some home renovations, like turning a part of your home into a workspace, which you’re in the process of repaying. It may also be a relatively small expense, like hygiene and cleaning products. If you have a family or small children, you may have seen a rise in your grocery bills or childcare fees, two expenses that are likely to remain high even as things get back to normal.

It’s therefore essential to look at how your spending habits changed during the pandemic. Do you foresee these expenses continuing? Is there spending you can cut back on or eliminate because it is no longer necessary?

#3: How would a 1-2% increase in interest rates affect your budget?

During the pandemic, the Bank of Canada slashed its policy rate to an all-time low of 0.25% to encourage borrowing and spending. You may have seized the opportunity to take on more considerable expenses or debt during this time. For the time being, it looks like interest rates will stay low. However, interest rates will likely increase as the economy picks up. This means you might earn slightly more interest on your savings account. But this also can mean that the cost of paying back your loan will be higher.

#4: What would a 1-3% increase in your marginal tax rate do to your budget?

You may have experienced changes in your monthly income during the pandemic, resulting from stimulus payments or job or income loss. But when things rebound, you may expect them to recover as well. With more income coming in, your marginal tax rate will increase. As a result, you’ll owe the government more in taxes. When the 2022 tax season comes around, you’ll need to ensure you can pay your taxes. Planning ahead involves reassessing your budget.

#5: How can you optimize your investments?

Many attractive investment opportunities arose from the pandemic. But we’re already seeing stock price stagnation and drops since January for top-rated companies during the pandemic, such as Amazon, Netflix, and Peloton. It’s important to reevaluate your investment holdings, review your source(s) of income and how they will be affected by things reopening.

Consulting with a trusted advisor is the safest and most effective way to formulate an investment plan to take advantage of current opportunities in the market while subsequently planning for the future.

Conclusion

Regardless of how your family’s financial situation has shifted during the pandemic, evaluating your current needs, goals, and opportunities moving forward can help you exit the pandemic dynamic in a financially stable fashion.

Investing in GICs the right way: GIC Laddering explained

Written by kiara on . Posted in Blog.

Even the most conservative investment products require disciplined strategies to maximize returns.

Do a quick Google search for ‘Best GIC rates’ and you’ll find that there are many guaranteed investment certificate (GIC) rates available from which to choose from. Having options is certainly a good thing, but it can also be a source of anxiety: How much should I invest? Which GIC term length should I pick? How can I make the most returns? What happens if interest rates fall? As with any product you’re considering purchasing, financial or other, you’re sure to have some questions.

Thankfully, there exists a tried and proven strategy called GIC laddering, which our advisors actually use, that helps to greatly reduce the guesswork and ensure your GIC investments stay ahead of any developments that could negatively impact your overall returns.

But first, what are GICs?

GICS are essentially loans you make to a bank, credit union or financial institution for a certain period of time, also known as the term. Terms can range from as little as 30 days to as long as 1-, 2-, 3-, 4- or 5-years. Typically, this money is ‘locked-in,’ which means you don’t have access to it until the GIC matures.

In return, you receive a percentage of your initial deposit as regular payouts. Depending on the GIC, you may be paid interest on a monthly, semi-annual, or yearly basis or upon maturity. The most popular ways to receive interest are through annual payouts or being paid at maturity.

Why should I invest in a GIC?

Fixed-income investments like GICs provide peace of mind and security, mainly because you don’t have to worry about losing your initial investment. In fact, your initial investment is guaranteed to be returned to you.

You also get the added comfort of knowing exactly by how much your investment will grow and, in turn, how much you’ll pocket. In the case of GICs, that means your total initial investment plus interest!

Compared to other investment products, GICs are particularly attractive because you can depend on them to provide a steady stream of income.

Adding GICs to your portfolio can also help reduce your overall investment risk. For this reason, your portfolio should include safer options that generate consistent income, such as GICs. A guarantee of income, regardless of the amount, is especially helpful in preparing for the future.

The risk-return tradeoff of GICs…

GICs are considered relatively low-risk investments, since you’re guaranteed to get back the amount you invest. However, GICs aren’t the best option if you’re looking for exceptional growth.

Just to give you an idea: As of April 2021, the highest GIC rates irrespective of term are sitting around the 2% mark. Meanwhile, the S&P 500 index (^GSPC), which is considered a good indicator of the U.S. market, delivered an average annual return of 13.6% (as of August 2020).

GICs are not a particularly good investment either if you require on-hand access to your capital; early withdrawals can result in penalties.

This said, GIC rates, like the rates for savings accounts, mortgages, and credit cards, change over time, rising or falling. While the rate is guaranteed once you lock in your money for the respective term, you can’t know for certain which direction GIC rates are headed. It’s entirely possible that a few months from now, GIC rates will be higher than they are today. It’s equally possible that they will be lower.

Since it can be such a gamble to try to predict which way GIC rates are going, it’s important to have a strategy in place that can help you get the most competitive rate(s) on the market but also protect you in the case of falling interest rates. GIC laddering does exactly that.

Here’s how GIC laddering works

GIC laddering involves splitting the total amount you plan to invest across multiple GICs, ensuring that you have a GIC that matures each year and then reinvesting the amount that comes due at the best rate available.

GIC laddering is a strategy that focuses on purchasing GICs with different maturity dates and therefore different interest rates. This way, you don’t have to guess the direction of interest rates.

With this approach, you’ll always be getting the highest average rate of return regardless of how interest rates fluctuate and be able to capitalize on the opportunity presented by rates rising.

So, for example, you have $30,000 to invest. According to the GIC laddering strategy, you would invest $10,000 in each term. We recommend splitting your money equally between 1-, 2-, and 3-year terms. As our GIC Department Manager, Tina Patel, explains: “3 years is a good time to see all the changes and movements happening.

This would give you $10,000 of principal maturing every year for 3 years, which you can then reinvest into another 3-year GIC. The 3-year GIC rate will always be higher than say a 1-year or a 2-year rate, so you’re always getting the highest rate available. As a general rule of thumb, the longer the GIC term, the higher the interest rate.

“If the rates go up, then you have money to reinvest in a higher rate because you have a maturity coming up. If the rates go down, you protect yourself because not everything is coming due at the same time,” explains Patel.

An additional advantage of this approach is that you will always have access to part of your money as money comes due each year. So not only are you benefitting from the most competitive rates to grow your investment as much as possible, you’re also able to easily access your money in the event you need it.

As the advice goes, don’t pull all your eggs in one basket. This not only rings true for eggs, but also GICs.

Want to learn more about our GIC rates?

At Rothenberg, we shop over 20 financial institutions to find the highest GIC rates for our clients. Our website is regularly updated with the most current GIC offers: www.rothenberg.ca/gic-rates/. A Rothenberg advisor can always help you decide if investing in a GIC is right for you. Contact us here or by emailing us at inforequest@rothenberg.ca. For information about non-registered GICs, please email Tina Patel, Manager of the GIC department at t.patel@rothenberg.ca.

Should I Do My Own Taxes or Hire a Tax Professional?

Written by kiara on . Posted in Blog.

Online tax software is budget-friendly and time-efficient, but depending on the complexity of your situation, hiring a tax professional may be preferable.

The official deadline to file your Canadian personal income tax return for 2020 and pay any taxes owed to the Canada Revenue Agency (CRA) is April 30, 2021.  

For Quebecers only: You can file your return up to May 30, 2021 and you will not be penalized. You can read more about this here.

Tax season is here, yet again. If you’re a tax filing veteran, you’re likely comfortable filing your tax return yourself, without any help. There’s satisfaction in doing it yourself and as it turns out, you might even enjoy it.

Canadians still love their tax refunds, but with an increasing number of people missing refunds due to costly mistakes, you might be torn over whether you should go the do-it-yourself route or if now is the time to employ the services of a tax expert.

An error on your tax return can lead to a penalty, interest charges or even an audit by the CRA. Perhaps most importantly, however, you may miss out on valuable tax deductions or credits.

Continue reading to learn how to decide whether tax software will do the job, or you require professional help.

When To Do Your Taxes Yourself

Preparing your own tax return should be easy if your financial situation is simple. We’ll call these people Tax DIYers, where DIY stands for “Do-It-Yourself!”

TurboTax and other off-the-shelf tax preparation software options will walk you through a series of questions about your finances and alert you to any credits and deductions you may qualify for. They don’t require any math calculations or in-depth knowledge of the tax code.

But how do you determine if your position is simple?

  1. If preparing your taxes just requires you to pull information from a handful of documents prepared by others, such as the T4, you’ll find basic tax software suitable.
  2. If your tax situation hasn’t changed over the last year, you work for an employer, are single with no kids, etc., your tax return would be very straightforward.
  3. If nothing is going on in your life that can complicate your tax situation, it might not be worth paying a professional.

When to Hire a Professional

You might be better off hiring an accountant than trying to do your tax return yourself in some situations.

Tax preparers stay up to date on tax codes as well as provincial and federal tax laws.

An accountant can recommend what deductions and exemptions you qualify for and help you plan for future growth by informing you about any tax requirements changes.

Hire a tax expert in case of:

1. Major Life Changes

If you recently got married (congratulations), you might need a professional to guide you on the tax filing status to use. While most couples prefer filing jointly, there are some situations where it makes more sense to file separately.

It’s not just marriage. Other life milestones like expanding your family and having a child, losing or getting a new job, graduating from college and relocating could all impact your tax return and your potential total refund.

An accountant can help you learn about any new benefits or tactics to minimize your tax liability. This way, you will be able to take advantage of every tax break available to you.

A tax professional can also help you learn to navigate your tax return this year, so you feel confident doing it yourself in the future. You can always revert to doing your own taxes if you don’t experience any other major life changes the next year.

2. Failing to Pay in the Past

If you failed to file necessary tax returns in the past years, reach out to a tax expert.

They know about the programs offered by the CRA for individuals in this situation. A tax accountant can help you file years’ worth of returns, something that might take you a long time to master, especially as the April 30 tax filing deadline approaches.

This gives you confidence that your tax return is filed correctly and the peace of mind that you’re in good standing with the CRA.

3. Owning a Business

If you are a business owner, you should probably consider hiring an accountant to prepare your tax return.

Almost every financial transaction comes with some kind of tax consequence. Your accountant will prevent you from making any costly mistakes, help you report tax items accurately, and maximize deductions.

You should also use a tax preparer if you purchased rental property during the year.

4. Simply Not Having the Time

Tax preparation involves gathering documents, reviewing the procedures, and filling out tax forms. It is a notoriously slow and boring process, which is why so many of us dread it and postpone it until the last minute.

While doing this might seem like a simple weekend project for some Canadians, for others, not so much. Maybe you feel that the time you’d spend doing your taxes would be better spent elsewhere.

Consider hiring a tax expert if you lack the time or patience to prepare your own return.

In Conclusion

There is no universally correct answer when it comes to filing your taxes with software versus hiring an accountant or tax professional. Ultimately, the choice comes down to the complexity of your tax situation.

If your tax situation is fairly straightforward and you have some confidence in your ability to work step-by-step through tax software, it’s relatively cheaper to do your own taxes this way.

If your tax situation is more complicated, hiring a tax preparer can be worth the expense.

Just ensure the preparer has the right credentials and stellar testimonials to avoid being a victim of tax scams.

Over to You…

Irrespective of whether you file your own tax return or hire someone else to do it, have your return in by April 30.

10 tax deductions and credits you may be eligible for

Written by kiara on . Posted in Blog.

Tax season can be stressful, but it can also be an exciting time for your wallet.

The official deadline to file your Canadian personal income tax return for 2020 and pay any taxes owed to the Canada Revenue Agency (CRA) is April 30, 2021.  

For Quebecers only: You can file your return up to May 30, 2021 and you will not be penalized. You can read more about this here.

There are a string of tax deductions and credits you may qualify for that when applied can reduce or eliminate the amount of tax you owe. This means less money going to the taxman and more money in your pocket.

You may also end up being one of the millions of people receiving a tax refund, that is, a direct payout from the government, with the average amount per return reported at $1,858.

A tax professional will know which deductions and credits you are eligible for. In the case you’ve decided to forego any help altogether and brave the tax system yourself, continue reading to find out the most common tax deductions and credits you or your family may be eligible for.

Note that unlike the basic personal amount, which is automatically applied when you file online, you will most likely have to manually enter the amounts to receive the deductions and credits listed.

On that note, let’s dig in…

1. [NEW] Home Office Expenses for Employees

Type: Deduction

The form required for this is Form T2200 or T2200s. Quebec residents require a TP-64.3-V.

Did you work from home during 2020 due to COVID-19? Chances are, yes. If so, you may be able to claim certain out-of-pocket expenses related to your job on your tax return, provided you have not been reimbursed already by your employer. You can calculate your home office expenses by using the CRA’s online calculator.

The CRA also offers a temporary flat rate method as an alternative to simplify your claim. But the maximum amount you can claim with this method is $400, which may not cover all your expenses. More information on this flat rate can be found here on the CRA website.

2. Age Amount

Type: non-refundable tax credit

You may be entitled to the age amount tax credit if you are 65 years of age or older at the end of the taxation year. If your income is less than $38,508, you are eligible to receive the full age amount deduction of $7,637.

The higher your income, the less you will receive. If your income is higher than $89,421 for 2020, then you are not eligible for the age income amount deduction.

3. Pension income amount

You may be able to claim up to $2,000 if you report eligible pension or annuity payments on your tax return. Income from your Registered Retirement Income Fund (RRIF) qualifies for the $2,000 pension income amount.

For a detailed list of eligible pension and annuity income, click here if you’re 65 or younger and click here if you’re 65 years or older.

4. Medical expenses

Type: non-refundable tax credit

Through taxes, you are paying for medical services, but there are many medical expenses that you’ll have to pay out-of-pocket. Tally up receipt totals for the medical expenses made over the 12-month period ending in 2020, which you have not been reimbursed for. You may be able to claim eligible medical expenses up to $2,397 or 3% of your net income, whichever is less, to count toward a credit.

One of the most common medical expenses you can claim is prescription medication and dental services that are not for cosmetic purposes. You can also claim medical expenses for your spouse, common-law partner, your children, or other dependents.

5. [NEW] Digital news subscription

Type: non-refundable tax credit

You can get a digital news subscription for a year as low as the cost of a sandwich, but it can also set you back $100 or more per year. If you are an avid news consumer and have multiple subscriptions, the costs can add up.

Luckily for you, this is the first tax year you will be able to claim any expenses up to $500 that you paid over the past 12 months for a digital news subscription.

The only caveat is that the subscription needs to have been purchased from a qualified Canadian journalism organization, or QCJO. Qualifying digital news subscriptions include The Globe and Mail and the Toronto Star Newspapers. Here is a full, up-to-date list of qualifying digital news subscriptions.

 6. Foreign tax credit

Type: non-refundable tax credit

You are required to complete Form T2209.

You may have money abroad that is generating income, which is the likely case of persons such as expats and international students. This income you will have to report on your tax return, but you may be able to claim this credit depending on tax treaties. For more information, view the CRA website.

7. Disability tax credit (DTC)

Type: non-refundable tax credit

You must fill out and have the CRA approve Form T2201 if you are applying for the DTC for the first time.

Although you may not consider yourself as disabled, if you have significant health problems that affects your daily life, you may be eligible to receive financial relief in the form of the disability tax credit (DTC). Hundreds of thousands of individuals claim DTC each year, with the government distributing over $1.3 billion dollars in relief.

For 2020, you will be able to claim up to $8,416 should you qualify. First, you must meet the CRA criteria of disability and receive an attestation from a medical professional.

Thousands of medical conditions fall under the scope of DTC. You can find out if you’re eligible for the DTC here.

8. [NEW] Canada caregiver credit (CCC)

Type: non-refundable tax credit

Those caring for a dependent with a physical or mental impairment may be able to claim up to a maximum of $7,276. To learn more about this, view the CRA website here.

9. Tuition, education, and textbook amounts

Type: non-refundable tax credit

You must have received Form T2202, TL11A, TL11C, or TL11D from your educational institution.

It’s no secret that education is costly. Thankfully, you may be able to write off costs related to your education, such as tuition fees or textbook costs, on your tax return.

The amount you are eligible to claim depends on the amount set by your province or territory. Unfortunately, the federal education and textbook tax credits were eliminated back in 2017.

10. Registered Retirement Savings Plan (RRSP)

Did you contribute in 2020 to your RRSP? If so, you can deduct the total amount contributed from your taxable income. You can read more about RRSPs here.

In Conclusion…

Claiming deductions and credits is one of the best ways to reduce the total amount that you’ll pay in taxes. When you reduce your taxable income, you lower your effective tax rate. You may also enjoy a sizeable payout from the government, otherwise known as a tax refund. To keep more money in your pockets, you’ll want to claim as many deductions and credits as possible.

Borrowing, Saving, and Investing in 2021

Written by kiara on . Posted in Blog.

2020 was a sobering year filled with unprecedented economic challenges. Thanks to the swift collective response to the pandemic, the outlook for 2021 is bright with possibilities of recovery in all areas of your life, including your relationship with money. In this post, we’ll take a look at what the next year has in store for each of the three main themes of personal finance: borrowing, saving, and investing, so you can be prepared for what lies ahead.

Borrowing money from the bank

The Bank of Canada (BoC) is committed to maintaining its policy interest rate at a record-low of 0.25% for the foreseeable future. As Canada’s economic recovery proceeds as expected, the BoC says it will hold the interest rate at 0.25% “until economic slack is absorbed” and a 2% inflation rate is “sustainably achieved.”

Lower policy interest rate, lower borrowing costs?

The BoC’s decision impacts the rates you get on things like your mortgage, credit card, and bank loans. A lower policy interest rate means banks can set lower interest rates for their clients. For you this means it is now less expensive to borrow money than it was before the pandemic.

To understand why this is the case, it’s important to understand how banks operate.

While you’re sleeping, banks will lend or borrow money among themselves. Banks will lend money if they have a cash surplus at the end of the business day. Meanwhile, they will borrow money from another bank if they have insufficient funds to cover the day’s transactions.

The policy interest rate is the target interest rate set for these overnight inter-bank transactions. This rate is set by the BoC, which manages Canada’s economy and finances as the nation’s central bank.

When the BoC sets a low policy interest rate, like 0.25%, this means that the cost of lending or borrowing money between banks is comparatively less expensive to say, a pre-pandemic rate, such as 1.75%.

In turn, since it costs less for banks to borrow and lend between themselves, they can lower their products’ interest rates. As mentioned above, for you, this means the cost of borrowing money from a bank is cheaper.

What’s the catch? The BoC typically lowers its benchmark rate to encourage you, the consumer, to borrow money. Since you normally only borrow money when you plan to spend it, and spending is what fuels economic recovery, you can now see why the BoC lowers its interest rate.

Making the decision to borrow

Just because it’s cheaper to borrow money, doesn’t mean you have to do so. A decision to borrow money from a bank, whether it’s for a small line of credit or something as big as financing a mortgage, should not be made in haste or taken lightly.

While it’s unlikely the interest rate on your mortgage or loans will change, if you delay your payments, you will most probably end up having to pay late penalties. Interest will also accrue, necessitating hefty payments down the line. Not to mention, your decisions may impact your credit score and you may even jeopardize your ability to borrow money in the future.

This is all to say: If you’re considering borrowing money from your bank in the near future, yes, it’s better to do so when rates are extremely low, but you need to also consider your individual situation. There’s no such thing as free money: Are you able to repay back the amount you borrowed? It’s equally important to assess how borrowing fits into your overall personal finance strategy.

Saving for your goals

COVID-19 cases are climbing across Canada, which has led to partial lockdown measures. These partial lockdown measures, from physical distancing to closing ‘non-essential’ businesses and 8pm curfews, could pose significant obstacles to returning to a pre-pandemic way of life in the near-term. But there may be a silver lining for you in all of this if you’re looking to stack up your money and save.

Spend less, save more

Measures implemented by provinces to ensure public health and safety and stop the spread of COVID-19 may actually work in your favor as they can discourage and even protect you from spending needlessly.

It’s no secret that when you don’t spend as much, you’re able to save more.

According to a recent survey by Scotiabank, Canadians are becoming better savers thanks to reduced spending in other areas of their lives. In fact, Canadians have increased their savings by $160 billion during the pandemic.

“The pandemic has prompted many Canadians to reassess their personal finances and short-term priorities, shifting how they manage their money and planning for whatever uncertainties lay ahead,” says D’Arcy McDonald, SVP, Deposits, Investments, & Payments at Scotiabank. “Not only are Canadians making savings a priority, but with different spending patterns created by the pandemic, many are seeing their savings grow even faster.

Managing your savings

So, what happens after you’ve managed to put some money aside? You can do a couple of things, namely place it in your savings account, which is an important aspect of any personal finance strategy. However, if you’re just saving in a savings account, you’re not going to get the best rate of return right now. Again, this goes back to the BoC interest rates being so low.

Central bank policy rates are a double-edged sword. While your bank will offer you ultralow interest rates on loans and lines of credit, they will also lower the interest rates for your savings account. Typically, the decrease is negligible, but it may be worth looking into other savings options to make the optimize your personal finance goals.

“In your interest, you may want to look into a TFSA. Something that gives you more bang for your buck,” says Rothenberg Wealth Management Advisor Stuart Greenley.

 

Investing to grow your income

The BoC expects Canada’s economy to grow by an average of almost 4% in 2021 and 2022, following “one of the deepest recessions in Canadian history.” The Conference Board of Canada estimates that the GDP contracted by a whole 5.3% in 2020.

With growth expected this year, economic recovery is on the horizon. The economy is set to retrace its 2020 setback starting as soon as the second half of 2021 depending on the evolution of the pandemic and in particular, how quickly vaccines can be distributed across the country.

As the inoculated population grows, the economy can reopen and a sense of normalcy to everyday life and, perhaps most importantly, ‘business as usual’ will gradually be restored. This will filter into different facets of the investment landscape, which will certainly affect your personal finance strategy and goals.

Implications for stock market and equities

When it comes to the stock market and equities, it is important to keep in mind that, the stock market often reflects the anticipated direction of the economy.

In 2020, as business activity was restricted, people were laid off, and sectors flickered out, whole industries suffered a decline in output. As the economy starts recovering in 2021, industries affected by the pandemic can start to reopen, albeit slowly. With companies able to resume their activities, their stocks are poised for recovery. But how quickly affected stocks will make a comeback remains to be seen.

Fixed-income investments

Though stocks usually get the headlines – an important asset class is fixed income.  The fixed income component of a portfolio can include Guaranteed Investment Certificates, Government & Corporate bonds, and preferred shares. These options can form an important part of your personal finance strategy, providing a predictable and steady stream of income in the form of regular interest or dividend payments.

Our balanced portfolio strategy

Regardless of the outlook for equities and fixed income investments in 2021, it’s important to maintain a well-balanced investment portfolio tailored to your specific situation. A diversification into different asset classes will help reduce the volatility in your portfolio.

“The key to investing is to make sure that your portfolio is well-balanced” says Rothenberg Vice-President and Wealth Management Advisor Maurice Pallone. “You want to be able to take advantage of opportunities when they arise, and simultaneously protect your portfolio from unanticipated events.”

Conclusions

  1. Borrowing money is cheaper, but getting into debt is also easier
  2. The returns on your savings may be lower than before the pandemic
  3. A well-balanced investment portfolio is the key to success

During these times, it’s especially important to seek out the advice of a wealth management professional, who can coach you on money management and guide you towards creating a balanced portfolio that is suited to your financial situation and short- and long-term goals. Simply email us at inforequest@rothenberg.ca or call us at 514-934-0586 for an introduction to one of our trusted advisors.

5 Money Resolutions You Can Make Now

Written by kiara on . Posted in Blog.

Resolutions. You might’ve made some for this year to improve certain aspects of your life, whether personal, professional, or both. It’s an equally good idea to make some resolutions as well to make the most of your money. Your financial well-being is just as important as your physical and mental health and your career.

Below you will find 5 realistic money management ideas that are easy to implement and stick to, and can have transformative effects on your financial well-being.

1. Be intentional. Set goals and deadlines.

Goals are what motivate us to push forward. Without motivation or a sense of direction, you may never achieve what truly matters to you. By setting financial goals, you can lead the life that you want.

When it comes to financial goals, it’s not only critical to write them down. Writing them down is only part of the recipe for success. You must also be clear and concise. When your goals are vague, you’ll have trouble achieving them. Therefore, it’s important to set a timeframe and deadline for each of your financial goals.

It’s equally important to ensure your goals are measurable. This allows you to track your progress, adjust your efforts, and know when you can celebrate your success. Always include a tangible number in your goal. You can then work backwards and determine how long it will take you to achieve this goal. Conquer one step at a time, be patient, and remain committed. Keep in mind that nothing happens overnight.

2. Put your finances and savings on autopilot.

Banking has become a lot easier because of new technologies. You can now receive deposits, pay your bills, grow your savings, and apply for loans at the click of a cursor or the touch of a finger. Digital banking is so popular that more than 76% of Canadians use digital channels, both mobile and online, to manage their finances.

One neat feature of digital banking solutions is that you can automate your personal finances according to your needs and goals. This means you don’t have to worry about your paycheck getting lost in the mail, missing regular bill payments, or misplacing financial documents.

Automating your finances doesn’t only help relieve stress and avoid late penalties. It can also help you get out of debt quicker and build wealth over time. By automatically making payments on your debt or contributing money to your savings, investment, or retirement accounts, you can reduce your debt and make your money work for you.

3. Create or update your will.

You may think only the rich and wealthy need wills. Or you may be worried that the cost won’t be worthwhile. You may simply avoid creating a will altogether because the subject itself can be uncomfortable to think or talk about. Whatever the reason, you should know that a will represents an essential part of a sound financial plan, and every adult should have one.

A will doesn’t just cover how your hard-earned money will be distributed when the inevitable occurs. A will also enables you to maximize your estate’s benefits and control your legacy. Perhaps most importantly, you can also help ease the burden on your loved ones during an exceptionally difficult time.

More than half of Canadians don’t have a will and millions don’t have a will that is up-to-date. Are you among them? If the answer is yes, it’s time to start writing, or at the very least, brainstorming.

4. Make it a habit to pay yourself.

What does “pay yourself” mean? It depends on your life stage and circumstances. If you’re an employee, it’s about setting money aside before paying your bills. If you’re a business owner, it may be rewarding your family for all the hard work, trials, and tribulations throughout the year, such as with a vacation.

“Successful savers take it off the top of their paycheques, invest it and let the chips fall where they may,” said David Chilton, the author of The Wealthy Barber, in an interview.

The general idea is to work your way towards financial freedom by prioritizing yourself. Saving is not necessarily an intuitive habit, but the more and more you do it, the easier it becomes. And you can even automate it, as in Point 2.

 5. Invest in companies that reflect your values.

There are many ways you can use your money to contribute to bettering the world around you. One of the most popular ways is by donating to charities, which you can receive tax credits for.

Another way you can help is by investing in companies that are committed to social good and creating positive change. Contrary to popular opinion, you can earn competitive returns and invest for the social good without sacrificing one for the other. Franklin Templeton confirms that ESG investing “doesn’t require a trade-off in terms of performance.”

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