Unless you have the kind of generous parents who can afford to drop tens of thousands of dollars on your education, it looks like you’re going to be stuck paying for your own education. Don’t sweat it. Having to pay for things yourself builds character.
Most people pay for their post-secondary using a combination of factors. Many will work during the summer months. Some will be able to hit up scholarships. And others will have a sugar daddy, willing to give them cash in exchange for, uh, companionship.
That last method isn’t recommended, especially if you’re a dude.
The process is mostly the same in the United States, but slightly different enough to warrant a blog post. Here are four significant differences with student loans between the two nations.
Related: the case against going to college
College is crazy expensive in the United States versus Canada. Especially when you compare elite schools down south to equivalent institutions up here.
Take McGill, one of Canada’s top schools. A student from Quebec will only pay $2,328 per year in tuition. Someone from one of Canada’s other provinces will pay $7,227 annually, while international students will pay between $15,000 and $40,000. Each will also have to pay an additional $1,000 for books.
Compare that to Brown, which is one of America’s top schools. Tuition for the 2017-18 school year is $52,231. How anyone affords that is beyond me.
What ends up happening is U.S. students end up much deeper in debt than their Canadian peers. The average Canadian ends up with approximately $25,000 in student debt after their university degree is completed. The average American student will owe more than $37,000.
Both Canadian and American student loans are administered by their respective governments. But Canadian borrowers will likely deal with their provincial government rather than the feds.
Here’s how the Canadian system works. The federal government comes up with a certain number of guidelines. Each individual province decides whether they’ll follow these rules or tweak them to their own liking. Quebec, naturally, has its own set of rules. So does Ontario and Alberta.
In the United States, loans are handled exclusively by the federal government through the Federal Student Aid program.
Working with banks
In the United States, many student loans are issued by the federal government itself. These loans are called Stafford and Perkins loans, and are directly subsidized by the U.S. government. These loans are capped at approximately $10,000 per year for each student.
This isn’t enough for the average borrower, so many turn to private student loans. The largest player in this part of the market is Sallie Mae, which specializes in student debt. Sallie Mae has approximately $150 billion in student loans outstanding. In addition, many banks offer private student loans.
In Canada, most student loans are done directly with the government. Students can borrow up to the cost of their tuition each year from the feds, plus a top-up for books and other incidentals. If a borrower needs more, they can then hit up a private bank for more cash. Banks tend to market their loans to people who need more than the average loan – like doctors.
For the most part, whether you live in Canada or the United States, you have to pay back your student loans. Bankruptcy won’t get rid of them, either.
There are loan forgiveness programs in both Canada and the United States. In the U.S., you must first get a job with the government or an approved not-for-profit organization. Then, after you’ve already made 120 qualifying monthly payments, you can apply to have your remaining student loan balance forgiven.
It’s a little different in Canada. Doctors and nurses who work in remote communities can apply to have their student loans forgiven. There are also several provincial programs that will forgive a portion of someone’s student loans (via tax credits) if they live and work in a province for a certain amount of time.
The bottom line
Essentially, both Canada and the United States have very similar systems designed to encourage as many people to attend school as possible. There are only small differences between the two. For more information about Canadian student loans, consult a student loan expert.
It used to be that reverse mortgages were only considered as a last resort – like breaking the piggy bank once all other sources of retirement income have run out. However, this is no longer the case and a growing number of advisers are recommending reverse mortgages for their clients. Now, this is not to say that reverse mortgages are right for everyone. But if you are considering one, then here are five reasons why reverse mortgages can help retirees.
Before we get started, let’s look at what a reverse mortgage is. In simplest terms, these loans allow seniors to tap into the equity they have built up in their homes without having to make any payments on the interest or principal if they live in their home.
These loans have been around since the 1960’s and are only available to seniors age 62 or older. As mentioned, there are no monthly payments but borrowers will have to show that they can continue to pay property taxes, utilities, and homeowner’s insurance.
Perceptions of reverse mortgages are changing. According to All Reverse Mortgage, a direct lender of reverse mortgages in California, the program ‘has helped thousands of homeowners to safely access the equity in their home to better enjoy your retirement years.’
With that in mind, here are the reasons why a reverse mortgage can help in retirement.
Control Your Spending
Living on a fixed income requires discipline, a lot of discipline. For retirees, this means balancing withdrawals from their investment portfolios and savings accounts. However, this can be tricky – especially if their portfolio is comprised on securities – as timing withdrawals can be difficult at best.
This is one way which reverse mortgages can help as the added liquidity helps to balance out withdrawals and in some cases, can even allow retirees to keep the principal in their retirement portfolio. Doing so allows them to grow their account at a time when the added income can help to cover the costs of living longer more active lives.
Another plus of this approach is that retirees can use their reverse mortgage as a line of credit. This way they can use the reverse mortgage to cover regular monthly expenses and then time withdrawals from their core portfolio to pay down the balance.
Delaying Social Security
Did you know that delaying Social Security until the age of 70 can increase the benefit by more than 30%? While this sounds great, for many seniors holding off on applying for Social Security can be difficult to achieve.
Enter the reverse mortgage. By using this tool, senior can get the extra income they need to bridge the gap until Social Security kicks in. Granted, you don’t want to drain all the equity you have built up in your home; but small monthly payments can help to supplement income.
Paying Taxes from IRA Conversions
IRAs are a great retirement savings tool. However, converting a 401(k) or a traditional IRA accounts to a Roth IRA account does have one downside – taxes. Especially if you haven’t reached the age of 70 ½.
As such, a reverse mortgage can give you access to tax-free capital which can be used to pay the taxman when you convert your IRA. I know they should have made it simpler but let’s face it we are talking about taxes here and nothing is every that simple.
Increase the Size of Your Estate
I realize this might sound counterintuitive as one of the biggest concerns about reverse mortgages is how they will affect one’s estate. However, the reality is that a home is a single asset – and one which might rise or fall depending on market conditions.
As such, a reverse mortgage is a way to reallocate some of the equity into different investment vehicles – some which may grow faster than the value of a home. Thus, reverse mortgages can help to increase the size of your estate.
Setting Up a Rainy-Day Fund
Unexpected expenses can be the bain of your retirement as they can deplete the savings you have built up over years. As such, reverse mortgages can help to cushion the blow of expected expenses during retirement. In this way, you can pay the expenses while not having to worry about what will come next.
Anybody who has seen the digital revolution propelling the likes of Facebook, Amazon and Google into becoming household names will know that the online realm represents a smart investment opportunity.
And whilst the recent Snapchat IPO showed how a simple social media app can generate millions, there are plenty of other success stories in the online gaming realm.
Thanks to the proliferation of mobile technologies, online gaming has become incredibly popular with a vibrant development scene packed with innovative start-ups and small businesses who are able to keep overheads low, whilst reaching global audiences through app stores.
When a Swedish office worker quickly created the ground-breaking world-building game, Minecraft, on a coffee break, he could have had little idea that his creation would be sold to Microsoft for $2.5 billion.
And whilst we might not all be able to use programming skills to catapult ourselves to the height of luxury, there are many other ways that we can get involved in the potentially lucrative online gaming scene.
Girl Smartphone Technology Woman Mobile Texting
All investors will know how important it is to be aware of growing social trends and changes in behaviour to anticipate which areas are going to be most profitable.
Whether it’s catching up on Lucky Nugget Casino’s guide to how millennials and their smartphone dependence could lead to a mobile casino boom, or even seeing how video games are starting to compete with traditional sports thanks to the eSports phenomenon, it all shows how there’s plenty of exciting opportunities ahead of us.
Perhaps it’s because online gaming is so new that it’s helped many overnight success stories. Companies like Finland’s Supercell now enjoy yearly revenues of $2.3 billion merely by creating simple multiplayer smartphone games like Clash Royale. And through an innovative ‘freemium’ pricing structure, Supercell have encouraged a climate where a one-off payment is no longer the standard for the online gaming realm.
And it’s not just Supercell who are heralded the Finnish gaming revolution, as their compatriots Next Games are expected to have a $30 million IPO in the coming weeks that could prove to be a very shrewd investment opportunity for many.
So whilst we may all recognize that the mobile gaming revolution has given us the chance to play anything from puzzle games to online casino titles with ease, it looks like there are many other ways that we can all reap the benefits from video gaming.
“Backtesting? How boring!” “I just want to make money.” I hear this all the time from new traders rushing in and wanting the glory straight away without getting their hands dirty.
Let’s say you’re opening a new business selling coffee. If you are completing your due diligence properly you and the bank will want to know how much your new business will make in the following years (projected income). If your treating your trading like a business (which I highly recommend), you will also need to know how much money you can expect to make with your system in the years to come. You would be surprised how very few traders implement this into their trading.
Now, this can be time-consuming but the rewards and confidence you will gain are well worth it.
Now you can backtest on your broker’s charts, it will all depend on what time frame you trade on. I trade on IG and have access to a charting program called pro real time, which can be accessed through IG or via their website (www.prorealtime.com).
Pro real time gives me access to 15 months of data on the 5min chart for most stock indexes, the higher the time frame you trade off the longer you will be able to go back. For example, if you trade off the 1hr time frame you will able to go back many years to test you system.
Now this does sound like a lot of work, but why not do 30mins per day, and in no time you will have 2 years of results in front of you.
So to backtest your gap strategy you will need to know the rules of your trade, when does the trade trigger? What stop loss do I use? And the risk you will be using per trade. You will notice once you start to back test you will find patterns, like the trade does not work on Fridays very well, the stop loss I use is too large and never gets tested when I’m in a trade. (let’s look at a smaller stop loss)
Looking back at the results I find adds more rules to the trade, but this is what we want, all we are doing is fine tuning our trade, to make it work better and add more profits to our account.
I have a backtesting sheet on an A4 piece of paper that I use, the information I use for my strategy is
- The time the trade triggered
- How long did the trade take to hit my profit target
- Risk V Reward (the stop loss size compared to my profit target)
- Day of the week
- Was there any news announcements around time of the trade (or trump tweets)
- How many points the trade went against me (is my stop loss to large for the trade?)
And like I mentioned as you make your way back in time so to speak, you will find other information that is very valuable to your bottom line.
Moving forward on a day to day basis I keep track of all my trades that have triggered in the last 24 hours, which can be time-consuming on some days, but a whole lot better than going back 2 years looking for results.
So the main benefits I feel of backtesting a strategy are: knowing how profitable your system is, your winning %, and your potential profit. You will have more confidence in taking your trade and in some ways it can take a little of the emotion out of trading. Looking down at your stats sheet knowing that over the last 2 years this trade you’re about to take has a 62% chance of giving you some profits.
News events, does your trade work when there is an interest rate decision by central banks? When a war has broken out? Or when a country is going through a change of government?
These are just some of the questions you will not know about your system unless you get your hands dirty and do some backtesting.
I’ve blogged before about the potential income stream and earning possibilities of online poker. The skill set of a good poker player is not that dissimilar to the skill set of a successful entrepreneur, as keen poker player John Roa (CEO and founder of AKTA, a UX and digital development consultancy, and Digital Hope, a not-for-profit organization that supports underfunded international NGOs), discussed recently on medium.com:
‘I end up finding myself using a lot of the same skill sets in both situations — trying to call bluffs, anticipating moves and playing my cards perfectly without giving away my hand… In poker, if you’re a good player and you’re not a crazy person then you’re going to really try to make bets where you have the probability of success most of the time. Even if it’s not a great probability, if you have say a 60% chance of winning, you are going to take that every day over 45%. That’s kind of how being an entrepreneur is.’
Poker has also been a major contribution to the transformation of former PokerStars tournament regular David Daneshagr into an MBA graduate and founder of the highly successful digital marketplace BloomNation. Daneshagr started playing in the early 2000’s, and by 2006 he was ranked the fifth-best player in the world. After graduating from the Booth School of Business he and two friends founded BloomNation, using the winnings of Daneshagr’s 2010 tournament success to properly launch the company. Now BloomNation has surpassed $1 million in sales and grows 15-30% each month.
Roa and Daneshagr are just two examples of the success at the table correlating with success in the boardroom, and here’re 4 lessons to learn from their stories.
1. Develop Optimism
Roe was and is an optimistic poker player. Early on he learned that to play poker at a serious level you need a high dose of optimism, belief in yourself and the likelihood of your success, 3 key qualities any entrepreneur needs. On the flip side of this he also learned that appreciating and accepting failure is all part of the game, sometimes you’ve just got to grit your teeth and get on with it.
2. Sharpen your Execution
Poker and business are both situations that require sharp execution skills. Daneshagr was a keen observer of his fellow players and quickly ascertained their bluffs, but he knew that just like in business there were no scripts to follow during a game. Ultimately if he was making a decision that risked $100,000 on the outcome, he had to have the focus and skill to carry it through in the best possible way.
3. Be a better Communicator
Roa firmly believes that the subtle communication skills he learned at the poker table have served him well in his role as CEO and founder of successful companies. The psychology you can develop during a poker game, reading people, tracking their behaviors and patterns and observing their reactions to actions and events can all translate effectively into a business setting. Communication is a learned skill, the more quickly you can adapt the more effective you become in the long run.
4. The Power of Reinvention
Poker offers the chance to change your trajectory, no matter how poor past performance has been with each new table you can reinvent yourself, a fact that Daneshagr knows and has taken advantage of. He’s learned to let losing streaks and past losses go and that’s enabled him to approach new ventures with a fresh approach. Reinvention goes hand in hand with the ability to ride the wave of risk, ultimately if you can’t let poor performance go it will follow you to new endeavors.