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Three Solid Ideas For Your HeLOC

Given the rising interest rates, if you have been using your HELOC (Home equity Line of Credit or Secured Line of Credit) for investing or for debt payments, here are 3 solid ideas to do with that account.

  1. Reduce the principal
  2. Pay it Off
  3. Close it

With interest rates rising, paying off debt has now become a solid investment plan. It will pay upwards of 4% in this situation (as of May 2022).

1. Reduce the HELOC Principal

If your HELOC rate is at 4.5%, every dollar you pay to the principal saves you 4.5%. That money stays in your pocket, so it can be used for other things, and it is risk-free. This makes it an excellent investment.

This gem has disappeared for a long time, due to very low-interest rates. With rates now going up, paying off debt is a good investment, again.

2. Pay it Off

This fits in nicely with the Debt is Bad view that I have. This is also a follow-on to (1) Reduce the Principal. Having no debt creates so many choices and options in your life. You can then invest the money you were paying off the HELOC principal with.

3. Close It

This assumes you have achieved (2) by paying the line of credit off. Why close it?

I am confident many financial planners will poo-poo this perspective. I have always found borrowing to invest a risky thing to do, but paying off debt is never risky. You could put that money in a HISA for the moment until you decide what to do with it.

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TD Mutual Funds to Directline?

The journey from TD Mutual Funds to TD DirectLine has proven a winding and lengthy one. In Adieu TD Mutual Funds, I outlined how it all started.

Thanks to changes to the TD Mutual Fund Account for my son’s RESP, we will be moving it to TD Directline. The changes meant we would be unable to use the TD E-series Index Funds unless we moved the account. I also grew weary of the clashes over Investing Risk Profiles.

This moving of accounts is not possible online. We had to make an appointment with a TD Branch nearby. The meeting went, interestingly.

Meeting

The meeting was with a TD Investment Rep, my wife and myself. My wife needed to be there because we held the RESP for our son. It all started well, and we proceeded to traverse the myriad of online forms to open a new Directline RESP and then transfer the TD Mutual Funds content into the same account. Every step was online, and I should have been able to do it myself if I had access to the system.

My wife and I each already have DirectLine accounts. We were looking to add this account to one of those accounts. The Rep said the account needed to be added to my wife’s account. I had no issue with that advice.

The process of setting up the account meandered along. We filled in the information for my wife, and at the end of the questioning, an odd form came up. The paper stated that it was about to open a new account for my wife. This seemed strange since we had already told the system that she had an account. The same thing happened while collecting my data, and again, a new account was mentioned.

The meeting concluded with the process partially complete. The transfer still had to be processed. More forms needed to be signed, so we made another appointment to come in and complete the move of securities.

TD Directline Still Waiting

This meeting took place in October, it is now three months later, and the RESP account has not moved. I followed up with the branch, and they dutifully told me they would “check in to it.” Nothing came of these inquiries.

While I waited, I moved another account from a TD Mutual Fund position to a TD Directline Account. I solely held that account, and the move took three days. I went in and dealt with the same young lady, and it all went, except I ended up with a new Account and a New Directline access as well.

Too Many TD Directline Acccesses

I called TD Directline to consolidate the three login accesses that ended up being created by these processes. At this juncture, things got more interesting.

The representative managed to consolidate all of these accounts until one online login. One login makes life simpler for me. The Rep also inquired about the RESP transfer. It was delayed due to incorrectly done forms at the branch. He called the branch and may have cleared up things, but I am still waiting. The RESP still sits in a TD Mutual Account and remains transferred to the new Directline RESP account.

Keep Calm but Follow Up

That is what I continue to do. I will check in the new year what is happening with my son’s RESP. Given he turns 17 in a few months, I don’t have much more time to put money into it.

Other TD E-series Funds Stories

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Adieu TD Mutual Fund Account

Thanks to TD’s new stance on using TD E-series Index Funds in TD Mutual Funds account, it is goodbye. I still have two accounts open, and they are both going to move somewhere else.

Estimated reading time: 2 minutes

A while ago, I received a cryptic letter about “changes to my TD Mutual Fund Account.” I could only find out by going into the bank and talking to a TD investing person. Through some “internet research,” I suspected it had to do with TD E-series Index funds. This research included:

My suspicions were confirmed. I spoke to a rep with whom I had to reschedule my appointment. She confirmed with me the E-series Index Funds would no longer be “tradeable” in these accounts. This means:

  1. I could not buy any more of the TD E-series Index Funds in those accounts
  2. I cannot re-balance those accounts, by moving between these funds
  3. It would not be possible to do this at the Bank or Online either. Why online it is removed is bewildering.

So now I am moving my two accounts to TD Directline. I have had TD Mutual Fund accounts (and CT Mutual Fund accounts) for more than 27 years. Maybe I should have done this sooner.

TD E-series Done?

No, I can continue to buy them in my TD Directline accounts. There have always been issues dealing with E-series funds in my TD Mutual Fund Accounts. The Bank investment advisors make little or nothing from them, so there was little motivation to help.

I have also read about other, even lower MER ETFs (e.g. HXT, VCN, ZCN, XIC). I can also use them in a TD Directline account.

Other TD E-series Funds Stories

Questrade

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With Money Never is Better than Late?

Are there times when Never is better than late financially? That question comes up in finances all the time. FOMO or Fear of Missing Out is a strong driving force for some.

Spoiler Alert, no, is the answer to the above queries (except the last one, that is up to you).

Now I am most certainly not talking about paying off debt. In the case of debt late is better than never. Being on time, however, is the correct answer.

Better late than never?
Time Waits For No One But Sometimes NOT Doing it is Better!

In investing being “late to the show” can be problematic. Sometimes it is better to just ignore it, and try to find something else.

If you bought into the Tech Boom in 1999, you most likely lost your shirt, if you didn’t bail out. Some folks, however, who were in at the ground floor, might only have been lightly singed by the great drop. If you got into Debt Financing in 2007, again, maybe should have given it a pass.

If your friend invites you over for “just a party” but you get wind of it being an Amway recruiting party, never is a better choice.

Certainly with Ponzi Schemes Never is better than Late.

The Fear of Missing Out (FOMO) can make us jump into things at the wrong time. Better wait than late, is a better view.

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I read with great amusement an article in Business Insider Rich people make the same 5 mistakes over and over. I found it amusing, because it attempts to fool you into thinking that if you act like rich folk, you’ll become one. Unfortunately, Lies travel faster than truth.

Maybe the article is attempting to convince you that Rich Folk and you are similar, since you make the same mistakes? This is hardly the case.

Why are rich folk rich?

  • Started with money, most of the time. Family money makes getting rich a lot easier than you think.
  • Education and advantages that being rich gives you. Not just what you know, but who you know.
  • Pay lower tax rates, because they have people who make sure that happens.
  • They have enough money to make mistakes. They can take risks, that most folks can’t.

Rich People Can Make Financial Mistakes

That is what you should take from this story. Rich folk have the luxury of being able to make financial mistakes, they can recover from them. Most of us don’t have the wiggle room to escape financial blunders.

Rich folks can become like the rest of us, if they make mistakes, that is true. The story the great Investment Monolith wants you to believe is that the reverse is possible too. I think it is possible but the former is much more likely than the latter.

Mistakes are easily made, we all do them, every day. To succeed financially takes dedication, discipline and damn hard work. The mistakes mentioned in this article are bad:

  1. Assuming they can out-earn bad spending habits. That is not a mistake reserved to the rich, in fact this is how we all dig the big hole called debt.
  2. Not automating their savings. Another spin on pay yourself first, which is something you can do as long as you are not spending more than you make.
  3. Not speaking with a professional for tax-planning or estate-planning purposes. This seems like sound advice, if you take it as, making sure you do your taxes well, and you have your Will and Power of Attorney up to date.
  4. Assuming they don’t need a financial adviser because they’re successful. This is the heart of the article, as it seems to have been written by a financial professional. I have a great mistrust of the financial industry in general and in advisors in specific, but if you use this type of service, you had better trust them (and you had better watch them closely). In the end, it is your money.
  5. Not having any idea how much they spend, again not a mistake reserved to the rich. I had no idea I was that far in debt ? We’ve talked about that before.

What Should You Do ?

Don’t make financial mistakes? Easier said than done, but you must be careful with your money. Don’t make rich folk financial mistakes? Absolutely, because you don’t have the luxury of making them.

If you are one of the Rich Folk, why are you reading this?

Originally written in 2019, updated with more snark.

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