Bitcoin: Is it Halal?

Manzil + Koho Card Review

One thing I plan on doing regularly is to review other halal companies and products that are out there. That way you can get another perspective. Ultimately I think Canadian Islamic Wealth is number 1. But I’m biased. Kinda like how your mom always tells you you’re the most handsome guy or a beautiful girl. You very well could be but your mom would tell you that no matter what. Anyways, Manzil +Koho Card.

Background

This is a really interesting relationship that Manzil has built with Koho. From the looks of things, they are trying to partner with Koho to offer a Halal Pre-Paid Visa. What makes it halal? Ultimately you load up the card with your own money and use it for your everyday purchases. Unlike a regular credit card, you can only load the card with your cash. So there is no risk of going into debt and there is no risk of paying interest on that debt if you are late. The reality is scholars have of course allowed the use of Credit Cards with the warning that you pay things off on time. The reality is many Muslims we deal with forget or spend outside their means. Which of course means the interest is inevitable. Further, utilizing interest-based financial instruments (even if deemed halal) enables the interest-based system to thrive even more. Manzil adopting this pre-paid Visa idea alongside Koho is a great step in allowing Muslims to book travel, accommodations, and shop online with money they have instead of interest or debt. Remember the Prophet Muhammad said “After the major sins which must be avoided, the greatest sin is that someone dies in a state of debt and leaves behind no asset to pay it off.” (Darimi)

The Card

I signed up for the card. The cards have an interesting assortment of colors.  The Koho app is user-friendly it tracks your purchases and cashback as well. It also has savings features such as round-up which allows you round pennies to the nearest purchase and save (every little bit counts) . It also has a feature that allows you to get a $100 advance on your paycheck with no interest. This is a great feature and avoids Muslims from having to use overdraft or outrageous payday loans. Sometimes even the best planning can be hit by an unexpected bill.

You can load the card via e-transfer, direct deposit, or by linking your bank account. E-transfer is what I did and the funds ended up there in about 30 minutes.  The process to load the card with money is fairly easy. They allow you to load it via e-transfer, direct deposit, and more.  It took less than a week after signing for the card to arrive. A simple phone call after the card arrives allows you to activate the card and you can go use it for your pin number to be officially active.
Overall it is simple, easy to use, and comes with some nice features. Definitely a good alternative to avoid interest, overdraft fees, and more. My only critique is that the first time i tried loading the card I did so from my business account. Nobody reached out to me and told me that wasn’t going to work. I had to follow up to see what was going on. A minor issue but still needs to be pointed out.

The Vision

I am not 100% sure what Manzil’s plan is for offering this card. At the very least it is a way for Muslims to get Visa features without the high fees and risk of Interest. But after having conversations with Manzil and seeing their development over the last year I think there is a “bigger fish to fry”. I see this Manzil pre-paid visa as a stepping stone by KOHO as an inexpensive way to gauge demand for halal tools and options in the Muslim community and on Manzils website they have several other halal financing options. If I were to make a prediction I think these are the workings of arranging the first-ever halal checking account and halal deposit options in Canada. This may be paving the way for the first-ever Canadian Islamic Bank. If we can go down this road this will be a game-changer for Muslims in Canada.

Overall, the story, the card, and the cause are all things I think every Muslim should get behind. At the very least you will get a card that you can use for all your purchases and get cashback. It will be halal and keep you away from debt and interest. Best case scenario, the community supporting these endeavors by Manzil could be the steps we need in order to have our own Islamic Bank.

If you decide to get set up with this click here:
https://partners.koho.ca/manzil/?ref=MANZILCIW

Debt: Do you really need it?

I was doing some reading yesterday. It turns out the average Canadian has over $72,000 of consumer debt. The average American has $90,000 in consumer debt. These come in the form of car loans, lines of credit, and credit card debt. Oh, and let’s not forget the don’t pay for your furniture until 2025 (i don’t know what they are called) and then pay the full amount or 30% interest on it. Seriously, this is capitalism run amok. That means $800 per month of the average Canadian income is going towards servicing debt. The average American nearly $1000 per month goes to pay the debt (this doesn’t include student loans or mortgages). These debt-ridden individuals and families will pay over $25,000 in interest over the life-span of this debt (assuming they don’t borrow anymore).  I don’t know how this is reflected in the Muslim community. I would hope that we are more responsible then this. However, based on conversations I have had with many clients it is a trap that Muslims fall into as well. Here are some things we need to think about and normalize.

1) Buy less S**T!

This large amount of consumer debt (going into debt to consume) is a result of people spending money they don’t have on things they don’t need to impress people they don’t like. “keeping up with the Joneses” per se. Well, the stats would suggest the Joneses are broke. The planet, your bank account, your mental health, and your physical health will thank you! How often have you bought a new car, a new toy, or a new set of furniture only to be discontent with it a few weeks after buying it? I am not saying to spend money! What I am saying is buy what you can afford! And spend money on things that you actually enjoy and bring meaning to your life!

I’ll give you an example. When I started working at Investors Group, I was making some really good money. I went and I leased a Lexus. I pay approximately $750 per month for this car. I was happy. A young guy with a nice car at a payment I could afford. In reality, I don’t really care about cars. I bought this car because I wanted others to think I was doing well. I was. But I would have been just as happy driving a Toyota Camry, A Volkswagon Jetta, or a Honda Accord. I only need heated seats and a heated steering wheel (Winnipeg is Cold). I would have been happier setting aside that extra $300 per month or so for travel, martial arts classes, and giving to charity. Those are things that interest me. If you care about cars and you can afford them by all means do it! But don’t buy something you can’t afford and go into debt! Especially if you are not enthusiastic about the thing you are buying!

 

2) No amount of stuff can make you happy!

 

The prophet Muhammad (PBUH) said, “Wealth is not having a vast amount of riches, it is in contentment.”(1). We see this all the time. Celebrities with millions of dollars, fancy cars, and a huge fanbase committing suicide. Your stuff won’t make you happy. But not having mountains of debt to repay will be better for you financially but improve your standing on the day of judgment (interest is a very big sin in Islam).

Further, stuff can’t make you happy. Debt, on the other hand, can impact our mental health, our physical health, and our relationships. “Fighting with your spouse about money is a warning sign” that you have too much debt (2).

3) Financial Freedom

This is the most important one. Debt turns you into a servant. You must stay at the job you hate because you have payments. You can’t risk your steady paycheck to try and start the business you always dreamed of. You have to work longer hours and sacrifice more just to be rid of this debt.

Also, if you took the difference in those payments and invested it at a 6% rate of return for 20 years. . Let’s assume 50%. You spend the rest on what you want. You’d have between $115,000 -$250,000. It could be considerably more if you added more and got a higher return.

Conclusion

We need to get away from this consumer mentality. Too often we are trying to impress people that don’t matter with our stuff. I am not saying not to buy luxuries. I am not saying not to spend money on things you enjoy. I am saying let’s stop getting loans for things that are unnecessary and let’s be financially free of debt. It is crippling us and we don’t even realize it.

References

1. Bukhar, Muslim

2. https://www.cpacanada.ca/en/news/canada/2019-10-25-debt-health-impact

Consolidation Loans: Should you get one?

Many Muslims have debt. A car loan, a credit card, a line of credit, etc. The sad reality is that all of this debt comes is interest-based. Usually, this is coupled with high payments and high levels of interest, and feelings of crushing debt. Naturally, many people seek out solutions to this problem, and often times this comes in the form of a consolidation loan.

What’s a Consolidation Loan?

A consolidation loan is a loan that combines all the loans that you currently have and rolls them into one. It usually involves a lower interest and lowers payment than the combination of all your other debts. For example, if you have credit card debt of $2000 with 19% Interest, a car loan of $8000 with 9% interest, and a line of credit of $15,000 with 5%. interest. Combine these debts could be costing you $600-$800 per month in cash flow. By consolidating you would have a single debt of $25,000 interest of 6% payment of maybe $400 per month. Basically, this method frees up $200-$400 of monthly cash flow.

Here are a few things to keep in mind

1) Consolidation loans only work if you use that “extra cash flow” to pay down the principal.

Often time I see people go for consolidation loans in order to pay to free up cash-flow and get out of debt more quickly. This is not a bad idea by itself, however, oftentimes I see clients who take a consolidation loan, have an extra $200 per month, and proceed to spend that on things that are unnecessary. If you take a consolidation loan. Make sure the extra cash flow goes to attacking the principal!

2) Cancel the stuff that got you in trouble.

A major failure that I have seen is people will go to the effort of getting a consolidation loan but not close their credit cards and lines of credit. Now they have to contend with their consolidation loan as well as the temptation of their line of credit and freed-up credit cards. Some go on a spending spree and end up in an even worse financial position than they were before.

3) All of these contain interest

Currently, most of these loans and consolidation options are interest-based. I will never say any of them are halal. I am saying that a consolidation loan can be used to get you out of interest-based debt more quickly. If you get one, work your butt off to pay it down and get out of interest. No more stress.

All in all a consolidation loan to pay down debts is not a bad idea. However, it can be a disaster if it is not handled properly. If a consolidation loan will cause you to go even deeper in debt or have you putting less money towards your debt it should be avoided.

Halal LIRA’s

What is a LIRA?

A LIRA is a Locked-in Retirement Account. I know you don’t really care about what the acronym actually stands for it’s more important to understand what they do. How they are created? and How to use them in a halal way? Let’s go.

Once upon a time, a long time ago or maybe even in the present-day, you worked for an employer that provides/ provided you with a company pension. This is common among large and medium-size employers to help retain talent. How it works is usually after a waiting period 30, 60, 90 days you will be offered an employee benefits package. This package will include health and dental benefits along with your retirement and pension options. Generally speaking, you will be offered a Defined Contribution Plan (DCP) and in this contribution plan, you will either be able to choose how much you contribute or be forced to make some level of contribution depending on how your employer has structured it. The contributions you make will be matched by your employer. From what I have seen employers can match these anywhere from 15%-50% they can do more but that’s been the average.  But Jesse what does this have to do with a LIRA? I’m getting to it I promise.

A LIRA is Formed

Usually, when you leave your former employer you will be given a few options. The first will be to keep the pension with the employer. With this option, you will leave this money under the management of your former employer and you will eventually get to access it if you remember you worked there when you retire (i don’t recommend this). The other option they will give you is to transfer that money to a LIRA (see told you we’d get there) (I recommend this).  A LIRA essentially locks this money away until (you guessed it) retirement. Meaning you can’t withdraw this money. The reason why transferring this money to a LIRA is better is because you now at least have control over how the funds are invested. Like most other investment accounts out there a LIRA can be invested in either a Halal way or a Haram way. By taking control of that pension money you earned you will be able to ensure it is invested in a way that is aligned with Islamic Values. Alternatively, by leaving it with an employer I can assure you the money will not be invested in a Halal way.

How to Transfer?

Usually, your employer will give you an option to transfer the funds and a package for doing so after you have stopped working for them. Don’t worry the advisor you’ve chosen will be more then happy to do this paperwork for you  (even I and I hate paperwork).

Which Company Should you transfer your LIRA to?

Well, that’s obvious. Canadian Islamic Wealth of course. We work with people from all walks of life. Some are investing as little as $50 per month and as much as $2,000,000. It doesn’t matter to us as long as you want to do things in a halal way.  Obviously, we don’t just want you to invest one time. We want to understand your goals and your entire financial situation so that we can create a plan for you that allows you to achieve your goals in a halal way.

All in all LIRA’s are not that complicated. It is an account that only exists because you left your employer for bigger and better things. The best thing to do is to move those investments after you left your employer so that you can keep track of them and make sure they are invested in a halal way.

 

 

 

 

 

 

 

Hajj Savings Plan

Hajj is one of the 5 Pillars of Islam. Once in our lives, Muslims must make a pilgrimage to Mecca.  The problem is that if you live in Canada or the United States it can cost up to $12,000 to go on your trip to Hajj. That is just for one person. The reality is procrastinating on this requirement can have consequences. Your health, wealth, and income are not guranteed. That is why Planning for it today is essential. Follow these 5 steps to go to Hajj sooner.

Step 1: Determine when you want to go.

Do you want to go next year? 3 years? 5 Years? Setting a specific date and writing that date down is essential. Without that, we have no target and no means of setting regular savings targets. Canadian Islamic Wealth has helped many families go to Hajj and the ones that are successful have a date in mind for when they want to go. By setting an actual date instead of saying “eventually” the formings of something real begins.

Step 2: Determine the Cost and the Savings Targets

If you can find cheaper packages go for it… but from what I have seen in Canada Hajj can cost $12,000 or more. What does that mean for a savings target? Well depending on when you want to go will determine how much you need to save. For example, if you needed $12,000 in 5 years. You would need to save $158 per month and achieve an 8% profit on your investments. If you wanted it in 3 years you would need approximately $250 per month in savings and a 10% Return. Either way, setting a savings strategy is essential for achieving your Hajj goal.

Step 3: Put it somewhere you won’t touch it

Many of us are weak. When we see large sums of money in our account we want to spend it. I know. I’ve had many clients ruin savings plans in the past by having access to the money that is intended for Hajj. That’s why I want you to open a Hajj savings account with us. If it’s an emergency… a real emergency… you can get it back. But most of the time having to call us and hear a lecture on the importance of Hajj is enough for people to think twice before ruining their hajj savings plan.

Step 4: Open a TFSA at CIW

Very few companies out there understand the importance of hajj and its financial implications the way we do. Not only will we open a TFSA for you and make sure your profit is earned in a halal way, but we will also help you achieve your other financial goals in a halal way.

Step 5: Enjoy the fact that you’ve completed an essential pillar of your faith.