Category: newsletters

Feedback on my newsletter indicates some clients would like the latest information on financial products. I want to differentiate this space from the thousands of other columns and blogs on financial matters. We probably don’t need more financial information. We need to know how to use the information we already know. That is not to say I will never discuss financial products or financial news.

The value I bring to your financial situation if you let me is to help you gain a new perspective on your personal finances. For example, say I am trying to get a client to pay off a debt. When I point out to him that he will be rid of his monthly payment and he would save the interest cost when he retires the debt, that fact does not motivate him enough to take action. But what if I told him that his net worth(assets minus liabilities) would be a million dollars if the debt was gone? Might he then consider it?

Let me begin this newsletter with a description of two new clients. A couple with one child and one on the way, they were referred to me by a co worker.

This couple in their early 30s have a mortgage balance below the average for their stage of life, due to prepayments. They have no other debt other than the mortgage(YES mortgage is a debt), They have worked hard to pay off debts as they wisely used a financial gift, and at present have only one vehicle. The lower mortgage balance, wise use of a little extra money, and only one vehicle by choice makes them unusual in their peer group. They wanted to meet with me to gather all the pieces of their financial situation to get a sense of the big picture. They are again unusual in being aware of their cash flow and very organized with all their financial information. They want to plan for the decreased income once she went on maternity leave, and to set a course for their long term goals. They are well on their way because they truly understand the value of planning and sought advice to achieve their goals.

I recently started a serious fitness program that involved one on one sessions with a personal trainer. The first time we met she had me record what I had eaten for the past few days.

What an eye opener. My diary showed that although I wasn’t eating enough calories per day, too high a percentage of those few calories were from fat. She told me that in order to be successful in my workouts I would have to increase my protein intake and decrease my fat. No lecturing just a matter of fact tone of voice. And during the ensuing months she would inquire: Are you eating your protein? The reason for my perseverance in the program she set up for me? It is her encouragement and positive feedback.

Let me introduce Dennis to you. He was featured last August. Dennis had a busy summer. Here are a few random financial tidbits he discovered.

In one survey of Canadians aged 35-44 90% agreed that it was important to have a financial plan in place at age 35. How many of those respondents actually walk the talk? Less than half did.(1)

Only one third of Canadians who were allowed to make RRSP contributions in 2008 actually did so.(2) Less than 28% of private sector employees have an employer sponsored pension plan.(3)

Most pension plans are now defined contribution plans where the responsibility for managing the portfolio has been passed from expert, educated professionals to the inexperienced, time deprived individual investor.

Just this month one of my clients, a couple with 2 teens, achieved a milestone in their finances. They paid off their mortgage. Their original amortization was 25 years but 11 years after purchasing their house they are now proud OWNERS and can tell their bank to take a hike.

With good reason too. When their own branch was closed on Monday she went to another branch and was told :’If you want to pay off your mortgage you will have to go to your own branch.’ When she did get to put down her final payment she wasn’t told she would be charged a $33 penalty unless she divided the payment over 2 months. They neglected to mention that in person but she was told that on the phone after the fact. So when you see those bank ads claiming to look out for you: not true. She is not the only client that has stories of fees and poor customer service.

Zany Zant had just invented a nifty device that measured indifference and disgust. He wanted to test it and to observe if there was correlation between the two emotions. So he asked his best friend Fast Hopper if he would wear it for a day. “No prob” said Fast Hopper.

The temperature the day Fast Hopper had to test out the device was -25C. He had forgotten to turn on the timer for his car’s block heater. “Doh!” said Fast Hopper.

His wife reminded him over breakfast that he had promised to help her with their incomplete 2007 tax returns weeks ago. “Meh.” said Fast Hopper.

As he entered the office one of his colleagues asked him if he had heard the news on the radio about the budget update. Fast Hopper had to confess he had only half listened to a few words. “Meh,” he said. “I’ll listen to the TV news tonight.”

His boss had left him and email requesting to meet with him later in the morning. There was also a phone message from his financial planner asking him to return his call. He added those to his to do list for the day. “Meh, I have all day to get to it.”.

He had Zany had decided to go out for lunch. Zany asked Fast Hopper if he had made any New Year resolutions. “Meh,” grunted Fast Hopper, “what use are those, I never stick to them for more than a week.” Zany said he was going to keep track of his spending for a month to see if he could save more.

The past few months have seen a barrage of financial events and changes. Like a 100 item buffet, information and choices presented by the local, national and world economies are information overload and show no sign of abating. Therefore I am introducing a new feature the Very Important Trivia Hall of Fame.

I am valuable to you when I find that gold nugget or diamond that is relevant to your financial situation.

For example: An acquaintance asked me to do his father’s tax return. After checking his T slips it became clear that the father qualified for the Guaranteed Income Supplement, a government benefit available to low income seniors. Both he and his son were unaware of this program.

And the Inductees Are…

For almost a century Canadians have been paying personal income tax. Personal tax was started as a means of financing World War 1. Since then Canadians have been deferring (two thumbs up) evading or avoiding(big red X) paying income tax.

One step to ensure that an income earner pays no more tax than he or she must is to understand there is an essential difference between a deduction and a credit.

Canadians also need to learn that getting a large tax refund year after year is not the best idea. Apparently that is a hard lesson to learn because at present there are millions of dollars of unclaimed refunds according to the Canada Revenue Agency. We can be assured that the owners of those refunds are NOT the same people who complain about the government.

Only 50% of a capital gain is subject to tax. But don’t write this in stone or even felt pen. One certainty about taxes is that little ever stays the same. It is a game of moving numbers!
If you are your own boss you must pay both employer and employee portions of the Canada Pension Plan. As of 2006 that was 9.9% up to a maximum of $3821.40.

I still contend that it is not possible to sneeze with your eyes open. Unless of course, you are a snake or a fish. Please feel free to prove me wrong.

Well here we are in the midst of fall. It has been such a beautiful spring and summer that I am reluctant to put my sandals in the back of the closet until next year.

What has transpired in the financial realm that is of relevance? Let’s do a recap of the past few months.

First off I hope that all of you have done your 2005 tax return, especially if you owe money. Remember that the penalties for overdue taxes are an immediate 5% on the unpaid balance and daily interest thereafter.

Putting that task in the procrastination pile will not make the problem go away! Most of you know you can ask for my help, moral support or otherwise.