New Year’s Financial Resolutions

Every year, I make resolutions about the areas of my life that I would like to improve. The changes often never even get started and rarely make it to December 31.  I’d like to help you be successful if your goals are financial.

In a recent Sun Life Financial survey, 66% of Canadians said their debt level was the same or worse than a year ago.

Step 1 – Make a Goal.

It doesn’t matter if it’s saving 10% of your gross (or net) income, saving $1000 so that next Christmas the expenses do not need to go on your credit card (due to lack of cash flow), paying off your credit card every month, putting aside 3 months income for a rainy day, or saving money for a special vacation.  All that matters is that it’s your goal and that it means something to you.

Step 2 – Determine your Cash Flow

You cannot save even $50 each month, unless you know where that money is going to come from.  So this step involves reviewing your income and expenses.  Most experts suggest that 3 months is a good snapshot.  Note: If you pay for items such as insurance on an annual basis, you need to average those costs and add them to your 90 day expenses. 

Usually, a good start for this review is by looking through your bank and credit card statements.  Remember – all you bank statement says for cash is that you withdrew it, it doesn’t tell you whether you spent that money on giving your children money for school pizza lunches or on $5 Starbuck coffees.

If you would like a spreadsheet to use for this exercise, let me know and I can supply you with one.  Alternatively check out the one available on the Hello Life website. 

Step 3 – Review your Income and Expenses

So now that you know where your money comes from and where you spend it – you need to determine what you can adjust.  Is it exchanging Starbuck coffees for ones you brew at home or buy at Tim Hortons? Is it decreasing your clothing or eating in restaurants budget?  Does it require an entire review of all of your spending habits?

If you need help with this step, contact me. I can either help you or send you to a professional who can.

Step 4 – Implementation / Action

Money that doesn’t “exist” is easy to save.  If your goal is to pay down credit card debt, you can set up an automatic payment from your bank account to the credit card to occur as soon as your paycheck lands in your bank account.  If your goal is savings, I can help you by setting up an account for the savings and arrange the same automatic transfer.

As we all know, nothing actually happens unless you have an action plan.  Let’s work together to implement your financial goals.

10 Ways to Save Money

They say that if you continue to do the same thing the same way over again, you will end up with the same results.  

Here are 10 ways to save money or to get "free" money that you should consider. 

1. The 24-hour rule - Fight impulse purchases by waiting 24 hours before you buy it.

2. Comparison shop - I just purchased a new Toaster 

Oven and let my "fingers do the walking" on my computer before heading out.  I purchased the unit on sale for less than half price versus other stores and comparable units. 

3. Bundling - Bundling services gives the service provider more business in return for a better deal for you. So bring multiple services to your bank or cable company and negotiate. (I did recently and saved 30% on my cable, internet and cell phone.)

4. Pay bills on time: Paying late fees is a waste of money.

5. Use your perks: Your employer or association may offer perks or discounts. Check them out. But know your prices,sometimes you can do better on your own.

6. RRSP matching from your employer, RESP Grants, etc- Always take free money.

7. Shop with a list - the longer you spend in the grocery store, the more you spend

8. Borrow and share - for items that you only use occasionally, borrow, rent or check Kijiji or Craigslist.

9. Cut your energy usage - Turn off the lights, turn down the thermostat and don't wash your clothes or dishes during peak usage hours.

10. Weekly mortgage - If you pay your mortgage monthly, consider going bi-weekly or weekly. It shaves time and money off of your mortgage payments.

Tax Tips

April 30, 2012 is the deadline to file your taxes if you're an employee and it is also the deadline for self employed people to make sure that the CRA has received full payment of their outstanding balance. Therefore, here are some tips to help you complete your tax filing. Please contact your accountant, tax preparer or the CRA if you have specific questions.

The CBC has listed 9 tips to save you money at tax time. Included are:
1. Be sure to take advantage of all income-splitting and pension sharing opportunities.
2. Don’t assume that you don’t need to bother filing a tax return because you have no income.
3. Be sure to transfer any unused credits – including Child Tax Credit, Tuition Credits and Donations.
4. Know the limits of using tax software or online tax filing programs.
5. Be sure to claim all eligible medical expenses. Note: only expenses that exceed the lesser of $2,052 or three per cent of net income can be claimed. But there’s a long list of expenses that qualify, so it’s often not too difficult to reach that threshold, especially for the lower income spouse.
6. Take advantage of the new tax credits – including:
a. non-refundable Children’s Arts Tax Credit – maximum of $75 per child
b. The Volunteer Firefighter’s Tax Credit
c. Family Caregiver Tax Credit – beginning next year
d. TFSAs – if you withdraw funds, they cannot be replaced until the following calendar year
e. Examination fees now qualify for the tuition tax credit
f. 2011 budget also loosened the restrictions on transferring investments held in one sibling’s Registered Education Savings Plans (RESP) to another sibling’s RESP
g. RDSP withdrawals no longer trigger refunds of grants and bonds paid in the last yen years if a doctor certifies that a plan recipient isn’t likely to survive for five years
7. Keep good records.
8. Be proactive with your taxes.
9. Be sure to report all T-slips.

For more information on these items – check out the original article .

Do you have money put aside in case of an emergency?

From the 1970s through to the 1990s, this was a no-brainer, as interest rates were relatively good on the usual savings vehicles — high-interest savings accounts and Canada Savings Bonds. But in the last decade or so, interest rates have dropped to record lows, credit has become more easily available, and we have started expecting portfolio returns significantly higher than an emergency fund would generate.

So it's understandable that the emergency account would disappear from a lot of people’s lives.

In the current economic climate, credit has been tougher to obtain and unemployment rates are rising rapidly; EI pays very little compared to many people's spend-what-you-earn lifestyle, and using a home equity line of credit in a period of declining real estate values is neither wise nor likely possible. Thanks to all that, an emergency fund is an absolute must in these economic times.

The main reasons for creating an emergency fund are to provide protection in the event of a layoff; to provide cash in the event of a sudden disability or illness requiring time off work; and to provide funds for any other possible emergency (e.g. a new roof for the home, a new furnace, car repairs, etc.).

What's in a fund?
Creating an emergency fund does not mean investing aggressively in an equity portfolio and selling when the going gets good — the money needs to be safe and secure. It should also be liquid, so that you can get easy access to your cash if need be, but it shouldn't be so accessible that it can be frittered away.

Saving grace

While this account won't be the one you use to save up for that expensive house on the beach, the more you can save the better. Still, make sure that you know that the fund isn't designed to provide money for non-essentials such as entertainment, vacations, gifts or eating out. It is designed to ensure that you can maintain a roof over your heads, put food on the table and maintain payments for essentials.

Figuring out how much you need to save requires answers to a few questions, as the amount of savings depends to a large extent on individual situations. What is your level of debt? Do you have dependents? Is your spouse employed at the same company? Is your occupation one for which there is usually a demand, so any period of unemployment is likely to be short term? Or will you be faced with the possibility of retraining in another field, which will mean substantial time and financial costs? Do you have other investments of a sufficient amount that you could access if need be? Do you have family who would be likely to help out? The general rule is that you should have at least three to six months of living expenses in your emergency fund.

Goodbye Taxman

Until the advent of the tax-free savings account (TFSA), the amounts saved in these rainy-day funds always generated interest that was fully taxable. The TFSA provides a great savings vehicle for an emergency fund and there will be no tax on the interest! With a couple both building savings of $5,000 per year each in a TFSA, there will be a solid basis of an emergency fund right there. If you feel the RRSP is more important, taking the tax refund generated by the RRSP contribution and putting it into the TFSA allows accumulation of assets that are all tax sheltered.

RRSP versus TFSA versus Debt Management

It’s the time of year where we all make (and break) New Year’s Resolutions. Two top resolutions are weight loss and saving money and many of us have already broken their resolutions already. (In my case the diet – but I’m back on it.)

The question I am often asked is if I don’t have the cash flow to save as much as I should – where should I put my money? The answer is different for each of us, but the process to decide what is optimal remains the same. There are six basic steps:
1. Set Short and Long Term Goals and prioritize them
2. Know where you stand – put all of your personal insurance, group insurance, bank statements, savings statements, RRSP, pay slips, pension information, tax information, credit card statements and mortgage information in one place so that you can review them easily
3. Review this information with a financial planner – for both short and long term planning purposes
4. Develop a personalized plan – this may involve adjusting your spending and savings patterns – but you may learn that you are on track and don’t need to make any adjustments
5. Implement the plan
6. Monitor and Review the plan on a regular basis

I can help you to analyze your current situation, to develop a plan, to implement a plan, or simply to provide you with some tools that will enable you to do it yourself. (Be aware, that much like the DIY shows on TV that happen in a magical 30 minutes, financial planning is harder than it looks.)

Jonathan Chevreau once tweeted that a financial plan is Eliminate debt. Cut up plastic. Join pension. Buy home. Pay it off. Spend little. Save tons. Invest wisely. Be tax smart. Marry for life. Unfortunately, we don’t all live in a perfect place. However, we can all develop a perfect plan for our current situation.

Give me a call and we can set up an appointment.

Web Sites to assist in your vacation plans

July is here and finally, it’s summer and we all switch into “Vacation mode” or at least “I’d like to be in Vacation Mode”.

Here are some on line resources to help make your planning easier and to save you some money. I’ve divided them into categories and included some pre-travel tips at the end.

The Fine Print
This is just a list of sites. I have not used most of them and do not warranty or recommend the services that they provide. Note – the fine print on this list is upfront and in large print – just like the services I provide.

If you plan to stay in Ontario
Here are some web sites to get great bargains:
• www.AttractionsOntario.ca - this site includes discount coupons for a range of Toronto and Ontario attractions
• www.bargainmoose.ca/ - Bargain Moose finds you the best deals in Canada, and keeps you up-to-date with Canadian coupon codes, freebies and hot deals. You can even sign up to get their newsletter.
• www.groupon.com/toronto - Get 50 to 90 percent off the best stuff your city has to offer. This link is for Toronto, but many other cities are available.
• www.shoestringshopping.com/ - Find bargains and warehouse sales in the Greater Toronto Area
• www.menupalace.com/menupalace/ - Restaurants, MenuPalace.com is North America's ultimate Restaurant dining guide. It includes discount coupons.

If you’re looking for things to do, try these sites:

• www.seeTorontoNow.com – for a list of what’s on in the city.
• You can also try the event listing in Now magazine – www.NowToronto.com for what’s coming up in the next week
• if you’re looking to go to the Stratford or Shaw festivals – their websites are:
o www.StratfordFestival.ca
o www.ShawFest.com
• If you prefer to check out the smaller summer theatre festivals – a listing can be found at www.TheatreOntario.org


Looking to Travel

Looking for web sites that offer good deals? How about checking the following:
• www.Expedia.ca
• www.PriceLine.com
• www.Hotwire.com

Looking just for a rental car – www.Breezenet.com
How about specials on air fares - www.MoMondo.com – a Danish site with low air fares

Some sites with Cruise specials include:
• www.TravelZoo.ca
• www.CruisesOnly.com
• www.VacationsToGo.com
• www.OnlineVacationCenter.com

Looking for places to stay?

• www.CasaCasa.org – links travelers looking for places to stay with people who have rooms to spare. It bills itself as a budget B&B
• www.Digsville.com – a home-swapping site
• www.HomeExchange.com – is 18 years old and assists people looking to swap homes. They have 36,000 homes worldwide
• www.affordabletravelclub.net – you must be at least 40 years of age, have a permanent residence, and be able to provide clean, comfortable, and private sleeping quarters and either full or continental breakfast for two or more guests.
• www.HotelsCombined.com - A site that scans the other web sites to find the best deal in hotels

Looking for a bike tour - www.BikeToursDirect.com

Looking for a guide abroad?
• www.Viamigo.com
• www.RentaLocalFriend.com

General Tips
Do you have Travel Insurance if you’re traveling out of Ontario? Give me a call and I can point you in the right direction. Note – most group plans include Emergency Medical Travel Insurance as one of the benefits.

If you are going on an extended trip – let your credit card company know. You also need to have a trusted friend or neighbor check your house or your home insurance policy may not be valid should something go wrong.

Finally, don’t forget about potential Roaming charges on your cell phone if you travel out of the province. Check with your service provider for your options.

Do you know of additional web sites? Let me know and I will add them to this list.