The Best Gift You Have Received

What is the best present you have received?

I am a practical guy, and I enjoy practical gifts, meaning I enjoy getting gifts I will use.  I'm not big on decorations or fancy things.  I don't mind gift cards because I can use them to things that my family will use.  I like movies or books that I will see or read again and again.  Tools or camping gear is always welcome.

Now, I know my wife doesn't think like me.  She is a very practical lady, but she doesn't want gifts that, while making a job easier, try to assist her in doing a job she really dislikes to begin with.  For instance, she appreciates the high quality mixer that a got her several years ago because she somewhat enjoys cooking, uses the mixer almost everyday, and it helps make that job easier.  She currently wants a sewing machine, not because she enjoys sewing, but because she needs one.  So she already told me I can't get her a sewing machine for Christmas, because no matter how good it is, she isn't going to be thrilled at the chance to use it.  Message received; if she tells me she doesn't want something for Christmas, I can clue in and not get it for her.

2010 Personal Tax Info

We are approaching the end of another year, which means Christmas is close, but so is the 2010 financial year.  The following is some tax information that you may want to review as the year draws to a close.

The Federal Income Tax rates for 2010 are as follows:
•15% on the first $40,970 of taxable income
•22% on taxable income between $40,970 and $81,941
•26% on taxable income between $81,941 and $127,021
•29% of taxable income over $127,021
The Federal Basic Personal Amount in 2010 is $10,382

The Alberta Income Tax rate is 10% of taxable income.  The Alberta Basic Personal Amount is $16,825.

6 Tips to Controlling High Interest Debt

If utilized properly, credit can be very useful. You can obtain loans to help you purchase a new car or house, for example, since it is normally hard to find sufficient funds for either in a savings account. However, you should always bear in mind that any money borrowed must be paid back with interest.

If you do not pay close attention to your finances you can quickly run into financial difficulty, perhaps seemingly insurmountable difficulty! Some people wind up borrowing money simply to pay their debts, leading to a debt cycle that spirals out of control.

People find themselves financially strapped and consequently in debt from a number of means:
  * Unemployment, regardless of the reason
  * Unexpected bills
  * Divorce
  * Out of control spending well beyond one's budget
  * Inability to put money aside for savings
  * Inattention to mounting financial obligations
  * Any catastrophic and expensive life event (e.g. severe auto accident)

Below are 6 tips to help make sure you don't get even further into debt if you are already struggling.

Typical Wedding About $26,000

A little over a year ago I posted an article called The Cost of a Wedding.  The typical cost of a wedding in 2009 was $26,000, an amount high enough to make me look it a couple of times and shake my head in disbelief.   The Globe and Mail recently posted an article about a company that makes princess dresses for little girls at a cost of $1,600.  Anecdotally. I surveyed a few young ladies who graduated last year and the typical cost of their grad dress was about $1,000 plus another $200 for alterations.  I asked them if any of them have worn it since the grad ceremony and none of them have.

As Canadians start their Christmas shopping, I would encourage them all to think of this: is what you are buying for your friend or family going to be worth the price?  Will it last or be used more than once?

Debit and Credit Card Skimming

Protect Your Cash by Protecting Your PIN

Over 84% of Canadian adults have at least 1 debit card and at 74% have at least 1 credit card.  Despite the convenience and popularity of these cards, there is a risk of fraud. It is important to protect your cards, just as you would cash or cheques. Some of the risks associated with debit/credit card fraud are the same as carrying around your account numbers, so protect your card information in your wallet, online and over the phone.

However, there is another threat to card users that is unique - it's called "skimming." Skimming occurs when thieves set up a device that captures the magnetic stripe and keypad information from ATM machines, gas pumps, restaurants, and retail stores. By doing the following, your information will be protected and you will reduce the risk of having your information stolen.

Good $ Information

There are many good financial advice articles floating around the web.  Here are articles from the past few weeks that I think may be worth your time:

Why women need to save more than men for retirement at Globeandmail.com - Longer life spans, health issues, less income and savings, and lower benefits are some of the hurdles.

Generation Spend at Macleans.ca - Today's youth are looking at outspending Baby Boomers

Is retirement chained to your home? at Financialpost.com - Canadians plan to take longer to pay off their mortgages, maybe even 35 years, but they don't expect it to affect their retirement plans.

Young, broke? You, too, can be a millionaire at Financialpost.com - Young people should start a tax-free savings account as soon as possible

Wealth Building Tips for New College/University Graduates at Milliondollarjourney.com

Enjoy.  If you know of some others, please let me know.  Jerry

Do Not Forget Investing

With so many articles and news programs focusing on Canadians' high personal debt load, it can be easy to forget that saving and investing are also vital parts of a budget and financial plan.  It is essential to reduce debt, especially bad debt that makes life difficult, but it is also important to reach retirement with money invested and hopefully growing.

How do you start investing when the paycheque is gone between bills and mortgage?
The best way to start is to put away a little at a time.  Use a High Interest Savings Account and put $10 or $25 into it every paycheque.  When you get a bonus, put $100 into it.  Most people don't even notice the money is gone from chequing if it's done as soon as they are paid.  Add more to the regular savings amount as the years go on. 

Games That Teach About Money

In my quest to help youth understand the importance of budgeting, avoiding unnecessary debt and saving money, I have looked at various board games as teaching tools.  Some games, like Life, has aspects of what I am looking for but is too unrealistic.  I have altered the rules to Monopoly, adding savings account and mutual fund options, and most recently making GO a salary based square where the salary goes up and down with education and may even be missed if you lose your job with a Chance card.  That version is actually coming very close to what I want, but I have some minor tweaks to do yet.

A game that my eldest son has been playing over the past couple of months is called Record Shop Tycoon.  You start out in a small store in a poor location (it's all you can afford) and then are responsible for stocking music CDs to sell to your customers.  The game takes into account neighbourhood buying patterns, supplies

Thanksgiving Heading Into Christmas

My family celebrated Thanksgiving in a city that took several hours of driving to arrive in.  Once there our kids and their cousins had a blast making a lot of noise, some messes, and eating a lot of food, some healthy and some not.

A bit of a tradition in our families is to go around the table and ask everyone what they are thankful for.  The kids outnumbered the adults about 3:1 and they expressed thanks for some very interesting things.  I though I would share some of them with you.

The kids expressed thanks for:

Are we teaching students enough about debt?

Students are leaving university with more debt than ever, often crossing the $40,000 mark, and then they go out into the world and accumulate even more debt buy buying rent-to-own furniture and borrowing for vehicles. 

The real scare comes from credit cards.  They are freely offered with little explanation of how to use them and how they affect your credit score.  And those habits that people form in their teens and 20's usually carry on throughout their life.

This may seem a little alarmist, and it is.  But I really want everyone to understand that excessive spending and debt accumulation can cause problems for not only you, but your whole household for decades after you bought that TV or went on that vacation.

Check out this article at Canada.com to find out more details about Canadian debt loads.

Take care of your debt.  Life will be so much easier.  Jerry

Learning From Someone's Money Mistakes

I had someone tell me a bit of a depressing story about a month ago.  I'm sharing it here because I beelive we can all probably learn something from it.

This person's son and daughter-in-law were eager to buy a home in the middle of the job/housing boom.  They were told repeatedly by family members that owning a house would be better than renting, even though the couple really didn't have a down payment.  They took about a year of scraping together a 5% down payment plus the CHMC insurance fee and went off to see someone about a loan. 

Do You Have A Plan?

No matter what stage of life you are in, a financial plan can help you direct your finances, identify where your costs are going and how to best take advantage of investing opportunities.

If you have student loans and credit card debt, a financial plan can help you figure out which loans should be paid off first, easing your cashflow problems and reducing the rates you pay. 

If you are buying a home or newer vehicle, a plan can help you know what you can realistically afford.  Too many people purchase homes or vehicles thinking of only what they want and not what they can actually afford.  A good plan will take into account bumps in rates as well, giving you some breathing room even with economic shocks.

If you are trying to figure out how and what to save for retirement, a plan can help you know what your goals should be and what you need to do to achieve them.  The longer you have to save, the more time your plan has to work to make financial security in retirement possible.

Even in retirement a financial plan can help you know what to do with your investments, how much you can withdraw every year to live on, and what you may have left of your wealth that can help your loved ones.

Every stage of life should have a financial plan.  With a plan, you know what you are building and what you need to build it.  Don't hesitate to contact a trusted Financial Planner while you are trying to build your plan for your future.  Jerry

Canadians Loving Debt?

If you have been reading any newspapers or news magazines over the past couple of months, you probably have read a few articles about how Canadians' household/personal debt is worrisome.  Since the economic troubles started 3 years ago, Americans have been working hard to both lower their personal debt and to increase their personal savings.  This is great because their personal debt had risen to around an average personal debt load of 150% of annual income and savings was around 0% for a few years leading up to 2007.  This significant economic event has shaken up the Americans and has caused consumers to change their spending and saving behaviour.

However, the economic event has not shaken up Canadians enough to change behaviour in the same way.  In fact, our reputation as savers is going out the window.  Over the past several years our savings rate dropped not only to 0%, but there were quarters where it was negative, meaning people were dipping into their savings to spend money on homes/vehicles or other items.  And our personal debt to annual income ratio has risen to just below that of the Americans with ours now at over 147%.  Much of this is because with today's low mortgage rates, people have been buying the largest house they could afford, not taking into account that rates won't always stay this low.

What does this mean for us?

• As rates increase, and they will, servicing the debt at these high levels will become very difficult for most Canadian households, which will force Canadians to change their behaviour.  Many will have missed the opportunity to pay down debt during the lowest ever rate environment and will have to concentrate on being able to make the rising payments.
• The activities that many Canadians have enjoyed over the past several years, annual trips, eating out a few times a week... will probably decrease as people try to decrease expenses.
• The rising rates will encourage more saving as current low returns make people feel like they might as well spend the money as they don't make much saving it.

Hopefully, you have enough years left before retirement to pay down debt and improve your savings/investment nest egg.

Jonathon Chevreau, Wealthy Boomer columnist for the Financial Post, recently wrote an article trying to emphasize Freedom, not Stuff.  It's worth a read and may encourage some to review their own habits and what the future may hold for them.

7 Tips To Keep Safe While Online Shopping

Online purchases have grown dramatically over the past decade.  Whether you are looking for auto parts, books or even clothing, you can buy them online.  While many people want to see and touch the items they are buying, more and more feel safe about purchasing their goods over the internet.

 There are security risks, but if you follow the tips below you can have more confidence in your online shopping experience.

1. Make sure your information is being entered on a secure site. 
2. Look for the latest credit card password procedures
3. Know who you are buying from. Use stores you are familiar with or people you know have dealt with.. 
4. Beware of refurbished items, usually a detail buried in small print.
5. Check the store’s return policies before you buy.
6. Use a separate credit card for online shopping, preferably one with a low limit in case the number gets stolen.
7. If the deal sounds too good to be true, it probably is.

Christmas is coming, so if you are looking for a specialty item you just can't get nearby, feel free to do some online shopping, but keep safe.  Jerry

5 Tips To Help In A Tight Economy

No matter how you look at it, the economy is going through some difficult times, and many Canadians are facing tighter budgets than they have seen in a long time.  The following are a few tips that can help people manage their finances through the ups and downs ahead.

Watch out for high interest rate debt
As of Oct 31, 2007, there were over 64.1 million credit cards in circulation in Canada.  Many of these cards charge standard interest rates of 18% or more.  The way most credit card payments work is that your monthly payment will cover the interest charged and 3% of the balance of the card.  If you have a balance of $2,000 on your card, and you make the minimum monthly payment, this means that after 5 years you would have paid over $830 dollars in interest, and still have $321 left to pay on the card.

Financial Life Stages Are Changing - Good or Bad?

Throughout most of the 1900’s most households’ financial life went through the following stages:

Accumulation – 20 to 35 years
  ·    Building up debt as many purchases require borrowing (Mortgage, credit cards, student loans)
  ·    Furniture is second hand, vehicles are used
  ·    Getting your education and starting career expertise
  ·    Budget is usually kept very controlled from necessity
Mid Accumulation – 35 to 50 years
  ·    Start saving for retirement,
  ·    Paying down big debt like mortgages and car loans
  ·    Some purchases are made for quality rather than price (vehicle, furniture)
  ·    Saving for children’s education
  ·    Get serious about financial planning with tax and estate planning

The Service We Deserve

Knowledgeable Service With A Smile

I walked into a computer store a few years ago to ask about computer repairs.  My computer was under warranty from a national dealer and they were willing to pay for a technician of my choice to repair it.  When I brought this up to the technician I went to see, the first thing he did was start telling me about all the things he would not do and asking how he was going to get paid.  After a rather unproductive and frustrating 10 minutes I left the store with no solutions to my problems, but knowing that the technician was very concerned over how he would get paid.

I went to a different store the next day, brought up the same issue, and this technician simply asked “What can I do to help?”  That was the response I was looking for.  They fixed my problem, the warranty covered repairs and I was able to use my computer again.  I have not been back to the first store since, but I have gone back to the second one for both repairs and advice.

Several years ago I worked in a city’s downtown core where there was a large mall.  Foot Locker was having a sale, and the specific shoe I wanted was half off.  I visited the store, couldn’t find the shoe on the shelves, and asked a staff

Financial Abuse Of The Elderly

Financial exploitation of older adults is a growing yet hidden epidemic. The media regularly chronicles outrageous behaviors involving awful and unlawful treatment of older adults. Gender, circumstances, the relationship of the perpetrator to the victim, and other elements of the stories change but the outcomes are similar - compromised health, wellness and safety of older adults.

Vulnerability to elder abuse increases as a result of age-related changes and challenges such as cognitive impairment, reduced sensory capabilities, mobility challenges, depression, isolation, and dependency on others for assistance with daily living activities.

What is “Financial Abuse”?
It’s using the elder’s money or assets contrary to the elder’s wishes, needs, or best interests - or for the abuser’s personal gain.

My Predictions For The Future

There are many economists and psychics who will tell you what is going to happen in the future.  I thought I might give it a try too, so here goes.

Rates will go up, someday.  There are arguments about whether or not rates will rise this year or next.  I’m going to boldly say that 10 years from now, rates will have gone up from today!  I feel pretty safe saying this as these are pretty much the lowest bank rates that have existed since such tracking began.

Lessons From Pigs, Truckers And Overtime

Pigs:  One of the first lessons I learned was the importance of work.  My dad believed having animals and chores would be good for us kids, and those chores were what we did because we lived under his roof.  We were also given the opportunity to buy and raise animals.  I bought 4 pigs, took care of them (fed, cleaned the stalls, watered…) and sold them after about 12 months.  After totaling the costs and paying my dad back for the feed, I barely broke even. 

After some bitter complaining about all that work for nothing, my dad simply said “If you had fed the pigs every morning and night, cleaned their stalls out more often, and always made sure they had water, you probably could have sold them at 8 months for the same price.  By not doing those things properly, it took longer for them to gain weight and increased your costs.  Do it right next time and you will make money.”  Hard lesson for a 14 year old to learn.  I bought more pigs, did a better job at caring for them and made some money off them.

Investments Too Good To Be True

I have a family member who was taken in by a con artist.  Actually, it was a group of con artists.  It was a very slick, smooth, and quick con that took advantage of my family member’s preconceived notions about the investment world.  They lied about their investment opportunities and ended up taking a lot of money from many different people.  Unfortunately, because these con artists were from another country and the people who were conned feel quite embarrassed about the situation, no-one has ever been prosecuted.  Some victims, in fact, still believe in the con artists and insist that the investment is growing and will pay off any day now.  Pretty sad, and I just hope they aren’t still giving the crooks money out of incredibly misplaced faith.

I shared the above because I want to emphasize one thing:  If it seems too good to be true, it probably is.  Now, I have to say that there are many investment opportunities out there, from investing in large corporations, to buying into a business, to helping fund private investment firms.  However, there are many crooks that are quite willing to take your money, and they are very good at it.  The following are a few of the things you will want to think about before trying to invest your hard earned money:

Sharing Banking Tips That Have Helped Me

About once a month someone asks me for a banking tip that will either make banking life easier or less expensive.  The following are a few of the things help me:

Online banking – This is a life saver.  I can pay my bills from home or the office at 7:00 in the morning or 11:00 at night.  It also lets me see all my transactions everyday, so I always know what is in my account.  The rare cheque that I write is scanned (front and back) so I can see online who it was to and for how much.  In addition to have this information readily available to me, it helps me be aware right away if any fraud is committed on my account.  By looking at my account a few times a week, I actually protect myself from fraud and would be able to spot something wrong right away.

Registered Education Savings Plan (RESP)

The second article that I ever wrote for RCU Speak was about RESPs.  You can find it here.  RESPS are probably the best investment option to save for a child’s education, and I would hope every parent/grandparent would look into them to save for their children’s future.

The basics of a Registered Education Savings Plan are:

• Contributed money grows tax deferred, so it is not taxed until it is withdrawn, usually when the student is in a low tax bracket.
• With each contribution, up to defined limits, the RESP will receive a bonus from the government of 20% to 40%, depending on the family’s income.  This bonus also earns interest.
• An RESP can be opened for a person at any age, but can only remain open for a maximum of 26 years.  The CESG is only available if the beneficiary is 17 years old or less.
• The Canada Education Savings Grant provides anyone who invests in RESPs with an amount equal to 20% of yearly contributions, up to an annual maximum of $500 per child (and to $1,000 from $800 if there is unused grant room from previous years) to a maximum of $7,200.
• There is a maximum lifetime contribution limit of $50,000.  If you contribute more than $2,500 per year ($5,000 if there is unused room), you only receive the above mentioned amount from CESG per year, but the whole contribution grows tax sheltered.
• The child/children who is the beneficiary(ies) of the RESP must have a Social Insurance Number from the government to have an RESP.

Some additional things to be aware of:

Graduation Speech For Today

Rick Spence has written an article in the Financial Post about what he would say to grad today if he were asked to give the key note address.  Rick is a Marketing Consultant specializing in helping small businesses.

You can check out his whole article in the link.

A few highlights:

You are a free agent
You are a small cog emerging from a big bureaucratic machine. Most of you will soon exchange your student number for an employee ID badge. But you don't have to be a cog. Think of yourself as a free agent, choosing where and how you work. A job is not your life, just a contract. Many new opportunities will present themselves. Some will be dressed as job offers; others disguise themselves as business opportunities, bad bosses, new technologies or career roadblocks. To stick with one job or one employer is to settle for a

I'm saving money. Now what?

We have been telling members for years to put money away every month. Some of our younger members have started doing just that, but they aren’t sure what to do with the money they save to make it work for them.  I suggest the following:

Mutual Funds – mutual funds are a collection of investments that usually hold a variety of stocks, bonds and seg funds.  Some can be industry specific (focus on the energy or banking sector) and others are much more diversified.  There is risk with mutual funds that you could lose your investment, and you need to be aware that mutual funds charge fees for managing your fund.  In the long run mutual funds can be a good investment for those who want to invest but don’t feel comfortable doing it on your own.  The fee you pay is to have someone adjust your investments for you.  You should meet with your advisor at least annually to make sure they are doing what you want.

What Makes Up A Credit Score?

Last month I wrote an article about how to read your Credit Report.  Since then, I’ve had a few people ask me about the credit scores themselves.  It’s an important topic, so I hope the following can help everyone understand how the credit bureau agencies create your credit score.

In Canada there are two credit bureau agencies that collect credit information and establish credit scores: Equifax and TransUnion.  Every time you apply for credit and make or miss a payment on a bill, that company reports that occurrence to the credit agencies.  With that information the credit agencies determine your credit score.  A credit score is a 3 digit number that represents your borrowing and repayment history, with 300 being the worst and 900 being the best.

What influences your credit score?
The credit agencies use a formula to determine your credit score.  This formula takes into account the following:

Choosing an Executor and Guardian

A couple of weeks ago I wrote an article about how to help your loved ones or executor find the information they need in case you have an accident.  It is important to have that set up, but I had a few people ask me about what an executor actually does.  I hope to answer that and what a guardian does as well as both will be involved in case of an accident.

What is an Executor and how should I choose one?
An executor is the legal term for someone who carries out the direction of a will and handles your financial affairs after your death.  Usually the person (or company) is selected and named in the will, a topic which you should discuss with your family and lawyer before you pass on.

Debt or Investments First?

I often get asked: “Which is more important, investing or paying down debt?”  Usually my answer is "Both."

Let me qualify that, the most important priority is paying down high interest debt like credit cards.  Credit cards often have interest rates ranging from 18% to 28% which has a tremendous negative impact on where your money is going and can make it impossible to invest in yourself.

Once you have the high interest debt paid off, then you should split your disposable income between paying off debt and investing.  This balance can serve you well no matter what happens to the rates.  If the rates go up, your term deposit and savings account earnings increase.  If rates go down, you will be able to pay down debt more quickly.  Over the long term (more than 10 years) you will see the benefit of doing both activities.  Even if you are investing in mutual funds or stocks, over the long-term reinvesting dividends will help your investments grow, while your loan payments steadily pay down your debt.

The real point is that you want as much time as possible for compound interest to work on your investments while steadily paying down your debt.  Jerry

Monopoly is More Than a game

Teaching kids about finances is important to me.  I believe that too many kids grow into adults with very little knowledge and almost no skills concerning money management, and end up buying things they really can’t afford and then paying for them at high interest rates for a long, long time.  I hope that the information in this blog can help both parents and youth learn something that will make their financial lives easier.  While I know money isn’t the point of life, I do think it helps make some parts of life a little easier.

I’ve been thinking for several months about how to make a board game that can help my kids understand some financial lessons about saving and investing money.  They are already quite good at spending it, although we are working on the idea of quality and value.

Make life easier in case of an accident

If something were to happen to you would your spouse, guardian or executor know where to look for your important personal information?  Most of us would have to say no, it would be very difficult for someone to find our information/documents if something happened to us.

It’s a difficult subject to think about, and even harder to talk about with others, but preparing your personal information in case of an accident will help both you and your executor in a difficult time. 

Student Loans and Education Financing

1.  What student loan options do I have?
There are 2 government student loan options (National and Provincial) and there are education Loans from Financial Institutions like Credit Unions and banks.

2.  Which is best for me?
I would recommend starting with the Provincial and National student loan programs.  You apply for both on the same application.  With these government student loans you do not pay or accumulate interest while you are going to school, there are some payment relief programs in place after graduation, and the interest paid on government student loans is tax deductible.  There are some scholarships or grants that may decrease what you owe for government student loans.

3.  So why would I use a credit union or bank education loan?  

CU's ranked best for Small Businesses by survey

CFIB survey ranks CUs best for Small Businesses

The Canadian Federation of Independent Businesses (CFIB) did a survey of 12,124 business owners on which banks serve businesses best, with specific questions around items such as financing, fees and service.  Results show Credit Unions at #1 for micro and small businesses.

Much of the full report talks about how banks can or should improve their service to get more market share in serving these businesses.  Unfortunately, they don’t spend much time on why Credit Unions get such a high ranking form so many of those surveyed.

We would like to say we get ranked so well because of our longer hours, competitive rates, low business fees, committment to community, and great online banking website, but it’s probably just because we have the most awesome staff.

Check out the link at the CFIB website for more details about the survey results.
Jerry

Marshmallows = Money

I heard a motivational speech this weekend that really got me to start thinking about how I need to teach my kids and rethink some of my own spending habits.  A major portion of this speech centered around an experiment started in the 1960’s called “The Stanford Marshmallow Experiment” performed by Walter Mischel.

The way the experiment worked was like this:

Using 400 four year old children as test subjects, each child was placed in a room by him or herself, with a marshmallow placed on the table in front of them.  The child was then told that they could eat the marshmallow right then if they wanted to, but if they waited until the experimenter returned from an errand (15 to 20 minutes) then the child could have 2 marshmallows.  If the child ate the marshmallow before the experimenter returned, there would not be a second marshmallow.

How To Read A Credit Report

Credit reports from any of the major reporting companies show a history of your credit use over as much as a ten year period. A report begins with identifying information, including your name and social security number, current and former addresses. Next is a list of creditors and your payment history with them, and ratings of your credit use.

Look carefully at each part of your report and note any errors. Incorrect demographic information can make it impossible for your own report to be found. This can cause real problems when you apply for a loan, an insurance policy, or in some cases a job.

Financial Articles For You

I have found a few Financial Articles that I think may be of some interest to you.  I'm linking to the specific article, as I don't always agree with everything on the website itself.
Enjoy.

An Interview With The Millionnaire Next Door - Get Rich Slowly Blog
Eight tips for feud-free estate plans - Financial Post
Keeping the farm all in the family - Financial Post
Feeding yourself on a dollar a day - Macleans

If you know of a good financial book or article that you have read, please post a comment about it below.
Jerry

Banking Has Changed - A Lot!

While I was growing up in the 1970/80’s, I remember my mom having to run to town (we lived on a farm) very quickly in order to pay a bill at the bank before it closed at 4:00. She did that run maybe 2 or 3 times per month.  She also withdrew some cash for small purchases, but most of our larger purchases, like groceries, were paid for by cheque.  That was the norm for a few decades for families all across Canada.

In the early 1980’s bank/debit cards and ATMs were introduced, allowing Canadians to do withdrawals from their chequing account.  This added a major convenience as consumers no longer had to worry about getting to the bank when it was open for cash withdrawals.  With the addition of deposit services through ATMs, Canadian banking habits started to change, and those habits were no longer centered on banking hours.

Healthy Financial Life

In February I wrote an article about the habits of a “Sick Financial Life”.  It was very easy to write as the problems listed are common habits that we see harming our members on a regular basis.  Today I decided to look at the positive habits that we also see on a regular basis (but we do see people in bad situation more than those with good, after all, the doctor doesn’t tend to see the healthy people).

The people we see who are leading a healthy financial life either have or are doing the following:

1. 1.    Set realistic short term and long-term financial goals.  They then create and stick to a plan in order to achieve them.
2. 2.    They know their financial situation.  They keep track of debt monthly, and review their investments at least annually.
   

How much insurance is enough?

If you’re looking for an easy and quick response to this question, then you aren’t talking to someone who really knows insurance.

There are many factors to consider in evaluating your life insurance needs which may include current age, spouse’s age, children (college costs), funeral costs, taxes due on death, outstanding loans and annual income needs.  A life insurance policy will ensure your family’s needs will continue to be met, even if your untimely death cuts your earnings potential short.

Fraud Prevention

During these tough economic times, criminals are growing more creative in their acts of fraud. There seem to be a lot of letters, phone calls and e-mails going around right now, offering everyone the chance to get a lot of money for doing very little. That by itself is almost a sure sign of a scam.

You work hard for your money, and Rocky Credit Union doesn’t want some crook from who-knows-where to end up with your life savings. Be on the look out for a few of the following typical warning signs that a criminal is out to get your money:

Sick Financial Life

Financial problems come from all sorts of sources and can create havoc in quite a few different ways.  I just want to let everyone know about some of the most common and harmful financial situations that we see on a regular basis.

• Too much consumer debt – It has been a very tough 18 months for many people, with lay offs and reduced wages for many households.  Unfortunately, during the boom times, many households were buying vehicles, expensive toys, and going on vacations and did not put much away for a rainy day. 
  

FP - Golden Years Postponed

Just a few articles from various sources this past week that I thought you might find of interesting.

Financial Post - Golden years postponed
Globe Investor Blog – How to avoid taking on too much mortgage debt
Financial Post, Wealthy Boomer – Canadians flunking test on TFSA
Financial Post – Crack that nest egg

I'm not trying to create a downer of a post, it's just that the articles came out that way this week.
Jerry

New Mortgage Rules Coming

The Canadian government is reacting to suggestions from the Big 6 Banks, the Bank of Canada, and a wide variety of economists by making it a little more difficult to get into mortgage debt.  The reason so many organizations want to make it more difficult to get into a mortgage is because of the climb in housing prices over the past several months.

In 2007, Canadian housing prices reached an unaffordable level for over 30% of households based on several different indices.  What these indices looked at was the average household income and the average household mortgage payment.  Once the mortgage payment crosses the 40% of income point, this means many households will have a lot of difficulty making the payments.

Youtube Budget Series

There are quite a few sources for people to turn to when trying to learn about budgets and finances.  As a part of trying to help our members have the best knowledge and advice available Rocky Credit Union created this blog.  Now we are also doing Youtube videos.

The first videos are about budgeting.  With this difficult economy it’s a topic that many people just don’t know enough about.  We hope our videos can help.  We will also be doing videos about saving and investing, what to look for when getting a mortgage, and quite a few other topics as well. 

Check out our Youtube videos at myrockycu.
Let us know what you think.  Jerry

Good Financial Articles

There are a  lot of good articels to read around the internet, and this week seemed to have a lot worth reading.  The following are a few I thought were interesting and worth sharing.  I don't always agree with everything on these websites, but I think the linked articles would be of benefit for our readers.

FP Magazine Daily - Men and women see retirement differently
Globe Investor Blog - The cost of bad habits
FP Wealthy Boomer - 20% betting that CPP, lotteries or inheritance will make up for failure to save in RRSPs
Globe Investor Blog - Many couples don’t share same retirement dreams
Macleans Magazine -Awash in a sea of debt- Oblivious to the risks, Canadians are piling on record debt loads
FP Wealthy Boomer - "I need $1 million to retire " and 5 other popular retirement theories that need a rethink

Each one of these articles deals with an important area of financial education.  I hope you enjoy them, and feel free to comment on this blog about books and articles that have helped you in your progress towards your financial goals.  Jerry

Good advice, or just taking your money?

There are some very good financial advice books out there.  I personally like The Wealthy Barber by David Chilton & Findependence Day by Jonathan Chevreau.  Both are Canadian books that describe the Canadian tax situation, with Findependence Day being the more recent of the two books.

A popular book for the last decade has been Rich Dad Poor Dad by Robert Kiyosaki.  He has some very good advice in this book about how to think and act differently with money.  I do not agree with everything, but I do like most of the concepts, and overall I think it is a good book.

As people look at buying these books for their advice, and try to figure out how to make more money for themselves, they often are willing to pay a small fee to take a seminar from a trusted author or organization to help motivate them and teach them how to make or save more money. 

Tax Free Savings Accounts (TFSA)

The Tax-Free Savings Account (TFSA) is a flexible, registered general-purpose savings vehicle that allows Canadians to earn tax-free investment income to more easily meet lifetime savings needs. The TFSA complements existing registered savings plans like the Registered Retirement Savings Plans (RRSP) and the Registered Education Savings Plans (RESP).

How the Tax-Free Savings Account Works

• •Canadian residents age 18 or older can contribute up to $5,000 annually to a TFSA.
• •Investment income earned in a TFSA is tax-free.
• •Withdrawals from a TFSA are tax-free.
• •Unused TFSA contribution room is carried forward and accumulates in future years.
• •Full amount of withdrawals can be put back into the TFSA in future years.
• •Choose from a wide range of investment options such as mutual funds, Guaranteed Investment Certificates (GICs/Term Deposits) and bonds.
• •Contributions are not tax-deductible.
• •Neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as Old Age Security, the Guaranteed Income Supplement, and the Canada Child Tax Benefit.
• •Funds can be given to a spouse or common-law partner for them to invest in their TFSA.
• •TFSA assets can generally be transferred to a spouse or common-law partner upon death. 

The TFSA has a lot of great benefits.   To get the most out of your TFSA, make sure you talk to an investment professional.  Jerry

Different Types of Investments

Over the past decade people have been looking at new ways tog et more out of their investments, often looking for better returns.  Annual returns are very important, and will greatly impact your retirement planning, but they are not the only thing you should look at.  The following are some general descriptions and their advantages and disadvantages:

Savings accounts
Pros:  Very flexible, immediate access to cash, few penalties at withdrawal, low risk of losing investment
Cons:  Lower rate of return

Has Your Spending Changed?

Alberta and most of Canada had some pretty amazing economic years from 2001 through 2007.  With lots of jobs and low unemployment, there was a fair bit of money to go around.

Quite a few people invested the extra money they were making, some put it into much larger houses, a few paid down debt, and others used it as a down payment to buy boats, quads, ski-doos, RVs and other somewhat expensive luxuries.  Whether those actions were right or wrong is not the point of this article.  My point (question) is this:  With the drop in the economy, possibly a reduced income for you and your family, has your spending changed?

Baby Boomers turn 65 in 2010

Baby Boomers were born in the years after World War 2, typically classified as those born from 1945 to 1964.  What that means is that the oldest of the Baby Boomers are turning 65 years old in 2010, and 65 seems to be the magic retirement age.

This means something different than it did back in the 1940s when retirement was really embraced.  Back then, it was quite likely that if you lived to 65, you would only live a couple of more years, therefore you usually only needed enough to live on for a few years after retirement.  That is not the case anymore.  If you retire at 65 today, there is al most a 50% chance that you will live to be 87 years old, meaning you need enough to support you for over 20 years.

Youtube Budget Contest Over This Friday

Just letting everyone know that our Youtube Budget Contest deadline is this Friday.  If you are between 15-21 years old, check it out.  You could win $300 and other stuff (I think it's cool stuff).  We don't have a lot of entires yet, so with 1st, 2nd and 3rd prizes up for grabs you have a pretty good chance of winning something.

Check out the contest page
Jerry

New Year + New Plan = New Life!

With the holiday season over for another year, many of us likely have more debt than we’d prefer following the aftermath of utilizing credit cards, lines of credit, etc.  A great New Year’s Resolution is to not fall into this seasonal trap ever again.  Starting a budget plan now to cover yearly expenses including the ‘big hits’ (summer vacation/winter vacation and December shopping) would be a refreshing way to start off the New Year.

And why stop there?  This could be the year to create or update your financial plan.  Budgeting, protecting assets, retirement planning and life insurance – it sounds like a daunting task to sort through.  With the assistance of a financial planner and a little homework on your part, it can get done.

Decluttering and organizing the home has been a huge topic in magazine articles and home shows so why not apply this to your life as well?  Having a plan reduces stress and encourages a feeling of contentment knowing that your budget, retirement and loved ones are taken care of.
Elaine, Personal Financial Counsellor

Important 2010 Finance Info

With 2010 arriving, we are now under the 2010 tax levels.  The following are a few Federal tax numbers you may want to know about:

 - Basic Personal Income Exemption Amount of $10,382 (increase of $62)
 - Tax rate of 15% from $10,382 to $49,970 (increase of $244)
 - Tax rate of 22% from $49,970 to $81,941 (increase of $489)
 - Tax rate of 26% from $81,941 to $127,021 (increase of $757)
 - Tax rate of 29% on above $127,021

What's your goal for 2010?

Do you have a financial goal and plan for this year? Do you have any goals for your finances in 2010?

It’s important to have a goal and a plan on how to achieve it. If you don’t have a goal, it’s like a ship not having a destination. And if you do have a goal, but no plan on how to achieve it, that is like a ship that doesn’t have a crew. Either way, you end up going wherever the current and wind take you, and you have very little control over where you end up.