Should I contribute to my RSP or reimburse my mortgage? We constantly hear that we should maximize our RSP as soon as financially possible. However, you would also like to get rid of your mortgage and the related monthly payments. What should you do? The answer relies not only on the financial incentives that confer each savings priority but also depends on your level of comfort with each solution. Unlike common belief, the principal advantage...
Borrowing to invest: Risks and benefits An investor can borrow to invest in a portfolio of securities in order to increase his chances of reaching his long-term financial goals. However, the issues involved are complex, and it is very important that they be fully understood. How does it work ? In the same way an entrepreneur borrows to invest in his company, allowing it to grow more quickly and generate additional income, a “Leveraged investment”...
Why do smart people make bad financial decisions ? The research behind behavorial finance is expanding exponentially, uncovering more gaps in our collective knowledge of how financial markets actually work. Here are some of the most common mistakes... Traps to avoid with our investments Both traditional finance and basic economics assume all investors behave rationally at all times. All investors can access the same information and all act in their best interests. Behavioural finance theorists...
Immediate and Deferred Annuities: Making Both Work for a Secure Retirement Annuities have a long and historic lineage dating back to ancient times when Roman citizens and soldiers would receive an “annua”, or annual stipend, from the government in exchange for a lump sum of money. Since then, the family tree of annuities has sprouted into several different bloodlines with variations in their structure and use. Immediate annuities, which are offered through life insurance companies...
Fiscal strategy : The Smith Manoeuvre Discover how you can deduct interests payed on your mortgage or other financial assets from your taxes ? A stategy to lower your tax burden The Smith Maneouver consists in restructuring your loans in a way that allows you to deduct interest charges from your taxes. Thus, if you own investments in a taxable account (not in an RSP) and a mortgage for which interests are not tax-deductible, it...
Record Keeping in the Cloud – is it Safe? As our lives become more intertwined with the Internet it may be only a matter of time before all of our important data is stored in this vast “cloud” of bits and bytes. Most people are well on their way with online banking and bill paying, e-tax filing, email, document storage vaults, Social Security information, and soon we will be making payments using our smart phones...
Retirement Income Planning Requires Realistic Spending Assumptions If you have read any literature on retirement planning or have received advice from a financial professional, chances are you were presented with the 70% rule; the rule that suggests that retirees will need between 70% - 80% of their pre-retirement income in order to maintain their standard of living. There are several flaws with this formula, the least of which is that it doesn’t consider your actual...
Should You be the Bank of Mom and Dad to Your Adult Child? What to do when Your Adult Child Comes Looking for a Loan It’s an unfortunate sign of the times that an increasing number of adult children, caught in the convergence of a sluggish economy, a slow job market, and tight lending, are turning to the Bank of Mom and Dad for financial help. And, as much as parents would do anything in...
Planning for the Long, Long-Term Most people looking to implement a financial plan are making decisions with the long-term in mind. While what “long-term” means tend to vary depending on factors like age, individual and family goals, it’s safe to say most planners and their clients would agree that long-term is usually measured in years, not months. Whether it’s the young professional first considering a still-distant retirement age, or a retiree trying to leave a...
Finance Lessons for Your Teen The current economic environment has caused many to reconsider their personal finances; resulting in lots of people having to drastically change their spending and savings habits. Out of this economic malaise may arise an opportunity to instill the right financial habits in your teens, and they can carry these habits with them into adulthood. Just as our parents or grandparents of the Great Depression era developed deeply ingrained attitudes about...
Will It to be So: Things to Consider for a Strong Will Answer this riddle: what’s the one thing that will eventually happen to everyone, but generally, no one wants to discuss? Death is a subject that immediately conjures up all sorts of emotions because, let’s be honest, the absence of being IS emotional. But, death is also cause for practicality. It’s a cause for stating clearly what to do about money and property so...
Your Protection Strategy Needs a Legal Foundation Any protection strategy that focuses only on insurance can leave you and your family vulnerable to the threat of a legal system which doesn’t necessarily share your objectives. Absent specific, court sanctioned directives on your part, your life and the lives of your family members will be subject to the default provisions of the law that guide critical financial, family, and health decisions when you are unable due...