Spending Profile, New Feature Release: Monthly Statements

We released a new feature into Spending Profile today - you can now download monthly statements directly from the website. You can choose any month from any year without restriction. They are in html format with embedded images, so there is only one file to download. This means they can be viewed on any platform in any browser and do not require a plug-in.

Our next step is to re-instate the automatic emailing of monthly statements on the first of every month.

A big thank you to Charbel Choueiri, our lead architect, who worked very hard to release this feature for our members.

New version of Spending Profile released!

We are very pleased to announce that a new version of Spending Profile has been released!

Version 3.1 contains numerous new features that our members have been requesting for a long time, as well as improvements in speed. Thanks for being patient!

Visit the site at www.spendingprofile.com. Recreate your password instantly here if you have forgotten it. Or use the Live Demo if you don't have an account.

What's NEW with Spending Profile?

• Subcategories! Finally, you can divide your expenses into categories and subcategories. For example, you can create a category called Car, and inside it you can have Gas, Insurance, and Maintenance.
• A new Accounts field so you can specify which bank account or credit card you used for each transaction.
• Faster performance due to using Ajax. You won't have to wait so long for pages to load.
• Pie charts that show subcategories. Click a slice to drill into it and see the data at the next level.
• Export your data for use in other software programs, such as Excel or Microsoft Money.
• Smarter importing - the program can learn from your past history and automatically categorize your imported transactions, making it faster and easier to stay up-to-date.
• Many more improvements that you'll just have to log on to see!

To see the new version, visit www.spendingprofile.com. Please send us feedback at info@spendingprofile.com, or use the feedback form on the main page after logging in. Thank you!

Lisa Wall
Project Coordinator
Spending Profile

All GICs Are Not Created Equal

(July 2009)

Given the performance of equity markets over the past year many people have decided to return to more secure investments such as a Guaranteed Investment Certificate (GIC). Even though we are currently experiencing historic lows in interest rates there are some who have decided it’s better to be safe rather than take any risk in the markets.

A recent survey of Canadian financial institutions told us that the rates quoted on a 5-year deposit were between 1.5 and 4%, and on a 1-year deposit were quoted between 0.1 and 3%. In a non-registered account, and depending on your taxable income, these deposits may be yielding a negative return after inflation. It is important to remember that guaranteed investments do carry a risk, that being purchasing power.

In the event you are deciding to invest in a GIC you should know that there are different institutions that have different features and benefits associated with guaranteed deposits. We will focus our discussion on insurance company and bank GICs.

Insurance and bank GICs are equal on a couple of fronts. Both offer guaranteed interest income with options for compound or simple interest and various options to draw interest income. Both have deposit insurance protection up to $100,000. Canada Deposit Insurance Corporation (CDIC) insures bank deposits for maturities up to 5-year terms, whereas Assuris will guarantee deposits for maturities up to 10-year terms. Therefore you have the option to lock in a rate for a much longer period of time with an insurance company.

Insurance company GICs include the ability to name a beneficiary, the person who will inherit your funds in the event of death. A bank GIC is automatically paid to your estate upon death. No other option is offered through banks. Bank GICs must pass through probate whereas insurance GICs with a named beneficiary will bypass probate and avoid probate fees, a saving of up to 1.5% in Ontario. Also, with a named beneficiary the proceeds are paid instantly without delay associated with the probate process.

Insurance company GICs allow for an additional tax break for those over age 65. Interest earned is deemed to be annuity income and eligible for the pension tax credit and pension splitting opportunities. Bank GICs do not allow for pension tax credits or income splitting.

Insurance company GICs with certain named beneficiaries offer protection against creditors. This option makes sense for self-employed individuals where bankruptcy is a possibility. However, do not expect creditor protection by shifting your assets to an insurance company in contemplation of bankruptcy. Courts are unlikely to uphold creditor protection in these circumstances. Bank GICs do not provide creditor protection and they are often the very entity that will go after the assets in the event of a bankruptcy, so it will most likely never become an option with banks.

It is evident that there are features and benefits worth considering before you decide where to park your money. Insurance company GICs are a life insurance product and are treated totally differently than those offered through the banks.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.

Year-Round Tax Planning with Child Care Expenses

(June 2009)

Now that you have filed your 2008 tax return, you may be wondering if you took full advantage of all your deductions and credits to minimize your income taxes. Child care receipts are accumulated throughout the year and are often misplaced or forgotten when it’s time to prepare your tax return. Nevertheless, it pays to keep these little slips of paper as they could be worth a significant tax refund.

Tax relief can come in the form of tax deductions or tax credits. Depending on your taxable income, deductions can be worth more than credits, but whether you are talking about a deduction or a credit, they’re both worth money to you.

It is important to note that child care expenses cannot be carried forward to future tax years. They must be deducted in the year that they are incurred. The only way to make a claim after the fact is to apply for a reassessment. It is expected that the lower earning parent must claim child care expenses. If you have children between the ages of seven and sixteen, you may deduct up to $4,000 per year in child care costs. If your children are under seven then you are entitled to deduct up to $7,000 a year. In the event your child is disabled, you are entitled to $10,000 per year of child care expenses.

In addition to direct child care expenses, there are other expenses and credits that can be claimed in order to reduce your taxes. Parents received a tax credit of $2,038 in 2008 for each child under the age of 18. Either parent may utilize this claim, however only one parent may make the claim regardless of the number of children. You may be able to transfer any unused portion to your spouse or common-law partner.

Starting in the year 2007, the Government of Canada now allows a tax credit based on enrollment in an eligible fitness program. The credit is available to all children under the age of 16. The yearly maximum is $500 per child, and the claim can be made by either parent. The cost of public transit passes for children under the age of 19 can also be claimed by the parents. There is also no restriction on who can claim transit passes and the fitness amount for children.

Parents can claim adoption expenses relating to a completed adoption for a child under the age of 18 years. Eligible adoption expenses include fees paid to provincially licensed adoption agencies, legal, administrative and translation fees, reasonable travel and living costs for the child and adoptive parents, and mandatory fees paid to a foreign institution. The maximum claim is $10, 445, and the expenses may be divided between the two adoptive parents as long as the total is not in excess of the maximum.

Raising children can be a huge expense. Some estimates are that it costs about $100,000 to raise a child to age 18. Ensure you take advantage of these tax saving tips to help relieve some of the financial costs. Keep all receipts in a file and then your task of making the most of your tax credits and deductions is much easier.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.

Have We Hit Bottom Yet?

(May 2009)

Is it really different this time? These are the burning questions that most of us who have money invested in the equity markets are asking. Let’s look at the history of the Dow Jones Industrial Average (DJIA) and see if we can really see a light at the end of the tunnel. As of March 31, 2009, this major stock market index has seen six straight quarters of negative returns. This marks only the second time that this has happened since 1900.

The first paragraph doesn’t bode well for an up-beat and positive story, does it? Well here are some interesting statistics that may give you some insight into how you may want to allocate some of your personal wealth and savings.

The only other occurrence of six straight negative quarters was in the second quarter of 1970. Following that pitiful performance, the DJIA returned more than 11% the following quarter, more than 22% the following six months, and more than 30% the following year. Not bad for a market that appeared to be going nowhere.

Let’s dissect this wreckage further. Obviously the last quarter of 2008 was the fifth straight quarter of negative returns. Only six times has this occurred since 1900. Only once in 1970, as discussed above, did the trend continue. In the other five occurrences the DJIA recorded positive returns the following year. The average return was more than 43%, while the median was more than 15%.

In addition, March 31, 2009 was the ninth occurrence where the DJIA saw two straight quarters of double-digit negative returns since 1900. The average return one year later was almost 23% following these occurrences of back-to-back quarters of double-digit losses. The only exception where positive returns were not posted was after 1931.

So how are you feeling about your investments today? Historically speaking, the majority of the previous occurrences where equities were in a similar situation as today, it proved to be a significant buying opportunity. Of course there are no guarantees when dealing with equities.

Your decision to stay invested will hinge on your personal goals, and more importantly, your emotions. Unless your long-term goals have changed, you will not be helping yourself by changing your investment strategy. The only way to truly appreciate the spectacular returns that equities have provided over the last century is by staying invested. As an equity investor you must learn to live through the temporary declines that inevitably will occur. Your alternative today is to “cash in” at the bottom and live with 3% GIC rates to fund your retirement. Speak to your financial planner to assist with these most important financial decisions.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.

Separation and Divorce - The Agreement

(April 2009)

So you’ve decided that you can’t work things out and it’s time to separate. The end of marriage may be viewed as a tragic event. Separation and divorce can be a difficult process both emotionally and financially. One of the first things you want to establish is a separation agreement. Your agreement becomes a legally binding contract once it is signed and witnessed by both parties. Among other things it outlines items such as spousal support, the division of property and debts, and provides for custody, visitation and support of children.

Where do you start? There are essentially four ways one can approach this situation. Hopefully you are still talking to your soon-to-be former spouse. This can lead to an amicable negotiated separation and a clean break from each other. If both parties see eye-to-eye they can draft their own agreement and take it to their respective lawyers for review. This ensures all legal aspects are covered. As long as there are no outstanding issues, you have an agreement.

If you’re still talking but just can’t seem to come up with an agreement, the next option may be the mediation approach. Mediators are objective participants who don’t take sides but try to work with both parties equally. They may provide guidance or refer other professionals for specialized areas such as the development of a parenting plan or financial planning calculations. Many mediators are also lawyers and provide their services from a legal point of view.

The third method is a process called the collaborative approach. In this case both parties retain their respective legal counsel and everyone meets together. There is a pledge not to go to court. Both parties exchange information honestly, and a solution is developed that takes into account the highest priorities of both parties and their children. The goal is to reach an agreement that everyone can live with.

Finally, the traditional method is the litigation process. Here each party retains their respective lawyers and all discussion is handled through their legal counsel. All communication between the spouses has ended. This process can be quite costly, time consuming, and can end with multiple court appearances.

One method is not necessarily better than the other. Despite the method chosen to draft your agreement, ultimately many of the issues of separation and divorce will revolve around finances and money. An exactly equal division of property is often not the same as a fair division of property. Sometimes a specially trained financial planner is required to assist with the complicated calculations needed in evaluating the division scenarios to ensure that financial decisions made today will not result in costly mistakes in the future.

During this emotional life transition it is important to know that there are many support services available to help with your agreement. Your team may include mental health professionals, child specialists, financial specialists and legal professionals. Your team will help to rebuild your foundation toward a happier and healthier life for the future.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.

Don’t You Just Love Market Volatility?

(March 2009)

Has market volatility made you feel uneasy about your future? You’re not alone. Some people have tried to react to the situation by moving money around and converting to cash. This may not be the best course of action. Although the market is not rewarding investors right now, confidence is re-building and exceptional values are being realized by those with a long-term perspective.

Let’s go back to basics. Have your goals and objectives changed? Are you still thinking long-term, or have you succumbed to the hype and media stories about pending doom and gloom? There is no doubt that markets have been volatile for quite some time and the media has successfully created an atmosphere of fear and worry. This fear has caused some to panic and sell their investments. But is this the correct response to the current situation? We don’t think so.

There are many reasons to embrace market volatility. Let’s illustrate by example. Most of us probably don’t go to the store and search out the most expensive items to buy. We are natural bargain hunters. We look in flyers for products on sale. During the current market situation, the share price of many great companies has gone on sale, yet fear has caused panic-stricken investors to sell these great companies at discount prices. You must remember that for every seller of shares there is a buyer. That’s what makes the market. Only time will prove who was smarter: the buyer who bought a bargain, or the seller who sold at a loss.

When markets appear to be in crisis, it’s easy to lose perspective. As mentioned earlier, unless your goals have changed, you’re probably not finished buying equities yet. Review your time horizon and determine if you really need your money to be in cash today. History tells us that the biggest rewards are realized by the person who buys at the lowest points in the market cycle.

But do you have the knowledge and courage to make these decisions yourself? If you answer no, there are options. You can hire a professional money manager to do it for you. Mutual funds are one example of professionally managed money. These money managers employ proven investment strategies that work. But you must give them time. Embrace market volatility now and reap the rewards over time.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments with your topics of interest at 613-798-2421 or E-mail at rick@invested-interest.ca.

Financial Planning for the Surviving Spouse

(February 2009)

Dealing with the loss of a spouse is considered one of the most difficult events in a person’s life. It is expected for the survivor to be distraught and only able to deal with urgent matters for some time. Although people need time to grieve, it is also important to evaluate financial matters as soon as possible.

Provided the deceased spouse or common-law partner made sufficient contributions to the Canada Pension Plan (CPP) the survivor may be entitled to receive a monthly survivor benefit from the CPP. Survivor benefits will be based on the amount contributed to the plan, the age of the survivor at the time of the spouse’s death, and whether the survivor also receives a CPP disability or retirement pension. It is important to apply for these benefits at the earliest time possible following a spouse’s death, as retroactive payments are only permitted up to 11 months. In addition, surviving spouses or common law partners may also be entitled to receive a lump sum death benefit from the CPP equal to six months of the retirement pension, up to a maximum of $2,500.

Tax planning can play an important role for the survivor. Without proper tax considerations there may be a significant and unnecessary tax bill to the deceased. If the surviving spouse is the sole beneficiary of taxable investments, there may be an option to defer tax implication until the survivor’s death. Further, it is important to consider any unused RRSP contribution room of the deceased spouse. A spousal RRSP contribution is an option to reduce the tax implications on the deceased's final tax return. Otherwise, any unused contribution room will be lost. The spousal contribution must be made within 60 days of the end of the calendar year following a spouse’s death. If the deceased died in November or December, there may not be much time to make this decision.

It is recommended to review all insurance policies and pension plans. Many survivors lose their entitlement to medical insurance coverage upon their spouse’s death. In addition, the survivor may need to update personal life and disability insurance, especially if there are dependent children. A survivor who is not employed may alternatively have to look at critical illness insurance or long term care insurance.

Dealing with the death of a loved one is indeed a challenging experience. These few points only scratch the surface of the many financial issues that a survivor may face. Speak to your financial planner to assist with these and other planning topics as soon as you feel you are ready.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments Inc. to discuss your particular circumstances or suggest a topic for future articles, at 613-798-2421 or e-mail rick@invested-interest.ca.

Retirement Fears May be Ill Founded (January 2009)

The thought of retirement can be frightening. For many it’s a journey into an uncharted financial territory. A recent study found that about two-thirds of Canadians who are approaching retirement are stressed about the thought outliving their money.

Although this study focused on the financial aspects of retirement, it is important to remember that there are many other non-financial considerations. These include hobbies, volunteerism, fitness, lifestyle and travel, just to name a few. These may, or may not, have a significant financial consideration. It is equally important to have plans for these aspects of retirement life.

The survey of 2,200 Canadians found that only 40% of people in their first year of retirement felt comfortable with their retirement savings. This number dropped to 29% for those in their second year of retirement. However, confidence takes hold by the fifth year, when 58% said they were comfortable about their finances and after ten years 80% were comfortable about their financial future.

Once retirees settle into their new situation they tended to live within their means. They started to feel better once they figured out how much money they actually needed to meet their retirement goals and lifestyle needs. This study showed that many retirees were quite comfortable living on 60% of pre-retirement income. Many previous studies told us that the figure was closer to 75% or more. This may have been partly the cause of uncertainty and concern for those who were about to be, or newly retired.

In order to reduce some of this stress it is important for Canadians to prepare a retirement income projection before retiring. This allows for realistic planning rather than unrealistic dreaming. It will show the financial health of one’s retirement lifestyle desires. Only then can one relax and settle into their new situation.

The study also found that professional financial advice played a vital role in one’s comfort level, both before and after retirement. People who worked with a financial planner had a higher level of financial confidence and felt better about their financial health than people who did not use a planner.

Financial planners have an abundance of calculators and tools to assist with the planning process. Speak to your financial planner about your retirement income projection. Specialized computer programs are used to assist with these calculations. The result is a projection based on best and worst case scenarios. The work will be worth peace of mind and a stress reduced retirement.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments Inc. to discuss your particular circumstances or suggest a topic for future articles, at 613-798-2421 or e-mail rick@invested-interest.ca.