Where Does Your Money Go?

BUY – SELL – What to Do?

noreply@blogger.com (Lisa) — Thu, 20 Nov 2008 00:04:00 +0000

We have had enough market volatility during 2008 to last a lifetime. As stock markets began a swift decline investors started to make panicked decisions, switching investments, changing advisors and altering their investment objectives. They may have become their own worst enemy. For many, discipline was overcome by fear. Thus, while thinking they were in control, they were actually losing control. These emotionally charged decisions might end up costing a bundle over the long-term.

We know that not everyone was panicking. Warren Buffett, touted as the most successful investor of our time, invested billions into distressed companies during the market set back. Is he crazy? Has he lost his touch? We don’t think so. Mr. Buffett did what he does best. He saw an opportunity and capitalized on it. He will no doubt multiply his investment multi-fold over the next few years.

You’ve heard it before and we’ll say it again. The path to investment success is to buy low and sell high. However, although this concept seems relatively simple to comprehend, putting it into practice can be quite difficult for some investors during a volatile market. Redemption rates are typically at their highest levels when markets are on the extreme negative side. The result is that frightened investors receive a very low price for their shares. Once the market is back on the up swing, money tends to resurface as investors are buying back at higher prices. Does this make sense? You pay $10 a share and sell at $5 a share, and then buy back at $10 a share. As markets improve it becomes clear that the anxious investor may have been better served by inaction alone.

For instance, during 2001 to 2003, the Canadian market fell 43%. Investors who fled during this period missed out on the profits of the market returning at 163% over the next few years. A key factor to consider is that the markets tend to go up more often then they go down.

All this is not to say hang in at any, and all costs. If your time horizon for needing your money is short, less than a year, then you probably should not be in the market at all. Typically you need at least three to four years at a minimum with the ability to buy during times of market weakness in order to have success with your investment strategy.

Investors must accept the reality that markets go down as well as up. You must be prepared for this at all times. This current financial crisis will eventually end and more normal markets will return. The best course of action is to review your investment strategy, time horizon and objectives. Confirm that your current asset allocation is consistent with your investment strategy. If not, then make adjustments. If it is, then stay the course and consider making further investments at these low prices.

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.

Auto Insurance Secrets

noreply@blogger.com (Lisa) — Thu, 20 Nov 2008 00:01:00 +0000

I want to relate a personal experience that has opened my eyes to the auto insurance industry. Back in 2005 my wife had a slight “fender bender” with a young driver. After exchanging information the other driver made mention that he was going to get a “whole new car” out of this event. Not exactly, but he said he would require the insurance company to give him a complete new paint job. My wife’s car had a minimal scratch that was buffed out in a mater of seconds and his damage was not much more.

Knowing very little about auto insurance and due to the fact that the other driver was adamant that he would make a claim we informed our insurance company about the incident. Our insurance advisor said we did the right thing and notified the insurance company of a pending claim. We never heard anything further but saw our premiums increase for the next three renewal years. We only assumed that the other driver had made a claim, our insurance company had determined my wife to be at fault and they had made a settled the claim with a payment.

As the years went by, our premiums seemed to be getting out of hand so we decided to shop around this year only to discover the “paid claim” notation on our policy was a black eye on our record. No competing insurance company would come even close to our premiums. It was all because of this claim on her record.

I could not believe the other driver had actually made a claim so began to make enquiries. I wanted to have details about the claim and how much was actually paid to the other driver in 2005. Our insurance company was not much help, but then we stumbled upon Autoplus reports. By signing an authorization, Autoplus was able to send a complete record of any and all insurance claims made by my wife. There was no cost to receive the report and it came to us by mail within two weeks. It went back to the mid 1980’s. To our amazement there was never a claim paid, not one.

We confronted our insurance company with this information and demanded an explanation on their justification for charging extra premiums and noting a paid claim on our insurance record. After a number of months we finally had this paid claim notation removed from our 2008-renewal document. We made a request that they reverse the extra premiums charged for the past three years. After almost four months from the beginning of our initial enquiry we received a refund cheque for more than $750. That refund represented a return of the extra premium that was collected in 2006, 2007 and 2008.

I did not take this incident personally. We were caught up in a “systems” problem. We needed human intervention to have the problem resolved. As long as the paid claim was on our record we would continue to have extra premiums charged and competing companies would have a difficult time giving us a competitive quote.

If you have a questionable claim on your insurance record you can go through the same process and determine if indeed the extra premium you are paying is justified. Ask your insurance company for proof that they actually paid a claim. If they cannot, or they will not supply this information, you can contact CGI Insurance Business Services and request your Consumer Autoplus Report. It will show the history of paid insurance claims made against you. You can then confirm if the extra premium you are paying is justified.

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.

RESPs and How They Work

noreply@blogger.com (Lisa) — Sat, 06 Sep 2008 03:41:00 +0000

As your children return to school you may have wondered about how you will pay for their tuition when it comes time for college or university. There was a time when college was less expensive than university. However the cost of going to college is increasing and the gap is narrowing. The common denominator is that the cost of higher education is ever increasing. One way to save for a child’s education is through a Registered Education Savings Plan (RESP).

The federal government is offering free money to Canadians who make contributions into the RESP program. They will match 20% of all contributions up to a maximum of $2,500 per year until the year the beneficiary child turns 17. No grant is eligible the year the child turns 18 years of age. This means there is $500 per year opportunity to be gained from the Canada Education Savings Grant. Unused grant room can be carried forward to future years however the maximum grant available in any given year is $1,000.

Currently RESP contributions are not tax deductible. However, any growth on the contributions and the CESG is tax deferred until it is withdrawn from the plan. When the child begins to attend a post secondary institution, the funds can be withdrawn and taxed in the hands of the child, who will likely be in a lower tax bracket then the parent, and who will usually pay less tax on the withdrawals. The child may also be able to reduce the amount of tax owing through the use of education, textbook and tuition tax credits.

You can even open a family RESP, and name one or more children as beneficiaries under the same plan. The beneficiaries must be related to the contributor either as your own children, grandchildren or legally adopted.

Should the named beneficiary decide not to attend a post secondary education there are a few options available for the RESP funds. The beneficiary can be changed to the child’s sibling. If there is no alternate beneficiary the earnings may be transferred into the contributor’s RRSP, subject to available RRSP room. The contributor can then withdraw their capital and return the grant money to the government. Another option is to make a donation to an educational institution. It is important to talk to the plan administrator or representative to determine your options in this situation.

There are many more highlights and strategies involved with using a RESP. We recommend speaking with a professional advisor about your own personal circumstance to decide the best education saving strategy for you. Through further knowledge on the subject parents will gain a better perspective in financing their child’s educational needs.

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.

Market Emotions Run High

noreply@blogger.com (Lisa) — Tue, 04 Mar 2008 15:57:00 +0000

We don’t know what the future holds for investors; no one does. What we can tell you is that the media has once again succeeded in creating significant fear about investing. This is just at the point in time that people should be courageous about investing and their investments.

How many of you sold some, or all of your investments recently? You just couldn’t take the “losses” any longer. How many invested in guaranteed investments with your RRSP contribution? You just couldn’t stand the “volatility” any more. But you committed to move your money back into mutual funds when things settle down. The risk of this action is that you miss the turn-around that inevitably occurs when markets recover.

We’ve all heard it before, “Buy Low and Sell High.” So why do so many people show fear and run away when the market declines. This is precisely the time to have courage. Good quality and profitable companies with sound management and expanding markets have had their share price decline significantly over the past few months. These companies are not going away.

There are those who boast about having some clairvoyant ability to be able to time when to get in and when to get out of the market. The vast majority, professionals included, admit with honesty that they have no idea when it’s the right time to sell or buy into the market.

This emotional roller coaster ride is not new and it’s been seen before. The late sixties saw a rapidly rising market come to an abrupt end in 1974 with the oil embargo and Nixon’s resignation. Then again in the eighties with the 30% one-day drop on October 19, 1987. And once again the markets peaked and fell when the technology bubble burst in 2000. This is the pattern of the past and will continue to be the pattern of the future.

So what is the average Canadian investor to do? Strap yourself in, like on a roller coaster. Know and develop an understanding that markets have ups and downs, just like a roller coaster ride. Don’t un-strap and jump off in the middle of the ride. This could prove be detrimental to your long-term financial health. The best course of action is to stay on the ride, stay invested, and bring new money into the market while its “On Sale.”

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.

Tax Planning Strategies to Preserve Your Estate

noreply@blogger.com (Lisa) — Tue, 19 Feb 2008 17:13:00 +0000

It has been said many times before; “The only certainties in life are death and taxes.” And although it may not be top on our list of financial planning issues, there are tax strategies you can implement for your time of passing. Failure to do so could result in substantially less for your heirs and inviting the government to become one of your beneficiaries. Here are a few ideas to help preserve the value of your estate.

The first step is to ensure that your will is current and beneficiaries are clearly identified. Making a charitable organization one of your beneficiaries is a popular way to reduce taxes, increase the value of your estate and leave a legacy to your favourite charity. Make sure your legal representative has the ability to transfer assets “in kind” as there may be significant tax benefits by donating assets rather than cash. There are also special ways of specifying your gift to ensure that the donation receipt is issued properly and the donation amount receives the maximum tax benefits. This can be a tricky area of estate planning and it is advisable to have your will drafted by a lawyer who specializes in charitable giving.

If you are married or in a common-law relationship, you can rollover most assets left to your spouse or common-law partner. In Ontario, the definition of a common-law couple is two people who have either lived together in a conjugal relationship for at least 3 years or; lived together in a relationship of some permanence and they are the adoptive or natural parents of a child. Unrealized capital gains can be deferred until your spouse sells the asset, or at the time of his or her death. This is a tax deferral idea, not an tax avoidance strategy.

If the deceased had unused RRSP contribution room, and they have a surviving spouse or common-law partner who is under the age of 71, their personal representative may consider making a spousal RRSP contribution. Although an RRSP contribution cannot be made to the deceased’s RRSP after the time of death, a contribution can be made to the RRSP of a spouse or common-law partner within 60 days of the end of the calendar year in which the deceased died.

It is possible that the deceased has unused capital losses from previous years or capital losses that occurred at the time of death. These losses can be used to reduce capital gains. However, capital losses can also be used to reduce any type of income in the year of death and the year prior to death. Utilizing unused capital losses can be quite complicated and it may be best if the personal representative consults with a tax professional to ensure the maximum use of their value.

We have literally scratched the surface of estate planning here. These are just a few examples of many strategies that can be implemented and you should seek the services of a qualified estate-planning professional or lawyer to assist you with preparing your will and making appropriate selections for your individual situation and personal goals.

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.

Investing in 2008

noreply@blogger.com (Lisa) — Thu, 03 Jan 2008 15:10:00 +0000

The following article was contributed by Ottawa-based financial planner Rick Sutherland, CLU, CFP, FDS, R.F.P.

The market conditions experienced during the second half of 2007 generated worry and angst among investors. It is important to realize that market dips have two sides and it is not all negative. The first side that causes concern is the “down side”. There is however a second side called a “recovery”. This is when long-term investors reap the benefits of patience.

Let’s first look at 2007 and try to assess what happened. The Canadian market had been surging ahead since 2002. This was largely driven by rising commodity and specifically oil prices. The Canadian dollar tapped $1.10 against the US dollar for a brief moment during 2007. And the sub-prime lending practices in the United States came to an abrupt halt in the summer of 2007.

The sub-prime affair was probably the most worrisome event of 2007. It is now apparent that lenders were loaning money to unqualified borrowers at ridiculous rates, creating a boom in real estate. Many borrowers did not document their income honestly, making it easier to over state their credit worthiness. As long as home prices were rising, borrowers could refinance to solve their credit problems. But eventually home prices stopped rising and borrowers fell behind. The situation became unsustainable. Thus, the value of securities backed by loans started to fall.

The financial service sector became vulnerable due to the sub-prime chain of events. Prices in this sector have fallen dramatically, some as much as 50%, or more. And the pain wasn’t just in the US. The financial sector in Europe and Japan felt the sub-prime effect. The substantial drop is being viewed as a very significant purchasing opportunity by long-term disciplined investors.

So what opportunities are available in Canada? Even though Canada has already seen tremendous growth, there are some who feel this trend will continue. Developing countries are moving from a rural to an urban society. This is creating demand in the oil, agriculture and commodities sectors. Canada has expertise in all three areas. On a note of caution, the high Canadian dollar may not bode well for certain manufacturing sectors that were previously beneficiaries of a low dollar.

Thus, being an astute investor sometimes calls on the demand to be an opportunity seeker. Realize that there are two sides to market movements and have courage to invest when others are running scared. This could be a great time for nerves of steel. Make your investments with conviction and be patient.

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-End Tax Planning Tips

noreply@blogger.com (Lisa) — Wed, 19 Dec 2007 18:27:00 +0000

The following article was contributed by Ottawa-based financial planner Rick Sutherland, CLU, CFP, FDS, R.F.P.

It is that time of the year again. The holiday season and year-end tax planning is upon us. We try to keep our opinions about the holidays to ourselves, but we do promote that tax planning is a year-round activity. Human nature prevails and many choose to make last minute decisions about both. This can lead to procrastination and inaction or hurried decisions and disappointing results. After December 31 there is very little that can be done to reduce your taxes and save money. However, here is a short list of year-end tax-planning ideas that can be implemented before the end of the year.

Make a donation to your favourite charity, but instead of giving cash you can benefit more by donating securities. Let’s assume you want to give $10,000. You don’t have the cash but you own an investment that has increased in value. By donating the investment, stocks or mutual funds for example, you will receive a donation receipt for the full amount of $10,000 and you do not pay capital gains tax on the sale of the investment. You win and the charity wins and the government has assisted in making the transaction attractive from a tax point of view.

Speak to your investment advisor about investing in a tax shelter. Certain tax shelters are sanctioned by the Canada Revenue Agency and may be eligible for deductions and credits for 2007. Others carry the risk of being declared invalid so caution must be exercised. Make sure you are comfortable with the underlying investment first. The investment is always more important then the tax savings.

For money held outside registered investments you may want to consider triggering losses or gains. If you have capital gains to report this year or reported capital gains in the three prior years, consider selling investments that have dropped in value. You can apply the loss against your gains this year or the three previous years. Losses can also be carried forward indefinitely into the future. It also makes sense to trigger capital gains if you will not suffer a tax consequence. You may be carrying forward a loss from previous years that will offset the gain in 2007.

You may want to make a withdrawal from your RRSP or RRIF before the end of the year if your 2007 income is low. You may pay little or no tax on the withdrawal. Remember the financial institution must withhold tax when you withdraw from your RRSP, but you may be eligible for most or all of the tax as a refund when you complete your 2007 tax return.

If you are self-employed you may have the opportunity to split income with family members. Review the services that family members provided in 2007 and decide if you can justify paying tax-deductible compensation in the form of salary or wages to family members before the year-end.

These few ideas only scratch the surface of tax-planning strategies. Speak to your investment advisor and tax specialist for more information. We wish everyone a save and happy holiday season and we look forward to speaking to you in 2008.

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.

Identity Theft – Protect Yourself

noreply@blogger.com (Lisa) — Fri, 19 Oct 2007 15:27:00 +0000

The following article was contributed by Ottawa-based financial planner Rick Sutherland, CLU, CFP, FDS, R.F.P.

Identity theft is one of the fastest growing crimes in North America. In fact, identity theft occurs every four seconds. Canadians are increasingly becoming concerned about falling victim to this crime and statistics reveal that 15% of Canadians have already had their credit card used fraudulently. So what exactly is identity theft? What techniques are the thieves using and how can you prevent yourself from becoming a victim?

Identity theft involves the theft of financial or personal information with the intent of establishing another person’s identity. For instance, identity theft will occur when a piece of identification is stolen, such as a driver’s license, and then an application is made for credit cards under the false identity. Where as, identity fraud occurs when the thief uses the new identity to make purchases or gain access to financial accounts.

Criminals do not have to be high tech in order to perform identity theft. One common method is known as “phishing.” This is a term used to describe the act of a criminal posing as a legitimate business, institution or government agency. They send unsolicited e-mails in an attempt to gather personal, financial and sensitive information.

Statistics reveal 24 % of Canadians have received “phishing” identity theft attempts. “Phishers: can replicate web sites so well that an estimated 3%-5% of recipients will unknowingly furnish “phishers” with personal data.

Another popular technique is called “Skimming”. This is a high tech method by which thieves swipe your card and capture your personal information using an electronic device. The theft occurs in an instant, often without the owner of the card being aware.

Further methods used to obtain personal information include “shoulder surfing” which is the use of a direct observation technique such as looking over someone’s shoulder to get information. The thieves learn to memorize numbers quickly as you are typing them. They may even carry a small camera designed to record keystrokes.

Here are some Internet precautions to follow in order to avoid becoming the next victim. Never click on or open e-mail when you are not sure of its legitimacy, even if it looks genuine. Delete the e-mail in question immediately. Avoid e-mailing personal and financial information.

But the Internet is not the only place to be cautious. Keep your eye on your credit and debit card at all times. Regularly review your account statements. Save receipts and compare them with your billing statements. Open bills promptly and reconcile accounts at least monthly. Report any questionable charges immediately and in writing to the credit card issuer. Notify card companies in advance of address changes. Shred or otherwise destroy credit card receipts, bills and related information when no longer needed. Avoid keeping a written record of your bank PIN number(s), social insurance number and computer passwords, and never carry these details with you. A SIN number and drivers licence together gives a thief most of the information needed to create a new identity.

It is important to be attentive to your personal information in today’s modern world. These tips only scratch the surface of how the scam artist works. Be aware and protect yourself. The time, stress and potential cost to recreate your identity can be avoided with awareness and diligence. An excellent resource on this topic can be found at www.phonebusters.com.

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

Hot Investment Tips by E-mail!

noreply@blogger.com (Lisa) — Thu, 30 Aug 2007 19:56:00 +0000

The following article was contributed by Ottawa-based financial planner Rick Sutherland, CLU, CFP, FDS, R.F.P.

Are hot stock tips bombarding you by e-mail? If you’ve ever surfed the Internet looking up investment related topics you may have unknowingly given your email address to one of many Internet scam fraudsters, or should I say spam companies. They claim to be legitimate firms providing a valuable service to the investing public.

In 2005 the Canadian Government’s Task Force on Spam estimated that there are more that 100 million investment-related emails sent every week. With all this good investment advice so freely given out we should all be millionaires.

Its seems nowadays about 80% of e-mails received are junk mail, not that its illegal to send e-mails. However, a lot of the hot stock tip e-mails are outside the regulated industry. When it comes to investments, stock information comes in many forms whether it is from advisors, newspaper articles, Internet surfing, friends and relatives and yes, through e-mails.

Most, if not all, “hot stock tips” we receive in our e-mails are unsolicited. It’s very enticing when you receive a personalized e-mail promising high returns and very low risk, but you must buy now. But how can we decipher between a good and bad tip? Usually it’s only after money has been lost.

The Ontario Securities Commission (OSC), the Investment Dealers Association (IDA) and many brokerage firms have set up educational programs for the public, clients and advisors to help identify the difference between legitimate advice and spam e-mails. Visit the OSC web site at www.osc.gov.on.ca for more information about how to recognize and protect yourself against investment scams and frauds.

Before you decide to “jump on board” with one of these “hot stock tips”, do your homework. Search the company and look for any regulatory filings. Talk to your stockbroker to get their opinion. The advisor will review your goals and assist you in making a decision on whether this investment fits your risk profile. Their role is to look after your best interests. At this point you may still proceed and buy the stock, but if your advisor had cautioned you against this move you will be on your own if the investment turns out to be a flop.

A lot of these “get-rich-quick” scam e-mails, are sent by people who are just under the radar of the criminal authorities for fraud, theft or forgery. In the end these spam e-mails will always be around and it’s “buyer beware.”

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

Less Taxes….More Retirement Income

noreply@blogger.com (Lisa) — Fri, 20 Jul 2007 22:11:00 +0000

The following article was contributed by Ottawa-based financial planner Rick Sutherland, CLU, CFP, FDS, R.F.P.

Further to our story on the tax changes proposed in the 2007 federal budget, we bring more detailed news on the opportunity for those who are retired. These changes specifically refer to the opportunity for couples to take advantage of income splitting.

Why should we be concerned about Income Splitting? In Canada we have a progressive income tax system. The more income you make, the higher your tax burden. Retired couples can now use the new income splitting rules to help reduce the ever-increasing progressive tax rates. This is achieved by transferring income from a higher income-earning spouse to a lower income-earning spouse. It has proven to be a significant tax reducer as a couple receiving two smaller incomes at retirement is taxed at a lower rate than one person receiving a large portion or all of the household income.

The new rules apply only to income that’s eligible for the pension tax credit. Therefore, if you are 65 years or older, you can split up to 50% of the following incomes: Registered Retirement Income Funds (RRIF), Life Income Funds (LIF), Locked-in Retirement Income Funds (LRIF) and Annuities purchased from Registered Retirement Saving Plans (RRSP) or Deferred Profit Sharing Plan (DPSP) assets. There is no age restriction on company Registered Pension Plan (RPP) benefits. You can also split Canada Pension Plan (CPP) benefits starting at age 60 but only for the benefits accumulated while you were a couple.

By way of an example, we can look at the tax saving where there is one spouse earning a pension plan benefit of $100,000 and neither spouse earns any other income. She decides to split income to the maximum amount of $50,000. The tax savings is greater than $5,000. And did we mention that both spouses are now eligible for the pension credit, which has doubled to $2,000? This extra income will be a welcome addition to all retirees who take advantage of the new rules.

Furthermore, if you are 65 or older you are eligible for the age tax credit and Old Age Security (OAS) benefits. This age credit is potentially worth another $5,066 in tax credits. Depending on your income there is a reduction for those earning more than $30,936. Any unused portion of the credit can be transferred to your spouse. OAS does have a claw-back feature that begins at income of $63,511.
You can see there may be thousands of tax dollars to be saved by implementing these income-splitting strategies starting in 2007. As always there are rules that must be followed and you should seek the advice of your trusted financial advisor to assist you with making these decisions. The sooner you start planning, the faster you can begin planning how to spend this newfound money.

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

Everyday Tax Saving Strategies

noreply@blogger.com (Lisa) — Mon, 02 Jul 2007 00:46:00 +0000

The following article was contributed by Ottawa-based financial planner Rick Sutherland, CLU, CFP, FDS, R.F.P.

Everyday Tax Saving Strategies

In Canada we supplement our four seasons of weather with additional seasons to represent major money and tax saving events. We have just passed the “RRSP Season.” It’s the time of year when people who want to save a few dollars on their income taxes will stock a few dollars away in an approved Registered Retirement Savings Plan. We have now entered the “Tax Season.” This is the time of year when everyone has to reconcile his or her income and expenses with the federal government.

It’s too late to make tax-planning decisions that will have much of an impact on your 2006 tax return. Other than RRSP contributions, the time to do that was before December 31. You can however, begin making plans that will have an impact on the taxes you pay in 2007 and beyond.

Decisions to place money into a Registered Retirement Savings Plan, RRSP, will reduce your taxable income and possibly result in a tax refund or reduce the amount of tax owing. The RRSP has added benefits of tax deferral and tax sheltered growth. You can defer this income to a later date, possibly to a time when you are earning much less income and realize a huge tax saving. During the period of deferral your investment grows tax free or sheltered. The name of the RRSP game is immediate tax reduction, tax deferral and tax sheltered growth.

Another tax planning strategy is income splitting. This involves decisions that will shift income from a high-income person to a low-income person. Spousal RRSPs have been the obvious planning opportunity to shift retirement income to a lower income spouse or partner. The federal government announced last fall that pensioners, starting in 2007, could split up to 50% of pension income with their spouse. Due to age restrictions the viability of a spousal RRSP still warrants a close look.

Opening up “in-trust” accounts for minor children could have the effect of shifting income into the hands of your child. Capital gains are taxed in the hands of the child rather than the parent. Watch out though, as dividend and interest income will still be taxed in the hands of the parent.

Plan your retirement income carefully. It may be to your advantage to convert your RRSP into a Registered Retirement Income Fund, RRIF, early. The concept is to reduce the RRIF capital and therefore lower the mandatory RRIF payment in later years. This strategy could be helpful to preserve your ability to receive the Old Age Security benefit without the claw back. The current claw back begins at income levels above $63,511.

Tax planning strategies should not be seasonal but should be considered very carefully throughout the year. Speak to your financial planner to learn more about these and other tax planning strategies.

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

Bonds Versus Bond Mutual Funds – Which is Better?

noreply@blogger.com (Lisa) — Thu, 19 Apr 2007 20:22:00 +0000

The following article was contributed by Ottawa-based financial planner Rick Sutherland, CLU, CFP, FDS, R.F.P.

Bonds Versus Bond Mutual Funds – Which is Better?

We are often asked the question ‘Why would I invest in a bond mutual fund as opposed to buying individual bonds?’ There are many reasons why one would choose to own a bond fund rather than owning bonds directly.

Bonds can sometimes be difficult securities for individuals to buy and sell. This can give the bond fund greater liquidity (the ability to convert to cash) than owning individual bonds.

A Bond fund offers instantaneous diversification. Much like equity mutual funds, bond funds are comprised of many different fixed income securities. This gives the investor an optimal mix for safety and diversification. The term to maturity of the bonds can range from short-term (1 to 5 years) to long-term (over 30 yrs) and everything in between. All levels of government including federal, provincial and municipalities issue bonds. Even corporate bonds can be added for higher returns and a little added risk. As an individual you would need to be very wealthy to duplicate the diversification offered through the ownership of a bond fund.

When talking about the Bond market, size does matter. Bond fund managers can be trading millions of dollars each day. This gives them considerably more purchasing power than individuals. The result is better pricing and potentially better returns for bond fund investors.

Bond fund managers are considered institutional investors, giving them a greater access to available bond inventory at a cheaper price. Depending on their relationship with the bond dealers the bond fund manager may be given exclusive access to bonds on an “initial issue” basis. The retail bond investor is rarely offered an opportunity to participate in an initial issue. You are typically limited to what the bond dealer is offering at their asking price with no ability to do a price comparison.

So while there are individuals that can build and manage their own bond portfolio, most people do not have the time, resources or the expertise to take on this challenge. For ease and efficiency investors receive good value for the management fees charged by owning bond funds.

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. Website: http://www.invested-interest.ca/

Canadian Capitalist

noreply@blogger.com (Lisa) — Wed, 11 Apr 2007 15:52:00 +0000

We got reviewed by Canadian Capitalist! Check it out: http://www.canadiancapitalist.com/2007/04/10/test-driving-spending-profile

More Press

noreply@blogger.com (Lisa) — Thu, 29 Mar 2007 18:21:00 +0000

More press in the Ottawa Citizen today. Lots of new sign-ups!

Invisible Ink Feature Article

noreply@blogger.com (Lisa) — Wed, 07 Feb 2007 18:34:00 +0000

Hey, I just got interviewed on Invisible Ink by Zachary Houle! Take a look: http://zacharyhoule.ottawabloggers.com/2007/02/01/five-questions-lisa-wall-spending-profile/

What does Christmas cost?

noreply@blogger.com (Lisa) — Fri, 05 Jan 2007 00:30:00 +0000

The holidays, though joyful and festive, can be a strain on your finances. You may have purchased items on credit, and are now wondering when and how you will pay for them. The first step is always to know how much you have spent. You need to gather your receipts, credit card statements, and bank statements, and record them in your Spending Profile account. This will give you the full picture. Even if it's ugly, you need to know this information in order to make informed choices when managing your money.

Don't worry if you haven't logged on in a few months; just start fresh today. Each month is analysed separately, so when you return to your account, the missing data won't affect your current and future results. Get the full benefit of your Spending Profile account by using it regularly to help you stay on top of your spending, pay off your debts faster, and reach your financial goals sooner.

Forgot your password? Get a new one here.

Have you tried the automatic import feature yet? You can import transactions from your bank straight into your Spending Profile account! It's quick and easy - just sign in and click on the button at the top left.

Did you know? Spending Profile accounts are now free! So if your account had expired, it is now active again. You can always get a new password if you have forgotten it.

Wishing you the best in financial health for 2007!

Young People Not Saving For Retirement

noreply@blogger.com (Lisa) — Thu, 21 Dec 2006 23:00:00 +0000

It appears most young people today are NOT saving for reitrement, and of those who are, most invest their money the wrong way (ie in bonds instead of stocks).

- Anne began saving at age 40 and invested in bonds.She has $118,000 at age 65
- Barbara began saving at age 40 and invested in stocks.She has $240,000 at age 65.
- Carol began saving at age 20 and invested in bonds.She has $265,000 at age 65
- Diane began saving at age 20 and invested in stocks.She has $1,128,000 at age 65

See the full article here: http://www.ricedelman.com/planning/kidsncash/generationY.asp

Blog Tag

noreply@blogger.com (Lisa) — Tue, 12 Dec 2006 16:21:00 +0000

Tag! You're it! I just became part of a game of "Blog Tag". To participate, I have to post a blog entry with 5 little known facts about myself. My blog is normally not about me; it is about personal finance and how my website, Spending Profile, can help people reach their financial goals. But it's nice to put a human face on technology, at least to show that there is an actual person behind the screen.

So here goes:

1. I was born in Bath. No! Not in a bath, but in the town of Bath in the South of England. Do I have a british accent? No - except when I get angry. I came here when I was 2, but we visited England often since my Dad was in the navy.

2. When I was 3, I came within 12 hours of dying of an apendicitis. They didn't think it was that because it was the youngest case they had ever had. They finally realized, but my appendix had already burst and sent "bad stuff" all over. They cleaned it up and I recovered.

3. I play clarinet in the Ottawa Symphony Orchestra. I studied music at the Quebec Conservatory of Music and graduated "avec grande distinction", although I was so nervous at my final exam I was sure my hair would turn white overnight like Marie Antoinette!

4. I watch Lebanese soap operas! Yes, well, I have a reason: I am learning Arabic. I study soap operas because they use everyday language. I write down every word and translate them to English. I am learning Arabic because a) I love languages, and b) my fiancé is Lebanese, and I need to be able to speak to his relatives when I visit Lebanon!

5. I am an avid scrapbooker. I have a circle of scrapbooking friends, and we go scrapbooking together every week. We each own a scrapbooking cart, which is a suitcase-sized container on wheels that holds all our tools and paper supplies. Scrapbooking is a hot new trend, and we are out to convert people to it - a major success will be when we convert our first MALE scrapbooker!

Hmm. I have to tag other bloggers now:
- Kristina Mausser from Digital World. I saw her give a great presentation at Bar Camp Ottawa on writing for the web.
- Ryan Lowe, who I met briefly at Demo Camp in November, and whose blog I have read.
- Mark Levison, whose tool scrum I checked out, and who has a blog.

Budget Surprises: What's Your Latte Factor?

noreply@blogger.com (Lisa) — Thu, 30 Nov 2006 16:48:00 +0000

It's surprising how small expenses add up when you buy them regularly. For example, I just logged into Spending Profile and noticed that my spending in the restaurants category was 3 TIMES what I had budgeted! I have to admit I know why. I buy my lunch at work. The prices are low; I can get good lunch for $4 to $6. This is much less than I would pay at a restaurant outiside the office. So I feel I'm getting a good deal, plus it plays to my laziness as I don't have to pack a lunch. But I buy lunch every day. It adds up. I've spent $120 on lunches this month already.

David Bach refers to this in his books as the "Latte factor". If you buy a coffee once or twice a day, it adds up to a small fortune over time. Different people have different Latte factors. The problem is, many people don't even know they have a Latte factor, since they have never analyzed their spending habits.

The first step in reducing or eliminating your Latte factor is identifying it. My Latte factor jumped out at me from the pie charts in Spending Profile. The Restaurants slice was simply too big.

What to do? $120 is more than the monthly amount I would like to be spending on restaurants. I know it will be more effort, but I have a feeling I'll be packing leftovers for lunch more often now!

Family Finances

noreply@blogger.com (Lisa) — Wed, 29 Nov 2006 03:25:00 +0000

I got a really great email today from a friend of mine who just got married. She would like to use Spending Profile with her husband and was asking if the service could handle joint or shared accounts.

Your site and blog look good! As I mentioned when you first talked to me, it would be really useful to have the tool be manageable for a couple (or even a family’s) expenses rather than just an individual’s expenses. I would like to try out your site, but it doesn’t make sense for us unless we can do everything i.e. common expenses, Emily personal expenses and Emanuel personal expenses. Hmm, I just thought of something. I suppose that we could have 3 separate accounts. Is there a way to link accounts or to combine the accounts, so that for example I could combine half of the common expenses plus my personal account to see what I actually spent?

This really got me thinking. It's not the first time I've been asked about family accounts. Many people haved shared financial responsibilities, and they cannot and should not manage their finances in isolation.

In a word, YES, I definitely plan to add this functionality. The challenge will be to stay in line with Spending Profile's aim of being simple to use, and not to turn it into a complex system with too many features many people won't use.

It should be possible to open a single "joint", or "family" account to which multiple people will have access.

As for organizing the transactions, I think this will tie in quite well with the feature I described in my last post on Sub-categories. Joint or family accounts could have a top level of categories, one for each person, as well as a common one for shared expenses. For example, Emily, Emanuel, and commen could be at the top level, and then with each you can define your own categories and subcategories.

Different views of the data could hide or show different people's transactions. For example, there could be a View menu with options such as,
- View Emily's transactions only
- View Emanual's transactions only
- View Common transactions only
- View All Transactions
- View a Combination of the above...

Where the last option would allow you to pick exactly what you want to see. For example, you could choose to see all of Emily's transactions, combined with 50% of the common transactions, to get your full picture. Hm, perhaps that should be the default. And you could choose a split different from 50/50 if desired (I'm thinking of families where the income is unequal, such as where one partner is a full-time parent).

This should be extensible to families with children. Then we will no doubt get into hiding transactions from certain members! This could get interesting... And what about allowance, or transfers from one family member to another?

Again, I do have to keep in mind that Spending Profile is meant to be simple. I'm not attempting to rewrite Quicken or MS Money. I think this functionality will be a valuable addition, and the challenge will be to find the right balance.

Expense Categories: Subcategories

noreply@blogger.com (Lisa) — Tue, 28 Nov 2006 03:05:00 +0000

I have noticed that people using Spending Profile like to categorize their expenses at multiple levels. For example, they will create categories called House: Gas, House: Mortgage, and Investments: RRSP. This should be more naturally reflected in the software. You should be able to create a supercategory called House, and another called Investments, to which you add the desired subcategories.

Remebering to Budget

noreply@blogger.com (Lisa) — Sun, 26 Nov 2006 03:50:00 +0000

The hardest thing about budgeting is remembering to do it. I would like to add something in Spending Profile to help make this easier. I find the best way to remember to do something is to send myself an email about it. This works better than to do lists, which so often get written but never read. So far, I have two ideas:

1. Send members a reminder email with a message to log on and add their latest purchases. You would have the option of how often you wish to receive reminders, and you could turn them off if desired.

2. Send members a monthly statement showing their current financial situation in a few simple charts, plus a summary table. This serves as a reminder as well; if the charts are empty, there's some catching up to do!

I have already implemented option 2; the first statements were mailed out on November 1st. The code is ugly though, and I need to rewrite it before the next mailing. I have set up option 1 (reminders) in the database. Writing the script will be next.

Financial Goals

noreply@blogger.com (Lisa) — Fri, 24 Nov 2006 13:45:00 +0000

Hey, I just thought that it would be neat to somehow tie people's financial goals into their Spending Profile accounts.

Goals should be clearly visible at all times, to remind us of them and encourage us to save towards them.

How could goals be related to a client's data? Let me think. Well, currently, we have a budget tool. You set budget targets for each spending category, and compare them to your actual spending. To relate this to goals, we could calculate how much under or over your targets you are overall, and report that amount with a message. For example, "This month, you are $134.50 closer to buying a yacht.".

What about having a PAGE DEDICATED TO SAVING??! Hey, what about it? It could show your saving (or overspending) for each month. It could allow you to set a date for achieving each financial goal, and tell you how much you need to save each month to get there. Ooh! What do you think? Hey, and if you are overspending, it could tell you which of your categories you have the worst spending habits in. Hey, now that's a Spending Profile! :)

Feedback and New Direction for Spending Profile

noreply@blogger.com (Lisa) — Thu, 23 Nov 2006 02:47:00 +0000

I got some great suggestions from people at DemoCamp last night. I light of these, I'm planning to change the model by which Spending Profile is offered to the public. This will be a starting point, and we'll see how it progresses from there.

I'm going to try using Google AdSense to make money, instead of charging for the service. This way, members will be generating revenue by clicking on targetted ads.

Let's go figure out how to set this up!

DemoCamp Ottawa

noreply@blogger.com (Lisa) — Tue, 21 Nov 2006 23:04:00 +0000

Last night, I presented Spending Profile at DemoCamp in Ottawa. There were about 55 people there, and I got some great feedback on the site.

DemoCamp is an ad-hoc gathering born from the desire for people to share and learn in an open environment. It is an intense event with discussions, demos, and interaction from attendees.