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One of the most important financial planning steps you can do each year is to complete a Net Worth Statement. Your Net Worth is simply a snapshot of the difference between what you own (your assets) versus what you owe (your liabilities). Below is a sample statement.

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As a financial planner, I often observe when I meet prospective clients for the first time is their lack of an emergency fund as part of their cash management plan. Why do we need an emergency fund? At anytime, we could experience a situation where our cash flow cannot meet the demands due to an unexpected emergency. These range from the moderately inconvenient, like a major car repair, to the potentially disastrous, like the death or disability of an income earner, or a long period of unemployment. Some of these problems can be moderated by life or disability insurance, or by unemployment insurance, but some financial impact will likely remain.

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In June 2006, I attended the Morningstar Investment Conference, which focused on “Retirement Income Planning”. One well-known speaker, Moshe Milevsky, introduced the concept in retirement planning of not just how to generate retirement income in your portfolio by having a proper asset allocation (a mix of cash, bonds and equities according to your risk tolerance) but also the importance of product allocation.  Product allocation refers to your allocation to various products such as GICs, mutual funds, annuities and a new category called the “variable annuity”. This article focuses on the variable annuity as a consideration.

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If you invest in mutual funds, have you ever wondered how your funds get classified? What’s makes a fund, for example, a Canadian Balanced Fund, in the first place? That’s where the Canadian Investment Funds Standards Committee (CIFSC) comes in. As stated on their website (http://www.cifsc.org) “the primary purpose of the committee is to provide investors with a consistent set of mutual fund categories”.  Over the past several years, it’s been anything but consistent and especially difficult for advisors who need to do research on the funds they advise their clients on.

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Traditional mutual funds are set up in a “trust” structure. When you make a purchase, you buy “units” of a specific fund, for example, Fund A. However, if you decide to sell Fund A or switch to Fund B, outside a registered plan you incur a deemed disposition. If there is a profit, you’ll have a capital gain and may be subject to tax. Wouldn’t it be nice, if there were a way to defer the tax until you actually want to sell all or a portion of the investment? There is and the way is to use “corporate class” mutual funds. 

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Do You Know Your “Number”?

With RRSP season having just ended and tax season ramping up, the last thing on most people’s minds right now is planning for their retirement.

Whether you do your own investing on-line, use your local bank, broker, or a financial planner do you know your “Number”?

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One of the simplest financial planning steps you can do is to complete a Net Worth Statement each year. Your Net Worth is simply a snapshot of the difference between what you own (your assets) versus what you owe (your liabilities).

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On a Fixed Income? Give Yourself a Raise!

In my last article, I introduced the concept of annuities.  In this article, I’ll introduce a very intriguing concept, the “insured annuity”. It took me a few times seeing this concept presented to fully understand it, so if at first glance it seems complicated, that’s understandable.

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Annuities are an under-utilized product for those seeking consistent stable income, regardless of stock market conditions.  In simple terms, an annuity can be thought of as the opposite of a mortgage for a home.  With a mortgage, a financial institution gives you a specific amount with which to purchase a home and in turn you make regular payments back to them. With an annuity, you give the financial institution a specific amount and they in turn make regular payments back to you. This article is a brief overview of two primary types; the “term-certain” and the “life” annuity.

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