Frankly Speaking

Surviving The Holidays Without Racking Up Debt

Posted by Frank Wiginton on Tue, Nov 15, 2016

As we head into the holiday season, many will get the biggest surprise of all – not from the gifts under the tree – but from the credit card bill in January!

It doesn’t have to be this way if you do a little planning and stick to your list.  Below are some tips on ways to beat the January credit card blues sad

  1. Start by evaluating your gift list. Giving a gift is nice but not worth it if it is going to mean mounting debt, significant stress and anxiety. Start by speaking with your friends and family and seeing if they would be willing to do a Secret Santa exchange where you only have to buy one gift. You never know – they may be looking to save some money as well, and I am sure they would rather not have a gift if they understood the stress and anxiety it was causing.
  2. Set a budget on how much you can afford and determine how much you can spend on any one gift.  This can be the hardest one to keep but can make all the difference.
  3. Planning ahead is a must. Attempt to purchase gifts throughout the year so you don’t have a huge amount of expenses all in December.
  4. Only buy things on sale. If you are shopping year-round the item you would like to buy will go on sale. Every store has to turn over their inventory and will do it 3-4 times a year. In order to do this they will put the items on sale to liquidate the inventory.
  5. Use your debit card. This way if you don’t have the money you can’t buy it!
  6. Set up a separate savings account. Set up to have $10 every week taken from your bank account and transferred to this savings account. Come the end of the year you will have $500 saved for the holidays! The best part – you won’t even notice that $10 missing every week but you will notice how great it will be to have that $500 to pay for Christmas.
  7. Use gift cards to stay on budget. If you set a budget of $50 a person, it is easy to spend over that limit due to taxes and extras. For example you find a great item that is $54.99, you think to yourself – that’s about $50. The problem is once you pay for it the total comes to $62.14! Now you are nearly 25% over budget. Another example is when you buy multiple gifts. You buy them a DVD – $19.99, a book $22.99, and a $10 Starbucks card. Add it up throw in the taxes and your total is… $58.57!
  8. Try buying gifts online. On eBay, Craigslist, Kijiji, you can find new and used items for a fraction of the cost. Books, CD’s, DVD’s, etc are especially abundant and inexpensive. Be sure to include any shipping costs and taxes in your calculation of cost to avoid spending more than your budget.
  9. Buy expensive items after Christmas. If you are buying an expensive item (electronics, furniture, appliances, etc), cut out a picture of it from a flyer or catalog and put it in a card to give to them Christmas day. Then go and buy it after christmas when the boxing week sales are on and save a bundle!

All this is can help to make your Christmas more affordable and reduce your debt and your stress. Let’s not forget what Christmas should really about, the festivities, the traditions, seeing old friends and family. Do you remember all the Christmas gifts you were given last year? Probably not, but you likely do remember the time you spent with family and friends. these are the gifts you will carry with you year-round.

Tags: credit card, debt consolidation, christmas gifts, eBay, Gift Cards, holiday budget, holiday cards, holiday shopping, budget holiday, Craigslist, debit card, Kijiji, personal credit, savings account, Secret Santa, Debt

Mortgage Insurance Protection – Get coverage on your own!

Posted by Frank Wiginton on Tue, Nov 15, 2016

I write these articles because I get sick to my stomach every time I see the media or a company mislead the public on a personal finance issue. The latest was an advertising supplement in the middle of the Globe and Mail business section. It was entitled “Mortgage insurance among ‘must-haves’ for first-time homebuyers” and written to look like a newspaper article and did not have an author’s name on it. For good reason, it made the claim that mortgage insurance was a must-have so buy it through your lender! Interestingly enough the article was produced by Genworth Financial Group who sell mortgages and yes you guessed it MORTGAGE INSURANCE.

I agree that people should put proper protection in place for their loved ones but not for their mortgage provider. I believe that you are far better off applying for your own life insurance protection through an independent insurance broker. To understand the reasons why see the article below.

Bank Mortgage Life Insurance: Who Is Protecting Whom?

Buying a house involves more than just looking through listings and visiting open houses. Somewhere along the way, purchasers must apply for a mortgage. I recently met with John* and Susan*, a married couple with two children, ages 3 and 1. They purchased a home, met with a mortgage representative from one of the Big Five Banks and received a $300,000 mortgage. They also opted for the bank’s mortgage insurance.

They told me that they answered no to the health questions and checked the box that read “we would like our insurance to start as soon as our application is approved”. They did this without as much as an afterthought. To them, having insurance meant that if one of them were to die, money would be paid out for the other’s use.

I explained to them that mortgage insurance may be cancelled by the bank if they move to another financial institution, if the mortgage is in default or paid off; and it may not be guaranteed at the mortgage renewal date. They admitted they were not informed of this. I continued to tell them that the bank covers only the value of the mortgage upon death. For instance, in three years time, if the mortgage is paid down to $220,000, upon death, the bank will only cover the decreased balance: $220,000. Meanwhile, the premium amount stays the same; it does not decrease in conjunction with the mortgage.

I told them to pretend that John chose to solely use the bank’s insurance and that three years from now, on his way home from work, he passes away from a sudden heart attack. Devastated and alone with two young children, Susan would contact the bank about the insurance, thinking that it would provide financial protection to her and the kids.

John looked uneasy and admitted that his dad passed away from a heart attack a few years ago. As well, John was diagnosed at the age of 9 with a heart murmur and answered NO to the question “have you ever had or been treated for heart disorder?” simply because he forgot.

I explained to John that the bank performs “Post Claim Underwriting”, meaning medical issues are explored upon claims (i.e. after a person dies). If John did die, his medical records would be obtained and a claim could potentially be denied because he had failed to disclose the heart murmur. This would result in Susan and her family not receiving any money from the bank, thus causing serious financial hardships for the family.

When insurance is applied for using a licensed Insurance Advisor/Broker, all due diligence is performed up front; thorough medical questions are asked and if required, a nurse visits your home or office to perform a physical.

The bank’s insurance product did not do what John and Susan thought they had hired it to do: financially protect the surviving spouse and family. Instead, it only protected the mortgage. Granted, the paid off mortgage is one less expense that Susan would have to worry about but with her not working, the family’s financial future could be in serious jeopardy.

With John’s income lost forever, Susan would have to find a job to pay for childcare, household expenses, daily bills, groceries, car payments, future education, outstanding debts, taxes as well as final expenses for John.

My clients are always advised to look at the bigger picture: insurance should protect more than just the mortgage on a home. When looking for a house, apply for insurance outside of the bank right away – you can lock into a rate at a younger age and continue to fund the policy without having to worry about “what if?” Not to mention, the policy is owned by you…it can follow you if lenders are changed.

Furthermore, structuring a proper insurance plan will allow you to pay a level premium for a set amount of coverage. If monthly premiums are $70 per month for $300,000 of insurance, this is the amount the beneficiary of your choosing will receive, not the bank.

In addition to dealing with a realtor, a mortgage representative, a home inspector, a moving company and all the other types of businesses that are needed prior to moving into a home, always include a licensed Insurance Advisor/Broker on that list. In fact, a number of my clients are mortgage brokers and mortgage representatives with the banks.

When the mortgage agent at the bank tells you it’s a good idea to buy the bank’s mortgage insurance and asks you to check the box reading “I/we would like our insurance to start: as soon as my/our application is approved”, check the “initial to waive Life Insurance” box instead. If the Bank or Mortgage broker asks why, you’ll already know the answer.

*Names in this article have been changed.

Tags: Mortgage, health insurance, mortgage life insurance, Financial Planning, Insurance, life insurance, mortgage insurance, mortgage protection, mortgage refinance, term life insurance quote, Debt

5 Financial Lessons I Learned While Swimming With The Sharks!

Posted by Frank Wiginton on Tue, Nov 15, 2016

As you can see by the picture below – I am not in a cage and I am not wearing protective gear! There was no need! This was a dive I did in the Bahamas, just off Nassau Island.

Before I get to my lessons learned, I strongly encourage everyone to learn more about these incredible creatures that play such a critical role in our ecosystem. A fun and easy way to do this is to watch the movie Shark Water. This is a docudrama and is very entertaining and enlightening.  http://www.sharkwater.com/

Do your homework before jumping in the water!

Before even considering doing a dive with sharks I had learned a lot about them. With this knowledge I had more interest in them and sought out the opportunity to do this dive. By the time I was ready to enter the water, I was calm and ready for the dive.

When it comes to your finances it is just as important to make the effort to learn more about them. The more you learn and participate in your finances the more opportunities you will find. By the time you enter the waters of the markets you will be able to approach it in a calm manner and be ready to deal with what ever happens.

sharkGo with a guide.

Even with my knowledge of sharks, I would have never considered doing this dive on my own. Terri (a very cheerful and fun women from Australia) was our dive master. With more than 300 dives and 50 shark dives under her belt, the rest of us listened carefully to her instruction and respected her knowledge. It gave us all greater comfort and confidence, and reduced a lot of the anxiety and stress! She coached us and put forth a comprehensive dive plan so we knew exactly what needed to be done and the likely outcome of the dives.

When it comes to your finances you should find a guide to help you. Your guide should be qualified with lots of experience. They should be a Certified Financial Planner (CFP) with at least 5-10 years of experience. Your guide should prepare a comprehensive written financial plan so you know exactly what needs to be done and what will be the likely outcomes. This will help highlight the risks and dangers to help you make better decisions. This plan will give you greater comfort and confidence, and reduced a lot of the anxiety and stress!

Not all sharks are vicious.

Now some of you have looked at the pictures and thought: JAWS! when in reality these are not Great Whites. These are Black Tipped Reef sharks. They are active predators of small bony fishes, cephalopods, and crustaceans. They have little to no interest in people. There are many other types of sharks in the ocean, most of which are timid and scared of humans.

The same goes for financial service professionals. When you go looking for your guide beware the vicious ones! Start by speaking with friends and family – people you know and trust. Go to the Financial Planners Standards Council (FPSC) to search for a CFP. http://www.fpsccanada.org/public/finding_planner Remeber that not all advisors are planners – ask them if they will prepare a comprehensive written financial plan and if they can provide you a sample of an annonymous one. Also remember that not all planners are out to sell you something. Some truely want to help you.

You don’t have to get bitten!

As we prepared for the dive one of the things Terri talked about were the risks and uncertainties involved (and man you should have seen the waiver we had to sign – AND have witnessed!). Having  a lot of experience with these dives she also explained all the actions we were going to take to mitigate the risks and help to prevent some of the uncertainties. For instance – we all had to wear dark wetsuits for the dive – this helped to change the colour of our skin so we didn’t look the colour of the sharks fish food. Now our hands were still bear – so to mitigate the risk of the sharks MISTAKING them for a fish they might eat, we were told to keep our hands within our body and not use them for swimming (if you waived your hand around they may see the movement in the water and think it was food and you would lose your hand.).

So by doing your homework and understanding your finances while working with an experienced guide, can really help to reduce your risk. Your CFP can, through preparing a comprehensive written financial plan, identify all the potential risks you may face and develop strategies to mitigate those risks and uncertainties. An idea might be to chang the colour of your investments so they don’t get eaten by the markets!

shark

Every shark for themself.

Watching Terri feed these beautiful creatures was an amazing sight of nature at its purist. When she pulled out a piece of fish and held it out for the sharks to eat, many turned and lunged at it with no consequence for the other sharks or anything else that swam between it and the food. As we divers knelt in the sandy bottom and watched the sharks swim in circles around us, you quickly realize that they don’t have the slightest interest in you. You are just another rock on the bottom, or creature of the ocean. When the fish bate was gone many of the sharks simply swam off in search of their next meal elsewhere. Everybody asks me if I was worried if the sharks would bite me, and my reply was “NO! I am not their food, and I am not threatening them – they have no interest in me!”

The same is true when it comes to your finances. If you dangle your investments in an ocean full of “sharks” you may get many lunging at it with no real consequence or care for what happens. If you don’t have a plan to manage your investments or direct what happens they will likely sit like rocks on the bottom of some investment account with little to know attention being paid to them. Many of the “sharks” in the financial industry are only interested as long as there is food. Once they have eaten and the food is gone, they simply swim off in search of their next meal. That why it is so important to work with a Certified Financial Planner who will help to monitor your investments and make sure your comprehensive written financial plan is being executed properly. Remember nobody cares more about your money than you do! If you haven’t heard from your “shark” in a while – then give them a call. Take care of what you have and you will have something to take care of you.

Another thing I learned is that if you want to have a successful event – BRING FOOD!

Please take some time and learn about these increadible creatures and the important role they play in our ecosystem. Visit http://www.savingsharks.com/ and http://www.sharkwater.com/ to get started.

Frank

Tags: certified financial planner, investing, Financial Planning

Mapping out a prenup

Posted by Frank Wiginton on Tue, Nov 15, 2016
canadian business

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Mutual Funds Or ETFs? Exchange-Traded Funds Offer More Diversification At A Lower Cost. Do Mutual Funds Still Belong In Your Portfolio?

Posted by Frank Wiginton on Tue, Nov 15, 2016
National Post

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Is it better to rent than own?

Posted by Frank Wiginton on Tue, Nov 15, 2016
Canadian Business

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Past service: To buy or not to buy

Posted by Frank Wiginton on Tue, Nov 15, 2016

Advisors

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Savings – Pay Yourself First!: Budgeting 101

Posted by Frank Wiginton on Tue, Nov 15, 2016

You have all heard or read it before: the best way to build wealth is to pay yourself first! Made popular back in the 1920′s it really didn’t take off until the 1990′s with David Chiltons book The Wealthy Barber . With advancements in technology and  payroll systems, the ability to automate this process has helped to make it a very simple and successful way to reach your goals. You can easily set up to have 10% of your earnings go towards your goals. Retirement saving, buy a house, new car fund, children’s education etc are all good examples.

The reason why these automated programs are successful is that once it is running you learn to live without that money and it starts to really add up!

For example if you make $55,000 a year and you put 5% towards retirement every year (ignore raises and inflation): in 35 years at 6% return you will have saved $326,500! @ 8% = $525,680!!!!  Would you really miss 5% of pre-tax income!

TIP: If you are going through a period of financial difficulty (laid off, medical leave, etc) you may want to stop any and all savings programs until your income comes back. I would rather you avoid accumulating debt at 7,10,12,18,26% while saving and earning 2,4,5,8%. The math will never make sense.

TIP: If you currently have a fair bit of debt and little savings you need to get aggressive and get rid of the debt! Once you have paid it down then get started on your savings. Read this article on how to effectively pay down debt.

Watch for my book “One Day A Month To Financial Success” due out October 2011!

Tags: Budgeting, Financial Planning, Savings, The Wealthy Barber

How To Effectively Pay Down Debt!

Posted by Frank Wiginton on Tue, Nov 15, 2016

If you have debt and are currently reading this you have already accomplished step 1.

Step 1 – Make the decision to tackle your debt once and for all!

This is a critical step to getting your debt under control. In our consumer based, got to have the latest STUFF, no matter what the costs, society it is no wonder many are living beyond their means and racking up the debt. So if you are ready to truly deal with your debt and give yourself a better quality of life repeat after me: I have more than enough stuff! I want rid of my debt, high interest charges, stress, and frustration! I AM READY FOR A BETTER QUALITY OF LIFE!

Now repeat it again!

Step 2 – Make a list of ALL your debt!

Gather up all your bank statements, credit card statements, store credit, car loans, personal loans, lines of credit, mortgage, etc. Now on one piece of paper (if it is a long list use legal length paper) or in a spreadsheet list each creditor, the amount outstanding, the minimum payment, outstanding available credit, and the rate of interest. If you don;t know or can’t figure out how much interest you are paying – then pick up the phone call them and ask them to tell you! If you have a “DO NOT PAY FOR 18 MONTHS” kind of loan then learn how much the interest is and be sure to pay it all off before it comes due.

EXTRA: If at this point you have debt payments that total more than 40% of your gross income, you should contact Credit Canada at 1-800-267-2272 or visit their website at www.creditcanada.com . They can help educate and organize you to pay off your debt. They will show you how to communicate with your creditors to stop interest charges and reduce your payments. They can also help you to protect your credit rating and prepare to the future.

Step 3 – Organize the debt from highest interest to lowest interest

Rewrite or sort the spreadsheet from highest interest to lowest interest. Example:

Creditor Amount Outstanding Minimum Payment Available Credit Interest
Department Store Card $      2,200.00 $     66.00 $ 300.00 28.0%
MBNA Card $      4,850.00 $   145.50 $ 250.00 24.5%
Master Card $      3,300.00 $     99.00 $ 700.00 19.9%
Visa $      5,275.00 $   158.25 $ 725.00 19.5%
Personal Loan $     11,000.00 $   220.00 $     - 12.5%
Line of Credit $       8,850.00 $   265.50 $ 1,150.00 9.5%
Car Loan $     14,825.00 $   450.00 $      - 6.5%
Mortgage $   248,000.00 $1,250.00 $  12,000.00 4.8%

Step 4 – Pay out highest interest debt first!

Be sure to make the minimum payment on all debt first. This will help to protect your credit rating. Then any money you have left over take and put it all against the highest interest debt to pay it down as quickly as possible. Now look at the bottom of your spreadsheet where you have listed the debt with the lowest interest rate. Do you have any available credit at these lower interest rates? If so I want you to max out these accounts to pay off the higher interest debt as soon as possible.

Step 5 – Close your credit!

For many once you have paid off the debt it is far too easy to rack it back up! Once you have paid off the debt (highest to lowest interest) close the credit. This will help you in the future to qualify for other credit, improve your credit score and make it easier for you to stay on track for debt elimination.

Be aware that for many it may take four or five years to payout debt. The secret is that once you do start and you see those balances going down rather than up it will make you feel better and help motivate you to stick with it. By using the services of a credit counselor you may be able to save thousands of dollars in interest and having someone to talk to and work with you to accomplish this goal can make all the difference. Call or go to Credit Canada’s website www.creditcanada.com to learn more. Be sure to check out a number of great tools they have on their site that can help you to pay off your debt faster and save you more money http://creditcanada.com/financialtools.asp

Watch for my book “One Day A Month To Financial Success” due out October 2011!

Tags: Budgeting, credit card, debt consolidation, Mortgage, interest, Credit Canada, creditcanada.com, Loan, Financial Planning, car loan, Credit Cards, financial tools, Debt, Budget, Line of Credit

Identifying Income: Budgeting 101

Posted by Frank Wiginton on Tue, Nov 15, 2016

There are two sides to a budget – Income and Expenses.

Many when they build a budget will take their most recent pay and use it to determine how much  income they have coming in every month. This will start their budget off by several hundred dollars!

First many get paid on a bi-weekly (every two weeks) basis. So simply multiplying by two will have you underestimating your income by 8.3%! This could represent your retirement savings!

Second Some of the deductions on your pay are considered expenses and should be put in the expense column. So you may end up double counting these expenses. Most common is retirement or pension contributions that come right off your pay cheque. Other items might be life or health insurance premiums, union dues, gym memberships, etc. These automatic deductions can skew your actual income.

Third – Depending on your income and the time of year that you run your budget you may have CPP and EI deduction being taken off or you may not. If you earn $44,000 or more you will max out your contributions to CPP and EI. Once you have reached this amount of income you will no longer have those deductions.

TIP:  If you make more than $44,000 the easiest way to deal with those deductions is to take the max CPP and EI amounts for the year and divide them by 12 and subtract that amount off your income. (2010 MAX CPP premium $2163.15 /12 = $180.26, MAX EI Premium $747.36 /12 = $62.28 )

If you are self employed, commission income, or variable income; take the income from last year and give serious thought as to whether this years income will be more or less and try your best to estimate what you think you may earn. Speak with your bosses about what they think is realistic and then once you have determined a number take off 20% to be conservative on your budget. Any extra that you do earn can to a seperate fund to pay for your “Nice To Have” goals!

If you have two or more incomes contributing to the expenses you need to do this for each one and add them all together.

To help you identify other income sources such as dividend and investment income, rental income, alimony/child support, etc; it is easiest to take last years tax returns and go through the 100′s and 200′s section of the T1 General. This is where you list all income.

Watch for my book “One Day A Month To Financial Success” due out October 2011!

Tags: Budgeting, CPP, taxes, income, EI, Financial Planning, Debt, Budget