Government Issues a Financial Toolkit for Canadians

In an effort to help Canadians make better decisions when it comes to spending and saving their money; the federal government has developed a Financial Toolkit.  The Toolkit is designed to help Canadians make sense of the many financial questions they face every day.

 

With consumer debt at record high levels; the government’s intent is to promote financial literacy among Canadians.  The kit was created in partnership with the Financial Consumer Agency of Canada, the Investor Education Fund and l’Autorite des marches financiers.

 

Available both on-line and in print form; the Toolkit includes worksheets, questionnaires, quizzes, case studies and educational videos.  The goal is to educate Canadians so they can make more rational and responsible financial decisions.

 

On a national basis, the average household debt stands at 152% of disposable income.  This means for every dollar of income brought into the house; after taxes have been paid, the household owes $1.52 in debt.   This is just shy of the 160% debt level both the U.S. and the United Kingdom reached just prior to the housing market collapse in 2008.

 

Economists believe the high level of consumer debt is a direct result of the low interest rates that have been in place since the 2008 crisis.  The low interest rates are part of the stimulus designed to boost the economy by making it less expensive to borrow and spend.

 

No one likes to be told how to spend their money; and I know some of you find it difficult to talk about your debt, but ignoring it won’t make it go away.   If you prefer to deal with it on your own; check out the government’s web site at:  www.fcac-acfc.gc.ca/ft-of/home-accueil-eng.html  and get some ideas.

 

However, if you prefer a more personal plan designed around your specific needs; give me a call, I am always happy to help.

 

Have a great weekend,

 

Tracey

 

Source:  Advisor.ca

 

 

Financial Tips for Divorcees

The majority of common-law and married couples have shared assets.  These include owning a home together (72%), joint bank accounts (64%), joint credit cards (52%) and a joint Financial Plan (64%).

So how do you regain your financial independence after the break up?

With divorce proceedings taking longer, 21% lasting more than two years, it makes it even more challenging for those trying to get back on their own two feet.  “Many people aren’t prepared for the costs associated with divorce and how their lifestyles may change afterwards,” says John Tracy, senior vice president, TD Canada Trust.

Here are five tips to help those new singles re-establish their financial stability;

1.       Get Started.  Know your current financial position; you will need to divide the assets and liabilities you and your partner owned together, and figure out what liabilities you will be responsible for.

2.      Re-evaluate goals.  If you partner was the one who took care of the money related decisions, it’s time to get a handle on the household finances and adjust your investments accordingly.  Work with a Financial Planner to create your own Financial Plan; this will ensure you achieve your short and long term goals.

3.      Focus on building wealth.  Set up a pre-authorized transfer of monies from your bank account into your RRSP or TFSA.  If you can’t afford a lot, look for an investment that has a low minimum to get started.  Make sure the goal is on investing and not just saving, everyone has a different risk tolerance so pick an investment that has the right mix of safety and growth for you.

4.      Review your Insurance Policies.  Many couples get joint life insurance policies to save on premiums, but now you may need to split the policy or get your own.  You may also want to look at a Critical Illness or Disability policy to cover expenses if you were unable to work for a period of time due to illness or injury.

5.      Track your progress.  Review your Financial Plan on a regular basis; as your new life evolves it will need to be updated and changed.

Now that you are single your priorities will change, ensuring your financial stability should be at the top of your list.  If you need help creating a budget to get started, or revising your current Financial Plan; don’t hesitate to give me a call.

Have a great weekend,

Tracey

 

Source:  Advisor.ca

 

QE3 and What it Means

The Federal Reserve announced yesterday it will spend $40 billion per month to purchase mortgage-backed securities because the US economy is too weak to reduce its high unemployment.  The Fed said they will keep buying bonds until the job market shows substantial improvement.  The Fed also extended the plan to keep interest rates at record-low levels until mid-2015. 

Three years into this stuttering recovery, stimulus seems to be the name of the game.  Canada’s sluggish economy will likely get an indirect nudge from the stimulus measures announced Thursday.  Furthermore, China is likely to join the US and Europe’s lead and introduce their own stimulus package later this fall.

“It’s a reflection of the times.  It tells us the enormous challenge the global economy is still facing,” said Craig Alexander, chief economist for TD Bank. 

The bond purchases are intended to spur borrowing and spending by lowering long-term interest rates.  Purchasing mortgage-backed securities and other forms of asset purchases the Fed hopes to revive America’s housing market.  Since the 2008 financial crisis the Fed has purchased $2 trillion in treasury bonds and mortgage-backed securities.   

Skeptics caution that more bond purchases may increase the risk of higher inflation and do little to benefit the economy as rates are already at near record lows.

The Fed is under pressure to act because the US economy is still growing too slowly to reduce the high unemployment rate.  For more than three years the unemployment rate has topped 8%.

The benefit to Canada is that anything that helps the US economy indirectly helps Canada.  Canada’s snail passed recovery is mainly attributed to the weakness in its exporting sector; particularly shipments to the US, our largest trading partner.

The real-world impact of these stimulus measures could simply be to raise business and consumer confidence, boosting investments and household spending. 

Some analysts say not to expect lasting benefits, after the initial rush, economies and markets will again return to levels that reflect the fact that fundamentally little has changed.  In several countries, both governments and households need time to repair the damage caused by years of reckless borrowing and spending.

“History tells us financial excess is usually followed by financial stress,” says Craig Wright Royal Bank chief economist, “We had a decade of financial excess, so we have a decade of stress left, and we’re only half-way through it.”

So is the glass half full or half empty?  If we are half way through the difficult times then I still believe the investment strategy of getting paid to wait is our best option; besides we’re already half way there.

Have a great weekend,

Tracey

Source:  Advisor.ca

Breaking the Rules of TFSAs

The Canadian Revenue Agency (CRA) has sent more than 70,000 notices to Canadians who over contributed to their Tax Free Savings Accounts (TFSAs) in 2011, demanding they pay more tax for breaking the rules.

While it would seem the over contribution problem is chronic; the numbers are down from 2010 (103,000 notices) and the number of problematic accounts only represent 1% of TFSA holders’.  “This figure is significantly lower than the 1.5% who received proposed TFSA returns in previous contribution years.  The vast majority of contributors understand the rules.” Philippe Brideau a spokesperson from CRA said in an email.

TFSAs are simple in nature; they let Canadians earn money on their investments inside the account without tax implications.  The current maximum annual contribution is $5000 and like your RRSP this amount is carried forward if you don’t contribute in a given year.  Currently a new TFSA investor can contribute up to $20,000.

 Timing is Key

Account holders cannot withdraw and re-contribute large amounts in the same year.  If they do, they will be taxed on the over contribution.  Excess amounts are taxed at the rate of 1% per month for every month the over contribution exists.

Until the rules are clear to all investors, CRA says they will be flexible and waive fees for those Canadians who genuinely misunderstood the rules.   Of the 103,000 cases in 2010, 38000 have sent in payments while 22,500 were granted waivers.  The average penalty was approximately $318.

The CRA says there is more than $60 billion dollars currently invested in TFSAs.  In addition, Prime Minister Harper promised during his last campaign to double the annual contribution limit once the federal deficit is eliminated.

A TFSA is an excellent investment vehicle to add to your portfolio; however they do not make sense for everyone.  If you are unsure of the rules, or are wondering if they make sense for you; give me a call.

Have a great weekend,

Tracey

 

Source:  Advisor.ca