Top 3 Financial website picks for this week

I love surfing the internet for information and there are some blogs I follow because the authors really know their stuff.  Here are a few good financial articles that appeared over the Internet this week:

Retirement savings

One of the most difficult things about saving for retirement is figuring out that magic number. This blog post discusses the two different phases of retirement and how to save for both.

 http://www.rhondasherwood.com/blog/bc-financial-advisor-planning-for-the-two-phases-of-your-retirement/

Insurance myths

Insurance companies are notorious for taking your money when things are good and then failing to deliver coverage when you need it. This article discusses eight insurance myths you should be aware of. The most interesting one? When it comes to standard home insurance, insurance companies will only cover the depreciated value of a household item if it's stolen or damaged. So even though your stolen TV may have cost you $3,000, and a replacement will cost you $5,000, an insurance company may only offer you $1,000 to replace it!

http://money.ca.msn.com/insurance/insight/eight-insurance-myths-1?ocid=tweet

The difference between in-law suites and rental apartments

With today's housing costs soaring, many home owners are tempted to offset their mortgage costs with a rental apartment. If you're buying a place that boasts an in-law suite, however, beware. It's not the same as a rental - mainly because it's illegal to rent out.

http://realestate.yourmoney.ca/2011/11/what-is-the-difference-between-an-in-law-suite-and-a-rental.html

What do Accountants Know About Mortgages? Quite a bit actually.....

 

 

When planning for retirement, which vehicles offer the best return on your investment - investing in RRSPs, Tax Free Savings Accounts (TFSAs), financial assets that generate capital outside of registered plans, or making accelerated payments on your mortgage? 

That was the question posed by the Certified General Accountants Association of Canada in its latest research report - and its findings may surprise you.
While most people would assume RRSPs are the best route to go - especially given the marketing push they receive by financial institutions and advisers - they actually don't give you the biggest bang for your buck if you factor in the amount they're taxed after retirement. The research report revealed that, for lower income earners without dependents, RRSP investments are your best savings option if you're renting, and don't have a home that is generating equity. If you are a homeowner, it makes more sense to accelerate your mortgage payments rather than set aside 2% of your annual income in an RRSP because you'll get twice the return.
 If you're in a higher income bracket, a combined RRSP and TFSA is the way to go if you're planning on investing more than 10% of your annual income, rather than simply saving in one vehicle or the other, the report says. This is assuming you take the tax return from your RRSP investment and reinvest it in a TFSA. This lowers the tax rate after retirement because you're splitting your savings between the two vehicles.
That being said, the CGA discovered that - regardless of your income bracket - accelerating your mortgage payments yields the highest returns compared to other savings options. However, every situation is different, and we're not all text book cases. If you're thinking about saving for retirement, make sure you thoroughly assess your options and determine which route makes the most sense for your particular circumstance.
To see the report in its entirety, visit the website here:
http://www.cga-canada.org/en-ca/ResearchReports/ca_rep_2011-11_planning_for_retirement.pdf

Real Estate Investment Advise From Twitter

Whether you're a prospective real estate investor, or someone who's simply in the market to buy a primary residence, we can all benefit from the nuggets that were shared via Twitter during the Real Estate Investment Network (REIN) BC Workshop last Friday (@REINCanada). Below are a few highlights that attendees wanted to share: 1. Before purchasing a property, always get a survey. That two-dimensional drawing might bring to light information that you may have missed otherwise - such as the actual property line of a residence. 2. Take your tape measure to every viewing. You never know when certain measurements will come in handy - especially when you're trying to visualize the property later. 3. When obtaining a mortgage, don't be afraid to go for the going 4-year rate instead of the traditional 5-year. The rates are often lower, and many times a 4-year rate is all you need. 4. Don't believe the stats - always think regionally. While Canada's real estate market may be heating up, the regional pocket your interested in may be a buyer's market - and, resultantly, may offer some great deals.

Dear 1% - Occupy This!

Yes that's right!  We are everywhere.  That thing in the park is just a rouse to keep your eyes off the real Revolution.  So listen up you 1% because this isn't going away. 

Stop acting like sheep.  You are so very clever to see a trend and quickly write a marketing campaign around one of your products and show the market just how much you care.  Your campaigns are entertaining and clever but really don't play out all that well.  So here's some ideas:

• on one hand you preach the new trend of savings and have rushed to get budgets bearing your logo to smart phones across the land.  Better idea - practice what you preach.  Take responsibility for the mess you have created and work with your clients to make it better. (Kudos to Bank of Montreal who seem to do this more than others)
• Big buck bonuses area based on quarter earnings:  Better idea - adopt a new model for business that encourages investors to buy into a long term vision.  Hold back the executive big buck bonuses for 5 years and then rate the overall performance of the bank. 
• Staff are treated like chattels and measured on performance and out comes on a yearly bases.  Better idea - your staff are the 99%.  If you want treat the 99% better then start on your own door step.  Develop mission statements that mean something. Hire people who believe in your vision and will take pride in their work and not just the top 1% of grads who are all competing for the top spot and will stop at nothing to prove their worthiness.  
• You're products are all designed to make the 1% more money.  Better idea - tell us how you make your money.  Most of the 99% have no problem with idea of profits and we appreciate your service. But when you boast record profits as Rome is burning it's a little hard to take.   Give more back. 

Yesterday I had a the honour of speaking with someone who like me had left the banking system over disillusionment.  This person told me they left because they were tired of lying to people.  Every month there was a new product to push and a new script complete with answers for objections.  When I started Mortgages for Women I did my own research over a two year period.  I worked with a marketing firm that did a ton of focus workshops for me.  The message was clear.  "Give it to me straight, give me a go forward plan, don't base #'s on assumptions, and don't make it sound likes it's all about me."  Sound familiar?  Yup - that's what the 99% are asking for.


 

Don't Get Caught Off Guard By Rate Hikes

If you have a variable rate mortgage, you're not alone. A new Bank of America/Merrill Lynch report reveals that 66% of Canadians now have mortgages that are floating with prime - up from the typical 30%

There's absolutely nothing wrong with having a variable rate mortgage, but the Merrill Lynch report reiterates that these mortgages would be affected by an increase in the Bank of Canada's overnight lending rate - something not all mortgage holders are prepared for.

While the Federal government changed the mortgage rules so that anyone applying for a variable rate must now be qualified on the five-year fixed, let's be realistic - not everyone ends up paying that higher rate. To free up monthly cash flow, most mortgage holders prefer the lowest rate possible so they can afford additional expenses more comfortably. Judging by the Bank of Canada's most recent announcement, it doesn't look like it's going to be raising interest rates anytime soon - but that doesn't mean you shouldn't get your finances in order now.

At one point, your household was approved on the going five-year fixed rate - so it might be a wise move to take a look at your budget, trim frivolous spending and increase your mortgage payment. That move will lessen the blow when rates eventually rise. Because they will rise - and when they do, they may increase quicker than you currently expect. As little as a 2% increase in the lending rate will erase any savings variable rate holders are currently experiencing. If the Bank of Canada increases its lending rate by increments of 0.5%, you'll only have four months to adjust.

Financial Literacy - Day 3 - the 5 C's

 

Applying for credit can be very frustrating.  If you read enough in the media you would think Credit grows on trees.  There are certainly some circumstances where credit may seem easy to get but at the end of the day most credit applications are assessed on the 5 C's of credit.  Credit applications are designed to capture your information in a format that addresses the 5C's.  Where the disconnect usually occurs in the lack of due diligence a company does to verify the information.  So just exactly what are the 5 C's?

1) CREDIT:  Lenders will take a look at your borrowing history and see how you pay your bills.  This is your credit report and confirms if your payments are made on time.


2) CHARACTER:  An application tells a lender a lot about you personally.  They are looking how long you've been on your present job and how long you have been in your line of work.  Is your income reasonable for the type of job you do.  For example if you declare you work in a grocery store and you make $75,000 a year that might raise a red flag.  But if you say your the manager of a high end grocery store and you make $75,000 a year that is more reasonable.  Make sure your employer and occupation correctly reflect what you do.  Someone who moves every six months may not necessarily be a good credit risk to a lender.  A lot of recent credit inquires might alert a lender to think you are busy seeking credit and will affect your quality of application.  Lenders are looking for a stable client who has a decent job history and some stability of location. 

3) CAPACITY:  How will you service the debt?  Does your income and existing payments leave enough to provide you the "capacity" to service the new debt.

4)  CAPITOL:  This is your overall net worth.  How much do you have in savings and rrsp's?   In the case of buying a home your capitol would be your down payment and lenders want to see where it's coming from.  If you are borrowing money for your business it's also expected that you will use your own money or "capitol" and lenders want to know where it came from. 

5) COLLATERAL:   What are you using to secure the loan?  In the event of car loan the collateral will be the vehicle, if the funds are for a mortgage the house will be the collateral.  Proper collateral often reduces the risk of the loan. 

The next time you fill out an application for credit pay attention to the questions.  You will be able to identify which one of the 5 C's the question applies to.  Try to give the lender a proper picture of you situation but don't misrepresent yourself.  That's called fraud and comes with it's own consequences. 

Time for the Money Talk

It's day 2 of Financial Literacy month and time for a rant.............

How often do you and your partner talk about money?  All this financial literacy stuff in the news should be telling you how badly you need to get your head around this subject.  And honestly, its no big deal .  It comes down to this.  How much money do you make?  How much does it cost to provide shelter?  How much does you life style require? How much are you saving? 

Isn't it funny that all the corp speakers who have made the system so complicated are now trying to shove literature down your throat?  I for one have had enough.  The biggest enemy to your money are the people trying to get you to spend it.  And it's safety in numbers!

Last night a watched an episode of "Till Debt Do Us Part' and Gail, our BFF in money, sat a whole family down and did a budget.  Everybody got her straight talk.  I loved the fact that there was no pitch, no product, nobody with all the answers and no body trying to sell the family anything. Straight talk!  Every family needs to get busy and get their head around that money doesn't grow on trees.  Besides, it makes it easy for parents to say no.  If you watched the episode you would have been very proud of the kids and how engaged they were.

When I left the bank it was because I was sick and tired of the scripts.  What was so wrong with instead of telling clients a pitch we just said, here's the product, here's how the bank makes money off it, and here's what it does for you.  Honestly, that's the talk I have with all my clients.  We need services and we don't mind paying for them but we don't want to be ripped off.  All we need is a little Straight talk and lot less pitch.

Agree?  then leave a comment and help me send a message because you know the "corp speaks" are watching this channel.  

Welcome to Financial Literacy Week. Let's Start with Life Insurance!

November has been officially called financial literacy month.  The Government has put a lot of thought into educating Canadians about finance.  I applaud their efforts and give a big standing ovation to Finance Minister Jim Flaherty for his speech yesterday given at the Downtown Toronto YMCA. He said Canadians shouldn't need a magnifying glass, a dictionary or a lawyer to understand what they are signing at the bank.  HOOORAYYYY!!!   Have I not been saying that for years?


I will have a lot to say about financial literacy over the coming month but for today I want to talk about Life Insurance.  Like you this is always the last thing on my mind except that today we had some tragic news in our office.  Our client who's mortgage was closing today died in a single vehicle car accident last night.  We are devastated.  I personally loved working with this client.  There were a whole pile of circumstances surrounding her mortgage but let's just say her life was about to get a whole lot better.  I am sure yesterday was one of the best days she had in a long time. 

We worked hard on her mortgage and put together a package that was going to change her life. The day she came into sign the documents she was over the moon.  When it came to the form asking her if she wanted life insurance she waived it.  I know life insurance gets a bad name especially when it's offered by the lender but just for today I'm going to rant.

Life Insurance sales people would tell you the bank's mortgage life insurance is crap.  Bank's will tell you life insurance you buy outside what they offer does not cover the mortgage and therefore crap.  So who's right?  Seriously, I don't care.  But what I do care about is that you have SOMETHING!!  Please understand that signing up for life insurance is not a life time commitment.  You can cancel policies anytime you want so that's probably a more important question to ask than to waste brain power trying to figure out who's ripping you off. 

The life insurance we offer covers you from the day you sign the documents.  If you walk out our door and get hit by a bus you are covered.  When you are buying a home the closing is coming even in the event of your death and the burden to close will fall on your estate.  If you have no insurance prior to arranging your mortgage for goodness sake take the deal.  You have the luxury of shopping it around after you leave the office.  

I am not a licensed life insurance sales person and I tell everyone that.  If making money selling life insurance was of any interest to me I would give up my career as mortgage broker.  But just for today I am going to ask you to start Financial Literacy month by reviewing your insurance policies.  Let's start with the "hit by a bus" theory and go from there.  I agree it's really easy to be over insured but I wish I could have last week back and make my client change her mind.  Over insured until you have time to review is better than nothing at all. 

Sorry to start the month on a downer and I promise it will get better from here.