Your money news from Metronews.ca

Conquer savings paralysis by being a 1% superhero

Alison Griffiths, Metro Canada — Tue, 27 Mar 2012 13:00:00 -0400

Is your savings plan a one step forward, two steps back exercise? Do you make tons of excellent resolutions, only to do a financial face-plant when temptation beckons? Or perhaps you get distracted by job, family, life and never manage to keep track so you really don’t know where you are.

If you fit into one or more of these scenarios, a rescue by Superhero/ine 1% is in order. Yes, such a character exists — in fact, Marvel Comics has been beating down my door for the rights.

But while I’m waiting on millions in royalties, let’s put Superhero/ine 1% to work for you.

Say you earn $50,000 and are saving three per cent of your income ($1,500) annually by contributing to an RRSP, TFSA or a savings account.

Ten per cent is usually the gold standard for savings. But getting to 10 per cent from three is like trying to lose 25 pounds in a couple of weeks. Maybe you can do it, but maintain it? Tougher.

If you stick with the current savings rate and manage a four per cent return over the next 10 years, you’ll have just over $18,500 tucked away. I’m also adding in a salary boost of two per cent annually and assuming inflation is three per cent.

Now, take the hand of Superhero/ine 1% and increase your savings rate from three to four per cent annually ($2,000). After 10 years you’d have more than $24,600 squirrelled away. If this money is contributed to an RRSP, the net gain will actually be higher as your taxable income will be reduced.

Here’s where Superhero/ine 1% really produces magic. If you can increase your savings by a single percentage point every year you’d have $52,300 in hand.

Granted, at the end of 10 years your savings rate would be 13 per cent of income. To many that’s too big a leap. Not only that, you might be saying, “In your dreams!” when looking at my salary increase projection of two per cent annually.

My point is that by increasing your savings a small amount annually or until you reach a specific goal — say 10 per cent of income — you can conquer savings paralysis.

And it’s all thanks to Superhero/ine 1%. You can play with your own figures with The New York Times’ The 1% more saving calculator. (Visit New York Times website “The 1% more calculator.”)

– Alison Griffiths is the author of Count On Yourself: Take Charge of Your Money. Reach her at alisongriffiths.ca or at griffiths.alison@gmail.com

Chinese markets a global measuring stick

Allan Small, Metro Canada — Tue, 27 Mar 2012 06:00:00 -0400

If the past week is any indication, China, the world’s second largest country, continues to have a tremendous effect on global markets. The government in China recently announced the growth expectations for the country’s GDP would be reduced to 7.5 per cent. This is the smallest growth numbers we have seen in a few years.

The global markets reacted negatively to that announcement. Last week, China released manufacturing data revealing no expansion for the month of March. This marked the fifth straight month the data has shown contraction, signalling difficulties for the nation’s manufacturers. The market dropped noticeably on this news as well.

Should the market look to China as a measuring stick for global growth?

My short answer is yes. They are the second largest economy in the world. China is one of the largest if not the largest importer of commodities and energy products. Therefore, in my opinion, if the Chinese announce the manufacturing sector is in contraction territory and overall GDP growth is slowing, the world should take notice and with good reason.

The effects China has on our country are quite significant. For the most part, Canada is a nation that exports many of the things China requires. In my opinion, we are a commodities and energy based country. Many have referred to our currency as a petro currency due to the massive amounts of oil we export to the rest of the world, particularly the United States.

Thus, even though 90 per cent of what Canada exports goes to the U.S., the perception is that because China has been driving the commodities and oil markets higher for quite sometime, our dollar and stock market will move on announcements coming out of China daily.

The action on our stock market and with our currency confirmed this once again this past week. The TSX was negative for the week and our dollar dropped down to be approximately on par with the U.S. dollar once again.

In my opinion, the struggles that China is facing today are nothing to be concerned about yet. I believe that China has created its own slow down on purpose (as they said they were going to do) to cool off an overheated housing market and to slow down inflation.

The Chinese want their growth to be 7.5 per cent. I believe they have realized their previous growth numbers of nine to 10 per cent are unsustainable.

At the end of the year I believe their growth will be around the eight per cent, but they want the world to believe they will slow to 7.5 per cent. I feel that they have done the right thing with their housing market finally starting to slow and their inflation rate falling to just over three per cent. The Chinese growth rates are now more sustainable and over time will provide more stability throughout the world.

Therefore at this time, when there is a sell-off on the global markets due to the slowing of the Chinese economy, I would look at it as a buying opportunity. If the country were to ever overshoot their targets to the downside, I believe that China would be able to react very quickly to prop up their economy by easing interest rates or reducing bank reserves which should kick-start their markets once again.

I do not feel the China data of the past few weeks is as bad as the market reaction is telling us and therefore represents just a small set-back to higher markets in the future.

If you have any questions regarding the above article or are looking for an Investment Advisor to help you with your portfolio, please visit my website at www.allansmall.com. I will be glad to speak to you.

Allan Small is an Investment Advisor with DWM Securities Inc., a DundeeWealth Inc. Company. This is not an official publication of DWM Securities Inc. The views expressed are those of the author alone, and are not necessarily those of DWM Securities Inc.

Boost your savings on cross-border shopping

Alison Griffiths, Metro Canada — Tue, 20 Mar 2012 13:00:00 -0400

‘Tis the season for travel.

It’s the time of year when many families head south for the beach or the slopes and shopping, especially now with the loonie lingering near par.

Sadly, we’re limited when it comes to enjoying some of the best U.S. deals. I recently bought my favourite wine, J. Lohr Paso Robles Cab, for a mere 12 bucks at Target. The same vino in Canada will set you back $20 or more. But we can still only bring back 1.14 litres of liquor or 1.5 litres of wine regardless of the trip length.

Savvy cross-border shoppers head to the outlet malls and big box stores to score deals. But with a bit of planning you can do even better by monitoring the coupon offers at your destination.

First, check out the local newspaper. Advertising is up since the worse of the recession and the papers are full of coupons. In Canada, we usually see flyer-heavy papers on Wednesday and Thursday, but in Florida, for example, Saturday or Sunday is when you will find the largest number of flyers and ads.

Another great source are the newspapers’ websites. They are far richer with coupons than in Canada.
Also, visit store websites. Last week, I took advantage of a two-day only 20 per cent off any purchase at Chico’s and a similar deal at Macy’s. Some stores are strict about having the coupon in hand but when I left my Macy’s offer in the printer, the checkout person swiped one she had at the counter to give me the discount.

Finally coupon sites have proliferated in the U.S., more 500 at last count. Here are five top websites, according to the Wall Street Journal:
CouponCabin.com
RetailMeNot.com
SmartSource.com
Coupons.com (mainly groceries, also I couldn’t load it with my Safari browser but could with Firefox).
CouponMom.com (primarily groceries)

If you are intending to do some serious shopping be sure to start your deal search before you leave Canada or you might end up clipping or printing a coupon that only kicks in when you’re at the airport heading home.

– Alison Griffiths is the author of Count On Yourself: Take Charge of Your Money. Reach her at alisongriffiths.ca or at griffiths.alison@gmail.com

Quick tips about tax time

Lesley Scorgie, Metro Canada — Tue, 20 Mar 2012 06:00:00 -0400

It's tax time, and we have a quick tip sheet for the financially challenged.

When do I have to file my taxes?
Each year taxes are due to Canada Revenue Agency (CRA) by midnight of April 30.

How do I file my taxes?
You, or your professional tax advisor, can file your taxes through NETFILE (netfile.gc.ca). For help using NETFILE, consult CRA’s online help or call the NETFILE help desk: 1-800-714-7257. Not everyone can use NETFILE, so check out the restrictions. If you run into problems you can still file the old-fashioned way in paper form and have the post office postmark it by April 30, 2012.

What if I’ve moved?
File your taxes according to the address where you were living on Dec. 31 of the tax year.

What if I’ve experienced a major life event?
If you’ve had a child, experienced a death in your immediate family, got married, separated or divorced, there are special tax considerations for your situation, so consult with a professional tax advisor.

What if I’m behind on my taxes?
If you haven’t filed your taxes in a long time, get on it. By law, you must file a yearly tax return. The longer you let it go, the more complicated it gets.

Do I pay a fine if I’m late filing my taxes?
If you are eligible for a refund, there is no penalty. However, if you owe taxes, the late filing penalty is five per cent of the amount you owe for 2011, plus one per cent of the balance owing for each full month that your return is late, to a maximum of 12 months.

What if I’m missing a form?
By law, all your tax forms must be filed with CRA. You can request replacement tax slips by contacting the issuing agency.

Do I have to file a joint tax return?
Taxes are filed on an individual basis in Canada. But, if you’re married or living common-law you must claim your marital status because your tax benefits are calculated based on total household income.

What can I write off?
If you are self-employed, you’re allowed to claim some business expenses against your income. If you’re not self-employed, it’s unlikely you can write off employment related expenses. Research what you can claim or hire an expert. Keep receipts and documentation in case you’re audited.

What if I made a mistake?
If you’ve already filed your return, but discover an error, you can submit a T1 Adjustment to the CRA.

Stay tuned for next week’s piece on the top ways to reduce your tax bill.

Find me on Twitter @Lesleyscorgie

Tighter bank rules could lead to leaner profits

Allan Small, FMA Investment Advisor — Mon, 19 Mar 2012 23:49:27 -0400

Many analysts and investors including myself have been wondering what the catalyst would be to take this market to the next level. If this past week is any indication, perhaps the banking sector is the answer.

This past week, the U.S. Federal Reserve reported the results of their most recent stress tests. They applied a very stressful economic situation (a 13% unemployment rate and a decline in the stock market of 50%) to the largest 19 banks in the country to see if they were able to handle this difficult environment. Fifteen out of the 19 banks were able to pass the test proving the U.S. banking system was strong enough to weather even the most dire conditions and survive.

Many of the banks, once passing the “stress” tests were then able to raise their dividends and even buy back their company’s stock to show investors that not only are they still in business, but they are thriving.

I have said many times that I do not understand how or why the U.S. government, in my opinion, continues to hurt the banks with their most recent policies and regulations. U.S. banks are finding it a lot more difficult today to make the profits they once did due to these new rules the U.S. government wants to put through. I believe that if banks are not allowed to grow and turn a profit, they will bring down the whole market.

I do not believe the stock market can move significantly higher without the participation of the banks. I believe the banks are the lifeline of a country. If things are going well in an economy, the banks will do well. When times are good, the banks provide the loans that small and large businesses require to move forward with their strategic plans. If this money is not available, it can be a large headwind for these businesses.

When you consider the U.S. banking sector, many still have a bad taste in their mouths from the days of 2008. Many in the U.S. have vowed to go after those institutions that brought the United States, and for the most part the world, to its knees in 2008. These individuals have been quite successful in helping rewrite the rules that pertain to these banks and the way they do business today. However, in my opinion, what these individuals did not realize is the damage they are doing to investors by implementing these changes.

The U.S. banking system makes up a large part of U.S. stock markets. U.S. bank shares are some of the most widely held shares in the United States and around the world. Thus, when the new rules and regulations limit bank profitability, they also have a negative effect on the banks shares prices and in turn affect investor’s portfolios.

The rallies we have seen in the markets over the past few years have come from sectors like tech or energy. U.S. banks and financial institutions have contributed very little to anything positive over the past few years. I believe that if we could finally get some participation from the U.S. financial sector to this rally, who knows how high this market will go.

If you have any questions regarding the above article or are looking for an Investment Advisor to help you with your portfolio, please visit my website at www.allansmall.com. I will be glad to speak to you.

Allan Small is an Investment Advisor with DWM Securities Inc., a DundeeWealth Inc. Company.

This is not an official publication of DWM Securities Inc. The views expressed are those of the author alone, and are not necessarily those of DWM Securities Inc.

Reality check: Are we just a bunch of money dummies?

Alison Griffiths, Metro Canada — Tue, 13 Mar 2012 13:00:00 -0400

If there’s a growth industry in Canada over the past several years it’s been financial literacy. We have seminars, forums, conferences, gala dinners, government pronouncements and umpteen columns and blogs by personal finance writers all aimed at promoting and improving financial literacy. Heck, we Canadians even have a financial literacy month — it’s November if you didn’t already know!

So how have we done? Not that well, according to a survey just released by the Financial Consumer Agency of Canada.

The agency asked five questions of more than 2,000 Canadians. Shockingly, only four per cent of respondents got all the questions right and only 23 per cent correctly answered four of the five. And these questions were hardly stumpers! Take the true or false test yourself.

1. When you open an account, the bank must give you a written statement of all service fees and charges.
Correct answer: True. If you got this one right, you’re in good company, as 80 per cent of those surveyed did also.

2. You won’t pay interest on a cash advance as long as you pay your credit card balance in full by the due date indicated on your statement.
Correct answer: False. Only 40 per cent got this right and it can be a costly mistake as interest is charged the minute you withdraw the money.

3. A bank cannot refuse to open an account because a person has filed for bankruptcy, doesn’t have a job or has no money.
Correct answer: True. Only 35 per cent knew about this basic right.

4. If you want to pay off or renegotiate your mortgage before the maturity date, you will never have to pay a penalty greater than three months’ interest.
Correct answer: False. Sixty-one per cent got this one wrong and it too can be a costly mistake.

5. Financial institutions allow account holders to share their PIN with other family members, such as a spouse.
Correct Answer: False. Hearteningly, 67 per cent got this correct.

While there was some encouraging news in the survey results, overall the fact is Canadians still have a long way to go until they are financially literate.

– Alison Griffiths is the author of Count On Yourself: Take Charge of Your Money. Reach her at alisongriffiths.ca or at griffiths.alison@gmail.com

The U.S. has been creating jobs — when will Canada follow suit?

Allan Small, Metro Canada — Tue, 13 Mar 2012 06:00:00 -0400

Another month has come and gone and the U.S. continues to add more than 200,000 jobs per month. One of the main concerns coming into 2012 was job growth in the United States. Now that we have seen 200,000 jobs created monthly for the past three months, perhaps the “bears” (negative investors) will have one less thing to be pessimistic about.

Recently, job creation in Canada has not been as positive. While the U.S. has been creating more than 200,000 jobs per month, Canada has been struggling to create jobs. In February, Canada lost 2,800 jobs. February was the third month out of the last five that our country failed to create jobs. The only reason our unemployment rate fell was because approximately 37,900 people left the workforce in the month, which caused the unemployment rate to drop to 7.4% from 7.6%. This was the largest drop in the labour force since 2009.

The Canadian government continues to maintain that all the jobs that were lost during the recession in 2008 have all been made back. I would like to know where all the jobs have been created. I understand the western provinces with their oil and commodities continue to flourish and are hiring as many workers as possible. However, what about us here in Ontario? What about all the manufacturing jobs we’ve lost? Do individuals living in Ontario have to go out west to find a job? What is our government doing to foster innovation and technology in this country? Have we just become a nation of oil and materials?

As our country struggles with stagnant job growth and a declining work force, can our stock market continue to climb higher? I believe the answer is yes. The Toronto Stock market will continue to power ahead as long as the U.S. and China continue to grow. We have seen statistics recently coming out of China that clearly show, in my opinion, that they have engineered a soft landing rather than the hard one many analysts had feared. The U.S. economy continues to move forward with jobs, housing and manufacturing, clearly showing signs of improvement. If both these countries continue their positive ways, I believe the TSX will move higher over time, even though I think the Canadian economy continues to struggle. Therefore, if you are an investor that is looking for growth, I believe you need to keep looking to both China and the U.S. for clues to where our stock market and economy will go in the future. I believe our country’s economic numbers will not show investors where our stock market is headed. Canada exports more than 90% of our goods to the United States and therefore I believe it is the United Sates that dictates how our markets move and how profitable our investors become.

If you have any questions regarding the above article or are looking for an Investment Advisor to help you with your portfolio, please visit my website at www.allansmall.com. I will be glad to speak to you!

Allan Small is an Investment Advisor with DWM Securities Inc., a DundeeWealth Inc. Company. This is not an official publication of DWM Securities Inc. The views expressed are those of the author alone, and are not necessarily those of DWM Securities Inc.

Protect yourself from fraud

Lesley Scorgie, Metro Canada — Tue, 13 Mar 2012 06:00:00 -0400

I ‘win a free cruise’ by way of an unsolicited phone call at least once a month. I don’t know why or how my phone number is made available to these fraudsters, but it happens and it irritates me.

Fraud prevention is important so that you don’t end up in a poor financial position you didn’t create.
Take a common sense approach to protecting your personal and financial information. If an offer looks too good to be true, it probably is.

If you don’t recognize a phone number, don’t pick it up. Let it go to voicemail. Legitimate people will leave a detailed message and request a call back. If someone you don’t know wants your personal information or to sell you a suspicious product or service, stop talking to them.

Beware of individuals that try to sign you up for a sales program that looks like a pyramid or Ponzi scheme. If you get a bad vibe from someone, or the company they are associated with, don’t ask them for referral. You’ll need to conduct independent research.

When surfing the Internet or social networking, limit the amount of information you disclose. Never give out your address, phone number or banking information.

If you’re shopping online, ensure the payment website is secure. If you’re not sure it is, call the company that makes the product directly and talk to the privacy officer. Never click on a pop-up window, especially if the advertisement is requesting your personal information.

If you receive email requests for information, verify the message and sender using a third party unrelated to the message.

Change your passwords regularly and try to make them difficult for fraudsters to guess, but easy for you to remember. Typically a combination of numbers and letters is best. Check that your computer’s operating system is fully updated and that you have a robust security system that includes a personal firewall, anti-spam, anti-virus and anti-spyware.

Log off everything, especially online banking.

If you slack off protecting your information, your identity could be stolen, resulting in financial ruin.

Don’t leave yourself vulnerable to fraud.

Find me on Twitter @Lesleyscorgie

What is keeping investors out of the market?

Allan Small, Metro Canada — Tue, 06 Mar 2012 06:00:00 -0400

The North American stock markets have moved significantly higher from their low points of last fall. Yet, many analysts believe the average retail investor has yet to take part in this rally. If these analysts are correct, I would like to know why not.

In speaking with many investors this RRSP season, I have come to realize that a large percentage of them are quite negative about investing. If I had a dime for every investor I have spoken to that made comments like "I wish I had invested all my money in real estate or gold coins," I would be a very wealthy man.

Perhaps it's this negativity keeping investors out of the stock market. Investors have been through a lot over the past five years -- the U.S. credit crisis in 2008 followed by the Euro crisis in 2011 have left investors wondering if they will ever make money in the stock market again. Thus, when individuals see the market moving higher, they remain skeptical and don’t join in on the increase out of fear that a worst-case scenario may be just around the corner.

Many investors have heard the phrase, “Buy low and sell high.” However, I can't tell you how many individuals don’t follow it. When times are tough and the media is talking about how bad the markets are, or how we are just one step away from the markets exploding to the downside, that is the time when individuals should consider investing. If you were to look at a cycle of investor emotions, you would find that the point of maximum return is at the point when nobody wants to invest. Buying into the stock market at a bottom makes most sense.

However, many investors wait for the markets to gain steam before they consider investing. In my opinion, as the market rallies off the bottom, people continue to harp on all the bad news while ignoring all the good that is happening until the point at which the stock market is firing on all cylinders and they cannot find many negatives to worry about. I believe it’s at this point where the average retail investor begins to move into the markets, therefore buying at a high point.

We know from the cycle of emotions that the point of maximum risk is when the market is strong and everything is moving forward. I believe that when the media can't find anything wrong with the stock market and the market keeps reaching new highs each day, that this is the time when investors should consider scaling back exposure and not buy. Many people, in theory, would agree with this if asked, however most do the opposite.

Thus if you are an investor today and you have your money in cash or on the sidelines, I would like to know why? Do you think the market is a little toppy right now? Are you waiting for a pullback to invest? We just had one in the fall and, thus, if you didn’t take advantage of it then, when would you? If you are waiting for confirmation that this rally is for real, I think the percentage gains we have experienced so far this year should prove this. Therefore, if you are not invested after going through both the low points we saw late last year, or the high points we are experiencing now, when will you put your money to work? To me it makes no sense.

If you have any questions regarding the above article or are looking for an investment advisor to help you with your portfolio, please visit my website at www.allansmall.com. I will be glad to speak to you.

Allan Small is an Investment Advisor with DWM Securities Inc., a DundeeWealth Inc. Company. This is not an official publication of DWM Securities Inc. The views expressed are those of the author alone, and are not necessarily those of DWM Securities Inc.

Why are happy people ‘rich’?

Lesley Scorgie, Metro Canada — Tue, 06 Mar 2012 06:00:00 -0400

I read a Fast Company article last week about how the happiest people are spending their money. It’s clear that happy people live lives that are rich; ‘rich’ meaning balanced and largely stress-free.

Happy people often have a different idea of ‘the dream.’ Rather than working to afford a big house and two cars, they’re creating their own ‘dream’ based on what makes them fulfilled. For example, instead of living in the suburbs, many buy smaller, more centrally located homes where they don’t need a car.

They save time commuting, exercise more, have fewer expenses and a lower environmental footprint.Redefining ‘the dream’ also means less stress. Happy people spend money on affordable experiences, not accumulating ‘stuff’ that contributes to debt. For example, many would prefer to travel versus hosting a lavish wedding; while others spend money on house cleaning so that they have more time to spend with their kids.

Prioritizing expenses to afford personally fulfilling experiences also means living within their means. That in turn translates into less debt and reduced stress.

Happy people also find creative ways to make more money. Some become full-time entrepreneurs. Others keep working their nine-to-five job, and turn their hobbies, like photography, music or teaching, into extra income by selling their services or inventing new products.

This crowd is frugal and resourceful, which enables them to save for their vision of retirement. Interestingly, many have selected careers that will carry them well past the traditional retirement age of 65.

Like happy people, choosing to not to keep up with the Joneses can buy you more time to focus on the things that matter to you. And it will help you build financial freedom by avoiding debt and having more money for savings.