Whether you have one child or five, effectively managing your finances is always going to be a bit of a juggling act when you have a family to provide for, especially in light of our current global economic situation. There are always unexpected expenses to deal with, but that is not to say that setting a budget and sticking to it will not help you stay out of debt. Aside from budgeting, here are a few other lesser known tips to help you and your family spend your hard-earned money wisely.

Shop Smart

When shopping for more than one or two people, you can save a lot of money and time by buying in bulk. Purchase large amounts of non-perishable items like rice, pasta, shampoo and anything else that you can buy in larger amounts. This will also save you from having to go to the store every two days, which in the long run saves you money as well because when you are not shopping as often, you are less likely to buy things you don’t really need.

Another great way to save money on shopping is to buy generic brands. Take a minute to think about why you purchase the big name brands. Is it because their quality is far superior, or, is it because you have seen them on television and have become a victim of their marketing schemes? A few things may actually be worth paying a bit more for, so find out what works for you.

Manage Vehicle Expenses Wisely

First of all, if you have more than one vehicle, you should probably sit down and take a good look at whether or not you really need two. Do you use the second vehicle often enough to warrant paying insurance and maintenance on two? If your place of work is not too far, you could always consider adopting the European style and cycling to work whenever possible.

Next, you may think that skimping on vehicle maintenance is saving you money, but neglecting your car’s needs will wear it down more quickly, and you may even end up spending more on a major repair that could have been avoided. [Also See: How to Extend the Life of Your Car]

On the other hand, many people tend to overdo it, and according to the AAA about 95% of all drivers change their oil too often. The 3000 mile rule only really applies to commercial vehicles like taxis, which are always on the road. For the average driver, an oil change every 7,500 miles is sufficient.

Get Creative with Birthdays and Special Occasions

For some reason, birthdays and other occasions like Mother’s Day are not included in our budget plans. We all have a number of friends and family, each of whom has a birthday every year, and those last-minute gifts can often get pricey.

Think of ways you can make someone a gift yourself. Homemade gifts may seem old-fashioned, but they can be fun and, more importantly, they will cost you a fraction of the price. Rather than getting your aunt another ridiculously priced gift set of bath salts that she will never use, why not make something yourself?

This may seem time-consuming but you don’t necessarily have to knit a scarf or make jewelry. If you can do these things, that’s great, but making your own gifts can be as simple as putting together a nice photo album or baking a cake. If you really don’t think you can make something yourself, don’t despair, there are other ways to save on gifts. Check out thrift stores or go shopping on eBay, you may be surprised at what you can find.

A guest contribution by Daniel from Merlin Assurance – the Quebec Home Insurance broker

Still catching up from Christmas and New Year’s? No problem. It’s still possible to have a special, romantic and affordable Valentine’s Day with your loved one. Here are 5 frugal and fun tips for a decadent date night on February 14^th.

Cake:                                                                                                        

A heart-shaped cake is always a fun Valentine gesture, but most people think you need to run out and purchase a special pan to get the job done. While that’s certainly a nice way to go for specialty sizes, the truth is you can pull off a decent heart cake with basic pan shapes you likely already have in your cupboards. Using your favorite cake recipe or dry mix of choice, fill both a round and square cake pan. When the cakes have finished baking, turn the square one so one of the points is facing down. It will look like a diamond. Next, cut the circle cake in half and place one half along each of the top edges of the diamond. You now have a heart. Frost at will, or take it to the next level and bake two of each for a double-layer cake. For Valentine’s Day, I recommend going selecting a red velvet cake with cream cheese frosting, but if you have another favorite that means something to you as a couple, that’s fine too.

Coupons:

If pennies are tight and you still want to give your significant other a gift, consider packaging up a stack of love coupons that you can print out on your computer. The key to making this successful is to choose coupon redemption options that your partner will think is amazing. Massages, breakfasts in bed and queen or king for a day are all popular options, but by all means take some time to come up with some ideas that are unique to your loved one.

Camping:

While most people think of family camping when the subject of rustic getaways comes up, the truth is that camping can be a great couple’s experience as well. Go for the gusto and consider glamping in a nice cabin where you can whip up a great candlelight meal, or pitching a tent (climate permitting) somewhere with an absolutely spectacular view. Mother nature is the perfect backdrop for getting back to basics.

Corks:

Wine tasting is an elegant entertaining option suitable for couples at any time of year, but is particularly appropriate for an affordable Valentine’s Day outing. Tasting fees are typically quite reasonable, and wineries located in picturesque destinations are by no means difficult to come by. Choose one within driving distance of where you live and turn the event into a romantic daytrip. Select a bottle that works with several of your favorite foods and you’ll be all set for a decadent dinner at home.

Cooking:

Which brings me to my next suggestion. If you’re going to skip going out, then dinner needs to be epic. Stick within your budget of course, but definitely pull out a few stops. Toss a little red wine into that mushroom gravy, get a little Mediterranean with those flatbread pizzas or wrap some bacon around those broiled shrimp. One of my favorite budget strategies for savory Valentine treats is to fold chicken wings into hearts and baste with your red sauce of choice before grilling, broiling or roasting. Buffalo, sweet Thai chili or even barbecue sauce. So long as it’s red. Basically, you place the middle joint towards you and tuck the other ends towards that same joint so they hold in place. Voila! A heart. Try this out for an appetizer or pair your heart-shaped wings with a gourmet salad and a favorite microbrew.

These are my top picks for enjoying Valentine’s Day on a budget. What are your top ideas for affordable February romance?

Many people believe that, once they have retired, they have “made it” — financially as well as with regard to lifestyle preferences. However, retirement doesn’t mark the end of the journey. Indeed, if you plan to retain your financial freedom during retirement, it is vital that you adhere to sound financial principles. Here are 4 financial principles to follow during retirement:

1. Keep Your Spending Moderate

You want to ensure that your spending is moderate during retirement. If you are drawing on a retirement account, the difficulties — and the ups and downs — sometimes encountered due to the financial markets can mean that your capital is drawn down faster than you imagine. It is important to keep your spending moderate, and remember to live within a pre-determined income. Retirement should not mean the end of all restraint regarding your spending; on the contrary, you should continue to pay attention to your spending, tracking it and living within your means.

2. Protect Your Assets

Retirement is a time when it is possible that you might let some of your insurance policies lapse. You want to be careful, though, to continue to protect your assets with a reputable company like Castle Cover, or some other company that specializes in over-50 insurance. Home insurance, auto insurance and other types of insurance are important. If you have a life partner that relies on you for income, life insurance is also still important. You should also consider long-term care insurance, since you don’t want a prolonged stay in the hospital or a nursing home to completely deplete your finances. Make sure to protect your assets during retirement, and you will have less to fear from catastrophe.

3. Keep Up Your Health

While retirement is a time for some indulgence, it is important to keep up your health. While health insurance can help you offset some of your costs, it is still better to prevent health problems. Continue to exercise, and eat right. Poor health is expensive, no matter your health insurance situation, nor the health care provided by the country in which you live. One of the surest ways to protect your finances is to protect your health. Good health ensures that you are able to enjoy the fruits of your labor.

4. Plan for the Disposal of Your Estate

It might be unpleasant to consider your eventual demise, but estate planning is essential during retirement. Think about what you want done with your assets when you are gone, and also prepare for your own maintenance in the event of a potential decline in faculties later on. Now is the time to make sure that power of attorney, health care proxy, and the establishment trustees are all determined upon. Double check your will, and consider your beneficiaries. Consider different options for your assets, including trusts, that can protect your assets and ensure that all is arranged according to your wishes.

Bottom Line

Retirement requires the careful management of your assets, as well as planning for what may happen to them later. With careful planning, and adherence to strong financial principles, you are likely enjoy a comfortable retirement, and outlive your money.

February 14^th is right around the corner. Whether you’re planning on kicking it with your single friends or staying in for a steamy yet affordable Valentine’s Day with your boo, chances are you’re on the prowl for some stylish Valentine cocktails to serve. Whether the plan is to curl up in a snow-covered cabin with a hot toddy or hit the beach from your mod vacation rental, this list of Valentine cocktails is sure to leave you inspired. (See also: Stylish Winter Cocktails)

Cranberry Cobbler Martini

This custom-crafted cocktail from Brasseriejo in Boston’s Colonnade Hotel has the holiday’s color scheme down pat.

Ingredients: 1.5 ounces of Bulleit Bourbon, 1 ounce of cranberry syrup, 2 ounces of cranberry juice, one ounce of lime juice.

Directions: Fill a martinini shaker with ice. Add bourbon, syrup, and both juices. Shake vigorously and strain into a martini glass. Garnish with fresh cranberries.

Pair the cranberry cobbler with your favorite February finger foods, such as heart-shaped roasted chicken wings, low-fat Thai shrimp toast or a decidedly Mediterranean bruschetta.

Berry Kiss

Berry Kiss

From the folks at HaruSushi in NYC, comes this five-ingredient recipe called the Berry Kiss. With both strawberry puree and POM juice, there won’t be any doubt that this cocktail was indeed designed with Valentine’s Day in mind.

Ingredients: 1.5 ounces of Absolut Citron, 1 ounce of Veev acai liqueur, a half ounce of strawberry puree, one half ounce of POM juice, 2 orange slices and a splash of sour mix.

Directions: Muddle the fresh strawberry and orange slices, and then pour all contents over ice into a beverage shaker. Give the entire mix a vigorous shake and strain into a sugar-rimmed cosmo glass.

Personally, I’d serve this drink with a strawberry and cheese tray, but you could also go with cucumber canapés or your favorite cocktail bread topper.

Anejo Kiss

The people at the Partida tequila company have put together this luscious drink that also keeps kisses in the front of everyone’s mind. I like that it’s simple and to the point.

Ingredients: 1 and a half ounces of Partida Anejo, one half ounce of white Crème de Cacao and one ounce of Amarula Cream.

Directions: Mix ingredients well in a shaker with ice and strain into a chilled martini glass.

With the creaminess of this cocktail, I’d save it for the after dinner drink slot in your Valentine itinerary. Also, since the drink appears quite rich, you may want to go with a lighter dessert such as dark-chocolate-covered strawberries.

Gloria’s Pyrat Punch

This tropical treat comes straight from the Cuisinart Resort in Anguilla. Made famous by the popular television show The Bachelor, it’s a venue well-known for its stylish beverage and food selections. This one is particularly perfect if you’re getting ready to take your significant other on a tropical getaway to pop the question. Whip up a batch before hopping into that airport shuttle, or use it to create a theme around which you can enjoy the holiday at home.

Ingredients: 2 ounces of Pyrat rum, 1 ounce of apricot brandy, an ounce of Galliano, 3 ounces of orange juice, a dash of lime and 2 drops of grenadine.

Directions: Combine all ingredients and shake. Pour on ice into a highball glass or – for full effect – a hollowed out pineapple.

If you do opt for the stay at home plan, this cocktail is best paired with foods from the grill. Seafood is particularly well suited, but there’s certainly nothing wrong with ribs, rice and grilled fruit either. As long as your menu celebrates the tropical outdoors, you’ll be good to go.

The Pink Mimosa

This unusual beverage was created by Scott Curry, head cocktail technician at Alta Bistro in Whistler, British Columbia. It includes the unique ingredient of Nonna Pia’s strawberry and fig infused balsamic reduction to create a sexy, fun and colorful cocktail option for the venue’s guests. Who knew?

Ingredients: 1 ounce Schramm vodka, dash of elderflower, splash of the balsamic reduction, a dash each of lemon and orange, 2-3 freshly muddled strawberries and a sparkling rose wine to top things off.

Directions: In a shaker, muddle the strawberries and shake with all liquids but the sparkling rose wine. Double strain into a champagne class and top with the sparkling wine. Garnish with strawberries.

This hand-crafted mimosa is perfect for a Valentine’s Day brunch or for hiding that surprise engagement ring. Pair with fun breakfast foods such as smoked salmon with bagels and capers, quiche or breakfast casserole with sliced fruit.

These are the Valentine cocktails that caught my attention. What are you favorites?

The big news this week in Canada is that the government is preparing to make some changes to the Old Age security program. As you might imagine, it’s raised quite the ruckus. And, of course, it provides a great opportunity for you to consider your current situation, and figure out what you are counting on for the future.

Does Old Age Security need change?

Jim Yih at Retire Happy Blog takes a look at Old Age Security, and considers the possibilities of change. Are you ready for what’s next?

Is Our Old Age Security Program Sustainable?

Boomer at Boomer & Echo consider the possibility that OAS may not be sustainable, considering the numbers and determining what might be done.

Smart Ways to Invest in Yourself

At Coupon Shoebox, I take a look at how you can invest in yourself. After all, you are your best asset, and you can’t rely on anyone else like you can rely on yourself.

Planning for the Future: Are You Ready for What’s Next?

Janet at Credit, Eh takes a look at what could be coming in the future. You need to be ready to make your own plans, since what ends up happening may not be what you expect.

Personal Finance Basics: Build an Emergency Fund

Alan at Canadian Finance Blog addresses the basics of an emergency fund. This is important, since you should be your main line of defense in a financial catastrophe.

Income Security VS Job Security — Does it Matter?

Kevin at Out Of Your Rut takes a look at income security and job security. In some cases, there is a difference. And you need to figure out what you are relying on in both cases.

Want To Be Your Own Boss? Steps To Take Before Going Solo

Tisha at The Digerati Life considers the steps you need to take before striking out on your own. Get ready to count on yourself for your income!

Other Financial Posts

Here are a few more posts from around the blogosphere, dealing with finances:

• Volunteer Opportunities That Teach Valuable Skills at Cash Money Life.
• Top 5 Smartphone Shopping Apps to Help You Save Money at Money Crashers.
• Federal Income Tax Return Filing Requirements for Retirees at Moolanomy.
• The Worst Place To Lose Your Job? at THE Canadian Personal Finance Blog.
• The 401(k) Maximum Contribution Went Up This Year. Did You Bump Up Your Contributions? at Bible Money Matters.
• What is Self-Employment Tax? at Free From Broke.
• Why PayPal Freezes Or Limits Accounts And How To Prevent This From Happening To You at My Wife Quit.

Image source: Algirdas via Wikimedia Commons

Taking out a home equity line of credit (HELOC) has become a popular way to borrow. A recent survey commissioned by the TitlePLUS title insurance program showed that more than one-third (36%) of Canadians have a HELOC. This makes sense when you think about the advantages that this type of loan offers. HELOCs are flexible – you can borrow against and pay back the loan at just about any time – and they often offer low interest rates. However, this type of loan also has its drawbacks, which the TitlePLUS survey showed many Canadians may not know about.

According to the survey, which sampled 1,501 Canadians aged 18 or older in October 2011, 59% of Canadians are confident in their level of knowledge about HELOCs. But when asked to answer specific true-or-false questions about how HELOCs work, those surveyed correctly answered only 38% of the questions.

The survey showed there are 6 things many Canadians don’t know about their HELOC.

1. 57% of survey respondents didn’t know that when you take out a HELOC, the bank lending you money puts a mortgage on your home.
2. 58% didn’t know that taking out a HELOC when you already have a mortgage on your home means that the bank places a second mortgage on your home, or modifies the original mortgage to account for the loan.
3. 58% didn’t know that when you take out a HELOC, your home becomes the bank’s security for any credit card debt, other loans you have with that bank, or any other loans you have co-signed.
4. 62% didn’t know that having a HELOC could hurt your ability to take out a loan or mortgage with another financial institution.
5. 83% didn’t know that when you pay off and close your HELOC, any credit card consolidated under this line of credit may be cancelled and not available for future use.
6. 69% didn’t know that having a HELOC can negatively affect your credit rating or future loan applications.

While HELOCs can be a convenient way to borrow, keep in mind that you’re using your home as collateral. That means that while you owe money on a HELOC, the bank has a financial claim to your home. You likely won’t be able to sell or refinance your home until you’ve paid off your loan in full. If you miss payments, you could even be at risk of losing your home.

To make sure you understand how your HELOC works and what the risks are, LawPRO (the insurance company that provides TitlePLUS title insurance) advises talking to a lawyer before signing on the dotted line. And that’s something many Canadians don’t appear to be doing.

According to the TitlePLUS survey, although 55% of respondents reviewed their loan documents with a loan officer and 33% read all the fine print, only 12% talked with a lawyer before signing the agreement. A surprising 11% admitted to not reviewing any documents or seeking advice before signing.

Online banking is all about convenience for most people. Indeed, I love banking online. It makes it easy to check my balances, transfer funds, and pay bills. It doesn’t matter where I am; online banking means that I can take care of everything financial without having to worry about being in town.

Unfortunately, as with all things related to technology, this increased convenience also comes with security risks. Your personal financial information might be vulnerable when you engage in online banking without taking proper precautions.

Online Banking at Home

It’s easiest to protect your information when you do your online banking from home. Avoiding public computers can be one of the best ways to stay safe. Avoid logging in to any financial accounts when you are using a library computer, or a computer in an Internet cafe.

At home, though, you still need to protect yourself. Make sure that your router is properly secure — especially if it’s a wireless router. You want it to be difficult for others to access your home’s Internet connection. You should also install security software on your computer, and make sure that it’s up to date. Some of the free products, including Avira, can be just as effective as the costlier products. Don’t assume that using a Mac will complete protect you, either. There has been a rise in malware aimed at Macs.

Online Banking While Away

Of course, part of the convenience of online banking is being able to check your accounts while away from home. I have been known to do online banking while visiting my parents, and in other situations. You can bank online and still protect your information, even while away from home. Just be careful, and make sure that the device you are using has updated security software.

Avoid using Wi-Fi hotspots when you are banking. It’s one thing to check your bank accounts when you’re using the password-protected Internet access provided to you by your hotel, or by a homeowner. It’s another thing to engage in sensitive online banking operations when you are using a hotspot that doesn’t even require you to log in. Don’t bank using these public connections.

Storing Your Passwords

Be careful about where you keep your passwords. Don’t leave them around where others can find them. Keep them in a secure place. Create passwords that are unconnected with your personal information. Create strong passwords that are almost completely random, and that can’t be guessed by someone after poking around a little in your social media profile.

If you store passwords on your computer, make sure that it really is your own computer, and that others have very limited access to it. You should close all programs and windows when you aren’t using them. You can even up the ante a bit with the help of encryption software that will encrypt your log in information to add another layer of security, no matter where you are.

Avoid Phishing Attempts

Finally, be careful of phishing attempts with your online banking. Sometimes, you’ll receive an email from what looks like your bank. If you receive electronic statements, and other communication from your financial institution, you might be fooled, because you are expecting emails from your bank. You need to be careful. Be wary of clicking on links in emails, since you might be taken to phishing web site — where scammers will steal your log in credentials and then have access to your account. Instead, enter what you know to be the official site of your bank directly into the address bar.

Also, never give out bank account information over the Internet. Banks will not ask you to reply to them with your full account number and/or PIN. Additionally, you should avoid giving out such information over Skype or through any sort of instant messaging program. Be careful of who you give information to, especially if you didn’t initiate the contact.

Bottom Line

Online banking is a great way to keep up with your accounts, no matter where you are. However, there are threats to your privacy and financial security all around you. Be careful about where and when you access your bank accounts, and you should be able to protect yourself to a certain degree from ID theft.

“Do not give way to useless alarm; though it is right to be prepared for the worst, there is no occasion to look on it as certain.” – Pride & Prejudice, 1813

Mark Twain was right when he said that although history doesn’t necessarily repeat itself, it certainly rhymes. In today’s world, I believe Gordon Pape (Gordon) would agree with Twain, but disagree with the second half of the above quote from Jane Austen’s novel. Based on the recommendations in his newest self-help guide (or what I define as a handbook given it’s format), he proclaims that there is a great deal of certainty with regard to future retirement plans…and the news isn’t good !

The timing of the launch of this book could not be better.: people continue to live through the (hopefully) tail end of the worst financial crisis since the Great Depression; the press continues to flash large headlines about the European union crumbling into pieces; the US is in debt up to its eyeballs with some of the worst unemployment numbers in its history; personal retirement accounts are a fraction of their original value; defined benefit pension plans are becoming as rare as four-star movies, and; many people are now scheduling visits with credit counselors to manage the predictable Christmas over-spending. Oh, and don’t forget those new years’ resolutions that are already wearing off (gym?).

At the same time, we are exposed to new national financial surveys on a weekly basis. Many of the recent surveys are highlighted in Gordon’s book. Sadly, a lot of what we’re learning is nothing new: the RRSP is underutilized, after 3 years most people are still clueless about the TFSA program, and too many people are retiring with a debt load over their head. Followers of Gordon’s previous books (and articles –  many of which are freely available) will appreciate his message that “Despite years
of warnings, exhortations and incentives, far too many are still unwilling or unable to take the action necessary to protect themselves from years of financial distress in later life.” Was that Twain I just heard ?

Throughout the book, you can almost hear Gordon’s head banging against the wall as he tries to understand why people won’t embrace Retirement’s Harsh New Realities. He claims this will be his last book on retirement (he is 75 years old), but I am betting he’ll provide a revised edition or two – he has to! He also stated that critics have previously accused him of scaremongering. Well, believe me, there are things he could have done with this new book that would have provided a much scarier story.

Book Layout

This handbook is divided into 2 sections. The first deals with those 9 harsh new realities (incidentally, for those who maintain an interest in financial planning, some really are not that new!). A couple favorites, for me, are the chapters entitled ‘We Don’t Know What We’re Doing’, and, ‘We Don’t Know Who to Trust’. The second section is basically the process map of solutions to the addressed problems.

Gordon provides a golden nugget at end of the book, with a section of Questions & Answers. You can appreciate that the author is exposed to thousands of emails, with people asking about even the most basic financial issues. Just reading through the questions will demonstrate why he needed to produce his swan song.

To conclude section two, he adds appendices that include Retirement planning worksheets, expense estimation worksheets, inflation training and a listing of recommended web site links. I always recommend that authors provide web access to PDF versions of their worksheets, since most readers  won’t mark up their books. Hopefully Gordon will put this on his list of to do items (with our thanks) !

Section One: The Realities

It should not come as a surprise to anyone paying attention: most of us are living longer. That simply means we could experience retirement for a much longer period. And with long life comes a larger requirement for money to support that extended period. In the old days, many of us were fortunate to hold a job for life and retire into the sunset with a solid defined benefit pension to cover that longer time frame. Today, unless you’re in the public sector with a tax-payer funded pension plan, the odds are high that you either have NO pension, or, your company has shifted your plan to defined contribution.

Sprott Business School professor, Ian Lee, identifies 3 classes of Canadians based on pensions:
- first class Canadians who receive an MP’s pension (now there’s a surprise)
- government class Canadians who get the public service pensions (retiring at 50 or 55, no less), and
- cattle-class Canadians collecting OAS at age 65

A Richard Ivey School of Business analysis of the 47 Canadian companies with the largest pension liabilities showed 40 had fewer pension assets than liabilities as of the end of fiscal 2010. The 47 companies’ aggregate pension liabilities of more than $150 billion exceeded total pension assets of about $136 billion.

Scared yet? It gets worse: another stat from Gordon’s book – “The number of Canadians with incomes below Statistics Canada’s poverty line grew from 204,000 to 250,000 between 2007 and 2008 (almost 25% in 1 year!)”. Add to this the fact that tens of thousands of Canadian seniors eligible for CPP and OAS have not even applied for their benefits, and you can understand why Gordon feels Were on Our Own, and. We Don’t Know What We’re Doing. To add insult to injury, another incentive for starting to get interested as early as possible is the latest finding as it relates to the early onset of dementia.

When the author reviews the nest eggs of many of the people who seek his guidance, it’s no small wonder that he highlights a chapter heading: Our Savings Are Pitiful. How often have you read articles promoting the benefits of compounding? The issue is that compounding requires time and money to be effective. Sadly, too much of that money is tied up in ‘stuff’ rather than in retirement accounts.

Gordon also utilizes a fair amount of space to deal with the issue of financial literacy. Many of those who are at least aware that they are illiterate don’t know exactly what to do about it. The fact is, regardless of income levels, education, profession or disciplines, financial ignorance is universal. Too often, we assume that certain individuals should be financially astute because they possess higher IQ’s. That is about as silly as thinking “owners of expensive vehicles are automatically skilled drivers”. The author offers some opinions as they relate to the Task Force on Financial Literacy. Needless to say, there is a bit of skepticism voiced about the financial industry’s involvement and it’s potential conflicts of interest (oh, and if only it were as easy as hopping on a yellow scooter). As for the government’s involvement?  Well, after reading the recent McLean’s cover “99 stupid things the government spent your money on”, you would wonder why the government should be involved with anything to do with financial literacy.

Yet another chapter focuses on the concept of risk and highlights the harsh reality that there is no such thing as a ‘safe’ investment. I won’t spoil the impact of this chapter with details, but suffice it to say, there are a lot of investments (sorry, I meant financial marketing ideas) to avoid. His comments about ‘Couch Potato Investing’ have already stirred up conversations on the web and in the national newspapers. Hopefully, people are reading those exchanges. Detailed arguments are highly educational.

And no financial self-help guide would be complete without a chapter addressing Canada’s needlessly complicated income tax system. Gordon takes the reader on a tour of the income tax form to demonstrate how the system is stacked against the retiree. If you don’t understand the phrase ‘income-tested benefits’, you are in for an eye opening presentation. It’s a great way to learn that success comes to those who finally embrace the need for completion of one’s financial homework. The government benefits from taxpayer ignorance…and they know it.

Harsh reality #8, We Don’t Know Who To Trust,  is a favorite. This morning, I opened the financial section of a national newspaper and the headline read: “Ex-RBC advisor gets prison term”.  Another couple of headlines, this time from web sites: “Is Your Investment Advisor Capitalizing On Your Fear ?”; “IIROC levies $5 million fine against ex-broker (Henry Cole)”. And, Rolling Stone Magazine columnist, Matt Taibbi has recently exposed yet another chapter in the ongoing saga of Wall Street fraud. At some point, you wonder if stuffing your savings in the spare bedroom mattress isn’t such a bad idea after all. The return isn’t very good, and inflation coverage is zero, but at least it’s better than what the financial parasites are offering. And you can (hopefully) trust yourself. At least you can trust yourself better than the Alberta-based funeral director who was recently caught substituting cheaper caskets and cremation trays.

When composing book reviews, I typically don’t like to inject detailed comments from other authors, but please look below to see the quote from author Ellen Schultz. Frankly, her comment defines this chapter of Gordon’s book to a ‘T’. The #8 reality, to me, is the harshest. You have to be on the top of your game if you wish to avoid the next Bernie Madoff. Where there are sheep, there will be shepherds.

As I have opined before, the world is a corrupt place. And until the human race is universally recalled and put through a badly needed re-design, this will always be the case. Live (and invest) accordingly. Want some proof ? Check out these links:
 ScamWarners.com and Top Business Scandals of 2011.

Section One of Gordon’s guide, ends with a chapter focusing on the harsh reality of personal sacrifice. In his own blunt language, the author lets off a bit of steam with a general observation of the Canadian situation: “There is no escaping the fact that, collectively, we are financial dolts”. Somehow, we seem to put a top priority in acquiring the trophy home and a driveway full of depreciating assets, rather than  balancing the greed with our future needs. If you are the type of person who needs a symbolic kick in the fanny to help you prioritize, this chapter will provide it. I must warn you, though: Gordon wears a rather pointed shoe.

Section Two: The Solutions

Now that the reader has had a chance to understand those 9 harsh realities, it is time to discuss exactly what can be done to overcome the hurdles. Advancing to the “In Conclusion” chapter, I think Gordon’s summary quote sets the stage for getting people to respond to his solution recommendations: “Retirement Planning is not something you can kick down the road. If you wait until you’re fifty, it’s too late.”

If you’re not sure where you are on the road to recovery, you can spend some time with Gordon’s Retirement Worry Index within the Make A Plan chapter. Don’t be surprised if you’re already in the desperation scenario (could that be why reverse mortgages are now selling like hotcakes ?).

His solutions list covers topics he has covered before in many of his previous books: using the RSP; using the relatively new TFSA (a small, but important government gift); minimizing taxes; eliminating debt; using an advisor, and; understanding your private pension (if you have one) and the government’s CPP and OAS plans.

My favorite chapter in this section is entitled, Educate Yourself. It’s quite a jolt when you read the statistics surrounding the math competencies of the average Canadian. On top of that, 42% of our adult population have problems reading! Is it any wonder why so many people own overly complex (and expensive) financial products. The true test of any change in general financial literacy will be reflected in the future behavior of the financial product engineers and the proliferation of even more complex products.

Every book I have ever read, has a key line or two that I underline, because those lines perfectly define the key message of the book. The Solutions section of this book serves as the ‘to do’ list for the reader, and I want to use a couple of Gordon’s quotes to emphasize how important it is to begin these chapters with the right mindset.

From page 140:
“This book and others like it can provide significant help, as long as people are motivated enough to read them.”

From page 234:
“All the courses and books in the world won’t help if people aren’t willing to allocate time to learn.”

As I mentioned at the outset, this book serves as an educational guide, with actionable steps to get both your brain and body in motion towards a rewarding retirement plan. Gordon has provided a boatload of information and recommendations in one convenient location: he has described the major issues, told you what to do about them, told you what to buy and what not to buy and, provided some real world examples to illustrate the recommendations.

But as he has said, content and process are meaningless without commitment. For too many people, this really is the last chance to prepare for a happy retirement. I highly recommend that you read and, more importantly, act on the blunt and honest advice in this handbook. Now!

Well done, Gordon.

COMMENTS SECTION

Reality #8 and Ellen Schultz:
“Financial industry companies treat customers as sources of revenue to be inveigled into paying as much as possible, through shrewd half-truths, complicated language and methods, and bold face promises accompanied by exculpating fine print”.

Case Studies: the gift that keeps on giving
As Warren Buffet would remind us, it’s a lot cheaper to let other people make mistakes, and then learn from them. And  some of the best online gifts to help you with this process, are the case studies of real people that are provided in the national newspapers each Saturday. These highly educational stories are available for free and can be found as follows:

Financial Post:
Globe & Mail:

Here is a test for you: go to those respective web sites and read at least the last 5 case studies.
If after starting through the first study, you find your eyes glazing over, with an urge to hit the tv remote, that’s the perfect indication that you should be making an appointment with a fee-only financial planner – and soon.

On a serious note, if you do decide to read those studies, pay particular attention to the process that those financial planners go through as they evaluate the client’s financial situation and develop income projections for the future (including government benefits). This will help you to understand how a financial professional is trained to KNOW how to establish the amount of resources you will require to survive retirement. We really do live in an ‘it depends’ world and there is no ‘right number’ unless specific personal goals are established first (my thanks to the newspapers for that free information).

Nothing New:
You may recall that I made a comment about some of the book’s content not being new to those who follow financial planning closely. Yes, a lot of information may be available elsewhere. And, yes, it may have been covered a hundred times – but for many people, a lot of the content is new.

I always treasure this comment from Wall Street Journal columnist Jason Zweig:
“In my columns, I write the exact same thing between 10-60 times a year, making sure none of my readers can tell that I’m repeating myself. That’s because there are only a handful of enduring truths about investing…sooner or later you must either lie, or repeat yourself”.

When it comes to financial planning and investing, you can’t say it enough times !

This is one of the questions I recently received from one of my subscribers. The right answer, of course, is it depends.

Why do Stock Prices Change?

Before I explain how to figure out what to do, it is important to understand why stock prices rise and fall. Every stock has its own market made up of buyers and sellers. Some investors are looking for long term returns and they are mainly concerned with the strength and future prospects of the business they are buying into. The other class of investors are looking to buy stocks that are rising, hoping to book profit in the short term if the rise continues and sell when the price changes direction.

In the short term, the market is a zero sum game – there is a finite number of buyers and sellers and a finite number of investment dollars in the market. Which means for every penny in profit to some investor, another investor somewhere loses a penny. In the long term though, other factors come into play. Demographic changes, increase in wealth of the nation, inflation, competitive entries and exits, growth and decline of companies, they all change the market dynamics. Essentially, if you are a long term investor, you are more concerned about the fundamental business of the company you are invested in, and how the company continues to execute and grow profitably. You are also worried about the macro economic conditions and how they might influence the prospects of your investments. For a short term investor, these are irrelevant.

Ultimately, in the long run, the stock price is a reflection of the value a company has created in the marketplace with its products and services. In the short run, the stock price is merely a result of the demand and supply curves for the shares and may be out of whack with the company’s real value.

With the stock prices being random in the short term, there is no correct advice for a short term investor. There is a school of investing called technical investing that studies and tries to profit from the short term price and volume movements. However, since in the short term the stock market is a zero sum game, profits and losses are more or less equal. It is very difficult for a technical trader to make consistent profits and sustain it for a long stretch of time. Trading the markets used to be very difficult in the old days with full service brokers, but with proliferation of discount brokerages, like Zecco, Scottrade etc. and fast executions, technical trading is now becoming much more prevalent. This creates greater volatility in the markets. If you are a long term investor, instead of being scared of the volatility, you should embrace it for the opportunities it may bring.

So Should I Buy More or Sell?

Lets assume you are a long term investor and you originally bought the stock when you realized that the stock price is attractive compared to the value the company presents. In this case, look at the following 3 aspects before you decide what you should do with the stock.

1. Has anything changed with the story? – You know why you bought the stock. If the investment thesis is still intact, there is no reason to sell. In the short term, prices may fall for any number of reasons. For example, if a large shareholder sells their stake (such as a mutual fund), it can cause a short lived decline in the prices. However, keep an eye on the recent developments that may be a reason for the stock price decline. For example, when Netflix announced they will separate their streaming video service from the core DVD rental business, many customers decided to leave. This is a fundamental impact on their future prospects and should be evaluated.
2. Are you comfortably within the allocation limits? – If you find that the story is still the same, you may want to add more shares in the company. It is however easy to get carried away and overweight your portfolio with one stock. If you have already reached the allocation that you defined for this stock/industry/asset class in your portfolio, there is no reason to deviate from it. Remember, you created your asset allocation to align with your life goals and they have not changed.
3. Is the stock liquid enough? – If you do have more room in your asset allocation that allows you to add shares, then by all means place an order. Many of the smaller stocks are less liquid and even a 100 share transaction can drop the price in the short term. It does not mean that if you want to buy the stock at this new price, you will be able to. In these cases, make sure that you specify a limit price you are willing to pay. If your purchase order does not fill, do not obsess over it or chase the stock. There are many other opportunities out there.

Personally I believe that a portfolio of well chosen 10-15 stocks in a variety of industries and sectors is a good level of diversification and I only invest a maximum of 10% of my portfolio in any one stock. You may have a different risk profile and diversification needs. Just stay consistent and disciplined.

About the Author: Shailesh Kumar writes about stocks at Value Stock Guide, a popular site devoted to value investing. You can subscribe to his investment newsletter for more investment advice and ideas.

Credit cards can be great financial tools. However, as with all things financial, if you want your decisions to be successful, you need to do what’s best for you. When choosing a credit card, you want one that offers you the best combination of perks for your individual financial situation.

The right credit card can help you find financial freedom — as long as you pay off the balance each month and follow good spending habits. Your credit card should match your spending plan and priorities, and help you reach your long-term financial goals.

What Do You Want the Credit Card For?

Your first issue should be to figure out what you want the credit card for. You should consider the reasons you are getting the credit card. Some reasons to open a credit card account include:

• Build your credit history
• Consolidate debt and pay it down quicker
• Earn rewards to redeem for free travel, merchandise and even cash back
• Emergency access to funds

Consider the reasons behind opening a credit card account. This will give you your first idea of what might work best for you. For someone trying to rebuild his or her credit, a secured credit card might be the only option at first. If you are looking to consolidate debt so that you can pay off your credit cards as quickly as possible, a card offering a 0% balance transfer deal might be preferable, even if there isn’t a rewards program. Think about why you plan to use the card, and choose one that will best help you reach your goals.

Other Things to Consider

Of course, once you have a general idea of how your credit card will be used, it’s time to consider secondary factors. Do your research, and find out what might work best for your situation, and what will help you maximize your money. Things to keep in mind:

• Rewards that you will use: If you want to make use of a rewards program, it’s important to make sure that you will actually use the rewards. This means that you need to think about what your priorities are. Do you prefer travel rewards? Get a card that offers generous points and easy-to-redeem opportunities for airfare and hotel states. If you just want the cash, consider cards with generous programs, including those with rotating categories that earn more, depending on what you buy.
• Interest rate: Those who pay off their credit cards each month don’t have to be as concerned about a high interest rate. However, if you get a credit card in the hopes of financing large purchases for three or four months, or if you regularly carry a balance, a lower interest rate becomes more important. Consider your habits as you choose a credit card.
• Intro period: If you are transferring a relatively low balance to a new credit card, a short introductory period might not be a big deal — especially if you like the rewards program the card has. However, if you have a bigger balance, pay attention to the intro period; you’ll need a longer period in order to get the most benefit out of the interest savings. In some cases, it might be worth it to transfer to a card with 2.99% rate for the life of the balance, rather than to get a card that will stick you with a 19.99% interest rate after nine months.
• Other perks: Find out what other useful features the credit card might have. Some users like concierge services. Others like cards that offer flexible rewards programs. If you shop at a certain store, an associated card can provide you with extra perks that you will use. Find out about the ability to set your own due date, occasionally skip a payment, or receive some other benefit. Sometimes, these “fringe” benefits can make a bigger difference than you might think.

No matter what credit card you apply for, you want it to fit your style, and your spending priorities. Take some time to think about what is most important in a credit card, and how a credit card can be used as a tool to help you reach your financial goals. Then apply for whatever card best fits your needs.