We would like to wish you all a happy and prosperous New Year!

Over the past year I have learned quite a bit from my fellow finance bloggers. There have been thousands of excellent and useful articles published across the personal finance blogsphere over the last twelve months, below you will find a list of some of the best articles of 2009. Of course there have been many more excellent articles in the past year, these are just a few timeless articles I’d like to point out.

The Dividend Blog Guy reminds us of the two simple reasons why we invest. Although there are probably many more reasons why we invest these two are the central reasons.

Len Penzo has quickly become one of my favorite bloggers this year, earlier this year he revealed his Ten Commandments of Personal Finance.

Million Dollar Journey is well on his path to reach his goal of becoming a millionaire before the age of 35, earlier  this year he asked what is important about money to you? Have you ever asked yourself this question? If not I would highly recommend to find out soon.

Oblivious Investor explained why he invests in Vanguard and maybe why you should too.

Canadian Capitalist cautious investors about the recent gold rush and points out why a gold bubble might be forming.

Pay yourself first is a very common recommended strategy, however Digerati Life tells us to save money by paying yourself last.

Everyone would like to become a millionaire one day, but most are not sure how they could achieve this. No need to look further Two Pennies Earned shares a few simple ways you can become a millionaire.

Bible Money Matters reminds us that managing money is not just a mathematical exercise, but also a psychological one.

37% of investment fraud victims are victimized more than once, Before You Invest explains how this is not a coincidence but rather a planned event; Recovery Room Investment Schemes,

Christian Personal Finance lay’s out the ABC’s of personal finance.

Looking for ways to save money? Look no further than The Digerati Life’s 55 Best Ways to Save Money.

Darwin’s Finance explains the important difference between Median and Mean.

Oblivious Investor is not a big fan of Mutual Funds, however he does provide 11 tips for selecting a mutual fund.

Exchange Trade Funds have become very popular of the last little while, ETF Data Base debunks some of the myths surrounding ETFs.

Gen Y Wealth provides an excellent flow chart to help Gen Y members with their investments.

Do you have any interesting articles to share? Feel free to add them in the comments!

I try to stay away from writing about the blog itself as most readers are here for the investing and personal finance topics and not so much about how the blog’s statistics. But as we are reaching the end of this year, I believe this is a good time to reflect on some of the events of the past year on Financial Highway.

Financial Highway has been around for 10 months now and has seen a very decent growth rate over this time period. We were featured several times in the Globe and Mail this year and a few mentions in other mainstream media such as Time Magazine, Wall Street Journal, CNN, The Daily Crux, MSN and The Consumerist.

We won the Best Post of the Year (2009) with 11 Dumb Ways to Get in Debt, thank you everyone for voting.

We have welcomed over 100,000 visitors who viewed over 170,000 pages in the last 10 months.

Top 5 Investment Articles are:
Investing and Money Rules of Thumb
Compounding Interest: Best Investment Strategy -Invest Early
Gold – Bad Investment: 3 Reasons why I don’t buy Bullion
Discount Brokers: 5 Tips to Choose the Best Discount Broker
Successful Investing: 10 Tips for Successful Investing

Most Commented Post:
11 Dumb Ways to get in Debt

Top 5 Overall Articles:
7 Credit Score Myths
Canadian Discount Brokerage Review and Comparison for TFSA and RRSP
11 Dumb Ways to get in Debt
Insurance Myths Debunked Part 2 – Life Insurance
Investing and Money Rules of Thumb

Top 5 Referrers’ (Thank You!)
Consumerist
The Daily Crux
Million Dollar Journey
Tip’d
Twitter

*****We wish you all happy and safe holidays and a Merry Christmas!*****

Due to recent economical troubles layaway, which was once upon a very popular practice that vanished with the increase in use of credit cards, has made a come back. Layaway is a similar to credit card, but with potentially much lower costs. Basically if you want to purchase something but do not have sufficient funds to do so you can ask the store to “lay” the item “away” for you for a specific period of time after you pay an initial deposit and a possible small set up fee. Once you have paid off the item you simply pick it up and leave, this can potentially save you hundreds in interest charges on credit card. Personally I am not a big fan of layaway, I still believe if you cannot pay for it you should not buy it. Considering the other option would be using a credit card and paying 15-30% interest, layaway does seem like a better alternative. With the holiday shopping reaching its peak here are some pros and cons of layaway so you can reach your own verdict.

Pros of Layaway

• Cost is spread over several payments, no need to come up with all the funds at once.

• Layaway fees (often) are much cheaper than interest paid on credit card over couple cycles.

• Set aside major purchases or Christmas gifts without worrying it’ll be out of stock.

• You can beat the Christmas rush and shop before the stores get too crowded.

• It can help impulsive buyers come to their senses and return items (minus fees).

• Take advantage of sales even if you cannot afford to buy the item outright.

• If you fail to make payments it will not hurt your credit report.

• You can plan ahead for special occasions such as weddings.

Cons of Layaway

• If the item is low in value the layaway fee could translate to a relatively high “interest rate”.

• You may loose out on savings if the price of the item goes down (some stores set a limit on “price adjustment).

• Layaway fees can be hefty; some plans come with fees to participate, from $5 to $100.

• It may lead undisciplined shoppers to spend a lot more than they can afford.

• If the store goes out of business you may be out of luck in getting your item or money back.

• If you miss payments you could lose all the money you have paid.

• If you cannot afford the item should you be really buying it?

Layaway can be a good option if used carefully, however the preferred method should still be paying everything with cash.

What are your thoughts on layaway? Is it credit card’s evil little brother or is it the consumer’s savior?

Last week we took a close look at some insurance myths, mainly car insurance myths. This week I am hoping to shed some light on life insurance myths, contradictory to what most believe life insurance is an important part of your financial plan and understanding some common myths can go a long way in your decision process.

It’s Better to Invest Than to Buy Any Kind Of Life Insurance
When I used work in the life insurance industry this would always be the number response to life insurance and it is a very dangerous myth. Although this maybe a valid reason in the future for not having insurance, at the early stages of your accumulation phase life insurance is important. Chances are you have a mortgage, maybe student loans and other consumer debts at the early stages what if something were to happen to you today or in couple of months? Your investments would not be anywhere close to cover the debt obligations left to your family. Until you reach the breakeven point you will need some sort of life insurance.

I Should ALWAYS Buy Term and Invest the Difference.
Personally I believe most people are sufficiently covered with term insurance, however not ALWAYS! There are cases when permanent insurance is needed (estate equalization, taxation, funeral cost etc). In these cases term insurance will not provide sufficient coverage for your needs.

Life Insurance Won’t Pay If You Commit Suicide
This myth has been brought about mainly by movies; the fact is that suicide is often not directly excluded from life insurance policies. Often there is an exclusion period for suicide; in Ontario (and most of Canada) this period is two years. If you commit suicide within the first two years of your policy inception then no payout will be made, if it is past the two years then your full face value is paid out (assuming everything else is remains the same).

All Life Insurance Policies Are the Same
“No need to read my policy – they are all the same, if you die your beneficiary will get paid.” You should always read and fully understand a contract you sign, although the concept of life insurance is simple not every contract is the same. Some have certain exclusion, some term policies are renewable and convertible while others may not be and so on. The auto insurance industry is highly regulated and policies are standard, this is not the case with life insurance policy. Read through your policy when you receive it and ask the agent questions if things are not clear. Also you need to make sure that all the information on the policy is correct such as the insured’s name and the beneficiary’s contact information.

Insurance Agents Can Determine Your Insurance Needs
Most life insurance salespeople are looking out for their client’s best interest, however remember that most get paid a commission and this can sometimes create a conflict of interest. Do not rely solely on what your salesperson advises, determine your own needs prior to speaking with insurance agents this way you’ll at least have a rough idea of how much you’d need. If you are unsure about how much you need see this post on some guidelines in determining how much life insurance you need.

Other Resources:

Here are 14 tips for purchasing life insurance.

Check out Clarifinancial for life insurance quotes from multiple agents and all anonymous.

We are reaching the end of the year and one of the busiest times of the year and when you are too busy you tend to forget stuff sometimes. This is what happened yesterday I forgot to change the date of this post and it was published when it was not suppose to be, I apologize for the mistake.

In other news; our article 11 Dumb Ways to Get in Debt has been nominated for best article of the year at Best of Money Carnival…..wohooo….if you have a minute head over there and vote for us quickly by leaving a comment on the post with the title….thanks for your help and support!!

This weeks Round Up

Cynthia Pinkston @ ClariFinancial on Top Five Reason to Review Your Life Insurance

Frugal Trader @ Million Dollar Journey Year End Tax Tips

Canadian Capitalist on HST Tax Grab

Jason Zweig @ Wall Street Journal on Dangerous of Dividend Stocks

Mike @ Oblivious Investor on Risks in Buying Bonds

Len Penzo on 10 Financial Lessons We Can Learn from Baseball

Flexo @ Consumerism Commentary on Is Value Based Socially Responsible Investments Worthwhile?

Peter @ Bible Money Matters on 5 Ways to Give More and Spend Less this Christmas

Everyone knows that they should live below their means, save for retirement, pay off debt and so on, but why do so many people fail? The math is simple and does not lie; yet many people fail to save enough money and fall too far in debt. Maybe personal finance is about more than just math? The Secret Language of Money tries to tackle this issue from a psychological point of view.

What is The Secret Language Of Money about
The book is a look at the psychological aspect of money management. What is your money story? How has your early life experience affected your perception of money and money management skills? The authors tackle personal finance from a psychological and behavioral point of view, they do not talk about what our savings rate should be or what type of portfolio to have. It provides the reader with the tools to understand why they perceive money the way they do and how to change their behavior. The primary author of this book is Dr. David Krueger, who is a psychiatrist and an Executive Mentor Coach. Krueger touches on many important aspects of psychology and money, such as early experiences with money and your money story.  He effectively uses many real life examples from his practice to illustrate these notions. The authors’ do an excellent job in brining psychology and money together.

What I Like:

• A different view on personal finance – not just focusing on math but rather on a journey to explore one’s true attitude and feelings towards money and how to change these behaviors.
• Excellent integration of psychology and money, clear examples used to illustrate arguments.
• No jargon, there are no (or not many) psychology or finance jargon used.
• Work sheets – worksheets are included to help reader assess their personal money attitude.

What I Don’t Like:

• Sidetracking – There were times when the authors sidetracked too far away from the main topic, sometimes it felt as if I was reading a psychology textbook.

Share your thoughts on psychology and money and win a copy of The Secret Language of Money!!

Conclusion:
As you can see I do not have many complains about the book. I very much enjoyed it and it was refreshing to read a book on personal finance and learn something new. I believe understanding one’s money psychology is crucial in order to be financially successful and this book does an excellent job in helping readers understand their money story. Just be warned that it might get a little boring towards the middle section of it, but can be of great benefit in the long run. If you are looking for the usual personal finance book and basic budgeting and saving tips then look away, however if you want to get a better understanding of your finances and your thoughts and feelings towards this sensitive topic then this is a must-read for you.

Financial Highway Rating: ★★★★★

Insurance is one of those things we have to have but don’t necessarily understand fully. We have life insurance, auto insurance, property insurance, business insurance, liability insurance and so on. Insurance myths come about due to this inherent lack of understanding of the insurance industry.  Some of these myths are so prevailing that until I started to study insurance and got a better understanding of the industry I believed them myself.

Red Cars Are More Expensive to Insure
This is probably the most common myth about car insurance, until a few years ago I too believed that red cars cost more to insure. The fact is that insurance companies do not pay any attention to the color of the vehicle and often do not even ask about it. When it comes to car insurance companies care about the make, model, year, body type and engine size of the car; they do not care about the color.

If Someone Driving My Car is in an At-Fault-Accident I Will Not Be Responsible
Wrong! If you lend your car to someone you will be lending your insurance along with it, if they cause an accident it will stay on your insurance record and insurers will rate you for it. The policy covering the vehicle is considered the primary policy and is liable for the damage, in some cases if there is insufficient coverage (maybe a deductible difference) than the driver’s policy may kick in to cover the difference. This may vary from province/state to province/state.

Auto Insurance is Not Regulated, Companies Can do As They Please
This could not be any further from the truth. Although it may feel like insurance companies are ripping you off and can do as they wish, this is not true. The insurance industry is highly regulated and every company has to file their rating system with the appropriate regulatory bodies, they cannot randomly increase rates on individuals.

If My Car is Totaled, Insurance Company will Pay Off the Lease/Loan
False! If your car is totaled the insurance company will only pay you the actual cash value of the vehicle, this is the value of the car before the loss occurred minus depreciation. If the amount you owe is more than this then you will be responsible for the difference. Often when the vehicle is leased/financed brand new you can purchase a “depreciation waiver” in which case you would receive the actual purchase price of the car without any depreciation.

You believe any of these myths? Any other myths you’d like to shed some light on? What is the most common myth you have heard?

As we are heading into the holiday season and year end we get busier and may start to forget some important tasks before the end of the year, Canadian Capitalist has put together a handy Year-end Financial Deadlines.

Most of our spending and consumption is psychological driven and often we are unaware of them, Gail discusses one very prominent psychological phenomena; The Halo effect. Of course as a behavioral finance enthusiast this was my favorite piece of the week.

Although this year started rough for the Canadian economy and stock market things have turned since March of this year. We have seen the stock rise well over 45% and the housing market has improved Rob Carrick @ Globe & Mail discusses on how this helped Canadians and their networth.

Want to be a millionaire? Million Dollar Journey (who is well on his way to becoming a millionaire himself) lists top 10 wealthiest Canadians and what they all have in common, find out and maybe you can be among them soon.

Currently I am reading Stop Acting Rich and Start Living Like A Millionaire by Dr. Thomas J. Stanley (review and book giveaway coming soon) in his book he states that his research shows that most millionaires are not big spenders but are in fact frugal people. Yahoo Finance speaks with Dr. Stanley on this topic in To Act Like the Rich, Be Frugal.

Insurance is always a confusing topic for most people, yet it is a crucial part of financial planning. Canadian Finance Blog discusses how you can determine if you have sufficient home insurance.

A few weeks ago I was reading an issue of Canadian Business which had an interesting discussion on mandatory financial licensing for everyone. Although, I find the idea far fetched upon further consideration it does sound like a good concept.

The article was referring to a recent report by Sumit Agarwal, senior financial economist with the Federal Reserve Board, and colleagues who suggest a mandatory financial literacy test for everyone before major financial decisions such as mortgage or major investment. I am sure many would not be too happy with such imposition, however think about the long-term benefits of this proposal.

If a mandatory financial literacy test program existed before the recent mortgage subprime-led-credit crisis things could have been different. Many people would not have taken on subprime mortgages and investors would have been more careful.

One common object to this suggestion is the cost associated for such a program and many taxpayers would not be too happy. Once again we should consider all the long-term savings of such program – if we had this program before the recent economic collapse taxpayers would not be on the hook for billions of dollars in bailout money and the government would not be trillions of dollars in debt. Furthermore, hundreds of thousands of people would have not lost their homes and jobs. Hence this would have saved the taxpayers billions of dollars.

Mandatory financial licensing would also help prevent investment fraud, if investors are forced to take courses and pass tests they will be more likely to detect investment fraud and less likely to fall victim of such scams.

When discussing this idea with the Mrs. one of her arguments was that we would discriminate against those who lack the mental capacity to understand financial concepts and cannot pass these tests. Although this may be true but would that be a bad thing? If one does not understand the risk they are taking and the responsibilities of having a mortgage should they really have a mortgage? Furthermore, we discriminate all the time with other privileges such as driving tests and citizenship tests, there are minimum requirements to obtain either one and if one does not meet these requirements they will not receive the privileges.

Of course we are far from implementing such programs however the recent economic events have made this concept more realistic. There are many other factors that need to be taken into account before such programs can be launched, however I find the idea is worthy of serious consideration.

What are your thoughts on financial licensing? Is it a far fetched concept? Do you feel it is redundant and stupid? Or should the governments give serious consideration to such programs?