7 Tips for Financial Success

All of us want to be financially successful but many of us have psychological blocks or limiting habits and behaviours that can limit our desire to get there.

Here are 7 tips for financial success:

1. It’s A Life Style
   I don’t know anyone who became rich without working hard for it. Those who have a strong focus and work ethic tend to be more financially secure. As well, those that take (measured) risks rather than settling for what they can get by on tend to be much further ahead. A 40-hour work week can be a springboard to taking one’s income to the next level – look for ways you can add value to your organization and do more than is expected – people tend to notice (not to mention the good karma points you earn!) and opportunities seem to ‘magically’ come to those that put this into action. Example: My husband was surprised and pleased to have his organization offer to sponsor his Master’s degree (which built his skills and confidence and resulted in a nice pay raise) as a result of his great attitude and willingness to work on his own time. (He created a process to save the company money, without cutting people’s jobs or spending any extra) – and the decision makers noticed and rewarded him accordingly.
2. Say “no” when people make unreasonable requests
   How many people have stories about the time they “had” to lend their sister money, or the time they were “forced” to host an expensive dinner for their family because it was expected? Generosity can be a good thing, but only when exercised with foresight and in keeping with your own financial well-being. It is ok to say, “No” when you are confronted with an unreasonable request, especially when it comes to money. Get in the habit of finding other ways to express love and commitment to friends and family members, rather than spending. ie. Potlucks, outdoor activities, supportive phone calls, hand-written notes, cute emails, etc.
   
3. Check the Price Tag
   People who are successful financially are generally in the habit of looking at how much things cost and even have policies NOT to spend unless they can get a deal. They spend very consciously, and they would probably hesitate to spend $600 on designer brand stuff (Unless they got the items on sale at an already discounted outlet store, they didn’t have other versions of those items already, and the plan is to have the items last for a significant period of time). It’s not being cheap, it’s being smart.
4. Don’t buy on credit if you can’t pay in full
   People who are financially successful don’t pay for things on credit if they can’t afford to pay cash on the spot. Purchase on credit only when you will not carry a balance. Many credit cards offer great rewards and points that can be used for travel, car rentals, hotels, and other merchandise, but don’t let the rewards tempt you to overspend and carry a balance, or it will far outweigh any of the benefits.
   
5. Track expenses and create a realistic budget
   Do you have a monthly budget? Do you find your budget and actual spending don’t line up? Maybe your budget isn’t realistic and the extra stress and guilt about not sticking to it are just making matters worse. Track your expenses by saving all of your receipts for a month. Then look at your spending habits and create a reasonable and sustainable budget that is realistic for you.
6. Give Back
   Volunteer, support your favourite cause, or offer to help others when they need some guidance. You can give in many ways, including with your skills, your time, your stuff that you don’t need anymore, as well as with your cash. Again, opportunities and money seem to come to those who live with a generosity of spirit. Be a part of both give and take. You never know when your support will come full circle and be there when you need a boost.
7. Save and Invest on a regular basis
   Think about what you want to have in 5 to 10 years down the road. Invest for both safety and high returns (yes, these opportunities do exist, although odds are your bank or financial advisor will disagree) and get your money working for you. Accumulate money for things you want to buy and have a designated amount of savings set aside for those unexpected expenses.

Any other tips to share?

Disclaimer: This blog should be used for informational purposes only and should not replace the advice of a licensed financial professional.

What is an Annuity?

Annuities are one of many retirement income options available in Canada. The average purchasers tend to be in their mid-sixties. Annuities are binding contracts between the customer and the issuer (usually a life insurance company) and they provide the customer with a set amount of money based on a payment schedule. Unlike many other sources of income, annuities are unusual in that they pay a lifetime of income and will not be depleted while you are alive.

Some types of annuities:

Straight Life Annuity

• Provides an annuity for the duration of the customer’s life
• Highest level of income
• Payments cease as soon as the customer passes away, even if that is only 1 year into the contract

Life Annuity with Guaranteed Number of Payments

• This annuity is similar to the straight life annuity
• Provides a set guaranteed number of payments (5, 10, 15, or 20 years) regardless of when the death of the customer occurs

Joint and Survivor Annuity

• Provides income for 2 people
• If one annuitant passes away, the other will receive income while they are alive or for their guaranteed period of time
• Usually offered as reducing or non-reducing annuities – With reducing annuities the surviving customer will be paid a reduced amount of income
• Guarantee period is usually based on the age of the youngest annuitant

Cash Refund Annuity

• If the customer passes away before their annuity payments exceed their initial investment, the balance will be paid in cash to a named beneficiary or the customer’s estate

Fixed Term Annuity

• Similar to the Cash Refund, but for a fixed amount of time (5, 10, 15, or 20 years)
• If the customers passes away before the end of the term, payments will continued to a beneficiary or the customer’s estate

Annuity Income Determination
A few factors affect the determination of an annuity income. These include current interest rates, gender of the customer (as females have an average lifespan longer than males), and the number of years the customer wants to have their payment guaranteed. There are also tax benefits associated with Annuities that may be preferable to income from a Registered Retirement Income Fund (RRIF) which is what an RRSP is converted to once a person turns 71 at the latest. For more information about Annuities, contact info@sharethewealth.ca for referrals to trusted professionals (we do not collect a fee for such a referral).

Disclaimer: This blog should be used for informational purposes only and should not replace the advice of a licensed financial professional.

Strategies for Living on Less

There are many excellent reasons to get in the habit of living on a lower income – this last recession was a wake up call for the Canadian middle class who suddenly had to do so due to job losses and business bankruptcies. There are few things worse than being forced into a situation – and psychologically, there is a big difference between choosing to live a certain way versus having to live a certain way. So much depends on our mind-set around money. While a lower income may seem like a nightmare for some, it can actually be fun and a good way to exercise your creativity to habitually find ways to live on less. I have to admit, this is one of my personal favourite things to do – see how little I can spend in a day or a week, because it forces me to think outside of the box, create more community with others ie. Setting up a carpool or clothing swap, opting for pot-lucks instead of restaurants, and finding free ways to have fun. And the surplus at the end of each month is a huge reward! Here are a few good habits and ideas that can help keep you afloat and living well on fewer funds.

Needs vs. Wants
A surprising number of people have difficulty classifying their needs and wants. When you’re living on less, these differences become extremely important. A need, as my mother always told me, revolves around the basics – shelter, utilities, food, clothing, transportation, emergency fund/planned savings and long-term investing/saving. Basic clothing such as socks, shoes, pants, and tops, are a need, but those $600 heels are a want, even if they might make you look stylish in the office. It is also a must to get clear on what are true needs and wants when it comes to the basics – a single person may not ‘need’ a 1 bedroom apartment versus perhaps sharing a 1 bedroom plus den with a roommate or two (this can also be a lot more fun!), or renting a room in a larger house, or downgrading to a studio suite. Similarly, there can be a huge range of costs in groceries – do you really ‘need’ to have strawberries in December, when their cost is at a premium?

Reduce Costs
Two of the biggest costs for people are housing and transportation. If you’re headed towards retirement or an income reduction, prepare yourself by getting your housing costs down to a third of your income or less. You may have to downsize or move to another area, but it will be worth it in the long run. If you drive a gas heavy, leased or otherwise financed car, consider trading in for a cheaper, more fuel-efficient model and take public transit or carpool. Or better yet, get a bike, (and cancel the gym membership you never use!) and/or see if you can work from home or adjust your hours so you don’t have to commute as much or at all. Some people I know either run or walk to work. Be creative!

Make a Budget
No matter how much or little money you have, a budget is very important and useful. A budget simply means having an awareness of what your fixed costs are and what your limits are for variable expenses. Include fixed and variable expenses in your budget. Make sure you build a ‘fun’ account within your variable expenses that allows you to indulge in genuinely pleasurable wants. You will enjoy them that much more when they are planned for and well thought out. *For example, my husband and I at one point had gotten into the habit of eating out almost all of our meals and snacks, and we weren’t even really enjoying it anymore – it was just an expensive habit. When we cut right back, we realized that there was one South Indian restaurant we really missed, so now we save up to go there every couple of months – it becomes a treat to look forward too and is much more enjoyable now.

Use Your Skills
What skills or products can you offer to somebody in order to get something back in return? Bartering is a great way to get the things you need without spending a lot of money. Offer to walk a neighbor’s dog in exchange for some fresh vegetables from their garden, or trade childcare with another parent so you can take turns going out (or staying in, if you get what I’m saying) for a low cost date.

Do free activities
Going for a walk or bike ride together, or playing a board game or cards, cooking or baking, watching a favourite TV show, renting books or videos from the library, trading back or foot massages, or just talking are great ways to relax and enjoy time well spent. It’s amazing how dependent we as a developed society have become on costly forms of entertainment, including mindless spending for fun.

The thought of living on a lower income may seem like a challenge, but with some clear priorities and strategies you may be surprised how your life improves significantly with less. What else works for you? Share your experience!

Disclaimer: This blog should be used for informational purposes only and should not replace the advice of a licensed financial professional.

Understanding the new HST (Harmonized Sales Tax)

As of May 1, 2010, British Columbians began to notice the effects of the new harmonized sales tax (HST). Although the HST is not set to be implemented until July 1, 2010 goods that straddle the deadline will be subjected to the full HST for use of the service after July 1.

How will this affect you?

If you buy tickets to a concert, flight tickets, or a gym membership, these things may be subject to HST if the purchase was made after April 30, and the service continues or occurs after June 30. You will be required to pay HST for the portion of the service that occurs after June 30.

What types of goods and services will HST be applied to?

• Restaurant / café purchases above $4
• Funeral services
• New homes that cost above $400,000
• All other goods / services that were previously taxed with GST & PST
• Groceries that are not considered “basic”

What types of goods and services will be exempt from HST?

• Feminine hygiene products
• Newspapers
• Baby diapers
• Children’s shoes & Clothing
• Infant car seats & Booster seats
• Used residential housing
• Music lessons
• Specific childcare services
• Restaurant / café purchases below $4

The government has decided to implement the very unpopular HST in order to create a surplus in the hopes of reducing income taxes. Although paying the extra 7% will be a challenge for many tax payers, the government’s “big picture agenda” is that that consumers will benefit from the long-term effects. The government is asking for businesses to lower administrative costs and pass on savings to consumers. The HST is a hot topic and there are lots of good discussion forums out there that shed more light on the subject – if this is of interest to you, please click here for more.

So if you’re going to a café after July 1, be sure to order the sandwich under $4 or it’ll cost you an extra 7% – geesh… well, on the bright side, I guess we now have more incentive to bring our lunches from home using basic HST-exempt groceries, invest more and open our own businesses. What are your thoughts on the HST?

Disclaimer: This blog should be used for informational purposes only and should not replace the advice of a licensed financial professional.

Managing Your Day-to-Day Finances Made Easy

Many of us find it difficult to manage our finances because we don’t have a good, simple system in place that deals with the day-to-day. Instead, we ignore the issue until it we have piles of messy-looking receipts or bills, and it feels scary, or overwhelming, which makes it even harder to tackle until it becomes a financial emergency. Here are a few tips for making your finances a little less intimidating and a lot more manageable.

Consolidate Your Accounts. Most people have several bank accounts. The more accounts you have, the harder it is to manage them. It’s easy to forget about accounts that are not used often. The simplest solution is to have one account for household expenses, also called ‘fixed expenses’ ie. Rent/mortgage, grocery, utility bills, transportation, emergency fund, insurance (car, home, life, disability), savings/investment and then a personal account for you and a spouse for your disposable or ‘variable expenses’ ie. Entertainment, (restaurants, fashion, magazines, gifts, movies, alcohol), extra savings for planned spending ie. Trip to Spain, new car, flat screen TV, and any extra savings or investing.

Communication! For couples, good communication about how much goes into the household account is essential – some couples split the costs 50/50 if both are working for money outside the home, others contribute based on how much they earn ie. If she makes 70% of the total income, the costs are split 70/30. If only one person is earning 100% of the income, while the other is doing un-paid work in the home, many find it essential to agree on what’s needed to cover the fixed costs and deposit that into the household account and then split the remainder equally for disposable spending each month. There are many ways to create a clear system that works for both of you – good communication and agreement is essential! Otherwise the usual outcome is all or some of: resentment, constant fighting, unmanageable debt, money hoarding/hiding, and often bankruptcy and divorce. A little compromise and communication go a long way! Money coaching or financial coaching is a good solution for couples that want some guidance in this area…

Pay Your Bills From Any Part Of The World. Save yourself the hassle of keeping up with all your statements, go paperless. Paperless billing is available from almost all banks and credit card companies. This way, you can keep up with your statements even when you’re traveling or otherwise away from your home or computer, without worrying about missing the mail or throwing away something you should have kept. Although I’ve gone paperless, I print out my online statement each month and file it away for tax season!

Set Up Automatic Payments. Credit cards and other bills can usually be paid automatically, either through your bank account or through the creditor’s website. Set these up to pay every month and you never have to worry about missing a payment again. A word of caution: always make sure that your bank account has sufficient funds, especially when paying credit cards automatically, or you may incur significant fees. This tip is not for everyone, but if you find yourself missing deadlines, it may be helpful.

Track Your Finances. Like a New Year’s resolution, most people plan their budget once a year and then promptly forget about it. If you track your budget monthly, you can keep up with not only your regular expenses but also emergency items that may change the whole picture. Your bank or Credit Card Company may offer free software to help you with this task. You can also download our Money Tracking Spreadsheet for your use! If you’d like to improve in this area, our Conscious Spending blog will help out too!

It is often said that if you take care of the little steps, the big steps take care of themselves. These tips make the day-to-day manageable and managing the day-to-day is the foundation to building wealth, prosperity and happiness in all areas.

Disclaimer: This blog should be used for informational purposes only and should not replace the advice of a licensed financial professional.

All About Spousal RRSPs

Spousal RRSPs can be confusing, but also very beneficial to families who have a spouse who earns the bulk of the income. Some common questions are: Whose money is it? Where does it come from? What about the tax?

Here are the basics about these plans:

• A Spousal RRSP is just like a regular RRSP except that one person (the higher income earner in the higher tax bracket) contributes to the other person’s plan (and thereby gets the tax credit, while helping their spouse build up their retirement income). For instance, one spouse contributes to their own RRSP and also contributes to his or her spouses RRSP, but each spouse owns their own RRSP.
• A spouse may not contribute more than his or her annual limit to the two RRSPs combined. For example, if the contribution room is $18,000, s/he might contribute $9,000 to each RRSP.
• The recipient of the Spousal RRSP ‘owns’ the money that the contributor has contributed.
• The contributor is able to deduct the contribution from his or her income as the recipient will be taxed on the withdrawal.
• The recipient must wait until two years after the last contribution before s/he makes a withdrawal. If s/he does not, the money will count as taxable income for the contributor.

When does it make sense to set up a Spousal RRSP?

Typically, a Spousal RRSP only makes sense when one spouse makes a significantly higher income than the other does. By contributing to a Spousal RRSP, the contributor lowers his or her taxable income.

When it comes to retirement, the contributor will have less money in his or her RRSP than if s/he had contributed everything to his or her fund. This means his or her monthly retirement income will be lower. The net effect is to lower the overall tax burden for the couple both now and after retirement.

Have you contributed to a Spousal RRSP? Do you have any suggestions or stories to share? If you have questions about Spousal RRSPs or would like to hear about some Spousal RRSP investment options, we’d be happy to talk with you – email us at info@sharethewealth.ca.

Disclaimer: This blog should be used for informational purposes only and should not replace the advice of a licensed financial professional.

Taming the Take Out Beast

Seems Pretty Hard! I have heard (and said myself, I’m no saint here) “I’m too tired to cook”, “I work hard, I deserve a break”, “There’s nothing to eat around here!” However, eating out (or ordering in) is one of the most insidious devourers of our income, and taking steps to break the habit can make the difference between creating a healthy savings/investment pool and living paycheque to paycheque.

But it’s possible. A little creative thinking and some planning can help you create a workable monthly grocery budget without compromising on taste. There are many ways to control food costs and cooking time and still eat great tasting food! If you are game to tame the take out beast, try these tips.

1. Cook twice as much food as you need for one meal. Eat one portion and freeze the other (or eat it for lunch the next day). This saves on the costs of cooking, (electricity or gas) but more importantly, the cost of your own time and energy. By regularly building those extra meals up in the freezer, on those nights when you just can’t stand the thought of cooking (or genuinely do not have the time), you’ll have something in the freezer that you can pop in the microwave. No fast food, or expensive boxed frozen dinners – just a good, healthy, home-cooked meal. This works really well with lasagna, pasta sauces, even burritos (I got a great tip from a friend of mine who drives a bus – he brings his tin-foil wrapped frozen home-made burrito to work, places it on the dashboard of the bus, and by lunchtime it is nice and hot!)

2. Plan to cook meals that involve the same ingredients for a few days. For example, roast a chicken one night, chicken salad another night, and use the bones to make stock for soup a third night. This trick works especially well with specialty ingredients like fresh herbs. If your favorite recipe calls for a tablespoon of fresh basil, you will probably have to buy a whole bunch, and this way you will minimize waste.

3. Have healthy, quick snacks in the pantry for late-night cravings or to take to work. It’s better for your budget and your waistline to have some fresh fruit, for example, or granola/cereal portions on hand instead of running out to the corner store or heading for the vending machine. (One trick I use: investing in those Ziploc one-cup containers with lids and put measured dry cereal in them (Special K with pecans, or the vanilla almond one). Saves a fortune AND creates a barrier to over-eating junk food.

4. This is my favourite! Instead of meeting friends at restaurants or coffee shops as a social gathering, start a supper club that meets every two weeks or so. Get together with some of your neighbors and have everyone bring a different course each time you meet. Rotate the entrée, a couple of sides, dessert and drinks. You can do Mexican, Italian, Greek, Japanese, whatever you want. You’ll find that this saves you money even if it’s your turn to do the entrée and make it a rule that everyone pitches in for clean up.

Another reason for the supper club is to share more money-saving grocery tips, or maybe even swap coupons. Do you know some tips we haven’t mentioned or great recipes? Share them with us in the comments section. Together, with a little planning and a commitment to the process, we can save money, eat well, lose weight and build our relationships!

Disclaimer: This blog should be used for informational purposes only and should not replace the advice of a licensed financial professional.

Book Review: The How of Happiness

“All of us want to be happy, even if we don’t admit it openly or choose to cloak our desire in different words. Whether our dreams are about professional success, spiritual fulfillment, a sense of connection, a purpose in life, or love and sex, we covet those things because ultimately we believe that they will make us happier. Yet few of us truly appreciate just how much we can improve our happiness or know precisely how to go about doing it. To step back and consider your deep-seated assumptions about how to become a happier person and whether it’s even possible for you – what I hope this book will spur you to do – is to understand that becoming happier is realizable, that it’s in your power, and that it’s one of the most vital and momentous things that you can do for yourself and for those around you.” – Foreword from the author – The How of Happiness – Sonja Lyubomirsky

My dear friend and Professional Coach Signy Wilson recently highly recommended “The How of Happiness” by Dr. Sonja Lyubomirsky to me and I am so grateful she did, as this book is the best one I have read on the subject, both in terms of readability and in terms of its clear instructions for pragmatic action.

Sonja has a PhD in Positive Psychology and has written the first book based on the results of her empirical investigations on the “Science of Happiness”. She is a research scientist, not a clinician, life coach or self-help guru and her research studies have revealed how people can practically achieve a greater sense of happiness in their lives. She cites numerous studies to support her claims, conclusions and recommendations, and the book written in language that is friendly, conversational and practical.

Dr. Lyubomirsky’s overarching conclusion is that each of us has a genetic happiness “set point” we are born with (akin to a body weight set point) that determines 50% of our happiness quotient – some people are naturally more happy and optimistic, and others less so. 10% of our happiness quotient is situational or circumstantial, such as our age, race, wealth, living situation, job, attractiveness, health and so on. The remaining 40% is up to us to actively control, and it is this 40% that Sonja focuses the main content of her book on. She has also included a self-assessment test to determine where we are currently on the happiness scale, what kinds of happiness-creating activities are best suited to our individual make-up, motivations and preferences, and how to go about putting these activities into action.

In Part One of the book, the reader is invited to take another assessment to determine the types of activities that are the most gratifying fit for him/her on the road to increasing happiness. Sonja’s studies have shown that there are 12 areas that can be actively engaged in to produce measurable results, as follows:
1. Expressing Gratitude
2. Cultivating Optimism
3. Avoiding Over-thinking
4. Practicing Acts of Kindness
5. Nurturing Social Relationships
6. Developing Strategies for Coping
7. Learning to Forgive
8. Increasing Flow Experiences (*”flow” is defined as activities where you are so involved you lose track of time ie. Reading, painting, running, etc.)
9. Savouring Life’s Joys
10. Committing to Your Goals
11. Practicing Religion and Spirituality
12. Taking Care of Your Body (Meditation)
12a. Taking Care of Your Body (Physical Activity)
12b. Taking Care of Your Body (Acting Like a Happy Person)

After completing the person-activity fit diagnostic, which takes only a few minutes and is easily scored, you identify the four categories of activities that represent your top interests. There are sections in Part 2 that are devoted to activities that fall into each of the 12 categories of activity covered by the diagnostic assessment where you can pick the specific activities in which you want to engage. This is the “How” part of creating happiness, which is often sorely lacking in other self-help books on the subject.

When I did the diagnostic I was happily surprised to see how closely the results represent the kinds of things I already like to do and gave me great practical ideas on how I could take those activities to the “next level” – my top two areas were “Practicing Acts of Kindness” and “Increasing Flow Activities”, followed by “Practicing Spirituality” and “Taking Care of My Body”. I found I was easily able to be more involved in what I was doing in these areas already, as well as pick new activities in which to engage.

What is also very positive is the author’s emphasis on NOT overwhelming us with too many happiness activities. The recommendation is to pick no more than three of the four areas identified by the diagnostic – alternatively, it can be only one activity. Lyubomirsky makes doing happiness activities very manageable as well as fun.

Sonja also outlines and debunks, again, based in science, some popular “Happiness Myths”. Her findings and both empowering and reassuring.

Myth #1 – Happiness must be “Found”. This implies that happiness is some elusive thing that must be discovered outside of us somehow. To understand that 40% of our happiness is determined by intentional activity is to appreciate the promise of the great impact that you can make on your own life through intentional strategies that you can implement to remake yourself as a happier person.

Myth #2 – Happiness lies in changing our circumstances. This kind of thinking is “I would be happy IF ____________” or “I will be happy WHEN _________” (insert “I lose 20 pounds” or “I become financially independent” or “I meet the love of my life” etc.)  As only 10% of our happiness is ground in our circumstances, even when we do achieve these types of goals, while it may make us happy temporarily, science shows that the happiness is not as great, nor does it have as lasting an effect as the other types of activities the author outlines in the book. **I can certainly concur with this on a personal anecdotal level – in 2009 I achieved two goals I thought would make me very happy – losing weight and becoming financially independent. Of course, achieving these goals did feel great, but about week or so later the “happiness high” wore off and just became the regular “status quo”. This is due to our ability as humans to adapt to our circumstances, both positive and negative. (Which isn’t to say we shouldn’t pursue these types of goals, but rather to have realistic expectations of their time-limited results on our overall happiness level). My personal ‘take-away’ from this learning was to continuously strive to achieve additional meaningful goals, as well as make sure I am doing the other happiness-enhancing activities that came up on my list as well…and so far, so good!

Myth #3 – You either have it [happiness] or you don’t. The notion that we are stuck with our genetic programming to be either happy or unhappy is being proven by a growing body of research to be untrue – we can overcome our genetic programming by the action we take!

And the best news of all? I found this book on sale at Chapters, in the Bargain Section for just over $6.00 – well worth every penny spent and the time invested to read and put the suggestions into action. Although I’m an advocate of using the library wherever possible, given that there are several self-assessment activities and areas to measure one’s progressive happiness quotient (and depression quotient) over time, getting one’s own personal copy may be a good plan.

Let us know what you think! What happiness activities are working for you?