WHAT DO YOU REALLY, WANT?

Whenever I facilitate a workshop on finance the very first question I ask the participants is WHAT ARE YOUR FINANCIAL WISHES?      Most of the participants are stumped by this question.

In The story of Aladdin’s Lamp the Genie once released from his imprisonment in the bottle asks Aladdin. “WHAT DO YOU WISH’   I refer to this fable to illustrate a point.  When Aladdin was confronted with this question he hesitated, and like most of us, he did not have a list of specific wishes.  He had a vague idea of what would provide the most immediate pleasure and comfort.  He did not have a working plan and he did know what he wanted.  I ask, the Genie’s question a little differently. What is it you to accomplish financially?  The common response is “You know I have never really thought of that.”

At the beginning of a workshop on finance I get those same reactions. So let’s see if I can help guide you to achieve your financial goals

It is Tuesday night and you are watching reality television wishing you were one of those rich people or one of those getting rich doing their show.  You wished so hard that the Genie appears,   “Give me a list of the ten things you want now and they all will be yours in five years.  You will receive the first one in January and the second one in June and every year after this for the next five years.  There is only one catch; you must name these ten things in 120 seconds.”

How many of you are able to do this now?  Stop reading and get your, I phone, I Pad, purple, yellow or blackberries and begin writing taking only 120 seconds to complete the list.  How was that for you, did you complete your list in 120 seconds or were you mystified, dumfounded, and exhausted, well you are not alone you are just like 90% of the population over the age of 20.

Kids know what they want; we have all seen or experienced with a child who wants a particular toy, they know the name of the toy, they know where it is sold, what colour it is, how much it cost and they also know you will move heaven and earth to get it for them.

The Genie feels sorry for you and decided to give you another chance.   He tells you “I will be back in seven days and if you have those ten things listed they will be yours.”

What are you going to do, are you going to turn off the television, and get your note-book or one of those berries and begin writing or are you going to do it after this particular show is over?  It is all your choice, remember. The decisions you make today determines the life you live tomorrow.

You decided you are starting now.  The first list you created you set aside, NO! You say out loud as you jump out of your chair, this is not what I really, want.   You start again.  This time you date and time the second page and begin, using the previous list as a reference, you look at the list again and will see the things you know you need, also what you don’t want.

Here are  some things you might have on that first list.

  1. Be happy,
  2.  Have good health
  3. Travel
  4.  Have a fancy car
  5. Eat at superfine restaurants
  6. Have a big House
  7. Buy designer clothes and shoes
  8. Want to be comfortable
  9. Get married
  10.  Have a family

Now here is a list of the things you need and want to accomplish.

  1. Stop borrowing money to buy things
  2. Bring my current debt up-to-date
  3. Pay off all my debt Buy a Home
  4. Create a small only God knows fund
  5. Create a Big emergency fund
  6. Buy a house
  7. Open a  Registered Retirement Savings Plan
  8. Save my children’s education
  9. Have an annual vacation
  10. Pay off the house

A very different list from the previous one.  Are these better choices?

Try creating your own list using the above as a reference.

When you have these things in place, peace of mind, happiness and contentment will follow, and your Financial Advisor aka Genie will have guided you to reach your financial goals.

It requires some practice and it will definitely take much more than 120 seconds to get it right but it is worth doing.

Let me know how you felt before and after the exercise.

Tessa-Marie

SAVINGS PLAN – FOR FAMILIES AND CHILDREN

While facilitating workshops throughout the city I am surprised at the number of  families, who do not take advantage of savings available for their children.   The Government of Canada continually sends out communications telling parents of the amount of money that is available for their children’s education.

This is done to encourage families with children to open Registered Education Savings Plan for their children’s education.

Today we will discuss Registered Education Savings Plan.

REGISTERED EDUCATION SAVINGS PLAN

Registered Education Savings Plan (RESP)
The Registered Education Savings Plan (RESP) allows savings for education to grow tax free in a special savings plan registered by the Government of Canada until a child named in the RESP enrolls in a post-secondary education program.

Eligibility Information

Applicants must meet the following criteria:

 Application Information

  • Information on the RESP application procedure is also available through financial institutions, such as a bank or credit union.  There are also other providers.  These institutions, planners and dealers are known as “RESP providers.”

It’s a good idea to ask some questions before choosing a Registered Education Provider.

Here are a few questions you should ask when talking with a RESP provider.

  • Once I have opened an RESP, will I have to pay any fees?  If so, what are they for and how much will I have to pay?
  • Do I have to put a minimum amount of money into an RESP?
  • Do I have to make regular payments?
  • What are my investment choices?  What are the benefits of each choice? Can the value of my investment go down?
  • Can I withdraw money if I need it?  Are there any fees or penalties for withdrawing money early?
  • Can I transfer the RESP to another person, or to another RESP provider?   What is the cost to transfer?
  • What will happen to my savings in the RESP if my child does not continue his or her education after high school?
  • Does the RESP provider limit the types of qualified educational programs that I can use my RESP for?
  • What happens if I close my RESP early?
  • What if my child decides to go to school part-time?
  • Does the RESP provider offer all education savings incentives including the additional Canada Education Savings Grant and Canada Learning Bond?

Next week we will discuss all the other Savings available for families including the Canadian Learning Bond and the Canada Education Savings Grant.

Tessa-Marie

 

 

TEN STEPS FOR CREATING A SPENDING PLAN

                                                                                                                                      

Creating a SPENDING PLAN may not sound like the most exciting thing in the world to do, but it is vital in keeping your financial house in order.

Before you begin to create your SPENDING PLAN it is important to realize that in order to be successful you have to include all your financial details, no spending is too small to be listed.  It is imperative all spending is listed.

Ultimately, the end result will show where your money is coming from, how much it is where it is all going.

  1.  First, at the top of the page write down the date and amount you bring home each week, bi-weekly or monthly.    By that I mean the amount you receive in your account which is your net pay,  this is the amount you have to live on.
  2. Write down EVERYTHING you spend each day.   Most people remember their mortgage or rent payment,  but often forget the impulsive things they buy,   like a chocolate bar, the lottery tickets they buy on their way to work each morning.    I recommend that you carry a small notepad with you and write down everything you spend money on,  including lunch, magazines, and your morning coffee.    By keeping track of everything you spend money on, you will have a complete list of all your expenses, which will make it easier to create your Spending Plan.
  3. Savings:  Your savings must be included in your list of expenses?  Remember to pay yourself first;  consider it a debt you owe to you.    Have your bank do your savings automatically for you.
  4.  Your weekly,  bi-weekly or monthly income should equal the same as your expenses.   If your expenses are greater than your income, you will need to revamp your spending plan.
  5. Once you have created your spending plan your job is to make it work for you.   What are you willing to give up, to make your spending plan work?    I do not recommend stopping or modifying your savings,  if you do you are again putting yourself last. Look at the amount you spend on groceries,  cable TV, eating out.    Groceries are usually the bigger culprit; make a list of what you already have and shop accordingly, not because it is on sale.
  6. If you choose not to decrease your spending, are you prepared to take on a part-time job?    To spend more than you are making is to dig a hole while standing in the same spot,  eventually you will not be able to toss the dirt over your head and out.   You will need to go over your spending plan several times, before you get it right. Keep at it,  it is worth the effort
  7.  If you have a spouse you will have to work together to produce a spending plan that will benefit both you and your partner.
  8. Even if one person manages the day-to-day of the spending plan the partner should be aware of what is going on in that plan.
  9. After you have your spending plan as you want it,  your next step is to implement the plan.   
  10.  Set up weekly, bi-weekly or monthly meeting where you and your partner go over the plan,  you will need to visit the plan often in e beginning.    Then you can go over it at least once a month to make sure you are on tract.

Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com

REGISTERED RETIREMENT SAVINGS PLAN

This is the one investment every Canadian who qualifies should take full advantage of.

I am passionate about managing your money and controlling debt, but I am extremely enthusiastic in encouraging everyone to take full advantage of opening a Registered Retirement Savings account.

Last week I was invited to speak to a group of ladies about RRSP. They wanted to know more about it, some of them already had one but did not know much more than the upfront tax sheltered benefits.

It’s the time of the year when information about RRSP is all over the place; on Bill Boards, Radio, TV and when you turn on computer. Everyone tells you that you have till March 1st to contribute to your RRSP to take full advantage of the tax sheltered component.

Here are two more reasons why everyone should have RRSP especially young adults just entering the workforce.

  1.       FIRST TIME HOME BUYERS PLAN

 The plan works like this; if you have contributed to your RRSP for the past number of years and you have decided to purchase you FIRST HOME the Government allows you to take a maximum of $25,000 from your RRSP and put it towards purchasing your first home.

 If you have a partner, the partner is also allowed to put up to $25,000 towards the purchase of the home with fifteen years to put the funds back.   

These funds can be used during the purchase period to put towards your down payment, to buy furniture, pay your lawyer’s fees or pizza for your friends who have helped you move.  After you have been in your home for two years you will receive a notice with your income tax forms to reinvest one fifteenth of the amount you withdrew from the RRSP. 

 If you withdrew $25,000 the amount you would need to reinvest would be $1,666.67 annually but if you did it every pay day and you are paid bi-weekly the total would be $64.10 a pay.    That is a very affordable and doable plan.

It’s a big win for you. You have just given yourself an interest-free small mortgage that will be paid off  in 15 years.

 

 

  2.   RETIREMENT

 Once you have decided to stop working and you are now depending on a reduce income, you may begin withdrawing from your RRSP to enable you to maintain a comfortable life style. Because you are now retired your tax rate will be significantly lower than when you were working.

I am sure you have all heard of someone one who is quite upset that they are now paying tax every time they withdraw from their RRSP.  Let me tell you about Violet.  I met Violet a number of years ago when I worked downtown.  Violet got on the bus a few stops after me every day on our home from work. She was older than me (she told me she was 69 years old at that time) so I would give my seat to her.  One day Violet and I were riding on the Bay bus and there was a sign about RRSP and how it was the time to do it.  There was also a table that showed that if you started investing at the age 20, stopped investing at the age of 30 but leaving the investment in place and someone else started at the age of 30 and continued investing until 65 that the person who started investing at the age of 20 would have more money than the person who started at 30 and stayed invest to the age of 65.

 I remembered so well, when Violet looked at the ad and smiled, then she looked up at me and said…

 “My dear I hope you are taking advantage of the great privilege the Government of Canada have given us to save for our retirement. You see I did not open a RRSP.  I never thought of being older and that is why today I am working at 69 years old just to make ends meet. My Canada Pension and Old Age Pension is not enough to meet all my financial needs. If only I had made that decision I would have the choice of taking a vacation during the winter or staying home and just relaxing. Please do not make the same mistake as I did.” 

I had already opened my RRSP and was happy to tell her that I had.

So now when you see and hear the ads about investing for your future and you think, “Well, I have all the time in the world” remember the old saying that TIME AND TIDES WAITS FOR NO ONE. Or better still, look at the older person sitting next to you and remember Violet.  Do you want to be the next Violet?

Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com

HAVE YOU BEGUN PLANNING YOUR CHILDREN’S POST SECONDARY EDUCATION?

 

On Tuesday your little, Emma, Kaden, Joshua and Sarah went to school for the first time and they your child might be one of those attending all day kindergarten.  If you were like me when my children started school, you cried and felt deserted; ”Where did my baby go?” I had the same feelings with each of my three children.   The time flies so fast, so before you know it Sarah will be out of high school and ready to attend university.   All of this will be in thirteen years from Tuesday.     Remember when you were ready to go to university?  It was not that long ago, was it?

This is the time I would like to see you think, take the time to really think.   What have you done for Kaden’s university fund?    “What fund?” you replied. ” What is that woman talking about? Does she know that we are in a recession?   I need every penny to help pay the bills. I can barely make ends meet as it is.”  All these thoughts will most definitely cross your mind, but that child has to go on to university whether you think about it or not.

I know how difficult it is to think of saving for your children’s university education at the moment and you are not able to see what you can do, even if you feel it was something you should do.

I spoke to you about a Registered Education Savings Plan for your child or children in my last blog.  It is never too early to start and never too late to start, so you need to start now. 
September 1st is the new “New Year” when you have children beginning their educational journey. Think about it; the big banks have a fiscal year that starts on November 1st, so your fiscal year starts September 1.  It’s ok to have a non-January new year. If the banks can do it, why not you? 

 Take a look at your spending plan. What can you change this year? What can you do better? Where would you like to see an improvement?  Start working on your spending plan (aka budget).   Make some room for your child’s education savings plan.  Remember if you did not start Joshua’s Registered Education Savings Plan the year he was born you have to start now.

 Things you will need  to open an RESP:

  1. A Social Insurance Number in the name of the child, one for each child
  2. For Identification:  A Birth Certificate or a Permanent Resident Card in the name of the child

 

What you should know when opening an RESP

  1. Choose an RESP provider that best suits your needs, which could be your bank or credit unions.
  2. Anyone can open an RESP for a child – parents, guardian, grandparents, other relatives or friends.
  3. The maximum contribution in each RESP is $50,000.
  4. The Government will contribute 20% each year on the first $2,500.00 deposit in the plan from the Canada Education Savings Grant.
  5. The Government will deposit $500.00 as soon as the plan is opened and then $100.00 annually until the child reaches the age of 15.
  6. The Canada Education Savings grant will be paid to the age of 17.

 

Talk to your financial institution or check out the Canada Education Savings Grant Brochure.

 Call 1 800 O-Canada (1 800 622 6232) to order a free copy.

The most important thing to remember is that if you do not have an RESP opened for your child or children  you are leaving money on the table which could and will benefit your children and, in turn, your family. 

The cost of post secondary education keeps climbing each year, so with this in mind it is very important to prepare for your children’s education and the time to begin is now.  Thirteen years is not that far away. 

Spend some time this week, or on the weekend, looking over your spending plan. Visit your financial institution and make an appointment to meet  with an INVESTMENT SPECIALIST.  Please note I wrote investment specialist in capitals so you will realize it is important and use that title when making your appointment.   This person is trained to provide advice on investments. 

 Take a note-book with you, date it and write the person’s name and phone number on the first page.  What you want is to create a relationship with that person.  If you do not like the vibe or you feel you are not connecting with them or they are more interested in getting their numbers, let them know that you want someone who can give you the time, great customer service and one who cares about your investment as much as you do.  You are looking to get someone who will take you seriously and work with you to attain yours and your family’s goal.
Keep in touch and let me know how you are doing.

Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com