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Tuesday, February 9, 2010 4:34 PM EST
Increased savings will bolster RRSP season
The coming RRSP season will be relatively strong as Canadians move from cash into income and equity mutual funds, CIBC economist Benjamin Tal predicts in a report released on Monday.
“While the recent softening in the equity market will keep investors cautious,” he writes, “the dramatic decline in the overall volatility in the market has helped raise Canadians’ risk tolerance in recent months.”
The real news, though, is that investors actually have enough extra cash to meaningfully contribute to their RRSPs. The overall disposable income in Canada rose by almost 3.5 per cent, annualized, in the six months ending September 2009, thanks to a stronger job market and beneficial tax policies introduced in the 2009 budget.
“For the first time in many years, this extra cash is being saved not spent,” Mr. Tal says.
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Tuesday, February 9, 2010 10:13 AM EST
Beware the pitfalls of a rental property
Last week in Home Cents, I wrote about how to turn your home into an income property. My focus was managing a property renovation on a budget. But, as several readers accurately pointed out, rental units come with a lot of regulatory red tape.
If your rental unit isn’t up to code, you may not get a return on your investment when you try to sell your house. Likewise, if you’re in the market for a home with a rental unit, it’s important to make sure it’s a legal addition or it could affect your financing.
Raymond Leclair, a real estate lawyer and vice-president of insurance company TitlePLUS, agrees with readers that adding a rental suite, or buying a home equipped with one, requires a lot of homework. “Basically, people think it’s much easier than it really is. There are some real pitfalls.”
Sixty-nine per cent of Canadian homeowners think owning a residential rental property or renting part of their home is a good investment, according to a 2008 Harris/Decima study. But before homeowners and buyers put their money on the line, here are some tips each side should keep in mind.
Thursday, February 4, 2010 3:11 PM EST
Help for choosing the right credit card
As much as one can be a fan of governmental agencies, I’m quite partial to the Financial Consumer Agency of Canada (FCAC) and its website, Moneytools.ca. The site from FCAC, a regulatory agency established by the federal government, offers up several effective finance tools for the average consumer.
On Thursday the FCAC said it has updated its credit card selector tool to include current information on more than 250 credit cards from 28 different issuers. The tool lets you compare the costs, advantages and rewards of most credit cards available in Canada. The interactive tool sorts the different products into categories and compares their conditions, options, rewards and other features in an easy-to-read, side-by-side format. You can also download simple tables to compare different gold and platinum cards, U.S. dollar credit cards or student credit cards.
If you’re in the market for a new credit card, make sure you don’t get taken in by the rewards that several offer. In particular, the “Introductory interest rates on some credit cards may be appealing,” says FCAC Commissioner Ursula Menke, “but remember to ask how long these promotional rates last. Most reduced rates end after a set period of time."
Ms. Menke advises consumers to ask the credit card issuer some critical questions before selecting a card.
“Find out which types of transactions are covered by the introductory offer. Ask what the regular interest rate will be when the introductory offer expires and if there are any other circumstances that could cause the introductory offer to end. Make sure you understand how your payments will be applied to your balance, and don’t forget to ask the card issuer about any fees and other conditions linked to the offer,” the Commissioner says.
Tuesday, February 2, 2010 4:42 PM EST
How to turn your home into an income property
Ask a first-time home buyer their biggest worry and the answer is likely to be the mortgage. Taking on the largest debt of one’s life is a sobering experience. Even for those that come to the table with a sizeable down-payment, a mortgage is a long and costly commitment. Many buyers take comfort in knowing that if they need extra income to make the mortgage payments, they can rent out part of their home. But not all rental properties are created equal.
“There are some surefire signs that are really obvious when you’re looking to see if you can generate extra income from your home,” says Scott McGillivray, host of HGTV’s series Income Property. On the show, he helps first-time homeowners shoulder the burden of their mortgages by building rental suites and creating income properties.
Monday, February 1, 2010 1:25 PM EST
How to make ETFs part of your RRSP
At a friend’s birthday party recently, the conversation around the kitchen table turned to our RRSPs and the baskets of mutual funds they held. My friends lamented the declines in their portfolios, but were irked more by the management fees they were paying for the privilege of owning their shrinking investments. Studies have shown that Canadians pay among the highest management expense ratios (MERs) in the world, with fees for equity mutual funds at 2.5 per cent on average.
Maybe we should all just buy ETFs, suggested one friend.
Thursday, January 28, 2010 3:15 PM EST
Many couples don’t share same retirement dreams
My husband and I talked about a lot of things before we decided to marry, but not about our retirement plans. It just seemed too far off when we were graduating from university and had yet to make an RRSP contribution. Still, discussing your vision for retirement with your significant other is just as important as any other major life decision, such as buying a home or having children.
“Retirement can be one of those taboo topics that couples tend to avoid, just like talking about sex, money troubles or problems with the kids,” says relationship therapist Joe Rich. “It is important to tackle this subject head-on with your partner long before you retire in order to avoid conflict down the road.”
Canadian retirees agree that it’s important to talk to your significant other to ensure you share the same vision of your future together, according to the TD Waterhouse Couples and Retirement poll released on Wednesday. Yet many of us either don’t know what we want to do in retirement or have different goals than our partner.
Friday, January 29, 2010 11:44 AM EST
Could your family survive on one income?
When a friend of mine lost her job last year, she wondered how long she and her husband could subsist on his income alone. They wanted to avoid dipping into their savings for as long as possible. When they gathered all of their bills and tallied their basic expenses, they found that they had four months until their household cash flow turned negative.
“If we lost my husband’s job we’d be fine,” says my high-earning friend. “But me not working is not an option.”
Whether the result of a job loss or a planned departure from work, losing a second income is a challenging and frightening experience.
Before I even got pregnant with our two children, my husband and I were busy planning how to manage the loss of my income during maternity leave. The government maternity leave benefits fell absurdly short of replacing my full-time salary. With my first daughter, I solved the problem by hiring a nanny and returning to work after three months. With my second, I was fortunate to have an employer that allowed me to work part-time from home for several months. I enjoyed the extra quality time with my baby, but returned to work before she was a year old.
If I’m being perfectly honest, I didn’t want to relinquish the financial security my salary provides the family. Becoming a single income household would mean a move to significantly smaller quarters and giving up many of the niceties we have become accustomed to, like swimming and piano lessons for our girls. We don’t live a luxurious lifestyle, but it is comfortable. My husband and I both know what it’s like growing up when money is tight and we have worked hard to avoid that in our home.
I do wonder, though, how families make the sacrifices necessary to live on one salary.
Friday, January 22, 2010 8:23 AM EST
The cost of bad habits
I don’t mean to get all preachy, but just in case anyone needed an extra incentive to kick a bad habit as we start the New Year, money is a good one. Vices such as smoking, immoderate gambling and drinking put a real dent in your finances.
Take smoking. If you have a pack-a-day habit, at $9 for 20 cigarettes, that’s more than $60 a week. You can check out the Canadian Cancer Society’s cost of smoking calculator to see how much you can save by quitting. It shows, for example, that within a year you could enjoy enough savings to fund a home renovation, while cutting your risk of a smoking-related heart attack in half.
One reader recently wrote me that he built up a rainy-day fund from the money he saved by quitting a pack a day. “It’s been a real surprise how quickly that can build up to real money,” he said. “Suddenly, I had about $300 a month that I could spend on something else.”
While he quit cold-turkey, the Canadian Cancer Society Smokers’ Helpline is a ready resource if you’re ready to kick the habit.
Tuesday, January 19, 2010 7:38 AM EST
Canadians don’t expect to afford retirement dreams
Chatting with a financial planner recently, I learned that increasing life spans mean we all need to adjust our retirement savings goals. People should plan for retirement income to last until at least age 95, she told me. Even for those not leaving the workforce early, that’s still 30 years of living expenses to finance. No wonder many Canadians don’t expect to be able to afford their dream retirement.
Three quarters of Canadians don’t expect to have enough income to reach their retirement dreams, according to the 20th Annual RBC RRSP Poll, released Monday. The survey results, though, don’t go on to describe what creature comforts constitute a dream retirement. Are most of us envisioning sunny isles and swaying palm trees?
Friday, January 15, 2010 11:23 PM EST
How to cut your car insurance costs
I recently wrote about trying to tighten my family’s budget in 2010 and finding an opportunity to reduce our car insurance fees. We were able to save several hundreds of dollars a year simply by showing our provider competing quotes and asking for a reduction after some driving infractions came off of our record.
Car insurance is one of those household costs that many people consider to be fixed and may overlook when fine-tuning a budget. But there is quite a lot of variability in the rates available. Rates can vary wildly between providers and will fluctuate based on your circumstances. If you’ve recently added another driver to your vehicle or if you’re driving record has changed, it’s time to go shopping for better quotes.
“It’s a good idea to shop every year,” says George Small, co-founder of insurance comparison website Kanetix.ca. “People’s lives are constantly changing. Families may have children coming of driving age or changing vehicles. We always suggest doing it annually on renewal, even if you choose not to change providers.”
Home Cents Contributors
Chaya Cooperberg
Chaya Cooperberg is living the dream. She’s the mother of two young girls, managing a busy household in the suburbs of Toronto on a tight budget. She’s also managed to build a full-time career in investor relations, running award-winning programs for Canadian public companies. She sits on the Board of the Canadian Investor Relations Institute’s Ontario chapter as well as the National Investor Relations Institute’s virtual chapter.
