Failing to plan is planning to fail - especially when it comes to money management

It all starts with a budget.  Most of us hate the "B" word but it will be the most important step in getting an idea of where all your money goes every month. 

Budgeting is really not difficult once you make up your mind to get started.  An Excel spreadsheet will make it easier to track, sum up and modify your budget as you go. Best to make it a family affair if you are still talking to your spouse about money! Start with the biggest items like mortgage or rent, car expenses, food, credit card payments and don't forget your "Latte Factor" - those unnecessary little expenditures on which we waste our money.  David Bach who coined and trademarked the phrase has a great site with a calculator to help you with this part. See Latte Factor.

Just for one week, track every single expense. Keep all  your receipts and enter them in your budget sheet. You may be surprised at how the seemingly "little" things add up. Keep going! A month of keeping track is even better.

Now that you see where the money goes, you can start planning on where you can save and invest. Even a little savings will make a difference if you do it long enough on a regular basis. Try saving just 1 or 2 dollars a day to start.

Even a small sum like $50 a month can build a nest egg of over $100,000 if you start at the age of 21 and stop at age 65, starting with an initial sum of $1000 and assuming a 5% rate of return. Try out some possible scenarios on the calculator below to see how you can benefit from regular saving and investing.
Calculator: Advantage of early investing

Keep it up! If you get a raise or unexpected money put that in your "nest egg" fund and forget you have it. Some other ideas for saving:

• Walk instead of taking the car for short trips. You will gain an extra bonus of better health!
• Take your lunch to work or "school" ( yes, I am talking about all  you college and university students) 
• Check out the free online movies instead of going out and paying to see the same movie
• Make extras when cooking so you have a quick meal ready in the freezer instead of ordering pizza

Send me your ideas and comments for other ways to save and still have fun! 

Financial education –start small and start young

“The number one problem in today's generation and economy is the lack of financial literacy.” Alan Greenspan

Success in life is often measured in terms of the piles of accumulated "things" we possess but we are really missing the point of success by limiting ourselves to this measurement stick.  A good financial education will give us the possibility of obtaining not only material riches but the riches of experience which enable us to put deposits in our Memory Bank. Financial knowledge will also give us a good understanding of maintaining,  conserving and sharing our accumulated riches. If our children learn to manage money responsibly it will not end up managing them. 

Ideally we have to start teaching finance when kids are small, trusting and ready to soak up information. Perhaps you have heard of the 3-Jar method of teaching good financial habits? It is often used with young kids but adults could benefit from copying the idea of allocating their funds into three"jars". One jar is for 

SAVING (tough but necessary) - 

one is for SPENDING (Yay!!) and 

one is for SHARING (riches are better shared). 

Kids taught to handle their allowance or gifts of money in this way will end up being able to manage money wisely..  

I think that elementary and high school curricula should have mandatory courses in personal finance so that kids will hopefully avoid some of the pitfalls of poor financial decisions due to lack of knowledge. Learning Finance can actually be fun!! What's more, there is a payoff for doing well in the course - a sound financial education is a great investment in a comfortable future. We owe it to ourselves and our kids to teach them to not only control and manage their money but to share their wealth with others. 

"He had heard people speak contemptuously of money: he wondered if they had ever tried to do without it." Somerset Maugham in: "Of Human Bondage" 

Turbulence in the markets? Here's a strategy for sleeping better at night.

You have heard it all before - "What goes up must come down". This applies so very well to the stock markets and can cause untold grief to those who are not well prepared for the roller coaster ride. There are several strategies you can use to help you breathe easier when the next wave comes along:

1) DIVERSIFY: follow the old adage about not putting all your eggs in one basket. Have a mixture of fixed income and stocks and cash.

2) UNDERSTAND WHAT YOU ARE BUYING: do not buy shares in companies you do not understand.  Buy companies you deal with or indirectly use on a regular basis.
3) GO BASIC: some of the safest stocks to buy include Canadian banks (the Big Five, TD, BMO, RBC, ScotiaBank, CIBC) utilities (Enbridge), pharmacies and related companies (Shoppers Drug Mart, Johnson & Johnson, Proctor & Gamble), low-cost restaurants ( Tim Hortons, MacDonalds), transportation (CN, CP and Westjet), energy (oil and gas equipment e.g. Mullen Group). Real estate can be a good investment as Real Estate Investment Trusts (REITs e.g. RioCan, Chartwell or an ETF Reit) See More on REITs.

4) RIDE OUT THE VOLATILITY:  do not jump in and sell your investment when dips in the market happen. Follow the trends and take opportunities to use your cash to buy good companies at cheap prices.

5) INVEST IN HIGH QUALITY SEGREGATED FUNDS:  your investment will be covered with guarantees to protect you against major losses.
6) KEEP SOME CASH for buying opportunities. Remember, when everyone is selling that is the best time to buy and when most are buying, it is a good time to sell.
7) EDUCATE YOURSELF ON FINANCE:  read Jeremy Siegel's "Stocks for the Long Run" and the update on an old classic-  Benjamin Graham "The Intelligent Investor" See The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)

For more information on segregated funds and more ways of protecting your investment: Contact us at Celesta Financial

The Wealthy Barber returns - with a new book on managing your money wisely

David Chilton, author of "The Wealthy Barber"  a popular book on personal finance has now written a sequel to this one as "The Wealthy Barber Returns". It is due to hit the shelves in the fall of 2011.

Here is a short piece of the book in which he show us the dangers of the  "Diderot effect":

"One of the finest pieces ever written on the saving/spending challenge was an essay penned way back in 1772 by the witty and wise French philosopher Denis Diderot. It was entitled Regrets on Parting With My Old Dressing Gown: Or, A Warning to Those Who Have More Taste Than Money.
In it, Diderot eloquently chronicles how his beautiful, new, scarlet dressing gown came to wreak havoc on both his mood and his finances. Soon after receiving the gown, it became apparent that his surroundings, though formerly very pleasing to him, were not in keeping with the gown’s elegance. He felt compelled to replace his tapestry, his art works, his bookshelves and chairs and finally even the beloved table that had served as his desk. Eventually, a poorer Diderot sat uncomfortably in his stylish and now formal study. “I was absolute master of my old dressing gown, but I have become a slave to my new one,” he lamented.
All of us have some Diderot in us. Therefore, the reference “group” you often need to be most wary of is not your affluent friends, or even your wealthier work colleagues; it’s you, yourself.
Few things influence your spending decisions of today more than your spending decisions of yesterday.
Spending begets spending."

Click on this link to see more of this excerpt from his new book After 21 years...The Wealthy Barber Returns.

Synergy - Life, Disability and Critical Illness insurance - all rolled into one solution

Every day we face risks - and every day our lives could be dramatically changed by some event either within or beyond our control. 

LIFE HAPPENS!

Effective risk management should involve a plan to minimize financial consequences for ourselves and our loved ones.
A recent, innovative and unique insurance solution -  Synergy from  Manulife Financial can provide you with a cost saving bundle of insurance for LIFE, DISABILITY and CRITICAL ILLNESS - all in one policy.  Coverage lasts until age 65. Conversion of the life insurance portion into permanent insurance with no medical underwriting is an option.


 To learn more about how this could be the right product for your needs please Contact us at Celesta Financial

Children's Arts Tax Credit - new in the Canadian federal budget

In addition to the Children's Fitness Tax Credit there will now be a 15% Children's Arts Credit available for the 2011 tax year.


The next time you file your income tax return you will be able to claim a federal tax credit for your child's drama, music, sculpting or painting classes. The maximum benefit is $75 ($500 x 15%.) and  you should keep your receipts. Eligible children will be 16 or less at the beginning of the tax year.

The definition of “eligible activities”  covers most non-sports related programs that contribute to the development of creative skills or expertise in artistic or cultural activities.   The child has to be registered for eight consecutive weeks or five consecutive days and the activity cannot be part of their regular school program.  For more details go to the CRA website at Children's Arts Tax Credit. For more on the new budget see Budget 2011.

Pay yourself first and build a nest egg of savings - the easy way

There is a certain Buddhistic calm that comes from having....money in the bank. ~ Tom Robbins

See how the power of starting early and saving even small amounts regularly can make an enormous difference to your wealth. To get an idea of  the benefits of investing on a regular basis you can use this tool from Fiscal Agents- Savings and Investment Centre:

Calculator: Advantage of early investing
 
Even a small sum like $50 a month can build a nest egg of over $100,000 if you start at the age of 21 and stop at age 65, starting with an initial sum of $1000 and assuming a 5% rate of return. Try out some possible scenarios on the calculator above to see how you can benefit from regular saving and investing.

Your funds could be regularly invested in high quality mutual or segregated balanced funds and/or a ladder of GICs. In Canada,  up to $5000 per year of these funds could be be tax sheltered in a Tax Free Savings Account (TFSA). For those who are comfortable taking on a bit more risk you could allocate a larger portion of the money to mutual funds and/or segregated equity funds. Contact us at Celesta Financial for some options in these areas and kick start your savings plan right away.

"A penny saved is a penny earned."  Benjamin Franklin