Three Fast Ways to Save Money

Of course, financial experts rarely advocate against saving. But market swoons to tend to bring out consumers’ thrifty sides. For some help with boosting your monthly savings, here are three options that won’t take more than an hour or two:

Switch Cellphone Plans
Save: $400 a year

Cellphone users are paying more — $92 per month on average for a two-year contract, up from $78 last year, according to J.D. Power & Associates. And picking the right plan has also become more complex as carriers add new data plans and require different packages for different phones. In early July, Verizon joined AT&T in eliminating unlimited data plans for new subscribers. Moving into a plan that better fits your calling texting and data patterns could save up to $400, Satyavolu says. Sites like BillShrink and Validas will analyze your current bill and make savings suggestions, or you can call your provider and competing services. (Some apps can also help you save on texting or talk time.) But if the best bet seems to be switching carriers, be warned: early termination fees can go as high as $350, which could eat up any savings in a hurry. Switching can also change call quality, so ask friends who use that carrier if they’ve had problems — or better yet, borrow their phone and test for yourself.

Shop Insurance Policies
Save: $200 a year

More severe natural disasters and higher rebuilding costs have led insurers to raise homeowners insurance premiums by more than 7% in many areas over the past year. (Some are hurricane-prone areas, but not all. Some Pennsylvania homeowners saw premiums jump 33% last year.) That’s reason enough to shop around on sites like Netquote.com and Insurance.com, checking rates and available discounts. Be sure to call your current insurer, too, and see if they have any new programs you might be eligible for, Garrett says. It wouldn’t be hard to save at least $200 per year or more. Last month, Garrett bought new homeowners and auto insurance policies, cutting her yearly bill by $800.

Change (or Ditch) Cable
Save: $800 a year

Consumers can save substantially by finding a new cable provider, or depending on their viewing habits, cutting the cord altogether. Switching is easier to compare with sites like BillShrink or WhiteFence.com. And most viewers have more options than they think, especially for those who are interested in satellite — and the annual savings for switching averages $800 a year, Satyavolu says. Providers often make their best deals available via cable-phone-Internet bundles, though, and switching to a lower price can entail an unbearably slow Internet or a crackly phone connection, says Dan Rayburn, an analyst for investment bank Frost & Sullivan who covers digital media companies. Also, the growing options for free or cheap TV online mean some people may be able to get by with fewer channels, says Rayburn. A viewer might, for example, switch to a basic cable package with 13 or so channels and use an $8 monthly streaming subscription from Netflix or Hulu to catch more missed movies and TV shows.

Source: finance.yahoo.com

Why to choose a variable-rate Mortgage

With a variable-rate mortgage, the payment can fluctuate as interest rates rise or fall. For this reason, you usually get a better rate — to reflect the uncertainty and increased risk.

Although the central bank rate has not changed much over the past year — and is not expected to soon — lenders have been narrowing the gap between the two rates. That means it’s a good time to consider a variable mortgage before the gap gets even smaller.

Here’s an example of the potential savings. The best available five-year fixed rate stands at around 3.2 per cent and the five-year variable at 2.6 per cent, representing a 0.60 percentage point spread. You could save $2,700 annually on a $450,000 mortgage — the average price of a Toronto home — by going variable.

So, if you can sleep at night with the risk that your mortgage payment might change, a variable rate wins out. Here are some other factors in its favour:

1. Variable mortgages are historically cheaper. In the last 50 years, variable rates have been an average of 1 per cent cheaper than fixed rates, says James Laird of True North Mortgage. According to Bank of Montreal research, the last time fixed rates held advantage over variable rates was in the late 1980s.

2. Variable rates are near historical lows. The Bank of Canada has indicated it plans to keep rates low in the face of uncertainty over North American and European economies. The U.S. Federal Reserve has promised to keep interest rates low through 2013 and Canadian rates cannot diverge far from American ones. Some people in the mortgage industry are saying interest rates could fall further.

3. Variable rate penalties are typically lower. With a fixed mortgage, the penalty to break your mortgage is the greater of three months’ interest or the Interest Rate Differential (IRD). A variable rate, on the other hand, is only subject to the three months’ interest penalty. The much feared and little understood IRD penalty too often comes close to the cash savings you would earn with the new, lower interest rate, taking away much of the incentive to refinance. Most of the 8 per cent of Canadians who refinanced in 2010 in fixed mortgages would have paid the higher IRD.

4. You can lock in at any time. If for whatever reason during your variable mortgage term you wish to lock in all or part of your mortgage at a fixed rate, you have the freedom to do so without any penalties or costs.

5. You start saving right away. Because of the current spread between fixed and variable rates, the savings are immediate. Even if interest rates rise, the increase would have to be big enough to wipe out the savings reaped at the beginning of the mortgage.

Variable rates are riskier, but it’s a gamble that pays off. If you’re still unsure, you could go half fixed and half variable, in which case you’ll never be more than half wrong.

Source: Kerri-Lynn McAllister | moneyville.ca

Things you should never buy new

1. DVDs and CDs: Used DVDs and CDs will play like new if they were well taken care of. Even if you wind up with a scratched disc and you don’t want to bother with a return, there are ways to remove the scratches and make the DVD or CD playable again.

2. Books: You can buy used books at significant discounts from online sellers and brick-and-mortar used book stores. The condition of the books may vary, but they usually range from good to like-new. And of course, check out your local library for free reading material.

3. Video Games: Kids get tired of video games rather quickly. You can easily find used video games from online sellers at sites like Amazon and eBay a few months after the release date. Most video game store outlets will feature a used game shelf, as well. And if you’re not the patient type, you can rent or borrow from a friend first to see if it’s worth the purchase.

4. Special Occasion and Holiday Clothing: Sometimes you’ll need to buy formal clothing for special occasions, such as weddings or prom. Most people will take good care of formal clothing but will only wear it once or twice. Their closet castouts are your savings: Thrift stores, yard sales, online sellers and even some dress shops offer fantastic buys on used formalwear.

5. Jewelry: Depreciation hits hard when you try to sell used jewelry, but as a buyer you can take advantage of the markdown to save a bundle. This is especially true for diamonds, which has ridiculously low resale value. Check out estate sales and reputable pawn shops to find great deals on unique pieces. Even if you decide to resell the jewelry later, the depreciation won’t hurt as much.

6. Ikea Furniture: Why bother assembling your own when you can pick it up for free (or nearly free) on Craigslist and Freecycle? Summer is the best time to hunt for Ikea furniture–that’s when college students are changing apartments and tossing out their goodies.

7. Games and Toys: How long do games and toys remain your child’s favorite before they’re left forgotten under the bed or in the closet? You can find used children’s toys in great condition at moving sales or on Craigslist, or you can ask your neighbors, friends, and family to trade used toys. Just make sure to give them a good wash before letting junior play.

8. Maternity and Baby Clothes: Compared to everyday outfits that you can wear any time, maternity clothes don’t get much wear outside the few months of pregnancy when they fit. The same goes for baby clothes that are quickly outgrown. You’ll save a small fortune by purchasing gently used maternity clothes and baby clothes at yard sales and thrift stores. Like children’s games and toys, friends and family may have baby or maternity clothing that they’ll be happy to let you take off their hands.

9. Musical Instruments: Purchasing new musical instruments for a beginner musician is rarely a good idea. (Are you ready to pay $60 an hour for piano lessons?) For your little dear who wants to learn to play an instrument, you should see how long his or her interest lasts by acquiring a rented or used instrument to practice with first. Unless you’re a professional musician or your junior prodigy is seriously committed to music, a brand new instrument may not be the best investment.

10. Pets: If you buy a puppy (or kitty) from a professional breeder or a pet store outlet, it can set you back anywhere from a few hundred dollars to several thousand dollars. On top of this, you’ll need to anticipate additional fees and vet bills, too. Instead, adopt a pre-owned pet from your local animal shelter and get a new family member, fees, and vaccines at a substantially lower cost.

11. Home Accent: Pieces Home decorating pieces and artwork are rarely handled on a day-to-day basis, so they’re generally still in good condition even after being resold multiple times. If you like the worn-out look of some decor pieces, you can be sure you didn’t pay extra for something that comes naturally with time. And don’t forget, for most of us, discovering a true gem at a garage sale is 90% of the fun!

12. Craft Supplies: If you’re into crafting, you probably have a variety of different supplies left over from prior projects. If you require some additional supplies for your upcoming project, then you can join a craft swap where you’ll find other crafty people to trade supplies with. If you have leftovers, be sure to donate them to your local schools.

13. Houses: You’re typically able to get better and more features for your dollar when you purchase an older home rather than building new. Older houses were often constructed on bigger corner lots, and you also get architectural variety in your neighborhood if the houses were built or remodeled in different eras.

14. Office Furniture: Good office furniture is built to withstand heavy use and handling. Really solid pieces will last a lifetime, long after they’re resold the first or second time. A great used desk or file cabinet will work as well as (or better than) a new one, but for a fraction of the cost. With the recession shutting down so many businesses, you can easily find lots of great office furniture deals.

15. Cars: You’ve probably heard this before: Cars depreciate the second you drive them off of the dealership’s lot. In buying a used car, you save money on both the initial cost and the insurance. It also helps to know a trusty mechanic who can check it over first. This way, you’ll be aware of any potential problems before you make the purchase.

16. Hand Tools: Simple tools with few moving parts, like hammers, hoes and wrenches, will keep for decades so long as they are well-made to begin with and are well-maintained. These are fairly easy to find at neighborhood yard or garage sales. If you don’t need to use hand tools very often, an even better deal is to rent a set of tools or borrow them from a friend.

17. Sports Equipment: Most people buy sports equipment planning to use it until it drops, but this rarely happens. So when sports equipment ends up on the resale market, they tend to still be in excellent condition. Look into buying used sporting gear through Craigslist and at yard sales or sports equipment stores.

18. Consumer Electronics: I know most folks like shiny new toys, but refurbished electronic goods are a much sweeter deal. Consumer electronics are returned to the manufacturer for different reasons, but generally, they’ll be inspected for damaged parts, fixed, tested, then resold at a lower price. Just make sure you get a good warranty along with your purchase.

19. Gardening Supplies: This is an easy way for you to save money, and all you need to do is be observant. Take a look outdoors and you’ll likely find such gardening supplies as mulch, wood, and even stones for free or vastly reduced prices. Used garden equipment and tools are also common goods at yard sales.

20. Timeshares: Buying timeshares isn’t for everyone, but if you decide that it suits your lifestyle, purchasing the property as a resale would be a better deal than buying it brand new: on average, you’ll save 67 percent on the price for a comparable new timeshare. If you’re new to timeshare ownership, give it a test run first by renting short term.

21. Recreational Items: It’s fairly easy to find high ticket recreational items like campers, boats, and jet skis being resold. Oftentimes, they’re barely used at all. As long as they’re in safe, working condition, they’ll make for a better value when purchased used than new.

Source: Yahoo.com

So if you’re looking for ways to accelerate your retirement, here’s how you can move the date of your retirement party up a few years:

1. Add cash.
Yes, it takes money to make money. So the first step in starting and growing your retirement nest egg is finding ways to get more cash into your retirement accounts.

When times are tight, saving more can be a tall order. But you may get some help. If your employer offers a matching contribution to your 401(k) plan, you might double those extra savings. Similarly, Uncle Sam offers benefits in the form of deductions for contributions to 401(k) plans and traditional IRAs, as well as tax credits for low- and middle-income taxpayers who contribute to IRAs.

It takes a little more than $550 per month in savings, earning a 7% return, to get to $1 million over the course of a 35-year career. But if you can add just $100 per month to that — including what your employer puts in and your tax savings — you can cut more than two years off your wait.

2. Embrace stocks.
Saving more is great, but there’s only so much you’ll be able to put aside. You have to make the most of what you have.

People are often too conservative in their retirement investments. Despite the sometimes violent ups and downs of the stock market, the long-term return on stocks far exceeds that of less risky investments like bonds and bank savings accounts. If you have all your money in cash, you won’t lose a penny — but you’re lucky to make 1%-2% right now. Even target funds and other balanced retirement options have sizable portions of their assets in bonds.

A 7% return is a reasonable average for a portfolio that has slightly more in bonds than in stocks. But throughout most of your career, you can afford to take more risk. Owning more stock could raise that return to 9%, lopping off almost five more years from your target.

3. Hit for the fences.
If you only want to match the S&P 500, buying index funds is easy. To get higher returns, however, you’ll have to find stocks that will outperform the index. Here are some examples from the past 20 years:

Those stocks have done particularly well, especially given how badly stocks have done since 2000. But you don’t have to belt all your picks out of the park to retire sooner. If you can eke out just another couple of percentage points on your average return — boosting it to 11% — then that’ll cut another 3 1/2 years off your target.

4. Become a cheapskate.
So far, we’ve only looked at half of the story. How much you spend plays just as important a role in retirement as how much you save. And while many expenses go away when you stop working, new ones quickly take their place — things like travel, entertainment, hobbies, and medical care.

But you have a lot of control over many of these expenses. If it’s worth it to you to spend less in retirement, you won’t have to save as much before you retire. Cutting 10% off your spending means you’ll get to your smaller goal a year earlier.

All in all, combining these four simple tips can let you retire as much as a decade or more sooner than you otherwise would. That thought just might be enough to make even a bad day at work seem brighter.

Source: Fool.com

And even if starting up a new business when the economy is shrinking does prove to be a baptism of fire, it could strengthen you in the long run. If you survive, think how well you’ll perform when the good times return.

Here are some of the ways you can withstand a recession when you start a new business.

Sell food

Some goods are a necessity, meaning people will buy them in about the same quantities irrespective of whether their income rises or falls. So businesses that sell essential goods or services generally perform as well in lean times as they do in boom time.

The most obvious necessity is food, being, as it is, pretty much fundamental to our survival.

However, there’s a difference between what you need to eat to survive and the amount of food we in the Western world actually eat. People can and do cut back in less bountiful times.

A food retailer might consequently think differently about how to market its goods in a recession. For example, instead of Two-for-One offers consumers might prefer getting a single item for half the price.

People don’t just cut back in terms of volume. While sales of premium ranges could drop, value ranges might conversely fare better.

However, ‘luxury’ foods aren’t always sacrificed on the alter of belt-tightening. Haagen Dazs ice-cream, for example, sold well during the early 1990s recession because although it was luxurious, it was still affordable to the average person.

Sell affordable “luxury” goods

People do not wish to forgo all pleasure during economic downturns. They will cut back on inessential expenditure, but cherish what remains even more as a result.

This means that businesses which offer slimmed down versions of luxury goods can prosper, as Jim Surguy, senior partner at Harvest Consulting explains: “When times are hard people will search for value, so the response should be to make smaller versions of the same things they always buy – drinks in half-sized bottles, or seeds not plants, or holidays lasting five days instead of seven days.”

Instead of cutting back, people can substitute their luxury goods for cheaper versions. For example, someone might buy some Cadbury’s chocolate from the newsagent instead of going to a premium chocolatier such as Hotel Chocolat. Or they might rent a DVD instead of going to the cinema. Or they might substitute a holiday in the States with a holiday in France.

To sate your customers’ wish for luxury goods in lean times, then, you need to sell them more cheaply. This means you should make them more cost-effectively, by sourcing cheaper materials/ingredients or having a more efficient production process. Or you could just accept tighter profit margins.

Start or buy a funeral parlour or healthcare business

Illness and death are implacable even in the face of recession. Therefore anything to do with healthcare – such as manufacturing, delivering supplies or providing services – and funeral parlours are immune to the effects of high interest rates, high inflation, and tumbling house prices.

Start or buy a debt collection business

Not much explanation needed for this one, where the amount of business you get almost certainly goes up in times of hardship.

Start or buy a legal services business

The same goes for family-law solicitors. The industry as a whole is pretty much immune to a recession (neither crime nor litigation abate in a downturn), but family solicitors are, if anything, likely to bring in more business. Recession is stressful, stress causes friction in marriages – divorce rates go up.

Buy a school

It seems strange to think of a school as a business and pupils as customers. But in a sense they are, so long as you’re talking about independent schools.

And if you own a school you can count on plenty of repeat business, even in a tough economic climate.

“Schools keep their customers for up to seven years,” says Peers Carter, co-owner of a school and partner at STC, the School Transfer Company, which specialises in selling education businesses. “Parents make a strong commitment to their children’s education and do not abandon it or change schools lightly. They will, quite rightly, give up luxuries such as holidays or new cars to keep their children in a good school.

“In the last major recession between 1989 and 1996, most independent schools survived and thrived – indeed there were more independent schools after the recession than before it!”

Start or buy a business in home maintenance

If you have a leak in your roof, are without electricity or have a mice infestation then something must be done. And even if people have non-essential maintenance jobs they’re often loathe to delay them until the economy improves, because the problem can, if left, worsen and ultimately become more expensive to fix.

So, if you’re a plumber, electrician, roofer, or are skilled in another area of home maintenance, then you have less to fear from economic uncertainty than most.

Sell goods or services popular with over-50s

Richard Denny, a business-development adviser, explains this one: “In an uncertain economic climate, the one section of the community that is still growing is the over-fifty marketplace. They have equity in their property, they have savings and they earn a bit more as interest rates rise.

“They are continuing to spend on holidays, on hobbies, on sports and keeping fit, on interests, on lifestyle, on health and diet. So anything in those directions is a very big market.”

Buy a franchise

By no means do franchises always thrive in a downturn. Indeed, some are very much susceptible to recession by dint of the nature of the industry they’re in.

However, in general, an established franchise will stand a better chance than most. Many are old enough to have been around during previous downturns, and since they survived them, they’re in a good position to withstand fresh economic turbulence.

When demand across the economy recedes it’s more likely to be small businesses than experienced franchise chains that suffer. Franchises have the time-honed, streamlined systems and processes to ensure that they’re among the majority of businesses that survive a recession.

Proven ways to make money

1. Pay yourself first
This is the single best money tip of them all and it’s easy. Just set up an automatic payroll deduction that will whisk away 5% to 10% of your paycheque before you ever see it, and deposit that amount in a good, low-cost mutual fund. Soon, with no effort on your part, you’ll have a healthy nest egg. Why does this trick work so well? Because most people find it hard to save money by sticking to a budget — it’s just too tempting to spend what’s left over. But if you make saving an automatic first priority, you quickly adjust to living on the cash that remains.

2. Mark it down
Use the calendar to your advantage, says Barb Garbens, a fee-only financial planner at BL Garbens Associates Inc. in Toronto. By contributing to your RRSPs at the beginning of the year rather than at the end, you can enjoy an extra year of tax-free compounding. And by paying your mortgage weekly or bi-weekly instead of monthly, you can pay off your mortgage years faster than someone who sticks to a monthly schedule.

3. Get real
About your expectations, that is. Advertisements depict a world in which everyone makes a six-figure salary, retires at 55 and earns 15% a year on their investments. The reality is different. Most Canadians make under $50,000 a year. The typical man retires at 63, the typical woman at 60. The median return of balanced mutual funds over the past five years has been a meagre 5%. What do all these numbers mean? That you shouldn’t stress if you’re not on track to retire in your mid-fifties — and that you should be very suspicious of fast-talking brokers who promise you 20% annual returns.

4. Think twice
Before hiring someone to take care of a job you could do yourself. Why? Because you earn money in pre-tax dollars, but you pay bills in after-tax dollars. Thus, many middle-class earners will discover that paying an $800 landscaper’s bill (in after-tax dollars) really costs them nearly $1,500 in before-tax salary. Think about it: if you do the landscaping yourself, you’re giving yourself the equivalent of a $1,500 raise.

5. Pick a date
New Year’s Day, for instance, or Canada Day — and draw up a net worth statement on that day every year. Begin by listing your assets at their current value. This includes your house, your car, your RRSPs, and anything else you own. Then subtract your liabilities — the amount you have left owing on your mortgage, your credit card and other loans. What remains is your net worth. If it’s going up every year, that’s great. If not, start asking questions.

6. Repeat after us: time is money
Literally. Every dollar that you invest now will double in 12 years, assuming a 6% annual return. So even if you don’t feel particularly wealthy in your 20s and 30s, try to put away what you can, either by investing or by paying down your mortgage and other debts. You’ll be pleased you did when you look at your net worth in your 40s and 50s.

7. Learn the virtues of standing still
The biggest single mistake that people make in trying to build their wealth is being too active — they flip in and out of investments and chase yesterday’s hot mutual funds or stocks. Problem is, yesterday’s winners are often tomorrow’s losers. What’s more, the transaction costs of jumping in and out of investments can eat up profits. So avoid frequent trading. Never buy an investment — whether it’s a house,a stock or a fund — if you’re not prepared to hold it for the next 10 years.

8. Spend less than you make
This is still the only way to build wealth — and it’s easier than you may think. Just promise yourself not to increase your spending when you get a raise at work or a windfall of some other type. Instead, bump up your automatic payroll deductions by the after-tax amount of the raise, and soon you’ll be soaking away barrels of cash, without having to give up anything you currently enjoy.

9. Distinguish between bad debt and good debt
Bad debt is money you borrow to purchase something that quickly declines in value — a vacation, clothes, restaurant meals. Good debt is money you borrow to buy things that can go up in value or increase your earnings potential: an education, stocks, bonds, mutual funds, a house.

10. Pay it off
Pay off your credit cards and mortgage before beginning to invest. Chances are you’ll earn a higher rate of return from erasing loans than from playing the stock market. Paying down your credit card, for instance, guarantees you a risk-free after-tax return of about 18%. To achieve a similar return through investing, you would have to earn more than 25% before tax and you would have to take on risk.

11. Attack debt
Attack debt systematically rather than trying to pay the same amount to everyone. Start by paying off your highest-interest debt — credit card debt is usually the worst.Then move on to car loans and your mortgage. If you’re carrying a lot of high interest rate debt, talk to your bank about the possibility of taking out a lower cost consolidation loan, backed by your home, and use that money to pay off your most expensive debt.

12. Forget the fees
No one should pay a fee to use a credit card when there are better cards out there for free. For instance, the TD Gold Select Visa offers purchase protection, extended warranties, travel accident and car rental insurance, emergency travel assistance and preferred rates at Budget — all for an annual fee of zippo. If you want rewards, the Citi Enrich MasterCard and Capital One 1% Cash Rebate Platinum MasterCard give you 1% of your money back, the TD GM Visa card gives you up to 3% back towards a GM vehicle, and the President’s Choice Financial MasterCard hands you a break on groceries. Best of all, none charge an annual fee.

13. Don’t lease cars
When you lease, you’re paying a premium to drive a new vehicle, plus you’re essentially financing almost the entire cost of your new car. That’s fine if you absolutely must have a new car every three years, but not a great strategy otherwise. You’ll almost always save money by buying a car and driving it for five to 10 years.

14. Hire a fee-only financial adviser
For a truly unbiased look at your finances, hire a fee-only financial adviser that you pay by the hour. These folks don’t have a conflict of interest. In contrast, most conventional advisers earn their incomes from selling you mutual funds and other products and have a built-in bias as a result. While fee-only advisers charge $200 to $300 an hour, they can be cheaper in the long run than conventional advisers. And they’re certainly more objective.

15. Negotiate
Never accept your bank’s first offer without asking if a better deal is available. Whether you’re buying a GIC or negotiating a mortgage, bank reps usually have a bit of room to negotiate. If you’re a good customer, point out that fact — and suggest you’ll look elsewhere if you can’t get a slightly higher interest rate on your GIC or a lower rate on your mortgage.

16. Use professionals
Use mortgage brokers and insurance brokers to help you shop for the best deal in their respective areas. Unlike salespeople who represent just a single bank or insurance company, brokers can show you products from several firms and steer you to the best deal. An insurance broker can compare features of policies from competing companies; similarly, a mortgage broker can offer you deals from dozens of small lenders that you would otherwise have missed.

17. Open a president’s choice or ING account
Both these banks operate primarily through websites and over the phone with only a limited number of ATMs and physical locations. The benefit is that they offer higher interest rates on your savings and lower fees than the Big Five banks. What’s not to like about that?

18. Know when to renew
Pass up your adviser’s pitch for expensive whole-life and universal-life policies and buy a renewable term-life policy instead. Such a policy typically covers you for either 10 or 20 years and is far cheaper than the alternatives. When the policy expires, you’re guaranteed to be able to renew it, so you can extend your coverage if you wish.

19. Compare policies
Term-life policies can vary hugely in cost, so check out quotes from rival firms at Term.ca or Term4sale.com before you buy. An insurance broker can help steer you through the competing choices.

20. Increase deductibles
Raise the deductible on your car or home insurance and your premiums will plunge by as much as 40%. For instance, simply raising the deductible on your home insurance from $500 to $5,000 could cut the insurance bill for a three-bedroom Toronto home to $420 from $700. While you’re at it, find out how much you could save by insuring both your car and your house with the same company. Most insurers offer a discount to people who give them all their business.

21. Don’t buy life insurance you don’t need
The only good reason to purchase a policy is if someone will suffer financial distress from your death. So if you’re single, you probably don’t need insurance. And if you’re married with kids, you don’t need policies on your kids’ lives. (If — heaven forbid — anything were to happen to your children, you would be grief-stricken, but you wouldn’t suffer a financial loss, would you?)

22. Put extra money toward your mortgage
Your return will beat anything you could get on a GIC or mutual fund. For instance, if you have a $250,000 25-year mortgage at 5% and you pay $200 a month on top of your regular payments, you’ll save $40,000 in interest and pay off your home five years sooner, says Andy MacDonald, president of MortgageBroker Inc. in Mississauga, Ont.

23. Consider Manulife One
A product which merges your mortgage with a line of credit and a chequing account. Any cash you deposit immediately reduces your mortgage total; any cheque you write adds to your total owing. Result? You never have idle cash lying around.

24. Become a landlord
If you’re sending junior off to university, consider buying him a house. That’s right — if you buy a home at the right price, and your teenager acts as the property manager and rents out rooms to other students, you can often turn a profit when you sell the house upon your child’s graduation. Even if home prices don’t go up, you can usually count on housing your offspring for free for four years.

25. Negotiate fees with your agent
Insist on a better deal from your real estate agent when it comes time to sell your home. Especially if you’re listing a pricey property in a hot market, ask your agent to discount the standard 6% commission. Alan Silverstein, a Toronto real estate lawyer, says you can often get an agent down to 4% or lower if he or she thinks your house will sell quickly. Saving a couple of percentage points will mean $6,000 more in your pocket on the sale of a $300,000 home.

26. Keep receipts
Take advantage of the small stuff, says Lee Bernstein, a tax accountant in Toronto. You can write off the cost of a safety deposit box, for instance. Two-income families can also deduct the cost of kids’ after-school lessons and summer camp if those expenses allow the parents to work and earn money. Moving expenses incurred to take a job elsewhere in Canada are deductible; as are tax preparation fees in some cases. And don’t forget medical and dental expenses — you can miss out if you don’t keep receipts.

27. Invest right to avoid taxes
The key is to remember that capital gains and stock dividends enjoy tax breaks, while interest payments from bonds and GICs don’t. So keep any bonds or GICs you own in your RRSP. If you run out of contribution room, your stocks and stock-based mutual funds can remain outside your RRSP without inflicting too much tax damage.

28. Contribute to your RRSP
The biggest, best tax loophole is contributing to an RRSP. Yep, we know it sounds mundane — but it’s also true. So stop whining and make that contribution.

29. Beat the taxman by re-arranging debt
In general, interest on money you borrow to invest is tax deductible, but interest on money you borrow to spend isn’t. So rather than using your savings to buy stocks and borrowing to buy furniture, switch it around: by borrowing cash to buy stocks and using savings for the sofa, you turn the interest into a tax deduction.

30. Get help
If you find a tax accountant you like, stick with her — she can suggest ways to minimize your taxes. Software can also make your return a snap. QuickTax, TaxWiz and UFile each cost less than $50, but save you hours of tedium.

31. Split income with your spouse, both now and in retirement
By making your incomes as equal as possible, you’ll minimize the overall tax that both of you will pay. One strategy is for a high-earning spouse to contribute to a spousal RRSP for his or her stay-at-home partner. If you run your own business, you can cut your family’s overall tax bill by employing your lower earning spouse — or kids — to perform some tasks you would otherwise have to do yourself.

32. Diversify
You’ll be glad you did. Holding a varied portfolio ensures that no single disaster can blow a hole in your nest egg; it also guarantees you’ll have a part of any good news going. To ensure you’re diversified, make sure that your holdings include both stocks and bonds. Your stocks should span several industries, rather than being concentrated in a single sector. They should also be geographically diversified, with Canadian, U.S. and international firms in the mix.

33. Think in terms of your portfolio, not individual stocks or funds
About 90% of the difference between the returns of different portfolios comes down to broad decisions about which types of assets to buy, rather than narrow decisions about which specific stocks, bonds or mutual funds to hold. The classic blend is to put 60% of your holdings in stocks and 40% in bonds. Conservative investors may want to reverse those proportions, while aggressive investors may want to drop the bond component to 20%.

34. Steal other people’s ideas
Unlike students writing a university essay, investors get rewarded in their portfolios for copying the work of the smartest people they know. One of our favorite sites is Gurufocus.com, which tracks the commentary and holdings of more than 25 great investors, including Warren Buffett.

35. Follow our couch potato strategy
It beats 80% of the money managed by professionals over the long term and requires only 15 minutes of your time each year. For step-by-step instructions on how to become a Couch Potato, click here.

36. Cut your costs
This is the single best way to juice your returns. Despite what you may think, paying more for money management doesn’t improve results. So look at low-cost index funds or exchange-traded funds (ETFs). If you truly want an active manager, pick a fund with a below-median management expense ratio to ensure profits stay in your pocket.

37. Be realistic
About how much you can withdraw from your retirement portfolio each year. Many new retirees assume they can spend 7% to 10% of their nest egg every year.That’s fine in a rising stock market, but if the market slumps and you keep taking out that much, you’ll quickly run down your savings. Studies agree that to make your money last you should count on withdrawing only about 4% a year.

38. Count on a government pension
Most of us will get more from Ottawa than we think. A married couple with no savings or company pension can expect $24,000 a year from all government sources when they retire; the average combined payout from just the Canada Pension Plan and Old Age Security is now almost $11,000 per retired person a year.

39. Protect yourself
Protect yourself from stock market slumps in retirement by keeping five years’ worth of living expenses invested in a “ladder” of safe bonds, with one fifth of your holdings maturing each year. That way you can live off the money from your maturing bonds during a market downturn, and you won’t end up decimating your portfolio by cashing in stocks when they’re down.

40. Make a will
Making a will doesn’t take a lot of time, it doesn’t cost much, and it can save your heirs thousands in taxes and legal fees as well as legal squabbles. If you can avoid all that by hiring a lawyer to draft a will for $200 to $300,why wouldn’t you?

41. Talking about wills
Our advice is to talk about wills. Most feuds over wills come about because parents don’t communicate their decisions to their kids while they’re alive. When the will is read, heirs are surprised, feelings are bruised, and nastiness ensues as sibling turns on sibling. So, before you make a will, talk it over with everyone involved. Then, after you have the will, keep on talking — the best will is one that surprises no one when it comes time to use it.

42. Make use of registered education savings plans (RESPs)
After you open one of these plans at your local bank, you can contribute up to $4,000 a year per child to a lifetime limit of $42,000. The money grows tax-free until it’s withdrawn for your child’s education. But here’s the even niftier part: the federal government gives you an immediate top up for each contribution. The amount of the grant varies according to your family income, but it’s worth a minimum of 20% of the first $2,000 per child you contribute — in other words, $400 a year for free. Sounds like a deal to us.

43. Live closer to work
Many of us underestimate the true cost of commuting, both in terms of stress and in terms of dollars. Case in point: The Canadian Automobile Association calculates a husband and wife can spend $140,000 over five years making the one-hour commute from Hamilton, Ont., to Toronto in separate Chevy Cavaliers.

44. Money isn’t everything
Switching to a new job where you have more trust in management brings you as much happiness as a 36% pay raise, according to a recent study by economists John Helliwell and Haifang Huang at the University of British Columbia. Switching to a job that offers more variety is like getting a 21% pay raise, and getting a position that requires a high level of skill is worth a 19% raise.

45. Give your kids part of their inheritance while you’re still alive
A bit of cash when your kids are in their 30s could save them a fortune in mortgage interest — and you’ll enjoy being around to see the difference your money makes.

Source: canadianbusiness.ca

1. Cash in those bank rewards travel points
Citibank, Chase and Capital One have been hit hard with the financial crisis, and they’re watering down the value of credit card rewards points as a result. If you have 20,000 or fewer points (or miles) in any of the major credit-cards rewards programs, consider cashing then in before they’re devalued further.

2. Save money on fancy restaurants
Go to Restaurant.com and buy a $25 gift certificate for a fine restaurant near you (or at your destination) for only $10. Hundreds of eateries are willing to sell $25 gift certificates for only $10 because it helps encourage customers to dine at their establishments.

3. Packages can offer the best savings but a new Web site helps verify the quality of any given deal,
To fill rooms and seats, hotels and airlines will resort to rock-bottom prices, but they don’t want to publicize these discounts. So they sell a certain number of rooms or seats to companies that bundle them in packages. How good of a deal are these packages? Dealbase.com trawls the Internet for package deals. Its computers then figure out how much it would cost to book the component parts of the package (such as the hotel room and spa credit) separately, estimating for you how much you will (or won’t) save by booking the package.

4. Use envelopes for easy budgeting during a trip
If you have trouble sticking to your budget or keeping track of numbers, try putting cash into different envelopes marked for each day. Only spend the cash in your envelope. Use your debit card for emergencies only.

5. Try a ‘supermarket souvenir’
Instead of loading up on $20 T-shirts nobody likes, seek out local supermarket staples that may seem exotic back home. Examples include chocolate-covered macadamia nuts from a Safeway in Hawaii or a nicely-packaged box of tea from a Tesco supermarket in Britain. Check out our gallery of inspiring supermarket souvenirs from our staff and our readers.

Source: msnbc.msn.com

How about a credit card that gives cash rebates?

You can book your own flights during seat sales, often a better deal than using the card.

There’s nothing worse than waiting years to collect points for a airline ticket, only to find you still have to pay hefty taxes and surcharges. If you have points piling up, you may be happier with cash rebates paid once a year that you can use to buy anything you like.

There are more cashback credit cards on the Canadian market than ever before. Let’s start with no-fee or low-fee cards.

The CIBC Dividend Card has three tiers of rebates. You get 0.25 per cent on net annual purchases up to $1,500, 0.5 per cent up to $3,000 and 1 per cent over $3,000.

Scotiabank’s Moneyback Visa card has the same three tiers of rebates. It has an $8 annual fee, but gives you an 18.59 per cent interest rate (lower than CIBC’s 19.5 per cent).

The TD Rebate Visa suits low spenders. It has just two tiers: 0.5 per cent on purchases under $3,000 a year and 1 per cent above that (up to $25,000 a year).

RBC’s no-fee Rewards Visa Gold and Rewards Visa Classic cards give you financial rewards. You can pay down an RBC mortgage, loan or line of credit, or contribute to a registered retirement savings plan or education savings plan.

Financial rewards are popular, accounting for 18 per cent of total gift certificate redemptions, says RBC spokeswoman Jackie Braden. People like to pay themselves first and get related tax benefits or grants.

BMO has a no-fee cashback reward option on its Mosaik MasterCard, giving 0.5 per cent on purchases and 1.5 per cent at Shell gas stations. (With the premium cashback option at $49 a year, you get 1 per cent on purchases and 2 per cent at Shell.)

Monty Loree, a blogger who writes about credit at www.canadian-money-advisor.ca, helped me find other cashback cards that looked enticing.

Citizen’s Bank lets you earn points for its financial products. It donates 10 cents to non-profit initiatives worldwide each time you use the card.

At a cost of $45 a year, Citizen’s My Visa Rewards Plus card has a low interest rate of 11.25 per cent.

Capital One’s Cash Back Platinum Plus MasterCard, aimed at big spenders, gives you 1 per cent on purchases up to $10,000, 1.5 per cent up to $20,000 and 2 per cent on $20,000 or more.

It has a $59 annual fee and a variable interest rate of prime plus 15.05 per cent (equal to 19.8 per cent right now).

MBNA’s Premier Rewards Platinum Plus MasterCard gives you a 1 per cent rebate on all purchases with no limits. The annual fee is $29.

Finally, American Express has a Costco cash rebate card with three tiers: 0.25 per cent on the first $2,000, 0.5 per cent on the next $3,000 and 1.5 per cent on any amount over $5,000.

The maximum rebate is $500 a year, which requires $37,000 in spending.

While the Amex card is free, you have to pay for a Costco membership every year ($50). It’s the only credit card accepted by Costco stores. You can juice up your rebate by an extra 0.5 per cent when you carry a balance on the card.

Source: Thestar.com

We feel your pain. So let us reassure you. Despite what you may think, there is a lot of good news about retirement. We’ve talked to a wide-ranging selection of financial experts and we’ve come away with one conclusion — you’re doing far better than you think you are. Join us as we reveal 10 things that most people don’t know about retirement, but should.

1. You’re not behind at all
The ads make it sound as if 55 is a reasonable retirement age. In fact, for most of us it’s not. The median retirement age in Canada is 62 for men and 61 for women, according to Statistics Canada. Who does retire early? By and large, federal government employees, who ditch work at a median age of 58. You can credit their early departures to generous pensions that are indexed for inflation. But even public-sector employees aren’t hanging up their work clothes at 55.

If you look at the math behind retirement, you can see why most of us stick around the office a bit longer than we might like. For every year early that you retire, you pay three penalties: you lose a year of potential savings, you lose a year of growth for your retirement savings, and you gain one more year of retirement expenses.

Consider a woman who hits 55 in good financial shape, with a paid-off condo and $100,000 in savings. She can count on her savings to produce $4,000 or $5,000 a year in returns, but she’s too young to start collecting Old Age Security or Canada Pension Plan. Unless she resorts to desperate measures, such as selling her condo or burning through her savings, retirement is impractical.

But look at what a difference five years can make. If she buckles down and contributes $10,000 a year to her retirement fund during that period, and achieves a 7% annual average return, her savings double to $200,000. That bankroll can generate $8,000 to $10,000 a year in income as long as she lives. At 60, she can also start collecting Canada Pension Plan. If she combines those sources of income with part-time work, a phased-in retirement becomes quite practical.

2. You’ll live longer than you expect
When we’re doing our retirement planning, many of us figure that we’ll live to 80, the average lifespan in Canada. But that average is misleading. It reflects what a newborn baby can expect in the way of lifespan and is dragged down by all the unfortunate people who die relatively young.

If you’ve managed to reach 65 without suffering a terminal illness, you’ll probably live considerably beyond 80. According to StatsCan, a 65-year-old man can expect to live to 83; a 65-year-old woman can look forward to blowing out the candles on her 86th birthday.

And remember — those are averages. Half of retirees live longer, some much longer. Moshe Milevsky, an associate professor of finance at Toronto’s Schulich School of Business at York University, says there is a 41% chance that at least one member of a 65-year-old couple will live to 90. So even if you don’t quit work until 65, there’s a good chance that your retirement could still wind up spanning a quarter or more of your life.

3. You’ll see more of your partner — a lot more
Sure, you love your spouse, but let’s do a little math here. Chances are, for most of your married life at least one of you has worked outside the home. Subtract sleep, travel time and other away time and you’ve seen your beloved for — at most — six hours a day.

In retirement, that figure can easily double. And continued exposure can cause even happy couples to bicker. Fred and Janet Barnes (not their real names) retired to Dickey Lake, Ont., to renovate a cottage after living in and around Toronto for most of their lives. “His perfectionism drove me a little crazy,” says Janet. “My slapdash methods were hard for Fred to take.” The Barneses eventually figured out ways to divide the work so they wouldn’t get on each other’s nerves.

Other retired couples strike different bargains — maybe the kitchen becomes her territory, while the garage becomes his — but whatever the specifics of the deal may be, the important point is to realize that retirement is not just a financial journey. It’s also an emotional odyssey and you should plan ahead to make the most of it.

Beginning in your 50s, you should start thinking about the activities that will fill your day in retirement. “You’re going to need to stay connected,” says Dr. Randy Swedburg, chair of the applied human sciences department at Concordia University in Montreal. Your many options include going back to school, giving your time to charity, or starting your own business.

4. A part-time job is worth $400,000 in the bank
If your retirement savings are a bit smaller than you had hoped, take heart — a part-time job in retirement can go a long way toward making up for an undersized portfolio.

Let’s say that you can make $20,000 a year from your part-time job. That is about what you could reasonably expect a $400,000 investment portfolio to generate in retirement, says Terry Greene, a fee-only planner with MSC Financial Services Ltd. in North Vancouver. So your part-time job is the financial equal of a $400,000 portfolio. Especially if your part-time job consists of doing work you enjoy, you may find that you never want to fully retire.

5. Your employer really does love you
The first wave of baby boomers has already hit 60. Millions more will soon hit retirement age. And there are not that many people coming up behind them. “The demographic trends are suggesting that over the next 10 to 15 years, we’re not going to replace the workforce that currently exists,” says Ted Emond, a senior consultant with Hewitt Associates, a human resources consulting firm in Toronto.

The likely result of Canada’s aging society is a potential labor shortage that will make skilled help more and more valuable with each passing year. HSBC Bank Canada, is already attempting to keep older employees in the workforce by letting them work part-time while collecting pensions. Wal-Mart Canada allows its retirees to come back as consultants or to mentor current employees. Count on more employers to do the same as demographics makes skilled employees tougher to find.

6. Government is more generous than you think
The financial planning industry likes to cast doubt on the future of Canada Pension Plan. In fact, CPP is on solid financial ground after the reforms of a decade ago, according to the federal government’s chief actuary. CPP (or Quebec Pension Plan in the case of Quebecers), combined with Old Age Security, will provide you with an average of $11,500 a year if you’ve worked in Canada your entire life and retire at 65. The maximum you could qualify for is about $16,600 a year.

Don’t forget, too, that you’re eligible for a Guaranteed Income Supplement if you’re a low-income retiree. “For low-income [earners], government programs are going to provide you withthe standard of living you’ve always been used to,” says Malcolm Hamilton, a consulting actuary with Mercer, a benefits consulting firm in Toronto.

7. You may be missing free money
A Sun Life Financial survey found nearly 40% of us have access to savings programs in which our employer kicks in money to supplement what we contribute. But one in five of us who are eligible for such plans doesn’t participate. As a result, we lose guaranteed returns of 25% or more.

You should inquire with your human resources department to make sure you’re not missing out. Many publicly traded companies offer employee stock ownership plans with an employer match. If you buy $80 of your company’s stock each month through such a plan, your employer kicks in an additional $20 a month — an instant investment return of 25%. Other companies offer retirement plans in which the company matches your contribution dollar for dollar — a guaranteed return of 100%. In either case, the money is free and you should grab it.

8. You don’t need a million bucks
Financial planners like to say you’ll need 70% of your current income in retirement. To hit that goal, a middle-class couple will need to amass a million dollars or more in savings. But is the 70% figure truly a good estimate of what you need in retirement?

Probably not. Brian FitzGerald, co-author of The Pension Puzzle and chief executive officer of Capital G Consulting in Toronto, says you have many more costs while you’re working than while you’re retired, so your need for cash in retirement is considerably less than the 70% figure suggests. “There’s a bunch of expenses you don’t have to incur in retirement,” he says. For instance, most retirees no longer have to worry about paying off a house, funding their kids’ education, making RRSP contributions or commuting to work. And they pay substantially less in income tax because they’re earning less.

So how much of your current income do you really need to maintain your standard of living in retirement? “I’m pretty confident that 50% will do the job for most people,” says Hamilton, the actuary. Of course, if you want to live lavishly and travel constantly, you will need more, but if you’re happy to go on living much as you always have, replacing half of your working income should do the job.

9. RRSPs aren’t always the answer
Canada has five seasons: winter, spring, summer, fall, and RRSP time. But while we’re annually bombarded with ads telling us to stuff money into our RRSPs, don’t think of those four-letter contraptions as your only option in retirement planning.

RRSPs are not your best strategy if you have high-interest debt, such as a credit card balance. Given the 18% or more you’re probably paying on your credit card debt, you should first devote every available dollar to paying down that costly debt. RRSPs may also not be your best option if you’re a low-income earner, since the tax savings that result from making an RRSP contribution aren’t worth much if you don’t pay much tax to start with.

If the federal government goes ahead with its proposal to introduce tax-free savings accounts next year, RRSPs will have an additional competitor for your attention. Ottawa’s proposal, as it now stands, would allow each of us to put up to $5,000 a year into a tax-free savings account, or TFSA. You won’t get any tax deduction for doing so, but your money will grow tax-free. And you will be able to withdraw the TFSA money without paying any taxes. While the math gets complicated, “I would think people with below-average incomes are better with TFSAs,” says Hamilton, the actuary.

10. There’s a world of possibilities
One option that can instantly multiply your retirement spending power is to leave Canada behind. Mexico, Costa Rica, Malaysia and Panama all enjoy far better weather than we do, and much lower costs of living. “Overall, there is no question you can live here on one-half to one-third what you could in any Canadian city and have a good lifestyle,” says Tom Dawson, 54, who with his wife, Donna, moved to Panama City nearly two years ago from St. Albert, Alta. The 1,800-sq.-ft. condominium they bought overlooks the Pacific Ocean and the Panama Canal, and cost them less than $200,000. Medical care is excellent, locally grown produce is cheap and foreigners who retire to Panama with a pension can qualify for several tempting tax breaks, including an exemption from property taxes.

The federal government offers primers on retiring abroad (click on www.voyage.gc.ca and search “Retirement Abroad”). Another useful source of information is The Canadian Snowbird Guide by Douglas Gray. But no book or website can fully convey the day-to-day reality of a foreign country. Try out a destination before making any permanent decisions. Rent a home for a year and see what daily life is like. If it matches or exceeds your expectations, you may be able to afford the retirement of your dreams on far less money than you expected.

Source: CanadianBusiness.com

Source: canadianbusiness.com