Archive for June, 2011

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Inflation Rates Triple

It’s not just your imagination.  Retail prices are up significantly, according to the latest measure of CPI inflation (total CPI) produced by Statistics Canada.  In fact, the rate has tripled according to the latest data reported by the Bank of Canada.  As at the end of April 2011, total CPI was a whopping 3.3%!

The Consumer Price Index (CPI) is used to estimate how the purchasing power of money changes over time. The CPI measures inflation  by comparing the retail prices of a representative “shopping basket” of goods and services at two different points in time. 

Here’s how this year’s figures compare to prior years:  at the end of the second quarter of 2009, total CPI was 1.2 %.  At the end of the same period in 2010, it was 1.4%. 

How is that affecting Canadians?  The many respondents of the Knowledge Bureau Poll in June concur that they are spending more, citing food and gas prices as main culprits. 

Respondent Pat Harris says “We are seeing a huge decrease in discretionary spending as people struggle to pay for basic necessities such as food, electricity, heating fuel and gasoline. As people who live in rural Ontario with NO access to public transit, many are finding it difficult just to get to work.”

Over on the West Cost, Peter McG states: “Gasoline, fresh fruits & vegetables, meat and grains all significantly up in price. Government reaching into our pockets for ever more money. House prices are ridiculous (Vancouver)! Been to Dairy Queen lately? They want $5.00 for a Sundae and $3.00 for a simple Ice Cream Cone. Ridiculous. Really feel for young families who would like to buy a home to raise their family. Not even a dream for most!”

This bears out when you look at core inflation, the year-over-year growth in a variant of the CPI that excludes the eight most volatile components —which account for 19 per cent of the CPI basket—(fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products).  That figure rates core inflation at only 1.6% at the end of April, while core inflation excluding food, energy and the effect of change in indirect taxes was only 1%. 

It’s Your Money. Your Life.  Now is the time to take a hard look at Real Wealth Management  as a process to kill wealth eroders like taxes, inflation and investment fees.  It’s not that difficult.  You need to know some basic terms and work with a professional advisory team who knows your objectives and concerns to help you make decisions about your spending and savings.

Evelyn Jacks is President of the national financial education institute, Knowledge Bureau  and best-selling author of 46 books on tax preparation, planning and wealth management, including Essential Tax Facts.    Take a free trial of the Real Wealth Management course to think with focus on how to take better control.


Tax Refunds and Postal Strikes

Are you anxiously awaiting your tax refund during the postal strike? You are not alone. To be effective, strikes are timed to pressure management for a speedy resolution by disrupting the masses. The current postal strike is no exception, occurring in the midst of one of the most significant financial transactions of the year for millions of individual Canadians, and at a time of fragile recovery for many businesses.

According to the CRA website, the Canadian Union of Postal Workers agreed that during the current lock-out, they would deliver certain Government of Canada cheques on the 20th of the month. This includes the Canada Child Tax Benefit, Old Age Security, Canada Pension Plan and Guaranteed Income Supplement. However, those cheques may be late.

Tax refunds for neither individuals nor businesses, Universal Child Care Benefits for parents of young children, Goods and Services/HST tax credit cheques, and Employment Insurance cheques for families struggling with unemployment did not make the “go” list at all.

The average tax refund has been hovering around $1500 over the past several years; more than many people add to their TFSAs or RRSPs annually. That lump sum—often resulting from an over-deduction of tax on wages–will pay off expensive credit cards, pay down mortgage balances, and pay for the costs of annual family camping trips; inflated this year because of the cost of gas. For some, it will help to pay for summer or fall tuition, or, on a more basic level, non-discretionary items like rent or food. For others it is the only significant savings opportunity of the year.

If this concerns you, you may wish to consider changing the way you file your returns and apply for social benefits. You might consider electronic tax filing and electronic deposits for everything from tax refunds to GST Credits, Child Tax Benefits, Employment Insurance Benefits and Old Age Security payments in the future.

Unfortunately, that alternative won’t help those who count on tax refunds, or social benefits like the UCCB, GST or EI, if they don’t qualify to open bank accounts to which electronic payments can be made.

It’s Your Money. Your Life. It’s important that you are in control of your money so that you can make wise choices. File earlier next year, and consider using tax software, electronic filing and deposit, or the services of a qualified tax professional to get your tax refund faster. That professional can also help you with audit problems, late filed returns and the recovery a taxes and social benefits because of errors or omissions. And please do respond to the Knowledge Bureau Report Poll on issues like these. It’s important to have a voice.

Evelyn Jacks is President of the national financial education institute, Knowledge Bureau and best-selling author of 46 books on tax preparation, planning and wealth management, including Master Your Taxes. She was a member of the Federal Task Force on Financial Literacy.


The Value of Great Professional Advice

If you were the coach of the Vancouver Canucks today, what would you be telling your team?  Professional advisors get paid to give the right advice, when it counts.  Whether coaching a hockey team in an all-important final game, or a family whose retirement planning has gone awry, the principle is the same:  to get the results needed, there is great value in superb coaching.

 It’s probable that the coach of any championship team will have covered many aspects of plan execution in anticipation of such an important end result.   In fact, he or she will have done so all along the way.  Winning teams evolve.  The right team members are chosen, inspired with vision, values and a disciplined process, and motivated with performance goals that are not only achievable, but have the potential to be exceeded.  External experts will have been engaged, as required, to cover unusual or one-time events, all as part of the overall winning strategy.  Individuals will have been coached on sharpening their skills and mastering their mental resolve.  Winning coaches, in short, are superb at managing each component to the end game.  They will have instilled the confidence their team needs to face the fiercest of challengers, by helping them consistently stick to the strategy, process and execution plan. 

 How true this is of a financial environment as well:  the landscape is constantly changing; as a result, there can be gaps and failures in performance of a financial plan, further skewed by changes in lifecycles and lifestyles, and unexpected catastrophes that require both readiness and immediate management.  Disasters happen; recoveries are about getting back on your feet and resuming the journey.    Investors who need to achieve specific results, can’t quit.   Rather, they need to forget about the past and focus on the future. They need to come back strongly and seize new opportunities.  And, they need to rely on experienced professional advisors to help them execute, especially when they are in a deep rut.  

 It’s Your Money. Your Life.  It’s impossible to win the Stanley Cup alone.  Investors and hockey players who win big, have both:  great teams and great professional advisors.   Do you?  Go Canucks Go

Evelyn Jacks is President of the national financial education institute, Knowledge Bureau and best-selling author of 46 books on tax preparation, planning and wealth management, including Master Your Taxes. She was a member of the Federal Task Force on Financial Literacy.


Financial Education Builds Self Esteem

Have you ever met a successful person with poor self esteem? They are on such a difficult road. We all need to feel safe, secure and part of a family, yet that’s not a reality for many. Self-esteem matters. When you know yourself, you know your values and your principles. You stand for something, and that’s something those around you can count on. This is especially true when you have developed disciplined values and principles about family wealth.

It’s incumbent upon parents to raise strong, resilient children to pass the torch to, particularly if there is much responsibility in their futures. That great responsibility can include the care of significant wealth. From a financial point of view, strong families expose their children to scenarios in which knowledge and skills about money management result in confident, responsible decision-making for life.

That’s all very important when it comes to family wealth management. It all happens so quickly: children grow up and leave home, parents and siblings die, and for so many boomers—so busy caring for the young and the old alike—the time to counsel their heirs about future responsibilities regarding personal and financial stewardship has somehow slipped away.

Failure to find time for teachable moments is rooted in procrastination for some. That’s because it takes courage to talk about money, particularly if its accumulation has affected relationships. But it’s important to get those conversations on track.

When are you going to talk to your children about the insurance policies, residences and financial assets they will inherit? Do your children view money as a resource tool to help them maximize their potential? Do they have any skills to manage it? For example, do your adult children know:

  1. How to read their tax return
  2. How to construct a personal net worth statement
  3. Principles to save by (should that be 10%, 18% or 25% of income?)
  4. Principles to borrow by (paying off the credit card minimum every month is not such a sound financial plan!)
  5. How to preserve income and capital from taxes, inflation and fees

Have you introduced those adult children to your professional advisory team for help with taxes, financial and wealth planning? They could very well be on the road to exceeding the income you have made in your lifetime—especially if they are better educated than you are. They could also be quite shocked to know that they will inherit a lot of money from you.

It’s Your Money. Your Life. Financial education is a life skill that builds self esteem. Are you talking to your adult children about their money and the wealth you will pass down to them? Would your child consider it a devastating breach of trust if this were a surprise later? That’s risky, if your goal is a strong family with strong self-esteem. Taking the time to guide young people pays off in building and sustaining strong financial dynasties. Are you reaching out to help them? Would your child consider it a devastating breach of trust if this were a surprise later? That’s risky, if your goal is a strong family with strong self-esteem.

Evelyn Jacks is President of the national financial education institute, Knowledge Bureau and best-selling author of 46 books on tax preparation, planning and wealth management, including Master Your Taxes. She was a member of the Federal Task Force on Financial Literacy.


Stable Retirements Depend on Guiding the Young

Good to know:  Canadian retirees are a financially stable lot.  Throughout their lifetimes, those with higher levels of education earned more and generally saved more for retirement.  Good for them and the financial advice they received along the way!
But wait:  higher education, better financial knowledge and higher income have also led to higher debt, according to the fascinating 2009 Canadian Financial Capabilities Survey from Statistics Canada.  Those retirees with debt had median household incomes of $42,000 and median net worth of $295,000.  Their debt was well under control, though:  only 7% of total assets. More good news: 7 in 10 retirees with debt reported they had no trouble keeping up with bills and other financial commitments.
Digging even deeper, here is another startling fact:  turns out that financial stability in retirement is also very much dependent on the way you manage your personal relationships along the way.  Divorced people who are retired have the highest incidence of debt, and the lowest annual median income and net worth, compared with all other groups.
And so it appears that commitment to the right education, and the right conjugal relationship, can make all the difference to the quality of life, affluence and peace of mind you will have when you really need it. Yet, who must make those very important decisions about money and life?  It’s the very young.
It’s Your Money. Your Life. Taking the time to guide young people pays off in building and sustaining strong financial dynasties.  Are you reaching out to help them?