Sunday, December 16, 2012

How to achieve financial investment success with your financial adviser


- Save money regularly
- Setup your investment goals and financial objectives
- Establish an excellent relationship with your financial adviser
- Make sure your financial adviser understands your financial plan for the future
- After your financial adviser understood your financial objectives and goals, he/she should come up with a printout that outlines your financial plan indicating your financial goals, current financial situation, personality, age, degree of conservativeness, level of aggressiveness, and risk tolerance.
- Your financial adviser should come up with an investment strategy and investment portfolio tailored according to your financial situation, preferences, risks levels, expectations, goals, plans, and objectives
- Ensure a regular automatic investment amount taken monthly, bi-weekly, or weekly debit from your bank account
- Diversify. This is an essential investment strategy as it allows a reasonable asset mix of the types of investment for your portfolio allowing you to compensate for loses as well as take advantage of substantial gains
- Contribute regularly to your Registered Retirement Savings Plan (RRSP) as its growth is sheltered from tax
- Regular updates, new information, monitoring and analysis of the performance and opportunities of your investment portfolio
- Ask for recommendations, solutions,  and strategy on how to meet and attain your financial goals and investment objectives
- Feel free, open and honestly bring out questions and concerns to your financial advisor and make sure you understand his or her answers, explanations, and solutions

Saturday, December 15, 2012

How to stay financially healthy and stable (Do's and Don'ts)


Do's:

- Pray. It takes away your worries.
- Take care of yourself and your loved ones. Health is wealth!
- Love your job. Once you found a great job, you enjoy it, and extremely happy with your work, stick to it unless you have a far better alternative and absolutely sure it's worth it
- Save money on a regular basis and set it up automatically by direct debit from your bank account
- Save extra money for sudden financial emergencies and contigencies
- Be insured. Get life insurance, home insurance, auto, car (vehicle) insurance, and other necessary insurances to ensure peace of your mind
- Fund a registered retirement savings account
- Eliminate your debts. The longer they stay, the more painful it is for you
- Prepare for the unexpected
- Buy only what you need
- Control your spending
- Monitor and keep track of your income and expenses. Record daily expenditures so that you know exactly where your money is going
- Have only one credit card and keep your credit limit as low as possible
- Pay the full balances of all your credit cards to avoid those sky-rocketing interest rates which brutally rob you
- Pay your bills on time to maintain a good credit rating and excellent credit history
- Setup pre-authorized monthly debit to pay your bills and get rid of headaches and hassles
- Develop and implement an effective realistic monthly budget
- Set your financial goals on the short term (less than 5 years), intermediate (5-10 years) as well as long term (over 10 years) objectives
- Know your financial priorities. Avoid temptations
- Invest and diversify your investment portfolio
- Invest on things that appreciate in value over time (such as education, real state, property)
- Whenever you plan to loan or borrow money, make sure you have a working plan to repay it on time and thus minimizing interest rates and avoiding unwanted fees
- Seek the advise and help of financial advisers, counsellors, and financial experts
- Ensure that you have an up to date Will and Power of Attorney
- Do whatever it takes for the good of yourself, your family, relatives, community, country, and to the world. All good works will never bear bad fruit.

Don'ts:

- Don't cheat yourself and others
- Don't buy what you can't afford
- Don't spend more than you earn
- Don't use your savings to pay your bills
- Don't use money set aside for something to use it for another thing. Never do this!
- Don't take it for granted. Avoid those "Buy now, pay later", "No payments 'til next year" schemes and traps
- Don't borrow from one creditor to pay another debt. Don't use a credit card (or withdraw cash advance) to pay another credit card company

*** :) ***

Relax. Time is your friend. Grow old gracefully with peace of mind! Enjoy the rewards of your hard labour throughout those years!!!

How to diversify on the types of investments for your personal investment portfolio


Types of investments:

1. Cash investments
2. Fixed income investments
3. Equity investments

Cash investments

- ease of withdrawal whenever a need arises
- lower rate of return
- very little risk of losing

Examples of cash investments:

- GIC (Guaranteed investment certificate)
- Savings accounts
- T-bills (Treasury bills)
- Money market funds
- Money market mutual funds

Fixed income investments

- fixed rate of return on your investment
- lower investment risk
- generates a fixed amount of money for a certain amount of time (term)

Examples of Fixed income investments:

- Bonds
- Savings Bonds
- Government Bonds
- Mutual funds
- Fixed income mutual funds

Equity investments

- more risky than fixed income investments
- unpredictability of future growth
- although they are risky, equity investments have also the potential for bigger returns

Examples of equity investments:

- Local company or foreign stocks
- International stocks
- Global stocks
- Stock mutual funds
- Equity stocks
- Equity or Balanced mutual fund

How to diversify on the types of investments for your personal investment portfolio:


Investment strategy:
Diversification is the key. In order to diversify, you must have a balanced and correct mix of cash investments, fixed income investments, and equity investments so that you can achieve success on your financial goals. By diversifying, the potential gains from one type of investment will cover the probable loses of another type of investment. To learn more about how to diversify your investments and receive expert and professional advise, speak and discuss with your financial adviser.

Monthly Income & Expenses of a Typical Single, Young Professional in a Committed Relationship


This list below is by no means a complete representation of income and expense. The main purpose of listing these variables is to serve as a guide for budget calculations and management of personal finances. Financial planning plays a key role in personal financial success. Another factor for effective money management is control of cash flows. Thinking about the future is essential to successful later in life, which makes sense when you invest at the early stages in life. Here are just few of important points to consider when you plan a budget. Note that these would vary from person to person with different lifestyles, tastes and behaviour towards spending money.


Income:

Monthly salary from employer

Expenses:

Income taxes
Sales tax
Goods and services taxes
Other taxes
Employment insurance
Group insurance from employer
Group pension/retirement plan from employer
Other deductions
Savings for retirement (RRSP)
Savings for house/condominium/property purchase
Saving for car purchase or car replacement/lease
Saving for car/vehicle maintenance
Savings for consumer electronic products & home entertainment system
Savings to buy furniture
Saving for vacations, travels, visits, leisure trips
Savings for emergencies & unexpected costs
Housing/apartment rent
Food and drinks
Transportation cost
Loan/debt repayment
Credit card debt payments
Accident/Life insurance
Personal grooming and maintenance expenses
Clothing and accessories
Recreation, fun, and entertainment expenses
Health, well-being, and physical fitness fees
Social relationship and dating expenses
Birthdays, celebration, special occasions and events


*** Failure to have a personal budget analysis, planning and control would often result in budget deficit.

Personal investment styles & Risk tolerance of investors


Every person has different investment styles and risk tolerance. Some are aggressive, some are conservative, and some are moderate investors. These tendencies of investors are mainly affected by 3 factors:
1. Age
2. Financial status
3. Personality

Younger people tend to be aggressive while older people are from moderate to conservative investors.

The financial status of people is indicated mainly by the availability of current expense allowance which is the financial resource that is readily available as cash that would be used to cover for immediate expenses without withdrawing from the savings or investment portfolio. Financial status is also dependent on the stability of income over the years in the future as well as the amount of savings accumulated over the years.

The personality of investors affect their investment style. Each type of personality will respond differently to situations such as expectations of savings, rates, portfolio performance in short and long-term periods, unexpected situations including what they fear most. Personality of people can be pessimistic, careful, or optimistic. In case of a considerable drop in the value of investment portfolio, a pessimistic investor would probably move his or her investment portfolio to more conservative investments while the careful investor will monitor, assess, and study the situation and probably decide to move his or her money to balanced fund investments.

Sample of Life Insurance Cancellation Letter


If you and your spouse are not happy with your existing life insurance, and would like to cancel, terminate, and stop paying premiums to the Life Insurance Company, you must write a letter of cancellation. Very important thing to do before sending or faxing this cancellation letter, is to make sure you have another or new life insurance policy so that you and your beneficiary/beneficiaries have life insurance coverage and benefits. The cancellation letter should contain the following information:

Information required for your Life Insurance Cancellation Letter:


1. Date of the letter
2. Name of the Insurance Company
3. Address of the Insurance Company
4. Telephone and Fax numbers of the Insurance Company
5. Policy Number of Life Insurance
6. Name of Insured person(s)
7. Effective date
8. Amount of Insurance
9. Insurance coverage and benefits
10. Date when letter is signed
11. Signature of owners
12. Address of owners
13. Telephone (contact) numbers of owner(s)


Example of Life Insurance Cancellation Letter:


02 February 2012

ABC Life Assurance Company
123 Insular Street, Toronto, ON, M1A 2B3
Tel. no.: 416-123-4567
Fax no.: 1-800-987-6543

The undersigned owners of Policy Number 000123456  for the Life Insured named
John Smith and Jean Smith hereby request ABC Life Assurance Company
to cancel our policy effective today 02 February 2012.

Amount of Insurance: $100,000
Insurance Coverage and Benefits: Joint - First to Die - Yearly Renewable Term (YRT)


Date:  ___________________                                       
Signature: ________________                                       
Name of Insured: JOHN SMITH                                      

                                    
Date:  ___________________                                       
Signature: ________________                                       
Name of Insured:  JEAN SMITH                                      


Address of Owners:
123-4567 Blessed St.
Toronto, Ontario, M9A 8Z7
Canada

Telephone numbers:
416-123-4567 (home)
416-987-6543 (cell phone)

Term Life and Universal Life Insurance


Term Life Insurance


Term life insurance covers the insured for only a certain period of time. It usually comes in 10, 20, or 30-year terms. Term life insurance, therefore does not cover you for your entire life. Once the term is finished, you have to renew or buy a new term insurance. Although, after finishing your term, your premiums will increase with your age, term life insurance is affordable for families just starting out. Term life insurance is good for young people. Having a lesser cost of insurance coverage, you can put your money to other crucial areas such as paying loans and debts, funding your children's education, and other financial obligations. However, it is important to note that Term Life Insurance only pays a death benefit if the insured person dies during the term. If you die after the term, you will not get any money!

Universal Life Insurance


Universal Life (UL) Insurance is a type of permanent life insurance in which the premium payment is higher than the minimum cost of insurance (COI). The excess money is invested in funds, stocks, bonds, and other securities in order to earn an interest.

Underwriter


An underwriter is a third person or company, a broker, or agent, who helps you to choose the appropriate type of life insurance according to your needs. Underwriters help you with your application of life insurance to the insurance company.

How do insurance brokers or agents get paid?


Insurance brokers and agents get paid commission from the policies they sell. The higher the premium they sold, the higher their commissions would be. The commissions are paid by the insurance company to the brokers/agents. Your monthly premiums are all sent directly to the insurance company. Your monthly premiums do NOT go to the brokers or agents.

Cost of Insurance (COI) Options

1. Yearly Renewable Term (YRT) or Annually Increasing (AI)


What is YRT? Yearly Renewable Term (YRT) is an insurance option that is good for people who needs life insurance policy for less than 5 years. The advantage of this insurance option is the low initial cost of premium. This will allow you to accumulate more money from the premium and accelerate the cash value of your insurance coverage. However, the disadvantage of this option is that the premium will increase every time it is renewed, in this case, every year. This is why the name of this cost of insurance option is Yearly Renewable Term, also known as Annually Increasing. For a universal life insurance with COI structure of YRT, the excess money from the premium is invested so that the earnings will be compounded. The main purpose of this investment is to cover or offset the increased cost of insurance in the later years of the insured individual. The problem with this, however, is when the actual rate of return is lesser than the projected rate of return, then, the payment period becomes longer. For example, if you are paying higher premiums ($150/month) under an assumption of projected rate of return of 6% for a payment period of 6 years, so that after the said 6 years of paying premiums, you don't have to pay premiums for the rest of your life (i.e., the life insurance is fully paid), or otherwise known as premium payment holiday. But, if the actual rate of return is lesser than 6%, say for example 4%, then this would mean a longer payment period (more than 6 years) is required before the life insurance is fully paid.

2. Guaranteed Level


Guaranteed Level cost of insurance has the same (equal) premiums throughout the life of the policy and coverage period. The premium rate is locked-in for the duration of the coverage. This is ideal when you don't want an increasing premium. Equal payments can then be evenly spread for a longer payment period but with less amount of premium per payment period. The COI of a Level plan starts higher than a YRT. However, the cost of insurance will be lower when the insured person gets older.

3. Limited-pay


Limited-pay cost of insurance is where all the premiums are paid within a specified period usually 10, 15, or 20 years. The cost of insurance is guaranteed for the duration of the coverage and once paid for the term, no more additional premiums are required.

Cancellation of Life Insurance


If you cancel a life insurance, you will be charged with Surrender Charges. These surrender charges apply when coverage is decreased, cancelled, or terminated. Surrender charges vary (change) depending on the policy year. Cash Surrender Value is the amount of money that will be refunded to you if you cancel your policy. Cash Surrender Value is the difference between your policy's Total Cash Value and the deductions applicable which may be in the form of surrender charges, market value adjustments, etc.

Procedure for Cancellation of Life Insurance


How do I cancel my life insurance? Phone calls are not acceptable for cancellation of insurance policies. If you want to cancel your life insurance, you must write a letter saying you want to cancel your insurance. It is important that all persons insured in the policy should sign. If you have a spousal policy, your signature and the signature of your spouse are required. Equally important to include in the cancellation letter are:
1. Policy Number
2. Name(s) of the insured
3. Address
4. Telephone
5. Signatures of insured
After sending the letter through mail or fax, the insurance company will issue you a cheque within 2 to 3 weeks after the receipt of your cancellation letter. When selecting and applying for an insurance policy, you should be very careful, seek sufficient advice from proven and trusted sources. Do a good homework and research. It is recommended to seek advice and help from an independent insurance advisor. It is better to start off with the best insurance company rather than cancelling your insurance policy because after paying for many years, you feel unhappy about your life insurance and end up cancelling it, and of course, losing huge money!

Annual Billing vs. Monthly Billing


You can save money by choosing Annual Billing. The disadvantage of this is that you will have to pay a huge amount of money at one time. Paying monthly premium is generally convenient because you pay the cost of insurance with 12 monthly payments.

Tuesday, December 11, 2012

Advantages of Consumer Proposal over Filing for Bankruptcy


What is a Consumer Proposal?
A consumer proposal is a formal and legally binding agreement or deal that You and the Administrator of your Consumer Proposal make with your creditors (companies that you owe debt/money).

Why do creditors accept Consumer Proposals?
Creditors would receive more money from you in a consumer proposal than when you file a bankruptcy, in which case your creditors would receive less money from you.

How does a Consumer Proposal work?
- Secured creditors (e.g. Real Property, House mortgage) will be paid in accordance with existing payment arrangements. These payments may also be paid according to payment schemes that are mutually agreed upon by the debtor (you) and the secured creditor(s).
- Fees and payments are to be made by You to the Administrator of the Consumer Proposal.
- The Administrator (trustee company) of the CP (consumer proposal) will distribute the money received from the debtor (you) to the unsecured creditors (credit card companies, banks, finance companies, financial institutions, loan companies, credit corporations, etc.).

Major Advantages of Consumer Proposal over Filing for Bankruptcy:
- Only one small monthly payment to cover all your debts of different kinds.
- Total payment of 1/3 or less of all your unsecured debts.
- Better credit score or rating compared to Bankruptcy.
- All your debts are fully paid at the end of the payment period (usually 5 years).
- Easier to build credit after payment of all debts.
- Peace of mind.

The main advantage of consumer proposals over filing for bankruptcy is that in a CP, your credit score will not be badly affected as much as a bankruptcy which is the worst credit rating. When you want to sponsor family members or relatives, and you filed for bankruptcy, your sponsorship application is likely to be denied by immigration officials. When you are bankrupt, it is long and very hard to build up your credit again and difficult to gain trust from creditors once again.

When your monthly liabilities (debts) are totalling more than your assets, it is time to think and reconsider your way of spending money and your way of living. When you are spending more than you are earning, when your expenses are greater than your income, you need to stop and ponder. There are several reasons why people end up having trouble in their financial situations and budgets.

Major Reasons for Financial Difficulties:
- Credit mismanagement
- Loss of job
- Loss of business
- Insolvency
- Death of family member
- Expensive style of living

Example of Unsecured Debts from Unsecured Creditors:
$24,000 --- Credit card debts
$10,000 --- Line of credit
$ 8,500 ---- Bank loans
$ 1,500 ---- Home improvement card debt
$ 1,000 ---- Finance company loans
=================================
$45,000 --- TOTAL UNSECURED DEBT

Now, some people will immediately think of filing bankruptcy because they think this is the best resolve and the easiest way to go.
But Wait! Hold on!
Don't just take what your friends have to say and what other people or websites are saying because..................... there are better options. One of the best alternatives is a consumer proposal. Filing a consumer proposal is a great solution instead of filing for bankruptcy and insolvency.

Table:

A consumer proposal paying the administrator (trustee company) a total of $15,000 at a rate of $250 per month for a period of 60 months (5 years).

  

Monday, December 10, 2012

5 Ways How to Wisely Manage & Control your Credit Card Expenses


1. Have only one credit card

Get rid of retailers' cards, gas station cards, department store cards, home improvement cards, & all kinds of cards of similar nature that charges extremely high interest rates. Having more than one credit card increases your chances of being tempted to swipe your way to bigger credit card balances towards the end of the month.

2. Have a reasonable credit limit


Call your bank or credit card company and reduce your credit limit or set it to an amount that is reasonable and within your comfortable zone. Bank and credit card companies call you or send you mail and offer these credit limit increases but it's YOU that controls and decides. Avoid these traps and temptations.

3. Don't carry it with you when you don't really have to.


If you have the extra cash to purchase an item or a consumer product, use it. Use your credit card when you really need it or when there's a big reason for it (example: miles, points, bonuses, etc.). When you use your credit card however, make sure you pay the FULL credit card balance before your monthly due date to avoid those sky-rocketing high interest rates that adds extra burden on your finances.

4. Don't buy what you can't afford


Buy only what you really need and purchase it at the right time and when you have the right budget to purchase and own it.

5. Don't be tempted


Don't envy your neighbor's shining and nice-looking furniture or your friend's flashy jewelries, bracelet or wrist watch.


*** Self-control is the key. Control your credit card expenses & don't let your credit card control you!

Saturday, December 8, 2012

How to save 10 million Pesos in 20 years for retirement in the Philippines


Getting ready for your retirement is one of the important things we should consider while our physical bodies are still strong to work. Saving for retirement takes great responsibility, discipline, and a positive attitude. For Filipinos working overseas abroad especially in North America - USA and Canada, or in other countries where extra money for savings is practical, Pinoys should take this opportunity to save (dapat samantalahin nating mag-ipon). The table and computation of savings below is very possible and realistic. If you manage to save $1000 (American or Canadian) per month consistently for 20 years, you will be able to save $240,000 Canadian or US dollars at the end of 20 years. This is approximately 10 million to 12 million Philippine Pesos depending on the exchange rate. If you are, for example 40 years old in the year 2014, based on the table below, you will have at least 10 million pesos in the year 2034, at which time you are 60 years old, ready for retirement. For an average style of livelihood and moderate cost of living, this retirement money sounds reasonable and livable when you retire in the Philippines with your loved ones. The sacrifice and hardwork is finished abroad overseas. Now, it is time to retire, relax, and enjoy your savings and your life!

Saving $1000 per month for 20 years:

1000 x 12 = 12,000 after 1 year

12,000 x 20 = 240,000 after 20 years

---------------------------------------------------------------
$240,000 Savings at age 60 (retirement)
---------------------------------------------------------------

#     Year    Age   Savings
01   2014    40      12,000
02   2015    41      24,000
03   2016    42      36,000
04   2017    43      48,000
05   2018    44      60,000
06   2019    45      72,000
07   2020    46      84,000
08   2021    47      96,000
09   2022    48    108,000
10   2023    49    120,000
11   2024    50    132,000
12   2025    51    144,000
13   2026    52    156,000
14   2027    53    168,000
15   2028    54    180,000
16   2029    55    192,000
17   2030    56    204,000
18   2031    57    216,000
19   2032    58    228,000
20   2033    59    240,000
---------------------------------------------------------------
21   2034    60  $240,000

 --> 10 million to 12 million Pesos
 -->    at age  60  (year is 2034)
---------------------------------------------------------------

Note:
This table is based on Canadian and US Dollar exchange rates monetary conversion to Philippine Pesos.

*** These figures does not take into account interest rates. This is just for simple computation. For example, a savings account interest rate of 1% for a bank in the Philippines, and based on simple interest computation of $240,000 for 20 years, would yield $242,400 which is greater.