Monthly Archives: January 2013

This is What a Financial Plan Looks Like


Screen Shot 2013-01-29 at 8.23.15 AMThis is what a financial plan looks like. (Click Above)

Those of you that want to take control of your finances and starting living within your means, something like this would be a good place to start, ensuring that you have the fundamental building blocks covered. This plan draws in from many different aspects of popular financial plans. I’ll briefly explain this, and so you can modify this to your own income. This is based on a 2-income couple earning $5800 month. The first number to consider is taxes. Most people get taxes deducted at source, which is ideal. If you don’t have it deducted from source, put away tax money right away, so your bill every spring from the government doesn’t get too scary. This couple, after tax, brings home $5200 month. Going off the rule, don’t spend more than 25% of your income on your mortgage or rent (housing), they have $1458 for this monthly payment. Know that if this number is higher for you, you will have to sacrifice elsewhere, however you should strive to keep your housing in this 25% range. The biggest number in your budget/financial plan is the amount you will be living off of. This number for them: $2,088, should cover your cell phone bills, groceries, donations, entertainment, hydro and gas, entertainment, and so forth. If it’s easier to do a weekly number, this couple in question need to learn to live off about $500 each week.

This leads us to the next component which is ‘available funds for savings investment’ which is quite important to contribute to regularly. In this section we have $1654 available each month for savings and investing. Future income is important, and tax-wise is makes a lot of sense to max-out your RRSP, and so we are going to contribute $500 to each individual’s RRSP. This will create a nice refund back from your taxes, which you can use to upgrade your house or pay down your mortgage. This will also ensure you have your long-term savings covered. The next step would be to protect your current income through disability insurance — this you can only get while you have a job, however if you ever lose your job, as long as you keep this policy in place, will stay with you. The quotes will depend on age and lifestyle, however for a man around 30ish, I’ve put something in place for about $45.32. It’s important to consider critical illness insurance as well, which gives you a lump sum of money if diagnosed with a critical illness (like heart attach, cancer, stroke) and can pay for your health care pills, your bills while you are not working and so forth) and that is really it — as for the fundamentals, which really isn’ that hard!

This couple even has a surplus, meaning they can treat themselves to a romantic date night out at the end of the month, which is something to look forward to, to celebrate their frugalness and ability to rock it throughout the course of the month.

What is your financial plan like? How do your percentages differ?


Anatomy of a Mutual Fund


Tis’ the season. No, this article is not a month old, and this is not the holiday season I speak of; It is the season in which the consumer, investor and potential saver is inudated with the financial services $6 million advertising campaign.

All shiny and new, your new year’s resolution to get your personal finances in order seems like it may become a reality. You get a sense of entitlement when you see the subway-clad posters directing you to a website that is going to tell you how to get started, and how to actually have some money saved after everything else at the end of the month.

Granted, the vision of personal financial health and its actuality are very different. You begin to look into your options, and quickly feels like a first time home buyer walking in to the housing market for the first time: People are speaking a different language you did not even know existed. Your asked about your view on ETF’s, and warned that the deceptively low fees may result in bigger transaction costs later, and the loss of active management will come down to the overall effectiveness of the fund. Someone delves in to ‘passive management’, when you are still trying to grasp the last point, desperately wishing you had a pen and paper, feeling like you are back in your grade 12 math, as if grade 12 math covered any of this – wondering how cosine ever was more important than learning the tools of constructing a basic financial plan? You remember an e-mail a friend sent about ‘discount brokerages’ accounts, wishing you had asked further what that was. You’re not sure how to even enter the stock market, and think you know enough to write off the ING 2% savings account as not good enough – with all this research, you feel you should be able to find a better return than 2. You return home lost, confused and not any closer to the dream of financial security you crave for your future self, however not before stopping at a few stores on the way home, spending a few hundred dollars, realizing your resolution will have to pushed to the next month, diminishing the chances that you will actually pull through on your new year’s resolution. That evening, you remember the one person you know that works in the financial services industry. Being a long time acquaintance, you know you can ask some no pressure questions without being obligated to make a decision. She explains that there is another option for me: Mutual Funds. Mutual funds, she starts to explain to me, are kind of like watching the highlight reel on TSN when you are not able to actually get to (or even watch the game), in terms of the stock market. Mutual funds, by design, are only allowed to hold up to 10% of any individual stock, meaning one mutual fund has to hold at least 10 stocks, meaning they are diversified by their nature. Even better, after completing a painlessly easy ‘risk allocation’ questionnaire, you are placed into the proper risk category, measuring from conservative to balanced to an aggressive investor. Even better, as you get to be more comfortable with saving and investing, and wanting to know more about your portfolio and investments, you can easily to switch to include companies, industry sectors or other areas you grow an interest in investing in. She continued to say their was no minimum account balances, and that you could start a mutual fund account even if you were only depositing $50 or $100 each paycheck.

As I was trying to wrap my head around this, she made note of a couple things I should be aware of when opening up a mutual fund account. She summarized in the following:

Deferred Sales Charge (DSC)

A sales fee that you pay when you sell an investment, like a mutual fund. Also called a “back-end load.” The fee often goes down to zero after a few years. Also, you may be able to withdraw up to 10% of your investment each year free-of-charge. A deferred load fund is a mutual fund series that has no commission to purchase but is subject to a fund company charge upon redemption. Typically deferred load charges start at around 5% to 7% in the first year, and will decline towards 0% over the next 5 to 7 years. Also known as DSC funds, back end funds or rear load funds. These can be avoided by slecting FEL, or front-end load fee structures.

Book Value

The original purchase price (cost) of your investment plus distributions valued at the time of distribution.

Capital Gains

Profit earned from the sale of real estate, securities, mutual funds or other capital assets.


A per-share payment designated by a company’s board of directors to be distributed among shareholders. For preferred shares, it is generally a fixed amount. For common shares, the dividend varies with the fortunes of the company and the amount of cash on hand. It may be omitted if business is poor or the directors withhold earnings to invest in plant and equipment.

Early Redemption Fee

Fee charged to unitholders who redeem or switch out of their units within 30 or 90 days of their original purchase. Should an investor choose to redeem or switch during this time, a 2% fee would be charged and paid to the fund for the benefit of other unitholders.

Foreign Content

The 2005 Federal Budget removed the foreign content limit for registered plans. Customers with RSPs, pension plans or other registered accounts are no longer subject to the 30% foreign content limit. This change means that customers can now exceed 30% in foreign holdings in their accounts without incurring a monthly 1% penalty.


A front load mutual fund is a fund that offers a broker the option of charging investors a commission on the purchase. The commission is charged as a fixed percentage of the gross dollars invested. Also known as Service Charge (SC), Initial Service Charge (ISC), Low Service Charge (LSC), or Front End (FE).

Fund Manager

The individual or team of individuals manages a mutual funds portfolio of stocks, bonds and other securities. The fund manager decides when to buy or sell the securities held in the mutual fund. The fund manager is paid an annual management fee for his or her services. A fund manager is also referred to as a Portfolio Manager, Money Manager, or Mutual Fund Manager.

Fund Sponsor

The name of company responsible for promoting and distributing its fund(s). Most fund sponsors will promote under the same brand name several different funds, often managed by different fund managers. Also known as the Fund Company.

Management Expense Ratio (MER)

Is a measure of the total administrative costs incurred by a mutual fund expressed as a percentage of the assets. These costs include costs incurred in day to day operation of the fund and the compensation paid to the fund manager for managing the investments (management fee).

Management Fee

The compensation paid to the mutual fund manager by the fund company for managing the mutual fund and for supervision of the day-to-day administration and operations of the mutual fund.

No Load

Term used to describe a mutual fund that can generally be purchased or redeemed without a sales commission.

Canadian Balanced

These funds invest in a mixture of primarily Canadian Equities and Canadian Bonds. The ratio of the holdings in these two categories will vary from time to time, but will remain split in a ratio of between approximately 70/30 and 30/70 of the overall portfolio holdings.

U.S. Small & Mid Cap Equity

These funds invest primarily in common shares of US companies with a market capitalization of less than approximately $1.5 billion in the case of small cap holdings and between approximately $1.5 billion and $10 billion for mid cap share holdings.

Sector Funds


These funds invest primarily in common shares of Canadian corporations involved in the exploration for, mining or drilling of, refining of or production and harvesting of natural resources ranging from pulp and paper to base metals. These funds can also have up to 30% of their holdings invested in companies based outside of Canada.

Precious Metals

These funds invest primarily in the common shares of Canadian domiciled gold or other precious metals producing, mining or exploration companies. Some funds may also choose to hold the physical precious metals commodities as a portion of their investments. These funds can also have up to 30% of their holdings invested in companies based outside of Canada.

Yesterday I Mystery Shopped for a Financial Advisor


ImageYesterday I mystery shopped for a financial advisor.


Yes, while most people avoid this scary topic of personal finance by delaying devoting any real efforts and attention to their own situation, avoiding calls and e-mails from those pesky little salespeople, I went out and actively called a few different firms around.

Now I know why people avoid these pesky little salespeople.

And that’s not just saying things, I not only work in this industry, but work for one of the bigger firms which I won’t name here. In efforts to not waste these advisors time, I simply wanted to get a feel for what they had to offer clients, what their value added was, and really explore whether ‘fee only’ firms were any better than those that do not charge a fee to use them as an advisor. This is what I discovered. Every advisor registered with a legitimate company gets paid by the investment companies for the assets they bring in and hold under management. This money comes out of the build in fee that every client pays: whether it is management expense ratios, transactions costs, etc. Above this, the advisor can additionally charge the client a ‘fee’ for managing your money. This fee is paid directly to the advisor. Yes, so now you are paying your advisor directly through a fee, and indirectly through the MER/Transaction Costs which is part of the product you pay into. This might be okay if you really like your advisor, however if not, you should be able to find an advisor to set you up with a plan where the advisor is not getting paid twice on the same product. I say you should, as that is how I set up all my clients, as to increase transparency, the client should be able to fire their advisor at any time if they are unsatisfied, and the advisor has no right to tie your money up in plans with high redemption costs or penalties for early redemption. If they did, it was  probably to get a better sales bonus, something which should set off a warning sign you are with the wrong advisor. I digress.

Back to my mystery shopping: I was a bit shocked to hear from the advisors, and their narrow focus. I dictated I was interested in a financial plan, however there was an overwhelming interest solely in wealth management (And not one of them actually asked me for an appointment!). One of the first questions asked was: How much do you have in assets? Yes, that is right, nothing on budgeting, cash flow management, savings, insurance, or debt. As unimpressed and disappointed as I was, I came to realize that everyone that is interested in budgeting, cash flow management, savings, insurance or debt probably does not have anywhere to turn to get set in the right direction, and will continue to aimlessly wonder if they are doing anything right in their personal financial situation. While most advisors seem to be focusing on the rich, the rest squander, hearing about the importance of financial literacy from the media, but not seeing this in practice when they actually show interest in applying some of these personal finance basics. Perhaps its the legacy of the presence of Occupy Toronto has me focusing on ‘the rest’, or maybe it’s the recognition that this generation has so much at our disposal that we can choose to pursue and set out to accomplish almost anything under the sun, and perhaps it is time we start focusing some attention on those that need the direction the most.


Film Review: Confessions of a Shopaholic


titleBased on the novel by Sophie Kinsella, it’s a story of the financially irresponsible in all of us, and strikes a touching cord with the struggles and sacrifice of actually changing one’s life (and lifestyle) to get OUT of debt (not to mention to gain back control of one’s life.) It’s a common place discussion with the amount of debt everyone has, yet the concrete steps people fail to take to change their situation need to be told that it will be hard, and that ‘hoping for a better job that pays more’ or getting a raise are not the best course of action. Sacrifice and hard work is what will most often pay off, begin able to say “No, can’t afford it!’ will help you immeasurably in the end. Such as is the thesis of this movie.

Rebecca Bloomwood has been living in NYC for 5 years, working asrebecca bloomwood a journalist. When she loses her job (and the interview for her dream job), her 16,000 worth of debt forces her to take a job at a money magazine, ironically as a financial journalist. For a number of weeks she leads a double life as someone giving out financial advice to the public by day and being hunted down by debt collectors by night. Along with her roommate Suze, she starts to make improvements, by attending an addictions group and taking inventory of all her stuff,
yet a trip to Miami, Suze’s wedding, a TV appearance, a bundle of lies and a conniving archrival make sure she hits rock bottom in the worst way. With her parents advice. “If the American economy can be this much in debt and still function, so can you’, she is forced to climb out of the huge mess she made for herself, all by her self.

With a fun cast of Isla Fisher, Hugh Dancy, Krystan Ritter, Joan Cusack and John Goodman, directed by PJ Hogan, this is a great movie for anyone who has struggled with their cents!

Your Ideal Financial Advisor (Hint: It’s not Ryan Gosling)


ryan gosling
Someone on the streetcar just came up to you to comment on your haircut, and inquire on where you go to get it done. While smiling awkwardly, pleased with the attention but trying not to attract to much, you mentally make  note to be a regular at that salon for the foreseeable future.

You take your car to mechanic before taking your 15-year old crapshoot to get an emissions and safety test, and the guys say they can flick some switch and give you some advice, without charging you anything, and tell you exactly how to pass the test. They become your regular oil changers.

The same goes to your local bike shop, butcher or bookshop. We are touched when people in the service industry go above and beyond, realizing that a little care and effort into the ‘work they do’ and not the ‘sale they have to make’ is far more valuable than any other transaction they do in a day.

Far too often we come home from deciding to join a new gym, only to be completely turned off by the degrading treatment we receive from the personal trainers, while you realize they will never let you be happy with your workout unless you are paying $75 a workout with them. Further, far too many individually also report similar behaviour with their advisors, and don’t know what a good advisor looks like, as any experience has just been a sales attempt where an advisor has tried to sell them an insurance policy they really don’t understand. With the problem of debt and financial ignorance growing problems, there needs to be a focus on client-focused advisors as well as the traditional sales-based advisors. Here are some tips on where and what to look for in a great financial advisor:

1. Accessibility: The most important. As you start to save more and more money, you realize the ability to reach your advisor is important. Whether you call, e-mail, text, or visit, depending on your relationship, is is very important to get an advisor that will pick up your calls. Nothing irritates a client more than a advisor mentioning he was too busy for a 30-second phone conversation for 2 days straight. Thus is your job, if you can handle clients calling you, find a new calling.

2. Enthusiasm: You want someone that really likes their job. This will ensure they are always researching new products, strategies, articles or apps and sharing them with clients, and will let you know you always have an advisor that wants to make personal finances easier for you, and that your money is invested in the best place for you, not just the only product your advisor learnt all the required forms for.

3. Ethical: You want someone that you can trust. The business of advising is a very personable and socialable one, and you need to be comfortable with them, so they can do their job properly with all the required information, and you can be comfortable with them working with you.

4. Client-focused: If they ask you the amount of investable assets you have before they ask you what you hope to accomplish or what your issues are, this means they might not actually be willing to work you, but just process the transaction of setting up an account for you. You want someone that walks you through th process, and tries to offer solutions that include products, not just products themselves.


I hope this helps!