TurboTax is finding ways to make tax filing easy and affordable. I just discovered a couple of discounts being offered when using their online tax preparation software.

For Manulife Financial customers:

This tax season, Manulife Financial is again offering customers located in Canada the opportunity to save 20% off the cost of preparing their tax returns using TurboTax, from Intuit Canada.

There are three options:

• TurboTax Standard - maximize deductions from RRSPs, spousal/dependent credits and more.
• TurboTax Premier - all the features of the Standard plus extra guidance for investments and rental property income.
• TurboTax Home & Business - all the features of Premier, plus guidance for claiming self-employment income.

Take advantage of the discount at www.turbotax.ca/manulife

Free for students!

TurboTax Student Online Edition is free for students! You qualify if:

• You were a college or university student in 2011: You paid tuition fees during the 2011 calendar year and you hold a T2202A, TL11 or its equivalent.
• Youearned under $20K: Your household income does not exceed $20,000 gross (that is, before taxes).

Free for very basic returns

You can use TurboTax Free Online Edition if:

• You earned income: You receive T-slips, like T4s & T4As. You may have have tip income and/or pension income.
• You are not self-employed.
• You do not have investment income or RRSPs.
• You have not made any charitable donations or investments.
• You Have Simple Deductions: You receive only 'standard' federal & provincial deductions.
  

The best part...free advice!

For TurboTax customers, they offer free tax advice 24/7 between February 10 and May 4, 2012.

We cannot vouch for the product, so it's buyer beware, but Intuit has a good reputation overall.

Q: I am turning 60 next year. Should I apply for CPP now or wait until I am 65?

A: It sounds like you realize that electing to receive CPP prior to age 65 means that your monthly pension will be less than if you waited until age 65 to apply.

There is no simple answer to this question, which explains why you may have received conflicting advice.

Here is what you need to know to make a decision that is right for you.
The most recent changes to the CPP were designed so that if you live an average lifespan, there is no advantage or disadvantage to taking benefits early. There are some situations where taking CPP early or later make really good sense. Perhaps you fall into one of these categories:

Early CPP situation #1

You need the money - If have a cash flow deficit that early CPP benefits will cover, it makes sense to take it rather than build debt.

Early CPP situation #2

You are in poor health - If you expect a shortened life expectancy either because you have health issues or because your family history is one of shorter life spans, taking early CPP is a good bet.

Early CPP situation #3

You spent a number of years out of the workforce - Your pension amount depends on averaging your contributions and 'pensionable earnings' from age 18 until you start taking CPP. You're allowed to drop 15% of your lowest-earning years from the calculation, which amounts to seven years if you retire at 65. If you took time off work to raise kids or because you had a serious disability, you get to drop even more of your low-earning years. The thing is, it's easy to use up all your drop-out years if you spent a long time getting an education or just 'finding yourself.' If you then stop working in your early 60s and don't take CPP right away, you'll immediately start adding more years of zero earnings to the calculation. This will lower your average pensionable earnings, which in turn will make your benefit go down. Under these circumstances, you're clearly better off starting CPP early.

Later CPP situation #1

You expect to live a very long time - If longevity is in your family history, delaying CPP until at least age 65 means that you will have a larger pension for a long period of time.

Later CPP situation #2

You are still working - You can now begin receiving CPP benefits, and grow the benefit through continued contributions while you are working. That being said, you will possibly pay a higher rate of tax on CPP income while you are working than if you delayed receiving benefits until you retire.

As you can see, there is no simple answer to this question. Hopefully this outline will help you determine which approach is right for you.

Effective January 5th, 2012 students in Ontario are getting a financial boost from the provincial government.

Students in a university or college degree program will save $1,600, while students in college diploma and certificate programs will save $730. These amounts are 30% of the average tuition in Ontario, which is the formula being used to establish the amount.

Your children are eligible if they are:

1. A full-time student at a public college or university in Ontario
2. It's been less than four years since they left high school
3. They are in a program that they can apply to directly from high school
4. Their parents' gross income is $160,000 or less
5. They are a Canadian citizen, permanent resident or protected person
6. They are an Ontario resident

The deadline to apply for the term starting January 2012 is March 31, 2012.

How to apply

If your child already receives OSAP no application is necessary. They will be automatically considered and the student will receive the grant by cheque or direct deposit by the end of January.

For those that do not receive OSAP, an application must be completed and requires the following information:

1. Student's Social Insurance Number
2. Parents' Social Insurance Number(s)
3. Line 150 from each parents' 2010 tax return (if a 2010 tax return has not been filed yet, the grant will not be available)

Then you'll need to:

1. Register for an OSAP Access Number
2. Fill out and submit the online grant application
3. Print the declaration and signature pages which the student and parents sign.
4. Mail or fax the signed pages to

Student Financial Assistance Branch
Ministry of Training, Colleges and Universities
P.O. Box 4500
189 Red River Road, 4th Floor
Thunder Bay, ON P7B 6G9
Fax: (807) 343-7278

For more information, check the FAQ's or call the toll-free hotline at 1-888-449-4478.

Royal Bank's latest housing survey found that one-third of Canadians who are 55 or older have at least 16 years left on their mortgage term. That reality doesn't line up with the average Canadian's desire to be mortgage free by age 65.

The survey was picked up by the major media and splashed across both print and online news outlets.

Claude Demone, RBC's director of strategy for home equity financing stated the obvious, 'Canadians want to be mortgage-free as they approach retirement age and beyond, but the reality is that it takes prudent planning and the right advice to stay on track.'

My father forwarded the article to me. He regularly sends me information that he thinks would be of interest to his financial planning daughter. My response to him on the article about the RBC report was,

'It's a real problem....and the banks are not helping'.

He asked, 'How are the banks getting in the way?'

My answer to him was:

In spite of what the banks say in the media, I see what they do in practice every day.

1. Encourage people to borrow more than they can afford
2. Approve amortizations that are too long
3. Encourage the use of home equity lines of credit vs. mortgages

This is how I see the above playing out in my practice daily.

Over-borrowing

The banks will approve credit based on a simple formula called 'Total Debt Service Ratio' (TDSR). If your total monthly debt payments (mortgage, loans, credit cards, lines of credit) divided by your monthly before tax income is less than 40% that is acceptable. This assumes that your credit history is good and that you live in a perfect world.

There is little or no consideration for whether you are:

• Saving enough for retirement
• Saving enough for your children's education
• Adequately insured for disability or death
• In a position to have enough money left over to pay for other ongoing expenses like home repairs, supporting aging parents, a new car etc., etc.

The bottom line is that it is generally not a good idea to borrow as much as you qualify forif it puts other important financial priorities at risk.

Extended amortizations

Mortgage amortizations are typically based on current interest rates. I gave an example of how a modest increase in interest rates can blow up your repayment strategy in a prior blog posting here.

'Never out of debt' lines of credit

There is a trend towards the banks encouraging home equity lines (HELOC) of credit instead of conventional mortgages. The theory is that a HELOC provides greater flexibility to deal with fluctuating income and expenses by only requiring interest only payments. The theory is sound, but for the majority of Canadians the result is slower (or no) progress on reducing the principal outstanding. Why? Because life is imperfect and invariably, an event will occur that will interfere with your ability to reduce principal. Worst of all, the banks have your house as security for the debt, so they win even if you make no progress towards your debt retirement objective.

So, what are some solutions?

- Consider all of your financial goals, not just your home ownership goals, when determining how much you are prepared to borrow

- Do your own cash flow analysis and be sure to include expenses that only arise from time to time as opposed to on a monthly basis. Make sure to include room for savings at a level that will meet your long term retirement objectives. If you are not sure what that amount is, try out an online calculator or ask your financial advisor.

- If buying real estate, make sure that your real estate agent knows clearly what you upper price limit is and don't waver!

Being mortgage free takes planning. Make sure that you are in charge of the plan, not the banks.

With interest rates at historical lows, the majority of Canadians with mortgages, lines of credit or conventional loans are making the minimum payments required by their bank or credit union.

This is a mistake.

When interest rates are low, more of your payments can go towards principal rather than interest. This allows you to reduce the debt outstanding so that when rates inevitably rise, you have less principle outstanding at the higher rates.

Here's an example:

$400,000 mortgage at Prime less .85% is 2.15% (best rate I've seen of late),
Amortized over 25 years the monthly payment is $1,724 per month. The borrower assumes that they will be mortgage free in 25 years.

Let's fast forward 2 years. The good news is that the mortgage has been reduced to $375,000. The bad news is that interest rates have increased by 1% and this borrower is now paying 3.15% on their mortgage.

If the borrower leaves their mortgage payment at $1,724 per month, instead of only having 23 years left to be mortgage free, the amortization has become 27 years!

In order to keep the amortization at the original schedule (23 years remaining) the payment would need to be increased $206 to $1,930 per month.

Since the mortgage is fully secured by your home, the bank will likely not ask you to increase your payments. The longer you are indebted to them, the better their profits.

I think that anyone who decides to spend more rather than pay down debt when rates are low simply have not done the math. It's easier in the short term to avoid debt repayment....but it bites in the long term.

Yesterday, CNBC interviewed the President of the International Monetary Fund (IMF) Christine Lagarde on Europe's fiscal problems. You can see the interview here. It is well worth 8 minutes of your time.

In our view, resolution of the debt problems in Europe will take time, and will be expensive. To protect our clients, we have avoided European bonds, and minimized exposure to European equities for some time now. That being said, uncertainty regarding Europe's fiscal imbalances and the likely cost of restructuring that the European banks will have to bear will continue to drive stock market volatility globally.

We believe that the fear triggered by bad economic news and increased market volatility will result in short-term indiscriminate selling of a wide range of quality company shares. The rational and prudent investor will benefit over the longer term by accumulating shares in great companies during this time of volatility.

Will you be rational and prudent?

Every once in a while I come across an investor who was convinced to borrow money and invest the loan proceeds. This was presented to them as a smart way to build their net worth and reduce their tax bill at the same time.

There are a number of financial organizations that are known to encourage their financial advisors to recommend leveraged investing as a way of building their assets under management. How else can one get a prospective client with few or no investment assets to make an investment that will generate a sizeable commission?

I came across an example of such a case recently, and present it to you along with information about the strategy that you should read thoroughly beforeleveraging to invest.

Investment loan snapshot

(A) Initial loan value: $50,000
(B) Market value $41,358
(C) Current loan balance $49,052
(D)Aftertax interest cost since inception (2007 to present): $4,625

Total loss if strategy closed out $12,319 [$49,052 (C) - $41,358 (B)] + $4,625 (D)

So, the client has invested $4,625 in the form of loan payments, and if she wanted to close out the strategy now should wouldexperience aloss of $12,319.

Leveraging lesson #1 - If the investments go down in value and you have borrowed money, your losses would be larger than had you invested using your own money.

Clearly, closing out the strategy now will only trigger the loss. If the investor can afford to continue making the loan payments, they would be wise to hang in there until the portfolio recovers in part or whole.

Now, if the investor had not borrowed to invest, but simply invested cash, the portfolio, which has declined 17%, would need to grow by 21% to break even. Unfortunately, the leveraged strategy raises the break-even hurdle rate to 42% because of the additional after tax cost of the loan.

Lesson #2 - If the investments go up in value, you may still not make enough money to cover the costs of borrowing.

Here is the full summary that I share with clients when they ask about leveraging.

Is leveraging right for you?

Borrowing money to invest is risky. You should only consider borrowing to invest if:

• You are comfortable taking a high level of risk.
• You are comfortable taking on debt to buy investments that may go up or down in value.
• You are investing for the long-term. (20+ years).
• You have a stable income.
• You do not have any non-deductible debt such as credit cards, lines of credit, car loans or mortgage.
• You have maximized your RRSP and Tax Free Savings Account contributions.

You should not borrow to invest if:

• You have a low tolerance for risk.
• You are investing for a short period of time.
• You intend to rely on income from the investments to pay living expenses.
• You intend to rely on income from the investments to repay the loan. If this income stops or decreases you may not be able to pay back the loan.

You can end up losing money.

• If the investments go down in value and you have borrowed money, your losses would be larger than had you invested using your own money.
• Whether your investments make money or not you will still have to pay back the loan plus interest.
• You may have to sell other assets or use money you had set aside for other purposes to pay back the loan.
• If you used your home as security for the loan, you may lose your home.
• If the investments go up in value, you may still not make enough money to cover the costs of borrowing.

Tax considerations

• You should not borrow to invest just to receive a tax deduction.
• Interest costs are not always tax deductible. You may not be entitled to a tax deduction and may be reassessed for past deductions. You may want to consult a tax professional to determine whether your interest costs will be deductible before borrowing to invest.

I subscribe to one daily blog, and it is the one written by Seth Godin. Seth is a wonderful thought leader on all things business.

He posted a second blog on August 23 following an earthquake in Virginia that measured 5.9 on the Richter Scale.

Please replace the word 'earthquake' with the words 'stock market correction' and it makes just as much sense. Seth's blog follows:

Two earthquake-related thoughts about human nature

1. The first thing that happens after we encounter an earthquake is to wonder if anyone else felt it. The need for group validation is widespread and happens for events that don't involve earthquakes as well.
If those in the tribe feel something, we're likely to as well. That's why people look around before they stand up to offer an ovation at the end of a concert. Why should it matter if any of these strangers felt the way you did about the event? Because it does. A lot. Social proof matters.

2. Organizations are busy evacuating buildings, even national monuments. Even though experience indicates that the most dangerous thing you can do is have tens of thousands of people run down the stairs, cram into the elevators and stand in the streets, we do it anyway. Why? Because people like to do something. Action, even ineffective action, is something societies seek out during times of uncertainty.

Seth does a great job summing it up doesn't he?

Now, I'm one of those people that stand up to offer an ovation right away if I'm so inclined. I'm not at all interested if no one else in the audience does so.

That also may partially explain my tendency to recommend that investors add to equities when the majority are selling.

I don't give standing ovations for just any performance, and I don't recommend just any equity investment when bear markets strike. But for the deserving, I am happy to be one of the first to recognize the value that I see, stand up, and be counted.

Before your child heads off to University this fall, give them a chance to earn their first 'A' by having them complete a Caring for Clients Student Cash Flow Worksheet.

In fact, it's a great project to complete together with your child, since you are likely a big part of the income side of the equation.

Completing the worksheet has the following benefits:

1. Reduces the chance of a 'cash call' towards the end of the school year.

2. Helps the student see how individual expenses that seem minor add up to a really big annual number.

3. Identifies shortfalls that you and your children can discuss. Ask your child how they suggest closing the gap. (Part-time job perhaps? Contribution from their summer earnings?)

4. Begins teaching them the importance of budgeting since they don't teach that in University. (High Finance doesn't help you balance a personal budget!)

The worksheet is sufficiently detailed to ensure that all possible expenses and sources of income are taken into account.

Have a gold star sticker in your back pocket to put on the finished project. You may get a roll of the eyes, but don't kid yourself, your child will be proud of themselves.

Let's get started! You can find the worksheet here.

Investors are again wondering what they should do as stock markets decline around the world.

They wouldn't be wondering if they had a well crafted Investor Policy Statement (IPS).

An IPS is developed by your investment manager/advisor with your input, participation and ultimate endorsement. It represents the guiding principles for the management of your portfolio.

If your advisor has not prepared one for you, ask them why.

When done properly, it prevents advisors and clients from making some of the most common investment mistakes:

- Investing in equities with a short-term time horizon
- Choosing illiquid investments when access to capital is needed
- Expecting less volatility than is likely
- Expecting higher returns than is likely
- Paying more tax than is necessary
- Buying high and selling low

How can an IPS do this?

It outlines the following parameters specific to a client:

- Risk Tolerance - including quantifying how much of a decline you can take and for how long.
- Time Horizon - when you will need access to part or all of the investment.
- Return Expectations - what your portfolio return is most likely to be, and if it differs from what you would expect.
- Asset Mix - an outline of what percentage of your portfolios will be in stocks, bonds, GICs, cash, annuities, etc.
- Rebalancing - when and how your portfolio would be adjusted as market conditions change.

During times of volatility, the IPS reminds clients (and advisors) what strategic adjustments are appropriate (and inappropriate) for you. It can act as a form of discipline, leading to rational vs. emotional investment decisions.

Let us know if you would like to see a sampleCaring for Clients Investor Policy Statement.

An IPS cannot make your portfolio bulletproof, but it can ensure that you and your advisor are on the same page, in black and white.

This second entry seeks to further explain how Manulife can offer a package of coverage (life, disability, critical illness) for up to 30% less than if you purchased individual policies.

In Part I of this blog, I highlighted some of the differences between the disability coverage within the Synergy product as opposed to individual disability coverage that Manulife offers. Those differences explain, to some degree, the lower price point for the Synergy bundled product.

Lower Cost reason #2 - Manulife's maximum exposure

Let's assume that you qualify for the maximum amount of Synergy coverage. The maximum policy coverage is $500,000.

The amount of coverage is reduced by the amount of benefits paid out over the life of the policy.

• Life Insurance $500,000
• Disability Insurance $2,500 per month maximum
• Critical Illness Insurance $125,000 maximum

If you had bought individual policies with the above coverage limits, and you are age 45, the insurance company would potentially have to pay out $1,225,000 in the event that you experienced a qualified critical illness that disabled you totally and you ultimately died prior to age 65.

With the Synergy product, the benefits would max out at $500,000. So the bundled product should be less expensive.

Just because you purchase $500,000 Synergy coverage, does not necessarily mean that you are eligible for the maximum disability benefit of $2,500 per month. Your income must justify the benefit. If you have taxable income below about $46,000, you may not be eligible for the $2,500 monthly disability benefit. You may want to structure the size of your Synergy policy based on the maximum disability coverage that you are eligible for given your income level.

Lower Cost reason #3 - Age limits

Synergy cannot be purchased after age 50 and the policy expires at age 65.

The expiry date is an important one. The risk of death or being diagnosed with a critical illness increases dramatically after age 65. It is at that point when the Synergy product expires as compared to stand alone Critical Illness policies that can be purchased to age 75 or for life. Product warranties have this down to a science. This allows Manulife to price Synergy at a discount to stand alone policies that may extend beyond age 65.

As always, I recommend that you make insurance purchase decisions in the context of a comprehensive financial plan. The best solution is obvious when considered in light of cash flow, debt and retirement planning considerations to name just a few.

Manulife does a great job of developing products that address gaps in the marketplace, and an equally great job of promoting them. Their latest creation is an all-in-one product that can provide life, disability and critical illness insurance.

I have read comments from various insurance agents that this bundled product can save a client up to 30% of the cost of purchasing individual policies. I think that the potential cost savings of the Synergy product may be misleading and bears further scrutiny.

In my view, the reason that premiums are lower is the benefits within the Synergy product are less generous as compared to robust individual policies for life, disability and critical illness.

Now, there is nothing wrong with purchasing an insurance policy without all the bells and whistles as long as you understand the tradeoffs that you are making. For example, when shopping for a car, I expect that a fully loaded vehicle with all of the possible features will cost more than a standard, bare bones version of the same car. If I decide that I don't need the heated leather seats, I am happy that I don't have to pay for them. Buying insurance is not like buying a car though. The features that make disability insurance policies more expensive are not nice-to-haves like leather seats, but must-haves that dictate whether, and how much, you will actually receive in benefits at the time of claim.

As with all product purchases, buyer beware applies. Understanding what a policy does not cover is as important as understanding what it does cover.

In this entry I highlight some of the limitations of the disability insurance aspect of the Synergy plan that purchasers should be aware of.

Benefit Period Limits

Manulife limits the benefit period (for how long they will pay you) to a total of 24 months for all disabilities that are caused by psychiatric or by neck or back conditions. Some statistics indicate that up to 70% of disability claims fall into those categories.

So whereas a typical stand alone disability policy will provide benefits to age 65 no matter the cause, the Synergy product imposes a two year limit on payments for the most common disability benefit claims.

As a result, by limiting their exposure to these risks, Manulife should be able to reduce premiums.

Pre-existing conditions

For the Synergy product, Manulife does not pay disability benefits if a total disability begins within 24 months of the policy start date and is caused by, contributed to, or results from a pre-existing condition.

So, if you complained to your doctor of numbness in your foot, and then were diagnosed with Multiple Sclerosis within 24 months of the policy start date, Manulife could refuse benefits on the basis that the numbness was a pre-cursor to the MS related disability.

In a typical stand alone disability policy there would be full medical underwriting, and unless the policy specifically excludes or limits disabilities related to particular conditions, all disabilities would be fully covered.

Lessons learned

Make sure that your insurance agent properly compares the Synergy product against the stand alone alternatives. There is no question that a bundled approach can be an affordable solution for consumers. Just make sure that you understand what you are getting for the price paid.

Next entry I will highlight the limitations within the critical illness element of the Synergy product.

It is estimated that there are about 150 fee-only financial planners in Canada. That is 150 individuals, not companies. Compare that to the fact that there are over 17,500 Certified Financial Planners (CFPs) across the country.

With so many CFPs offering free financial plans, why would you pay for one?

To answer that question, let's first consider what a comprehensive financial plan entails.

- An analysis of your cash flow (current, future, and retirement)
- An analysis of your debts
- Illustrations of a variety of retirement income scenarios
- A review of your tax situation and potential tax savings
- An estate plan review
- Assessment of financial risks relative to your existing insurance package
- Investment analysis and recommendations, including a customized Investor Policy Statement
- Ongoing updates to ensure that you adapt to changing circumstances and stay on track.

Given the above, how many hours do you think a Financial Planner invests serving you?

To help you guess, here is a simple outline of the financial planning process.

- Gather all relevant information
- Assess and analyze the information
- Research if necessary
- Prepare analysis and recommendations
- Present recommendations
- Help with implementation

A properly developed comprehensive plan will take, on average, 15 - 25 hours of the planner's time.

Now ask yourself, what business person or company would provide 25 hours of expertise and work for free?

Right, none!

If you are getting a 'free' financial plan, it likely means that:

a) The plan is a loss leader. The planner is doing the plan with the expectation that you will purchase recommended products from them. As such, there is a built in conflict of interest motivating the advisor to build product recommendations into the plan. OR

b) You are not getting a comprehensive plan. OR

c) Both a) and b).

So if you are seeking a thorough, objective analysis of your financial circumstances without product influences, what do you think that's worth?

Although kidnap insurance is not new, the risks associated with international business and personal travel have raised both awareness and the need for this little known or understood insurance product.

What does it provide?

The product that that I present to clients is arranged by Hunter McCorquodale Inc., and underwritten by certain underwriters at Lloyds and offers:

Crisis Management - In my opinion, the most important benefit of coverage is immediate, priority access to ASI Global, a specialist crisis management team. Evidence suggests that, in situations where the advice of professional crisis management specialists was available, the hostage was released safely in 90% of cases.

In addition to Crisis Management, coverage includes, but is not limited to:

- Ransom payments or loss of ransom in transit

- Fees and expenses for

o Response consultants
o Independent negotiators
o PR consultants
o Security guards at incident site
o Travel and accommodation
o Interpreters

- Post-incident benefits such as

o Psychiatric, medical and dental care
o Cosmetic or plastic surgery
o Rest and rehabilitation

What does it cost?

Here are some examples to give you an idea as to the cost of coverage.

Business executive travels to Panama City monthly, 5 to 7 days per trip in addition to one trip to Columbia. $2 million coverage for 12 months was $2,575.

Two contractors go to Afghanistan and need coverage for 9 weeks. $1 million coverage was $2,450.

Large Canadian resource company, with worldwide operations needs coverage for 20,000 employees. $5 million coverage for 12 months was $49,000.

High net worth Canadian family travels within Canada and the US for vacation. $1 million coverage, 12 month policy is $1,300.

If the idea of Somali pirates, foreign terrorists or South American/Mexican drug cartels is taking the shine off of your travel plans, Kidnap insurance might be the solution for you.

U.S.citizens continue to have obligations for U.S. tax purposes even though they may be a Canadian resident for many years.

Canada and the U.S. have worked together over the years to ensure that treatment of RRSPs and RRIFs by each is consistent. This is not true for all Canadian investments where special rules apply. For example, problems can arise where a U.S. person holds a Registered Education Savings Plan (RESP).

The main disadvantage is that, unlike RRSPs and RRIFs, U.S. persons cannot elect to defer the taxation of income earned in an RESP.

The U.S. tax implications for RESPs depend mainly on the residency of the contributing parent and the beneficiary child.

Contributing Parent is a U.S. Citizen or Resident

The income earned within the plan, including Canadian Education Savings Grants, is taxable to the parent for U.S. tax purposes. There are no income tax consequences upon withdrawal of the funds. That being said, there is an element of double taxation. In addition to having to pay tax on the plan income as mentioned above, for Canadian tax purposes the income will generally be taxable in the hands of the child when they go to university or college.

Contributing Parent is Not a U.S. Citizen or Resident

but Beneficiary is a U.S. Citizen or Resident

The income earned within the plan is not taxable to any party when earned. However, if the child is a U.S. citizen or resident, the accumulated income is taxable to the child upon withdrawal of the funds. A special prescribed tax and interest charge is calculated based on the accumulated income distributed from the plan, which achieves roughtly the same result as if the income were taxed as it was earned over the life of the RESP.

Tax Reporting Requirements

Since an RESP is a foreign trust, U.S. persons who invest in them are subject to the U.S. reporting requirements for foreign trusts. The ability toobtain the tax treatment described above can be jeopardized if the proper U.S. tax reporting forms are not completed. In certaincases, a portion of the original RESP contributions may be taxable to the beneficiary if the appropriateforms are not filed.

If you are a U.S. citizen considering contributing to an RESP for your child in order to take advantage of the Canadian Education Savings Grant, it may be better for another relative in Canada to set up the RESP.

To find out howU.S. foreigntrust tax rules applyin your situation, speak with your accountant.

A banker, broker and financial planner walk into a bar.

They are approached by a fairly inebriated customer who laments the huge tax bill they just learned about from their accountant. He asks the financial experts what he should do. (true story, except the bar part). :-)

You can learn about the various professions via their answers to his question.

The banker suggests that the fellow simply refinance his mortgage by adding the CRA bill to his existing debt. With interest rates so low and a long ammortization, he will barely notice the increase in his monthly payment!

The broker tells him that the banker's advice was good and then asks to see his investment portfolio. Certainly he can help there.

When hearing about the unexpected tax bill, the fee-based financial planner says, 'how the heck did that happen'? And proceeds to develop a cash flow and tax minimization plan to ensure that the debt is paid off quickly, and a tax surprise like that doesn't occur again.

Which approach would you prefer?

If you are fully disabled for the rest of your working life, the disability benefits within your group medical insurance can easily exceed $1 million over time. In spite of the value of the coverage, and its financial importance in the event of a disability, most employees have a limited understanding of how the coverage would work for them in the event of a claim. Many will not be aware of insurability requirements for disability benefits.

A number of insurers are building in insurability requirements which employees must meet in order to be eligible for maximum benefits under the plan. A basic amount of coverage is in place without medical evidence. The basic coverage amount can be much less than you are eligible for based on your salary level. This is one way that insurers and employers keep plan costs under control. Medical evidence must be submitted by the employee and assessed by the insurer before the maximum benefit is approved.

For example, a recent plan that I reviewed had the following features:

• Benefit: 66.67% of monthly earnings rounded to the next higher $1
• Maximum Benefit $5,000
• Benefit Period: Age 65
• No Evidence Limit: Evidence of insurability is required for amounts in excess of $3,000.

So, based on the above limits, once a member of the plan, the employee automatically qualifies for 66.67% of salary coverage, until, their salary exceeds approximately $54,500. Unless they provide evidence of insurability, once they pass this income threshold, they will not be eligible for the maximum benefit under the plan. It is capped at $3,000.

I asked the client that is a member of the above plan how much disability coverage they have through work. They answered, 'two thirds of my salary from what I recall'. This client earned $75,000 and thought that he was covered for about $4,200 per month. He was shocked to find out that at best he would get $3,000 because he had not provided evidence of insurability when his salary was increased beyond $54,500.

When was the last time you reviewed your group health insurance benefits thoroughly? I recommend that you pay particular attention to the disability benefits. That is one of the most important, and valuable, features of your plan.

In past blogs I have highlighted how to find an unclaimed bank balance and a missing life insurance policy.

As it turns out, there are millions of matured Canada Savings Bonds (CSBs) that are sitting un-cashed somewhere.

The good news is that the federal government keeps a record of the owners, and many matured bonds have received an interest payment extension. This means that although the bonds have matured, the government will continue to pay interest for a further 10 years.

Getting at the principal investment is the key though. For Series 1 to 31 (the old ones with the interest coupons attached) you need to call the Bank of Canada at 1-800-665-8650.

For Series 32 and later, you should call 1-800-575-5151. You will want to be prepared with the CSB certificate number is you have it. If not, the service agent will ask you a variety of questions to confirm your identity and to identify which particular CSB issue they are to search for.

If it is determined that you are the rightful owner of matured bonds, and after a 120 day waiting period, The Bank of Canada will send you a letter of indemnity form to complete. This form must be completed in the presence of a Commissioner of Oaths or Notary Public. Check out http://www.redsealnotary.com for a cost effective notary in your neighbourhood.

The Bank of Canada has arranged a program for you to obtain Bonds of Indemnity from The Guarantee Company of North America (GCNA) at very favourable pricing. This program is available exclusively through an insurance broker, HKMB HUB International (HKMB HUB).

If the total amount of CSBs is less than $1000, the charge is $25.

If the total amount of CSBs is between $1000 and $3500, the charge is $65.

If the total amount of CSBs is between $3500 and $100,000, the charge is 2% of the total.

If the total amount of CSBs exceeds $100,000, HKMB HUB will help you find a surety/bonding company that will handle the transaction and the fees would be determined by that company.

Once HKMB HUB International has received your completed documentation, along with the associated premium fee payment, a replacement certificate(s) for your un-matured certificate(s) or a cheque for your matured certificate(s) will be issued. It takes6 to 8 weeks for this portion of the process to be completed.

If this information has not motivated you to retrieve your matured bonds, perhaps knowing that the interest rate being paid on most outstanding and matured CSBs is only .65% will.

This is often the response when I tell clients what it would cost to replace their company group health insurance if they become self-employed or find new employment with a company that does not offer as generous a group health insurance program.

The vast majority of employees do not know the monetary value of their company health insurance benefits. In fact, most are also unfamiliar with what the benefits offer them and their family.

You probably scanned the booklet when you were hired. You then selected some options (if there were multiple benefit levels to choose from) and then filed the booklet away.

Here are some things to consider before you make that job change, or gripe about the minimal raise you got this year....

1. The most valuable part of the plan is the long term disability benefit.

Insurance is really intended to cover the big, uncertain risks in life.
Employees tend to value the smaller, certain costs such as teeth cleaning and vision coverage. Most of us could manage the small stuff if we had to, but a long term disability without income would be a financial disaster.

2. The second most valuable part of the plan is the prescription coverage, if the annual benefit is unlimited.

These days, some of the most effective medications for a severe or chronic illness can cost upwards of $5,000 per month. Because of this, many plans now have annual caps on the amount that can be claimed for drugs. If your plan does not have an annual cap, be thankful.

3. You likely did not have to qualify medically to be eligible.

If the company is large enough, getting on the health plan is as simple as getting through your initial probation period (typically 3 months). You get on the plan irrespective of medications you currently take and your health history. If you tried to buy your own individual coverage, in some cases, existing medications would be excluded, and in cases of poor health history, coverage is often declined outright.

4. In general, group benefits are not portable.

Some plans allow a departing employee to convert the life insurance coverage to individual coverage. This will be at a higher rate that you could get if you applied for new coverage because you don't have to qualify medically. So if you are healthy, buying your own coverage makes more sense.

Some plans also offer conversion options for medical benefits, also at higher than medically underwritten rates, but if your health is poor, this could be a good option for you.

The most valuable benefit, long term disability is not portable.

5. The cost of group benefits is rising dramatically each year, which is a significant expense for your employer.

Health care cost inflation rates are well above general inflation rates. Cost of benefits can also increase dramatically for a small company with higher than average claims by one or more employees.

So if you are contemplating a change in employment, do your homework on the group benefits you are giving up so that you can negotiate knowledgeably with your new employer. Before you become your own boss, find out what buying your own coverage will cost so that you can factor that into the cost of running a business.

Mortgages are more often sold than bought. Evidence of this truth is best illustrated by the number of Canadians choosing to buy into the TD Collateral Mortgage structure.

Now, TD isn't the only bank offering Collateral Mortgages, they just seem to be the most aggressive in their sales approach with clients.

If you have a TD or Scotia bank STEP mortgage, you likely have a collateral mortgage and you might want to know what that means. Likely the bank told you about all of the advantages of such a structure, but they may not have emphasized the drawbacks.

First, let me distinguish between a Collateral Mortgage and the traditional Regular Mortgage. I asked Bob Woods, of Assured Mortgage Services (www.assuredmortgage.ca/bob) to clarify the differences.

He said, 'A collateral mortgage is a loan attached to a promissory note, and backed up by the collateral security of a mortgage on a property. These are not new in Canada and historically have been used in the granting of secured lines of credit. They work well by allowing the balance of the loan to float up or down depending on the customer's needs.'

So I asked Bob what are the downsides of such an approach for a conventional mortgage. Here is the list that he gave me:

• Collateral mortgages appear on your personal credit bureau, while Regular Mortgage Charges generally do not. Even when Regular mortgage charges do show up, they do not affect the credit rating. Bob has seen individuals with Credit Scores in the low 700's drop to less than 630 after the promissory note loan/collateral mortgage showed up on the credit bureau. The reason for this is that 30% of Equifax's Beacon Score is attributable to balance limit rations. A $300K limit and a $300K balance can do some serious damage to a person's credit score.

• A collateral mortgage is often registered for the total value of the property. TD is known to be offering up to 125% loan to value. This offers the customer the 'convenience' of applying for additional credit when the value in their property appreciates, without additional legal or registration fees. Personally, I don't see this as an advantage at all, since it facilitates taking on more debt rather than paying it down.

• It gives the bank more power as it relates to other unsecured debt (credit cards, lines of credit etc.) that you may have with the lender. A Collateral Mortgage allows the lender to seize equity (mortgage payment) and or re-direct that payment to cover other debts that you have with that lender. So in essence, you are securing all of your loans with your collateral mortgage.

• Acollateral mortgage cannot be transferred under a 'no fee' offer by a competitor bank at maturity. To transfer the mortgage would require new legal fees, re-registration of the mortgage etc. This is a disincentive to transfer your mortgage in order to get a better rate from a competitor.

• Finally, if your collateral mortgage goes into default, even briefly, the bank can revert to the registered face rate. Check your paperwork; this is likely to be Prime plus 10%.

I have no problem with banks changing their product structure or creating different borrowing options. What I do object to is the lack of transparency in explaining the pros and cons to the ultimate consumer.

Rona

A few Money Insights readers that read the most recent blog regarding searching for unclaimed bank balances asked if there was a similar search service for missing life insurance policies.

There is. It is free, and is offered by the OmbudServices for Life and Health Insurance (OLHI). But before the OmbudServices dedicate time and resources searching for a policy, they expect you to have done a little sleuthing first. At the very least, there are two minimum requirements:

1. There is a reasonable basis for the search. Due to the size and scope of each search, there must be basic evidence to support the premise that some un-located coverage does exist.

2. Specific, factual data about the deceased is available

OLHI expects that you will have already conducted a thorough search through the deceased's papers, files, and safety deposit boxes. In spite of the lack of policy documents, you must have reason to believe that a policy exists. For example, policy renewal statements, bank statements showing pre-authorized premium payments, and written correspondence with an insurance company would likely justify an inquiry.

OLHI will not do a search within the first three months following the date of death or later than two years after the date of death.

The search will not turn up policies purchased outside of Canada or group insurance policies. For possible group insurance, an executor should contact the deceased's employer and professional associations to determine if any group life insurance existed. Credit card issuers and banks should be contacted to confirm if any creditor insurance had been purchased.

You can find the guidelines and policy search form here http://bit.ly/ht1r0l.

Rona Birenbaum BAS, CFP, CHFS

At the end of 2009, there were over one million unclaimed bank account balances worth $395 million dollars in Canada.

An 'unclaimed balance' is a Canadian-dollar deposit or negotiable instrument, issued or held by a federally regulated bank or trust company. It can be in the form of a deposit account, bank draft, certified cheque, deposit receipt, money order, GIC, term deposit, credit card balance, or traveller's cheque.

When there has been no owner activity in relation to the balance for a period of 10 years, and the owner cannot be contacted by the institution holding it, the balance is turned over to the Bank of Canada, which acts as custodian on behalf of the owner.

The Bank of Canada will now hold unclaimed balances for thirty years, once they have been inactive for ten years at the financial institutions. Therefore, balances will now be held a total of forty years prior to being prescribed.

It is not unusual for older Canadians to have a myriad of bank accounts as a means of maximizing CDIC insurance, which until 2005, was $60,000 per bank account and GIC. (The coverage is now $100,000) Such accounts can get lost in the shuffle, particularly if the customer has moved residences multiple times. If you become a financial power of attorney or estate executor, it makes sense to inquire with the Bank of Canada regarding potential unclaimed balances.

You can search for an unclaimed balance by completing the online form at http://bit.ly/zytV8 or by calling the Bank of Canada at 1-888-891-6398.

Happy hunting!

When you leave your employment, voluntarily or not, youmayhave to decide what to do with this benefit. The options can be varied and in some cases, confusing. Once you have made your choice, there is no turning back. That is why it is essential that your decision is a fully informed one.

This is how the process typically works:

At the point of termination the company will provide a written outline ofyour company pension plan options. Watch for a deadline being stipulated for your response. Without a response within the required timeframe you may end up with a default option that is either not your preference or not to your best advantage. Typical options include:

Leave your funds in the pension plan

1. Hassle free - One of the advantages of this choice is that all investment decisions are made for you in exchange for a lifetime income. Before selecting this option, you want to be comfortable that the pension plan is solvent and the company is in good financial shape. Even then, the health of the pension plan, and company, is subject to change/deterioration over the length of your retirement. This used to be of little concern to pensioners until the recent financial crisis highlighted underfunded pension plans. Pensioners of some of Canada's premier employers (i.e. Nortel) will be experiencing significant pension income reductions as a result of underfunded pension plans.

2. Choose an appropriate spousal benefit - If you are married, you can elect that your spouse receives the same income, or a somewhat reduced income for their life in the event of your death. Making this election requires a trade off for lower income during you life. Given the uncertainties of life, we generally recommend electing a 50% spousal benefit at minimum. Anything less generous that will typically require the spouse to acknowledge the choicein writing.

3. Medical Benefits - Another benefit of the pension option may be medical benefits thatmay accompany the pension. Depending on the extent of the benefits, this could be a very valuable part of the pension option.

Commuting to a Locked In Retirement Account (LIRA)

1. Contol - The greatest benefit of this option is control; control over how the pool of capital is invested, and control over access to the capital itself (liquidity).

2. Liquidity - Lump sum withdrawals in excess of the monthly pension are not permitted, but LIRAs allow them within certain limits. In addition, at the time of transfer from LIRA to a Locked in Retirement Income Fund, unlocking provisions can provide additional liquidity if taken advantage of. You may never need to take advantage of the additional access, but it is nice to know the option exists in an emergency.

3. Premature death - In the event of the premature death of the pensioner without a spouse, the remaining value of account is available to the estate or designated beneficiary. In the case of a pension, without a guarantee period, the remaining capital is absorbed by the pension plan to be used to pay pensioners who live longer than expected.

4. A risk - One of the risks of choosing the transfer to a LIRA is of making poor investment decisions that erode the value of the benefit prematurely. Obtaining experienced advice is, therefore, important.

The decision to commute or not to commute is a complex one as there are many variables to consider. Make sure that you get advice, and that the advice is impartial and considers a full range of variables and your unique circumstances.

A recent article written by Manulife Financial advises that for insurance companies, the internet is a valuable research tool. Depending on the face amount and purpose of the policy, an underwriter might do an initial search on the applicant, policy owner and beneficiary.

In the majority of cases, they get positive confirmation of application details and this can speed up the approval process.

Here are a couple of recent cases that highlight how searching the internet made a difference.

Female, 29, applying for $250,000 Term 10 life insurance

This applicant had just moved to Canada from the southern United States and had initiated the application. This was a red flag because insurance is usually purchased on the recommendation of an insurance advisor - individuals don't usually seek it out. The curious underwriter Googled the applicant and the first hit was a 'Wanted' poster from the state the applicant previously lived in; she was wanted for forgery and passing bad cheques. The underwriter sent a link to the advisor and the surprised advisor confirmed that it was his client. The insurer declined the application.

Male, 35, applying for $4 million Term 10 life insurance

This young entrepreneur had an incredible business history. Due to the amount of insurance being applied for, the underwriter conducted a search on his business and name. The information on the business helped the underwriter feel more comfortable about the suitability of the product, and about the risk, as very little financial information was available through the standard Inspection Report. (An inspection report is required in the case of large size policy applications, and they are completed by a third party who has no direct interest in the transaction. The purpose is to confirm details reported on the insurance application form.) Interestingly, the client's You Tube video of his 35th birthday party was also available and showed the insured in an advanced stage of inebriation with a sign on his shirt that said 'If found please return to...' This certainly made the underwriter stop and think about this risk! (But ultimately the policy was approved as applied for.)

So, it's not just potential employers, first grade crushes and potential mother-in-laws Googling you. It's might also be an insurance company. You heard it here.

Caring for an ill parent brings many challenges; emotional, logistical, physical and financial.

On the financial front, in spite of our government funded health care system, caring for an ill parent does result in costs that are not covered by provincial health care programs. Some of these costs include:

• Lost wages for time taken to care for your parent
• Private care from a registered nurse or personal support worker (PSW)
• Medication not covered by provincial health care plans
• Medical devices to facilitate quality of life

In this article I outline a range of sources offunds that can help fund some of the costs associated with caring for an ailing parent.

Private Insurance Plans

Your parent may be a member of a private insurance program that funds a portion of some of these expenses. This could be the health benefits that accompany pension plan benefits, or stand alone privately paid for coverage. I have seen children fund health care expenses all the while the parent had insurance coverage that would have paid for some or all of those costs.

Also inquire if your parent purchased Critical Illness, Disabilityor Long Term Care insurance. They may be eligible for benefits through these plans.

Tax Credits

Attendant Care Credit

If your parent qualifies as disabled and requires the services of an attendant to enable them to function, they may be able to claim some or all of the costs of the attendant. The attendant must be at least 18 and not a spouse. The deduction cannot be claimed where the expenses were claimed for the Medical Expense Tax Credit (explained below).

Disability Tax Credit

This credit is available for disabled persons and is 15% of $7,239 or $1,086 for 2010. The credit can be transferred in certain cases.

Medical Expense Tax Credit

A credit for medical expenses not covered by other sources is available. The amount of the credit is for expenses in excess of the lesser of $2,024 or 3% of the person's net income in 2010. The credit can be transferred in certain cases. Provincial credits are also available.

Infirm Dependent Credit

Where your parent is dependent on you due to physical or mental infirmity you may be able to claim this credit. The amount of the credit depends on your parent's net income and is a maximum of $633.45 in 2010 (15% X $4,198). Provincial credits are also available.

Caregiver Tax Credit

This credit is available to taxpayers who are providing in-home care for a relative over the age of 65. The amount of the credit will be related to the dependent's net income and is a maximum of $633.45 in 2010 (15% X $4,223). Provincial credits are also available.

Government Pensions

If your parent has been a contributor to the CPP during their working lives and are less than age 65 they will probably be eligible for some CPP disability pension. To receive the pension they will need to meet the CPP definition of disability. The maximum current CPP disability pension is just over $1,100 per month and is considered taxable income. Your advisor can assist you in describing the specifics of the program and how an application can be made.

Private Pensions

If your parent was a member of a private pension plan and has not yet started receiving benefits, most pension plans will provide an early pension if they meet the plan definition of disability. The pension sponsor should be approached to determine the specific benefits provided.

Caring for an ill parent is a big responsibility that can at times feel overwhelming. Hopefully this information will help you tap into additional financial resources that will relieve some of the financial burden you and/or your parent may be facing.

Fighting about money is one of the most common reasons for divorce in North America. Many couples face an overwhelming task when creating and managing the household income. These couples find themselves frustrated when it comes to combining their financial styles, and, as a result, both their net worth, and relationship suffers.

So how do you prevent money stress from eroding your relationship? Here are five common situations that we see in our Financial Planning practice, and some suggestions for overcoming the difficulties.

'We don't discuss money, we fight about it'.

To prevent a money discussion from turning into an argument, make it a planned discussion. Most couples bring up the subject of money when they are unhappy about something and so the conversation turns into an 'I'm right, you're wrong' debate. For example, spouse buys an expensive item (flat screen tv, fancy new clothes etc.) while the other spouse feels the funds should be going towards the mortgage. What starts as a discussion turns into an argument about which use of funds is 'better'. That's a no win debate.

I recommend that couples meet regularly to discuss finances when they are calm, not at a time of crisis. A quarterly meeting on the weekend, or in the evening over a glass of wine works best. The fewer the distractions the better.

'We'll never retire at the rate we're going'

Uncertainty about the future can be very stressful for some people. To alleviate the anxiety, find out where you stand and assess your financial reality. Prepare a net worth statement and prepare a cash flow review. There are many retirement calculators on the internet that will give you some idea as to how close your retirement goal is. Email me at info@caringforclients.com for a monthly Budget Tracker that will help you calculate your current cost of living and start the dialogue.

'I'm a saver and he/she is a spender, that's the problem'

The problem is actually thinking that you can turn a spender into a saver or vice versa. Compromise and moderated behavior is the key. Rather than labeling one another, consider this line of thinking, 'We both spend but on different things. Let's budget'

Create a spending plan together that addresses your individual and combined financial needs and goals. This will often mean having a joint account for 'family' expenses and individual accounts for personal spending. The budget should be a reflection of both spouse's current and future lifestyle needs.

'You worry too much!'

It can be frustrating when a spouse worries constantly about money. In my experience the worry comes from a lack of information about how money is being spent, or whether certain financial goals are being achieved. Even if the worry is unfounded, the solution is complete disclosure. Regular meetings to review the family finances will eliminate the mystery and set the stage for constructive, joint decision making and goal setting.

'We aren't making any progress'

Hire an objective third party to help facilitate dialogue and develop a financial plan that respects both spouse's concerns and goals. The Financial Planner should have experience working with couples that are having difficulty having constructive conversations about finances. The planning process and ongoing, regular meetings with the planner will help diffuse the inter-couple stress and keep them focused on working together constructively.

Itook my daughter to Great Wolf Lodge recently, which is a family resort built around an indoor water park.

The park highlights are the water slides. They range from the kiddie slides to the high intensity Vortex.

Now, if you really must know, if I could get away with it, (and if I was under 48 inches tall), I would choose the kiddie slides every time. However, my 11-year old daughter is adventurous, but not so adventurous that she'd go on the slides alone so I made the sacrifice and joined her on the more 'exciting' slides.

We inched our way towards the 'Eagle', which appeared to be the most tame option at 1,100 feet of twists and turns. During the approach I listened to the squeals of glee and the screams of fear. I watched each person shoot out the end of each slide, focusing on their facial expressions. 'Were they upset? Were they laughing?' How would I feel when I got to the bottom?'

It got me thinking about investing. Anyone can go on a water slide and survive (even thrive) because at the scariest point of the slide you can't get off. There are no escape hatches, or ejector seats. All you can do is hold on tight, scream if that helps, and you get to the bottom safe and sound.

Investing can be as unnerving as a wild water slide for some people. The problem is an investor can bail out at any time. Research tells us that they do so frequently when it is scariest, which is usually the worst possible time.

So picture some water slides of varying intensities but you cannot see the end, and you cannot see how people are when they get to the end. Which slide would you choose and see the related investor risk tolerance.

Lazy River - not actually a slide, but a slow moving current where you can coast on an inner tube enjoying the ride while the sound of laughter and screaming surrounds you. Risk profile - Ultra Conservative. Forget investing, go for high yield savings accounts and cash equivalents.

Kiddie slide - a gentle, sloping ride ending in a light splash. Risk profile - Conservative, stick with GICs and quality bonds.

Eagle - a medium speed slide with a few twists and turns. Risk profile - Moderate, a preponderance of GICs and bonds with a sprinkling of quality equity investments.

Grizzly - a fully enclosed tube with higher speed twists and turns. Risk profile - Moderate/high, a balanced mix of fixed income and equity investments.

Niagara River Rapids - a roller coaster like ride with unexpected ups and heart pounding downs. Risk profile - High, primarily equity investments including smaller, non dividend yielding holdings.

Vortex - a dramatic drop down a dark tube into a huge wide basin where you are whipped around at a high rate of speed ending in a final dark, deep descent. Risk profile - Very high, speculative equities including the penny stock that the cab driver told you about yesterday.

Which slide would you choose?

It is a well known fact in the insurance industry that bank mortgage life insurance is underwritten at the time of claim.

It is not as well known by the borrowing public. In fact, the majority of mortgage customers are not familiar with the difference between underwriting at the time of claim vs. underwriting at the time of application. Do you know the difference and why it matters?

Simply put, when you buy bank mortgage insurance you only have to answer a couple of medical questions. Unless the size of the mortgage is very large (and hence you are buying a verylarge amount of life insurance) a nurse does not visit and take blood, urine, your blood pressure and weight.

The bank is not interested in any additional detail because they don't actually underwrite (rate the risk) the policy until there is a claim. At that point, they may actually decide that the insured is not eligible for coverage.
That's right, you don't knowif you really are covered until you die and your next of kin files a claim.

If you think I'm joking, watch this episode of CBC Marketplace. It will be crystal clear.

Mortgage insurance has other drawbacks as well, but they pale in comparison to thepossibility of your beneficiaries finding out that the insurance they believed would protect them will not pay out.

Usually, basic term life insurance is the better alternative. That being said, it's best to make a life insurance purchase decision in the context of your overall financial plan since everyone's circumstanceis differentand there is no one answer for all individuals.If you own mortgage life insurance, you can replace it with individual coverage. Just make sure that you get the individual coverage in place before you cancel the mortgage insurance.

For most Canadians, a mortgage is the largest debt they ever take on. Much time and attention is given to negotiating the lowest possible interest rate, but typically much less time is taken determining the optimal amortization period. This is even though the length of repayment (amortization) is directly correlated with the amount of interest paid and, therefore, the ultimate cost of your house purchase.

Here are the four most common approaches to choosing an amortization period along with potential drawbacks:

1. I select the maximum amortization in order to qualify for as large a mortgage as possible, so I can purchase my dream home.

This, of course, is one of the strategies that got many Americans into financial distress. The problem with this approach is that it leaves little room for financial hiccups such as, increasing interest rates, job loss, and unexpected expenses such as home repairs. When the 'unexpected' happens, credit cards become the solution and a debt spiral begins.

2. The shortest amortization that I can afford. I can't stand being in debt.

There is nothing wrong with this in theory.....but it lacks practical considerations. This approach also leaves little room for the financial hiccups noted above. Asking the lender to extend the amortization while you look for a new job doesn't always go over well. You know how it goes, it's easy getting credit when you don't need it......

Any half decent mortgage provides the option to double up the payment, increase the payment by 10% and make principal repayments of 20% of the original mortgage every year. All of these options speed up repayment. An alternate to committing to a short amortization would be to moderate the amortization and accumulate the extra funds in a savings account. Every six to twelve months you can determine how much of the savings to apply to the mortgage. If your employer has just announced another round of layoffs, hold onto the cash.

3. I chose an equity line of credit so I can control the rate of repayment.

This is a popular approach these days. It is a lot like #1 but can be even worse since often equity lines of credit only require that the monthly interest charges are covered. This is called the 'forever' amortization. A typical rationalization we hear is that it doesn't make sense to pay down the mortgage when interest rates are so low. The reality is that it's the best time to pay down the mortgage since the majority will go towards principal. When interest rates inevitably rise, the rate will apply to a smaller outstanding balance.

Equity lines of credit are best suited to the most financially disciplined of us. Those individuals benefit from the additional flexibility of an equity line of credit without the risk of still being indebted when reaching retirement age.

4. I chose what lender recommended.

This is hit and miss. The suitability of the recommendation depends on the experience, ethics and integrity of the lender. Even the best, most trustworthy lenders base their recommendation on fairly limited information about the client. Lenders typically gather asset/liability and income details in order to determine affordability and credit worthiness. They don't always know about the complete financial life of the client, which if they did, might lead them to an alternate recommendation.

So, how do you choose the mortgage that is right for you?

The options should be considered in light of your overall financial plan.

We give very specific recommendations to our clients regarding the maximum amount of debt they should consider as well as the optimal structure of the mortgage. The advice takes into consideration the client's entire financial reality, their many goals, and risks and opportunities they may not be aware of. Armed with the advice they can negotiate with their lender with much more confidence and power.

What's your amortization and is it optimal for you?

Recently, expert sales and productivity coach Nicki Weisswrote a fantastic article on how (and why) to stop multi-tasking. Below isthe article in it's entirety. This article comes from Nicki's super monthly newsletter. It is worth subscribing to and you can do so on her website's home page www.sa1eswise.ca

Sa1esWise: How (and Why) To Stop Multitasking

During a conference call with the executive team of a client company, I decided to send an email to another client.

I know, I know. You'd think I would have learned.

What could go wrong?

First I sent the client the message. Then I sent him another one with the attachment I had forgotten to append. In my third email I explained why the attachment he received wasn't the one he was expecting. When I eventually refocused on the call, I realized I hadn't heard a crucial question.

Multitaking makes you stupid

I swear I wasn't smoking anything, but apparently I was acting as if I had. A recent study has shown that IQs drop by 10 points in people who are distracted by email and phone calls.

We're only fooling ourselves when we think we get more done by doing several things at once. In reality new research shows that our productivity can decline by up to 40%. We don't actually multitask; we switch-task, rapidly shifting from one activity to another, interrupting ourselves and losing time.

You might think you're different, that you have multitasked so much you're an expert. But you'd be wrong. Recent findings show that heavy multitaskers are less competent at doing several things at once than light multitaskers. The more you multitask, the worse you are at it.

An experiment in non-multitasking

I decided to do an experiment. For one week I would not multitask and see what happened. When I was on the phone, I would only talk or listen. In a meeting I would only concentrate on the meeting.

I didn't think I could sustain that kind of focus, but turns out I was pretty successful, at least most of the time.

During the week I discovered six new ways of looking at the world:

1. The experience was delightful. When you stop checking for email you stay in closer touch with your surroundings. I noticed this phenomenon especially with my teenage sons. Normally I feel they don't want to interact with me much, given how uncool I am. However, I was surprised to notice how often they initiated a conversation when I wasn't constantly responding to the e-mail ping.

2. I made significant progress on challenging projects. I usually try to distract myself from work that requires thought and persistence, such as writing and strategizing. However, without distractions I was able to plough through the uncomfortable times and overcome the mind blocks.

3. My stress dropped dramatically. Research shows that multitasking isn't just inefficient, it's stressful. I can vouch for the stress factor. I felt liberated from the strain of keeping so many balls in the air, and I experienced a sense of accomplishment when I finished one task before going on to the next.

4. I lost all patience with time-wasting activities. An hour-long meeting seemed interminable and a meandering conversation was excruciating. I focused my attention like a laser beam on my list, and quickly burned through the 'to-do's'.

5. I had tremendous patience for enjoyable activities. I was in no rush to end conversations with my clients, and my mind stayed focused when I was brainstorming about a difficult problem.

6. Single-tasking has no downside. No one became frustrated with me for not answering a call or failing to return an email the second I received it.

Why don't we all just stop multitasking?

So, why not use all your brain's energy to listen to a prospect on the phone while booking a trip to Paris online?

Sounds good, except the brain is already working at capacity when you're doing just one task. It is picking up conversational nuances or thinking about what you've just heard. Ask it to take on a second or third task and you take away its ability to deal fully with the first one.

How do we resist the temptation?

Turn the distractions off. I often write and plan at 6:30 a.m. Following my successful experiment I continue to leave my cell phone and email off just in case a multitasker is trying to reach me. I turn my car phone off, too...sometimes (other single-task warriors I know leave their cell phones in the trunk).

Use your impatience constructively. So you're itchy without all the ring tones and email pings to answer. Fill that void by creating unrealistically short deadlines. Give yourself a third of the time you think you need to accomplish something.

There's nothing like a deadline to fully occupy your brain. If you only have 30 minutes to finish a presentation, you're not going to take a call or flip back an email.

Ironically, single-tasking to meet a tight deadline will reduce your stress, and just might help you to be more productive.

Talk back: What is your experience with multitasking? How does it affect your productivity? Your customer relationships?

Now I've seen it all.

A friend of mine recently told me about a financial advisory firm that offers:

A FREE financial plan

OR

A FREE Clublink golf lesson.

All you have to do is book a meeting with the financial advisor and bring in your investment statements to qualify. I checked it out and indeed, the offer was on the advisor's website in black and white.

It reminds me of an offer I received when visiting Las Vegas recently.

The friendly individual offered me and my husband:

$100

OR

Tickets to a show such as Cirque de Soleil or Donny and Marie (yikes!)

All we had to do was attend a 90 minute presentation and the 'gift' would be ours.

Now, I wasn't born yesterday, so I know a sales pitch (aka scam) when I see one and so we moved on while the salesperson was throwing every sales technique at us in the book.

Having chatted with a number of Vegas tourists, we found out that the 90 minute presentation is really a five hour, high pressure sales pitch for a time share investment.

My bottom line message is this.

If you want a financial plan, would you rather deal with a salesperson that offers one for 'free' if you bring in your investment statements, or with a professional with no strings attached?

It amazes me that millions of Canadians have billions of dollars invested in Money Market Funds (MMFs) that are earning no interest for all intents and purposes. In fact in the six months to the end of 2009, the average Canadian Money Market Fund earned just 0.02% after costs.*

The potential opportunity cost for Canadians is between $300 million and $400 million. That is because secure, higher interest savings options do exist. We know this because we use them for our clients.

So why are Canadians not selling their MMFs and finding better alternatives? Here is what I think:

- Investors are unaware that they are not earning any interest on their MMF investments.
- Inertia - it's easier to do nothing than do something.
- Advisors are not incentivized - There is a lot of work and administration and very little (or no) compensation related to moving clients into higher yielding savings vehicles.
- Investors are stuck in Deferred Sales Charge funds and would pay a redemption fee to get out, thus negating the benefit of earning more interest.

None of the above reasons are acceptable in my view. If you own a money market fund, ask your advisor what you are earning on it and why you haven't been presented with a better alternative.

*source: Globefund.com

I was having coffee with a friend recently who has three beautiful daughters age 6 and under. She asked me when I began giving my soon-to-be 11 year old daughter Rachel an allowance.

Now, there are many philosophies on the subject, and sharing my own is not meant to be prescriptive. I do find, however, that people tend to be interested in my personal money decisions given that I give so many people financial advice. (yes, I practice what I preach!).

My daughter started getting a weekly allowance about 3 months ago. Here is how it happened:

I was preparing dinner after work and she was doing her homework at the kitchen table. Out of the blue she said, 'Mom, when can I get an allowance?'

Me: 'Why do you ask?'

Daughter: 'Well, my friends get an allowance.' (bad answer)

Me: 'What would you spend an allowance on?'

Daughter: 'hmmmm, well, birthday presents and mother's day and father's day presents. Stuff like that. (good answer!) And I will do chores around the house.'

Me: Rachel, your responsibilities at home are yours whether or not you get an allowance. Everyone in the family pitches in, even though we don't get paid for it. That will not change. Dad and I will discuss this and let you know.

We did discuss it, and neither of us have anything against giving Rachel an allowance. She has learned the value of money over the years and when she has received gifts in the form of cash, she hands over most of it for her savings account. So, having a little spending money for presents etc. will get her used to making buying decisions.

We surveyed a number of parents and found out that the going rate within her group of friends is $5. Wow, when I was a kid it was 50 cents! But back then, I could buy two chocolate bars for 50 cents.

So, how is it going? Pretty well I think. She has made a couple of purchases, but has also been saving. Just this weekend she mentioned that she is saving up for a laptop. Good thing they get less expensive every day!!!

Feel free to share your allowance stories. I'd love to hear them!

But we don't ask with the intention of developing a portfolio designed to achieve those expectations. So why bother asking?

Well, we ask to get a sense of how much, and what type of client education will be necessary when we present the optimal portfolio.

One of the things we might discuss is the impact of volatility on returns. Here is a theoretical illustration to prove the point:

Beginning investment $100,000

Now, we realize that these numbers are constructed to illustrate the point, but the point is an important one nonetheless.

Individuals seeking double digit returns will typically purchase the Portfolio B investment in year three or four after the great returns have come to their attention. Then they experience the declines of years five and six. Typically, by year seven a number of them will decide that it wasn't such a good investment after all and sell at a loss. With this kind of volatility, most investors don't hold on long enough to receive the average 6.5% rate of return. And the bad news is that even if they were invested for the full 10 years, the 6.5% average gets them less money at the end of the day than the boring portfolio that generates 6% each year.

The bottom line is that volatility and sequence of returns matter. More on both of those subjects to come.

Stay tuned.

Although proof of Canadian provincial health insurance is sufficient for visitors to enter Cuba, your provincial plan may cover only part of the costs and will not pay the bill up-front, as required. It is therefore recommended that travellers purchase supplemental health insurance. Note that some private insurers also require the traveller to pay costs up-front and be reimbursed later. Travellers should note that Cuban authorities will not allow anyone with outstanding medical bills to leave the country.

If you have travel medical insurance through your employee group benefits or as a credit card benefit, read the fine print and ensure that the insurer will pay for medical expenses up front. If not, ensure that you have easy access to cash in the event of a medical emergency or purchase a separate policy that will pay expenses up front. For example, Manulife Financial Travel Medical Insurance will pay expenses up front if they are contacted as soon as the illness or accident occurs. Otherwise, you are on the hook for 25% of the costs.

All health insurance policies are recognized, except those issued by U.S. insurance companies, as they cannot provide coverage in Cuba.

For the latest travel advisories on Cuba, go to the Canada Foreign Affairs website.

I asked her whatshe pays now,and her answer was $25 per month. Now, $300 per year seems like a sizeable amount to me (I pay $60 for unlimited activity)and I suggested that the alternative being suggested may indeed save her a few dollars.

So, why wasshe skeptical? There are two reasons in my opinion.

1. Baggage - The banks havefocused so much oftheir efforts trying to upsell and cross sell products to their customers, that customers regularly question whose best interest is at heart. This will take a cultural change at the banks, and a lot of time, to overcome.

2. They still don't get it - How did this banker endeavor to convince my client that she would be better off with a different type of account? She handed my client a glossy brochure highlighting the advantages of the 'senior's account'.This is anot so subtle message to the customer to 'figure it out yourself'.

Rather than miss out on potential savings, I told my client to go back to the banker and ask for an illustration on how much she would save by switching - using her individual transaction history for the illustration. In my practice that's the approach I take when illustrating why one financial decision is preferable over another. Time consuming? Yes. A better result for clients? Definitely.

Great customer service is more than handing out a brochure. Insist that you get it.

Ultimate this, infinite that, gold, silver, platinum.....an almost endless list of choices.

One of my life philosophies is simplicity, so the obvious choice for me is PC Financial Mastercard.

There isno annual fee and points on all purchasesequate to 1% cash back.

I can redeem my points fora bunch of items from the PC Financial online store, but the best value is using the points to buy groceries at Loblaws. I shop at Loblaws or No Frils (a Loblaws division) weekly, so as soon as I rack up points Ican redeem them. Just yesterday I got three large bags of king crab legsfor the value of my points!

By being able to redeem for groceries I know that my points will never languish unutilized for months or years and I get real valueonce a month (everytime I pay my monthly Mastercard bill).

So, my card may not be fancy andmay not impress anyone when I flash it, but when my family digs intocrab legs with melted butter oohing and aahing,the reward is.........priceless.

Saving Money Tip#1 - Cook your meals

If after reading that tip, you are still here, that is a good sign. For many, the idea of cooking most meals at home is simply too overwhelming to consider. Keep reading though, because the returns on this tip are more than just financial.

For working professionals and families,dining outis one ofthe largest variable expenses.

Dining out sounds fancy, but it includes family meals at Swiss Chalet, ordering in Pizza or Sushi,or having dinner out in a moderately priced local restaurant. And of course it includes those special occasion meals. It can add up to hundreds of dollars each month, thousands each year.

I started cooking for real six years ago at the age of 37. Before thatmy repetoire consisted of spaghetti, omelets, and the odd stir fry. I regularly heated up prepared, frozen food. Then I moved in with my (now husband) Clifford, two of his children and my daughter. Clifford is traditional. Only nutritional homemade food will do for the nightly family meal. Since he had committed to doing the laundry, yardwork, and general maintenance, I could hardly say no.

The solution? www.recipezaar.com and some planning and discipline. Each Friday night I make a meal plan and grocery list (usually built around the Loblaws flyer). I shop on Saturday and have the recipes set up for the week. If I am out on Friday night I do it on Saturday morning.

I must say, that as a working parent, most days when I get home from work I'm not overflowing with energy, but that's where the discipline part kicks in. And the sous chefs.....I get the kids (and sometimes Clifford) involved chopping, setting the table and cleaning up. We have fun chatting about the day, and doing some general horsing around. It's wonderfultogether time and they are learning important life skills.

Try it....your health, family dynamic and budget will all benefit.

The weather, the shows, the restaurants and yes....the casinos.

So how do I reconcile my healthy relationship with, and respect for, money with the fun of slot machines?

Well, as with so many other things I set a budget and stick to it. Now by most measures my budget is laughable. I set myself a daily budget of $40. That's $20 during daytime hours and $20 during nighttime hours. It works because of a fabulous invention called the 'penny' slot machine. During a visit to Las Vegas about 6 years ago, I discovered that if I bet 9 cents each time I can make $20 last about 2 hours. Sometimes that $20 becomes $25 or even $40 and sometimes I lose it all but I figure that if I lose $20 over 2 hours that is pretty good entertainment value at $10 per hour. (and they serve free drinks to me all the while!!!). When I walk away with more than $20 it is with a skip in my step and the feeling that I 'won' by being ahead.

Now when I tell people about my approach, they usually laugh, or roll their eyes. 'You can't win much that way' they say. And I tell them that they are absolutely correct, which is fine with me. That's because I know that the odds are stacked against me and that all casino games are designed to separate partipants from their money. I truly don't believe that I can beat those odds and because of that I don't put at stake any more than I am comfortable parting with. Whereas the majority of gamblers cling to the belief that they will be one of the few lucky ones.

The casinos use every psychological trick in the books to encourage visitors to part with more and more cash. It takes a lot of discipline not to get caught up in it all. The same kind of discipline is helpful in all financial endeavors, whether it's saving, investing or spending.

I'm off to Las Vegas tomorrow morning. Wish me luck! ;-)

Actually,because we believe incomplete professional transparency, we tell prospective clients up front thatnagging is part of our job.

As a result, 95% of our clients have well crafted Wills and Powers of Attorney. We know how important these documents are for individuals of any age and our value as advisors is diminished if this piece ofthe financial plan is not completed.

So we nag.

We even draft up instructions and deliver them to the lawyer for review and discussion with the client if that will move things along. Whatever it takes, really. It is just not good enoughto think that our responsibility ends when the recommendation to get Wills and Powers of Attorneycompleted is given. We know that human nature oftenputs this taskat the bottom of the 'to do' list.

So what about the 5% who don't have these documents complete yet? Well, we are stillnagging them.......!!

64% of our usage was during off-peak hours
12% of our usage was during mid-peak hours
24% of our usage was during on-peak hours

That is a reasonable mix but not enough to earn an A+

The other reason why there is room for improvement is that the bill was still high at $183.
Granted, if we hadn't shifted some of our energy use to off peak hours, the bill could have
been as high as $250.

If you haven't familiarized yourself with the new rate system, go to
www.torontohydro.com/tou

Let us know what grade you give yourself!

Thousands of Canadians have opened these accounts over the past two years and many of them are making a tactical mistake by doing so. How can saving tax oninvestment incomebe a bad thing? It is when the alternative would grow your net worth faster.

The majority of TFSA accounts have been invested in low interest savings account vehicles. Many TFSA investors also still have debt on the books at rates that exceed their TFSA savings rates.

Here is how the math works:

$5,000 TFSA savings account earns 1% ($50).

$5,000 deposited against a mortgage or line of credit at 2.5%. This results in interest savings of $125.

I don't know about you, but at my house $125 beats $50 every time. Unless........and there is always an unless.

Unlessyou may have ashort-term need for that $5,000 and the debt that you pay down with those funds is a conventional mortgage that you cannot then draw from in an emergency. Liquidity needs can trump the math.

So, if you can get a guaranteed rate of return on your TFSA investments that exceeds the interest rate on your debt then you are not losing ground. Unfortunately, these days it is very difficult to find guaranteed investments that exceed line of credit and conventional mortgage rates.

The reality is that many Canadians were not asked about their overall financial circumstances when the TFSA was recommended to them, and that is a mistake. We know this happens because we see it all the time.

Thanks to the government for the TFSA account because it's a wonderful gift. Just be sure that there isn't a better use for the funds each time you make a deposit.

Be careful though, after experiencing 3 years of losses, CRA may question whether or not the business is truly capable of making a profit and may deem that it is more of a personal hobby than a business. When they do this, they can deny the losses which will result in an unexpected tax bill for you.

Check out Tim Cestnick's comments on the subject. He is the author of 101 Tax Secrets for Canadians.

If you want help ensuring that your business does become profitable, please let us know. We can connect you to the people and ideas that will take your business to the next level.

Rona & Clifford

What if no one reads it?
And if people read it, what if they don't like it?

You know, the two basic concerns in life.....do they care and will they like it (me)?

So I'll just blow past those two concerns because they are obstacles to experiencing great things in life like sharing, learning, teaching, discovering, achieving, helping, and loving.

So this entry isn't about money at all.

It's simply about starting something.

Rona