Thursday, May 28, 2015

How Do You Face the Challenge of Raising a Family?

Parents face tremendous financial pressure to raise their families.  No doubt, nothing frustrates parents more than advice from a financial planner telling them, “You need to spend less or earn more”.   Every family with children finds that their cost of living increases as their children grow.  These financial challenges are real. Discovering a one-size-fits-all solution is not easy.

Facing the Reality of Real Challenges

Groceries. Next to shelter and transportation, groceries rank  among the top monthly expenses.  With the cost of groceries on the rise, meal planning is important to the overall strategy of managing money.  Becoming creative meal planners and implementing some of the proven strategies listed here from My Money Coach could reduce your grocery bill.  One of many lessons I learned from Suze Orman was about wasting food.  Suze suggested taking a five-dollar bill, ripping it in half, and throwing it in the garbage.  She explained doing this is exactly the same thing you do with food.  When you buy too much food which then spoils or when you cook too much and neglect to freeze it, you throw it into the garbage.  You are throwing away money.  For me, this was a reality check which I am asking you to do.  Look at how you manage your food costs.   

Extracurricular Activities. Beyond the everyday needs of food and shelter, parents are challenged with an added expense, their children's extracurricular activities. The enrollment fees for the activities are only part of the total cost.  Living in rural Saskatchewan means driving to another town or city for children to play hockey, participate in gymnastics, or take music lessons.  Dance or sporting competitions mean further commutes, which includes not only gas money but hotel and meal expenses.  Realistically, how much can you afford to pay? The Government of Canada offers some support to help families who enroll their children in fitness activities but how can the maximum fitness tax credit of $300 per child stretch to cover the real cost? Limiting the number of high-cost activities might be a solution. Looking at other low-cost activities offered through school programs may still allow children to be active.  

Services.  Another challenge is managing all the bills.  Never before has the cost of services been so expensive.  The cost has increased along with the number of services people use. Think about it:  cell phone, satellite, internet and security systems are taking their share of your income. The hardest, if not impossible, part  is giving-up something that you have come to cherish as convenient or entertaining for your children and you. Perhaps the service is even described as essential.  Deciding what you can live without or at the very least reducing the cost of the service package may free some much-needed cash required elsewhere.      

How are you coping?  What have you had to reduce or eliminate so money was free for other goals and dreams?  What have you had to do to rise to the challenge of raising a family?  Many of us face the same challenges.  We can learn from each other.  The information and advice a financial planner shares is up to you to accept or discard. 


Thursday, May 21, 2015

Keeping Your Commitments

© <a href="">roibul</a> | <a href=""></a> - <a href="">Wooden Stakes Photo</a>
Making a commitment is similar to pounding a stake in the ground and taking a stand for something you firmly believe in and value. You vow to take action and follow through on your promise. 

In life, people make commitments to the ones they love by their actions:

* The husband who supports his wife while she endures chemotherapy.

* The wife who stays in a marriage even though her husband is an alcoholic.

* The single parent who remains committed to being the best parent in raising her children.

I was inspired to write about “keeping your commitments” as I prepared a presentation for our Toastmasters group.  Toastmasters is an organization which helps people develop their communication and leadership skills in a no-pressure, supportive, and safe environment.  The presentation about “Keeping Your Commitment” speaks about the importance of being faithful to the Toastmaster’s Promise.  When we make any commitment or promise, we vow to be responsible and dedicated to someone or something.

What does commitment mean to you?  Think seriously about your commitment to your spouse, family, employer, community, church or volunteer organizations.  Are you committed to support your environment or make the world a better place?  Now let’s switch gears, “What is the commitment to your financial well-being?”

Commitments: Ones that are fulfilled; ones that aren’t; ones that should be.
You may have underlying commitments without being aware that you have them.  You commit to earning money to pay the bills and support your family’s lifestyle.  You voluntarily fulfill your obligation because you see your role as the breadwinner.

Quite often it’s easier to keep your promise to someone else rather than to yourself. You know in your heart when you broke the promise to your goals and dreams, the times when you didn’t stick to your savings plan by spending more than you intended.  You sent your bank account spiraling into a negative territory or your credit card balance soaring.  You fell short of your commitment.

Then there are the commitments which are only thought about but haven’t been fulfilled.  These are the ones which you tell yourself, “Someday, I will.”   You may only see these commitments as things on your to-do list but they have far reaching consequences if they remain incomplete.   Click here to take a peek at the list, Ten Financial Items Every Canadian Should Have.  

These commitments mean protecting your family and you by:

·        Reviewing and updating your Will, Power of Attorney and Health Care Directive to ensure the information fulfills your wishes in the event of an untimely death or illness.  If you don’t have these documents, then you are strongly encouraged to make the commitment to contact an estate planner or a lawyer.

·        Reviewing your current life and disability insurance needs.  Have you done everything in your power to protect your family in the event of a sickness or death?  Make the commitment to check your coverage offered by your employer or insurance company.

·        Developing a financial plan so you know exactly where you are headed financially.  Committing to the plan ensures you are headed down the path to successfully completing your goals and dreams.

Coaching Your Way to Success

As a financial planner, I am curious why people remain unwilling to fulfill financial commitments.  Since I will not leave you stranded, I am offering to coach you to follow through with your commitments.  Once you determine the real “problem, issue or concern”, go the extra step and answer these straightforward questions which Thomas G. Crane presents in his book, The Heart of Coaching.  Behind each question is an underlying question to help understand its importance.   

     1.  What are you trying to achieve? {This casts vision}.

     2.  Why is this important to you? {This identifies priority}.

     3.  What have you tried so far? {This represents accountability}.

     4.  How has it worked/not worked? {This encourages reflectiveness}.

     5.  What options do you see going forward? {This develops creativity}.

     6.  What input would you like from me? {This shows openness}.

     7.  What is your “go forward” plan? {This initiates planning}.

     8.  How can I support you? {This creates a partnership.}

Listen to the whispers speaking to you.  Listen to the tiny voice inside your head saying, “It’s time to do something.”  Devise action steps:  pick up the phone; make the appointment; do the homework; get it done.  By doing so, you are putting a stake in the ground and keeping your commitments.

Thursday, May 14, 2015

The Link between Golf and Investing

Golf Course Sand Trap © Lisa Turay | Dreamstime Stock Photos

Market Turbulences

We can learn from famous characters who are known to project both positive and negative outlooks to the world in the face of dilemmas. While Chicken Little screams, “The sky is falling,” leading everyone to believe disaster is forthcoming, Shrek reassures the world, “Change is good, Donkey.”  Last week’s Alberta election saw  the toppling of both the PC government that had been in power for forty-four years and the TSX Composite Index, frightening investors who have a stake in the province’s energy sector.  Some may have seen this as the sky is falling while others took on the view that change is good.

On my recent trip to Medicine Hat, known as “The Gas City” in Alberta, I didn’t see hordes of “For Sale” signs posted on peoples’ lawns. Many jokingly predicted Albertans would move to their neighboring province, Saskatchewan.  On the contrary, the scene in Alberta appeared to be “business as usual” with people shopping in local stores, cleaning their yards, eating in restaurants, and fueling their vehicles.  Supporting the economy in the usual ways appeared to be the norm.  

The lesson to be learned from this recent event is that markets will always react to change – both positively and negatively.  Even a change in a provincial election can spur uncertainty.  If there is something investors do not react well to, it is “uncertainty.”
You need to be reassured about the importance of sticking to your investment plan and weathering the market storms.  As the new golf season opens and Canadians head onto the golf courses, this is an appropriate time to share the correlation between golf and investing. David Cork presents the similarities in his book, Bulls, Bears and Pigs (Published in 2005).   Some information never gets old.  On the contrary, you will appreciate the insight on how golfing and investing are related.  Learning to maneuver around the sand traps meticulously placed on a golf course can also be a much-needed lesson to maneuver around the sand traps in unexpected investment markets. 
Similarities between Golf and Investing
As a golfer, you fully understand the challenges which come with playing the game. Understanding the value of learning the game well helps you achieve the perfect score according to your standards. Investing is similar. Understanding the value of strategies helps you achieve the perfect returns from your money.  David shares eighteen similarities between golf and investing which coincidentally coincide with the number of holes on a golf course. How intriguing!  In fairness to the author and to entice you to read more from his book, I will only share some of the similarities:       
1st. Both golfing and investing are counterintuitive.  I know you are probably asking, “What does that mean?”  Simply put, we do the opposite of what’s considered to be normal, the way things are supposed to happen.  David shares:
 “Think about it.  With golf, you have to hit down to make the ball go up.  If you swing harder, the ball generally doesn’t go as far.  The higher the number on the club, the shorter the distance the ball travels. It’s hard to convince yourself to do what you need to be successful.”
“Now think about the most famous statement in the investing world:  buy low and sell high.  Completely counterintuitive.  What this statement is saying, really, is buy when things don’t necessarily look great and sell when they do look great.”
2nd. Starting early is beneficial.  When you have a goal in mind, the importance of beginning sooner rather than later will help you achieve that goal. David links how this truth applies to both golf and investing.
“Both your investments and your golf game benefit when you have a head start.  With investing, it’s critical to have enough time to allow interest to compound; with golf, starting young means having time to develop the proper swing mechanics.  But there are recourses in both golf and investing if you do start late.”
“The resource is the same. You have to work much harder. I know great golfers who came to the game late.  They’ve had to practice their tails off to get good.  Now the key with investing is you have to be prepared to catch up by contributing a larger percentage of your income than you might have had to if you had started young.”
3rd. Pressure can take its toll on you as a golfer and investor.  If you put too much pressure on yourself to achieve the perfect golf score, you likely will not perform consistently every time you play. Likewise, the same can be true about staying in the markets when panic overpowers you to exit at the first indication of turbulences. David’s take on this matter is:
“Most people don’t perform well under pressure.  I play with one guy who folds like a tent if you bet a quarter on his next putt.  Even pros can fold under pressure.  Once they’ve mastered the game, they have to learn how to play under the intense pressure of tournament golf.  Some of the most talented players don’t make the big time simply because they can’t handle the pressure.”
“And many investors have trouble handling the pressure of market fluctuations. Golfers need to deal with the pressure of key shots at all levels of play.  Similarly, investors need to learn to cope with the stress of volatility, or they will forever struggle in the market.”
His advice to deal with pressure is:  “If you constantly strive for perfection, you’ll drive yourself crazy, and you’ll never get there anyway.  Know the game, know yourself, and learn to play to your potential – then relax and enjoy the process.”
Learning the Game
If you conduct a “Google” search about similarities between golf and investing, you would be surprised to discover the number of articles on this topic.  The remarkable fact is people write, sharing their knowledge from their own experiences and others, to help you understand and learn the process.  The secret to being successful, whether it is learning to golf or invest, is to put into practice valuable lessons dropped into your hands.  If the investment markets tend to frighten you, learning the game of investing will take away some of your fears. 
Here’s food for thought:
                                       What you hear, you forget.
                                       What you see, you remember.
                                       What you do, you understand!
At today’s low interest rates, you may have to jump into the markets simply to earn a higher return to fund your dreams.
  • Approach the markets with caution.
  • Start slow.
  • Learn by doing.


Thursday, May 7, 2015

Have You Started Yet?

What’s holding you back from saving for your children’s education?  Is it one of those items on your to-do list that you can’t seem to complete?  In the end, it’s not about you. It’s about your children and their future. That makes all the difference.

Many Canadians are not taking advantage of the government's generosity to help fund their children’s education.  As parents, we always tend to want a better life for our children. I am not saying you need to bear the full burden of education costs.  There’s merit in sharing the responsibility with your child.  A sense of pride over the accomplishment of acquiring an education diploma, certificate, or degree can be shared by everyone.

The most amazing contribution you can make is simply starting early, practically when your child is born.  When you start early, the amount tucked away can grow into a small fortune. 

Consider this:

Even a contribution of $2 per day or $60 per month over 18 years (without factoring any earnings) would be $12,960.  Saving as little as a “toonie” a day is more than you would have had if you’d never started.

Education breaks the cycle of poverty.  Having seed money for a child’s education will allow them to acquire basic skills through a technical education program and increase their chances for new job opportunities. With a better paying job, students can then save money to further their own education if they choose to increase their knowledge or branch into new areas.  Whether students attend a post-secondary education facility or study on-line through distance learning programs, acquiring an education has become easier.  A small step to help initiate these opportunities may begin with a much-appreciated education fund.

Being overwhelmed about saving a mere $40,000 to fund a four-year university program (without including room and board) can prevent any parent from starting an RESP. Consider the benefits, though. Having some money put away for education is better than not having any money; and borrowing less for education is better than borrowing for the entire cost. You’ve probably heard the cliché, “every tiny bit helps”.  Just get started.  

Live, laugh, love, and save doesn’t have to be that difficult.  There are government programs to conquer the overwhelming task of saving to fund education expenses.

The Government of Canada offers a Registered Education Savings Plan which can decrease the financial burden of funding the cost completely on your own.   The two parts to this program are:  the Canada Education Savings Grant (CESG) and the Canada Learning Bond.

The Education Savings Grant. For every dollar you contribute, the amount will be matched by an education grant of 20%. For Saskatchewan residents, the provincial government will contribute an additional 10% towards every dollar deposited.  That’s 30% in education grants. Referring to the “Toonie-A-Day” challenge, your investment of $12,960 will grow by 30% to create a whopping $16,848 by adding the grants proceeds of $3,888. This grant certainly could fund part of a school year’s tuition.  

The Canada Learning Bond. Depending on your family’s net income, the initial $500 Canada Learning Bond can be deposited to your child’s education plan without the need for you to deposit any money.  All you are required to do is open a Registered Education Saving Plan and have a Social Insurance Number for both your child and you.     

It’s not an “All-or-Nothing” program, though.   The grant entitlement is matched up to the maximum contribution per year of $2,500 (or) up to $5,000 if your child has carry-forward room from previous years with the maximum lifetime contribution being $50,000. Most people may not be able to deposit the maximum annual amount for each child.  It’s important to note that the program is designed so you contribute the amount that you can afford and receive the grant matched to your specific deposit.  If you wish to learn more about the things you need to know about the Registered Education Savings Plan, click here for further details.  

The downside is if you don’t start saving early and contributing bit-size morsels to the education basket, you may experience enormous remorse when you wave “good-bye” to your children as they head-off in pursuit of their post-secondary education, saddled with student loans. 

Mark Twain’s quote appears fitting to our discussion on saving. “Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do.”   Could you have exerted more effort in saving money for your child’s education to be freed from total reliance on student loans?

Even if you still haven’t set up an RESP (Registered Education Savings Plan) for your family, the best time is now while your children are under seventeen years of age. One day in the not-so-distant future, your child will thank you and you will be grateful for taking action.