Category Archives: Wealth

Have You Said These 6 Things About Your Credit Card Recently?


It’s the cold, hard truth: Credit cards enable people to go into debt faster than ever before.

That’s partly because it’s never been easier to get a credit card. In fact, 70% of American adults have at least one card, and the average credit card holder in America has 3.7 in their wallet. One report tells the story of a man who has nearly 1,500 valid credit cards and a line of credit that reaches $1.7 million!

A few decades ago, we didn’t have this problem. Before the 1950s, when modern credit cards were introduced, people pretty much bought just what they could pay for in cash. Fast-forward to today: Americans are facing more than $900 billion in credit card debt, and the average U.S. household with debt owes $15,355 on credit cards alone. Yikes!

While lots of people are determined to take control of their money in every otherway, they can’t seem to quit their credit cards. For those folks, credit cards are the last thing to go.

Here are some reasons behind the credit card obsession, and our proof that no reason is good enough to keep that plastic around.

1. “They’re so easy to use compared to cash.”

That’s true! They don’t require as much space in our wallets, and we don’t have to think about actual dollars in our account when we swipe. Unfortunately, that also means it’s easier to overspend.

A study by Carnegie Mellon, Stanford and MIT even showed a difference in brain activity when we use credit cards instead of cash. Using cash activates pain receptors in our brains, creating an emotional response that keeps us from making the purchase. Credit cards don’t do that, so we don’t feel the pain of spending.

Suddenly, that $2 coffee turns into a $10 mid-morning meal.

2. “They’re great in case of an emergency.”

Lots of people say they keep a credit card around “in case of an emergency.” It’s a simple fix to a stressful situation, right? But then Christmas becomes an emergency. And your takeout. And that new smartphone. Before you know it, your “emergencies” become debt.

Don’t tempt yourself. Instead of using a credit card, build up an emergency fund of 3–6 months of living expenses and rely on that the next time a true emergency happens. Then it becomes just a minor inconvenience. Crisis averted.

3. “They give us rewards, points, miles, or cash back!”

Credit card companies are marketing geniuses. With rewards systems that appeal to just about anyone, they know exactly how to tempt you to sign up. But no one ever got rich off a rewards program.

You also have to use the card a lot to earn the perks. And that just equals more spending you might otherwise have avoided if you weren’t trying to reach the next reward level. Your risk of debt has just increased. Stick to cash and spend only what you have. Eventually, you’ll see the rewards that come with building real wealth.

4. “They’re easy to pay off every month.”

Maybe. But we’ve heard more than a few stories of people who planned to pay off their balances each month but fell into a trap along the way. Little by little their spending increased until those minimum payments didn’t seem so bad. From there, their debt swelled faster than Violet Beauregarde after she chomped Willy Wonka’s chewing gum. Don’t let your debt turn into a larger-than-life blueberry.

5. “They’re necessary to build a credit score.”

A high credit score means just one thing: You’ve interacted with debt a lot. It doesnot mean that you’re winning with money. In fact, it measures nothing about your relationship with money other than how much you like to borrow. So why would you want a high credit score? Because it allows you to take on even moredebt in the future? No way, José!

You can qualify for a mortgage and rent an apartment with zero credit (which will happen eventually if you stop borrowing altogether). And for everything else—even cars—pay cash. No credit score needed. Then you can focus on building wealth instead of worshiping your FICO score. The Bible says, “The borrower is slave to the lender” (Proverbs 22:7 NIV). Don’t let your credit cards enslave you.

6. “They make our dreams reality.”

Credit cards give us opportunities that we otherwise would never have. Instant gratification, right? If our only way to those opportunities is going into debt, we might need to reexamine our hearts. That’s because overspending often signals a deeper problem. When we constantly hunger for stuff, we’re suffering from discontentment and materialism. We compare ourselves to the Joneses (who are probably in debt themselves!), and we feel shame and inadequacy when we don’t measure up.

We use credit cards to satisfy that endless desire for more, bigger, newer and nicer stuff. The problem is, as soon as the newness wears off, we’re on to the next best thing. Nothing ever satisfies.

A credit card can’t fill the emptiness in our hearts. True joy comes from a sense of contentment. A heart full of gratitude for everything we already have leaves no room for discontentment, and it leaves no place for credit cards in our lives. Our best plan is to be content in every situation.

Sometimes we don’t realize how easily credit cards can harm our finances and our hearts until we step back and really look at the root cause of our addiction to them. When we understand how dangerous they are—and the lies that we’ve been told about them—we can break up with these pesky pieces of plastic more easily.

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Accident Insurance, Seriously? do you need it?

Upset couple hugging

How would you keep a roof over your head if you couldn’t work due to ill health? Many of us wrongly adopt the “it-will-never-happen-to-me” mentality, but for millions of households, putting your head in the sand could have dreadful consequences. Recent research from Shelter showed that nearly four million families could not keep up with housing costs in the event of a month’s missed pay.

“There is little or no room for manoeuvre for people with stretched household budgets,” says Gillian Guy, chief executive at Citizens Advice. “Many are still feeling the effects of the recession as low wages and high costs mean people face a daily battle to make ends meet. A month without a pay cheque can easily prove disastrous.”

So how can you ensure you are properly protected should you find yourself out of work due to an accident or sickness? It is worth considering insurance such as income protection or critical illness cover. These policies can pay vital bills in the event of prolonged periods unemployment due to poor health.



According to figures from the Institute of Actuaries and insurer LV, a 30-year-old, non-smoking man is nearly twice as likely to suffer a serious illness before the age of 70 than to die. Yet despite this, just one in 10 of us have this type of financial protection in place. “Anyone with debts or dependents should consider some form of financial protection insurance,” says Tom Baigrie, chief executive of Lifesearch, the insurance brokers. “For many people affording both types of cover would be difficult, however, the products do complement each other as they cover different risks.”

Critical illness cover pays a tax-free lump sum on diagnosis of any one of a list of serious illnesses, while an income protection policy pays a monthly income if you are unable to work through sickness. “It’s really important to think about why you might be unable to work for an extended period of time,” says Phil Jeynes, spokesman for insurance provider PruProtect. “Statistically, injury or illness are the biggest causes of absenteeism and many employers stop paying sick pay after quite a short period of time.”


Most people dramatically overestimate the amount of state aid they will receive if they are taken ill. According to Lifesearch, a 30-year-old earning a salary of £35,000 would only be entitled to around £300 a month in benefits if they were to become too ill to work. However, an income protection policy from Exeter Friendly, costing £15 a month, would guarantee a monthly income of £1,400 if the person buying it opted for payouts to begin after a six-month deferral period.

When you consider figures from Aviva that show that the average length of an income protection claim is nine years and four months the sum can soon add up. Based on the Exeter Friendly policy above, this cover could be worth nearly £150,000 over the course of your claim.

Policies are priced according to your age, general health and the amount you want to receive if you have to make a claim. When calculating how much cover you need, it makes financial sense to consider all the monthly outgoings you pay every month. “As well as your mortgage, rent or loan commitments, you must include those everyday essentials such as council tax, utility bills and the weekly food shop,” says Simon Burgess, director at protection provider British Money. “If you only take out enough cover to repay a loan or mortgage, you could still end up in debt trying to meet your other commitments.”

Financial experts agree that due to society’s increasing life expectancy, it is crucial to think past traditional retirement ages when taking out a protection policy to ensure that you will be adequately covered for the duration you require.

“Given that we may all need to work much longer to be able to afford to retire, one must think beyond age 65 as a maximum term,” says wealth manager Philippa Gee. “You still need to consider just how long your working life could be and scope a product to reflect that.” Bear in mind, however, that this could increase the cost of the policy, depending on the length of cover you are after.


While these policies complement each other, they do different things and cover different risks so it is important to carefully consider both before making a purchase. If you have a heart attack, for instance, and return to work after six months, a critical illness policy would have paid the lump sum, where income protection payments would stop when you go back to work.

When it comes to taking out insurance, policyholders must be careful to disclose all previous medical conditions. Failure to report even minor conditions, tests or even a complaint made to a GP could potentially invalidate a later claim, or result in a reduced payout.

When it comes to choosing an income protection policy, consumers should look to insure their “own occupation” – claimants who are unable to do their own job – rather than any work at all because they fall ill. The good news is that this type of cover, while offering better protection, may not be more costly as it is factors such as age, smoking, occupation, length of policy and amount of cover that determines the premium.

Get the most for your premiums and opt for two single policies rather than joint cover if you are in a relationship. Despite higher premiums of roughly 10%, these two policies can pay out twice, whereas a joint policy will only ever pay out once.



Buying insurance for children when they’re born, is it important?

Six-year-old Chloe and her brother Cayden with their parents Kenneth and Patricia Mah. With them are the family’s financial services consultants from AIA – Mr Tommy Tay and Ms Elaine Yeo (both on the left).ST PHOTO: NEO XIAOBIN

This will help should they be diagnosed with serious health problems later

Little Chloe Mah was just seven months old when she was diagnosed with Pompe disease, an inherited neuro-muscular disorder that is progressive, debilitating and often fatal.

It is difficult to determine the lifespan of people diagnosed with rare disorders such as hers.

And even if Chloe, now aged five, should live well into adulthood, her parents Kenneth and Patricia Mah are worried about the heavy medical expenses involved.


“People often ask us, how long can Chloe live?” Mr Mah, 45, said.

“But that’s not the question. It’s about the quality of life, not the quantity.”

And so they do whatever they can to help Chloe live as well as possible, in spite of the heavy financial cost.

Chloe requires enzyme replacement therapy at least 26 times a year, with each session costing about $9,500. She also needs various types of therapy – speech and language, occupational and physio.

Her annual medical bills total about $250,000, and other expenses amount to $30,000.

For instance, the filters for Chloe’s ventilators need to be replaced every three days, and they cost $5 each.

And her expenses will only increase as Chloe grows older and bigger, with the amount of enzyme she requires for each treatment increasing proportionately with her weight.

When Chloe was a year old, her an-nual hospitalisation bill was $117,000. Now it is a staggering $300,000.

Mr Mah used to earn between $60,000 and $80,000 annually running his own business. He is now a stay-at-home dad looking after Chloe. Mrs Mah, 40, is the head of training and competency at Finexis Advisory. The couple also have a son, two-year-old Cayden.

When Mr Mah quit his business, their annual household income halved, while Chloe’s medical bills seemed to triple, said Mrs Mah.

“It was a double whammy,” Mr Mah said.

Their annual household income is about $80,000 to $90,000. The family manages to get by with support from insurance coverage, careful financial management and donations.

Chloe has three insurance policies, all purchased in January 2010 when she was two months old and before her diagnosis. To date, the total payout has been $700,000 under a policy known as the AIA Healthshield Gold Max with Essential Plan A, covering the period from June 2010 to January 2015.

The plans cover Chloe’s hospital bills and various therapies.

The total premiums for the three policies are less than $200 a month.

The Mah family takes care to limit expenditure by driving to Johor Baru, for instance, to buy cheaper groceries and not going on expensive holidays.

Whatever donations the Mahs receive, they put in Chloe’s child development account, a special savings account for children.

“When we are old with no income, who will support her? This money in her fund will be important then,” said Mr Mah.

“We just want her to be as independent and as happy as she can.

“With whatever financial planning I can do, and based on Chloe’s own capabilities, we hope that she will be able to take care of herself and survive even when we are no longer around.”

Mr Mah emphasised the importance of having reliable financial advisers to help out when policyholders make a claim.

“I think without the AIA financial services consultant’s (FSC’s) guidance, we probably wouldn’t even have thought we could have gotten the first claim through,” he said.

The Mah family’s AIA FSCs – Ms Elaine Yeo and Mr Tommy Tay – stressed the importance of adequate financial protection for the whole family.

The parents, especially, should not be neglected, they pointed out.

Ms Yeo said: “Given that the parents are the breadwinners, they need equal protection against unforeseen circumstances to ensure their children can be taken care of.”

According to a 2012 protection gap survey commissioned by the Life Insurance Association (LIA), each working adult requires coverage of 10 times his or her annual income to be adequately insured.

“It is also best to have regular financial reviews to better address a family’s changing needs with each new milestone,” Ms Yeo added.

The two advisers strongly advised families to get insurance for their children when they are young, to safeguard against any unforeseen threats.

Financial planning for families with special needs children

The Mahs purchased insurance for Chloe when she was two months old, before she was diagnosed, but many families with children already diagnosed with rare disorders will find it difficult to buy insurance or receive financial aid.

It is more difficult and expensive to purchase coverage once the child has been diagnosed with a disease.

Families with children suffering from rare diseases face rising medical costs that will stretch on for an unknown number of years. This will impose a heavy financial burden on even middle-income families, who will need to dig into their savings and Medisave, both of which are limited.

Another concern is ensuring that the financial needs of a child will continue to be well met even after the parents or guardians pass away.

Nevertheless, families in these situations can still take action to address such concerns.

  • Take stock of all available financial assistance opportunities

Families can try to seek both financial and non-financial support from organisations such as Club Rainbow and the Rare Disorders Society. The latter was founded by Mr Mah himself.

Apart from patient support and parent support groups, the Rare Disorders Society, which is a non-profit organisation, also provides financial aid to families.

“A lot of these families often have to go through means testing to apply for financial aid. But for us, when it comes to rare diseases, it’s not about how much you earn. The most critical thing is how much are your medical expenses and needs,” Mrs Mah explained.

Mr Steven Ong, chief executive officer of Financial Planning Association of Singapore, suggested that families look into hospital funds such as the KKH Rare Diseases endowment sub-fund and NUH Kids Fund.

  • Understand the government schemes in place

There are also government schemes in place that families may be able to tap.

Families must familiarise themselves with the 3Ms – Medisave, MediShield and Medifund – and how each can help to pay for the medical expenses.

First though, be clear on the classification of your child’s disease.

For instance, if the disease was diagnosed at birth, you should check with existing medical insurers and MediShield to determine if the disease is classified as congenital or a neonatal condition that is covered by them.

Since March 2013, MediShield has been extended to cover newly diagnosed congenital and neonatal conditions with no underwriting, so long as parents do not opt their children out.

This, however, is only applicable to infants born on or after March 1, 2013 and are Singapore citizens at birth.

MediShield Life, to be introduced at the end of the year, is the “light at the end of the tunnel” for such families, Mr Ong said.

While subject to terms and conditions, it will cover all individuals automatically.

But for some serious pre-existing illnesses, individuals may need to pay 30 per cent higher premiums for 10 years. In addition, this subsidy is only for Class B2/C wards in government hospitals.

The CPF Nomination scheme, under the Special Needs Saving Scheme as administered by Special Needs Trust Co (SNTC), is an option to help manage the regular distribution of the parents’ CPF monies after they pass away, subject to specific conditions.

On top of that, the CPF Enhanced Nomination scheme will help parents transfer their CPF monies to their children’s Medi-save accounts, subject to the ceiling, to ensure the children can pay some of the medical expenses from their own Medisave accounts in future.

  • Consider insurance and its various alternatives

Parents are strongly advised to consider buying a medical insurance plan for their children as soon as practicable – and not wait until a sudden adverse diagnosis that may render the child uninsurable.

When purchasing a policy, Ms Eline See, council member of Insurance and Financial Practitioners Association of Singapore Executive Council, recommended that parents review the terms and conditions set out in the policies.

“Pay attention to benefits limits, exclusions as well as their claims requirements,” she advised.

Trying to apply for insurance after the child has been diagnosed with the disease might be difficult.

Mr Ong said: “Successful application with insurers depends on the underwriting decisions. Some insurers may limit the coverage of the policy by excluding the condition or increase the premiums due to increased risks.”

The Mah family wholeheartedly endorses the benefits of insurance even if bought after a diagnosis.

Mr Mah said: “Maybe they can’t get medical insurance, but how about life insurance? It doesn’t mean you can’t get any at all.

“Perhaps you may need to pay a bit more if your child has a disorder, and perhaps there are certain exclusions. But at least you’re covered for something with certain insurance.”

Ms See said while most insurance options are barred to those already diagnosed with medical conditions, there are still options in the market that cover existing medical conditions, albeit subject to terms and conditions and usually at a high cost.

“Insurance policies that cover long-term disability can also be considered,” she said.

Mr Aw Choon Hui, deputy chief executive officer of GYC Financial Advisory, noted that a few international health insurers offer plans that cover pre-existing conditions, subject to conditions. These plans have very high premiums compared with standard local plans.

There will also usually be a waiting period of a few years and a cap on the amount one can claim for that condition.

Alternatively, parents can consider enrolling in group insurance at their workplace.

Group insurance refers to company insurance where employees are covered and the employer owns the insurance policy.

However, such policies usually come with a waiting period before treatments for pre-existing conditions can be claimed.

Participation in such policies very much depends on the group insurance put in place by your employer, Ms See said.

  • Pay attention to rising medical expenses

To avoid being caught out, parents should keep an eye on rising medical costs.

It is important to note that some insurance plans have a lifetime limit to the total claims amount. This means that the plan will lapse once the claims exceed the lifetime limit.

And as medical expenses will rise every year, it is important to review the insurance policies regularly and take into account medical inflation and affordability of the insurance premium.

“As insurance premium often rises with age, it is important to ensure it is affordable in the long term,” Ms See advised.

Parents should also monitor their available funds against climbing medical costs over time. Just leaving your savings in a savings account or fixed deposit account might not be sufficient to beat the high cost of inflation for medical expenses, Mr Aw cautioned.

He said: “Part of that savings will need to be prudently invested to try to achieve better rates of return in the long run, otherwise it would be rapidly wiped out with rising inflation.

“One practical way is to consider creating a trust and systematically setting aside money on a regular basis to grow over the years so as to provide the financial resources needed for this child in the long term.”

Beyond consciously building a special medical fund exclusively for their child’s medical expenses, Ms Low Mei Kuen, director of the advisory unit in Providend, said one way to help grow this fund is to contribute to the child’s Medisave account, where the current interest rate is 4 per cent a year.

  • Plan for the future

While battling rising medical expenses will be the key priority for such families now, they should also consider the difficult issues that may arise should the parents die before the child.

This involves appointing an alternative and reliable guardian, planning a constant source of funding for the child, the distribution of this funding source over time and other issues related to caregiving.

Mr Ong acknowledged that there is no magic formula to correctly spread funds out over time, but said parents can consider tapping the various government schemes and creating a legal entity known as a Special Needs Trust with prior instructions on how the money should be used over time.

This trust will continue providing for the child’s expenses, as per the trust deed and any letter of wishes given by the parents.

According to Mr Aw, this is important as the parent’s assets may not be readily released if the case is embroiled in disputes or challenges from non-beneficiaries.

The trust would ensure that payment for expenses can still be disbursed without interruption as the trustee holds the legal title of the trust’s assets, although the child is the beneficiary.

Also, assets such as payouts from the parents’ life insurance policies can be injected into the trust upon the parents’ deaths so as to boost the assets of the trust.  Mr Aw noted that the parents could take on more life insurance on their own lives and assign the proceeds to the trust with the aim of boosting its available funds.

Originally posted on


20 Signs You’re Succeeding Even If You Feel Like You Aren’t



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We all feel like failures from time to time. While this is a normal feeling, you have to find a way to see yourself and your life from a different perspective. Sometimes we ignore the “little things.” Just because you are not a millionaire, don’t live in a mansion, and you don’t drive a fancy car, that doesn’t mean you’re a failure. In fact, it’s quite the contrary.

Here are 20 signs that you are succeeding in life:

1. Your relationships are less dramatic than they used to be.

Drama is not maturity. As we age, we should develop maturity. So maybe your relationships were drama-filled in your past, but if you have moved beyond that, then you are successful.

2. You are not afraid to ask for help and support any more.

Asking for help does not equal weakness. In fact, it is a strength. No person has ever succeeded in isolation. It takes teamwork to accomplish goals. Asking or help is a sign that you have grown as a person.

3. You have raised your standards.

You don’t tolerate bad behavior any more – from other people, or even yourself. You hold people accountable for their actions. You don’t spend time with the “energy vampires” in your life anymore.

4. You let go of things that don’t make you feel good.

No, this is not narcissistic even though it might seem like it. Self-love is success. Love yourself enough to say ‘no’ to anything that doesn’t make you happy, doesn’t serve your purpose, or drags you down.

5. You have moments where you appreciate who you see in the mirror.

Ideally, you should appreciate who you see in the mirror at every moment. But even if that doesn’t happen, if you do it more than you used to, then that is success. Love yourself. You are awesome.

6. You have learned that setbacks and failure are part of self-growth.

Not everyone can have success 100% of the time. That’s just not realistic. Life is about victories and losses. So look at your setbacks as stepping stones to something better. In reality, there really is no such thing as as setback. It’s all just part of a wondrous journey.

7. You have a support system that includes people who would do anything for you.

If you have figured out the people who “have your back” and recognized the ones who only pretend that they do, then you have succeeded. This is a painful realization, but once you learn to see the signs of betrayal, you can stay away from those people.

8. You don’t complain much.

Because you know there really is nothing to complain about. Unless you really have gone through some horrific life experience and had unimaginable losses, most of what we all experience on a day-to-day basis is just mundane. And successful people know that. And they live in a space of gratitude.

9. You can celebrate others’ successes.

Just because other people succeed, that doesn’t make you a failure. Applaud the people who rise to the top. The more positive energy you give to other people’s victories, the more you will create your own.

10. You have passions that you pursue.

You are not stagnant. You know you have something wonderful to contribute to the world. You have unique talents and gifts. Not only do you know that, you pursue it.

11. You have things to look forward to.

If you don’t have exciting things going on in your life that you are eagerly anticipating, then you are slowly dying inside. Successful people create goals that they are passionate about pursuing. They let this excitement drive their life.

12. You have goals that have come true.

Even though “failures” are a part of life, you have stuck to your goals and dreams long enough to make them come to fruition. You have  some tastes of victory. It fuels you.

13. You have empathy for others.

A person without empathy is dead inside. Empathy equals spreading love and positive energy into the world. Successful people know this. They love others as if they are family.

14. You love deeply and open yourself up to be loved by others.

Love is risky, and sometimes scary for people. It’s the one thing we all strive for, but it’s also intimately tied to the one thing we fear the most – rejection. If you open your heart enough to love and be loved, then you are successful.

15. You refuse to be be a victim.

You know that life doesn’t always happen to you. Many times, you are a co-creator of your life experiences. Successful people know this and refuse to be kept down by life experiences. The rise up and conquer anyway.

16. You don’t care what other people think.

You know you can’t please everyone. You know that the standards with which society judges people is many times unrealistic. So you just keep true to yourself and love the person you are.

17. You always look on the bright side.

Life can be full of disappointments – if you choose to see them that way. Otherwise, they are learning opportunities. No negative experience is ever wasted as long as you learn from it.

18. You accept what you can’t change.

Let’s face it – there many things you can’t change in life. All you can change is how you view what happens. If you can change your negative perspective on situations to a positive one, then you are successful.

19. You change what you can.

And let’s face it again – there are many things you can change in life. Successful people don’t sit around accepting the negatives that are changeable. They get out there and do something about it!!

20. You are happy.

To me, this is the ultimate definition of success. It doesn’t matter what the balance is in your bank account, how big your house is,  or how many fancy vacations you take. If you are happy, then you are succeeding in life.

Even if you don’t see yourself in many of these 20 things, don’t fret. It’s okay. Be happy that you see yourself in just a few. In time, the rest will come. You just need to keep moving onward and upward.

Originally posted on


5 Ways to Dress to Impress at Work



While most bosses won’t check out the labels on your clothes (unless you are have an extremely high-profile job where fashion is everything), the way you dress will likely make an impression on your boss no matter where you work. Looking presentable is important; waking up and throwing on clothes without thinking about what you are wearing won’t score you points. Certain factors — including how your clothes fit, which colors you wear, and how much skin you show — can affect how other people perceive you at work. Neat, presentable work attire can help you move up in your career, or at least keep your job, while consistent inappropriate clothing may negatively affect the way your boss perceives you. Particularly if your company has a dress code (official or not), breaking it can mean bad news for you. Thankfully, you can dress to impress if you follow these five easy steps.

1. Think about your audience

It’s common to hear people say to dress for your day, and this is great advice. Target has been in the news recently for creating a dress for your day atmosphere, which is something that is becoming very popular at many different companies. Dress for your day implies that you should do just that; if you’re sitting at your desk all day and your company allows jeans, then that might be just fine. However, if you have a meeting with an important client or your boss, you might want to dress up in a nice suit, or at least business attire.

Regularly thinking about your audience will show that you care about your job, and that you take it seriously. Many people also say that you should dress for the job you want: this means that even if everyone else in your job class wears jeans and polo shirts, you might want to dress a little nicer.

Source: Thinkstock

2. Be neat

Obviously, if you work at a fast-food restaurant with a required shirt, you won’t have a lot of options besides possibly which black pants you wear. However, you can control how neatly you dress in any situation. Tuck your shirt in, and make sure you wash it regularly. It doesn’t matter if every other person you work with is wearing the same shirt as you; if your shirt is clean and tucked in, and some of your coworkers’ shirts are ripped or dirty, you will be the one looking more presentable.

The above analogy is true for more than just a job at a restaurant. Looking neat and presentable is important for any job. Many workplaces are now encouraging a regular casual dress code; although you may be allowed to wear jeans, that doesn’t mean that you should wear jeans with holes in them. You can be neat no matter what you wear. The same is true for a business suit: a business suit isn’t impressive if it doesn’t look neat and well-maintained.

Source: Thinkstock

3. Look sharp

In addition to dressing neat, you should dress sharp whenever possible. This comes back to the idea of dressing for your day, but you can look sharp even on your relaxed days. You don’t have to spend tons of money to look sharp, either. While fancy name brand clothes make a nice touch, they aren’t always necessary, and for some jobs, they aren’t even appropriate.

One way to dress sharp is to have your own unique style and to maintain it. This doesn’t mean that you should dress so absurd that everyone in your office knows it’s you even without seeing your face, but having a clear personal style is a good thing as long as you are being respectful of your work culture. Avoid tacky additions that take away from your clothing, or focus your coworkers’ attention on your clothing instead of what you are saying (for example, a huge colorful necklace, or a ridiculous tie.) One last way to dress sharp is to keep in mind what is appropriate for the season in which you are working; if it’s winter and thirty degrees, don’t come into work in a sun dress or shorts.

Source: Thinkstock

4. Wear the right size

This seems like it should be the most obvious advice on our list, and yet many workers fail to wear well-fitted, appropriately tailored clothing regularly. Tailoring your clothing is a great way to look sharp at work, but even if you choose not to tailor your clothes, you should still try to find clothing that fits properly. Coming into work with clothing that is too big makes you look lazy, and sometimes gives the impression that you don’t care about your job. On the other hand, wearing clothing that is too tight can distract your coworkers. One study found thatrisque dressing at work is improper for all jobs; managers who dressed in a sexy manner were seen as less intelligent and competent.

Source: Thinkstock

5. Remember the details

Even if you wear clothes that fit and are fashionable, you will undermine all your hard work if you don’t pay attention to details. For women, this often means wearing minimal makeup, and both men and women should brush their hair (if they have longer hair) and wash their face, etc. There are also many items that you should avoid at work, including baseball hats (unless you are having a special team day at work), pajamas, offensive t-shirts, clothes with holes or rips, clothes that show too much skin, and so on.

Also, when possible, think about the colors you are wearing. Many people believe that dark colors make them look more professional, but color can be fun and appropriate if you make careful choices. Red can appear scary or send a bad message, blue can be calming, and other colors send different messages as well.

The most important thing is to make sure that you know the dress code at your work, and to dress appropriately for whatever you have going on during a particular day. If you want to go further than that, be sure to look sharp, and if possible, dress for the job you want instead of the one you have.

Originally posted on


10 Steps For First-Time Home Buyers

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Buying your first home can be a daunting task. But millions of people have been there before you and survived. If you do your homework, you’ll have the best possible chance of finding a place you can afford for a price you can handle. The big surprise for many first-timers is that they need to finish the first five steps on this list before they can even begin to look for a home.

1. Review your financial health.

Before clicking through pages of online listings or falling in love with your dream home, do a serious audit of your finances.

First look at savings. Don’t even consider buying a home before you have an emergency savings account with three to six months of living expenses. Look at how much is left over in your savings and investment accounts that could go toward a down payment.

Next, review exactly how much you’re spending every month – and where it’s going. This will tell you how much you can allocate to a mortgage payment. “Make sure to account for every dollar you spend on utilities, kids’ activities, food, car maintenance and payments, clothing, entertainment, retirement savings, regular savings, miscellaneous little items, etc., to know how and where a new mortgage payment fits into your budget,” says Liz Recchia, owner/broker at We Sell Real Estate, LLC, in Phoenix, Ariz., and author of “HELP! I Can’t Make My House Payment!”

As you research neighborhoods, factor in how moving would change your transportation costs to work. The Commute Solutions cost calculator takes into account your car’s vehicle type along with car payments, gas, miles traveled and other factors to help you estimate the cost of a potential commute.

2. Check into benefits for first-time home buyers.

Before you start meeting with lenders, it’s good to know what constitutes a good deal. And that includes looking into special programs that might make it easier for you to find a property you can afford. Read Credits For First-Time Home Buyers to learn more about these options. Take this information with you when you start looking for a mortgage.

3. Meet with lenders.

Many realtors will not spend time with clients who haven’t clarified how much they can afford to spend. And in most instances, sellers will not even entertain an offer that’s not accompanied with a mortgage pre-approval. That’s why – if you don’t have all cash (how many first-time buyers do do?) – your next step is talking to a lender and/or mortgage broker.

A lender or broker will assess your credit score and the amount you can qualify for on a loan. He or she will also discuss your assets (savings, 401(k), etc.) and debt, as well as any local programs that might be available for down payment assistance. That’s where your homework on first-time home buyer programs can help. If you think you qualify, look for a lender that handles the program you hope to get.

Do some research online, but work with a live person who can review your situation, answer questions and, if necessary, suggest how you can improve your credit.“Online calculators do not always include insurance and taxes or PMI [private mortgage insurance required if the down payment is less than 20%] and are not always an accurate picture of what the payment or actual fees for the loan are,” says Anita Wagoner Brown, director of sales and marketing for Home Creations, the largest new home builder in Oklahoma. For more information, read Investopedia’s tutorial Mortgage Basics.

4. Shop around for a mortgage.

Don’t be bound by loyalty when seeking a pre-approval or searching for a mortgage. “Shop lenders, even if you only qualify for one type of loan,” says Recchia.

Fees can be surprisingly varied. For example, an FHA loan may have different fees depending on if you’re applying for the loan through a local bank, credit union, mortgage banker, large bank or mortgage broker. See Understanding FHA Home Loans.

When you’ve gotten the best deal you can, get a mortgage pre-approval so you know how much house you can buy. And make sure you are pre-approved, not just pre-qualified.

5. Have a back-up lender.

Qualifying for a loan isn’t a guarantee your loan will eventually be funded: Underwriting guidelines shift, lender risk-analysis changes and investor markets can alter. “I have had clients who signed loan and escrow documents, and 24 to 48 hours before they were supposed to close were notified the lender froze funding on their loan program,” says Recchia. Having a second lender that has already qualified you for a mortgage gives you an alternate way to keep the process on, or close to, schedule

6. Find a realtor.

Once you know how much you can afford and the loan amount you’ll qualify for, it’s time to find a real estate agent. Look for one who works with a team of people who can offer suggestions about home inspectors, insurance agents, etc.

“Realtors do a lot of your groundwork up front for you by contacting listing agents to set up showings and help you negotiate the purchase,” says Brandon Gentile, a real estate agent at Keller Williams Realty in Clarkson, Mich. “The best part is, a buyer doesn’t pay for working with a realtor. The service is free for a buyer, as sellers pay all the commission.”

7. Decide on a neighborhood.

You’ll probably have an ideal location, but keep an open mind as you see how much house you can buy in different areas. Homes and land are less expensive the farther they are from a metropolitan area. On the other hand, imagining that the long commute won’t matter that much is an easy trap to fall into. The stress and costs of a long commute can undermine marriages, finances and mental health. Use the calculator in step 1 to see what that extra trip could add to your monthly bill.

8. When you find a property, crunch your numbers again.

If you’re thinking about making an offer on a home, take another look at your budget. This time factor in closing costs, moving expenses and any immediate repairs and appliances you may need before you can move into the home, notes Felipe Pacheco, a division manager of Primary Residential Mortgage Inc. (PRMI), who is based in Salt Lake City. Don’t overlook hidden costs such as the home inspection, home insurance, property taxes, homeowners association fees and more.

9. Look over utility bills.

First-time home buyers are often moving from rentals that use less energy (gas, oil, electric, propane, etc.) and water than a larger new home will. It is easy to be ambushed by soaring rates when your new house has ceilings higher than your rental – or older windows that leak air. Then there are unexpected utilities, such as buying gas to power a lawnmower. These costs can blow a budget.

Before submitting a purchase offer, request the energy bills from the past 12 months to get an idea of the average monthly cost, suggests Marianne Cusato, an award-winning designer based in Miami, Fla., and co-author of “The Just Right Home.” Most utility companies can provide a homeowner copies upon request. “If you are in love a house and everything else works but the energy bills, have an audit preformed to assess what your options are for making it more energy efficient,” says Cusato. “In many cities the electric company will come out and do the assessment for free.”

10. Don’t forgo a home inspection.

After your offer has been accepted, splurge for a home inspection. Spending even $500 can educate you about the house and help you decide if you really want to pay for necessary repairs. You can also leverage your offer depending on the results of the inspection report and make the seller financially responsible for all or some of the repairs.

The Bottom Line

Purchasing your first home is perhaps the biggest financial decision you’ll ever make. Don’t take on more of a financial obligation than you can handle. A small stretch may be worth it, but a big one could haunt you if life gets temporarily bumpy.

That’s why Recchia suggests keeping your risk tolerance in mind. “If you find great security in owning your house, save more money for a large down payment and find a loan that works for you. The higher the down payment, the less in debt you will be; the less debt, the better you will be able to weather economic storms and still own your house,” she says.

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11 steps to financial freedom

by Julie Cazzin



Want a new car? A bigger house? An earlier retirement? Make your own financial plan right here, in 11 easy steps.


I learned everything I know about money from my dad. Even though he had little formal education, he understood how money works, how to get it and how to make it grow. One moment stands out in my memory: it was a Sunday afternoon when I had just turned 12. Dad took his tan leather briefcase down from the top shelf of his bedroom closet, pulled out his notebook and preceded to show me how to create what I now know was his personal financial plan.

That afternoon, at our kitchen table, he showed me how saving can earn you money through compounded interest, and how owing money can bury you in debt. His message? If you have a financial plan, you have choices—and having choices and setting goals is what leading a successful and satisfying life is all about.

My dad’s personal financial plan was his road map, helping him navigate to his dreams. And the roads to those dreams were built on details. For instance, dad always knew exactly what his take-home pay was, how much the family spent every week on groceries and gas, and how much he needed to save each month to pay off his mortgage in 10 years—his main financial focus when I was growing up.

His plan wasn’t just about counting pennies though, it also allowed him to plan for luxuries—and pay for them in cash. That’s why there was a special column in his plan for $50 in weekly savings towards a family trip to Italy. He had a system he believed in, and made sure the household finances were managed effectively.

These days, most people I know don’t have a financial plan. We spend a lot of time planning for other aspects of our lives, such as our careers, marriages and having kids, but many of us fail to build a plan to achieve our financial goals.

If you would like to stop wondering about whether you’ll ever realize your financial goals, and build a plan to actually reach them, I can help. Read on and I’ll not only show you how to build a proper financial plan, I’ll take you through each step, complete with worksheets and a blank financial plan template that you can fill in at the end. Follow my simple instructions and in no time at all, you’ll have the peace of mind that comes with a professional-quality personal financial plan—without having to pay a financial planner a dime.

1. Talk to your spouse
Most couples never talk to each other about their financial goals. If you’re in a relationship, before you roll up your sleeves and dig into the numbers, talk to your spouse about what you want to accomplish. “Have a brief conversation about goals, values, and what kind of lifestyle you want,” says Karin Mizgala, chief executive officer of Money Coaches Canada, a national network of fee-only financial experts based in Vancouver. “That’s key to a good start.”

Action step #1: Click here to find 10 worksheets in the “MoneySense financial plan kit.” There is a PDF version of each worksheet that you can download and print out if you want to fill in the sheets with a pencil or pen. There is also a Microsoft Word version you can fill out on your computer. Print out “Worksheet 1-Prioritize your goals” for this step. You and your spouse should fill this sheet out separately, then compare the results when you’re done.

2. Figure out where you’re at
Before you start worrying about where you want to go, you first have to figure out where you are now. In this step you’ll create a net worth statement, which is essentially an honest measure of your current wealth. You do this by tallying up the value of what you own (your assets) and what you owe (your liabilities). When you subtract your liabilities from your assets, you get a number that represents your net worth. Your net worth statement is an important tool that charts your financial progress over the years. For instance, if your net worth is going down, you’re eroding your wealth and making it harder to achieve your goals. If it’s increasing, you’re on your way to getting richer and achieving your financial goals.

Action step #2: Determine your net worth. Print out “Worksheet 2-Gather your documents.” It’s a checklist to help you pull together what you’ll need before you start, including bank statements, credit card statements, and life insurance polices.

Once you have all your documents in front of you, you’re ready to fill out “Worksheet 3-Your net worth statement.” First list the values of all of your assets, including your home, your cars, your cash and investments. Then list your liabilities, including credit card debts, your mortgage and any other outstanding loans. Tally both your assets and your liabilities and transfer those amounts to the following section, your simplified net worth statement.

Finally, subtract your liabilities from your assets to discover your true net worth. This shorter net worth statement gives a clear snapshot of exactly where you stand today.

3. Track your spending
The key to building a strong financial plan for the future is to understand how much you spend and save right now. This is called tracking your cash flow, and it can give you a sense of control and confidence that makes it easier to make financial changes in your life.

Personally, I’ve kept a small journal tracking my spending for years because it helps me modify my behaviour if my spending gets out of control. It’s not always easy, but it works.

“The part most people dread is taking a really close look at their expenses,” says Mizgala. “But don’t put it off. Successfully managing cash flow is your key to financial control. It will give you an awareness that has more long-term value than anything you can invest in, buy or sell.”

The point of the exercise is to find out whether you finish each year with a cash surplus or a cash deficit. This number will tell you a lot about your general financial shape. A surplus means you’re living within your means, while a deficit shows you’re spending more than you make. If you have a deficit, you will have to cut your expenses (or increase your income) to achieve any financial goals.

What do most people find after doing this exercise? “They’re shocked,” says Mizgala. “It’s a very revealing exercise, mainly because if you have a family with two spouses with debit and credit cards, it’s hard to really see the complete financial picture unless you write it down. This awareness allows you to set up a system for the household.”

Action step #3: Record your cash flow. Fill out “Worksheet 4-Your spending and savings.” It shows what money is coming in (wages, interest, government benefits) and what’s flowing out (rent, debt payments, utility bills). Fill in all your monthly expenses in column 1 and your annual expenses in column 2. (You can leave column 3, the estimate for your future spending in retirement for a later date.)

Tally up your expenses in both columns and subtract them from total net income on both a monthly and yearly basis. The result is your cash flow deficit or surplus.

A good way to approach this exercise is to start with your regular monthly after-tax income and subtract the bills that don’t change month to month, such as rent or mortgage payments. If you don’t know the exact numbers, put in averages for things like groceries, gas or children’s activities. Then add in expenses that only come up a few times a year, such as travel, car repairs and gym fees. Estimate a total for these and divide it by 12, and put that figure in the monthly column of your worksheet. You may not pay the bills in 12 monthly installments but imagine you are setting money aside each month so that you have the total amount when the bill comes due.

4. Adjust your spending
Look closer. Are your expenses higher than your income? If so, you’re living beyond your means. You’ll need to adjust your expenses accordingly so you don’t go further into debt.

This step is not about punishing yourself or laying blame. If you’d rather eat out four times a week than buy a cottage in 10 years, that’s your choice. But you owe it to yourself to be honest about what you’re doing so you’re not wondering why you can’t reach your financial goals.

If you decide to cut back, there are some less painful ways of doing it. Consider renegotiating your mortgage to a lower rate or cutting out one major expense completely. A close friend of mine cut the $5,000 annual family vacation and substituted a couple of long weekends of camping instead. It saves his family $4,000 annually.

If you have a cash surplus, congratulations. You can start allocating money to meet your goals right away.

Action step #4: Compare your spending to your goals. Take a second look at “Worksheet 1-Prioritize your goals” and “Worksheet 4-Your spending and savings.” The idea here is to look at how well your current spending habits mesh with your goals. If you have a cash flow deficit you won’t be able to meet your goals, so you’ll have to see if you can free up cash by cutting back your spending in areas that are less important to you.

For instance, if you have a $5,000 a year deficit on Worksheet 4 and one of your goals is to go on a $4,000 family vacation to Britain in four years, you need to figure out a way to cut $6,000 a year from your spending. You could try using only one car and taking public transit to work. Such a cut could save you $6,000 a year in vehicle costs, allowing you to both balance your budget and reach your travel goal.

5. Set your life goals
Financial goals don’t just happen. You make them happen. This step requires you to assess where you want to be five, 10 and 20 years from now and answer some big questions, such as where you want to live in retirement and when you want to stop working.

One tip is to visualize what your life will be like 10 years from now if you do everything right. The truth is when they picture their future lives, very few people see themselves in a $10-million house in Hawaii. Most people’s goals are more realistic, such as keeping up their current standard of living in retirement (with maybe a few upgrades), preventing any financial disasters, and having the freedom to do the things they love, such as spending more time with friends and family.

“Think of what type of life you want in the future and how you are going to organize your life right now to get it,” says Mizgala. “Your job is to structure your finances so you can achieve your vision.”

Action step #5: Set your top three goals. Fill in “Worksheet 5-Your life and financial goals” and “Worksheet 6-Your top three goals.” If your are in a relationship, sit down with your partner and examine what your goals are and how they fit in with your spending and saving patterns. On Worksheet 5, list each of your top four or five goals and assign a dollar value to each, as well as a time frame for achieving the goal.

Now, compare how closely your goals align with those of your partner. In Worksheet 6, list the three most important goals that you both agree on, in order of priority, in column 1.

6. Develop a strategy
Once you know where you’re going, you need a plan to get there. The usual route is to spend less than you earn and invest the surplus in such a way that you can get where you want to go.

One word of caution—if you’ve identified your goals but you’re in debt, you probably should address that debt before you start investing for the future. “Even when people are not overspending and have debts that carry reasonable interest rates, I encourage them to work aggressively at paying those debts down,” says Norbert Schlenker, founder of Libra Investment Management in Salt Spring Island, B.C. “Don’t even think about investing before your debts are all gone.”

Action step #6: Chart a path to your goals. Go back to “Worksheet 6-Your top three goals” and in column 2, note any obstacles to achieving each goal. Then, in column 3, write down the action steps that you and your spouse have both agreed on to make that goal a reality. For instance, when you tally up the costs of your top three goals, you may find that you need an extra $65,000 in five years to meet those goals. The main obstacle may be that your household income is low because one partner works only part-time. That partner may decide to work full-time in order to earn extra money. The key is to develop strategies and appropriate timelines to make your goals materialize.

7. Review your insurance
If you work full time, much of your insurance may be provided by your employer’s group plan. But is it enough? If you feel confident enough to do some basic calculations yourself you can find out.

Many workplace benefit plans include disability insurance, but if yours doesn’t, get enough to replace at least 60% of your after-tax income.

Then look at your life insurance needs. The general rule of thumb is to get enough life insurance to cover 10 times your income if you have kids under 10 years old (five times your income if you have kids over 10), plus the amount needed to pay off your debt. So if you make $50,000 a year, you have $250,000 outstanding on your mortgage, and two kids under 10, you will need $750,000 in term life insurance. Go to for quotes.

At this point, it may make sense to have an agent review all your insurance policies—disability, life, auto and home—to make sure your coverage is adequate. But be careful. “Do not be oversold on insurance by an industry that is famous for doing exactly that,” says Schlenker. “Pay attention to fees, especially with life insurance. If you need more life insurance, chances are renewable term is the right product for you. You want plain vanilla coverage for a plain vanilla problem—your kids going hungry because you can’t work.”

Action step #7: Review your coverage. There’s no worksheet for this step, but you should still take some time to carefully review all of your insurance coverage. If you don’t have group coverage through work, you probably have private insurance policies for medical, dental, life and disability insurance. Consult an independent insurance agent for a quick review. If you need extra coverage, make a note of it so you can include that in your final financial plan.

8. Slash your taxes
Most tax planning is relatively simple. You’re probably doing a lot of things right already. For instance, if you own your home and use RRSPs, Registered Education Savings Plans (RESPs), and Tax-Free Savings Accounts (TFSAs), you’re already taking advantage of the best tax shelters out there.

To reduce the taxes you pay on your investment portfolio returns it helps to understand that the income tax system treats the various sources of investment income differently. Interest on bonds and foreign dividends is taxed at your full marginal tax rate, Canadian dividends are taxed at rates about one-third lower, and capital gains at half the full rate. So there are advantages to holding investments that generate capital gains and Canadian dividends outside of your RRSP and TFSA if you’re tight on contribution room.

Action step #8: Consider calling a tax accountant. Again, there’s no worksheet for this step. But a few basic principles apply. For those with low to moderate incomes, paying off debt—including the mortgage—is the best tax-planning you can do. That’s because you don’t pay taxes on the capital gains on your home and there’s no tax on the return you get for getting out of debt. If, however, you’re in a higher tax bracket—earning $85,000 a year or more—it may be worth paying for a couple of hours of an accountant’s time to see what mix of investment options—RRSPs, RESPs and TFSAs—is right for you tax-wise. Have these suggestions handy for your final plan.

9. Create an investing policy
Every professional financial plan includes an Investment Policy Statement (IPS) that recommends how a portfolio should be invested. It puts in writing the rules that will make you a more disciplined investor. Having an IPS helps you to stick with your plan and keeps you from changing course when the market gets volatile.

A typical investment policy might specify that your portfolio should always maintain a ratio of 60% stocks to 40% fixed-income investments. This ratio is determined by your time horizon and risk tolerance. The longer your time horizon and the greater your tolerance for risk, the higher the equity portion of your portfolio. As you near retirement and need the security of more stable income from your investments, the portfolio mix will usually tilt towards bonds.

An IPS also states the expected annual returns for your portfolio—typically 5% to 6% per year—over a very long time period, such as 20 years or more. Your IPS might also note the volatility you should expect for a given portfolio. For instance, it could say that you should expect the portfolio to suffer a 10% drop in the short term at least once a decade.

Action step #9: Determine which investments are right for you. Fill in “Worksheet 7-How are you currently invested?” and “Worksheet 8-Which investments are right for you?” On Worksheet 7, itemize every investment you own today—including cash, fixed-income products and equity holdings.

Worksheet 8 will help you assess how much you need to save monthly, when you’ll need the money, and what your risk tolerance is. The results will allow you to zero in on how you should invest in future to meet your goals.

If you have trouble with this section, you can always leave it for now. Once your financial plan is complete, you can consult a fee-only adviser to help you build an investment strategy that’s right for you.

10. Write up a will
Every adult who owns assets and has a spouse or children should have a will. An accurate and up-to-date will is the only way to ensure your assets will be distributed the way you want them to be. If you don’t have one, you’re letting the laws in the province you live in make those decisions for you. And if you hold the belief that your spouse will automatically inherit everything—you’re wrong. In most parts of Canada children trump partners. Without a will your husband or wife will get a predetermined amount of your assets—the rest goes to the kids.

Action step #10: Create or update your will. If you have an updated will it should be filed with your financial plan. If you don’t have one, hire a lawyer to draw one up for you. Visit and search for lawyers in your area who specialize in wills and estates.

11. Create your final plan
A typical financial plan has five main parts. The first outlines where you stand right now, that’s your current situation. The second contains your top financial goals, or where you want to go. The third is a simple net worth statement. The fourth lists the steps you must take to achieve your goals. It includes your income and expenses, an overview of your insurance, a section on retirement planning, and a section on estate planning. Finally, the fifth section—usually a separate document—is your Investment Policy Statement, which lays out how your portfolio is to be invested.

To get a better feel for what your financial plan might look like, let’s take a look at a plan that has already been created by a fictional couple, Patty and Walter Berglund. The Berglunds are a 34-year-old couple living in Halifax. They have two daughters, Debra and Marie, ages 5 and 2. Their household income is $110,000 and after all expenses have been paid, they have $20,000 in cash left over each year.

Their plan lists their top five goals—to pay down $20,000 in consumer debt, save $5,000 for a family trip to Disney World in two years, pay off their $150,000 mortgage in 15 years, save $60,000 in RESPs for their daughters’ post-secondary education and finally, to retire comfortably at age 60.

This is followed by a basic statement of their assets and liabilities that shows a net worth of $82,000. The couple’s projected income and expenses show a $20,000 annual cash surplus. That money is earmarked for their goals in the following way: In the first year the entire $20,000 surplus will go towards paying down the debt. In year two, $5,000 will go towards the big family Disney World trip, $5,000 towards an extra payment on their mortgage, $5,000 to the RESPs and $5,000 to a spousal RRSP for Patty. The couple agrees to continue using the annual surplus in this way each year until their goals change.

After consulting with an insurance agent, the Berglunds agreed that their group plans with their employer are mostly adequate but they decided to increase Walter’s insurance coverage by $300,000. In the section on retirement planning, the couple made some assumptions: that Walter remains employed as a physiotherapist and stays in the hospital’s defined benefit pension plan until age 60, and that Patty continues working part time earning $30,000 a year as a social worker. Walter will start saving $5,000 annually in a spousal RRSP for Patty once their consumer debt is paid off (excluding the mortgage). If they do this, the couple should have more than enough to cover their retirement expenses adequately. Their wills and power of attorneys are all in order.

The second document, the Investment Policy Statement (IPS), outlines the Berglunds’ investment plan. They have an average tolerance for risk and don’t require regular income from the portfolio right now. So a balanced 60% equity, 40% fixed income mix suits them fine. The couple wants a well-diversified portfolio at minimal expense. Thus, their policy states that low-cost index funds or exchange-traded funds are to be used wherever possible.

Their IPS also states that once a year the Berglunds will review their portfolio and rebalance to bring the asset allocation back to their pre-determined target mix of 60% equity and 40% fixed income. It also states clearly that sudden market price movements are not grounds for revision. This will help stop the Berglunds from making impulsive investment decisions out of fear or greed.

Action step #11: Create your financial plan. Open “Worksheet 9-Your financial plan” and gather together all of the worksheets you have already filled out. Worksheet 9 is a blank financial plan with all the sections already labeled for you. At this point, all you are really doing is taking information from the completed worksheets and putting it all together to form your plan. Before you proceed, it may help to review the sample plan for Patty and Walter Berglund at the end of Worksheet 9.

Now fill out “Worksheet 10-Your investment policy statement.” Again, refer to Patty and Walter Berglund’s Investment Policy Statement at the bottom of this worksheet for guidance. Write a brief summary of your current status, and under Objectives and Constraints write down your risk tolerance, time horizon, any taxation strategies you plan to use, and the amount of time you wish to spend managing your portfolio—in many cases, minimal.

Under Investment Strategy Guidelines, write an outline of how your investments will be allocated, according to asset class. The next three headings—Security Guidelines, Location Guidelines and Risk Control, Monitoring and Review are fairly generic and are already filled in for you.

Phew, it’s done! You now have a financial plan for the rest of your life. From this point on, as your goals change, modifications to your basic plan will be straightforward.

Of course you still have to follow your plan. But you’ll probably find that the process of putting it together has already changed some of your beliefs about how your money should be spent and invested, so changing your financial behaviour may not be as hard as you think.

To make sure you stay on track, you should take the time to review your plan at least once a year, and update it as necessary. It’s also a good idea to pull it out whenever you run into a big financial or life event, such as a market crash, marriage or job change. “It’s a tool to support you through life,” says Mizgala. “Money and household finances won’t be as scary when you break it down into these manageable bits. If you truly commit, it will be a huge boon to your emotional and financial well-being.”

Originally posted in


5 Benefits Of A Falling Market

by Bob Roger 




A good friend sent me a text the other day. The market was down, and he was nervous. “Is this the correction,” he asked. My response, which never changes each time he asks, was simple. “I don’t know. Stick to your investment plan.”

Study after study shows that investor behavior does a lot of damage to a portfolio. Good intentions aside, investors pile into stocks when the market reaches new highs. When it falls, they jump ship. The result is a repeating cycle of buying high and selling low.

Investor returns suffer. As this Morningstar report shows, investors’ actual returns lag mutual fund performance due to poor market timing. Carl Richards calls this the Behavior Gap.

There are ways to ‘Mind the Gap.’ Chief among them is to recognize the problem. We are more likely to avoid adverse investment behavior the more we understand it. Selling out of fear as the market declines produces sub-optimal returns. At a minimum we should consider this fact before executing a trade out of fear.

Beyond recognizing the problem, however, we can change our mindset. Lower equity prices, like falling prices on anything we buy, allows our money to go further. We’re thrilled when the price of gas falls. We are often less sanguine about falling stock prices. Yet the decline in the stock market offers several key benefits to any portfolio.

Here are five of them.

1.  Monthly Contributions Buy More Shares

As you contribute each month to 401(k), IRA, or taxable accounts, your money goes further. Even if contributions remain the same, the lower stock prices result in the purchase of more shares. It’s worth looking at your accounts to see this in action.

2.  Reinvested Dividends Go Further

Dividends can represent a significant portion of an investor’s returns. According to one study, from 1802 to 2002 dividends contributed five percentage points of the total 7.9% returns of stocks. Dividend reinvestment is key to these results.

According to one analysis, the reinvestment of dividends accounts for nearly 95% of the compound returns of the S&P 500 since 1926:

An investment of $10,000 in the S&P 500 Index at its 1926 inception (Figure 2) with all dividends reinvested would by the end of September 2007 have grown to approximately $33,100,000 (10.4 percent compounded). [Using the S&P 90 Stock Index before the 1957 debut of the S&P 500.] If dividends had not been reinvested, the value of that investment would have been just over $1,200,000 (6.1 percent compounded)-an amazing gap of $32 million.

Lower stock prices help supercharge the effect of reinvested dividends. At lower prices, reinvested dividends buy more shares of a company, fund or ETF.

3.  Share Buybacks Generate More Value

For the same reason that lower prices benefit new contributions and dividend reinvestment, lower prices also benefit corporate buyback programs. According to a WSJ report, companies repurchased $338.4 billion of stock in the first half of this year. As a company’s stock price drops, money spent on buybacks will purchase a greater number of shares.

4.  Rebalancing Enables You To Sell High And Buy Low

A fourth benefit of a falling market is an opportunity to sell high and buy low through rebalancing. Rebalancing, by definition, involves selling assets that have risen in value and using the proceeds to buy assets that have fallen in value.

As stock prices fall, rebalancing typically involves selling bond funds and using the proceeds to buy stock funds. The simple step of rebalancing results in increased risk-adjusted returns, in some cases improving results by 21%.

5.  Opportunity To Gain Priceless Investment Experience

Finally, a falling market gives investors invaluable experience. Many investors will manage a portfolio for decades. Living through a significant market decline provides a frontline opportunity to understand exactly how one will manage their emotions. This information can in turn inform future investment plans and expectations.

All of this leads me back to my friend’s question.  Is this the correction?

I don’t know.  Stick to your investment plan.

Originally posted on

More about Author, Bob Roger 

I am an invesde1c2794bde5140ddad11640c3bb7f64tor, lawyer, blogger, husband, father, and Buckeye fanatic. I graduated in 1992 from law school and have worked in private practice, in-house for a publicly traded company, and for a regulator in the securities industry. I’ve written about building wealth since 2007 on my blog, I also publish a weekly newsletter and podcast. My motto is simple–the best thing money can buy is financial freedom.


At a Professional Crossroads? How to Choose the Path That’s Right for You



Making a career choice and sticking to it is not as easy as it sounds, especially in today’s economic climate. It can be nerve-wracking to go through the process of choosing a path, especially when you’re not sure if it’ll take you to a long-lived career.


So how do you know which path to take? How can you be sure that going in a certain direction is the absolute best thing to do?


Consider these thought processes to help you make the career choice that’s right for you:


  1. Believe in the worth of your efforts. Only you know how much work and effort you’ve put into making yourself ready for the ideal career. And, as the saying goes, “You get out what you put in.” If you are genuinely satisfied that you’ve made the most thorough preparations, then pat yourself on the back and go for it!
  • Consider how your achievements measure up to others in positions similar to the one you want to be in.
  • Determine if the success you’ve achieved has equipped you to take the path you most want to take.
  • Trust that you’re good enough for it!
  1. Know your career goals. One of the most significant aspects of choosing the right career path is determining what you want to achieve from it. Take a look at the options in front of you. How well do they measure up to your goals?

  • Do you see yourself becoming the youngest CFO in the Northwest if you choose Option 1?
  • Will the recognition you desire be forthcoming after two years working in Option 2?
  • Can you safely say either option will allow you to reap the financial rewards you’re aiming for?
  1. Do it for all the right reasons. When chasing success, it’s very easy to get sidetracked by all the frills that seem to come with it. In fact, you may even lose sight of why you’re chasing a particular goal! Why would you choose a particular path? Is it to fit in with peers? Is it to prove to naysayers that you actually have what it takes?
  • Always choose the path that makes you happy and gives you pride in your (3)
  • Make choices that work out best for you and your family; forget those people on the outside looking in.
  1. Never compromise your beliefs. Above all, what’s ultimately important when at a professional crossroads is sticking to what you believe in. It can be really tempting to jump at an offer that seems to have everything you ever wanted, with the “small” exception that you have to step on toes to get to the top!

  • If you believe there’s a right way to achieve the professional success you want, stick to it!
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  • Usually, the choices that are the hardest to make are the best ones to make. It might not seem lucrative now, but you’ll never know what’s around the corner!


Remember that all that glitters isn’t gold! Sometimes the best road is the roughest road because at the end of it will be all the goals and successes you always dreamed of. Always remember to stay true to yourself and your goals; success is inevitable if you do!