Million Dollar Journey

Canadian Tire Gift Cards, Tip’d and Weekend Links

FrugalTrader — Fri, 21 Nov 2008 11:30:10 +0000

Canadian Tire Gift Card Discount

Great Canadian Rebates has secured another “just in time for Christmas” deal with Canadian Tire Online to offer members 5% cash back (instead of 3.5%) on all Canadian Tire gift cards!

How do you get the rebate? Simply join Great Canadian Rebates (free), click through to Canadian Tire, and make your gift card purchase. From there, you’ll soon get 5% of your purchase deposited into your GCR account which can be withdrawn via PayPal or cheque. The 5% cash back deal is only valid until Nov 27, 2008 so make sure to buy them up soon. Remember, not only is it free to join Great Canadian Rebates, they will pay you $2 upon registration.

Also note that all Million Dollar Journey readers who join Great Canadian Rebates are automatically entered into a $25 bookstore gift card giveaway. You can check out my review of Great Canadian Rebates for more info.

For those who like to maximize discounts, one strategy is to buy the 5% discounted Canadian Tire gift cards through Great Canadian Rebates, then use the gift cards to pay for Canadian Tire gasoline in conjunction with a Canadian Tire money multiplier coupon. You’ll end up with discounted gasoline and some Canadian Tire money to boot.

Tip’d

Tip’d is a new social media website, but geared towards personal finance. In other words, it’s DIGG for Personal Finance enthusiasts. It officially launched on Tuesday and seems to be generating a large following. Check it out, there are some great articles that get published.

Weekend Links

Canadian Capitalist researches the iShares Portfolio Builder ETF’s and considers them too complex and too pricey.

The Digerati Life has a perfect post about my holiday shopping habits in the article: Last Minute Gift Ideas and Shopping Tips For Holiday Procrastinators.

Canadian Dream is giving away $100 worth of gift cards in his 2 year anniversary celebration and all you need to do is leave a comment. Hurry though, the contest closes today (Nov 21) 8pm CST.

My Dollar Plan asks Are You Ready to Lose Your Job?

The Financial Blogger also has a 2nd anniversary contest and is giving away $200 CASH!

Frugal Dad explains and likes Gel Fuel Fireplaces: A Frugal Home Heating Alternative.

Four Pillars writes about financial education in schools and how it’s not the only solution.

Lazy Man and Money evaluates the pros and cons of a gym membership.

Thicken My Wallet lists the top 5 mistakes in starting a business.

The Sun’s Financial Diary posts a chart that indicates that the Dow is near its 6 year low.

Where Does All My Money Go explains that Long Term Bonds Have An Attractive History…But..

Brip Blap has a great tip for consultants in his article: who is the client?

Michael James on Money gives his opinion on the current state of the auto industry in: Auto Bailout: Throwing Good Money After Bad

Money Smart Life tells us how Merill Lynch and AIG filed which in turn triggered the credit crunch.

Generation X Finance evaluates extended warranties on used cars.

Popular Posts:

Common Job Interview Questions

FrugalTrader — Thu, 20 Nov 2008 11:30:28 +0000

Continuing on with my job interview tips, lets discuss some common interview questions that I’ve gotten over the years. As some of you know, my career experience has been in the engineering field which may vary from other careers in terms of interviewing. However, I can see these interview questions being fairly common in many careers.

If you are going through the job hunt process now, hopefully this post will help you get partially prepared for your next interview.

Here are some common job interview questions:

What are your strength/weaknesses? These are always tough questions, but remember to stay positive, even for the weakness part. Use weaknesses like, you have a tendency to work too hard, or that you are a perfectionist.
Tell me about your work experience thus far? This part can easily be scripted and should flow nicely.
Explain how your work experience applies to the position advertised. Take parts from your experience and try to piece it together to explain how you will benefit the company. Remember, the interviewer wants to see how you will add value to the company.
Tell me about problems you’ve had at work (technical and social) and how did you over come them? Think about a scenario where you had challenges but overcame them with some creativity and perseverance. Employers are seeing how well you think on the fly and how you deal with problems as they come up.
If you were in [a certain scenario], how would you handle it? Before the interview, consider some of these scenarios that they could ask that relates to the position. For example, I once applied for an “Occupational Health and Safety” type job, and one of their questions was “How would you deal with an unruly union member?” Really.. how would you?
Do you know anything about [insert industry key words here]? This is an easy one, simply do detailed research in the field that you are applying to. For example, if you are applying to an oil and gas job, make sure to know all the ins and outs of the oil and gas sector.
What do you know about our company? Another easy question as most companies have websites that detail their operations. Due diligence is required before any job interview.
Where do you see yourself in 5 years? Be honest, what are your career aspirations? Employers are looking to see if you will grow with the company.

What common questions have you seen in your job interviews?

Popular Posts:

Job Interview Tips

FrugalTrader — Wed, 19 Nov 2008 11:30:38 +0000

After doing the same job for the past few years, I’ve been starting to get the itch to branch out and try new things. Trying to find new work means breaking out of my comfort zone, updating my resume, and getting ready for interviews again. You know what they say, growth comes when you get the courage to leave the routine and try new things.

I’m not an expert, but I’ve been to quite a few interviews in my career due to work term offerings in Engineering school. Obviously, my interview encounters might be slanted towards Engineering jobs. :)

From my experience, here are some interview tips that have served me well in the past:

Show up 5-10 minutes early - Showing up too early almost shows desperation, but showing up late is a terrible first impression. Personally, I like to show up 5-10 minutes before “go time” so that I can get mentally prepared.
Dress to Impress - It never hurts to look your best during an interview as it shows that the interview is important to you.
Firm handshake, eye contact and smile - When you first meet your interviewer, make sure to make eye contact, smile and give a firm handshake. This is a big rule that you might hear over and over. Why? Because it works. In this game, it’s all about first impressions.
While speaking/listening, make eye contact. Good posture is also important - Making eye contact while listening or speaking shows that you’re interested and honest. Make sure to blink though, otherwise, it can get creepy.
Be positive in all of your responses, no matter how negative the question - Interviewers are looking to see your responses to hard questions. No matter what though, always put a positive light on your answers.
Try to relate your experiences with what they are looking for - An employer is looking to fill a position within their company with as little “ramp up” time as possible so that they can start making money off you sooner. The more experience you have that relates to the job, the better. Even if you lack an abundance of relevant experience, you must have “some” relevant experience otherwise you wouldn’t be in the interview.
Always have questions for the interviewer - Having questions during and/or after the interview is always a good thing as it shows interest and preparedness for the interview. Note however, that questions about salary or benefits should be left until the offer is on the table.
Bring a sheet of your references - This is a nice way to finish off the interview as it shows that you are prepared, serious about the position, and confident about what your past employers think of you.

In the next column about interviews, I will go over some common interview questions that I’ve gotten over the years.

What are your job interview tips?

Popular Posts:

Book Review and Giveaway: Killing Sacred Cows

FrugalTrader — Tue, 18 Nov 2008 11:30:22 +0000

“Killing Sacred Cows” is certainly a catchy title. At first glance, you might think that this book has some sort of religious theme, but it’s not that type of book. Killing Sacred Cows is about money myths that perpetuate, and the reasons why they are myths. The thing that stood out most about this book is that it goes against common financial wisdom. Think living frugally or maximizing a 401k (or RRSP) is a means to wealth? The author certainly doesn’t.

About the Author:

According to the back of the book:

Garrett Gunderson is an entrepreneur who became a multi millionaire by the age of twenty-six. He is the owner of 5 companies, winner of the SBA Young Entrepreneur award, and one of his businesses is on both the Inc. 5000 list and the Utah 100 list of the fastest growing companies. Garrett coaches elite business owners in the financial services industry and has created programs that empower people to achieve wealth.

What is this book about?

As I mentioned above, this book is about debunking money myths. In particular, each chapter is separated by common money beliefs that can be holding us back. To be completely honest, a lot of the so called “myths” that the author writes about are strong beliefs that I currently have about money.

The myths covered are:

Myth 1: The Finite Pie
Myth 2: You’re in it for the Long Haul
Myth 3: It’s All About the Numbers
Myth 4: Financial Security
Myth 5: Money is Power
Myth 6: High Risks = High Returns
Myth 7: Self-Insurance
Myth 8: Avoid Debt Like the Plague
Myth 9: A Penny Saved is a Penny Earned

What Did I Learn?

I’ve always been the type to worry about the numbers in wealth accumulation. According to Mr. Gunderson, however, money in itself has no value, it’s people who have value. Money is simply the result of “adding value” to the world. How do you “add value”, you ask? Through finding what’s called your soul purpose.

Finding your soul purpose is discovering what brings you the most joy and creates the most value for others. It’s what enables us to develop to our full potential. Ask yourself, if you had all the money you ever needed, what would you do everyday to be productive? Also, in what areas do you have superior skill and have extreme passion?

These questions regarding “soul purpose” really get me thinking. Am I working to my full potential with my current career? Do I wake up in the morning to go to work simply for the paycheck?

Final Thoughts

Even though there are a couple sections in the book that I don’t agree with (like the section on self-insurance), overall, I recommend this book. It gives fresh perspective on how wealth and money works from someone who has made millions at a very young age.

Want a Free Copy?

Simply leave a comment and you’ll automatically be entered in the draw for a free copy.
Please only 1 comment entry / person (please enter a valid email address).
Only those with a North American mailing address may enter (publisher rules, sorry).
Contest will end Friday 5pm EST Nov 21, 2008 and the winner announced shortly afterward!

Popular Posts:

Wealth Tip: Learn the Art of Delayed Gratification

FrugalTrader — Mon, 17 Nov 2008 10:30:33 +0000

There is one characteristic of human nature that is causing the high amounts of consumer debt that the majority of North American’s hold. What is it? It’s need for instant gratification.

Why save to buy something when you can borrow the money and have it now? The problem with buying now and forgetting about it is that it catches up on you sooner or later. Before you know it, the minimum payments will be more than you can handle.

A (sub) prime example is the current housing crisis going on in the U.S. Due to the accepted “buy now now now - ask questions later” lifestyle, some people were buying way more house than they could afford. Instead of saving for a down payment and obtaining a mortgage within what they could afford to pay, people went for the bigger more expensive house that their income could barely cover even with the low initial mortgage rates. As it typically does, instant gratification caught up on the over leveraged homeowners. Now, there is a record high number of foreclosures on the market.

Building lasting wealth is a slow process. Yes, there are some who seem to “strike” it rich all of the sudden, but more often than not, the wealth is due to hard work and commitment over time.

Examples of how delayed gratification can build wealth:

Education: Getting post secondary education instead of trying to make fast money out of high school. I don’t need to tell you that post secondary education results in higher salaries than those without. However, being a “forever student” can obviously hinder wealth.
Long Term Investing: Doing your research into a sound long term investment strategy instead of jumping in and out of whatever stock is “hot”. Case in point, how well do those high turnover active mutual funds perform relative to low cost index funds/ETF’s?
Retirement Contributions: I always hear people around me questioning why they should they save for retirement today when they could be hit by a bus and not see tomorrow? Sure, it’s true that could happen, but what if the more likely happens and tomorrow does come? Will they be ready? Contributing early and often along with long term compounding growth is an easy way to retire wealthy.
Saving: Living below your means to save for consumer items instead of living paycheck to paycheck (or beyond). From the Millionaire Next Door, most of North American Millionaires do not look like millionaires at all!
Real Estate: Buying rental properties at a good price for the long term instead of flipping properties to get rich quick. Not only does flipping properties increase risk significantly, the profits are taxed at a higher rate!
Business: When starting a business, spend quality time building the foundation (ie. the business plan). Even though compensation is low at this stage, it will pay for itself many times over as the business grows. Ever wonder why there are so many “Make $10k/month working from home” ads? It’s smart marketers preying on human “get rich quick” nature.

When I was younger, my parents always used the cliche “good things happen to those who wait.” Maybe they were onto something.

Popular Posts:

Top 4 Tax Free Savings Account Strategies

FrugalTrader — Thu, 13 Nov 2008 10:30:51 +0000

With the upcoming tax free savings/investment account in 2009, my mind has been racing about what exactly to do with the account. Between my wife and I, we will have $10,000 worth of contribution room available to us in the first year which we intend to fully maximize.

How do we intend to use the account? I’ve written a few ideas in the original TFSA column which I’m going to expand on below.

1. Income Fund

I am a big fan of passive income which is evident in my dividend investing endeavors. One idea that I have for a tax free investment account is to invest for income. The reason being is that the income is completely tax free.

With my leveraged account, I don’t invest in anything that produces a return of capital like income trusts or corporate mutual funds. However, since taxation isn’t an issue with the TFSA, I will be looking into consistent high yielding equities to produce a tax free monthly income. Some equities that come to mind are REITs and income trusts like Canadian Oil Sands.

2. Aggressive Trading

Another idea is to use the TFSA for aggressive equity/options trading. This one is not as attractive as investing for income as capital losses cannot be claimed within a TFSA account. On the other side of the coin, gains will not face any taxation either.

One lower risk options strategy is to write call options for equity positions that you already own. With this strategy, you set the price that you are willing to sell your position for, but collect a premium in the process. If the stock price raises above your limit before the expiry date, you will be forced to sell. However, if the stock price stays flat or goes down during this time, the option will expire. The result? You get to keep equity position and your premium collected. If you like, you can keep writing call options and collecting those premiums.

Check out this link for a detailed series on how call options work.

3. Credit Card Arbitrage

When I wrote about credit card arbitrage before, I came to the conclusion that the strategy wasn’t worth it due to the thin spread between borrowing and accumulated interest after taxes. However, using a TFSA in conjunction with this strategy eliminates the taxation on the earned interest and makes the strategy more feasible.

Basically, take the free money that select 0% credit cards offer, deposit it into a high interest tax free savings account (approximately 3% these days), and collect the tax free returns on the free money. The biggest caveat being to watch the dates when payments are due.

4. Emergency Fund

This is perhaps the most popular solution for the TFSA as it will allow people to let their “emergency” money grow/withdrawn tax free. While there’s nothing wrong with using the TFSA this way, there might be a bigger potential with using the TFSA as a retirement account.

What do you plan to do with the upcoming tax free savings account?

Popular Posts:

Leveraged Investing and Prime Interest Rates

FrugalTrader — Wed, 12 Nov 2008 10:30:40 +0000

In my last Smith Manoeuvre update, a reader commented as to why would I invest in any stocks with yields lower than my interest rate. To answer the question, to me, it’s not only about the yield, but also the strength of the underlying dividend. You see, if the company is paying out an above average dividend yield, and a payout ratio (dividend per share/earnings) being high, there is a higher probability that the company will reduce (or even cut) their dividend.

In addition, regular reader, DAvid pointed out that it’s not about the interest rate that you pay on leveraged stocks, it’s the “after tax” interest rate that you pay accounting for the tax deduction.

As the “after tax” interest rate varies depending on your marginal income tax rate and your investment loan rate, I drafted a table indicating what kind of dividend yield your portfolio would require to break even in various circumstances.

Dividend Yield Required to Break Even with Leveraged Dividend Investing

	Marginal Tax Rate
HELOC Rate	25%	30%	35%	40%	45%
3.0%	2.25%	2.10%	1.95%	1.80%	1.65%
3.5%	2.63%	2.45%	2.28%	2.10%	1.93%
4.0%	3.00%	2.80%	2.60%	2.40%	2.20%
4.5%	3.38%	3.15%	2.93%	2.70%	2.48%
5.0%	3.75%	3.50%	3.25%	3.00%	2.75%
5.5%	4.13%	3.85%	3.58%	3.30%	3.03%
6.0%	4.50%	4.20%	3.90%	3.60%	3.30%
6.5%	4.88%	4.55%	4.23%	3.90%	3.58%
7.0%	5.25%	4.90%	4.55%	4.20%	3.85%
7.5%	5.63%	5.25%	4.88%	4.50%	4.13%
8.0%	6.00%	5.60%	5.20%	4.80%	4.40%
8.5%	6.38%	5.95%	5.53%	5.10%	4.68%
9.0%	6.75%	6.30%	5.85%	5.40%	4.95%
9.5%	7.13%	6.65%	6.18%	5.70%	5.23%
10.0%	7.50%	7.00%	6.50%	6.00%	5.50%
10.5%	7.88%	7.35%	6.83%	6.30%	5.78%
11.0%	8.25%	7.70%	7.15%	6.60%	6.05%
11.5%	8.63%	8.05%	7.48%	6.90%	6.33%
12.0%	9.00%	8.40%	7.80%	7.20%	6.60%

As you probably concluded already, the higher your marginal tax rate (ie. the greater your regular income), the larger the advantage of leveraged investing. I’m personally in the 40′ish marginal tax bracket with a portfolio dividend yield of around 3.6%. This means that as long as my investment loan rate stays below 6%, I will remain cash flow positive. However, it’s a moving target as I expect my dividends to grow over time.

To look at the table another way, with today’s prime rate being 4%, at 40% MTR I would require a dividend yield of just 2.4% to break even.

If you currently have a leveraged income portfolio, are you cash flow positive?

Popular Posts:

Top 7 Financial Tips for Newlyweds

FrugalTrader — Mon, 10 Nov 2008 10:30:24 +0000

After a popular post about the financial disaster called divorce a little while ago, I thought I would chime in with my thoughts on how to get ahead after tying the knot. The tips below are applicable to not only newlyweds, but any family.

1. Before getting married, open your communications regarding money.

Figure out your spouses spending and saving philosophies along with long term financial goals. Make sure that you’re both on the same page or at least have similar views. In addition, all debts should be laid out on the table. As I’ve written about before, one of the leading causes of divorce in North America is money and financial infidelity.

2. Live below your means.

This doesn’t just apply to newlyweds, but to just about everyone. The only sure-fire way to get ahead financially and build wealth is to live below your means. Building a healthy savings can be used to build a down payment fund, contribute to RRSPs, or build other assets.

3. Plan and set your goals together as a team.

As marriage is serious business, money within the family should be planned as a family. Any debt held by a spouse should be considered as family debt and paid down accordingly. Other goals such as buying a house, retirement and vacations should be planned together as a team.

4. Arrange your affairs in a tax efficient matter.

If you’re at the stage of opening a non-registered account, for tax attribution purposes, the high income spouse should pay all the bills while the lower income spouse invests his/her money. Some may have a problem with having separate bank accounts. A solution for this is to have a common bank account for shared expenses, and separate bank accounts for investing and personal spending.

5. Have regular “financial” family meetings.

This is one of the steps that ensure proper communication about money. Once a month or so (or whatever is convenient), have a family sit down to discuss financial matters, goals, large upcoming expenses and saving strategies.

6. If you have dependents, get disability/life insurance, a will and an estate plan!

Dependents are those who “depend” on the breadwinners income to live. It could be you, your spouse or your young children. Income should be “insured” in the case of long term disability and death. Note that insurance is not a “get rich” benefit, but a lifestyle protection benefit.

For long term disability, I would personally choose a “own occupation” disability insurance rather than a “any” occupation insurance. In the case that you are disabled, this will allow you to collect benefits providing that your injury prevents you from doing your “own” job rather than “any” job. If you’re interested, here is an article detailing disability insurance.

For life insurance, term life should sufficient for most. This will provide fairly economical coverage in the case of the death of the main breadwinner in family. Don’t know how much coverage to get? Check out my calculations for an example of how much term life insurance we needed.

Even though death planning seems far away, you never know what can happen. Check out my article on why you need a will and an estate plan for more details.

7. Read and follow the book “Smart Couples Finish Rich.”

David Bach has some great information on how to plan family financial affairs. If you want a great start in your marriage, read and follow what’s recommended in the book. Make sure to read the ‘Values’ chapter carefully as I feel that it’s among the most important.

What tips do you have for newlyweds?

Note: In respect for Remembrance/Vetarans Day, there will be no post tomorrow (November 11, 2008). See you all on Wednesday!

Popular Posts:

Best of Million Dollar Journey - October 2008 Edition

FrugalTrader — Fri, 07 Nov 2008 10:30:04 +0000

Welcome to the monthly Million Dollar Journey summary. October was “gut check” month where the markets aggressively corrected taking my portfolio and net worth with it! No worries though as it’s a long term game.

Here are the top articles, comment contributors, and referrals for the past month:

Top Comment Contributors

Top Referrers

Many thanks to the sites that sent traffic to Million Dollar Journey over the past month. Below are the referrals that sent the most traffic to us in October.

Popular Posts:

TFSA Contribution Room

FrugalTrader — Thu, 06 Nov 2008 10:30:03 +0000

Giorgos asked an interesting question in the Tax Free Savings Account (TFSA) thread about how the contribution room of the TFSA will be calculated if there are gains in the account. Basically, if you invested the $5,000 maximum in the first year and luckily turned a quick profit and withdrew the money, what would would be the new contribution room? The answer surprised even me.

Here is the question again:

Lets say you put $5k into your TFSA, and you decide to invest them in some crazy options strategy (with a 1% of actually happening). Things happen the way you wanted and you end up with a total account value of $100k. What’s going to happen to the gains? Your capital gains are tax free, but your contributions space is already full. Question is, where does the $95k go? Do they let you keep those money in your TFSA, because they are from capital gains. What if I withdrew the money, what is the contribution room then?

I think that it may be safe to assume that all gains can remain in the TFSA (investment account) without any penalties. The interesting question is the last one, what happens to the contribution room if the account is liquidated? Coincidentally, I was browsing through the local newspaper, and a reader had a similar question for a financial advisor columnist (can’t remember his name).

The column stated (confirmed by Ed Rempel) that any amount withdrawn from the TFSA is available as new contribution room for the next year! In the above scenario, if the $100,000 is withdrawn from the account, then $105,000 contribution room is now available for next year. Personally, I would have assumed that only $5,000 would be available to be re-contributed, but this is a welcomed surprise. However, the reverse is also true. If you contribute/invest $5,000 to your TFSA which results in a loss of say $4,000. If the remaining $1,000 is withdrawn, then the contribution room for the next year is $6,000.

This contribution room tidbit of information makes the TFSA even more attractive than it already was. Personally, when the TFSA becomes available, I will more than likely be using it as an investment account instead of an emergency savings account. I will be writing more on some my potential TFSA strategies in another post.

Popular Posts:

Millionaires Corner: QCash’s Portfolio Holdings

FrugalTrader — Wed, 05 Nov 2008 10:30:23 +0000

Yet another update from our favorite young millionaire, QCash. For those of you who are new here, QCash is a self made millionaire who retired at the age of 36 with a net worth of over 1.5 million. This post gives us a glimpse of what he holds in his portfolio.

In response to a reader question, I am providing a comprehensive listing of my portfolio holdings.

If you refer to my account structures, you will see what all the account numbers mean and what I am trying to accomplish with them.

Ironically, as I was looking at FT’s Smith Manoeuvre portfolio, it occurred to me that we are pretty sympatico on our dividend paying stocks.

I have also made some moves in the last month to reduce the mutual funds (with their yucky MERs) from my wife’s portfolio and move the cash into a few bargains. I also made a foray into a few Income Trusts. I looked for some energy trusts that have been hammered because of the falling oil prices, looked at their distributions when oil and gas were at their current levels and examined their long term cash flow potential.

I did manage to catch a few falling knives and got cut as a result, but overall, I remain content with my strategy. As I mentioned before, I am not losing a lot of sleep through this market turmoil as I still have my RRSPs and real estate to fall back on.

Since recently dropping $200k in paper losses, I lost an additional $75K, but has since rebounded to total losses of only $125,000. Not enough to have me crawling to the window ledge any time soon.

So here you go (comments, criticisms and kudos) welcome:

I1 - Growth/Dividend account

With this account, I tried to mimic the dividend growth fund from Bank of Montreal. I was not always successful in picking up the stocks I wanted at the price I wanted. While this is not a comprehensive list, this represents my top 10 holdings:

Barrick Gold
Bank of Nova Scotia
Canadian Natural Resources
Canadian National Railway
George Weston
Manulife Financial
Power Financial Corp
Talisman Energy
Suncor Energy
Sun Life Financial

I2 - Income Generating - Joint

1250 shares of BMO
10000 shares of PMT.UN (I also own a few of these shares in my RRSP - see below)

I4 - Non-registered - My Account

25000 shares of EIT.UN (this is the one that it is causing my stomach to rumble the most). At the time, this represented only 5% of my portfolio and I like it as it was diversified over a large number of trusts, much like XTR). I am watching the exchange offer closely and will decide what to do with my warrants, when issued. However, it does generate $1750 per month for me.

I5 - Non-registered - Wife’s Account

My wife was a mutual fund gal and still is. She currently holds:

7200 units of BMO Monthly Income Fund
1800 units of Mavrix Dividend and Income Fund
4800 units of TD Monthly Income Fund
6000 shares of Consumers Waterheater Fund

I have been slowly weaning my wife off mutual funds, especially ones she has “duplicate” of. All of the above funds essentially hold the same stocks. The same stocks I have been accumulating in our I1 account. The only reason I haven’t dumped them in their entirety is that she has held these over several years and has some significant capital gains. I am trying to avoid triggering them until I get a real firm grip on what the tax implications on our overall portfolio will be.

In our registered accounts, I have become more aggressive as I didn’t have to worry about taxes on capital gains on the stuff that was in there:

R1 - My RRSP

1500 PMT.UN Paramount Energy Trust
500 PWT.UN Penn West Energy - I actually sold these shares from my I1 account earlier this year, but decided I like the yield.
1000 ROI Fund shares - these were a Labour Sponsored Investment Fund I picked up a few years back. This was a classic example of investing in something for the tax implications rather than the underlying company (generally a very bad idea). I have to hold onto them for a couple more years without having to pay back the tax credits I received for them.)

R2 - My other RRSP

This has two private mortgages and represents my “fixed income” component. I have one mortgage at 10% and another at 5.5%. Both pay weekly and I transfer the cash to my R1 account annually.

R3 - My wife’s RRSP

I finally got my wife out of all her various mutual funds this year, only to invest them as the market collapsed (she is still not talking to me :-) but we have some principal protected notes through BMO - Skylon (this is because of her aversion to risk, which has been rewarded this year) and I also put her into the ROI Fund when I took my shares as I wanted the tax credits (again, this is a bad reason to invest).

The rest of my wife’s portfolio represents the rest of our “real estate” holdings:

300 Canadian Real Estate Investment Trust
1200 H&R Real Estate Investment Trust
1000 Riocan Investment Trust

She also holds 5000 shares of MacQuarie Power & Infrastructure Fund. While she has taken a hit on the capital, the return adds up nicely in her account each month. And she doesn’t really need the money for another 30 years or so, so I hope we can keep on top it.

I moved her RRSP money mostly into trusts to try to increase her return. Holding the trusts in an RRSP is great, but I am sure there will be implications come 2011 as the tax changes take place. I am still educating myself on what these changes will do to the distributions, etc…

I have been building a spreadsheet (that is getting more and more complicated) that outlines monthly/quarterly distributions to these accounts, and sorts all the holdings by type across my entire portfolio so that at any given time I can see my asset allocation by type.

Popular Posts:

Teaching Kids about Money - Oprah Again

FrugalTrader — Tue, 04 Nov 2008 10:30:24 +0000

While TV channel surfing one recent evening, I came by another episode of Oprah that had Suze Orman as a guest. As you may remember, I’ve written about Oprah and money before where Suze spoke to Oprah about the grotesque amounts of debt that most North Americans are holding today.

Why did Oprah catch my attention this time again? No, not because of her new hair style, but because the topic was about money and kids. In particular, it appears that this teen generation has a bigger sense of entitlement than previous ones. Why is that? Suze explains that with the booming real estate/stock markets (economy) in recent years when kids were 8 - 10 years old, parents were free spending as times were good. Now as those spoiled children are teenagers, they feel that money is no object and whatever they “want” they should have regardless of the cost.

How can we reverse this trend? What can we do to teach children/teenagers about the value of money? Here are some suggestions that I learned from the show.

Kid Money Lessons:

Kids follow what you do not what you say - If parents are free spending without regard to how much something costs, then children will pick up on that. If parents are responsible with money, then it is shown that kids will learn from that. Suze Orman considers this to be the biggest money lesson for parents.
An allowance must be earned - Suze Orman believes that children must earn their allowance through doing chores around the house. Specifically, she recommends to pay the child by the minute based on minimum wage which works out to be around $0.10 - $0.15/minute of work. If the work is done well, then give the child a raise.
Should a teenager have a credit card? - This would depend on if the teenager has shown that he/she is responsible with money. It is suggested that as a requirement for getting a credit card that the teenager must pay the credit card balance in full 2 weeks before it’s due.
Don’t reward kids with money - Getting good grades etc. should not be rewarded with money, it should be rewarded with quality time with the parents. Only work should be compensated with money.
Teach kids to separate needs and wants - Kids want everything! The best thing to do is to teach kids how to prioritize their needs and their wants.

For those of you who have kids, what are you doing to teach your children about money? I know that a lot of you have very young children (like me), have you thought about money lessons for your kids?

Popular Posts:

A Primer on Reverse Mortgages

FrugalTrader — Mon, 03 Nov 2008 10:30:56 +0000

You’ve probably heard of reverse mortgages before and probably already have a negative opinion on them. You may have good justification for not liking them as they are fairly high interest mortgages that are targeted to seniors with low cash flow. However, lets get into details a bit and see what they are really all about.

What is a Reverse Mortgage?

A reverse mortgage is basically refinancing a home (for seniors) in order to get the equity out today with no monthly payments until the full loan is due when the homeowner passes away or moves. It provides tax free money to the senior homeowner in exchange for a hefty interest rate loan that compounds semi-annually over time. The bright side is that the home owner will not need to make payments until the loan is due in full. The problem is that by the time the loan is due when the home owner passes away or moves, there is typically very little equity remaining in the home. This means nothing will be left behind to the next generation.

The Details

There are very few reverse mortgage providers in Canada with the largest being Canada Home Income Plan (CHIP). CHIP will reverse mortgage up to 40% of the value of the home for homeowners age 60 and over. Of course, the older the homeowner and the more the equity that is in the home, the closer to the 40% loan to value (LTV) they will receive. They provide a variety of payment options from monthly equity payments to lump sums

As you can imagine, the interest rate charged on reverse mortgages are higher than regular mortgages. In addition to that, since no payments are made, they interest due grows very quickly (compounded semi-annually). As of today, CHIP charges up to 8.95% on their reverse mortgages. That means if CHIP lends you $100,000 today, in 10 short years, there will be over $240,000 owing on the home.

The Benefits

As mentioned above, it allows seniors with very low cash flow to draw on the equity in their homes to fund their lifestyle. If the senior is not concerned with leaving an inheritance to the next generation, then a reverse mortgage may be a viable solution.
The reverse mortgage payments are tax free and does not affect income tested benefits (GIS and OAS).
The total owed will never exceed the value of the home.

The Downside

With the high interest rates, the equity in the home will disappear quickly as shown above.
If the homeowner keeps the reverse mortgage for a number of years until he/she passes, there will be very little left for the next generation.

Conclusion

Getting a reverse mortgage is an expensive choice, but it can be a viable solution depending on the situation. In my opinion though, a reverse mortgage should be the last resort after considering other options like selling and downsizing or renting out a portion of your home.

Popular Posts:

Weekend Reading - Halloween Edition

FrugalTrader — Fri, 31 Oct 2008 10:30:27 +0000

Happy Halloween! When I was younger, I loved it when Halloween fell on a Friday. The reason being is that I could stay out a little bit longer to collect more cavity inducing candy. This will be the first Halloween in our new house, and we expect it to be a busy one as there are kids everywhere in this neighborhood.

Anyways, enough rambling, here is some great articles from around the blogosphere:

The Digerati Life gives us Fun, Cheap Halloween Costumes To DIY.

Canadian Capitalist wonders, is thrift making a comeback?

Generation X Finance advises us to Set Aside $1,000 in an Emergency Fund. Now.

Lazy Man and Money lists Five Questions I Ask Myself Before Making a Purchase.

The Sun’s Financial Diary asks What Is Going on with Gold?

Frugal Dad comes up with Seven Unique Side Hustles To Keep Your Family Finances Afloat.

Money Smart Life tell us 5 tips for reducing your moving expenses.

Brip Blap explains the riddle of steel.

My Dollar Plan has a great article on 16 Ways to Save Buying in Bulk.

Money Grubbing Lawyer questions employee stock purchase programs.

photo credit: fauxto_digit

Popular Posts:

Million Dollar Journey

Canadian Tire Gift Cards, Tip’d and Weekend Links

Canadian Tire Gift Card Discount

Tip’d

Weekend Links

Common Job Interview Questions

Here are some common job interview questions:

Job Interview Tips

From my experience, here are some interview tips that have served me well in the past:

Book Review and Giveaway: Killing Sacred Cows

About the Author:

What is this book about?

What Did I Learn?

Final Thoughts

Want a Free Copy?

Wealth Tip: Learn the Art of Delayed Gratification

Examples of how delayed gratification can build wealth:

More Stock Trading Videos and Super Weekend Reading

Additional Stock Trading Video Seminars

Weekend Links

Top 4 Tax Free Savings Account Strategies

1. Income Fund

2. Aggressive Trading

3. Credit Card Arbitrage

4. Emergency Fund

Leveraged Investing and Prime Interest Rates

Dividend Yield Required to Break Even with Leveraged Dividend Investing

Top 7 Financial Tips for Newlyweds

1. Before getting married, open your communications regarding money.

2. Live below your means.

3. Plan and set your goals together as a team.

4. Arrange your affairs in a tax efficient matter.

5. Have regular “financial” family meetings.

6. If you have dependents, get disability/life insurance, a will and an estate plan!

7. Read and follow the book “Smart Couples Finish Rich.”

Best of Million Dollar Journey - October 2008 Edition

Top 5 Most Popular Posts for Oct 2008

Top Comment Contributors

Top Referrers

TFSA Contribution Room

Millionaires Corner: QCash’s Portfolio Holdings

I1 - Growth/Dividend account

I2 - Income Generating - Joint

I4 - Non-registered - My Account

I5 - Non-registered - Wife’s Account

R1 - My RRSP

R2 - My other RRSP

R3 - My wife’s RRSP

Teaching Kids about Money - Oprah Again

Kid Money Lessons:

A Primer on Reverse Mortgages

What is a Reverse Mortgage?

The Details

The Benefits

The Downside

Conclusion

Weekend Reading - Halloween Edition