JOJI FELECITAS B. PANTOJA, BSc
Financial Planning Advisor

SERVICES                                                                                                                                           joji@waves.ca

This financial planning stuff used to confuse me a lot.  Every time my friends talk about stocks, mutual funds, GICs... I used to get intimidated and pretended I understood what they were talking about, right?

My friend introduced me to Mrs. Pantoja.  She spent lots of time educating me and my partner about this financial stuff.

Now, I often start the conversation about these things!  Hah!

GARRY REFELD, 48
Baptist Pastor

JOJI'S STEPS TOWARD SUCCESSFUL FINANCIAL PLANNING

STEP 1 - GET ORGANIZED

Have a system for storing your important financial information and documents. This will include a safe box, a home filing system, and a method for keeping track of your spending, debts, and investments.

STEP 2 - SET FINANCIAL GOALS

Develop a set of short-term and long-term goals that will guide your financial decision making.

What Are Your Goals?
The first step in achieving success in any endeavor is setting goals. In planning for financial success, you need to set specific goals. Joji Pantoja will guide you to list your financial goals. Some of your goals will require money, such as, "Save $200 per month in my retirement plan." Others will be things to do, such as, "Review my retirement benefits" or "Set up a monthly budget."

Saving for Your Specific Goals

• Determine how much you will need to save to reach them.

• Approximate the total dollar amount you will need for each goal.

• Determine the appropriate investment return for your time frame.

• Calculate how much you will need to save on a regular basis to reach your goal.

Joji has a worksheet which can be used for determining how you will reach any future financial goal. It will take into account the effect of inflation on reaching your goal.

STEP 3 - AVOID EXCESS DEBT

Make sure you can easily afford your necessary debts, such as mortgages and car loans, and avoid credit card and consumer debts.

STEP 4 - PAY YOURSELF FIRST

Pay yourself first by making your contributions to your savings plan the first expenditure you make every month. The first place to start is by taking a look at your current employment benefits and the savings plans your employer makes available.

STEP 5 - MANAGE FINANCIAL RISKS

Use the appropriate forms of insurance to control your financial losses due to illness, property loss, disability, premature death, or personal liability. Use an attorney to write your estate documents and a professional tax preparer to help you with any tax problems.

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10 Costly Estate Planning Mistakes
and How To Avoid Them

I DON'T NEED A WILL:
Everyone can benefit from a will or some other form of estate planning. Avoiding or reducing estate taxes, saving estate administrative costs, specifying who will receive your estate and protecting your family are just a few of the benefits a will can achieve.

Despite some financial costs associated with implementing an estate plan, for the vast majority of us, the benefits from a will or some other estate planning technique far outweigh the initial costs.

PROCRASTINATION:
Once a person recognizes the fact that they could benefit from some sort of estate planning, they often wait until it is too late. Unexpected death or disability can occur at anytime. 

INCORRECTLY TITLING PROPERTY:
Do-it-yourself estate planners often add children or others to bank accounts, investment accounts, real estate deeds and other property in an attempt at a cheap method to avoid probate and/or plan for disability.

Adding others to titles and accounts can have serious unintended consequences. For one, the added person's creditors may be able to access the property to satisfy their debts. You may even find a child's spouse in a divorce claiming a portion of the property. In addition, gift taxes may be triggered as well as the loss of significant tax benefit such as a stepped up basis upon your death. Further, by adding the person you have given up significant control of that property. If, for example, you added your child to the deed of you home, it may be impossible to transfer the property should the child withhold their consent.

A revocable living trust can avoid probate and plan for disability without exposing you to the pitfalls of adding children or others to the title of your assets.

LIFE INSURANCE:
Most people do not realize that life insurance proceeds are normally included in the estate of the deceased.

INCORRECT BENEFICIARY DESIGNATIONS:
Individuals often implement a well thought out estate plan only to have it undermined by an incorrect beneficiary designation. The most common, but certainly not the only mistake, is naming minor children as contingent beneficiaries.

For example, assume parents have wills that specify that in the event of both of their deaths that their estate be placed into a trust for their children's benefit until the children reach age 25. This is done to avoid the children receiving a large sum of money at age 18 as the parents recognize the negative effect that a large inheritance could have on a child.

Unfortunately, with the children named as contingent beneficiaries of the life insurance they will receive the proceeds at age 18. In addition, the courts will normally require that a court supervised and costly conservatorship be created to control the money while the child is a minor, which will have the effect of depleting the insurance proceeds.

An alternative is to name your estate or a trust directly as the contingent beneficiary. However, the exact beneficiary designation that is appropriate will depend upon the type of will or estate plan that you have in place, as well as other factors. Beneficiary designations are more difficult that they appear and you should consult you're your estate planner for specific advice concerning this matter.

FAILING TO PLAN FOR DISABILITY:
People are living longer and therefore the risk of being disabled sometime during your lifetime is increasing. A disability can be far more financially devastating than death. Nevertheless, disability planning is often ignored.

Just imagine that you are involved in a car accident, and although you will survive and fully recover, you will spend a month in the hospital and during that time you are unable to manage your own financial affairs. If you are married and your spouse has access to your finances and important assets then this may only be a minor inconvenience. However, if you are single or your spouse does not have complete access and control to an important asset this could be devastating. What if you owned a business and an important business decision needed to be made? Or what if you had intended to sell some stock or other investment but now were unable to do so?

Or imagine that you or your spouse has a serious stroke and are now permanently disabled. Without a disability plan it is often necessary to hire an attorney and commence a formal and costly judicial proceeding to have a conservator and guardian appointed.

GIFTING WHEN YOU SHOULDN'T AND NOT GIFTING WHEN YOU SHOULD:
When properly applied, gifting can be an extremely effective way to reduce estate taxes. However, many individuals incorrectly assume that gifting is simple and fail to obtain competent advice. T

DOING IT YOURSELF:
Even if a self-prepared will or trust is legally enforceable, estate planning is a complex legal process requiring knowledge in several legal disciplines, including estate law, tax law and property law. A proper estate plan involves evaluating a persons estate to determine the correct type of document (Will, Trust, ect.), drafting the document to accomplish the objectives and then coordinating the titling of assets and the beneficiary designation of life insurance, RRSPs, annuities, etCs. to be consistent with the estate plan.

HIRING A GENERALIST:
When hiring a doctor, attorney, mechanic or any type of service profession, I strongly recommend hiring a specialist. Almost without exception, the specialist will have more experience and skill in their area of specialty than will a generalist. This usually translates into higher quality services provided in the most cost effective manner possible.

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RRSP Simply Means...

An RRSP, or Registered Retirement Savings Plan, is a Canadian Government- approved plan that lets you save money for your retirement years. Your contributions are tax deductible (within certain limits), and the income earned is sheltered from tax.

FACT: Not only do you invest money that would otherwise be paid in taxes, but the earnings of your plan aren't taxed until you withdraw them.

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THE BASICS OF TAX PLANNING

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What's This Thing Called Mutual Funds?

Millions of Canadians are working toward their financial goals by investing their money in mutual funds. Whether it's saving for retirement or putting aside cash for a down payment on a home, mutual funds are becoming the investment of choice for a growing number of people.

Simply put, a mutual fund is a pool of investments made on behalf of a large group of people. Here's how it works: When you buy a mutual fund, you're actually putting your money together with that of many other people who like the same sorts of investments as you. A professional investment expert, known as a portfolio manager, takes that large pool of cash and invests it for the whole group. If the manager's choices of investments make a profit, you share that profit with everyone else in the group. If the investments lose money, everyone shares in the loss.

 

	The Investment of Choice Whether it's saving for retirement or putting aside cash for a down payment on a home, mutual funds are becoming the investment of choice for a growing number of people.

Sold in units
When you invest in mutual funds, you're buying a piece of the fund called a unit. Together these units make up the mutual fund, which is operated by mutual fund companies. Mutual fund companies keep track of all the individual investments by recording how many units each investor owns. The more money you put into a mutual fund, the more units you get. The price of a unit changes every day, depending on how well the investments are performing. When the investments are doing well, the price of a unit goes up. When the investments aren't doing as well, the price of the units goes down.

You make money on mutual funds if you buy your units at one price and sell them later at a higher price. Of course, you lose money if you sell your units for less than you paid for them.

 

	What do mutual funds invest in?

Mutual funds invest in many of the same things as individual investors - everything from treasury bills to shares on foreign stock markets. Mutual fund companies offer a variety of funds that let you put your money into many types of investments. For example, there are funds for people who want to buy short-term fixed-income investments and funds for those who want their money to go into Canadian stock markets. There are funds that specialize in buying shares in a specific sector, such as financial services companies, and funds that invest in a specific geographic region, such as Japan.

Portfolio managers buy many types of investments. While there are thousands of different investments available, they generally fit into two basic types: debt and equity.

Debt securities
Debt securities (or fixed-income securities) are obligations for an issuer to repay a sum of money, usually with interest. The issuer is typically a company or a government. Probably the most familiar kind of debt security is a guaranteed income certificate (GIC) from a bank. The bank uses your money for a set length of time and in return, agrees to pay back the original money with interest.

Debt securities are also an important way for companies and governments to raise money. They frequently sell debt securities called bonds and use the cash for major projects, or just to meet their daily expenses.

The government or company usually agrees to pay back the amount of the debt security within a set amount of time. If that period of time is about a year or less, the investment is often referred to as a money market instrument, which is a specific type of fixed-income security. Examples are short-term bonds and government treasury bills. If the length of time is more than about a year, the investment is often referred to as a fixed-income investment. Examples are corporate and government bonds and mortgages.

Equity securities
Equity securities are investments that give the holder part ownership in a company. When a mutual fund buys equity securities, it is buying a piece of a business. The most familiar example is common shares traded on the stock market.

Equity securities can earn money in two ways. The value of the shares can rise (or fall) as people buy and sell them on stock exchanges. If a company appears to be doing well in its business, more people may want to buy a piece of it and the price is likely to go up. On the other hand, if a company's business doesn't seem to be doing well, investors may decide to sell their piece of the company and the price is likely to go down. Some kinds of equity securities also pay you a portion of any profits the company may earn. These payments are called dividends.

 

	What advantages do mutual funds have?

You could make many of the same investments that managers of mutual funds make. So why bother buying mutual funds? There are several advantages.

Professional management
For one thing, professional portfolio managers make all the decisions about exactly which securities to invest in and when to buy or sell them. It's their full-time job, so you don't have to spend the time making these investment decisions on your own. Professional managers also have access to information and research that isn't readily available to individual investors.

Diversification
A second advantage is something called diversification. Diversification means owning several different investments at once. Here's why it's important: The value of your investments will go up and down over time; that's the nature of investing. But not all investments are likely to go up or down at the same time, or to the same extent.

Diversification may help your portfolio achieve better returns over the long term. Since mutual funds typically hold 30 or more investments, they offer a simple way to diversify your portfolio.

Easy access to your money
Unlike some other types of investment, mutual funds are liquid. This means you can sell your units at almost any time and get your money when you need it (even though you may get less than you invested).

Record keeping
And finally, mutual funds make your investments easier to keep track of. Mutual fund companies help you with the details by sending you regular financial reports, tax slips, and statements.

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WHAT IS THIS THING CALLED GIC?

10 Facts About RESP

1. Earn an immediate return of 20% on annual contributions up to $2,000 with the Canada Education Savings Grant.

2. Carry forward unused Canada Education Savings Grant room.

3. Open an individual plan, or a family RESP for more than one child.

4. Contribute a maximum of $4,000 per child, each year.

5. Maximum lifetime contribution of $42,000 per child.

6. Accumulated earnings grow tax sheltered.

7. Accumulated earnings are taxed at the child’s lower personal rate when withdrawn.

8. Use RESP savings to pay for tuition, books and living expenses.

9. You can change the beneficiary.

10. Withdraw unused contributions any time; earnings can be transferred tax sheltered to your, or your spouse’s, RRSP.

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Investment is like growing a tree.  You plant the seed, water it,
watch it sprout, nurture it, watch it grow, watch it bear fruit...