FELECITAS B. PANTOJA, BSc
STEP 1 - GET ORGANIZED
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.
Are Your Goals?
Saving for Your Specific Goals
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
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
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.
Costly Estate Planning Mistakes
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.
Investment of Choice
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 (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 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.
You could make many of the same investments that managers of mutual funds make. So why bother buying mutual funds? There are several advantages.
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.
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.
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).
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.
WHAT IS THIS THING CALLED GIC?
Guaranteed Investment Certificates are issued by banks, trust companies and credit unions in Canada. The Guarantee refers to insurance cover by Canadian Depositories Insurance Corporation (banks and trust companies) or the Member Protection Fund (credit unions). Maximum coverage under this guarantee is $60,000 per person under CDIC coverage and $100,000 under MPF coverage, subject to certain restrictions and exceptions. GICs pay a stated amount of interest to the investor. Interest can be compound (adding to the principal on the payment date) or regular, meaning that interest is paid to the investor. Terms can range from 30 days to 5 years.
10 Facts About RESP
Earn an immediate return of 20% on annual contributions up to $2,000 with the Canada Education Savings Grant.
Carry forward unused Canada Education Savings Grant room.
Open an individual plan, or a family RESP for more than one child.
Contribute a maximum of $4,000 per child, each year.
Maximum lifetime contribution of $42,000 per child.
Accumulated earnings grow tax sheltered.
Accumulated earnings are taxed at the child’s lower personal rate when withdrawn.
Use RESP savings to pay for tuition, books and living expenses.
You can change the beneficiary.
Withdraw unused contributions any time; earnings can be transferred tax sheltered to your, or your spouse’s, RRSP.
is like growing a tree. You plant the seed, water it,
watch it sprout, nurture it, watch it grow, watch it bear fruit...
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