What is TDMP?

The TDMP is a basically a way for someone interested in leveraging their home to invest to hand off the whole setup.  That is, TDMP will arrange the readvanceable mortgage, investment account/investments along with arranging payments, and mortgage pay down.  Coincidentally, their setup is very similar to the way that I have constructed my leveraged investment strategy.

What Does it Cost?

While not everyone has the time to watch their investments, automation can be a good thing. The automation with TDMP, however, comes with a cost (and other problems).  From their site:

The TDMP Setup fee is $2750 + GST and recurring Cash Management fees are $39.95 per month. These fees are 100% Tax Deductible and are funded from the proceeds of the plan so you are never out of pocket.

The Problems

While the fees are high (even if they are tax deductible), the biggest problem I have with TDMP though is their choice of investments.  The TDMP invests in a high distribution fund, and uses the monthly distributions to pay down the non tax deductible mortgage.  High distributions are great right?  With a leveraged investment account, it really depends on the content of the distribution.  Their 8% income fund has at least a portion of the distribution in the form of Return of Capital (ROC).

The TDMP withdraws all of the distribution and uses it to pay down the mortgage, similar to my modified Smith Manoeuvre strategy.  As readers of MDJ know, withdrawing ROC from a leveraged investment account can mean tax trouble for the underlying investment loan.  Basically as time passes, and the mortgage gets paid off, the investment loan will slowly become a non tax deductible loan due to the return of capital.

Over time, the investor will be left without a mortgage (hooray!) but with a large non-deductible investment loan in the place of a mortgage (boo!).  So basically back to square one.  Without the tax deductibility of the investment loan, the investor will be taking higher risk and will most likely face sub par returns after fees.

Final Thoughts

In my opinion, the only way that TDMP would make sense is if they use an income fund that payed distributions in the form of dividends only.  Dividends are tax efficient and can be withdrawn from a leveraged investment account without any consequence to the underlying investment loan.  That way, when the mortgage is eliminated, the investor will be left with a tax deductible investment loan.

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• Tax Free Savings Account (TFSA)

Copyright 2009 MillionDollarJourney - All Rights Reserved

Here were my picks at the beginning of the year

My 4 Stock Picks

1. Hanfeng Evergreen (HF.TO) - This company creates high yielding fertilizer for the Chinese market.  I’ve been watching this stock for a couple years now and it seems to be oversold relative to their (profitable) earnings.  This stock has the possibility of making a comeback providing that the Chinese market makes a partial recovery.  If the markets don’t cooperate in 2009, then this stock could go down even further.  Price as of closing Dec 31, 2008: $5.63
2. Johnson and Johnson (JNJ) - Now that I have my exciting stock out of the way, time to go to the boring large cap stuff.  Johnson and Johnson manufactures ’staple’ items like Tylenol, Johnson baby products, band aid, Listerine and other popular skin care products.  Even in a recession, I believe that people will continue to buy these products.  JNJ also offers a sustainable dividend at an attractive yield.  Price as of closing Dec 31, 2008: $59.83
3. Husky Energy (HSE.TO) - This is my pick for some energy sector exposure.  Even though the potential global recession throughout 2009 could keep oil prices depressed, I like Husky Energy’s oil properties and their profitability.  Their dividend doesn’t hurt either. Price as of closing Dec 31, 2008: $30.87
4. Power Financial (PWF.TO) - This holding company has large positions in IGM Financial, Great West Life, Canada Life and London Life.  It offers a generous sustainable dividend and I believe that this stock has been irrationally oversold.  Hopefully PWF will recover in 2009. Price as of closing Dec 31, 2008: $23.90

Here were the results during the last update:

Here is the most recent update:

1. Four Pillars 48.83%
2. Intelligent Speculator 43.32%
3. The Wild Investor 41.45%
4. Where does all my money go 28.72%
5. The Financial Blogger 13.29%
6. Million Dollar Journey 4.76%
7. Dividend Growth Investor 0.70%
8. Zach Stocks -3.09%
9. My Traders Journal -11.36%
10. S & P 500 +3.16%

My picks are slightly beating the S&P500, but lagging most of my fellow colleagues.   For those of you who had your own picks in the original article, how did you do?

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• Are Hybrid Vehicles Worth it?
• Tax Free Savings Account (TFSA)

Copyright 2009 MillionDollarJourney - All Rights Reserved

We are currently holding second place in the “best of blogs” poll held by the Globe and Mail.  If you haven’t voted already, please vote for us and see if we can push for the #1 spot!

Vote for Million Dollar Journey (scrolll to the end of the article)

Weekend Reading

Canadian Money Forum has a list of gas saving strategies.

Lazy Man and Money questions wealth creation.

Canadian Capitalist discusses the $0.05 levy on grocery bags.

Brip Blap has a commentary on the fear of money.

Four Pillars talks about the Toronto garbage strike.

Money Smart Life lists 3 brief money traps to avoid.

Canadian Dream has some tips on cheap summer travel.

My Dollar Plan lists 12 tasks for a mid year financial checkup.

Thicken My Wallet teaches us how to pick the right business partner.

Frugal Dad has a lawn care tip on sharpening your mower blades.

Financial Blogger indicates his life after the mba.

Sun’s Financial Diary writes about his first day on his new job.

Where Does All My Money Go gives us a heads up that British Investment advisors are about to go commission free.

Generation X Finance shows us the high cost of owning a car.

Michael James on Money has advice for wealthy athletes.

The Digerati Life asks “is the economic downturn over?”

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Copyright 2009 MillionDollarJourney - All Rights Reserved

When no one taught them about banking, saving, how much to save for retirement, how to live below their means, how much to spend on a house, etc, etc they just did what everyone else around them did. They used credit cards and lines of credit and got themselves in over their heads in debt.

When I would sit down with them to ‘do the math’ they would be shocked at how much they were spending on interest and misc bank fees and credit card fees. With a few tweaks (changing their cell phone plans, canceling extra cable packages, quitting the gym they never went to, switching to a no fee credit card, canceling credit card balance insurance and other miscellaneous useless fees) they were able to free up money to begin their emergency fund and begin investing once the emergency fund was full.

Then I found out about http://www.crown.org/ and while I don’t agree with some of their advice, they do provide certification and training for volunteer (non-professional) coaches. We never sell students anything or talk about specific investments. We can refer them to a professional for this type of help. Most of what we do is walk them through the steps, very similar to the steps outlines in Dave Ramsey’s Total Money Makeover (an excellent beginner book if you haven’t read it!).

People like the accountability and find it motivating. They often need a bit of tweaking in their finances or just someone to talk to about something they’ve never shared with anyone. Most of the people I work with are either referred through friends or referred through the church who provided the training. I get everything from newlyweds wanting to start out right to executives (usually women or couples).

Many are heavily in debt and just need some advice on how to start paying the debt off. Some have more money than they know what to do with and just needed some advice on how much to spend on a mortgage and what percentage to put away for retirement.

Basically I encourage them and walk them through the steps.

1. $1000 emergency fund.
2. Have an up to date will.
3. Have enough term life insurance.
4. Pay off all debt except for the mortgage.
5. 3-6 months fully funded emergency fund.
6. 15% pre-tax income automatically going for retirement (either through TFSA or RRSPs depending on their income).
7. RESPs for their kids if they have kids and hope to help with their education.
8. Pay off the house.
9. Live debt free! This frees them up to invest more, give more, buy real estate and live the life of their dreams however they see that carried out.

I give homework every time .. getting them to figure out their net worth, lists of debts and how much is owed plus interest rates for each debt as well as a list of all of their monthly expenses.

I also have them begin writing down EVERYTHING they spend for the whole time we meet. (I usually meet with them once a month for 6 months and then how often they like after that). Each month they need to show me their updated spread sheets. As they watch their net worth going up and their debts going down, they are often highly motivated to keep working at it.

I really try to encourage them along the way and make myself available through e-mail for any questions they have throughout the month. As they write it all down, we continue to tweak things that they can change.

I had one person who was spending $5 every day on diet coke and a chocolate bar the gas station across the street from her work. When I suggested she buy a case of diet coke and a pack of chocolate bars from the grocery store and keep them in the fridge at work, she had never thought of that and began saving nearly $4 a day .. and not changing her daily snack at all!

Almost everyone I’ve worked with pay huge amounts of bank fees. One person had 4 accounts with different banks all with monthly fees over $12.95 a month. She just thought this was normal. Once we got her switched to PC Financial and canceled all her other accounts, she had nearly $50 a month extra to pay off her debt with. She was pretty happy!

Editors Note:  As described in Kathryn’s profile below, she volunteers as a financial coach.  Question for personal finance beginners - Would you be willing to pay for basic financial coaching/education?

Kathryn works in public relations and training for a non profit. In her off hours, she volunteers as a financial coach helping ordinary Canadians with the basics of money management. Her passions include personal finance and adult education. Kathryn, along with her husband and two children live in Ontario.

Popular Posts:

• Canadian Discount Brokerage Comparison
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• High Interest Rate Savings Accounts
• MBNA SPG Credit Card Review
• Child Care Tax Credits
• Questrade Review
• Are Hybrid Vehicles Worth it?
• Tax Free Savings Account (TFSA)

Copyright 2009 MillionDollarJourney - All Rights Reserved

With one of our cars already 8 years old, the repairs are starting to add up.  So we’re currently in the process of shopping for a good used car/compact SUV, preferably a late model that is off lease with low kilometers.  We are leaning towards foreign models (Honda/Toyota) as we have had good experiences with them in the past.  Do you have any used car buying tips?  Should I be looking at dealerships?  Or perhaps private sales are the way to go?  Here’s an article I’ve written in the past about negotiating your new car purchase.

Back to the topic at hand, the net worth update.  Not a big change this month with most of the increase due to savings.  Portfolios gained a little, but nothing compared to last month.  The markets have pulled back a bit since the June high and some analysts are calling that further correction is needed/inevitable.  I’m not sure of the future direction of the market, but I do know that there is a mountain of cash on the sidelines.  Once the fund managers start deploying their cash, I expect that the markets will aggressively go higher.

You may have noticed as well that our vehicles have been depreciating at an accelerated rate over the past few months.  That’s intentional as I am looking to take the cars off the balance sheet soon.

Assets: $447,350.00 (+1.29%)

• Cash: $4,500 (+0.00%)
• Savings: $11,000 (+46.67%)
• Registered/Retirement Investment Account: $65,000 (+2.69%)
• Pension: $22,350 (+0.00%)
• Non-Registered Investment Account: $15,500.00 (+2.69%)
• Smith Manoeuvre Investment Account: $46,000 (+2.22%)
• Investment Property: $ 124,500 (+0.00%)
• Principal Residence: $275,000 (+0.00%) (purchase price)
• Vehicles: $8,000 (2 vehicles) (-11.11%)

Liabilities: $91,500.00 (-1.82%)

• Tax Liability: $3,000 (-0.00%)
• Investment Property Mortgage: $92,000 (-0.11%)
• Principal Residence Mortgage (readvanceable): $35,500 (-6.58%)
• HELOC balance: $53,000 (+1.53%)

Total Net Worth: ~$355,850.00 (+$7,400) (+2.12%)

• Started 2008 with Net Worth: $309,950.00
• Year to Date Gain/Loss: +14.81%

Some quick notes and explanations to net worth questions I get often:

The Cash

The $4,500 cash are held in chequing accounts to meet the minimum balance so that we pay no fees (accounting for regular bill payments). Yes, we do hold no fee accounts also, but I find value in having an account with a full service bank as the relationship with a banker can prove useful.

Savings

Our savings accounts are all held with PC Financial. We hold a fair bit of cash in case “something” comes up. The “something” can be anything that requires cash such as an investment opportunity that requires quick cash or maybe an emergency car/home repair.  We also need cash to cover any future tax liabilities.

Real Estate

Our real estate holdings consist of a primary residence plus a rental property. The value of the principal residence remains valued at the purchase price despite significant appreciation in the real estate market that we’re in.

Hope you have a great Canada Day!

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• How capital Gains Tax Works
• How Dividend and Interest Income Tax Works
• Registered Education Savings Plan (RESP)
• Top Cash Back Credit Cards in Canada
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• Are Hybrid Vehicles Worth it?
• Tax Free Savings Account (TFSA)

Copyright 2009 MillionDollarJourney - All Rights Reserved

About the Author:

According to the book:

Tal Ben-Shahar, Ph.D., is one of Harvard University’s most popular lecturers. He has been profiled on NPR and featured on CNN, CBS, in the New York Times and the Boston Globe.  His classes attract 20% of all Harvard graduates.  Ben-Shahar graduated from Harvard with a degree in philosophy and psychology.  For the last ten years, he has been teaching personal and organizational excellence, leadership, ethics, and self-esteem.

About the Book

Happier is about finding meaning and fulfillment in life, something which I have written about before.  They teach that when you learn how to live for the present and future at the same time, it brings true enjoyment and life fulfillment.

The book is separated into 3 sections:

1. What is Happiness? - That is the question that a lot of us have.  Ben-Shahar goes through the debate and gives us his definition of happiness.  He explains happiness as the ultimate currency (not money) and how important it is to have self-concordant goals.
2. Happiness Applied - Here the author applies his theories on happiness in education, the workplace, and in relationships.
3. Meditations on Happiness - Various meditations and exercises that you can do to help you find what brings you happiness and fulfillment.

Final Thoughts

In my opinion, this was a great book for those of you looking for a little more out of life.  I especially enjoyed the section on setting goals along with the various exercises to enhance happiness.

Want a Free Copy?

McGraw-Hill was generous in offering Million Dollar Journey readers the chance to win 2 copies of the book.  The details are below:

1. Simply leave a comment and you’ll automatically be entered in the draw for a free copy.
2. All email subscribers will receive an additional entry (privacy).

• 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 July 3, 2009 and the winner announced shortly after!

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• Canadian Discount Brokerage Comparison
• Top 6 ways to Save on Auto Insurance
• High Interest Rate Savings Accounts
• Top Cash Back Credit Cards in Canada
• Questrade Review
• Are Hybrid Vehicles Worth it?
• Tax Free Savings Account (TFSA)

Copyright 2009 MillionDollarJourney - All Rights Reserved

• Ram Balakrishnan - The popular blogger behind Canadian Capitalist.
• Rob Carrick - The personal finance columnist for the Globe and Mail.
• Chaya Cooperberg - The blogger behind the new Home Cents Blog.

Other Canadian PF blogger nominees include:

• Canadian Financial DIY, Michael James on Money, Thicken My Wallet, Where Does All My Money Go, Canadian Mortgage Trends, Squawkfox, Four Pillars, The Dividend Guy and The Wealthy Boomer.

If you enjoy following this blog as much as I enjoy writing for it, I would be honoured and appreciative if you could give Million Dollar Journey a vote.

How do you vote?  Simply click on the link below and scroll to the very bottom where you will see a list of blogs.  Pick your favorites and hit the “vote now” button.

Vote for Million Dollar Journey

Popular Posts:

• Canadian Discount Brokerage Comparison
• Top 6 ways to Save on Auto Insurance
• High Interest Rate Savings Accounts
• Top Cash Back Credit Cards in Canada
• Questrade Review
• Are Hybrid Vehicles Worth it?
• Tax Free Savings Account (TFSA)

Copyright 2009 MillionDollarJourney - All Rights Reserved

As mentioned, there are 2 copies of The Seven Rules of Wall Street to giveaway.  Of the 600+ entries (between comments and twitter followers), the two lucky winners are:

1. BBQ
2. Jared

Congrats guys, I will contact you shortly!

Weekend Reading

One Year Ago today, I answered a reader question about not having a will and where assets would go. It goes to show how important wills can be!

Canadian Money Forum has an entertaining thread about the difference in salary between your first job and your first real job.

Stingy Investor writes about market timing temptation.

Canadian Capitalist shows us that borrowing costs are going up.

The Intelligent Speculator has an introduction to managed accounts.

Tax Guy explains how to insure your investments without options.

Cash Money Life asks “would you be willing to work for free?”

Money Energy relates stress with increased spending.

However, what about those who make higher salaries? Take physician salaries for instance, a hospital specialist can make $300,000 a year with very little in the form of overhead fees.  If that specialist maxes out his RRSP of $21,000, it will only represent 7% of his income.  So does making a high income result in fewer tax deferral retirement account opportunities?

There is another option for the wealthy, it’s called the individual pension plan (IPP).

What is the Individual Pension Plan (IPP?)

An IPP is an alternative to the RRSP for executives/business owners with higher incomes.  It is a defined benefit plan that both employee and employer contribute to but with higher contribution limits (compared to an RRSP).

How much can you contribute to an IPP?

According to an article by Jonathan Chevreau:

IPP’s upper limits are established by an actuarial valuation conducted once every three years. The older the IPP member, the higher the contribution amount, assuming comparable income levels.

Who should consider using the IPP?

According to KPMG,

• a key executive and/or owner-manager of a corporation
• over 40 years old; and
• earning a base salary of more than $100,000

What are the Benefits of the IPP?

• An IPP allows the (older) plan holder to contribute more than an RRSP would allow.
• IPPs are creditor proof while RRSP’s are not.
• The IPP account holder can guarantee their retirement income as it is a defined benefit plan.  Compared to an RRSP where retirement income largely depends on market performance.

What are the drawbacks of the IPP?

• Access to the IPP funds are locked until retirement.
• Setup costs are higher than an RRSP.

Final Thoughts

This is a very brief primer on the individual pension plan as the details get quite a bit more extenisve.  As mentioned above, the individual pension plan is meant for those with higher incomes, at least 40 years old and ownership interest in the corporation that they work for (ie. plan to retire with the company).  If there are any readers currently on an IPP, it would be great to hear your experiences.

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• Are Hybrid Vehicles Worth it?
• Tax Free Savings Account (TFSA)

Copyright 2009 MillionDollarJourney - All Rights Reserved

For others, having tight boundaries is what they need to budget properly. They may be only able to stay on a budget when the boundaries are firm.

Here are a number of ways to budget.

1) Zero-Based Budget.

This is a super tight budget. Every dollar is accounted for and written down before the month begins. Every category has a limit and once that limit is reached, spending stops. I know a number of people that use this system and it seems to work for them. People who use the ‘envelope system’ are working with a zero-based budget. For me it doesn’t work. Life happens. Unexpected expenses are inevitable. Having a zero-based budget creates stress in my life and makes me want to rebel.

2) Flex Budget.

The flex budget is similar to the zero based budget except that the categories are more flexible. Instead of categories that might include groceries, clothing, kids, entertainment, eating out, personal stuff, gifts, etc etc, there are fixed expenses and there is ‘spending money’. The spending money is for whatever category you choose. The total amount for spending money is fixed but there is a large amount of flexibility on how the amount is spent. One month you may want to eat out more and spend less on clothing. The next you may buy more gifts and spend less on groceries. It’s your choice month to month how that fixed amount is spent. With a flex budget you are still going to want to track your spending so that you know how much spending money you have left each month.

3) Reverse Budget.

The reverse budget is super simple. You pay yourself first. You live off the rest. You avoid consumer debt. Again, it’s very similar to the flex budget in terms of it’s flexibility. The difference is that all savings (RRSPs, RESPs, TFSAs, investments) go out first. Fixed expenses are taken off second and the rest is to do with as you please. With the reverse budget there is no need to track spending unless you are particularly curious about where your money went. If you stick with cash or debit and don’t use credit, over time it won’t matter. You’ll be spending less than you make.

Only you know yourself well enough to know what kind of budget will work for you. Remember the same diet doesn’t work for everyone. Even though it comes down to simple math; eat less than you burn and spend less than you make, a budget or a diet plan gives you the tools you need to successfully carry out your goals. You need to find a system that works for you. Budgets shouldn’t be a chore. They are a tool to help you create success on your road to wealth.

Which budget most closely represents the type you use?

Kathryn works in public relations and training for a non profit. In her off hours, she volunteers as a financial coach helping ordinary Canadians with the basics of money management. Her passions include personal finance and adult education. Kathryn, along with her husband and two children live in Ontario.

Popular Posts:

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• Are Hybrid Vehicles Worth it?
• Tax Free Savings Account (TFSA)

Copyright 2009 MillionDollarJourney - All Rights Reserved

So what do we do in the case of losing main sources of income?  First, we need to look at household expenses and cut back where possible.  Next, we’ll need to evaluate what types of incomes are available with no salary.  Following that, existing savings/investments will need to be examined to see what can be liquidated to provide cash flow.  As a last resort, new debt or liquidation of retirement savings can be used.

Some assets to consider,

• Employment Insurance - This usually kicks in after about 4 weeks and lasts for about a year.  The maximum EI benefit is around $1500/month after taxes/deductions.
• Cash Savings - Some people don’t like to have cash hanging around, but we usually have cash in our accounts as it gives us a sense of safety.  As well, it allows us to take advantage of opportunities that require cash as they come up.
• Tax Free Savings Account - The TFSA can be withdrawn from completely tax free and is a tax efficient way to keep your emergency funds.
• Non Registered Investments - We have a leveraged non-registered investment account that produces dividends, but could be liquidated if need be.
• Home Equity Line of Credit - If you have home equity, then a home equity line of credit can provide instant cash at a fair rate.  However, the higher the balance grows, the higher the required interest payments will be.
• Retirement Funds - In my opinion, retirement accounts should be the last resort in terms of providing cash flow due to the high taxation along with losing the contribution room forever.  However, with the low amount of income that year anyways, it may be an opportunity to withdraw from an RRSP at a lower tax rate.

In our family, both spouses have professional jobs which would qualify us for employment insurance.  In addition, we have a healthy savings, non registered portfolios, some borrowing room on our line of credit, and fairly healthy retirement accounts..

If we were to both lose our jobs simultaneously, this is the order that I would use our funds until new work is found.

1. Savings Accounts/Cash on Hand: $12,000 (most of our cash was recently used to pay down mortgage)
2. Tax Free Savings Account: $0 (not funded yet)
3. Non Registered Investments: $60,000 ($45,000 leveraged, $15,000 regular)
4. Line of Credit (s): $95,000 available (HELOC and PLC)
5. Retirement Funds: $63,000

How long could we pay our expenses without going into debt or touching our retirement funds?  With no salary (assume no online income or severance), the only source of income left is via dividends in my leveraged investment account and employment insurance (EI).  As of right now, dividends provide around $1,800/year or $150/month.  However, the dividend income would decrease if we liquidated the portfolio for cash flow.

Our expenses are around $4,300/month.  Without jobs, I estimate that we could reduce our expenses to around $3,800/month.  This means that we would need at least $3,800 cash to cover our expenses while waiting for EI (assume $3k/month total EI income for both spouses).

Accounting for the initial cash requirement of $3,800 (waiting for EI), it would leave us with $8,200 in savings to cover the $650 monthly shortfall (counting dividends).  This cash would last around 12.5 months which is approximately when employment insurance would run out.

Hopefully by this point, we would have employment lined up, but if not, we would need to dip into our portfolios or line of credit.  If rates were to remain low like today (2.25%), it would be a toss up on whether to use the line of credit or liquidate our portfolio.  The largest downside of the line of credit is that it would create an additional monthly expense, unless we were to capitalize the interest.

Liquidating a taxable portfolio has it’s downfalls as well.  You could be forced to sell low, or even if you sell high you’ll face capital gains tax.  If choosing to liquidate, it may be best to liquidate positions as you need the cash instead of liquidating everything at the same time.

If we were to liquidate the portfolio completely (to keep things simple) and deposit into a high interest savings account that keeps up with inflation, it would eliminate my $150/month cash flow and would mean that the $60,000 cash would last 15.7 months (accounting for inflation).  At today’s market price point, there would be no capital gains tax payable on this amount.

So it looks like without going into debt, or dipping into our retirement savings, our expenses would be covered for up to about 28 months (assuming no big ticket expenses during that time.

So back to you, how long could you cover your expenses if you lost your main source(s) of income?

Popular Posts:

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• The Smith Manoeuvre - A Wealth Strategy - II
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• Questrade Review
• Are Hybrid Vehicles Worth it?
• Tax Free Savings Account (TFSA)

Copyright 2009 MillionDollarJourney - All Rights Reserved

What province do you live in?

Alberta

How old are you?

32

When did you retire?

August 2008 at 31.

What is your current net worth?

$1.7 million not including the equity in 3 corporations. I don’t include the value until it’s realized.

Can you break down your net worth by portfolio and real estate?

Only real estate is the primary residence. Bought for $320k and it’s currently worth about $400k. Contents would be another $30k to $40k. $100k in vehicles and toys.

We have $180k in RRSP’s, $100k in RESP’s/in-trust funds for two children, and $170k in a non-registered portfolio. Presently there’s about $40k in cash. There’s $180k in deferred income in the form of owner carry on sales of shares in private corporations. $20k in the form of  alternative minimum tax credit. There’s $510k in shareholder loans to the 3 private corporations.

When did you start saving and investing?

I started saving very young. I came from a frugal parents who grew up quite poor on farms. A penny saved is a penny earned was something I heard often growing up. I never received an allowance, but did work on the family farm for which I was paid. All that money went into a savings account and from there into GIC’s.

I got my first real job during high school when I was 17. I ended up spending the savings and income from that job on a car. Parents weren’t that happy, but you need to “fail” on your own sometimes to appreciate the lesson. I had a paid for car in school, something not many kids did, unless it was given to them. I spent what I earned for the next couple years and even flirted with consumer debt a bit before getting on track.

Investing started with my first RRSP contribution which was made when I was 19. I wasn’t a sophisticated investor then and found myself in mutual fund on the recommendation of the bank rep.

What is your savings philosophy?

A strict pay yourself first, spend the rest mentality. Everything is/was on an automated withdrawal - rrsp, resps, etc. They came out on the same frequency as income going into the account. You never miss it.

What would you say was the greatest factor in your financial achievement thus far?

By far the greatest factor was starting my company. There are numerous tax advantages available, but the earnings potential is key. The very nature of working for someone else means you’re enriching them from your labour. Owning the company allows you to enrich yourself and means others enrich you!

How does your spouse feel about your financial fanatics?

She came from a very different type of upbringing. Shopping was recreation. You worked to spend. Her and her siblings were indoctrinated into the world of credit with their first vehicle when their mother co-signed for each of them. It took a while to, ahem, fix her, but she’s onside now.

What influence did your parents have on your financial knowledge?

They had a huge influence in terms of my over all approach to money. Frugality and delayed gratification came directly from emulating them and following my upbringing. They were big savers, but quite risk adverse - a product of their upbringing. Neither were big believers in the market or vehicles like RRSP’s. Dad always said he could get a better return by investing in his own company. Before becoming a farmer he was an entrepreneur. After my brother and I passed on taking over the family farm, he went into business again.

What are your favorite stocks/mutual funds today?

We are indexed in our RRSP and no longer contributing. The RESP and in trust money for the kids is also indexed. The only active stock picking is happening in the non-registered portfolio. It is this portfolio that will one day provide all of our income. Given the huge tax advantage of Canadian dividends, this is the primary focus, but the yields on some income trusts are also quite attractive. I presently own T, TD, TRP, FTS, and RET.A. along with some XDV. On the trust side, I have some BPF.UN, YLO.UN and XTR.

How do you pick them?

Yield is important, but so is the viability of the company. I generally like low debt, fat margins and growing income. I try to buy them on sale, but given the time line of 2-3 years to convert the shareholder loans and owner carry amounts into cash for the non-registered portfolio, it’s not always going to be possible.

Thinking in terms of owning the whole company helps. Is this something I would buy myself? I drop the zero’s from financial statement and get it down to “real” levels that make sense to me. I really like the idea of utilities - these will always be around and profitable.

I also really like the franchise trusts. If you owned the whole thing, who wouldn’t want to be a franchiser? You get paid regardless of how much money your franchisee’s make. The royalty comes right off the top. Given the investment that someone has put into their local restaurant (probably 2-3 million in the case of Boston Pizza) - they’re highly committed to the business. Even a down turn in the economy that squeezes their profit or maybe makes them lose some money in the short turn - they’re not going to bail on their investment and all along the way - they’re paying me royalties.

If you were to give some financial tips to someone just starting out, what would it be?

Set goals and don’t stop until you achieve them. Pay yourself first. Don’t let your income determine your budget. A higher education is something you can always fall back on, even if you never use it. Owning a business isn’t for everyone - we’ve all heard the stats about how many fail, but if you’re young and just starting out, what do you have to lose?

Is retirement what you thought it would be?

Retirement has been interesting. Doing “nothing” is harder than it seems. The very things that drove me to get to where I am are proving to be difficult to turn off. School ends for the kids in a few weeks and we’ll have true “freedom” for the first time - well 2 months worth anyway. We’d like to travel more, but with 2 kids in school, it’s pretty much impossible.

What is your retirement investment strategy?

My goal is $2 million in book value in the non-registered portfolio by the time the kids are done school. That gives me about a decade. Unless the children show an interest in the business(es), we plan to have divested of them completely by then. I plan to live off the income generated by the portfolio. I don’t want to touch the capital. $2 million at book value with even a 4 or 5% yield via mostly dividends will provide more income than we could spend yearly.

Did you have a financial role model? If so, who?

My parents and my brother. Both are/were entrepreneurs.

What is your favorite financial book of all time?

Atlas Shrugged

Which financial web sites do you read often?

I read 4 or 5 blogs on a somewhat regular basis, including Million Dollar Journey, Triaging My Way To Financial Success, Canadian Capitalist, Thicken My Wallet.

I lurk on some forums like Canadian Business, RedFlagDeals, FinancialWebring and have started to post on Canadian Money Forum. I spent a lot of time online with the company I sold in August, so I’m trying to cure my internet addiction.

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For the readers that signed up for INO Stock Trading TV a while back and haven’t logged into their accounts, they have updated their videos once again.  Now they include a regularly updated video about current market conditions.  If you haven’t already, you can sign up here to view the videos (free).

Weekend Reading

A member of Canadian Money Forum has posted a great analysis of the TD Simply Save Program.

Financial Highway has some fathers day gift ideas.

Five Cent Nickel has a great article on the benefits of homemade household cleaners.

Canadian Capitalist writes about the problem with leverage.

The Digerati Life has an article comparing Detroit real estate to a parking spot in Boston!

Four Pillars has an interesting article on Freegans.

Lazy Man and Money has some tips on how to save money on groceries.

Thicken My Wallet asks if stocks are still a good investment.

Sun’s Financial Diary gives us a house and job update.

Canadian Dream lists how not to use the air conditioner.

Brip Blap reviews the 4 hour workweek.

The MoneyGardener answers the question “how much can we afford (in housing)?”

Money Smart Life has some travel tips.

Michael James on Money tells us that CRA no longer taxes loyalty programs.

My Dollar Plan lists money by the numbers.

Canadian Personal Finance Blog tells us that Canadians are charitable.

Generation X Finance explains how to do a mid year financial checkup.

Where Does All My Money Go writes about single inverse ETFs.

Frugal Dad has a great story in The Path to Contentment.

Financial Blogger asks what job would you take if you were a millionaire?

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Last week my son came home from school and announced, “Guess what Mom? We learned about puberty in class today and next week they’re going to tell us all the other stuff but I already know all about that, don’t I?” I responded, “I think we’ve covered it all but let me know if you learn anything new!”

Sex Ed is part of the school curriculum but for the most part the basics of finance are being left for parents to teach their kids. Parents, who for the most part were never taught the basics from their parents. The fact that my parents spoke to me, albeit briefly, about sex and about money is a huge leap from what their parents told them. They came from a generation where sex and money were topics to be avoided entirely.

What they taught me about sex included:

1. It’s necessary for making babies.
2. Don’t think about until your older.
3. It’s not nice to talk about.
4. Let’s talk about something else now.
5. We’d prefer you never brought this up again.
6. Let’s pretend this never happened.

I lucked out with a Dad who had a contagious passion for personal finance. I never knew how much my parents had or how much they made but I was taught the basics of money management which sparked an interest in personal finance that has lasted a lifetime.

What they taught me about money included:

1. The miracle of compound interest.
2. The perils of credit card debt and high interest rates.
3. There are lenders and borrowers. Be a lender.
4. Invest early. It’s all about the wait.
5. Read as much as you can about the subject. Never stop learning.
6. Never ask how much someone makes.
7. Never ask someone how much something cost them.

Much of what you learn from your parents about money comes from their example. Did they fight about money? Was money a source of tension in the house? Was it openly discussed? Did they look down on people from higher or lower socioeconomic backgrounds? Where the basics of finance overtly taught or was their example all you had to go on?

I laugh now when I think about how difficult ‘the talk’ must have been for my Mom. She clearly felt it was her duty to tell me but what an uncomfortable subject for her! Yet my Dad spoke about personal finance in a way that made it seem exciting, relevant, and full of potential to enrich my life. If only the other talk could have gone as well!

What did your parents teach you about money? Did they way they handle money influence the way you handle your finances?

Kathryn works in public relations and training for a non profit. In her off hours, she volunteers as a financial coach helping ordinary Canadians with the basics of money management. Her passions include personal finance and adult education. Kathryn, along with her husband and two children live in Ontario.

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Copyright 2009 MillionDollarJourney - All Rights Reserved

In the last update, I expected a pull back soon after the post, however, that hasn’t materialized yet.  I still expect some sort of correction at which time I will be deploying more capital.  Even without the pullback, there were some equities that were selling near their 52 week lows, like utilities.  Having said that, I initiated a position with Canadian Utilities (CU), TransAlta (TA) in addition to adding to my Fortis (FTS) position. Not only did I buy a few utilities, I initiated my position in Enbridge (ENB) and First Capital Realty (FCR) - a REIT dressed as a corporation.

I usually don’t sell within this portfolio as I would like to keep the dividend stream going for as long as possible.  However, there are times when companies change or get bought out.  In this case, I sold off my position in Petro Canada (PCA).  The reason being is that Suncor is in the process of merging with Petro Canada which will most likely result in a reduced dividend.  In addition, I already own Suncor within my RRSP.

The Portfolio as of June 2009:

More Stats

• Total Portfolio Book Value: $52,235 (total invested from HELOC including after tax interest)
• Portfolio Value (Cash + Equities): $49,196.60
• Total Cost Base of Equities (inc. fees): $41,970.95
• Market Value of Equities (June 16, 2009): $39,125
• Total Dividends / Year: $1,765.50
• Portfolio Dividend Yield: 4.21%

Sector Allocation (based on market value)

• Financials:    51.79%
• Utilities:    16.79%
• Energy:    20.00%
• Resources:    4.96%
• Real Estate:    4.52%
• Other:     1.95%

Leveraged Investing Disclaimer: There have been a lot of readers who have mentioned that they are interested in a leveraged portfolio.  Over the long term it may be lucrative.  However, over the short term, equities are volatile and can put the portfolio deep in the red.  My portfolio is a prime example of what can happen.  If you can’t stomach losing 20-30% in the portfolio in any given year, then your risk tolerance isn’t suited for leveraged investing.

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About the Author:

According to the book:

Sam Stovall, chief investment strategist of Standard & Poor’s Equity Research, serves as chairman of the S&P Investment Policy Committee, where he focuses on market history and valuations.  He is the author of The Standard & Poor’s Guide to Sector Investing and “Stovall’s Sector Watch,” a column featured on www.spoutlook.com.

About the Book

As indicated by the title, this book is about the seven rules of wall street and how they can be used to beat the market.  What rules might that be?  They include:

1. Let Your Winners Ride, but Cut Your Losers Short
2. As Goes January, So Goes the Year
3. Sell in May and Then Go Away
4. There’s No Free Lunch on Wall Street
5. There’s Always a Bull Market Someplace
6. Don’t Get Mad - Get Even!
7. Don’t Fight the Fed

As indicated by the short author biography above, Mr. Stovall is a specialist in sector investing within the S&P500.  What are sectors?  Out of the 500 companies listed on the S&P500, they are sorted in “sectors” such as information technology, consumer staples, utilites etc.  In this book, Mr. Stovall goes through each of the “rules”, explains their significance, and creates mock portfolios including back tested returns (since 1990).

The strategies above all involve actively monitoring and trading your equity positions with the longest hold time of one year.  Rule #5 involves fairly high turnover with potentially trading out of your positions every month.

What I Liked/Disliked About the Book

What I appreciated most about the book was that Sam Stovall went through each rule, explained the benefits/downfalls along with back tested returns (CAGR and risk adjusted) since the inception of “sectors” on the S&P500 (1990).  In addition, he creates mock sector ETF portfolios to drive the point home.

The largest problem I see with his conclusions is that his sector data only goes back to 1990 which, when the book was written, is only around 18 years of back testing.  This is a relatively small market sample in the grand scheme of investing.

Final Thoughts

Sam Stovall has some very convincing arguments in his book and shows some statistically impressive market beating strategies.  His favorite strategy however, involves quite a bit of turnover which can generate unnecessary taxation in a taxable investment account.  The obvious choice would be to use a tax sheltered account, but as his strategies involve US based sector ETFs, the exchange fees would impact returns (for Canadians).

Perhaps the best bet, if someone were to follow the strategies indicated in this book, is to open a Questrade RRSP account which allows the investor to hold US Dollars (which no other Canadian online stock broker allows).

Want a Free Copy?

McGraw-Hill was generous in offering Million Dollar Journey readers the chance to win 2 copies of the book.  The details are below:

1. Simply leave a comment and you’ll automatically be entered in the draw for a free copy.
2. Follow me on Twitter for an entry.

• 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 June 19, 2009 and the winner announced shortly after!

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Copyright 2009 MillionDollarJourney - All Rights Reserved

Yes, I’m out (of the work force) at the age of  31 - about 10 months ago. My wife is about 80-90% removed - she should hopefully be out completely soon.

We married young at ages 19/20 and had our first child shortly after. Having the baby motivated us to get our priorities straight. I came from a frugal business minded family, my wife, not so much. It a little while to financially train her.

We saved into RRSP’s right from the time we were married along with buying a house.  Houses were cheap then and we were fortunate that both sets of parents helped with a down payment. The bank pre-approved us for $120k or something like that but we bought one for $70k that had a basement suite in it.

I started a company when I was 23. Started small and part time. I staked it with $2,000 and largely grew it organically. It required some additional injections in the first couple years and later we used a HELOC to float some inventory. I applied the same frugality to the company as in the personal life. We left earnings in the corp and just took what we needed to live on. Over time RRSP contributions increased and we “caught up” in our mid to late 20’s.  Since then we’ve maxed our RRSP’s each year.

Real Estate

We sold the first house when I was 25 for about $90k. Made a bit of profit at first glance, but had put money into it. Profit was negligible - maybe $5k or so. The next house was bigger but again, well within our means. We actually paid for a lot first and waited two years to accumulate more money for the house. Lot was $45k or so, house built for $200k or so. Over the next few years we developed the basement, landscaping, etc as funds permitted. The second child born around this time. A few years later we sold that house and changed cities. House sold for $300k, with probably $280k or so into it. Small profit. We become mortgage free in and around this time.

In the new city, the trend of buying below our means continues. It was just after the start of the boom in Alberta - the bank suggests a house of up to $800k. We laughed, but we actually had to take advantage of it for a period of almost half a year as house #2 took a while to sell. We end up buying a $470k house and we were once again with a small mortgage ($100k or so).

The housing boom accelerated and I was spooked because houses aren’t supposed to appreciate to that extent. While I wasn’t fearful about losing money on the purchase price, I knew how hard it was to make $100k taxes in. The boom town was also crowded, so we got out of there. We sold for $600k for a total profit of $120k. Great return for short ownership period.

At that time, we were looking to diversify our income stream. All of our household income came from the company. My wife was (and still is) a stay at home mother.  She worked previously at various jobs, but never had a true career per se due to children. We looked high and low for another business opportunity. We looked in BC and Alberta, and eventually find one in a smaller city in Alberta.

The housing prices in the small town were cheaper than our previous boom town, but they were starting to take off.  We downsized considerably for house #4 - smaller and significantly less “nice” than the previous two. We paid just over $300k which freed up a substantial amount of money for the purchase of companies 2 and 3. This coupled with retained earnings inside company 1 yielded a small loan required to purchase business 2 and 3.  The house is currently worth about $400k.

The Companies

Three companies are now producing income and per usual, being treated frugally. The first priority is to pay off the corporate loan asap, then worry about paying back myself and company 1.

A year passed and another opportunity fell into my lap. I took a loan for the whole purchase price, floated the inventory from the HELOC (we’re mortgage free again) and had 4 companies producing income with, again, the priority to repay loan.

This brings us up to last summer. Company 1 sells stuff to Americans. Exchange rate has been eating the growth, but thanks to sourcing goods in USD, the profitability remains great. I don’t like storm clouds on the horizon, so it was time for us to get out. We listed company 1 in March (08), a buyer comes along and we close Aug 1. Crap hits fan shortly thereafter. Timing was impeccable.  We had significant retained earnings in company 1 which are now converted to a shareholder loan after paying dividends to shareholders.

The sold shares of company 1 were kept “onside” with the exemption rules (you have a once in a lifetime $750k exemption on qualifying shares of a small business). This means no tax on proceeds.

We were so happy with the outcome of selling company 1 that we decided to sell a minority portion of company 2 to the manager. This sale also qualifies for the exemption (shares in wife’s name),  again no tax.

As it sits, we have 3 companies. Companies 2 and 4 are completely self sufficient thanks to new minority owners with a vested interest in running it well. I regularly look over the numbers and make sure things are on track.

Company 3 is without minority owner and run 80% or so by a “bonus for performance” manager.  This system is not as good as an equity owner so my wife runs the 20% or so to ensure things are as they should be. The current manager is interested in being an equity owner, but capital deficient.

All 3 companies are debt free from external sources, save for company 4 which still floats it’s inventory via my HELOC. All 3 companies do owe us significant shareholder loans in the range of $500k (not including the HELOC which varies between $150k-$300k depending on the time of year).

At current repayment rate, we will be down to zero from $500k in 2 to 3 years, with one company being ready to produce income in a year or so.

There’s just under $200k left owing on an owner carry portion from us selling the shares of company 1 and 2. Both of these are uber secure as both have a clause which gives us the shares back if the buyers default.

The Retirement Income

As it sits, we have no (salary) income streams whatsoever. We’re deriving some income from non-reg investments and also from interest on the owner carry portions of the share sales. So we are currently eating some capital to live. I dislike debt (even to myself) and the sooner these companies throw income the better. The best way to do this is not to cripple the companies by taking income out of them.

Frugality persists, but we have loosened the purse strings a bit in the past 3 or 4 years. Combined household income didn’t pass through $100k until I was 28 and then never more than $120k until this past year when the shares were sold. Company 1 had around $200k or so per year that it could have been paid to us but we lived on far less.

In addition to RRSP’s of about $180k, we’ve stashed fairly significant funds for the children in an RESP and in trust accounts (approx $100k at the moment). Our oldest child is about 5 or 6 years away from being a high school grad.

The Future

The future is to be determined. A complication of retirement is children. Summer vacations excluded, we can’t venture far. We’re committed to this city until both kids are done school. I’ll be 43 then and actually free. At some point we’ll likely become minority shareholders and eventually non-owners of the 3 companies. Assuming no change in the profitability of the companies, both of us will have maxed out the exemptions ($750k each) when they are sold.

I’ve read quite about about retirement - early and otherwise - and it’s challenging. I took the winter off to pursue a hobby but now that winter is over, what do I do now? The traits that got me to where I am today is difficult to simply turn off. The wheels continue to spin - more so from a private business investment standpoint, but I am finding more ideas in the market.

I’ve considered returning to university as many years ago I left after a year of engineering. I’m not sure what I’d take, or if I’d even complete a degree, but learning stuff you’re actually interested in can be fun.  I might take a job to fill the time, but only for the sake of doing something productive, not for the income. Perhaps a non-profit? I don’t know for certain, I’m still figuring things out.

The Lessons

How did we get to retirement at such a young age?  Frugality, owning a business, having children young, setting goals, and delaying gratification are among the most important things. Splitting income and deferring tax via the companies has also been critical.

Stay tuned, I have an interview with “Retired at 31″ coming up that digs into a few more details.

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Copyright 2009 MillionDollarJourney - All Rights Reserved

As promised, I am giving away 2 copies of the book 397 ways to save money written by Kerry Taylor of SquawkFox.  Out of the many entries, the winners below were randomly chosen, congrats!

1. Terri
2. Susan

Top 6 Articles in May 2009

1. How Much Do You Need To Save for Early Retirement - After much talk about how much people save as a percentage of income, I created a simple spreadsheet that shows the power of saving more of your income.
2. Finding Your Passion - Finding meaning and fulfillment in life is a challenge that I have taken as of late, but how do you find your passion?  Kathryn has some tips, check it out!
3. Case Study: 60 Years Old, Lots of Cash, No Portfolio (part 2) - Here are parts 1 and 2 of a case study I did of a senior who has a ton of cash (about $1 million) from selling his properties, but no portfolio.  He’s looking to retire, but how can his cash support his lifestyle?  The articles give my opinion on how to meet his expenses via a fairly simple portfolio.
4. Consumer Tip: Scanning Code of Practice - Did you know that in most big box retail stores that if they scan the price of your item incorrectly, you are entitled to receive the item for free (up to $10).  I’ve gotten a lot of free groceries in my day because of this practice.
5. State of Canadian Family Finances (2008) - This article summarizes where Canadian families stand financially.  Some of the stats are pretty surprising.
6. Old Age Security and the OAS Clawback - When you reach 65, you are entitled to receive an amount of old age security depending on how many years you have spent in Canada.  However, did you know that the government will start “clawing back” OAS if you make over $66k?  Check out the details within the article.

Top Comment Contributors

1. cannon_fodder
2. Sampson
3. Dividend Growth Investor
4. Canadian Finance
5. Four Pillars

Top Referrers

1. Canadian Capitalist
2. Canadian Money Forum
3. Frugal Dad
4. My Dollar Plan
5. Moolanomy

Many Thanks to Our Banner Sponsors

• Red Flag Deals - Canada’s largest bargain community.
• Price Canada - Compares Prices before you buy.
• Globe Investor - Canada’s premier investment news portal.

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Copyright 2009 MillionDollarJourney - All Rights Reserved

So what else do these expensive chequing accounts offer besides unlimited transactions and free cheques.  From my wanderings, it seems that some of the high end chequing accounts do provide some extra value like free safety deposit boxes, email money transfers, US chequing accounts, or even waiving the annual fee on an expensive credit card.

So lets down to it, who offers the best high end chequing account?.

There are some details not included in the table above. To start, the credit card annual fee discounts that they offer with these accounts vary. The best offerings are from TD and CIBC.  They both offer to waive the fee on their Visa Infinite cards which are their top of the line travel credit cards.  Whereas Royal Bank is the only account to offer exclusive travel savings for clients of the VIP package.

Personally, I would only consider one of these accounts if they would waive the fee after a certain balance.  Having said that, it seems that TD bank has the most competitive product.  With a $5,000 balance, you get a small safety deposit box, free Visa Infinite credit card, a discount off TD waterhouse along with unlimited Interac withdrawals while traveling abroad.  For good measure, they throw in their U.S dollar bank account for free.  Caution though, if you drop $1 below the $5,000 threshold at any time, the monthly fee applies.

What do you think of these accounts?  Do you pay a monthly fee for your chequing account?

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Copyright 2009 MillionDollarJourney - All Rights Reserved

If you had asked me 10 years ago, I would have said “absolutely not”. In the last several years, having watched a number of people close to us arrange funerals both before and after death, I’ve softened my stance a bit. Let’s consider some of the advantages and disadvantages of the prepaid funeral.

Advantages of a Prepaid Funeral

1. Growth isn’t taxable - As long as the expenses incurred are for eligible funeral expenses as defined by section 148.1 of the Canada Tax Act, the growth is non-taxable.
2. Easier to think rationally when not grieving -  It’s difficult to think rationally while making so many decisions within days of losing someone. The deluxe weather treated hand carved maple upholstered casket? You bet! Nothing but the best for Granny. The ninety-five dollar guest book? Not a problem! Being frugal is often the furthest thing on someone’s mind in the aftermath of death. Yet if Granny was frugal herself, is it fair to her and her estate to be caught up in the moment of funeral spending? It’s simply easier to make those difficult decisions while not under so much stress.
3. The desire of client - Conversely if Granny is worried that you would be too frugal and not give her the send off of a lifetime, this is the opportunity for her to choose what she wants and pay for things just as she’d like them. Many older people worry whether they will have enough in their estate to cover funeral costs. They don’t want to burden their families. For some, even if they have plenty of money, preplanning and prepaying a funeral can give them a great deal of peace of mind.
4. Easy to get - Buying life insurance for someone in their 80s with major health issues is a challenge. Prepaid funerals, either as an insurance vehicle or as a trust fund don’t require a health screening or age limit to qualify.

Disadvantages of a Prepaid Funeral

1. They aren’t a good investment - Prepaid funerals make very little financial sense. The interest they generate is minimal. The plan contributor has little control over where or how the money is invested. From a psychological perceptive prepaid funerals have some merit but from a purely financial perspective, they aren’t the wisest choice.
2. There are scams out there - You will need to:
   • Ensure the funds are held either in an income trust or as a part of an insurance policy at a recognized Canadian Financial Institution covered under the CDIC (Canada Deposit Insurance Corporation).
   • Ensure the funeral home is a licensed funeral provider and is licensed under the Prearranged Funeral Act.
   • Confirm with the funeral home that you can transfer your prepaid arrangement anywhere in Canada.
   • Keep track of the policy and let your family know where it is.

Final Thoughts

Do I think prepaid funerals are a good idea? I still don’t. If you’re looking for tax free growth and think you have a few years, the money would best be put in a TFSA. At least that way, you still have the control over how the money is invested and it’s there when needed. You can still prearrange your funeral so that your wishes are carried out how you’d like.

Yet for many people, prepaying a funeral is a gift to their family. Having the funeral fully paid for and prearranged in the days following a death is one less thing the family needs to worry about in the midst of their grief. Knowing all this, if someone asks about prepaid funerals, I will no longer try to talk them out of it.

What are your thoughts on prepaid funerals?

Kathryn works in public relations and training for a non profit. In her off hours, she volunteers as a financial coach helping ordinary Canadians with the basics of money management. Her passions include personal finance and adult education. Kathryn, along with her husband and two children live in Ontario

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Copyright 2009 MillionDollarJourney - All Rights Reserved