About: Jason

Earlier this year we sent out a workbook for your financial plan and also sent you information on reducing debt faster. Now that you have paid attention and done all of this, it’s time to take care of the kids’ education fund. There are a few types of plans out there but my preference is the self-directed version that offers flexibility where you can start and stop the program at any time without penalty.

Other options that many people don’t know about is that there are certain companies that offer RESP top up programs. Basically they are RESP loans that have minimum payments that allow you to take full advantage of the RESP free grant money of 20%.

For example:

• If you have $5000 currently in your RESP, an investment/insurance company will loan you an additional $5000 dollars and place this into your child’s RESP.
• The government will then grant you an additional 20% on top of the new deposit (20% x $5000 = $1000).
• Now your RESP will total $11,000 and build up at whatever projected interest rate you have averaged.

This is a great way to have money compound for you faster and take advantage of the government grant money.

For more information about RESPs, please contact us and visit our articles on the website.

This week we are taking a closer look at insurance and investment options for business owners. Business owners have typically one thing in common with each other: they have placed their retirement funds inside their business. Now the trick is how to get the money out of the company in the most tax-effective way.

“Shared Ownership” is Not a Product

Rather, it is a financing arrangement between two or more parties to share the benefits and costs associated with an exempt life insurance policy. The arrangement consists of a life insurance policy, a shared ownership agreement, and a special transfer of a portion of this policy. There are no explicit provisions in the Canadian Income Tax Act (the “ITA”) that address the various tax issues relating to shared ownership arrangements. The concept derives from the wording in various provisions in the ITA which refer to “an interest in a life insurance policy”.

Common Strategies

The most common use of the Shared Ownership strategy involves a private Canadian corporation and the shareholder(s) of that corporation. Generally underlying this strategy is the corporation’s need to purchase life insurance to protect against financial losses arising from the premature death of a key shareholder / employee. Where additional funds are available inside the corporation and not currently needed to invest in the underlying business, the Shared Ownership strategy not only satisfies the need for life insurance coverage, but creates a tax-deferred investment vehicle that can benefit the shareholder / employee during retirement years.

The Shared Ownership strategy can be integrated with a business succession strategy, key-person life insurance coverage or the buy-sell / share redemption component of a shareholders agreement. It can also be used to fund estate liabilities. However, it is important to carefully plan and document all the terms and conditions. It is highly recommended that the financial, legal, accounting, and tax advisors of the parties are involved.

• See our Shared Ownership Worksheet Example

Save yourself from sinking into your Mortgage and Debts!

Do you want to Save Money, Save Time, and Enjoy Financial Flexibility?

Many of my clients have asked me how they can pay down their debt, increase their cash flow, or pay off their mortgage faster. With the average consumer debt balances reaching $26,000 and car payments/lease payments of $500 per month, 50% of the average household income is going out to pay consumer debt. This means that if one spouse loses their job, leaves work to be a stay-at-home parent, or encounters an unforeseen expense, they could be in big trouble.

In addition, your financial advisor and all the big investment and insurance firms want you to place $500 per month into an RRSP and an additional $200 to $400 into your insurance plan to cover the debt. So how do you manage your monthly cash flow, pay down your debts, and get that mortgage balance down at retirement? Sounds like the old story that goes… “there was an old lady who swallowed a bird to catch the spider to catch the fly”. The debt we add to our existing plan limits our ability to plan for any future.

So if the average Canadian is in big trouble, they may want to consider retiring in an RV in Mexico—not a bad idea! But how do you manage to set aside enough money each month, reduce debt, and have some sort of lifestyle? The answer is to find a mortgage product that provides flexibility for your income, lifestyle, and current debt load.

How are you going to live up to your parents’ expectations in paying off your $500,000 mortgage? Not a fair comment since my parents bought a house in Kelowna, BC for $30,000 back in 1975. Gone are the days where people focused on solely paying off their mortgage—how can you? The people I have seen who do this have racked up credit cards and lines of credits; they decrease one and increase the other. If you have children, you will know what I am talking about. The focus since the 2008 crash is to conserve cash flow and recover from the downturn in the economy.

So once you have a handle on the cash flow by restructuring your mortgage and debt, we can use a few strategies such as RRSP loans and tax refunds to fund your retirement. It’s another creative solution in fixing clients problems here at Your Future Financial Group.

Here’s how the Manulife One Mortgage Works

You create an all in one account which allows you to combine your mortgage, personal loans, and lines of credit with your income and short term savings.

How does this benefit your family? Simple! By consolidating your debt at one low rate, and then using your income and short term savings to reduce your balance, you will take years off your mortgage and save thousands in interest.

How This Is Accomplished…

Save Money

• Consolidating your debts at a low interest rate reduces your interest costs.
• Depositing your short term savings in your account reduces your debt immediately and saves interest.

As long as your income exceeds your expenses, having your income deposited to your Manulife One account means any excess cash will reduce your overall debt.

Save Time

• It’s easy to manage your daily finances with one account.
• With savings and debts in one account, you always know where you stand financially.
• Access your account with debit purchases, ABM withdrawals, chequing , and online or phone transactions.

Financial Flexibility

• The amount you deposit or withdraw each month is up to you as long as your borrowings and accrued interest don’t exceed your account limit.
• You can track portions of your debt and lock in some or all of your borrowings at a fixed rate.
• Access to your home equity, up to your borrowing limit, allows you to meet your changing financial needs.

The best part is, you don’t need to wait for your present mortgage to come due. Your first appraisal and up to $300 of your legal costs are covered by Manulife Bank on a home purchase.

Let us help you get started today!

Contact Your Future Financial Group to set up an appointment:

Call our Office Phone at: 1-250-869-8158

Or email us on our online email form.