Photo courtesty of the Toronto Star

September is coming soon and thousands of college and university students will be leaving the nest and heading off to school. If, as in many Canadian families, your child has been added to your auto insurance policy, you should notify your insurance professional. Your agent or broker can make or explain any changes to your policy that may be required as a result.

If your child is going to be living at home and going to school in the same community, your insurance needs and coverage probably won’t change. If your child is moving a significant distance from home, though, there will likely be some changes to your coverage and premiums.

Making intelligent alterations to your coverage can save you hundreds of dollars in insurance premiums throughout the school year. This is a real benefit to parents trying to put their kids through expensive college and university programs.

Reducing Insurance Costs for Post Secondary Students

Here’s are some ways to reduce costs:

1.    Keep your child on your insurance policy.

For most young drivers, especially young males, the cost of owning their own insurance policy can be quite high. It usually makes good financial sense to keep them insured under your policy as a secondary driver, if at all possible. This is particularly true if your child is moving to an urban center that has a substantially increased risk of theft or vandalism. Most insurance companies offer multi-car discounts for loyal customers, allowing you to insure your child’s car at reduced rates. Make sure that you inform your agent well in advance of the changes. Failure to do so may result in your child not being covered under your policy.

2.    If your child will not be driving while at school consider changing your child’s insurance status to “restricted”.

If your child won’t be taking a car with them to school, you may be entitled to a discount on their portion of your premium.  If your child is away at school you get a reduction of about 50%, depending upon how far away they are.  Make sure you inform your insurance professional when your child returns home for the summer.

3.    Ask for student discounts for having good grades.

Students who have good grades may be eligible for discounted premiums. This can make a big difference in your overall insurance costs, particularly if you have more than one child attending post-secondary education. If not, you can always shop around for insurance rates and options that better suit your family’s current needs and goals.

4.    Remind your child of the importance of a clean driving record.

Young drivers, especially young males, tend to suffer significant increases in premium costs if their driving record has one or more blemishes on it. It’s worthwhile to keep in mind the importance of safe and defensive driving practices.

Some insurance companies offer accident forgiveness programs for the first accident or traffic violation on your child’s record. This type of program can be very beneficial for students whose lack of driving experience might lead to an occasional fender bender.

You may want to consider scheduling an appointment with your insurance agent or broker and discuss the changes that your family is about to experience. Your insurance professional can answer questions that are unique to your personal situation and show you how to keep your insurance costs manageable while maintaining the coverage that you need.

If your rate remains the same or increases remember that you always have the option of shopping your rate around.  This can be done quickly and easily through online sites such as InsuranceHotline.com.  There may be a cheaper rate for you for the exact same coverage.

Camille Jones, CLU

By Camille Jones

When it comes to life insurance affordability, there are a variety of strategies that we can look at to ensure you are adequately insured without breaking your pockets.

For example, looking at term vs permanent insurance is a way to have greater insurance coverage for a lower cost. Term insurance can be purchased in 5/10/20 year terms, depending on how long you need the insurance and the cost. The lower the duration, the lower the cost. Most young individuals, individuals with small children, and/or individuals who have a short term liability, such as a mortgage, would choose the term option. The term option covers you for the duration chosen at inception, 5/10/20. After the term is up, there is an option of converting your policy to permanent or starting a new policy. This again is because of the lower rates for a greater amount of coverage. If one is just starting out in life, I would suggest term insurance.

Once you have established assets, such as a paid off mortgage, investments or to leave a legacy, the permanent option would be preferable. This is due to the benefit of holding this insurance until death. A permanent solution is more, but the death benefit need is usually lower than term insurance, as permanent insurance assists in paying taxes at death and funeral expenses.

Depending on the situation, sometimes it is more beneficial to have a “hybrid” policy, which is a combination of both permanent and term.

The best way to completely answer your questions is to meet with a consultant and go over an insurance needs analysis. When I sit with my clients, we do this analysis to determine where the insurance needs are, how much insurance is required and at what cost works into that client’s budget.

It is very important to have a protection plan in place for your family and assets, but just like a financial plan, there is no such thing as a one size fits all. We need to look at your individual situation and tailor your needs.

To discover the best protection plan for your family, contact Camille Jones, C.L.U at 647  856-8048 or 416 602 2231 or by email at [email protected].

Camille Jones, CLU

By Camille Jones

“I’m really curious about finances for newly-graduated students”

Graduation is both a joyous time and a very stressful time. It is great because on one hand, no more homework or late night study groups, but on the other hand, graduations marks the beginning of your career and of course, the repayment of student loans, mortgages and many other future debts.

This can be overwhelming for a new grad, especially when they have their parents and others saying that they should start saving. All the grad is thinking of is, “how can I save money when I am just starting out, and/or paying off my student loan”? This is true, but even as a newly graduated student, you need to start building life long habits of saving and paying yourself first. Remember, where we are today, is not where will be tomorrow, so start off small.

The rule of thumb is to save 10% of what you are earn a month, and then use what is remaining for expenses and hobbies. If 10% is too high to start with, 5% is ok, but nothing less. For example, if you make $500 per month, you should be setting aside $50 a month. As your income increases, you increase the amount you pay yourself. The key is to re-adjust your life to 10% less in your pay a month. If you think about it, most of us SPEND 10% of our earnings eating out on a monthly basis.

Please do not save your money under the mattress, as you loose the purchasing power of that money. The best solution for a grad is the tax-free savings account, (please view my previous articles for information on the TFSA). Now I am not neglecting your expenses and recommend that you set aside 25-30% of your pay to service them.

Create systems as soon as you start making an income. Building proper savings habits as soon as you start working will pay off BIG in the long term. When it comes to your student loan, it is not always beneficial to pay it off right away, as the interest on the loan is tax deductable, (please contact your account to see if this solution is good for you).

Lastly, the master key to your question is, get a financial planner working for you asap! We are trained to create a plan tailored to your needs, and look for opportunities that you can benefit from. When you have a cavity, you go to a dentist, an expert. Please do the same with servicing your financial needs. We are the experts here to assist.

Contact Camille Jones, C.L.U at 647  856-8048 or by email at [email protected].

Camille Jones, CLU

By Camille Jones

Have you wondered where all your money goes at the end of the month? Is it the bills swallowing up all of your income? Or is it eating out, going to the mall, and entertainment habits? The only solution is one we all hate to hear. You know, the B word. A budget.

A budget is an essential element of financial planning. It’s a great tool for not only monitoring finances, but for building better habits and getting your goals under control. The financial rewards of budgeting are great: growing your wealth, building financial confidence and gaining peace of mind.
Here are some basic steps for you to start your monthly budget.

1.    Calculate your TOTAL monthly income
-    List all income sources including salary, commissions, bonuses, business royalties
-    Use after tax amounts

2.    List Expenses
-    Consult your banking statements and list ALL your expenses. Monthly and annual
-    Separate your ‘fixed’ and ‘variable’ expenses
-    Expenses vary so take an average over three to four months
-    Also include your monthly contributions to your RSP or savings

3.    Total and Subtract
-    Total your income and expenses separately to see how much comes in each month and how much goes out
-    Subtract your expenses from your income to determine the amount left to save and invest

**This is an important number because it shows you how successful you are in managing your money. If the figure is small or a minus, you have to work on what ‘variable’ expenses you can reduce.

Use your budget to find ways to increase your savings and investments. How? Consider the following:

4.    Reduce Expenses
-    Identify expenses that can be cut and assist in setting new spending objectives
-    Decide how much you can realistically cut, but don’t go overboard; try cutting back a little at a time. If your goals are overly strict, you’ll never stick to them

5.    Review your Debt
-    How much can you pay down faster?
-    Is there a way to reduce overall interest costs, such as consolidating existing debts or payment plans?

You should consider working an expert financial planner to develop a short-term investment plan. Once your cost-cutting plan is in place, you should review your progress every few months. You may find further opportunities for shaving expenses, and you will most certainly see that you have more money left over to invest for your future!

Call Camille Jones, CLU to get started on your budget today.  647-856-8048

By Camille Jones

With interest rates so low, you may be thinking of taking the big step into home ownership, ‘moving up’ or even refinancing your existing home. If so, knowing what’s what with mortgages can save you money now and in the future. Here’s a mortgage primer to get you going.

Get pre-approved.

Many people want the security of knowing they have a pre-approved mortgage before they go house shopping. Having a preapproved mortgage helps you focus on looking at houses you can afford and provides the security of knowing you meet the financing requirements of the home you are trying to buy.

The down payment decision.

Conventional mortgages do not exceed 80 per cent of the purchase price of a house—you supply the other 20 per cent as a down payment. If you don’t have that kind of cash on hand, you can apply for a high ratio mortgage, but it must be insured through Canada Mortgage and Housing Corporation (CMHC) or GE Mortgage Insurance Canada (GE). In this case, it’s important to keep in mind that you need to pay an insurance premium typically in the range of 1% to 3% of your mortgage amount. This fee may be added to the mortgage amount.

Amortization period.

Amortization is the number of fixed payments or years it takes to repay the entire amount of a mortgage. The traditional amortization period is 25 years, but by making higher monthly payments over a shorter amortization period, you’ll pay off the loan that much faster and save substantially on borrowing
costs.

Accelerated mortgage payment
By making accelerated payments you’ll pay off your mortgage faster. The same is true of lump-sum payments. When you have excess cash, you can use it to reduce the principal amount of your mortgage loan. Most lenders allow a yearly lump-sum prepayment of up to 10 per cent of the original principal amount, and some allow more.

Term
A mortgage term is the period of time for which the money is loaned under the same rate. When the term expires, you have the choice of repaying the balance of the principal still owing or renegotiating your mortgage for a further term at the then current interest rate.

Open or closed—determines how much re-payment flexibility you want.

An open mortgage allows payment of the principal in part or in full at any time without penalty and tends to be for a short term – usually six months
to one year. Since open mortgages offer greater flexibility than closed mortgages, they typically have a higher interest rate. A closed mortgage allows limited prepayment privileges and a penalty usually applies if you repay the loan in full prior to the end of the term. Closed mortgages typically offer a
lower interest rate as compared to open mortgages of similar terms.

Fixed versus variable rate.

With a fixed rate mortgage, you can be certain the interest rate will remain the same for the mortgage term, making it easier to budget. A variable rate
mortgage may deliver a lower initial interest rate, but this will fluctuate from month to month with changes in prevailing market interest rates. The more rates change, the larger the impact on your monthly budget. Don’t jump into a mortgage—take the time to find the right product for your unique situation. We can help you make sound decisions for your life as it is now and as you wish it to be in the future.

To discover the best mortgage solution that best fits your needs, contact Camille Jones, C.L.U at 647  856-8048 or by email at [email protected].

Camille Jones, CLU

By Camille Jones

When creating a financial/investment portfolio, you need to ensure that there are multiple investment buckets available. This is because each bucket has its advantage and disadvantages. The key is to ensure you are increasing each bucket’s advantages and not allowing their disadvantages to erode your capital.

So what are these buckets? They are: Pension/Registered Retirement Savings Plan (RRSP)/non-Registered/Tax Free Savings Account (TFSA).

Not everyone gets the opportunity to have a pension, but if you are one of the lucky ones, take advantage of pensions and join them.  Why not have your employer help you save further income for retirement?

For everyone, else, and including pension recipients, ensure you are maximizing your RRSP contribution room. This not only helps reduce your earned income, but can also provide a tax reduction and in many cases a tax refund that you can use to fund your child’s Registered Education Savings Plan (RESP) or your TFSA.

Did you know that both a pension and a RRSP are 100% taxable when funds are withdrawn, and that is why you need to ensure you have non-registered and TFSA money saved. This is because both these investment buckets are tax “preferred” upon withdrawal.

With non-registered income (from investments that do not solely pay interest income), you are only taxed 50% of your capital growth and zero on the principal portion of any withdrawal, and with the TFSA, the income earned is completely tax-free.

By having all these investment buckets, when you need to withdraw money, you will typically go to your non-registered first, then your TFSA and leave your registered funds to accumulate tax-deferred as long as possible.. When your pension and RRSP mature and you have to start withdrawing income, by having non-registered and TFSA income, you only have to withdraw the minimum required, and thus will not be heavily taxed during your retirement years.

To discover the approach that best fits your needs, contact Camille Jones, C.L.U at 647  856-8048 or by email at [email protected].

Camille Jones, CLU

How would your family fare without you?

By Camille Jones

When was the last time you took a few moments to think about how your family’s lifestyle would be affected by losing you? Not only does your family depend on you for love and emotional support, but the fact of the matter is, they also rely on your continued earnings to provide for their daily living needs. This is why it’s critical you maintain sufficient life insurance coverage.

In the event of your death, life insurance proceeds can be used to eliminate debt, provide a home free and clear of mortgage payments, guarantee funds for a child’s education and to replace the income you generate today that maintains your family’s lifestyle.

How much is enough?

A common rule of thumb suggests you should maintain life insurance coverage equal to ten times your income. However the danger of a ‘rule of thumb’ is that it does not account for an individuals age, stage of life, or personal and family circumstances.  Instead of relying on a ‘rule of thumb’ that may not apply to you, you’d be well advised to complete a thorough needs analysis with the assistance of a financial planner.  An estate needs analysis will determine precisely how much money would be needed to produce a steady income for your family’s ongoing needs and how you’d choose to address mortgage and other debt obligations like post-secondary schooling for your kids, and other goals in the event of your death

If you’re a stay-at-home parent, don’t assume your lack of income means you have no need for life insurance – replacing your family role with professional child care and domestic help will be costly as your spouse continues in their career.

Going beyond life insurance
At the same time, don’t overlook the financial toll a disability would take on your family. U.S. figures show 48 per cent of all mortgage foreclosures are caused by a disability induced loss of earning power.  Appropriately-designed disability insurance can fill the void in the event you lose your ability to work or should you have no choice but to accept a lower-paying job.

Insurance Solutions
Comprehensive Critical illness insurance usually pays a lump sum to you should you be diagnosed as having a life altering medical condition specified in the
particular policy – such as a heart attack or stroke, or if you are diagnosed with a life threatening disease like cancer.  Ensure your Will is updated regularly,
making sure you specify whom you’d like to take care of your children in the event you and your spouse should die simultaneously.

This should be discussed with your designated guardian(s) before your choice is formalized in your Will and provisions should be made to ensure funding is available to allow your guardian to carry out his/her responsibilities. Also, make sure you appoint an executor (liquidator in Québec). This is the person who will act on your behalf to settle your personal affairs, including the financial aspects of your estate.

To discover which approach is best for you, contact Camille Jones, C.L.U at 647  856-8048 or by email at [email protected].

Camille Jones, CLU

By Camille Jones

February is Black History month, a month we celebrate our past accomplishments and our future successes in all areas of life. When planning our financial futures, we also need to plan on building generational wealth today and build financial legacies so that the opportunities for our culture to continue to grow remain everlasting.

Generational wealth is defined as passing and building a financial legacy that your future generations can reap the rewards. We all work hard to become financially free in our lifetime, but what about our future generations? Do we want them to have to battle with their finances the way we have or are we also planning on leaving financial legacies that will give them greater opportunities than you had?

To really build wealth, we have to build generational financial success. Generational wealth begins with erasing the “poverty” thinking mindset and replacing it with financial wealth education. We need to start attaching goals and values to the money we earn. To avoid multi-generational poverty, we need to start planning and investing in our future today.

Don’t wait until you are heading into retirement, saving for a home or saving for your child’s education to take advantage of the opportunities to change your financial future. There are a variety of options to invest in that can shape our future generations. Investing should start as soon as you are earning more than $3,500 a year. When you are 18yrs old, you have the opportunity to invest in a Tax-free savings account. One can use this account to build tax-free income for their retirement, a down payment on a home, leaving a legacy, the options are endless, and best part is, the income earned in this account is tax-free. How about investing in your community programs or businesses? We all can make a difference in our financial futures, but it starts with what we do today!

Protecting Generational Wealth

To ensure that the money you are investing remains invested and is not interrupted by any unforeseen deaths or illnesses, you need to invest in a private insurance protection plan. Don’t just rely on your employer’s benefits to protect you and your family, take action into your own hands. Remember, in order to take advantage of your employer’s benefits, you need to ensure that you have a sudden death or illness while employed with them!

There are now options for children to have life and critical illness insurance that not only protects their health, but also has a cash return and investment component at a lower cost.

Do not let an unforeseen illness or death take your legacy away. Protect and invest today.

Camille will be presenting investment options at 156 Duncan Mill rd, Toronto from 2pm-4pm on Sunday February 20^th, as well as, on February 21 and 23 at the Gallery Studio Café, 2877 Lakeshore blvd W 5pm-9pm. Please RSVP at 647-856-8048

Camille Jones, CLU

By Camille Jones

Year after year, many Canadians leave a key financial opportunity on the table by not contributing the maximum allowable amount into their Registered Retirement Savings Plan (RRSP). If your annual income tax assessment includes a notice from the Canada Revenue Agency that details how much unused contribution room you have left in your RRSP from previous years, the time to act is now.

For example, contributing $10,000 into an RRSP that offers a 7% return, compounded annually could turn into $76,123 over the span of just 30 years. Plus, contributing the full amount creates a larger income tax deduction that could result in a significant tax refund.* Although it may seem difficult to find the money to contribute into your RRSP every year, we can show you a number of strategies to consider that can help accelerate your plan using assets you have readily available and key tax planning benefits.

Know Your Limits
It’s important to know how much contribution room you have, prior to sitting down with us to discuss your RRSP strategy. Each year, the Canada Revenue Agency identifies your unused contribution room for the upcoming tax year on your Notice of Assessment. If, however, you are unable to locate your Notice of Assessment, a quick call to the Canada Revenue Agency at 1-800-959-8281 or a visit to www.cra.gc.ca can provide the information you need.

Invest Smart
It may be to your benefit to move money you currently have in savings accounts or other investments into your RRSP sooner, rather than later. Moving these dollars into your RRSP will not only result in a reduction of your annual tax bill – but it also allows you to maximize growth inside your RRSP, without generating immediate taxable income. It’s important to remember that interest earned on savings accounts and both realized and unrealized capital gains on non-registered investments will be taxed prior to when they are moved into your RRSP. You can also withdraw from a Tax-Free Savings Account (TFSA) to make your RRSP contribution. Any withdrawals from your TFSA are added to the available TFSA contribution room the following year.

Invest Regularly
Consider working your RRSP contribution into your budget by using a monthly investment plan that automatically deducts a specified amount from your savings or chequing account on a regular basis and invests it into funds held inside your RRSP. Monthly investment plans can be customized to work best for you.

Consider the Benefits of Borrowing
In many cases, borrowing to take full advantage of RRSP contribution room makes sense. Maximizing your RRSP contribution now offers immediate tax savings this year and tax-deferred potential growth for many years to come. Using this strategy can make it beneficial to borrow for a short period to maximize your plan.**

Your Financial Consultant can help you determine whether a loan fits into your financial plan by looking at the following factors:

Your age – The impact of compound growth increases depending on the
time that money is invested. While borrowing to invest may have more impact at a younger age, your consultant can prepare an illustration that shows it’s never too late to save for your retirement.

Your Ability to Repay – Your consultant should never recommend that you borrow more than you could possibly repay because it could make it difficult to save for next year’s RRSP contribution.

In addition, contributing to an RRSP generates an income tax deduction that may result in a significant tax refund that could be used to help pay down a portion of the loan almost immediately.

Your Ability to Borrow – An RRSP Loan or Line of Credit will increase
your Debt Service Ratio (the percentage of your monthly income
that goes to pay off debts) and lenders rely on this ratio to determine
your loan eligibility.

To discover which approach is best for you, contact Camille Jones, C.L.U at 647  856-8048 or by email at [email protected].

*Pre-tax RRSP contribution assumptions –
$10,000 investment purchased on January 1,
2010 at a gross rate of return of 7% over a 30
year period. The rate of return is used only to
illustrate the effects of the compound growth rate
and is not intended to reflect future values or
returns on investment.
**RRSP Loan assumptions – Client takes out a
1 year RRSP loan of $10,000 at a fixed rate of
6% on January 1, 2010 and makes a $860.66
($810.66 principal and $50.00 in interest) payment
on January 31, 2010. Client has a marginal
tax rate of 40% and receives a tax refund of
$4,000, which is used to pay down the loan on
February 1, 2010 (remaining balance on
February 1, 2010 is $10,000-[$810.66+$4,000] =
5189.34), which is paid monthly ($486.03) over
the remaining 11 months.

Camille Jones, CLU

By Camille Jones

The introduction of the Tax-FreeSavings Account (TFSA) represents the most important change to the way Canadians save money since RRSPs were launched in the late ‘50s. But the big question on many people’s minds is whether they should contribute to a TFSA, the tried-and tested RRSP or possibly even both?

Before shedding some light on their question, let’s first get a firm grasp on some of the innate differences and similarities. First and foremost, both RRSPs and TFSAs provide investors with the opportunity of tax-sheltered compound growth for investments held inside each plan. But unlike an RRSP, contributions to a TFSA are not tax deductible, amounts can be withdrawn tax free at any time and withdrawn amounts are added back into your TFSA contribution room the following year.

Now that we’ve established their unique characteristics, let’s get back to our original question:

Which is best?
On a very basic level, looking at your pre-retirement and expected postretirement marginal tax rates can provide you with an idea how to best allocate your investments. If you expect to be in a lower tax bracket during retirement, contribute to an RRSP is generally more beneficial. However if in retirement you anticipate being in a tax bracket that is equal or higher than your pre-retirement tax rate, the TFSA may be more tax-efficient.

Hold on; not so fast.
Although it’s tempting to settle on a simple rule-of-thumb, the decision on whether you should use a TFSA or RRSP is not that simple – your advisor
needs to work with you to consider the entire spectrum of financial strategies at your disposal that could ultimately impact your approach.  Even if you anticipate having a lower marginal tax rate in retirement, maximizing your RRSP contributions may not always be the most tax-efficient long-term strategy.

Since RRSP withdrawals (directly or through your Registered Retirement Income Fund (RRIF) or an annuity) increase your taxable income, those withdrawals may affect certain government income-tested benefits and credits such as the Old Age Security benefit and the Age Credit.

On the other hand, if your expected marginal tax rate in retirement is equal or higher than during your accumulation years, contributing to your TFSA may not be the best approach either. For example, RRSPs that are converted to a RRIF or an annuity after age 65 can produce income that is eligible for the pension income tax credit, and thus qualifies for pension income splitting with your spouse.

Other income splitting strategies such as the use of spousal RRSPs could effectively distribute a portion of your taxable income to a spouse with a lower marginal tax rate in retirement, further reducing your tax bill and reducing the claw-back effect on your income tested benefits and credits.

So where does this leave us?

Generally speaking, a TFSA may be better suited for shorter-term goals, such as an emergency fund or saving for a major purchase, since there is no tax on withdrawals and these plan withdrawals are added back into your TFSA contribution room the following year. However, for long-term
objectives, RRSPs are generally the vehicle of choice since there are strong incentives to keep your money invested, in the form of taxes and lost
contribution room on the withdrawals from an RRSP.

The TFSA can also be a powerful retirement savings tool. However due to the ease with which TFSA savings can be accessed (no taxes on withdrawals or loss of contribution room) only a disciplined investor who can resist the temptation to dip into their savings prior to retirement will fully benefit from its potential as a source of retirement income.

Remember, there is no one-size-fits all solution. In fact, there are a multitude of variables that must be taken into consideration. In many cases,
the TFSA should be used as a complementary product, along with your RRSPs, as they both have their own advantages. Your personal savings
strategy needs to take into account your unique circumstances as well as your short and long-term objectives.

To discover which approach is best for you, contact Camille Jones, C.L.U at 647  856-8048 or by email at [email protected].