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January/February 2012

Commentary - Hans H. Mathisen


Hopefully,you have missed the bi-monthly mail delivery of LIFE LETTER, LIFE LETTER MATURE, and my commentary.

But here's the good news: Starting immediately, LL, LLM and my commentary will be available on my website -- you will get what you used to receive by mail. And, if you have any questions or comments, you can phone me or reach me by email at

LIFE LETTER for January looks at debt reduction as a retirment savings strategy.

Small daily choices lead to financial freedom - February's LIFE LETTER discusses some of the small, minor daily lifestyle changes that could actually divert meaningful amounts into long-term savings.

LIFE LETTER MATURE - January looks at government benefits that can boost retirement income, and February's LLM asks the questions "What's your retirement planning mindset"?

THE STOCK MARKETS - WOW? 2011 was not a good year for the markets. As of Dec 30, the S&P TSX Index was at -11.1% for the year. Dow Jones stood at +5.5%; S&P 500 logged in at +2.11%; and Nasdaq recorded +3.66%. In Europe, Germany's DAX was down 14.69%: France's CAC declined 16.95%; and England's FTSE 100 fell 5.55%. The year-to-date performance in Asia is: Japan's NIKKEI is down 17.34%; and Hong Kong's HANG SENG has fallen 19.97%.

During the past week, I have been reviewing client's investment portfolio. There is still substantial growth. For example, in the three years from Dec. 29, 2008 to December 30, 2011, the S&P TSX Index is up 38.4%. Divide that by 3, and you get average annual growth of 12.8%. Your portfolio may not have a performance identical to the S&P TSX Index, but it is close. I picked year-end 2008 as a starting point for this reason: 2008 was the year of the collapse of Lehman Bros. and the subsequent demise of other major American financial institutions. This, in turn, caused world markets to decline sharply.

As Canadian investment expert Michael Ryval puts it, "Choose a Canadian equity fund that invests in solidly run companies that can make it in good times as well as bad. And if markets remain volatile, patience is key".

This is the investment philosophy that Hans Mathisen has always followed when investing your money. And, thanks for your patience.

Hans Mathisen





Debt reduction as retirement savings strategy

Statistics Canada recently reported the ratio of household credit market debt to disposable income reached the highest level since the agency began tracking this figure. In 1990 it was 50%, rose to 110% in 2000 and jumped to 149% in the second quarter of 2011. This can cause some angst for those with children reaching post-secondary school age.

Sam and Marsha are in their mid-forties and have a 17-year old daughter, Alicia. They have lived a more frugal lifestyle than most in their age group. Until now, they havenít given too much thought to when and how they want to retire, but with their daughter already looking at colleges, and with a sizable amount of debt weighing them down, they know that they will have to make some serious choices.

Their primary focus up to this point has been to ensure that Alicia has a quality education. They have steadily contributed funds to Aliciaís RESP and have relatively little in investments or savings. Their two mortgages, one on their principal residence and one on a small rental home, loom large over their retirement horizon, so they are ready to take some steps to get themselves in a better retirement position. They have even considered selling their rental as an option. This may not be a wise choice.

They both earn good incomes. Together, with Samís income from his contracting business and Marshaís teacherís salary, they earn about $150,000 per year. Their only real assets are the two houses they own (their $370,000 home and a $290,000 rental) have future years rental) which managed to hold their value pretty well in spite of the economic downturn. They have about $11,000 in savings and Aliciaís RESP has grown to $12,500. After accounting for their two mortgages of $564,000 and a small equity line of $18,000 they are left with about a $105,000 net worth which they want to grow substantially between now and retirement.

Marsha will receive a nice pension which should give them an adequate base of retirement income. Their rental income can also add to that base of income with another $1,000 a month once they pay off its mortgage. The rest of their income will need to come from their retirement funds which will not receive a lot of their savings dollars until after Alicia completes college.

A good course of action would be to concentrate on paying down their debt as much as possible between now and the time Alicia goes to college and avoiding any new consumer loans. Then, upon her graduation, apply the funds used for college expenses to a combination of retirement savings and further debt reduction. They should consider accelerating both of their mortgages by making extra principal payments and by making weekly instead of monthly payments. Paying down mortgages more quickly can, in effect, act as a forced savings plan that will free their equity to be used in retirement.

Sam and Marsha need a financial map which will keep them on a focused path to financial independence. At their age, they just canít afford to wait any longer.


Pay off debt, because it's the right thing to do. Call today!

Call Hans Mathisen today at (306)242-7042.
or email -

Copyright © 2012 Life Letter. All rights reserved

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Small daily choices lead to financial freedom

Most people want financial freedom over financial servitude. Who doesnít want to be financially independent, where their money is working for them rather than working for their money? The problem for most Canadians is that financial freedom can be a struggle of living paycheck-to-paycheck or where spending tends to win out over savings. Ultimately, financial freedom is not so much a single choice to attain it, but about daily choices that can make it a reality.

Setting long term savings goals, while essential, is not always effective for people who have never before accumulated a meaningful sum of money. When looking into the future and seeing the need to save $50,000 for a down payment on a house or $1 million dollars for a secure retirement, people can often become paralyzed by the sheer magnitude of their goal.

When a goal doesnít seem realistic or achievable, it can deflate any motivation to even start saving. But, goals broken down to small steps, not only appear much more attainable, but can reveal a number of little daily choices that can put a person on track to financial freedom.

Roger is 35 years old, earns $75,000 annually, and realizes that his retirement is just a few decades away. He has accumulated almost no savings. Based on a rough estimate of the assets he will need to enjoy a modest retirement lifestyle, he wants to accumulate $1 million. Assuming he is able to achieve an average compound return of 7% over 30 rental) have future years years, his annual savings goal is $12,000 or $1,000 a month. This may seem completely out of reach until we break it down further.

On a weekly basis, the goal is to save $230, money that is currently being spent on daily personal choices. Where can Roger find about $32 a day for savings?

His weekly choices may include expenditures like: lattes ($35), unnecessary car trips ($20), restaurant meals ($25), movies or other entertainment ($30), designer brands versus generic ($15), daily snacks or soft drinks ($25), premium cable ($10), impulse purchases ($45), expensive cell phone plans ($15), or ATM fees ($10). By adjusting just a few personal choices, Roger can find $230 worth of weekly savings.

As these items are discretionary spending (lifestyle choices), they are easier to adjust than fixed expenses like vehicle insurance, utilities and other necessities. While some type of personal expenditures donít apply to everyone, with a little effort almost everyone can find daily lifestyle choices where they could divert meaningful amounts into long-term savings.

The key is in understanding that these are not merely minor lifestyle choices, but choices that lead to the true financial freedom most Canadians seek. After all, the coffee shops, movie theatres, cable companies, cell phone providers and restaurants won't go broke if you cut back just a little bit.

Pay yourself first - because its the right thing to do.

Call Hans Mathisen today at (306)242-7042.
or email -

Copyright © 2012 Life Letter. All rights reserved

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Mathisen Financial, Inc.
335 Redberry Road
Saskatoon, Saskatchewan S7K 4W5
Bus. (306) 242-7042 Fax. (306) 242-4314