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March/April 2012

Commentary - Hans H. Mathisen

I trust that you have found LIFE LETTER and LIFE LETTER MATURE on my website ( There are also a wealth of helpful information on this site that you will find informative and useful when examining your investment portfolios.

Tax planning strategies for sole proprietors - LIFE LETTER for March takes a look at sole proprietorship and the unique tax challenges you can face with a home-based business.

An ideal opportunity to improve your cash flow - April's LIFE LETTER discusses current mortgage rates and how you can pay down interest debt faster.

LIFE LETTER MATURE - this month's LLM discusses estate planning for the terminally ill and looking at lifestyle changes to help secure your retirment.

THE STOCKMARKETS – In spite of high volatility, the first three months of 2012 fared better than “the gurus” predicted.

As of March 30, the S&P TSX Index was up 3.66%. The Dow Jones gained 8.13%, and the NASDAQ grew 18.67%. In Europe, Germany’s DAX stood at +0.47%, France’s CAC recorded -10.01%, and England’s FTSE 100 lost 2.23%. In Asia, Japan’s NIKEI declined 1.42%, and Hong Kong’s HANG SENG fell 10.77%.

Regarding volatility, Tye Bousada, president and portfolio manager with Toronto-based EdgePoint Investment Group Inc. says to Investment Executive’s March issue:

“Volatility is not a risk, in our minds. While short-term volatility is uncomfortable, it is not a true risk. However, it causes people to do things that create real risk – like run to cash”.

With inflation at slightly less than 3%, Bousada continues, any client sitting in cash at current interest rates of around 1% will be 20% poorer in a decade. That client will be losing ground even if invested in 10-year government bonds, which currently yield around 2%. And although most publicly traded companies need a strong economy to do well, the stock market provides the opportunity to find high-quality gems that can grow despite a difficult economy. We look to buy the businesses that can get bigger even in a tough world. Wealth is created by investing in great companies and staying invested.

“Some people allow the surges in the stock market to frighten them out of their investments, but they are not focusing on the fundamentals of the businesses they own. The key is for clients to think of themselves as part owners of wonderful businesses, then ignore daily price fluctuations and think long term”, says Richard Charlton, director of Charlton Group to Investment Executive.

Hans Mathisen





Tax planning strategies for sole proprietors

Sole proprietorship's are the most basic form of business organization. They are actually an extension of the person and are taxed as such. Due to its simplicity, many business start-ups begin as this form of organization. As your business grows, there are numerous taxation benefits to setting it up as a corporation. Speaking to a qualified tax planner can help you decide on the most advantageous business organization for your situation.

Tax planning strategies for home-based businesses

Due to the current economic climate and massive layoffs, many individuals are establishing homebased businesses. Some are following a long-held dream to "run their own show" while others are just trying to make a living. Whatever the circumstances, effective tax planning is critical to getting the most from your efforts.

Home-based businesses offer unique challenges from a tax perspective. The business climate is constantly changing and so is the tax legislation to deal with it. Home offices, outsourced services, globalization, and the massive growth of the Internet marketplace are presenting new challenges to tax authorities and business owners alike. Keeping abreast of the changing landscape in regards to taxation are best left to the professionals. Most sole proprietors are aware of the basic deductions allowed under the tax act. You must save your business receipts and record who, what, where, and why along with the date, and file them in an organized fashion. Things get a little tricky when you start considering deductions for home office expenses, the finer aspects of capital cost allowance (CCA), vehicle expenses, meals and entertainment, and asset acquisitions and dispositions. Due to these complexities, it's not surprising that the Canada Revenue Agency keeps a watchful eye on these deductions. A well thought out tax plan can help provide peace of mind that these transactions are handled correctly.

Shelter your profits

Once you have established your business and are showing a profit, it may be time to begin a program of sheltering these profits. After working too many 16 hour days, you most likely don’t want to hand over a large portion of your profits to the taxman. In addition to maximizing RRSP contributions, additional tax planning strategies can help keep more of your money for financing future business growth. A tax planning professional can help you organize your business for growth and profit. They can provide expert advice on whether to continue on with a sole proprietorship or to take advantage of the limited liability and tax benefits of incorporation. There are income-splitting opportunities that may reduce your tax burden and asset acquisition strategies to take advantage of. Wise tax planning strategies should always be a major component in any business owner's wealth building program.


Minimize your tax bill - Because it's the right thing to do. Call today!

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

Copyright © 2011 Life Letter. All rights reserved

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An ideal opportunity to improve your cash flow

With so many doom & gloom news headlines, it is refreshing to see that fixed rate mortgages are heading lower. A recent Financial Post article (March 9, 2012) explains that with the big banks now engaged in a so-called Mortgage War, now is a good time for Canadians to renew at rock-bottom rates.

Taking advantage of lower mortgage rates can help improve cash flow by lowering interest payment obligations. Remember, refinancing a mortgage at a lower rate only improves your financial position when the extra cash flow is used for paying down non-deductible and high interest debt faster, paying down mortgage principal or investing for the future.

Canadians simply can’t afford to leave money on the table when it comes to renewing a mortgage. The vast majority of consumers simply stay with their current mortgage lender without shopping for better rates.

Too many Canadians short-change themselves by not getting the best mortgage solution for their circumstances. What many consumers don't realize is that because mortgage lending is such a huge part of a bank's operations, most financial institutions will easily match a competitor's lower mortgage rate if it means keeping a customer.

When it comes to renewing a mortgage, the best strategy is to never automatically accept the mortgage renewal offer from the current lender. By checking competitor's rates, you will probably find that your current lender probably isn't offering you the very best rate available.

Some lenders try to retain customers through special offers on mortgage renewals. At first glance, it may appear to be a great deal. However, if we look at the numbers carefully, we see that appearances can be deceiving:

  • If a posted rate on a five-year fixed closed mortgage today is 4.59%, bank customers might get an offer as low as 3.98% at renewal. The catch is that an independent mortgage broker could probably find a rate of 2.98%. This means that if you went with the automatic renewal option, you just left a lot of your money on the table.
  • Let's say there is $250,000 left on a mortgage after 5 years and the offer is 3.98% for the next 5 years with 20 years remaining. The monthly payment would be $1508. The interest cost during the next five-year term is $45,084. If you can reduce the rate to 2.98%, the monthly payment drops to $1,382 and the interest paid over the same term falls to $33,515.
  • Anyone who takes the posted rate would pay $1,588 monthly for the same mortgage and their interest cost would jump to $52,205 for the first five year term.

As you can see, a 1% reduction in your mortgage renewal special offer translates into about $11,569 in interest savings in just 5 years. There are costs associated with switching a mortgage to another lender. The interest savings alone are worth it and, in many cases, these costs can be covered by the new lender. Even with the very low interest rates of today, it makes sense to find a great mortgage deal.

Get a great mortgage rate - because it's the right thing to do.

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

Copyright © 2011 Life Letter. All rights reserved

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