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March/April 2013

Commentary - Hans H. Mathisen

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

10-10-10-10-60 - This is the topic of LIFE LETTER for March,2013. This piece gives us a good idea of how to allocate our paycheque.

How is your group life insurance? - asks the April issue of LIFE LETTER. This type of life insurance is designed to have expired when it’s needed.

LIFE LETTER MATURE - covers two topics:
Funeral Planning Checklist and The Importance of having a will.

THE STOCKMARKETS
As of Thursday, March 28 – the last trading day of the first quarter of 2013 -- the S&P TSX was up 2.54%. The Dow Jones stood at +11.35%. In Europe, Germany’s DAX was up 2.40%; France’s CAC gained 2.48%; and England’s FTSE increased 8.71%. In Asia, Japan’s NIKKEI grew 18.67%; and Hong Kong’s HANG SENG was down 1.58 %.

What can we expect for the remainder of 2013? Christopher J. Wolfe, Chief Investment Officer, Merrill Lynch Wealth Management, says “this year could see the beginning of a ‘Great Rotation’ toward equities. Companies have been strengthening their stock prices by buying back their own shares because corporate balance sheets are in strong shape”.

Sandy McIntyre, co-chief executive with Sentry Investments, has an upbeat outlook for the rest of this year and beyond. “You get defensive with your portfolio when short rates are the same as long rates. You get aggressive with your portfolio when short rates are materially below long rates”.

Short term rates are currently low and long term rates are higher as the economy heals, with central banks coordinated in trying to stimulate global growth, led by the Federal Reserve in the United States vowing to keep interest rates low through 2015.

Just as famed investor Warren Buffett avoided the 2001 technology bubble because he doesn’t invest in things he doesn’t understand, McIntyre doesn’t invest in BlackBerry because he doesn’t know how many handsets will be sold, but he likes telecom companies that are information carriers.

“You start by buying understandable businesses , businesses that actually make sense, that have some predictability to them. I really like businesses that give me recurring, repeatable cash flow”.

 

HAPPY INVESTING!
Sincerely,
Hans Mathisen


 

 

 

LIFE LETTER

10 - 10 - 10 - 10 - 60

No, this is not a John Lithgow long-distance plan commercial. Remember these numbers, however, when allocating your paycheque.

All too often, people experience financial stress when something happens and they haven’t done a proper job of allocating their income. Ideally, an allocation plan will become a habit that leaves you prepared for just about any eventuality.

Here’s how:

10% for Lifestyle Protection – Disasters happen and most rarely make the news. You have likely experienced at least one already. Very few people are in the financial position where they can cover the cost of an event without the help of insurance. Use life insurance to cover debts, last expenses and income replacement on death; vehicle insurance to cover the costs of damages or injuries; property insurance to replace lost or damaged property; critical illness insurance to help recover from a serious illness; disability insurance to replace a portion of your income if you can’t work because of illness or injury; travel insurance if you become ill while travelling outside your province or country.

10% for Savings - There will come a time when you will need funds for a certain event in your future. Put aside these funds regularly for things like education, home down-payments and, perhaps most importantly, an emergency fund. Eventually your savings should be at a level that will allow you to allocate some of these funds to other things.

10 % for Investing - An investment is something that will generate an income, either right away or sometime in the future. This includes retirement savings, a business, income generating real estate, or funds that generate a regular income.

10% for Giving - There are financial benefits to you for giving to charity. The first $200 generates a nonrefundable tax credit of 15%. Everything above that, within limits, gets a credit at the top tax rate no matter what tax bracket you are in. In Alberta, for example, the maximum credit is actually 50% which is 11% higher than the maximum tax bracket of 39%.

60% for Lifestyle - This is where everything else comes from - your home, your vehicle(s), your food and clothing, your vacations, your entertainment and hobbies. All too often, this portion gets too much income allocated to it and is the first to suffer when something goes wrong.

Your income is what makes your lifestyle possible. However, if your income stops due to illness, injury or death, will there be adequate funds for you and your family to maintain your lifestyle? Will your resources be adequate if you experience a short period of unemployment, when a child is ready for post-secondary education, or if you need legal help with an unforeseen problem? Will you have enough independent income in the future or will you have to keep working at a time when you would have preferred retiring?

If you don’t have a problem tipping a server 15% to 20%, why not pay yourself a little better than that?

 

Allocate your income - Because it's the right thing to do. Call today!

Call Hans Mathisen today at (306)242-7042.
or email -
hans@mathisen.ca

Copyright © 2011 Life Letter. All rights reserved

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LIFE LETTER

How is your group life insurance?

Owen is married and has two children. He has been working at the same company for over five years and relies heavily on his employee group plan for his life insurance needs. A new single co-worker got the same benefits after only 90-days and Owen wonders if his group insurance can let him down.

Owen learned that group benefit plans treat all employees the same, regardless of individual needs. Coverage amounts may be determined by income, but a single worker with the same earnings will get the same benefit as a married worker with children.

Many plans offer the option of additional coverage for extra premium. However, the total amount of coverage available is limited and may not fully meet Owen’s needs.

A group employee insurance plan is a contract between an employer, union or association and an insurance company to provide protection for the employees or members. Because he is not a party to the contract, Owen has no rights under the plan other than to name a beneficiary.

The group plan can be changed at any time without Owen’s approval. His employer may decide to switch insurance companies, reduce coverage or cancel it completely. Even though he is the insured individual, Owen has no voice in these decisions.

Group insurance is year-to-year coverage. The insurance company can change the policy on the renewal date. It can increase the premiums, reduce the coverage or refuse to renew altogether.

The group insurance Owen has is low cost for two reasons. First, it covers him while he is least likely to die, while he is still able to work. Second, his employer pays a good portion of the premium. Some premiums paid for by his boss may be a taxable benefit to Owen.

When Owen quits, gets fired or retires, he will lose his coverage. Some companies, associations or unions may continue a portion of the benefits for a short time after retirement. He will get an opportunity to convert his life insurance coverage to a personal plan, but his options will be limited and can be very expensive. However, it is unlikely that Owen will feel he can afford it if he has just left his job.

Whether he is employed or not, Owen’s family will need money to pay off bills and provide income when he dies. He realizes that his group plan is a nice perk while he is working, but it does not fully meet all of his needs.

The answer for Owen is to obtain personal life insurance now and coordinate his total coverage needs with his group plan. He will have the option of increasing or decreasing coverage as he sees fit. Owen can use it as collateral for a loan, perhaps to start a business of his own. With the purchase of a permanent life insurance policy, he can use the cash build-up as an emergency fund in the future. In short, Owen will have a policy that he controls and will be in effect whether he is working or not.

Control your insurance - because it's the right thing to do.

Call Hans Mathisen today at (306)242-7042.
or email -
hans@mathisen.ca

Copyright © 2011 Life Letter. All rights reserved

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Mutual confidence is the power that binds together all harmonious human relationships.


Mathisen Financial, Inc.
335 Redberry Road
Saskatoon, Saskatchewan S7K 4W5
Bus. (306) 242-7042 Fax. (306) 242-4314
Email:
hans@mathisen.ca