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May/June 2013

Commentary - Hans H. Mathisen

Your financial future - is the topic of LIFE LETTER for May. Is your financial vehicle in good condition? Have you reviewed your financial trip insurance lately?

Be prepared for emergencies and opportunities - LIFE LETTER for June asks, "Are we planning so that we can handle emergencies and take advantage of opportunities?"

LIFE LETTER MATURE - covers two topics: “What if I need long term care?” And “10 steps to finding the right retirement residence”.

THE STOCK MARKETS – As of Friday, June 28, the S&P TSX was down 2.45% year-to-date. The Dow Jones registered +13.78%; the S&P 500 stood at +12.63%, and the Nasdaq grew 12.71%. In Europe, Germany’s DAX was up 4.56%; France’s CAC grew 2.69%; and England’s FTSE 100 increased 5.39%. In Asia, Japan’s NIKKEI was up 31.57%; and Hong Kong’s Hang Seng fell 8.18%.

Global markets sold off on June 20 largely on Federal Reserve’s chairman Ben Bernake’s statement that the Fed. Intends to gradually reduce its monthly purchases of Treasury and mortgaged-backed securities (currently amounting to $85 billion a month) beginning in the latter part of this year and ending by mid-2014. At the same time, the Chinese Federal reserve hiked its overnight Interbank lending rate to 13.00%. These two events fueled fear in North American and European markets and caused selling pressures during the last two weeks of June.

The analysts I follow acknowledge that monetary stimulus by central banks can only be carried so far and that markets need to believe in sustainability of the underlying growth. The market may actually increase its confidence in the validity of economic strengthening if we can come through a short-term jitter where it proves out that the economy can continue to self-generate on its own without the excessive quantative easing measures.

Bill Welk, Senior Vice President with Mackenzie Investments, puts it this way, “We are not convinced that the most recent announcements by the central banks indicate a central bank that is going to be hostile to growth. We think the reduction of excessive monetary stimulus is an important transition for the market to find its own footing and to gather confidence that the economy can continue to grow”.

Translation: The Federal Reserve’s quantitative easing was good while it lasted and served its intended purpose. Now, it appears that the market is robust enough to grow on its own.

HAPPY INVESTING!
Sincerely,
Hans Mathisen


 

 

 

LIFE LETTER

Your financial future

Much of what we do today is to improve our future financial position. As with anything, we can get better results by following a plan. This is why both Estate Planning and Financial Planning are important for those who want to ensure better tomorrows for ourselves and our families.

Financial Planning focuses on what we want to happen while we're still alive. Estate Planning is concerned with what we want to happen here on earth after our death. It's best to start with the Estate Plan because no one knows how soon it will be needed. Also, a well thought out Estate Plan provides direction for the development of your Financial Plan.

The first step in planning your estate is to decide what you want to happen to the people you care for after your death. For example, how much income do you want your widow to have? If you want your family to have a debt-free estate, how much is needed to pay off your debts? Some income taxes are triggered by death. How much tax will your heirs have to pay before they can inherit?

If you have a business interest, do you want it to be sold or retained? If it's to be sold, who will buy it? What will be needed to guarantee the sale? If you want it to be kept in the family, who will run it? What will they need to keep it going?

After you decide on the things you'd like to see happen, you can begin figuring out how to improve their chances. Some of your decisions can be written in your Will as directions to your successors. Others improvesometime may need special written Agreements with other people to make sure that they will happen.

Some assets will be in the wrong form to do what you want. You may want to make arrangements to convert them to another form at your death. For example, an interest in a private business could be converted to cash by means of an Insurance-Funded Buy-Sell Agreement.

Some of your assets may be of the right type for your heirs and you want to preserve them from the tax collector and other creditors. What you need is a method of creating instant, adequate cash at death to satisfy the vultures.

Some of us may discover that we don't have enough to leave our family in the position we'd like them to be. We then need instant cash at death to create our estate.

A sad fact is that many people will spend more time planning a vacation or dinner party than their financial future.

Your trip to your financial future deserves at least equal concern about the risks ahead. Then you can try to avoid them or offset their adverse consequences.

Is your financial vehicle in good condition? Will there be enough cash or income to offset such common risks as death, disability or serious illness? Have you reviewed your financial trip insurance lately?

Plan your financial future – because it’s the right thing to do.

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

Copyright © 2013 Life Letter. All rights reserved

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LIFE LETTER

Be prepared for emergencies and opportunities

Randy worked for a small business. When the owner died suddenly, the business accounts were frozen and it took several weeks before they could be accessed to meet payroll. Randy had trouble meeting his financial obligations and had to find a new job.

Jane worked at a small company for many years. When the owner decided to retire, she offered to sell the business to Jane. As she didn't have the funds available, the business was sold to someone else. The new owner let Jane go shortly after taking over.

Joe and Gayle had been renting a house for several years. When the owners decided to sell, they offered it to Joe and Gayle first. Because they didn't have enough for a down payment, they couldn't afford to buy the house and also had to move.

It seems that many people today are so busy living a lifestyle, they forget that emergencies and opportunities need to be dealt with. Randy, Jane, and Joe and Gayle would have been able to deal with their situations more favourably if they had established emergency and opportunity funds.

It's all too easy to start taking one's cash flow for granted and get lulled into the belief that it will go on uninterrupted. Many fall into the trap of trying to save money after all other payments are made. Usually, there is little or nothing left to save this way. Those who are best able to handle emergencies and opportunities that arise are in the habit of paying themselves first. How do you pay yourself first?

There are many ways and they include:

High Interest Bank Accounts - This may sound like an oxymoron, but there actually are a few banks that offer high interest savings accounts; some with chequing privileges, too. Bear in mind that any interest earned on money in these accounts is fully taxable. However, most bank accounts are readily accessible, so it can be easy to withdraw funds for things that aren't really emergencies or opportunities.

Guaranteed Interest Certificates (GICs) - Funds can be deposited for a certain period at a fixed interest rate. The interest is fully taxable, even if left on deposit in the GIC. Because GICs are for a fixed period, funds may not be available at the precise time they are needed.

Tax Free Savings Accounts (TFSA) – Introduced a few years ago, these plans allow you to earn growth on your deposits without paying taxes on it. Withdrawals can be replenished in the future and your investment choices mimic RRSP options.

Universal Life Insurance - These policies can combine protection and savings in one plan. The minimum premium is set at a level to cover the cost of the death benefit. The policyowner can choose to pay more, within certain limits, and these extra premiums accumulate on a tax deferred basis. Generally paid out as part of the death benefit, the extra deposits can also be accessed, depending on the company, by withdrawal or policy loan.

"When prosperity comes, do not use all of it."
- Confucius

Prepare for emergencies and opportunities - because it's the right thing to do.

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

Copyright © 2013 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
Email:
hans@mathisen.ca