Commentary - Hans H. Mathisen
"...many people will spend
more time planning a vacation or dinner party than their financial
future". LIFE LETTER for September sheds light on the process
that should be followed.
Financial strategies for newlyweds - While LIFE LETTER for October focuses on a young couple about to get married, many of us should act on the advice given to John and Jane. Even those of us who have been married for many years should heed these points.
LIFE LETTER MATURE - Your personal estate checklist was so well received when I first sent it out in 1996 that I still get requests for it. Here it is again. And Duties of an executor lists what the executor of your will must do. Two reminders in this regard:
1) Make sure you have a will and that your will is up-to-date
2) Does your executor have all the information required to perform his or her duties?
THE STOCK MARKETS - As the markets closed for the 3rd quarter of 2006, the Canadian S&P TSX Index, as well as most large cap Canadian blue chip mutual funds, are back where they were in mid-April, 2006. As of September 30, 2006, the year-to-date return of the S&P TSX Composite Index is +4.34%; the Dow Jones is up +8.97%; the S & P 500 is at +7.01%; and the NASDAQ stands at +2.41%. The European indexes are up +11.02% in Germany; 11.34% in France; and +6.09% in Britain. Japan's NIKKEI has gained a miserly +0.10%, while Hong Kong's Hang Seng has grown by a very healthy +17.93% during the first 9 months of 2006.
As the principal of Mathisen Financial, Inc., I take a conservative approach to where our clients' money is invested. Until further notice, I am betting on Canada..
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.
Your Estate 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 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?
Want help implementing your estate plans?
Hans Mathisen today at (306)242-7042.
Copyright © 2006 Life Letter. All rights reserved
Financial strategies for newlyweds
John and Jane had spent many months planning for their special day. They had also budgeted and spent many thousands of dollars to celebrate their wedding. Now what?
Since John and Jane have made a for richer or poorer commitment to each other, it's time to do something about it; and they need to start right away. Following is a list of the primary areas that will need their immediate attention:
Get your wills made - Unless they had wills prepared in anticipation of their marriage, any wills John and Jane did have automatically became invalid the moment they said "I do." If either dies without a will, the survivor will need a lawyer to have the estate settled. There will be extra costs and delays.
Change the beneficiary on life insurance policies and RRSPs - John and Jane will need to contact their insurance advisor and have the beneficiary on their policies changed. Also, they will have to change the beneficiary on their group benefits at work and on their RRSPs. This is something that does not automatically happen when you get married.
Review life and living benefits insurance - All too often, people rely almost entirely on their group benefits at work for their insurance protection. Remember, the group plan has been set up to provide all employees with almost exactly the same benefits. That means that the single person John or Jane works with has the same coverage that they do. So does the married person with children. A qualified insurance advisor can coordinate a plan, tailored with group benefits, to suit their individual needs.
Get into the habit of paying yourself first - This is the best way to build personal wealth, regardless of income level. It means John and Jane take their savings off the top of their pay cheques rather than from what little, if any, is left at the end of the month. A good rule of thumb is to save at least 10% of gross income. Lifestyle expenses should come from what they have left after they save. All too often, savings plans are put off until after the lifestyle is established. Invariably, those who pay themselves first employ those who pay themselves last.
Avoid personal debt - Too much personal debt is the most serious and common obstacle to achieving financial success. It is also a major contributor to divorce rates. Even modest levels of debt can put a drain on John and Jane's cash flow, leaving little or nothing to invest. Since interest on personal debt, such as credit cards, car loans and a mortgage, is not deductible for tax purposes, paying it off is one of the best investments they can make.
Don't delay - The most important step in getting on the road to financial success is simply getting started. John and Jane will gain absolutely nothing by putting it off until "tomorrow."
Too many people put financial planning on the back burner until their early 50's, when panic sets in. Start early and the financial goals you set for yourself will be much easier to achieve.
Want help implementing your financial stategies?
Call Hans Mathisen today at (306)242-7042.
Copyright © 2006 Life Letter. All rights reserved
Mutual confidence is the power that binds together all harmonious human relationships.