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Are You a Saver?

We all know we should save, right?

If you’re like me, then you’ve probably heard phrases like “make sure to save at least 10 percent of your income” or “save for retirement” from someone in your life.

I used to think if I just put my money into my bank account and kept it there, I was saving and everything would be just fine. Boy (or girl), was I wrong! What I should have been doing was investing my money instead.

What’s the difference?

SAVING vs. INVESTING

Saving implies you are holding on to your money to make sure it’s always there. As a simple analogy, think of a squirrel gathering nuts for winter – if Mr. Squirrel gathers 50 nuts, he will have 50 nuts when he’s ready to dig them up.

Investing also involves saving your money, but with the intention of growing it. Can you imagine how excited Mr. Squirrel would be if he gathered 50 nuts but has 75 when he retrieves them?

WHY SHOULD YOU INVEST?

There are two main reasons to invest rather than save.

The first reason is that the cost of living goes up every year.

Think back to 5 years ago – what was the price of bread back then compared to the price of bread now? Here are the expected food price increases in 2018, prepared by Dalhousie University and University of Guelph:

This rising cost of living is called inflation, and on average, it goes up by 2 to 3 percent every year. If your money doesn’t grow to at least keep up with inflation, then you won’t have the same purchasing power in years to come – you’re actually losing money!

You can use this Bank of Canada calculator to see how much you would need in today’s dollars to have the equivalent of $100 in previous years.

The second reason to invest is so you don’t have to work forever!

Many of us think of retirement in terms of a certain age, but I urge you to think of retirement as the point in your life at which you have enough money to cover your lifestyle, without working. As business owners, we expect that we will get paid from our business without having to physically do any of the day-to-day duties.

If your money doesn’t grow enough to sustain you in later years, then more than likely you will have to continue working to afford goods and services. In this case, you should aim to grow your money at a rate that is higher than inflation, to build up that “nest egg”.

The following graph shows how much you would need to save per month and invest it at a rate of 8% growth to have $1M at retirement. The numbers on the left indicate the number of years left until your retirement age.

E.g. Looking at the top of the graph, someone who aims to retire in 40 years will need to save $286.45 each month and invest it at 8%. Looking at the bottom of the graph, someone who is 5 years away from retirement will have to save $13,609.73 each month and invest it at 8% to get to the same goal of $1M.

SO HOW DO YOU START INVESTING?

It’s great to see your money growing, however you must remember that investing does come with some risk. Choosing the right investment for you depends on your goals, the length of time you would like to stay invested, and the type of investor you are.

Someone who is very young may have a longer period of time to invest and may therefore be willing to take a bit more risk to get more growth. Someone who is closer to retirement may be focused more on safety and may choose a conservative investment.

Having an advisor guide you through the process can give you a good indication of the type of investor you are and the best way to plan for your money goals.

 

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Kim Lowrie is an insurance agent and mutual fund representative with World Financial Group.

She and her husband have made it their lifelong mission to help families, individuals and business owners succeed financially.

To find a solution that best fits your needs and goals, connect with Kim:

647.231.9052

klowrie02unjc@wfgmail.ca

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The Cost of Hiring an Amateur

Understandably as a business owner there are A LOT of expenses to start and run your business. A common area entrepreneurs try to save a little is by doing their own bookkeeping. However bookkeeping is a vital process for a business and doing this wrong can be financially devastating! If you are going to be a DIYselfer avoid the following mistakes!

  • Keep track of your personal contributions into the business! The money you invest becomes part of your cost base and one day you will need to know what this cost when you sell the business or die. Keeping track of your personal contributions into the business will also have an immediate tax impact when you want to withdraw money from the business.
  • Missing eligible deductions! You don’t know what you don’t know and that could result in you missing eligible deductions or not maximizing the expenses you are claiming. So what? That means more taxes paid (or not enough loss recorded!). This is a hard one to learn on your own and some accountants or business development centers do offer courses on exactly this.
  • Not preparing financial statements! If you are just using an excel spreadsheet and putting your expenses under the right column heading; unfortunately this is not going to be helpful. Yes you have a grand total at the end of the month, and you can use this to make an income statement, but what you are lacking is the ability to make a balance sheet. This will be of greater consequence if you ever need to ask for a bank loan, investors or want to sell the business – they will want to see a complete set of financial statements.
  • Mixing personal and business finances. If you don’t separate the activities of the business from your personal activities it will be virtually impossible for you to truly understand how your business is doing. Did you spend that money investing back into the business… or did you spend it on personal activities? Plus if everything is combined the CRA then will access everything if they are auditing you. Treat the business – mentally and physically – as a separate entity and keep a proper paper trail of activities between business You and personal You.

These mistakes are by no means the full list of common mistakes. But each of these has a significant tax impact and business impact for you often immediately and in the future.

 

 

 

“Behind Every Great Business is a Great Accountant”

For more information on how to keep your business tax efficient, or to get a consultation on whether you are making all the right tax choices for your business, contact Dharna CPA. www.dharnacpa.ca. Info@dharnacpa.ca

How To Move Forward With Your Real Estate Investing Goals!

Amina

As a real estate investor, I took the time to get educated in various aspects of real estate before proceeding with my first investment property purchase. However, at some point I knew that getting educated was only part of the process – at some point I would have to pull the trigger, so to speak and actually purchase the property to meet my investing goals.

Everybody has reasons for starting their real estate investing career – mine started because I thought it would be a great way to supplement my income. I never expected to evolve and learn what I have learned to date. I keep expanding my goals and hopefully this post will inspire to keep expanding yours as well. I am now involved in residential, commercial and private lending for other investors and with so many different ways to invest the overall goal is to not only grow my own passive income but to also enjoy the journey.

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I love going to different meetup groups or getting out and meeting other investors – mostly to see what they are doing with their own portfolio’s and to learn about what path they took to achieve their goals. But today I am more picky on which ones I go to and how much I spend to attend a meeting. Factor in parking and gas, it can be a very expensive night with little or no return.

It can be advantageous to learn from others. Investors are a great group of people because they love to share their achievements and their struggles to get to where they are and so you get to learn for free. At the beginning of my real estate journey, I took the time to meet with investors I wanted to emulate and am grateful for those individuals who took the time to share their experiences and knowledge with me.

I have also met so many would-be investors who have attended every course available (some that cost thousands of dollars), will go to every meetup or investment club across Ontario, will speak to many investors and still not have the courage to pull the trigger and purchase that property – we commonly refer to this as analysis paralysis!

I recently met such a person and sometimes I can be very direct – mostly because I hate to see somebody waste so much money and not have anything in return. I met this person at an investor meeting and the charge was $20 to attend. I understand that sometimes investors who run these groups have to pay for the rooms so that is not a problem, however if you are attending a different meeting 2-3 times a week, that cost can add up.

So I met this gentleman at an event and we started talking! This specific gentleman thought that he could purchase a few properties and retire from his job within 6 months – unfortunately a myth that is perpetuated by many of these courses that charge thousands of dollars. We finally got around to the topic of the many courses he had taken to date over the last 3 years – in total he had spent close to $60,000 (one year’s annual salary) and had still not purchased a property.

I asked him what was holding him back and he said he did not feel ready and that he did not feel he had learned enough. I asked him what else he needed to know and he could not answer that question. He said he was taking another $10,000 course the following week that should give him the information he needed to proceed. I felt sorry for him because this is too often a reason I hear when people don’t feel ready to purchase a property yet.

Are you an investor who has yet to purchase your first property, even after attending many courses and seminars? What information are you lacking? What is holding you back?

By reaching out to an experienced investor and asking them the questions you most want to know, it might just give you the confidence you need to push forward. I recently did that with a new investor and one month later after taking my advice and doing some research on two markets we focused on, she is ready to pull the trigger on her first property!

If you are a successful investor and you come across somebody like this, please do them a favor and break down the myths for them; such as owning a few properties will not allow you to leave your job and retire; taking so many courses and spending so much money may or may not prepare you to purchase that property and finally being stuck in analysis paralysis will not prepare you to purchase your first property.

If you are a successful investor, don’t be afraid to share your experience with somebody like this – it may result in their success as well as yours!

I can be reached at amina@aminas-ms.ca or 416 697-5443.
To Your Wealth! Amina

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It's That Time of Year Again

Amina

It’s that time of year again when we get inundated with messages about topping up our RRSP’s or investing for the long run for our retirement, but how do you choose what to invest in?

The markets are down, the dollar is down and according to the press it’s doom and gloom on the horizon. But how do you as a savvy investor, cut through the headlines to figure out what is the best bet for your dollars?

Experts (who are they?) will say buy when the markets are down and sell when they are high, but when you look at your statement and you haven’t seen a high in your returns for a long time, who do you trust? How do you know that the more money you invest, will promise the returns you want?

time to invest

Well looking from the other side, here are some options you can consider that don’t depend on the stock markets and whether you should buy now or not?

Real Estate – buying single family, multi-family, commercial (plaza’s, strip malls, apartment buildings, etc) in a buy & hold strategy, can provide you with monthly cash flow as well as long term appreciation. Even when markets are down, your property will always serve you well as long as you keep the following points in mind:

  • Buy in markets that have population growth, job growth, infrastructure growth and a diversity of industries to service that market;
  • Buy low and sell high – this is also true in real estate, but it is more dependent on figuring out whether your property will cash flow positively while also paying down the mortgage. It does not make sense to invest in a property if it is not going to provide long-term wealth or cash flow – cash is king to a buy & hold investor. Furthermore, if you decide to sell a few years down the road, make sure you have maximized your returns so when you sell you are not on the losing end – remember buy low and sell high!
  • Using your RRSP’s to invest in a property; I spoke of this in my last article. By investing Non-Arms’s Length, you invest in a property that is owned by another investor, stranger, etc. the distinction is they cannot be related to you by blood (see last article Making RRSP’s Or TFSA Work)

If you don’t fancy investing in bricks & mortar properties, you might want to consider investing in development through Syndicated Mortgages. Syndicated mortgages have quickly caught on amongst savvy investors as they get to choose from a variety of different asset classes (single family developments, commercial, condo’s and hotels to name a few) to invest in. With a minimum investment of $30,000 and a fixed return of 8% per annum, you can’t lose. Here are some other benefits:

  • By investing your existing RRSP’s, they are held in trust by Olympia Trust – one of Canada’s biggest and most respected trust companies and not by the syndicated company themselves;
  • Your RRSP’s are not affected by the markets and thus you will continue to get a fixed return of 8% per annum regardless of whether the market is up or down or the dollar is up or down;
  • You get to choose where your money is invested and you don’t have to pay fees to invest ever!

Even though I love Investing in Real Estate, I don’t put all my eggs in one basket so I also invest in Dividend paying stocks. “The best way for people to get a decent return these days is to have a good portion of that return come from reliable dividends versus less reliable capital gains,” says Bob Gorman, market strategist at TD Waterhouse. “This is going to be the era of the dividend growth stock.”

Here are some tips that make Dividend Investing a versatile investment:

  • I invest only in blue chip stocks (yes stocks) that provide a consistent flow of dividends for the last 10 years and only 1 or 2 from each asset class (Utilities, Communication, Tech, etc)
  • I invest in 1 stock and then purchase more through cash injections into my account, without paying fees ever;
  • Picking the right dividend stocks is key. Avoid companies with the highest yields, because that may indicate the dividend is likely to be cut, and the stock price will suffer as a result. Instead, choose reliable dividend-payers that can maintain those dividends even in bad times, while also growing them consistently over time. Look for well-managed, profitable companies in stable industries with good balance sheets and modest growth. They should also pay out only a reasonable proportion of profits.
  • Invest in Canadian Dividend stocks in non-registered accounts (such as a TFSA) but hold your US Dividend stocks inside your RRSP to protect from US withholding taxes of 15%.
  • Pick Dividend stocks that have medium yields but also beat the rate of inflation – many stocks today don’t provide adequate returns after you factor in fees; by self-directing your investments, you can omit fees and maximize on the return.

Regardless of how you decide to invest your hard-earned dollars keep in mind that in order to maximize your returns and your retirement goals, be careful of what you invest in, how much or little you pay in fees and your time horizon. All of these facts will help guide you on your path to investing your RRSP’s this year!

To your Wealth!

Amina

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Importance of a Business Plan

anna

When most businesses develop a business plan the intention is for funding purposes.  They take the information to the banking and investors to gather the monies they require to grow or promote their businesses.  However a good business plan is much more that funding it is about clarity and direction.

The time invested in working through the different areas of your business plan is a path to enlightenment on your business and how you choose to drive your company.  As you develop your plan a greater understanding evolves for your marketing, documentation, policies, and sales projections.  As the plan is implemented you make adjustments based on the realities of business.  These adjustments are imperative to making improvements in the direction of your company.

The business plan starts with a mission and vision.  This is the reason you want to have your company.  Who and you serving and why is it important?  It creates a set of values that as a company you choose to stand by.  It becomes the reason for change to occur.  It all goes back to the mission and vision and does the change support your mission.

The road map to your success is in your business plan and the turns and corrections we make are a learning curve for company growth and change.  We set benchmarks and goals and track our performance so that we can regulate whether we are on the right path.

The plan should include your industry and the changes that are occurring and how your company is going to grow along with the change.  This includes a clear idea of your clients and customers.  It also includes major competitors and how you are going to compete along side of them.

Be honest with yourself about the strengths and weakness of your company.  If customer service is a strength hem use it to your advantage and if delivery is a weakness make a plan of improvement.  It may also be a great idea to list all your services/product.  You may surprise yourself on which items are actually making you money once you start the analysis.

A large part of the business plan should include an explanation of what and how you are going to market your products or service.  A review of the revenue, cost and projected profit should be part of your plan. All this is your road map to success!!!

Anna Ottaviani is a Board Certified NLP Master Practitioner & Master Coach, Board Certified Master Hypnotherapist,Creating Your Future® , Time Line® Therapist Practitioner and Reiki Master. Her methods are unique and tailored to each individual client. She can be reached at www.sucessfullyyou.ca or by phone at 289-221-5772. You can follow her on Facebook at http://www.facebook.com/successfullyyou?ref=ts&fref=ts

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