Archive for 2014

The Globe and Mail – By Dianne Maley

They wonder about the wisdom of their home renovation plan, which will cost between $100,000 and $140,000. They also wonder how best to prepare for retirement. They hope to hang up their hats in 2025 with an after-tax spending target of $66,000 a year. “We need to figure out what kind of foundation we need to put in place that will allow us some flexibility but also a secure retirement,” Sarah writes.

We asked Ian Black, a fee-only financial planner at Macdonald, Shymko Co. Ltd. in Vancouver, to look at Steve and Sarah’s situation …

To add a suite to their home, Sarah and Steve will have to borrow money, Mr. Black notes. In his analysis, he has them spending $120,000. “They should be aware their house may not increase in value by the same amount.”

While they have about $87,000 in cash and investments, spending the entire amount would use up any liquidity they have for emergencies. Mr. Black suggests the couple use $20,000 to $30,000 of their cash and borrow the balance for their renovation. Click here to read the rest of the article

Globe and Mail – Financial Facelift by Dianne Maley

Tess and Vince are 35 with two children, 4 and 6.

Tess recently went back to work after spending a year and a half at home with the children, so the cash is flowing more freely.

“Now that Tess is back to work, how should we allocate any extra money that we may have?” Vince asks in an e-mail. “Should we be saving, or could we take a little extra money now to enjoy ourselves and take a vacation here and there?”

Together, they bring in $233,500 before tax, including Vince’s bonus. They also are enjoying a relocation perk – a subsidized mortgage loan for $477,000 on which they pay only 1-per-cent interest.

“How much of a priority should it be for us to pay down the mortgage more quickly than our normal payments?” Vince asks. They wonder, too, how much they should be saving for the children’s higher education – and their own eventual retirement.

“Are we even close to on track for saving for retirement, or are we totally lost in terms of how much we really need?”

We asked Ngoc Day, a fee-only financial adviser at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Tess and Vince’s situation. Click here to read the rest of the article

The Globe and Mail – By Dianne Maley

Adele is 44 and single with two children, age 14 and 21, living at home.

Adele earns good money as a self-employed professional, but wonders about her future given the competing demands on her income, one of which is the cost of putting her children through university.

Being single in Vancouver, “with the intent to remain as such,” requires careful financial planning “in light of the costs being borne by one person,” Adele writes in an e-mail. To help pay the mortgage, she rents out a basement suite for $500 a month.

We asked Gina Macdonald, a financial planner at Macdonald Shymko & Co. Ltd. of Vancouver, to look at Adele’s situation.

What the expert says

Adele should use her cash on hand to pay off her car loan as soon as possible, Ms. Macdonald says. For an emergency fund, she should set up a secured line of credit instead of setting aside cash.

Based on the expense numbers she provided, Adele does seem to have a substantial monthly surplus.

First off, she should contribute the maximum of $2,500 a year for her younger child to a registered education savings plan to take full advantage of the federal government’s education savings grant. Click here to read the rest of the article

The Globe and Mail – By Shelley White

Mulling over an RRSP contribution? If you’re scrambling to come up with the cash before the March 3 deadline, take some time to consider your options first. While investing in a registered retirement savings plan can be a fantastic financial strategy for some, it’s not the right move for everyone …

Much of the allure of the RRSP contribution comes from the promise of a tax deduction, and hopefully a refund.

However, if you are in a lower income year and expect to be making more money next year, you might be better off holding off on that RRSP contribution, says Ian Black, a registered financial planner at Macdonald, Shymko and Co. Ltd., a fee-only financial planning firm in Vancouver. The higher your tax bracket, the bigger the tax break you’re going be rewarded with.

“Maybe you’ve just started out in a job, you’re in your 20s, just got out of university but don’t have any debt, and you can foresee within a year or two, you’ll have higher income,” Mr. Black says. “Say you’re at the 30 per cent tax bracket now, but you’ll be at the 48 per cent a year from now. You can pick up an 18-per-cent return just by delaying a year.”

If you have money for your RRSP and worry you might be tempted to spend it before next year, you can always make the contribution now and claim it a year or two down the road. Click here to read the rest of the article

Vancouver Sun – By Derrick Penner

Real estate is making British Columbian families richer, according to Statistics Canada’s latest report on financial security, though that is not necessarily making them better off.

British Columbia saw the median family net worth, which measures total assets minus total debts, rise 128 per cent between 1999 and 2012 to $344,000 from $150,700 13 years previously — the highest among provinces in Canada compared with the national average of 78 per cent to $243,800 from $137,000 over the same time period.

“From a financial planning perspective, that (gain) is irrelevant,” said Ian Black, a registered financial planner and principal with Vancouver firm Macdonald Shymko & Co., “unless you’re looking to get out of the market and (move) to another jurisdiction to release some of that equity.”

Black said the difficulty, particularly in the Lower Mainland, is that even if homeowners sell to downsize, the  will still be looking to buy in an already expensive market.

“You’ve got to live somewhere,” he added, and “that (increase in property value) isn’t going to generate any higher income.”  Click here to read the rest of the article