|
|
|
|
|
|
| Greetings! |
Do you have a hard time making financial decisions?
If so you're not alone. We all come across those "should I do this or should I do that" kinds of decisions.
- Should I pay down debt or invest in my RSP?
- Should I keep my money safe or invest in stocks?
- Should I buy a house now or wait?
- Should I keep my job or start my own business?
In most cases, the final answer lies with you. There is almost never a financial decision that is perfect for everyone. And the only way to make great financial decisions is to get really clear on what you want, to learn enough about the pros and cons of each financial decision, and then to go for it and not look back. Read on for some tips on how to deal with the Should I Invest or Pay Down Debt decision and learn more about stocks in our new Investments Plain and Simple series. Part of process of making great decisions is to continue to educate yourself financially. And finally, financial empowerment is in! In the recent budget, the Federal government has made financial literacy a priority. Click here to read what Karin had to say about it in her weekly article on the Financial Post magazine website. Please help us promote financial literacy by spreading the word about the Women's Financial Learning Centre. Click on the button below to confidently and anonymously forward this email to a friend.
|
|
|
|
| Sheila's Quick Tip - Should I invest or pay down debt? |
 That's one of the most frequently asked questions that I get from clients, and the answer isn't always obvious and it's rarely purely financial. In pure math terms, if the interest rate you are paying on your loans is higher than what you expect to earn on your investments on an after-tax basis, then the simple answer is to pay off debt. But what about feeling like you're never getting ahead? This is where a few rules of thumb will help you decide what to do. 1. Set a Date to Be Debt-Free: If you have any debt at all (loans, mortgage, credit cards), make sure you have a concrete debt repayment plan in place. This means setting a date to be debt-free and allocating an amount each month to repaying debt. 2. Pay off High Interest Debt first: If you are paying more than 10% interest on your debt and it's non-deductible debt, then you're almost always better off paying off the debt than saving or investing. Even in better investment times, it's almost impossible to get an investment that will pay you 10% after-tax consistently. Once the high interest debt is paid off, then you can start saving. 3. Know thyself: Are you the type of person who always has a little bit owing on credit cards or a line of credit, no matter how hard you try to pay it off completely? If that sounds like you, you're better off to put some money in savings using an automatic monthly savings plan even if you pay more in loan interest than you earn in your savings account. Otherwise your low grade debt habit might cause you to put off saving forever. 4. Balance your goals: If you have important short or long term goals, then balancing debt repayment with saving for your other goals can makes sense. If you put off your life completely for the sake of debt repayment, you might resist your plan and bust out and splurge - which will only make you feel guilty and no further ahead financially. The best answer for whether to pay down debt or to invest comes from an honest assessment of your relationship to debt and what will motivate and energize you to stick with your financial plan. If you're tired of being a slave to debt and want a fast track to freedom, check out Sheila's Debt-Free Challenge. Classes start in Vancouver February 10th.
|
Investments Plain and Simple: Stocks - The Basics
|
 You've heard the word many times and you may even have some of your money invested in them. But do you really know what a stock is and better yet, could you explain what it is to your daughter? If not, read on....
What is a stock?
At some point, just about every company needs to raise money, whether to start operations, to build a factory, or to take on new staff. Typically companies do one of two things when they need more cash:
1) They borrow the money from a bank or from individuals, or
2) They raise it from investors by selling them a piece of the company (called stocks or shares in the company)
If you buy stocks and become a shareholder, you are then a part owner in the company with a claim (however small it may be) on every asset (land, buildings, chairs, computers, etc.) and on whatever the company earns.
How do I make money from stocks?
There are two ways you can make money from stocks:
1) When the stock price goes up - if the value of your stock goes up over time, your stocks could become worth more than you paid for them. And if at that point you sell your stocks, the difference between your purchase price and your selling price is called a capital gain.
For example: if you buy 10 shares of ABC company for $10 each, you will have invested $100. If the share price goes up to $20 and you sell your 10 shares, you will now have $200, which means your stocks are worth $100 more than they were before. If you sell the stocks for $200 you will then have what's called a "capital gain" of $100 on your investment. (Your capital gain may be taxable - we'll talk about investment taxation in a future column).
2) When you receive dividends - when an established company makes a profit, it may choose to pay the profit out to its shareholders, rather than invest it back into the company. These payments are called dividends. Dividends are often paid quarterly and the amount you get depends on how many shares you own and the amount per share that the company decides to distribute.
Of course the flip side is that:
1) If your stock price goes down - and you have to sell your stocks at a time when they are worth less than what you initially paid, you incur a capital loss, which is a fancy way of saying you've lost at least some of your initial investment.
2) Dividends are not guaranteed - if the company stops making a profit, or if it goes through a change and decides to reinvest the profit in the company, it can stop paying dividends. At that point you could be out of an income stream.
Why would I invest in stocks if I could lose money?
In spite of the recent turmoil in the stock market, over the last 15 years Canadian stocks* (including reinvested dividends) have increased by an average of 7.09% per year compared to 4% for cash type investments. If you are saving for something that is at least 7-10 years away like retirement, having some of your money invested in stocks or stock mutual funds should help you get there faster. But before investing in stocks, make sure you have a solid plan and a good understanding of what you're investing in so you stay calm when the inevitable fluctuations happen along the way.
* As of Feb 2, 2009 - TSX/S&P Total Return
|
| Upcoming Workshops |
Why spend one more day wondering when you will ever get out of debt? Build Your Own Financial Plan - 3 month Teleclass program starts February 17th If you're tired of worrying about your finances and ready to take control, this program is for you. MoneyMastery Program - Ongoing telecoaching and education for Build Your Own Financial Plan graduates. Become a more confident and savvy investor so you can achieve your financial goals faster and with more ease. NEW PROGRAM - Private Practice Finances Made Easy For Therapists, Coaches, Counsellors and other healing professionals - Learn to take care of your therapy or healing practice finances before they take control of you! Program is co-faciliated by Karin Mizgala and Juliet Austin. Investing Basics for Women - Class offered through UBC Learn the fundamentals of investing and figure out how to invest your money wisely. Retirement Planning: New Realities, New Possibilities - Class offered through UBC Does the thought of retirement bring your more anxiety than joy? Do you wonder if you'll ever have enough money to retire comfortably? Or maybe you can't ever imagine retiring completely, but want this to be a choice not a financial necessity. | |
|
Feel free to call us if we can help in any way or if you would like to discuss which one of our programs would best suit your needs. We'd love to hear from you!
Sincerely,
|
|
Karin and Sheila
Karin Mizgala 604-880-4143
Sheila Walkington 604-716-5375 |
|
| Save $25 |
|
| Offer Expires: February 17, 2009 |
|
|
