May 2014
A blooming garden.




While it seemed like the Winter season would never be over, many of us are now experiencing the pleasure of watching nature come to life. The way we tend to our gardens is similar to how we should be tending to our finances. In order to grow, they need just as much planning and care as a flower bed, which is what we are here for.


Feel free to give us a call to discuss your portfolio.


Be well.



Peter, Claudio and Joanna

It's Finally Spring

by The Perspective - Spring 2014


Winter, Snow, Polar Vortex, Frost Quake!  Raise your hand if you are one of the millions of people whose fingers are crossed that these words are a thing of the past.  If you feel like this winter was one of the worst you can remember, you're probably right. A "misery index" released by meteorologists from the U.S. National Weather Service shows  that the winter of 2014 was indeed one of the most miserable on record. 


However, one bright spot is that while we hibernated, Canada put forth a tremendous effort in the Sochi Winter Olympics, and while we didn't surpass our Vancouver 2010 gold medal count, gold medals won in men's and women's hockey satisfied a nation's expectations and hopes.


And now we can finally look forward to spring which has already brought the vernal equinox which is the day of the year when light and dark are balanced. True or not, it's said that on this day you can balance an egg on its end.  Although we still have a little way to go to really enjoy the warmth and light that spring brings, we can begin to think about what we can do to renew ourselves and to better balance our lives.


While the first quarter of 2014 has seen political unrest in Eastern Europe between Russia and the Ukraine, a new Prime Minister in Italy and weak news about the state of China's industrial production, the story of the first quarter has really been about balance.  


Under the leadership of new Federal Reserve Chair Janet Yellen the US has continued to claw back their bond purchasing program known as "Quantitative Easing". Designed to stimulate economic activity in the wake of the 2008 credit crisis, quantitative easing at its zenith called for the monthly purchase of $85 Billion of US bonds by the Central Bank. In December 2013 Ben Bernacke finally ended speculation about when the US Federal Reserve would begin to reduce Quantitative Easing when he announced his intention to reduce the amount of QE from $85 billion to $75 billion a month. Two federal reserve committee meetings later have seen the Fed continue along this course, tapering the purchase of Treasury bonds by a further $20 billion (down to $55 billion per month) and remain on course for a complete exit of Quantitative Easing by the end of the year.


The theme of balance was also echoed in Canada when Finance Minister Jim Flaherty delivered what will be his last budget in February. In this budget he promised to bring balance to federal spending in 2015. Perhaps it is this balance that will form part of Flaherty's legacy as if budget 2014 projections prove true; there will be a surplus in Federal spending for the first time since the 2007/2008 fiscal year.  


So while the winter of 2014 saw consumers retreat to their homes, where they cozied up to their television sets to cheer on their favorite athletes, the spring has finally sprung and consumers are expected to spend once again, thus helping the global economy continue to grow at a slow yet steady pace.

A Legacy left to all Canadians

by The Perspective - Spring 2014


Arguably the second most important job in Canada's federal government is that of Finance Minister. Prior to his resignation on March 18, 2014 Jim Flaherty served as Canada's Minister of Finance since 2006. During this tenure he delivered 10 federal budgets all of which were aimed at least to some extent to ensure that the government, families and individuals were fiscally responsible.


On April 10, 2014, less than a month after resigning from his post, "the best finance minister in the world" left us. His legacy after eight years at the helm of the second most important job in the government will almost certainly be his handling of the 2008 "Credit Crises", the greatest financial and economic crisis the world has seen since the great depression. The "Credit Crisis" saw the death of Lehman Brothers. the nationalization of most of Iceland's Banks, and the bailout of American financial institutions Freddie Mac and Fannie Mae. Yet despite this turmoil Canada's economy did not falter, as Flaherty initiated programs to buy up billions of dollars of government-backed mortgages, that helped to sustain lending and borrowing in Canada.


While his work during the "Credit Crisis" will be what is most remembered, perhaps it is the work that he did for families, home buyers and the disabled that will define him. During his tenure he introduced:


Pension Income Splitting


Introduced in the 2007 budget and effective as of 2008 pensionincome splitting allows spouses to split up to 50% of income generated from eligible pension sources and is a strategy that can be advantageously employed when spouses are in different tax brackets.


The Children's Fitness Tax Credit


Announced by the government in the 2006 federal budget it provides a $500 tax credit that can be applied to the costs of children?s fitness programs such as those which require significant physical activity contributing to cardio respiratory endurance, plus one or more of:

  • muscular strength,
  • muscular endurance,
  • flexibility, and/or
  • balance

The Children's Art Tax Credit


Introduced in the 2011 Federal Budget, the Children's Arts Tax Credit is available for a wide range of activities that contribute to a child's development, but which are not eligible for the Children's Fitness Tax Credit. The credit is provided for up to $500 of eligible expenses per child, and is otherwise based on eligibility conditions for the Children's Fitness Tax Credit


Family Caregiver Tax Credit


The Family Caregiver Tax Credit provides tax relief to individuals who provide ongoing care and support for infirm dependent relatives, including, spouses, common-law partners and minor children. This 15% non-refundable tax credit is based on an amount of $2,000 and has been available since 2012.


Caregivers may claim the benefit of this Tax Credit by claiming an enhanced amount for an infirm dependant under one of the following existing dependency-related credits: the Spousal or Common-Law Partner Credit, the Child Tax Credit, the Eligible Dependant Credit, the Caregiver Credit or the Infirm.


RESPs Asset Sharing Among Siblings


The 2011 budget allowed for transfers between individual RESPs for siblings, without tax penalties and without triggering the repayment of Canada Education Savings Grants (CESG), provided that the beneficiary of a plan receiving a transfer of assets had not reached 21 years of age when the plan was opened. This measure allows transfers of amounts between siblings where people other than parents or grandparents contributed to the plans, for example, uncles and aunts.


The Registered Disability Savings Plan (RDSP)


The RDSP was introduced in 2007 and has been available to the public since 2008. The RDSP is a savings plan designed specifically for people with disabilities in Canada. This tax-deferred savings vehicle is intended to assist parents and others in planning for the long-term financial security of their relatives and others with disabilities that are eligible for the Disability Tax Credit.


Always encouraging Canadians to save more , Flaherty also introduced the Tax Free Savings Account in his 2008 budget in order to do just that and because he did not want to see Canadians fall into the same trap as their cousins to the south he reduced mortgage amortizations from 40 to 25 years ( he did initially increase them to 40 years but had a change of heart),  cut the ratio of debt that borrowers could carry, and brought a host of conventional mortgage restrictions ("Guideline B-20").


In short Jim Flarherty paved the way for Canadians to take ownership of their financial houses and as his son Quinn Flaherty eulogized, "Put your feet up, lay your head back, close your eyes and relax we will take it from here."

What are you saving money for?

by Jim Yih - April 2014,


Saving money is such a critical component of financial success.  Unfortunately, Canadians have not been good savers for a long time. Not only has the savings rate been on the decline since it peaked in 1982 at over 20%, but it's been below 5% since the late 1990s.


One of the problems is that saving money is not a natural habit. Very few people come out of the womb with the savings gene.


Saving money is a learned behaviour, and few people are given the opportunity to learn it properly. You don't get much of a financial education in schools, and it's rare to find programs in the workplace. Most people are left to learn about saving money at home. Unfortunately, most parents are not good savers themselves, and many never talk to their kids about money.


Why save money?

I guess the answer to this question really depends on your goals. Some people save to spend-they are planning to buy a car, or a house, or shoes, to take a vacation, or to renovate the kitchen. Some people save for their children's education. Others are saving for retirement. And yes, believe it or not, there are some people that are just saving because they can't spend all their money.


The first step in saving money is to know what you will use the money for, because this will help determine the appropriate savings vehicle. For example, if you are saving money for your child's education, then a Registered Education Savings Plan (RESP) will likely be the best tool. If you're saving for a holiday, you would never use an RESP. Instead, a Tax-Free Savings Account (TFSA) would be much more appropriate. Saving for retirement is probably the most complicated, because you could use a Registered Retirement Savings Plan (RRSP), a TFSA or several other options.


The key point for now is that saving money for your future is best done when you have a clear idea of your goals.


Which type of account?

Before we go further, it's important to understand the difference between an account and an investment. This idea is often misunderstood by people who are starting their savings journey. One way to understand the difference is to think of an account as a bucket, and an investment as something you carry inside the bucket.


The various account "buckets" in Canada include the ones we just mentioned-Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSA), Registered Education Savings Plan (RESPs)-as well as Registered Retirement Income Funds (RRIF), Locked-in Retirement Accounts (LIRA), and plain old non-registered (taxable) accounts. Each of these has different rules regarding the amount you can contribute, when you can withdraw the money, and how the growth and income are taxed.


An investment is a type of asset that you hold inside one of these buckets. For example, with the money in your RRSP bucket, you can buy a whole range of investments, such as mutual funds, stocks, bonds, Guaranteed Investment Certificates (GICs), exchange-traded funds (ETFs), and many others.


Let's quickly walk through the four main accounts you can use to save money:


Registered Retirement Savings Plan (RRSP)

The RRSP was created back in 1957 and is primarily used to save for retirement. The incentive to use a RRSP is really tax-driven: When you put money into an RRSP, your contribution qualifies for a tax deduction. Any investment growth is tax-deferred until withdrawal. But when you eventually take money out of your RRSP (usually in retirement), it is fully taxable. You can also make early withdrawals from RRSPs to buy your first home or to pay for your own education. Your RRSP contribution limit is determined by the amount of income you earn.


Registered Education Savings Plan (RESP)

The RESP is designed specifically to help you save for a child's education. RESPs are attractive because of the Canada Education Savings Grant: for every dollar you contribute to the RESP (to a maximum of $2,500 per child per year), the government will contribute 20 cents. As long as the money stays in the plan, there is no tax on any investment growth. Later, when the money is withdrawn to pay for your child's education, the growth is taxed in the child's hands, so there is usually little or no tax.


Tax-Free Savings Accounts (TFSA)

The TFSA is the newest type of account, as it was just introduced in 2009. Unlike the RRSP, there is no tax deduction for contributions. However, all investment growth is completely tax-free, and you can withdraw money from a TFSA any time without any tax consequences. The maximum contribution is currently $5,000 per year for anyone over 18. If you withdraw money, you get that contribution room back the next year.


Non-registered account

A non-registered account is just a general investment account. It offers no tax deduction on contributions, and all of the growth is taxable: interest income, dividends, and capital gains have different tax treatments, but the Canada Revenue Agency takes a slice of each. In most cases, you would only use a non-registered account when your TFSA contribution room is all used up.


As you can see, different accounts have different tax treatments and different rules. That also means different accounts will be more appropriate for different savings objectives. You can save money more effectively if you choose the type of account that is the best match with your savings goal.

View original article here.
Issue: 42
Financial Markets
In This Issue
It's Finally Spring...
A Legacy left to all Canadians
What are you saving money for?

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Peter Bailey
Wealth Advisor
Worldsource Financial Management Inc.
272 Lawrence Avenue West, Suite 203
Toronto, Ontario M5M 4M1 

The information provided is for general information purposes only and is based on the perspectives and opinions of the owners and writers. The information is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting, or professional advice. Readers should consult their own subject matter experts for advice on the specific circumstances before taking any action. Some of the information provided has been obtained from sources, which we believe to be reliable, however,  we cannot guarantee its accuracy or completeness. Worldsource Financial Management Inc. does not assume any liability for any inaccuracies in the information provided.Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual Funds and Segregated Funds provided by the Fund Companies are offered through Worldsource Financial Management Inc. Other products and services are offered through Peter Bailey.