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Personal Auditor General

Another blast from the archives from the year 2008 (just before I was laid off), note how critical I was of the government. Do you have your own Financial Auditor General?

The Canadian Government is a mega-business in terms of size and jurisdiction, and to keep this monster organization in line there is the Office of the Auditor General. Yesterday the Office of the Auditor General put out its 2008 Annual Report, and as usual it is full of many interesting issues with the Government specifically in the area of spending. There are some very interesting comments on User Fees in general and how they have been arbitrarily added by many government agencies without a specific accounting of what the “fee” is for. Interesting reading.

The concept of the Auditor General got me thinking about whether I could stand an audit of kind by a 3rd party of my finances. My answer is I don’t really think so, however it might actually be a great idea to force me and my family to explain some of the purchases and financial decisions that have been made over the past little while. Think of having to explain to someone why I held on to my High Tech stocks for so long? Makes me cringe just thinking about this whole idea, but to me it sounds like a good idea.

I have previously written about the Quarterly Financial Review (which we are almost half way through the second financial quarter) and also about your Financial Resume, and these ideas are great concepts to help families communicate with each other about their current financial status (especially once you have a few reviews under your belt so you can actually compare and contrast quarter to quarter), but I am thinking that maybe these ideas aren’t quite enough. If you add more accountability (pardon the pun) to your Personal Financial Life you may be forced to make more informed decisions (i.e. you are less likely to rely on your “gut” or impulses, if you know you have to explain later to someone why you did what you did).

Any ideas where this kind of “Personal Audit” could be implemented are welcome.

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Welcome to the 2nd Half of the Year!

Yes folks, the second half of the year is already almost a week old, astounding isn’t it?

What have you done so far financially this  year? Have you reached your goals, or are you on track to reach the goals you set for this year? Think about those plans you had in the new year and how you were going to change things this year, have you succeeded?

How about starting fresh right now and setting some easy goals to hit for the second half of the year.

Some Ideas for Financial Goals

These are “easy cheesy” goals, so no excuses folks:

  • Open a TFSA account for yourself
  • If you are married and have kids, write a Will, or update your Will (or find your Will and review it)
  • Open a TFSA account for your wife
  • Fill in your powers of attorney with your wife.
  • Open a TFSA account for your kids over 18 years old
  • Open an RESP for each of your kids below the age of 16
  • Open an RRSP account for yourself somewhere along the way
  • Put $100 into your RRSP (if you have room) at least twice before December 31st
  • Dispose of 1 Credit Card you no longer use (don’t just tear it up, actually cancel the account)
  • Pay all your Credit Card balances completely every month, no matter how hard it “hurts”.

Any other easy goals for the readers to try? Open for suggestions here.

Off Topic: Happy Birthday Dalai Lama, who is 75 years old today.

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De-Cluttering Financially

Time to get your collective brooms out and sweep out your investments.

As a start of year/end of year task I went through my many investment accounts (boy I really do have a lot of those, holy cow), I noticed that I had a lot of investment vehicles that I should really just eject from my portfolio. Why was I keeping them around? Some of the odd reasons I think were in my mind were:

  • They might actually rebound sorry Charlie, that boat has sailed for these stale¬†leftover investments (some from the tech boom), so that is not a good reason.
  • They seem to be paying OK dividends might not be a bad reason, but then again, if I looked at the MER on these Mutual funds, I was paying other people a lot of money to get these dividends.
  • I’m a lazy sod who just won’t admit when he is wrong I believe we have a winner!

What were the nature of this financial clutter?

  • Two AGF Mutual funds that plodded along but had absurd MERs on them
  • Some left over Cisco stock that used to pay out, but still has not got back to where I bought it some 10 years ago
  • A crappy TD bond mutual fund that was useless as well

Took all the proceeds from those sales and bought a Dividend ETF, unfortunately the losses cannot be taken advantage of, since they were in an RRSP. Should I be buying Dividend devices in an RRSP? Some say no, I like dividends, so that is what I did.

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Financial Planners an opinion

Historical article from the period when I was laid off from Nortel, and then had to figure out what to do next. The Financial Planner was actually part of my lay off package, and he was actually useful in terms of things I learned from him. I did write a redux of this visit article as well (i.e. lessons learned).

Monday I spent a good 2 hours with a Personal Finance Planner, that was made available to me by my soon to be former employer, and their right management team. I won’t divulge the name of the planner, just because I don’t feel right doing a “review” of their services, since I got them for a large discount.

Scope of Discussions

The scope of my discussions with this gentleman was mostly around what are my options to do with my severance package and what the tax implications would be if I withdrew from my company’s pension plan.

Bill (not the financial planners real first name) collected a fair amount of background information from us, which made my wife a little nervous (since she had not met him before, but I had at a group financial planning session). We were fairly strict in what we did and did not tell him, since we wanted the scope of the discussions to stay mostly around the task at hand (i.e. tax implications of my severance package).

Planning Session

After collecting the information, the financial planner had an already set up Excel spreadsheet with the tax scenarios possible for me and my family. Bill has done this with many (more than 100) former employees of my soon to be former employer. He also had a massive plasma display that he ran this on to show my wife and I what he was calculating. My wife pointed out I will never be getting a display like that for my computer.

He started by filling in some of the numbers he gave me about my yearly income, the size of the severance package, and the size of my pension pay out.

The variables to be dealt with are:

  1. Do I take my severance package completely when it is made available?
  2. Do I use the RRSP room I have now or later?
  3. Nortel was gracious enough to allow me to split my severance and take some now, and then some on January 1, 2009, do I do that?
  4. What are the implications of me withdrawing from the pension plan?

The financial planner went through all of these scenarios, gave his opinions and dealt with my and my wife’s questions in a professional way.

Outcomes

I think my wife and I had already decided what to do, but we didn’t really have a clear plan of why or how much, I think now we do (at least I hope we do). Simply sitting down with someone with enough Tax savvy and background to “bounce ideas” off was just great and I think I got my moneys worth out of it (remember I got this at a large discount).

Bill did point out that his company does offer many services, and that if I did need them, I should call him (and I wouldn’t expect anything less from a small business owner), but he was not pushy and understood the audience he was dealing with.

Bill also told me his hourly rate, and I think I might think a bit before going back to him, and make sure I was much better prepared than I was this time, because his services do not come cheap (but then again, you pay for expertise, I have always found).

All in all a positive experience, and I would recommend dealing with a financial planner, with NO ties to any insurance company or mutual fund company. Make sure the planner charges you by the hour, for the service he is offering, so you know where he or she is making their money (mostly).

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Financial Resume: Credit Cards

A good comment from someone jogged another area where you need to have a look at your financial resume and that is in the usage of your credit cards, and do you have them under control?

When I first graduated from University for the first year or two I actually carried a balance on my credit card (yes, hang my head in shame, but no one ever taught me about this stuff, if they had, I wouldn’t have done it honest). Now it wasn’t a large balance, but it was enough to be a drag on my life. This was a mistake but I learned from my mistake.

I no longer carry balances on credit cards, and ensure I never have to pay the high interest rates most credit cards charge, so that is a good thing, I’ll give myself a green star for that one.

I do however have FAR too many credit cards. I went to the Canadian Credit check folks and got a list of all the folks who have open credit files on me (with zero dollar balances) and it is scary. These things are dangerous because:

  1. Fraud on these accounts is more likely, just because there are a lot of them
  2. I have access to this credit, and quite frankly, I don’t trust myself on impulse buying or worse still fooling myself into some bizarre get rich scam, which causes me to draw on these credit facilities.

I need to get rid of all of the credit facilities and cards I do not need, so black mark on me for that one too!

On your financial resume, include a short-term debt section and how you deal with it, and whether you think it is under control, which is important. If your short-term debt is out of control, it will effect (affect?) your long-term debt eventually.

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