financial freedom

Money and You

(chapters 1 - 4)
(this page updated: November 18, 2011)
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The proper handling of our money on a "day-to-day" basis is very critical to every one of us, yet the educational system does not teach us how. For this reason, many of us are having money problems and encounter problems in making wise decisions related to money management. Then, when they get older, they begin to realize that there is no way they can retire and still expect to eat, pay the bills, and, maybe, have a little fun once in awhile!

YOUR suggestions for improving this booklet are most welcome!

Money is not everything, but having enough of it assures you of not having to worry about a lack of it.

Basically, most of us are true dummies when it comes to our money. If you agree that we work at our jobs and do most of the things we do simply for the reason that we want money, then you must agree that we should know how to handle that money if and when we get some.

This little book is intended to help you with your money matters. These ideas worked for me; your mileage may vary. I must have done a few things right; at age 42, I decided that work did not agree with me so I started taking a 3-month holiday every year; when those 3 months were over, I'd immediately take a 3-month vacation followed immediately by 3 months off. No, I won no lottery, did nothing illegal and inherited no more than $400.

My website lives at and/or and I'll make references to that from time to time to point you to more detailed information.

David Chilton wrote a very, very good book titled "The Wealthy Barber" and others have written many other books and made a lot of money doing so. Oprah and Dr. Phil (and others) have dedicated their TV shows to the subject of money management. Of the books I've read, Chilton's is the best. When I first read it, I wrote the Minister of Education and strongly suggested that every student in Grade 7 should be required to read and understand that book. That would go a long way to teaching us "fiscal sanity." My version is free. You're looking at it.

Money management does not have to be "super complicated." Some good habits, learned at a young age, go a long way to providing for a comfortable retirement, at an age when life can still be fun.

A wise person said, "I've been rich and I've been poor; rich is better; definitely better."

In my career as an accountant, income tax accountant and college instructor, I've seen most of the problems that plague us financially and I want to do what little I can to help you avoid those problems.

My plan (back in 1992) was to write a small book which would be so easy to understand that everybody and his kids would read it, love it and I would make a bundle with it. I've been wanting to do this long before the internet came along and plan was to find a publisher to print and sell it. Now that the Internet has come and I have enough money, my plan has changed. I'm giving my little book away via the internet. All I want in return is for readers to tell me they like it, and if not, then to tell me where I should change it. And change it I will, as I get input from readers.

This book is intended as a sort of "check list" of the things YOU should seriously consider if you don't want to run into money trouble or be a burden on your family (or the Social Welfare system) when the tough times come. The tough times seem to come, sooner or later, without fail. Remember Murphy's Law: "What can go wrong, will."

You must prepare for emergencies; even those who work for a large employer and so think they are safe, are not safe. The unexpected happens.

The advice given in these pages is not "all inclusive." Money management practices have to evolve as society, laws, customs, and individual needs and wants change. It would take an encyclopedia to "cover all the bases", and nobody could (nor would want to) read all that. These are some of the "basics." This will be of tremendous value to anyone age 16 and over, even younger. Those near, at, or past retirement age will benefit mainly from being put in a better position to advise the younger members of the family. Because it is intended for young people as well, it is written in a very simple style; all of it can be understood by even the very young. Using plain old Common Sense, they will realize that the suggestions and ideas presented here are sound. These are the matters which should have been taught in High School.

You are urged to read this with pen in hand; to make notes and to refresh your memory two or three times per year and check to see that you have remembered to put the financial suggestions into practice; to "keep you on the straight and narrow FISCAL path!" If you have printed out this book then a highlighter pen would come in handy. They don't work play nice with computer monitors.

My best wishes to you and your financially stable future.

Here is the list of what I plan to rant and rave about in this little booklet:

These are not necessarily in the order of importance; all of these areas are very important; they all involve your money. Note that things are constantly changing so bear that in mind while you read; it may be wise to check out the latest information on any given point that you read here.

Much of what you read here is directed specifically to Canadians but a lot will apply to anyone, anywhere, all the time.

I make frequent references to "RRSP" or "R.R.S.P." which is the Canadian "Registered Retirement Savings Plan." Our friends in the USA have a plan which is almost identical; it is the "Regular IRA" ("Individual Retirement Account") and they also have a different version called the "Roth IRA." To learn more about these please visit


(chapters 1 - 4 are on this page and the remainder is on page 2; see link at the bottom)

Chapter 1. Making your money

Chapter 2. Spending your money

Chapter 3. Saving your money

Chapter 4. Investing your money

Chapter 5. Income Tax and R.R.S.P.s for Canadians

Chapter 6. Paying Interest on your debts

Chapter 7. The Magic of Compound Interest

Chapter 8. Starting your own business

Chapter 9. Other ways to save money

appendix 1 Partnership Agreement

appendix 2 Your Resume

appendix 3 Some other resources that will interest you

Chapter 1. Making your money

In this chapter I'd like to offer you my thoughts, briefly, about your education, your job, get-rich-quick schemes and part-time jobs.

Your Education:

For the vast majority of us, making a healthy income depends on a good education and some "lucky breaks" in getting to know the right people who offer us good jobs. This is fine if such opportunities come your way. The value of a good education cannot be stressed enough.

You may be young and see people only a few years older out there making all kinds of money. It happens! The temptation to "get a piece of that action" is almost irresistable! You may forget, though, that next week or next month maybe next year, your "slightly older friend" will suddenly find that the job has unexpectedly dried up and another one is impossible to find. At this point, you might be very thankful that you continued your education a little longer.

Let's face it; when two people apply for a job, and one has considerable education while the other has not, the employer is likely to feel that the one with the education shows several advantages over the other; he/she had the SENSE to get the training, the AMBITION to become something, and the SMARTS which will be an asset in any type of activity. From the prospective employer's point of view, the decision (other things being equal) is easy.

Keep in mind, your formal education does not go on forever; your working life may go on for a very long time. The time you invest in studying, training and learning, is an investment in your future and also the future of your future family and children. But, there is more to it than "education." Read on.

Your job:

Don't be confused or deterred by stories of highly trained professionals walking the streets looking for work. After all, there is more to a good career than education and training. You also need to develop good inter - personal skills, and a good, positive ATTITUDE. If you cannot get along with your co - workers, you probably will not last in a job, and your next prospective employer, upon hearing about this from the former, will likely give you the "thumbs down." In situations like this, the employee may never be told the truth. Nobody likes to tell an employee that he/she is being fired for being a "jerk." You may leave with a completely false idea of why you were terminated. You may get a hint, however, when other opportunities fade after your references are checked.

Reference was made in the preceding paragraph, to the the word "ATTITUDE." As an employer, hiring and firing, I can guarantee that a good, happy, friendly, serious, helpful, loyal ATTITUDE is almost as important as a good education. Look at yourself the way others might. Would YOU hire someone who looked like you, walked like you, talked like you, dressed like you, had an attitude like yours, was as grumpy (or cheerful) as you, was as helpful as you, or, in general, acted the way you do? Are you a guy who insists on showing an attitude of "machismo", or a girl who carries herself with an air of "I'm better than you are"? Take a look at yourself, or, if you can, have a close friend or relative take a critical look at you, and give you some constructive criticism. Employers generally prefer someone who is mature over some immature kid. I have found that the older generation, and by that I mean those who are over the age of 40 or so, are often much more reliable, dependable, and trustworthy than younger people. If you are young, and looking for work, you have to compete with these mature folks!

When you are still deciding on what kind of career to pick, you could get some help from your nearest Unemployment Insurance office. Pick a career which is likely to be around for some time. Computer - related work is hard to beat. Jobs such as teachers, nurses, doctors, welders, carpenters etc. are difficult to phase out of existence. So are many others. Beware of jobs which run the risk of being taken over by technology. And technology changes overnight. Nowadays, you also have to watch that you don't wind up in a career that is easily outsourced. Too many of us have found out jobs suddenly leaving for India.

A "portable" job has many benefits. A "portable" job is one which can be used in different locations. The human body is much the same all over the world, so the work of medical practitioners is, in many ways the same all over. Welding methods can be used the world over. So can carpentry. Other professions, such as "law", are very different from one country to another. So is Income tax. These professions are not as "portable."

Don't just grab the first job you can get, even if the money seems great. Try to get into an area which really interests you. Only in such a job can you develop a positive ATTITUDE which will help you advance in that field. Talk to people in your chosen field and find out for yourself if that is REALLY what you could do for the next 35 - 45 years.

This is not to suggest that a change in careers is bad. It can be very good. But, changing careers can be traumatic, scary, and result in loss of considerable income during the period of re-adjustment.

If you are job hunting, an up-to-date Resume with a covering letter is essential. For an example of a Resume, see Appendix 2. Even if you are not currently job hunting, it is a good idea to keep your resume up to date and ready in case you suddenly need it.

Get - Rich - Quick Schemes:

A few comments about "get rich quick" schemes. And this include those "not quite so quick" schemes. We all get these "opportunities" thrust upon us, often by friends. They look so good. "This is opportunity knocking." We get invited to conferences where professionally trained speakers extoll the virtues of the company and the product, and convince us of the fact that we are "on the ground floor" of "opportunity unlimited." They pretend to take great pains in "warning" us that this is not a "Get Rich Quick" scheme, but nevertheless they try hard to make us believe that, in actuality, it is. They show us videos of beautiful people laying on beautiful beaches, under beautiful palm trees, near beautiful hotels, and smiling beautiful smiles, and tell us that if we work hard, selling THEIR PRODUCT, we soon will be smiling those same beautiful smiles. BEWARE! In my experience, 90% of these are scams! I have seen it over and over. Very often I have found myself affected by the enthusiasm whipped up by some who have become involved in these schemes. I have thought, "Wow, should I get into this; get a piece of the action?" In every case, without exception, I have been thankful that I did not get involved. Remember the old axiom, "If it looks too good to be true, it probably is." I have seen many good people waste incredible amounts of time, effort and hard - earned money on these schemes, only to be left feeling cheated, after a few months of high hopes. Sometimes, I think there should be a law regulating these scams. Some of them even require us to pay them a fair bit of money in training, conference fees, books, samples, "kits," video tapes and audio tapes, registration fees etc. etc. Paying them all this money makes us "fully qualified representatives." The Bottom Line is, "BEWARE and be very SKEPTICAL."

Part - time jobs:

Having said all that about "get - rich - quick" schemes, let me add that part time jobs have several advantages. Here I refer to those jobs you can do without putting out great amounts of money, without detriment to your family life, and involve the kind of activity which really interests you. Typically, these ideas come along because of your interests. Take, for example, the fellow who works with computers in his "9 - 5" office job. He is doing this work because he enjoys it. Along comes the opportunity to use his skills in a computer - related activity from home. He either already has a computer or can get one which is adequate (but perhaps not the ideal one) for the job at a good price. If this activity does not pan out, at least he has not lost a lot of time and money. If it does pan out, it could evolve into a steady stream of extra income, it could involve his family, and could develop into a full - time family business. The danger here is that he might be tempted to quit his "9 - 5" too soon; before the home business is really ready to support the family. He should be encouraged to proceed slowly and with some caution. A temptation to avoid here, would be the temptation to invest in newer, nicer, better, faster, more impressive tools or equipment, for example, the very latest computer with color laser printer, math co-processor, the latest software etc., when a slightly older machine would do the job at half the cost.

Chapter 2. Spending your money

Perhaps a better heading for this chapter would be "NOT spending your money." Money, however, is intended for only one thing, spending. The key is, WHEN. Spend it NOW, or later? Nobody can answer that question for you, but a few suggestions might be helpful. Let's be realistic; if you spend it now, you won't have it to spend, later. This, clearly, indicates that you have to be in full control of your spending habits.

It is no crime to visit a "Thrift Shop" where they sell only used goods. You can get some fabulous bargains there.

Don't live beyond your means and that includes not buying a house you really cannot afford and don't drive a vehicle you really should not have. A study I read about found that "many people who live in expensive homes and drive luxury cars do not have much wealth" and they also found that "Many people who have a great deal of wealth do not live in upscale neighborhoods."

If you are going to college or university, check out all the available grants, scholarships and bursaries. A person who is involved in the scholarships at a college told me that most students are "just too lazy" to bother applying for money they could have for the asking.

Perhaps the greatest mistake we make is in buying on impulse. We get an idea that we want something and we go get it. No self control. No common sense. This borders on stupidity, forgive me for saying so. We all do it; me too.

Nobody likes to be considered a "penny pincher," or to be thought of as "cheap," but nobody likes to face financial difficulty either, or the thought of a retirement in poverty. Hopefully, Chapter 3, on SAVING, will show the NEED to save for retirement.

Why not get into the habit of asking yourself, BEFORE you buy, a few questions, like:

The REAL Cost of What You Buy:

You may find that if you figure out how long you have to work, and how much you have to earn, to pay for something, you might have second thoughts. Take this example: (assuming no provincial sales tax)

a certain "toy" is priced at $ 700 and tax on it is $49. That means your total cost is $749.

Now, assuming your annual income is in the $30,000 range, your "marginal tax rate", is about 40%, depending on the tax rate where you live. This means that you have to earn $1,248. to pay for that "toy"!! (1,248 - 40% = 749) And if that is not enough to make you stop and think, consider this: If you were to take that $1,248 and put it into your savings account, then a year from now, assuming an interest rate of only 7%, you would have $1,270, and that is AFTER paying tax on the earned interest. If you had been smart enough to put that $1,248. into your investment account, you would have had $1,285 at the end of the first year. (ignoring income tax) Consider this, though, a year from now, would you be better off with $1,285 in your investment account, (or $1,270 in your savings account), or with a toy which was priced at $700. a year earlier, and now is worth, probably, a whole lot less?

Reference was made to your "Marginal Tax rate." This term refers to the tax you pay "on the last dollar you earn in a year." Let me explain with a simple example.

Let's say you have filled out your Income Tax return. Your total tax for the year was $9,201.11.

Your return was filed and the tax people processed it as you filed it.

Then, suddenly, an additional slip shows up from a Trust Company. You had forgotten that you'd had an account there for awhile, and it had earned $1,000 of interest. Now, you owe more tax. Let us assume that you re-did your tax return and found that your tax was $398 higher! That indicated that your "marginal tax rate" was about 40%.

Interest: The Money Measuring Method:

A little more on the REAL cost of what you are buying, when you buy something "on time." It is SO convenient, and so EASY to buy that way... so TEMPTING. The store makes it sound so easy, so inexpensive......

Don't be misled. Remember something from High School, called "INTEREST"? Remember the little Interest Formula: "I = PRT"? If you need "brushing up", see Chapter 6.

The common denominator for evaluating different financial options, is to determine the relevant interest rates. Much more of this in Chapter 6.

Bottom line: Don't try to "Keep Up with the Joneses." Somebody told me "keeping up with the Joneses" is "using money you don't have, to buy things you don't need, to impress people you don't like." Well put.

But you WILL spend money; what else is it good for? Here is a tip for paying bills. Some suppliers offer, e.g. a 2% discount if you pay a bill within 10 days. This is an opportunity for you if you like to earn a high rate of interest tax-free. For example, look at these numbers:

invoice amount: $100

terms: 2/10, net 30 (meaning take off 2% if you pay in 10 days; you MUST pay in 30 days)

here is the formula to figure out what rate you earn, tax-free, if you pay in 10 days:

(discount %) / (100% - discount %) x (365 / (final due date - discount period))

and using the numbers of our example:

2% / (100% - 2%) x (365 / (30 - 10))

or, simplifying that equation even more:

2/98 x 365/20

= 37.24% NOT BAD!

You work to make money; you make money to buy goods and services. The goods you buy deserve to be looked after. Some people seem to have the attitude that "things" are to be USED and used UP. I respectfully disagree. It seems more reasonable to USE your goods and TAKE CARE of them so you can continue to use and enjoy them and when you no longer want to use them, sell them at the highest - possible price. Insurance coverage should be considered for all higher - value goods such as your vehicles, boats, ATVs and your home and possibly for other goods as well. Unfortunately, too many of us have the selfish attitude "well, if my house burns down, the government or others will buy me a new one." Let me suggest you take care of your own assets and I'll take care of mine; if my house burns down I promise I'll not ask you to buy me a new one. That's what insurance is for. It is not a matter of not being able to afford it; it is a matter of not being able NOT to buy it.

But shop around for a good deal on insurance; make sure you are dealing with a very reputable company and then make the "deductible" such that your rate is low. That means you will be responsible for the first $x in case of a loss. The higher you make the deductible, the lower your premiums will be. Go over your policies before you pay the renewal invoice. If you don't understand it fully, discuss it with the agent. Make absolutely sure that you are dealing with a reputable insurance company. Remember Hurricane Katrina, in the last week of August, 2005, the worst natural disaster ever to hit the USA? Seven months after that catastrophy, home-owners who had valid insurance were still wondering what happened to their coverage. Insurance companies tried every trick in the book to avoid paying and lawsuits were launched against them.

The marketers have studied you, the consumer scientifically for a long time and they know what makes you tick. They know how to make you spend. And spend. And spend. All I can say is "don't be a sucker and fall for their tricks." When Christmas comes around these guys go into high gear to get their mitts onto your hard-earned cash. Stand up to them! Assert your rights!

A word about your favorite subject: Food. Quite likely, food is one of the biggest expenses in life. It is easy to get carried away with eating "the best foods in the best places" but it is just as easy to wind up broke. If you were to keep track of the cost of everything you eat and drink for awhile and see just what percentage of your hard-earned income is spent that way, you might be shocked. Why not cut back a little? Take a lunch to work rather than buying lunch and supporting another person. Why not eat out a lot less often. Compare prices between different supermarkets and stick with the one which has the lower prices. Cut out the junk food. Maybe you can grow a few veggies in your back yard and maybe you can catch a few fish and if you hunt, meat can be almost free. If you do not hunt, visit a buffalo (bison) rancher and buy a bison from him; pick out a nice, young bison and you can probably get the best meat for a fraction of what you would pay in a store. I can put you in touch with such a rancher. Accumulate some recipes which concentrate on nutritious foods which are inexpensive. I have a few on my website at I strongly suggest you stop eating out. Not only to save a LOT of $$ but if you knew what goes on in the kitchens of some restaurants, you would rather die than eat there again. Make a HABIT of making your own meals. The more often you do it, the more it will seem like "the right thing to do" and the easier it will become.

Your vehicle will probably be one of the largest drains on your bank account. It might be a good idea to watch for a good USED vehicle rather than buy a new one. I found that out. I bought a brand new Pontiac and it turned out to be a mechanical disaster. Later I bought a used Dodge van and it was 1000% better. My next vehicle will probably be another Dodge Grand Caravan Sport. If you plan your driving to minimize the number of kilometers or miles you drive, you can reduce fuel costs. Practice economical driving such as no jack-rabbit starts and sudden stops and you will also save your vehicle and reduce fuel consumption. Ask your insurance agent to shop around for you to find a lower rate. In March, 2011 I received my van insurance bill: $703. That clearly was creeping up and up so I asked my insurance agent to shop around for me and find me a better deal. She did; she came up with one FAR lower: $536 for identical coverage. Sometimes that works. I'm told synthetic oils are better for your car than other oils.

As if you needed more ways to spend your money, here is one more. If you are a parent, you know that your children need an "allowance." Some financial counsellors claim that the amount of the weekly allowance should correspond to the child's age and should be "$1 per week for each year of the child's life." That means a child of 12 would get $12 per week. I disagree. I think the amount depends entirely on each individual family's situation. No rules. And the child should be taught at an early age to use that money wisely. The child should learn that there are no guarantees. Any stream of income can suddenly, with no warning, stop.

Chapter 3. Saving your money:

There are lots of ways to save. Once your income is enough to cover your expenses you owe it to yourself to save for vacations, for a new car, house, retirement, or whatever else turns your crank. First, the NEEDS, then the WANTS.

Every financial advisor has his own ideas about saving, and has a right to those views. When you are consulting with a financial advisor about saving, though, be sure that the advisor is not steering you into directions which will line his pockets at your expense. If he is selling a product, be careful. Some plans/products will pay him a better commission than others.

Before you get into any serious savings project, you might consider putting and keeping enough in your savings account to cover any emergencies which might come up. You might bite on a hard candy and split a tooth (I did!). Your car might throw a rod, a family crisis might require you to suddenly need to take a trip across the country. These things happen in the best of families. If you have to unexpectedly borrow the money for such a crisis, and assuming you can get credit to do that borrowing, you will likely find yourself paying a pretty high rate of interest on that loan.

A sound "savings plan" takes maximum advantage of what is sometimes called "the magic of compounding." If you want to take advantage of that bit of so-called magic, you have to start saving early in life. Every year that slips by robs you of your ability to claim that benefit. Time is the key.

In March of 2006, USA Vice-President Dick Cheney made the statement that American need to save more money; too many are living "Paycheck to Paycheck." This statement holds very true for Canadians as well.

Now, of course, in order to do any saving, you have to develop an ATTITUDE towards saving.

Chapter 9 has a very long list of ideas that YOU can use to save a lot of money. Some may seem very trivial but, if you get into the habit of taking advantage of them, month after month, year after year, over the long haul, the savings can be substantial. You have to "honor the small to be worthy of the large." Remember the old adage: " A penny saved is 1.4 cents earned." (or something like that!)

Think about this; which is better for YOU:

(a) let others pay interest TO YOU
(b) you pay interest to OTHERS

Not a tough question. Yet, millions of us spend most of our lives making payments and letting "the other guy" laugh all the way to the bank. If these unfortunate millions would use some "spending common sense", they could be the ones "laughing all the way to the bank."


Consider a "weekly pay" mortgage instead of monthly pay. See if you can pay off your mortgage faster. How often is the interest compounded? For example, 13% compounded semi-annually will cost you more than 13% compounded annually. If you are just getting a new mortgage, ask about paying it off with extra payments, should you be able to do so, and ask about penalties if you pay it off before the due date.

Paying off your mortgage is a "must" in a sound money management policy. Examine this example and see if you agree:

Mortgage is $60,000, interest rate is 11%:

A. Payments at $900 per month:

Number of payments needed: 104

(8 years, 8 months)

Total interest paid: $33,154

B. Payments at $1,200 per month:

Number of payments needed: 68

(5 years, 8 months)

Total interest paid: $20,629

Pay your own property tax; don't let the mortgagor pay it. Check with your municipality about discounts offered for early pre-payment of your property tax. Even if it seems low, it may be a good idea; if you get a discount which equates to say, 6% annual return, this is better than leaving your money in the bank, earning 8%, since the interest you EARN will be TAXABLE; interest SAVED is yours to KEEP.

Some financial advisors suggest that you make a habit of putting 10% of your income into savings, every payday, without exception. Is this for you? If it is, you should be sure not to leave a "large" amount in your savings account for a long period of time if you could get a higher return by locking it into a Guaranteed Investment Certificate.


It may be a useful, informative and psychologically stimulating exercise for you to make a "personal balance sheet" once a year. No special forms or training needed. All you need to do is make a list of all your assets, another list of all your debts, then deduct the latter from the former (hopefully the assets will be greater!) and the result is your "Net Worth" on that date. End of the calendar year seems a logical time. You might list everything you own, and even show serial numbers beside such items as TV sets, VCR's etc. so that in case of fire or theft, this balance sheet may serve a secondary purpose. Assign values to each asset, keeping them "conservative"; maybe "garage sale prices" would be best to use. Keep the list in a safe place to protect it from fire. A year later, prepare an updated version and see how your net worth has improved (we hope!) during the year. This may motivate you to develop a sound financial ATTITUDE.

I strongly suggest a computer program which is quite easy to use, very cheap to buy and incredibly powerful in what it can do. I bought it and am so excited about it that I made a website about it as well as a forum. See my notes at this site: No, I am not connected with the owner/seller in any way, shape nor form. Never met the fellow but I checked out and tried a lot of these types of programs and this one "has it all."

Using a program like this to keep a database of all your assets (you can enter liabilities/debts too) has the additional advantage of telling you your "net worth" at any time. Who knows; you might be a millionnaire already, without even being aware of it.

Another benefit of keeping a database of all your assets (and liabilities) with a program such as this is that in the event of your untimely demise, your heirs will find it much easier to divvy up your estate.

Many financial institutions have all kinds of booklets which they have prepared to help customers with financial matters; check them out. Various governments also give away lots of printed info. Be careful what you read on the web; (NOT this site) many of them are simply trying to sell you their services and they may not really be right for you.


Life insurance is a "must" in many, but not all situations. Life insurance salespersons have to live too, and they make the highest commissions on policies which require high premiums. These are the policies which combine insurance with investing. These policies are designed to pay to you a sum of money at some date in the future. You will want protection if you have children at home and you should get only what you need, when you need it, and no more, and then shop around for the best price. Don't forget such unexpected places like Canadian Tire, when you shop for "TERM life insurance." See their details at If your insurance salesperson still insists that you should combine your insurance and your savings through him/her, get a copy of the Financial Post Magazine, for July 1991 and read page 10: "Insurance Not the Option", by Monica Townson.

Term Insurance is like car insurance; you pay for protection. If you suffer a loss, you collect. If you do not suffer any loss, you have paid your money for "peace of mind." This type of policy gives you the best bang for your buck. Insurance salespeople do not like to sell this kind of insurance, though, there is less commission in it for them. You might do well to shop around for the LOWEST cost TERM INSURANCE, and then get ONLY what you NEED, no more, and do your own investing (preferably in your RRSP) with the savings. Use caution when dealing with Life Insurance salespeople; they may offer you a policy with all kinds of "bells and whistles", confusing you into signing for a policy which you don't need. They really know how to confuse you!

In my experience, any "Life Insurance" plan that offers you a lot of money down the road x years is a bad deal for you. A lot of policy - holders who had expected to receive a large tax-free payout later in life found to their dismay that they were not going to collect a penny. Buy insurance if and when you need the protection and then get out. Do your own investing, separately. As Monica Townson wrote in the Financial Post Magazine, June, 1991, "Life insurance is not a good way to save for retirement." In the "Daily Herald Tribune" of Tuesday, April 30, 1996, page 11, I read "'Vanishing' premiums never disappear." That article explains how some people bought a policy which promised that they would have to pay premiums for only 12 years and then the accumulated earnings in the policy would cover the premiums from then on. Not so; it did not happen. Some of our very largest, most reputable life insurance companies were to blame. Some of these companies were facing rafts of lawsuits. Some have gone bankrupt. Other were fined for deceptive policy sales.

The premium on Term Insurance goes up as you get older. This makes sense; the older you are, the greater likelihood of your passing on. The life insurance industry offers "Whole Life" to provide for this. With a Whole Life policy you pay higher premiums in the earlier years (when you NEED the money the most!) to avoid paying higher premiums later. Chances are that in those later years you won't need life insurance at all. Universal life is similar but gives you some control over the "extra" premiums you pay, over and above the "term insurance cost." STUDY the proposed policy, read all you can, ask others, competitors etcetera before you lock yourself in and drain your financial resources needlessly, month after month, year after year. Study this area carefully, THEN make up your own mind. Be prepared; your life insurance salesperson may get upset.

And you sure don't need life insurance on your children! Insurance sellers love to persuade you that you need to insure your children. NOT SO! The kids are a financial liability; not an asset.

If you are already "locked in" to a life insurance policy, it may still be worthwhile to take a hard look at it and evaluate the alternatives. Why throw good money after bad?

Assuming that you are successful and do manage to save some money and assets, clearly you should make provision for what is to happen to those things when you eventually pass on to your reward. Too often we put off making a will until it is too late. Everyone should have a will, keep it current and let the family know where the latest version of it is. Face up to your own mortality; such is life. After you "go" you won't have much use for your accumulated assets. The old expression "He who has the most toys when he dies, wins" does not really tell it like it is. Let your heirs decide what to do with their inheritance. All you need to do is consider where you might be going. That reminds me of this cute story. A man was walking in a cemetary and saw this on a tombstone: "Take heed my friend, as you walk by; as you are now, so, once, was I. As I am now, you soon will be. Prepare to die and follow me." After thinking about this profundity for a moment, the reader took out a felt-pen and added underneath that warning: "To follow you I'll not consent, until I know which way you went."

You might find this site helpful if you want to prepare your own will: In fact, if you find that you like that site, or do not, I'd be interested in your comments.

Of course we hate to think about death, but it is one of the facts of life. You will die. Trust me; you will. And so will I. When a loved one dies, we are, in our grieving, susceptible to financial abuse by undertakers. Be careful. What worked in our family may not work for you, but give it some consideration. Plan ahead. Make it very clear to your family and put it in writing, for example, that you do not want a funeral. In our family we want to make our physical remains available to the medical community; if any organs can be re-used, then they should be made available. We carry cards in wallets to that effect. Whatever is left over is to be disposed of in the cheapest manner possible. Shop around for a low-priced crematorium. The price of even a "low cost" funeral is, in my opinion, a scam.

I keep reading "Term Life Insurance is the Best Way to Go." Premiums are a fraction of other types of policies.

Chapter 4. Investing your money

Investing is a great ego-booster. Everyone likes to know that he/she is an "Investor." Investing can be very rewarding, but does require caution. There have been numerous financial fiascos in recent years, and many have lost a bundle. Since the crash of '89, a great percentage of the public has become shy and seems to lean toward more secure investments, knowing full well, that over the long haul, these will probably not perform as well as those which are slightly more risky.

Before you have enough money to set up an investment account, get a bank account which:

(a) pays you interest on your balance, however low it might be

(b) will not charge you any service charges

(c) allows free cheques ("checks" for our friends in the USA)

No matter what age you are, you can get these kinds of accounts. You may need to set up two accounts at that bank; one for writing cheques and the other a "Savings Account."

Once you are dealing with a bank and are happy with it, don't close your eyes to other banks' benefits; move to another bank if it offers better services. Let competition keep them on their toes and if you move to another bank, don't hesitate to tell them why you are moving. It may help them too.

Then, when you have a "few" dollars, look for a "real" investment such as one in stocks (shares) in corporations. Just keep in mind; the more return you expect to get, the more risk you must assume. And watch the fees.

A good financial advisor is difficult to find. You have to get good reports about such a professional, from people you know and trust. Reading some financial papers helps too, even if you don't understand it all. Ask about fees. If you don't understand something, ask. That's what you are paying for. If you have a pretty fair idea about markets etc., you might consider a "Discount Broker." There are plenty of these now. These discount brokers cannot and will not offer any advice, and as a result, the fees are a percentage of what you would pay to a regular broker. Keep in mind, brokers, even the large national firms, are run by humans, and humans are prone to error. Watch what goes on, check their work, keep good records, and keep all copies of reports, correspondence, and put agreements, etc. in writing, rather than going by verbal communications.

If you are not willing or able to study the investment scene yourself, a "mutual fund" may be your best bet. Let the experts make all the investment decisions, in return for a fee. If you are happy with a lower return, and want 100% security, then a GIC (Guaranteed Investment Certificate) or a TD (Term Deposit) may be for you. If such an investment is made with a financial institution which is a member of the CDIC (Canada Deposit Insurance Corporation) and if the investment is Canadian, is for $100,000 or less, and is for a period not more than 5 years, you are fully insured. You might save on a regular basis in your savings account, and whenever there is, say, $1,000 that will not be needed for several months, you could transfer such excess to a GIC for whatever length of time that it will not be needed. This requires some basic cash flow forecasting.

You will find it helpful to keep a list of your ongoing cash needs. Make a list, showing by month, the cash outflows that will be needed. Don't forget expenses such as Property (land) tax, house insurance, car insurance, medical premiums, monthly bills for heat, power, cable, water and phone and all the "daily" expenses such as food, clothing, entertainment, fuel for vehicles, and donations etc. You could expand such a list to include cash INflows and anticipated month-end cash balances, making a regular "cash flow forecast."

When you are investing in stocks ("shares") don't make the mistake of selling out at low prices and buying in at high prices. A wise man once told me "Buy and HOLD." This is usually the best way; what goes up comes down and what goes down OFTEN (but not always) comes back up. Too many of us freak out when an investment goes down and we panic and sell for less than we paid. Then, when it is way up again, we buy in again.

A quick word about borrowing money to invest. In my humble opinion: "Bad idea." Yes, you could be lucky; the stock market could rise and you could make money. But it is just as likely to go down and you'll lose but you'll still have to repay the loan and interest thereon. Maybe Murphy's Law comes into effect here too.

But you do have to invest. You worked for your money; your money should work for you and the sooner the better and the only way you're going to see that happen is to start investing early in life and then continue.

To find the best interest rate:
Canadian rates:
U. S. A. rates:

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