This is where your finance takes place

Save a buck and get a 50 cents reward

The first trick to beat inflation is to save money that you would usually spend. Saving is definitely the ultimate way to put money in your pocket because you are working on after tax dollars. So if you want to increase your cash flow by a buck, you need to earn $1,50 to $2 (that is my case in Canada) to net $1. However, if you save this dollar by being frugal, you don’t need to calculate the taxes.

Gasoline and food

There are several tricks to be found on the web in order to save on gas or on food. While I won’t list all of them, there are some tricks that will help you out getting money back in your pockets:

For Gas:

- buy a more efficient fuel car

- lower your speed on highways

- use the bus and metro to get to work

- walk! (it’s good for health and your wallet J)

- plan ahead in order to use your car less frequently

For Food:

- use coupons

- buy in bulk and buy specials

- plan your meal for the week (instead of wasting fruits and vegetables)

- buy a freezer in order to store more food

- find cheap recipes (ask Frugal Trader from Million Dollar Journey, he has some of them!)

Earn more money

While this may not be the most effective way to beat inflation because of taxes, earning more money is always a good thing! While some employers will tend to increase your income according to the inflation every year, it is not the case for all of them, especially when the inflation is going over 3%!

It is really important to keep up with the inflation rate as both your salary and inflation are benefiting from the effect of compounding interest.

Since I started working, I always gave more than what was expected. I concentrated on doing a good job on the task I was expected to do and then, I worked on other side project in order to improve efficiency at work. By only doing what you have been told to, you will be getting your pay check and that’s it. However, if you always do more, you have big chances of getting promotions or bigger raise years after years. Some people may say that they won’t work for free in the hope of getting something in return. I say that I always “worked for free” and I got 4 promotions in 5 years and raise that beat inflation every year.

If your overtime is paid, you can always work a few hours more to increase your salary. However, the problem is that you would have to increase the number of hours worked by 3% every year to keep up with the inflation!

Another classic of PF blogs when it comes down to make more money is to create an alternative source of income. I suggest you read more about this option in the series I wrote about it.

So hopefully you will be able to find your way to beat inflation and keep up with your lifestyles. If you know any good tricks, please share it on this blog so we can all benefit from them!

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I don’t care if the oil barrel is dropping down below $100, I still pay the same high price for gas than at the beginning of the summer. We get filled by so many lame excuses (the last one was Ike!) than we are just a bunch of sheep, resigned to go to the slaughter house. NICE!

One of the purposes that we are waking up every single morning to go to work is to pay for our bills, maintain our lifestyles and hope for a better future. But how can we actually survive when our income is kept as is and the inflation is playing around 3 to 4% depending where you live? Here is a two part post about how to kick the inflation in the nuts and run away with something in your pocket!

Protect your investment

I think it is now obvious that GIC’s won’t protect your investment anymore. We are having a hard time to get 4% on the market. If the investment is held outside your RRSP or 401(K), you have to pay taxes on this interest income. Therefore, you are left with a net of roughly 2% and the inflation is between 3 to 4% right now.

There are many ways to protect your investment from inflation. The first one is to hold your fixed income inside your RRSP and 401(K). You should technically hold your more secure investment within this type of account since they are tax sheltered.

If you still want to invest into fixed income in your non registered account, I suggest you consider Corporate Class Funds which enables to grow your investment without paying taxes right away. In addition to that, interest income, dividend income and capital gains are all considered to be taxed as capital gains with this type of investments. Therefore, you can invest into bond funds or money market and deferring taxes in time.

Another option for Canadians will be the TFSA (Tax Free Saving Account) that will be available starting in 2009. This will allow you to put 5K per person per year into a tax sheltered investment account. Savings on taxes would definitely help prevent the damage caused by inflation.

Another investment type would be companies or other investment vehicle that provides dividend. For example, banks are reputed to give good and steady dividends that cover the inflation over time. The advantage which such high paying dividend stocks or funds is that they increase their dividend over time so you can always follow the inflation. I truly believe it is a good timing to invest into financials as they are taking a beating. Good banks will get out of this mess and still give a good dividend yield.

These are obviously not advices for your personal situation as I don’t know each of you personally. You should seriously sit with your financial advisor and discuss those points before making any decisions. Stay tunes as tomorrow, I’ll write about more tricks to beat inflation.

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Instead of crying and whining, they decided to listen to their destiny call and revise their whole plan of life. This is when they decided to move out west, in Calgary in order to benefit from the economic boom.

I thought of her two weeks ago when I read a paper on the economic boom in Saskatchewan. They apparently found more oil sand than in Alberta and this small province is now promised for a bright future. People are working seven days a week but a lot of them are making 6 figures income.

In the light of what I read, I decided pull out the good and the bad points of moving out another province/country in order to find a better life. So today I’m going with the good sides:

The hope of getting a better job

For people moving far away from their home, there must be an economic advantage. Since we are living in a beautiful country, I guess the economic factor must be pretty important. I remember my uncle moving to Vancouver about 15 years ago since there was not much job in finance in Montreal back then. Since my uncle and my aunt moved, they found pretty good job and the benefit from the housing boom to create an interesting nest egg.

When moving toward a city where there is a lot of job it will not only be easy to find a job but also to increase your income. You might have to work more at the beginning is there is a major job shortage but in the end, the economic aspect is definitely a plus.

Find out about other nice place to live

While moving to Calgary doesn’t seem that appealing to me, moving to British Columbia or California would definitely be interesting. There are so many cool places to live that we don’t know about. If you do proper research before moving, you definitely be able to find a nice place to live.

Another good point is that you have the possibility to move to a better climate. For example, the sun and the heat of California would surely help me forget about Montreal -20 degrees and 20 foot of snow during winter!

Make new friends

Some people decide to accept 2-3 years contract and they go back to their former city after. This would allow you to make new connections and friends while you are elsewhere. It is fun to communicate with people around the world that live different things. It also make a good and cheap place to visit for vacation!

Start over

Sometimes your life is just a mess and you absolutely need to make a fresh start. Moving in another city would definitely force you to start anew. It is like you have never existed in this new place, it is now up to you to put things in order and move forward!

Improve your resume

Showing that you have been working in a different province or country would surely prove flexibility, adaptability and autonomy to your future employers. I remember seeing the interest in my employer eyes when I explained them my experience in a student exchange program in Europe. Employers love to see people that can think outside the box and have a different kind of experience.

Think outside the box

The more you move in life, the more open minded you become. I have met a few people working in Dubai right now and they definitely don’t have the same thinking they used to. They show a different view of life based on their own experience. If you live your whole life in your neighbourhood, you will not necessarily be aware of what is going on out there.

I would be curious to know if anybody moved in another city/province/country in order to find a better job. It would be nice to share your experience.

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Finally, your withdrawals are considered as ROC (Return On Capital) until you reach your primary invested amount.

Since most of their characteristics are similar to the Tax-Free Savings Account (TFSA), we might think that the Corporate Class funds didn’t exist long enough so the majority of investors benefit from it and will shortly disappear due to a lack of interest.

Actually, if you invest money in a TFSA, your investment will grow in a tax sheltered environment and the withdrawals will never be taxable. Even better, you are not limited to the number of time to invest or withdraw money compared to RRSP (where you can withdraw your money only once and never buy back this contribution).

Another good point would be that TFSA is an account and not a type of investment. Therefore, you are not limited on the asset you purchase within your TFSA account. Most investment vehicles such as stocks, GIC’s, bonds and mutual funds are accepted. Corporate Class Funds are offered by investment firm and are limited in term of family. For example, Templeton may offer 10 Corporate Class Funds and once you have selected your investment firm, you are stuck with this choice if you don’t want to trigger capital gains. Since the TFSA allows almost all type of investment, you could surely find similar funds or indexes and bond combination with a cheaper MER’s than balanced or aggressive funds charging 2%+ MER’s.

The Tax-Free Savings Account is for small investor

I do not believe that Corporate Class Funds will disappear from the investment market for the following reasons: it is presently used by more fortunate individual based on the assumption that small investors don’t even know that such funds exist. Since most investment firm will target larger investors, chances are that nobody ever tell you that you could invest your 50K in this type of fund.

Since the TFSA is limited by a contribution of $5,000 per year, it will take 40 years for an investor to transfer his 200K non-registered portfolio within such account. He rather leaves his money within his Corporate Class Funds and continues to benefit from its tax advantages.

Therefore, the Canadian Government is most likely copying the tax benefit of a Corporate Class Funds and makes it available to everybody. Don’t get me wrong, there are no specifics conditions to buy Corporate Class Funds, it is just that most people don’t know about them!

So if you have a small balance in your non-registered portfolio, there are not many incentives to buy Corporate Class Funds, you are better off waiting and invest your money through a TFSA. However, if you have more than 30K to invest right away and don’t want to wait 6 years to transfer it into a TFSA, you are definitely better off looking for Corporate Class Funds.

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When I think about what we learn at school, I am not surprise that we have so many problems handling our personal finance. You will actually speak about taboo subject such as sex for hours, but they will never hit real taboos… such as personal finance. Same thing at home, you will probably find out about your parent sexual habits before you find out how they make and how much they have in their investment portfolio!

I recently read a study done by BMO relating the Canadians difficulties and dissatisfaction managing their personal finance. In fact, the study revealed that 46% Canadians are not comfortable to speak about personal finance and 53% regret not being able to managed them more closely. This proportion drops to 35% for family making more than $100,000 a year.

71% of them think they need help to manage their personal finance. While those statistics are disastrous as a modern society, they are good news for all the financial planners and PF bloggers

I think the major problem lies within the fact that talking about finance (46% of Canadians claim it is taboo in their family) is more taboo than religion (34%) and politics (20%). Maybe it is because people are afraid to find out that they are financially worst than their neighbor? Or they simply don’t want to face the truth about their financial situation? Or they are aware and they fell ashamed?

As it is the case for any other taboo, talking about personal finance with people around you will put an end to this madness and probably an end to most of your financial problems! I am not saying that you should listen to John Do’s opinion about how to manage your debt, but if you share experiences within your friends and family, you will definitely find ways to optimize your financial situation.

I will never say it enough; sharing your financial experience with your kids will definitely help them managing their own finance when they grow up. Frugal Dad shared one of his tricks to explain his 8 year-old girl the power of compounding interest. The most valuable heritage you could leave to your children is to show them how to handle money.

You might find it funny but one of the biggest lesson I learned from my parents is when my father had to declare bankruptcy when I was 15. We were living the good life (actually the very good life) for the past five years and then, all of a sudden, we were forced to move in a small “cage”. I only had $100 remaining from my summer job and I decided to use it to buy posters in order to decorate my new 8’X8’ room.

This is when I realized that overconsumption will lead you to financial nightmares. It doesn’t matter if you can afford the monthly payment or if you can make the minimum payment on your credit card. If you don’t have the ability to pay off your debts or to save money on a regular basis, you will not get out of your hole alive!

I was lucky enough that my parents told me the truth about their bankruptcy. They were honest and didn’t try to hide that they had to borrow from friends and family members to eat at one point.

Because of their hard work, this is now only a good story to be told since they are now in a good financial situation again. Since I learned from their mistakes, I won’t have to make them to understand how to manage my own money. This is why it is so important to share your good and bad financial experience with your children.

I guess this is probably why finance blogs are getting more and more popular. As a financial planner and a PF bloggers, I can’t be more happy I am curious to know if you are talking about your financial situation with family, friends or colleagues?

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