For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).
Smartphones and apps have enormously affected our daily life and financial management. And despite the fact the elder generation may still have some doubts about tracking incomes and expenses, millennials are more likely to connect their financial independence with these apps.
The fact is many mobile apps nowadays enable quickly entering data on incomes and expenses, and to find information about completed operations, make changes, export the database or restore it from a backup, and track your expenses and income. They give you some perspective on major and minor decisions in life so it becomes much easier to make right decisions on the flow of your personal money.
When choosing a program, it’s important to consider not only functionality and convenience of interface but also safety. To be sure the financial apps will not let you down, we have considered functional peculiarities and user reviews of many similar mobile apps, on the basis of which we present some of the best ones:
Mint
The Mint application helps to form a budget, track expenses and achieve financial goals. Costs and savings can be easily tracked in a special list, where different types of financial transactions are marked with different colors, as well as in the tables and charts that the application forms.
Users can also track movements on their bank accounts and credit-card balances in real time, monitor investments and even break their expenses into categories.
In addition, you can set up alerts if it’s time to pay bills, or if users have exceeded their budgets. Another convenient feature: a weekly consolidated report of the movement of your funds is available.
Back in 2003, when I began my career as a young sales manager in the hospitality industry, I earned an annual salary of $26,000. Little did I know at the time that my human capital – as in, the present value of my expected future income throughout my working lifetime – would be worth nearly $3,000,000!
I did some back-of-the-napkin calculations and was surprised to learn I’ve already earned a million dollars over my 15-year career. I find that incredible, given that I’ve never earned a six-figure salary and, in fact, my wages have been stagnant for the past four years.
Projecting my income forward using a modest 3 per cent annual growth rate reveals the potential to earn another $2 million by the time I turn 55.
Human Capital vs. Financial Capital
Put in different terms, however, and you can see that my human capital is shrinking each year. That’s because the value of my human capital peaked the day I started my career (back in 2003) with my entire lifetime of earnings ahead of me. Since then I’ve steadily used up my earning power and the value of my human capital has gradually declined.
The idea of eroding capital doesn’t sit well with me, but that’s where the second form of wealth building – your financial capital – comes into play. See, I’ve been a diligent saver for most of my career, which means converting my human capital (earnings) into financial capital (investments). Continue Reading…
Depending on where you live in Canada, purchasing real estate in recent years hasn’t exactly been a cakewalk. Tight supply and rampant buyer demand (and alleged speculative investing) have pushed home prices to what some experts argue are unsustainable levels in the nation’s hottest markets.
However, following a slew of new policy changes introduced over the last year — such as Metro Vancouver’s foreign buyer tax and the Ontario Fair Housing Plan — those red-hot conditions have changed, with real estate boards from both markets reporting slower sales in the months following.
That’s made a dent in the national numbers, reveals the latest analysis from the Canadian Real Estate Association: with a 11 per cent drop in sales from last September. This is despite the typically busier autumn market, which is often the last chance for buyers to make a serious go of it before the snow — and holiday season — sets in. Seasonally adjusted activity was up slightly month over month at 2.1 per cent.
Too soon to call for market stability: CREA
While this could indicate market conditions are starting to settle after what has been a turbulent spring and summer market, it’s too soon to call it a trend, say CREA’s analysts.
“National sales appear to be stabilizing. While encouraging, it’s too early to tell if this is the beginning of a longer-term trend,” stated CREA President Andrew Peck.
Calmer sales activity hasn’t translated to greater affordability, though: home prices continued their ascent, with benchmark prices rising in 13 of MLS’s tracked markets. It’s the first time in seven years that all markets have seen simultaneous growth, with the national average price coming to $487,000.
However, prices are increasing at a slower pace than at the market’s peak, and that’s mainly due to the lost steam in the detached house segment since March. One- and two-storey single family homes appreciated by 7.9 and 7.2 per cent respectively, compared to the sizzling condo market, which saw 19.8 per cent appreciation, and townhouses at 13.5 per cent.
I thought it might be of use to prepare a brief review of where we stand with regards to Bill Morneau’ s infamous July 18, 2017 tax proposals.
As you are aware, attempting a profound degree of subterfuge, Mr. Morneau announced some “minor” tax changes aimed at bringing “fairness” to the taxation of Canadian Controlled Private Corporations (CCPC). What he in fact brought forward was the most fundamental change to corporate taxation since the introduction of the current Income Tax Act in 1972. This was coupled by a paltry 75-day consultation period, most of which coincided with summer vacations and harvest.
Despite his attempted strategic deception, a robust group of stakeholders representing a wide cross section of the Canadian economy mobilized to challenge these proposals and carry the message to Canadians that what was being proposed was fundamentally at odds with any rational conception of fairness, but instead a punitive attack on small business, professionals and family farms. The government was inundated with over 21,000 submissions. Last week we saw what I believe will be the first of several stages of government retreat from these proposals.
Few of the proposals will end in legislation
It is my contention that given the profound opposition that these proposals have engendered, both within the Federal Liberal caucus and from many sectors of the Canadian economy that little, if any of the proposals will actually find their way into legislation. Even the revised proposals create such layers of byzantine complexity that they are largely unworkable, elevate the roll of a CRA auditor well beyond their current capability and increase compliance costs exponentially for most Canadian economic enterprises.
If I may I would like to review the proposals and revised positions:
I) Surplus Stripping
The initial proposals called for an expansion of the ill-conceived section 84.1 of the Act. This is the infamous section that resulted in it being more advantageous from a tax perspective to sell your business to your next door neighbour rather than to your children. The proposals had called for restrictions on sale beyond simply spouse or children to include extended family members. It also placed the power of determination of defining “arm’s length” to a CRA auditor. The proposals also introduced a new omnibus anti-avoidance measure, section 246(1) that would have eliminated the ability to implement a common post mortem strategy, commonly referred to as “pipeline.” It would have made redemption strategies the only acceptable means of undertaking post mortem tax planning, threatened retroactivity and potentially exposed business owners (and their estates) to taxation rates in excess of 70%.
Mr. Morneau fully retreated from this proposal on Thursday of last week. There has been guidance provided by the Department of Finance that section 84.1 will now be substantively reformed to remove or reduce impediments to inter-family succession.
Whether this will be restricted to farm and fishing corporations, or be a general provision applying to all CCPC’s remains to be seen. I am hopeful that the Department of Finance will actually survey the tax planning community for guidance on what is prudent an efficient.
The conclusions regarding the retreat from the earlier proposals are as follows:
The cancellation of s. 246(1) restores traditional planning including “pipeline” and maintains that estate freezes are still relevant and prudent planning option.
Attacks on potential Capital Dividend Account (CDA) credits have been terminated. The use of corporately owned life insurance is still a preferred planning method.
II) Capital Gains
The proposals, both directly and through the Taxation of Split Income (TOSI) proposed a radical curtailment of the ability to claim the Lifetime Capital Gains Exemption (LCGE). The LCGE would have been restricted to individuals over the age of 18. It also would have eliminated the ability to claim the LCGE where shares are owned by a trust. This is of course a common planning technique with both tax and non-tax rationale. The ability to income split, creditor protect corporately held assets and insurance and multiply the LCGE all require a family trust as a central element of any freeze transaction or other selected reorganization strategies.
“Books are the bees which carry the quickening pollen from one to another mind.” — James Russell Lowell, poet and author
Last week I highlighted two books that help manage your family’s retirement aspirations. This week I turn my sights onto two books that shape investment success over the long run: all about taking charge of investing in your self-education through quality reading.
I’ve selected two books that provide great insights into stewarding your long-term wealth. The authors are well known in the wealth management profession.
The books emphasise simple, yet fundamental recipes of investing: something for everyone’s investment toolbox when the bulls and bears make their presence known.
The Elements of Investing
Burton G. Malkeil and Charles D. Ellis
My initial pick is a gem written by two leading, seasoned authors of many books. Both have contributed heavily to the profession of managing wealth. The investing process is condensed into five short chapters, all in layman’s language.
The authors make the point that everything starts with savings. It is their position that each of us can make sound investing decisions. The process does not have to be complicated.
Rather, it is a highly disciplined approach to investing. All the rules you need to know and implement are explained. I visualise the book as a clear, concise and practical guide for the long road ahead.
The easygoing writing style emphasises keeping the approach to investing as simple as possible. My perspective concurs with the view that the book is a prudent, logical road map.
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