CASH FLOW: Commentary on the Debt Challenge

In Financial Planning on April 4, 2012 by

Could an All-in-One account could be the solution?

Attitudes and behaviour concerning debt differ by age.  Regardless of whether clients are in their 30s, 40s or 50s, many can feel they’re fighting an uphill battle.  Below are some researched findings and results from a Canadian Bank survey.


Clients in their 30s may be managing old debts, such as student loans, while acquiring new debts as they buy homes, start families and see their expenses rise.

A survey found Canadians aged 30 to 39 have the largest average outstanding debt balance ($209,200) and the largest average number of debt products (3.8 different debts).*

In the hustle of life some people neglect to realize how much credit card debt and other forms of financing really cost.  Seeing 18 or 19 per cent credit card or line of credit interest on a statement doesn’t impact everyone in the same manner (ie. how many years would it take to repay that balance just by making the minimum payment?).  Consolidating debt with a lower interest rate in an all-in-one account could make sense.  Unifying gives focus to debt repayment because it’s tough to effectively manage seven or eight accounts.

WATCH VIDEO:  To see an introduction of how an all-in-one account can save you money


Many clients in their 40s may have experienced a financial bump in the road, whether through job loss, divorce, illness or a death in the family.  Debt repayment may have stalled and they may feel trapped in a never ending cycle of bills.

Survey findings showed Canadians aged 40 to 49 owe an average of $157,600.  And they’re carrying these balances across, on average, 3.1 different debts.*

One of the biggest challenges to people in their 40s is the cost of raising a family, including saving for post-secondary education and retirement.  The key is to not over-extend yourself.  Make it a habit to be putting away at least 5 to 10 per cent of your income.  With the use of a product like Manulife One I’ve seen clients free up capital that would otherwise go to support debt at 18 or 19 per cent.  Once they make that adjustment it allows them to free up cash for other things – paying debt down quicker, putting away money in an RRSP or TFSA, or starting an insurance program.


Clients in their 50s are likely more in touch with the meaning of cash than younger generations who grew up on plastic debit and credit plans.  Nevertheless, many are still struggling with significant outstanding balances – and their monthly debt obligations may mean they don’t have the flexibility to retire when or how they want.

Canadians aged 50 to 59 owe an average of $108,500, with the largest number managing less than $50,000 in debt.  That said, one in four are still burdened with between $100,000 and $250,000 in debt.*

Some clients in their 50s are house rich and asset poor.  By downsizing early they can save in interest, property taxes, stress and upkeep, pay down debt and put money away for retirement.  It makes sense to have your home equity work for you.  With reduced debt, lower mortgage payments and education accounted for these clients can focus on topping up RSPs.  A Manulife One account can be incredibly useful for this group.  They can borrow money to contribute to an RSP and take advantage of the opportunity to reduce taxable income, accumulate money for retirement and apply any potential refunds to pay down the borrowed money inside their all-in-one account.

TO LEARN MORE about how an all-in-one account could benefit you visit my website and feel free to contact me.

*According to data gathered from the 2011 Consumer Debt Survey.  Surveyed 1,000 homeowners between the ages of 30 and 59 with household income of more than $50,000.



A Canadian Look at Retirement

In Financial Planning on March 15, 2012 by

WHO SHOULD CARE:  Government, Employer, Company, Family or You?

RRSP Season recently wrapped up.  In the midst of client meetings and industry seminars I heard an alarming stat:

“70% of people in Canada approaching retirement do not know where their income will come from once they’ve retired.”

Questions I asked myself:

  • Have these people not given any thought to retirement whatsoever?
  • Could a percentage of these people retire comfortably even though they haven’t defined a clear goal?
  • Do these people have enough assets so that if allocated properly could generate a dependable retirement income stream?

I know that retirement isn’t simply a matter of turning 65, getting a gold watch, and saying goodbye to the workplace.  Obviously retirement patterns vary across industries and the process of considering it is complex.  We must evaluate family situation, contractual arrangements, contemplate which financial vehicles to allocate money and then hope that these vehicles maximize income producing sustainability…  It’s a lot to think about!

Is there a mathematical formula out there that can answer this? 

Fortunately there are many resources available to help.  Professionals, academics, advisors and regular people have created solutions for solving the magical mathematical equation for retirement freedom.  Dr. Moshe Milevsky, a finance professor at the Schulich School of Business in Toronto helped to develop Canada’s first retirement income analysis tool based on Product Allocation for Retirement Income using algorithmic methods.  He notes that asset allocation can account for 90-95 per cent of investment performance and success when Canadians save for retirement. But as they approach and move into retirement, the type of financial products investors own will determine their financial health in their post-working years.

Watch Dr. Milevsky discussing product allocation.

If you or someone you know needs help organizing their assets for retirement it’s a great idea to speak with an advisor that can help eliminate risk.  The average Canadian spends less than 15 minutes per year thinking about their financial plans.  How much time do you spend?


The Wealthy Barber Returns

In Books on January 9, 2012 by

I enjoyed some R&R over the holiday season.  Some time away (Dominican Republic) gave me an opportunity to reflect.  Not a bad thing to do every once in a while…

Between swimming, surfing, tanning, playing baseball (with the locals) I managed to read a book.

For Christmas, I was given a copy of  The Wealthy Barber Returns.  Similar to his first book The Wealthy Barber, David Chilton still advocates paying yourself first (IE. saving 10% of your income).  The sooner we do this the sooner we can take advantage of compounding interest.

Some other points I found enlightening/refreshing were:

Track your money:  Watch where you’re spending.  Keep track of every dollar spent for 2-3 months.  Though tedious, this helps to shed light on habits and can lead to better ways of allocating and saving.

Rule of 72:  (72 divided by yearly interest rate) determines how long it will take to double your money.  For example if you invest $10,000 at 6%/year it will take 12 years for it to turn into $20,000.

The best things in life aren’t things:  Canadians have taken on sky-rocketing amounts of debt (LOC- Lines of Credit) in the last 2 decades.  Live within your means and spend less than you make.  It’s better to spend your money on experiences that can be cherished forever versus things that lose their lustre and cause us to want to buy more to replace them.

Overall it’s a decent read and relatively quick for those wanting to do some financial thinking.  It serves as an index or “potpourri” of ideas;  Is it better to put money into your RRSP or TFSA? How should you be investing?  Should you pay off debt first?

Watch David Chilton on The Hour w/ George Stroumboulopoulos.

Let me know if you’ve read the book or have any thoughts on it.