When it comes to debt, all your eggs do belong in one basket

Mark Huber, CFPSetForLife Financial ServicesTel: 604-207-9970 mhuber@HowToBeSetForLife.com http://www.HowToBeSetForLife.com

When it comes to debt, all your eggs do belong in one basket

Conducted through the IFID Centre by Moshe Milevsky & Maritz Research

1,261 Canadian homeowners surveyed between September 15 – 21, 2005

The research study

The survey by Maritz Research conducted between September 15 – 21, 2005 of Canadian homeowners has a margin of error of +/-2.73 per cent, 19 times out of 20. The number of Canadian homeowners surveyed was 1,261.

55% of Canadian homeowners surveyed have household debt

Many with different Types of debt Interest rates

different Creditors

Maritz Research survey

By spreading out debts at different interest rates Known as

“Space diversification”

Canadians are losing money

Consolidate at one low interest rate

Only 33% had tried this approach Nearly 40%

thought there was no advantage to consolidating

How you can stop losing money

In one line of credit, combine debts and short-term savings

Don’t let money wait in low interest accounts while debt accumulates in higher rate accounts Known as “time

diversification”

Another key to the most savings

Two families with identical debt

Each family Owes $94,709 Contributes

$1,000 toward repayment each month

Case Study Part 1: Diveronicas vs. Consuelos

Diveronicas payments

Monthly Payment

Interest rate

Mortgage $516.00 5.35%*Auto loan $320.90 7.93%Credit card Minimum

paymentLine of credit Balance

Remainder of $1,000.00

Total payments $1,000.00*Based on 20 year amortization period and an assumed fixed three year term interest rate

Consuelos payments

Monthly Payment

Interest rate

MortgageAuto loanCredit card

Line of credit $1,000.00 4.5%

Total payments $1,000.00

On average, Consuelo family will owe $929 less

after year 1 $970 less in

the second year

Which family is better off?

Would still see significant benefits in years 1 and 2

After the 3rd year of increase, this ends Debts best kept separate if:

Short-term interest rates are above mortgage rates

What if interest rates go up?

Eliminate space and time diversification

Complete consolidation strategy

All the eggs in one basket

Same debt - $94,709

Same monthly payment amount - $1,000

Difference: Diveronicas maintain a savings account with a $2,700 balance

Case Study Part 2: Diveronicas vs. Consuelos

After year 1, the Conseulos will have $3,763 less debt

Overall, the Conseulos will be better off by: $1,063 after year 1 Additional $1,289 at

the end of 2 years

So which family is better off?

Consolidate all your debts at as low a rate as possible

Make sure you don’t have excess cash sitting around

Make sure to pay down your debts, and in a sense, earn a much better after-tax rate of return

Learnings from the study

Thank you

For a full report of the study conducted by Maritz Research, visit www.ifid.ca/research.htm

Thanks to the IFID Centre for all references made to the study findings.

Important note

The commentary in this presentation is for general information only and should not be considered investment or tax service to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.

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Manulife and the block design are registered service marks and trademarks of The Manufacturers Life Insurance Company and are used by it and its affiliates including Manulife Financial Corporation.