Further Investigation.doc

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Financial Planning

Financial Planning is the organization of our financial situation for

the purpose of constructively managing income, assets and liabilities to

meet our goals.

To meet our unique needs, a financial plan needs to consider our

entire financial situation such as our income, assets, liabilities, savings,

preferences, risk tolerance, family situation, economic situation, andour health and longevity.

Very few of us consider our long-term financial future and

whether we can fund our lives, hopes and dreams - although we know we

should.

However, making the decision to prepare a financial plan puts us in

the driver's seat. We are pursuing financial security, which ultimately

gives us freedom and choice.

No matter our age, income, experience or goals, here is the tips

for financial planner that may be able to help us increase our wealth,

save on tax and secure the lifestyle we want.



Financial Plan Components

A financial plan will typically include the following components:

1. Cashflow Projections and Planning

Retirement Planning

Special Goals (like college, charity)

2. Investment Planning and Management

3. Family Security

4. Tax Planning (Tax Minimization)

5. Estate Planning

6. Inheritance Planning

7. Business Value Maximization, Exit and Succession Planning



Let’s take a closer look at each of them.

1. Cash Flow Projections and Planning

A Cash Flow Projection projects our cash inflows and

outflows throughout our lives. It’s where all the pieces of our

financial plan come together.

Projecting our resources and savings through time allows us

to see if we’re on track to reach our goals. If we’re retired, a

Cash Flow Projection tells us what retirement living standard we

can achieve.

To create a projection, we need to make a number of

assumptions such as income tax rates, future inflation, future

returns on our portfolio, and how long we live.

These can change and our projections that must change with

them.



a) Retirement Planning

For many people, one of their most important goals is to

prepare for their eventual retirement. Retirement planning

involves thinking about what we really like to do with our

time if we didn't work, and then preparing ourselves

financially, physically and psychologically for this.

Retirement is a big change. How will us keep

challenged mentally? How will us maintain ourselves worth

and be a valuable contributing member to society? What

activities will we and our spouse do to have a full, balanced

and happy life? Without work ties, we have more freedom to

live where we’d like and pursue activities and challenges that

our previously didn’t have time for.

So in our thinking of retirement, try to arrive at an

appropriate balance between diet / exercise, spouse /

family / friends, leisure / fun, relaxation, social, charitableand intellectual / creative (personal growth) pursuits.



Once we’ve figured out what we want to do in

retirement, we ’ll have to figure out what it will cost. We

don’t want to retire and then discover that we don’t have

enough money to do the things we want to do. Nor would us

want to put off retirement longer than necessary because

we’re not sure how much our actually need.

Once we’ve priced out our retirement activities, and

know exactly how much we need to save, we ’re in a better

position to take full advantage of tax-sheltered retirement

plans like RRSPs, spousal RRSPs, pension plans, supplemental

pension plans and other incentives that might be available to

us.

In practical terms, we should try and figure out as

best as possible our needs through time. We can use a

budget template to help us categorize our expenses.

The better job we do with figuring our needs, thebetter and more realistic our Cashflow Projection will be.

And the custom built portfolio will then better suit our

needs through time.



Also, note that in addition to our retirement needs, us

might have a few special non- periodic needs or ―Special

Goals‖.

b) Special Goals

It’s important, even essential to have dreams. Some

of the best things in life are free, but many dreams cost a

bundle.

What are our dreams? Perhaps they involve buying a

cottage, a large boat, a super-size motor home, or helping

our kids or grandkids with college. Or maybe us want to

make substantial gifts to charity?

Our financial plan should include these special goals as

we may have different strategies and tools that are used to

best achieve goals. And by knowing our goals, we might be

able better structure our investments to fund those goals;this can lead to even greater tax savings.



Let’s look at three of these special goals to see this more

clearly.

i. Major Purchases

If we buy a cottage, sailboat, deluxe motor

home, or some other costly item, we need to know how

it affects our retirement plans and other goals.

Depending on how we raise the needed monies from

our money or our spouse’s, from a company, RRSP o r

personal investment account. This will trigger varying

levels of income tax. Also, we will need to consider

how our portfolio will look like after raising the

monies. Which might mean further transactions to

make it well diversified.

And if the purchase is not planned until sometime

into the future, we need to figure out how best to

invest the needed cash in the interim. The longer our

time horizon, the more that inflation may affect our

purchase. Our saving and investment plans need totake this into account.



ii. College Education

A goal shared by many is for a great education

for our children or grandchildren. It’s much harder

today for students to pay their own way through

college. The cost of education has risen much faster

than inflation.

A Registered Education Savings Plan (RESP) is a

good way to save for education. It provides big tax

savings plus free grants from the government.

A Tax Free Savings Account is another great way

to save for this goal. Although there’s no government

grants, all of the income and gains in the plan tax-free.

Withdrawals can be made anytime which are tax-free.

Where an RESP and Tax Free Savings Accounts

aren’t enough, us might consider setting up a formal

trust. With this, the capital gains, and in some casesthe investment income, can be taxed in our children’s

hands where it is subject to little or no taxes.



And where we have our own company, taxable loans

to our children can be a cheap way to raise funds to

finance their education.

iii. Charitable Giving

Many of us have a cause that’s dear to our

hearts. What a legacy to leave – a meaningful gift to a

worthwhile charity! If we have surplus assets, it

might be best to donate now rather than after we ’re

gone. Not only does we save taxes now, we ’ll also see

the good that comes from our giving.

If we would like to give before our death, we

should try to donate stocks that have large gains. By

doing this, our capital gains are exempt from tax – so

we save on the capital gains tax.

Planning for each of our special goals helps us

know how much to save and to pick the rightinvestments to reach our goals. And in planning for

these goals in advance of funding these needs, we may

be able to structure our holdings to save more in



taxes. A well thought out plan can make the

difference between reaching our dreams and falling

short.

2. Investment Planning and Management

Our portfolio and regular savings need to be invested to

grow to provide for our needs. When we invest, both returns and

risk need to be considered. Without proper risk control, losses

can be devastating.

3. Family Security

One of the top priorities in financial planning is protecting

our family against devastating financial risks that result from

accidents, premature death, disability, illness, significant

property loss, and liability claims. Without proper protection, any

of these risks could destroy our family’s dreams and goals.

It’s natural for us to avoid thinking about the bad thingsthat might happen. But bad things do happen. We cannot predict

them but we can make sure that we ’re proper ly protected

financially if anything would happen to us or our family.



4. Tax Planning

Taxes affect every financial decision we make whether we

are aware of it or not. They affect how we save, what we invest

in, and how we withdraw money from our portfolio.

For the average household, income taxes represent the

single largest expense. The more money we make, the more we

pay in taxes. With our tiered tax brackets, as our income

increases, so too does the percentage of tax we pay. Our

financial decisions must consider our tax situation or we could end

up paying much more in taxes otherwise we’llwaste of our money!

By knowing our situation and goals, we are able to help

ourselves to plan our financial activities to keep taxes low

throughout our life, leaving us more money for our needs and

dreams.

5. Estate Planning

The biggest concern for many is making sure our spouse and

other family members are well provided for after we pass away.



Many of us know people who died and left their loved ones in

chaos. We may know others where the courts split our money up

in ways they would not have wanted.

Estate Planning is simply taking steps now to ensure our

affairs are well looked after when we ’re gone. It’s critical to plan

now since none of us knows when our time is up.

If we ’re wealthy, our planning will focus on how we can transfer

our estate according to our wishes as well as providing creditor

protection and tax advantages.

If we ’re less wealthy, it’s vital to take steps now to ensure our

family has enough money to live comfortably if we suddenly die.

When we get right down to it, Estate Planning is having the

decency to take care of our family by putting our affairs in order.

This means:

a. We ensure our family has enough money to meet their needs

b. Guardians are designated for minor children



c. Our organ donation intentions are registered (which could save

lives once we’vepassed away)

d. Our funeral plan is completed

e. We protect our wishes and decision making authority in the event

of our in capacity (Representation Agreement and Enduring Power

of Attorney)

f. We choose an appropriate Executor and Trustee (as well as

alternates)

g. We help our Executor carry out their duties and making our

wishes to family members known (family love letter)

h. We anticipate potential challenges to our estate distribution

plans (for example, a Wils Variation Act Claim) and use structure

or include potential defenses for issues that might arise

i. Our bequests are structured to meet the needs of our

beneficiaries (this include Trusts in our Will as opposed to

outright gifts)

j. Our review the legal ownership of assets and beneficiary

designations of RRSPs/RRIFs, pension plans and life insurance so

assets will flow on death as intended, andk. Income taxes and transfer related costs (like probate fees and

legal fees) are minimized.



To save taxes and other costs to make sure our money goes

where we want after our death, we must do our estate planning

now. We just don’t know when something might happen to us.

6. Inheritance Planning

Similar to planning the distribution of our estate, we might

also plan for the receipt of any inheritances. This could not only

help us save taxes on our inheritance on our parent’s death, but

can also help save our taxes for several years to come. And a

properly planned inheritance can also provide a level of creditor

protection. As our society is becoming more litigious with higher

court awards and also due to the high odds of a marital break up,

inheritance protection is a vital part of planning.

7. Business Succession Planning

If we own a business, chances are that it represents a substantialpart of our net worth. Although today we might be focused on its

survival or growth, we also need to plan for the day when we ’re no

longer running it.



And since our exit from our business may not be at the time of

our choosing due to disability or death, we need to plan for this

now.

Without a succession plan, our business may not survive our exit.

Or us might find that us or our family can’t get someone to buy it

for what it’s really worth when us need the money.

Our planning should consider the involvement level and desires of

our family members relative to the business and to our needs.

This can affect who we might sell to by be a partner, key

employees, family members, or a competitor.

Should we sell to family members, our estate plan needs to treat

fairly the interests of those who are active in the business

versus those who aren’t.

Once we know our business exit plan, then we’ll work with them tohelp us put together the right tools to protect our business value

and ensure what we get the most for it.



The benefit of financial planning is that it can help us to:

-Choose our lifestyle through balancing our spending and savings –

spending too little might result in our sacrificing life experiences;

spending too much might mean us outliving our money;

-Invest our money wisely by selecting the right asset mix, selecting

good investments, sheltering income from taxation, and controlling risk;

-Eliminate, reduce, and defer income taxes so us have more money

growing faster to meet our goals;

-Protect our family against devastating financial losses – like the

death, disability or illness of the family breadwinner, property loss,

theft or damage, and liability claims; and

-Distribute our estate according to our wishes, make sure our legacy is

creditor protected, and death and transfer taxes as well as future

income taxes to beneficiaries are minimized.



Couples and Money

There are the tips that can show us how to strengthen our finances asa family.

How to Talk the Talk

Psychologists say that many people will talk about anything, even sex,before they'll talk about their finances. Why is it so difficult for us to

talk about money? Perhaps because money symbolizes different things

to different people: power, control, security, or love, for instance.

It's been estimated that money issues are the driving force in 90% of

divorces, but we can live happily ever after, financially speaking, if we

work at not letting financial issues come between us and our partner.

In "Talking Money," book by Jean Chatzky, columnist for Money

magazine and regular contributor to the Today show, offers practical

advice for talking to our spouse or life partner about this emotionally

charged issue, including these tips for twosomes:





his or her spending habits are not good. We have to be honest

with ourselves about these feelings in order to be honest with our

partner.

4) Bring in a Third Party

If we can't seem to talk about finances, seek out a counselor to

help us sort through our financial issues. This could be a financial

counselor or a therapist or marriage counselor.

5) Do's and Don'ts for Couples

Chatzky also offers these do's and don'ts for merging our

finances:

a. Track Our Spending

Knowing where our money is going is the first key to

financial security, and keeping a budget, which includes

tracking our spending, is the only way to really know where

our money is going.



b. Agree to Disagree

Come up with spending and savings goals and guidelines, then

let our partner manage his or her own spending money

c. Designate a Bill Payer

One of us is likely to be better at day-to-day management

of the household expenses. It's okay to designate this

person as the bill payer, but the other person should be

involved and should know what needs to be done and how to

do it.

d. Keep Separate Credit Cards

Each of us should have at least one credit card in our own

name in order to maintain a separate credit history. If we

divorce or our spouse dies, it will be difficult or impossible

to get a mortgage, loan, or credit card without it. Having a

joint card with both our names on it doesn't work.



Starting a Family

The arrival of a first child will indeed change our life ... and our

financial future. Although we can't put a price on the pleasures and

rewards of parenting, it's essential to prepare for the financial

effects of welcoming a new addition to our family.

Whether we're expecting, thinking about adoption or building a

blended family, with careful budgeting and planning .

Most experts agree that those younger kids get the money training is

much better. If we’re already plan our family’s financial future with an

expert such as a financial planning professional, such an expert might

advise us on ways to teach our kids about money as well.

Here are some initial steps:

1. Determine the right allowance.

As early as kindergarten or first grade, our kid is going to

have to start paying for things. Try to match the allowance

closely to the expenses the child is expected to cover – that way,

they learn that their spending is not unlimited. Decide whether

they need to earn an amount for extras – toys and candy, for



instance – then stress why working for treats is important. When

kids are younger, we should keep a frequent watch over how

they're handling their cash – checking in every day or so – and

then spread out that oversight as they age.

2. Consider our own behavior.

Do we drive a more expensive car than we can afford?

Every time we go to the store, do we pull out a credit card to

pay? Do we and our spouse or partner fight openly about money at

home? Our child hears all of this. Children learn all-important

lessons by example. While we don't have to be perfect, think

about the money behaviors we're demonstrating in front of the

kids, and try to make them positive.

3. Buy a piggy bank.

Young children need this tried-and-true symbol of saving.

They need to know there's a place to put pocket change they

don't spend, and they are free to tap it only to accomplish a goal

that the both of us discuss. This isn't about buying stuff. It's

about setting goals.

4. Don't miss an opportunity for a lesson. Watch our child's behavior – see what they want to buy. Ask

them how they plans to pay for things. This is our window on

whether our money messages are getting through. "I want" and "I



need" are always opportunities for us to teach. Some pretty

serious money issues can come out of the mouths of babies.

Listen for them. Also, teach our kids to make spending "wish

lists" throughout the year – these are not only lessons in delayed

gratification but prioritizing needs and wants.

5. Have them open a savings account.

If small-balance passbook accounts still exist at our bank,

do the old-fashioned thing and go with our child to open one.

Make sure they keep their bankbook or monthly statements in a

safe place, and make sure they deposit funds at least once a

month to get in the habit. We might also consider mutual funds

geared toward children – the best ones have great educational

value.

6. Handle money mistakes carefully.

A child will make mistakes with money – they'll lose it, spend

it on the wrong things or possibly give it away to others at the

wrong times. It's generally a good idea to ask the child whether

that was a right use for the funds and what they might do the

next time.7. Discuss charity.

This may be a cultural issue within families, but increasingly,

kids are involved in charitable and community activities as part of



their educational process – it even figures into college

applications. Teaching our children to set aside a little for those

who have less than they do might be a good first lesson in what

should be a lifetime of sharing with others.

8. Adjust the conversation as they age.

As children become teens, they want more autonomy with

their spending. We need to match that trust with accountability.

If we deposit money in an account for them to spend on essentials

and treats, talk about what we are willing to pay for and make

those agreements ironclad. Kids will always come to us with their

hand out, but they need to know when we'll say "no."

9. Be open about our investments.

Kids are sponges. They know if their parents have

investments just by watching what's in the mail. Start talking

about why we buy stocks, bonds or mutual funds to help pay for

their education. If our child asks us to buy a book or subscribe to

a magazine or newspaper so they can learn more, don't think

twice – just do it.

10. Talk about college early. Even if we plan to pay our children's entire tuition, we need

to talk about the financial investment college represents long

before they go. We can also talk about whether our child will have



to pay any expenses on their own and how they will earn the

money. The massive investment college represents presents a

great opportunity to discuss what the most important things in

life really cost.

Other 15 tips Money Learning Activities to Do with Our Kids

Pick and choose from the following ideas, depending on our child’s age

and interests, or add our own. Have fun!

1. Go on a walk through the neighborhood and brainstorm jobs that our

child might be able to do to earn extra money, such as raking leaves,

walking dogs, washing cars and so on.

2. Play a board game that teaches money concepts. A few ideas: ―Payday,‖

―Monopoly,‖ and ―The Game of Life.‖

3. Take a tour of a bank and talk about what banks do and how to usebanks responsibly.

4. Have a shopping contest. Make a grocery list and see who spends the

least to get everything on the list.

5. Let our child practice writing checks (except the signature) to pay

some of our bills. Have them bring our check register up-to-date.6. Start a small business together. Plan what us will do (make

greeting cards, mow lawns, etc.), how much it will cost to get

started, what us will charge and how us will find customers.



7. If us decide to loan money to our child, charge interest so they can

learn the ramifications of borrowing.

8. Ask our kids to clip coupons for items us buy at the grocery store. For

every dollar saved from these coupons, share a percentage of our

savings with them.

9. When we buy something at a store, have our child pay for it with cash

so he or she can count out the money and practice getting back the

correct change.

10. As we walk through a store, have a contest to see how many items

each we can list that are ―needs‖ and ―wants.‖

11. For every dollar our child saves, add a percentage more — for example,

a dime for each dollar — to illustrate the concept of earning interest.

12. Plan a vacation together. Talk about places us might go as a

family, what it will cost, how much the family can spend, and then reach

a decision together. Brainstorm ways our kids can earn spending money

for the vacation.

13. Go on a family budget. Explain to our kids why we need to cut

back on spending and together set a goal to r educe the family’s

spending by, for example, 10 percent. Ask for ideas on how each familymember will contribute toward reaching this goal.

14. Cash our next paycheck and ask the kids to join us as we pay bills

for the month, counting out the cash to illustrate how money works in



tangible terms. If we don’t have enough cash to cover every bill,

discuss the decisions we will have to make.

15. Shop for a car together so our teen can learn how to estimate

the cost of buying, insuring and maintaining a car.

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