Personal Finance - The Wealthy Barber

10% solution

invest 10% of your income every month for long-term growth before taxes and expenses

• magic of compounding

• a dollar saved is two dollars earned

• negates inflation bc inflation does not rise fast enough and lower purchasing power creates more of an incentive to save

it’s better to be an owner, not a loaner because

it is more profitable to invest your money than leave it in the bank

dollar cost averaging

investment strategy where you invest equal amounts of money in regular intervals regardless of the price of the security

• doesnt have a hard thinking process

• negates the fluctuations and market conditions

• requires you to buy at very low prices and once the market recovers, you can sell for a high profit

mutual funds tips

• make sure tjhe fund has a good rate of return by looking at stats

• seek expert opinion

• see that the owner who eanred the past returns is still running the fund

• take note of the commissions

• verify that it has a good long-term

will

a legal document that outlines how a person wishes to divide and distribute their property and possessions following their death

what happens to a person’s estate if they don’t have a will? 

• estate assets are frozen and the court winds up the deceased affairs and pays off their debts.

• the remaining estate is then divided according to a strict set of rules found in the state’s intestacy (“having made no will”)

• in some places with the laws, no consideration is afforded to the deceased person’s potential inheritors.  

rules/steps for making a will (5)

• outline what your estate consists of and how you want it to be divided

• consult a lawyer

• choose an executor, someone who will oversee your will’s instructions.

• you must keep your will updated in light of drastic life changes (divorces, births, et cetera).

• keep a comprehensive, up-to-date net worth statement that lists all your possessions and everything you owe alongside a copy of your will

how to choose an executor

• choose someone w good money management skills

• someone who lives close to you

• someone who is honest and reliable

• choose someone who is younger or the same age as you

rules about how much life insurance a person should buy

insurance + living estate should cover:

• all financial affairs

• providing desired standard of living for their dependents

another term for life insurance

financial protection for dependents or income replacement insurance

4 things your living state + insurance provide for

• repay debts

• covering future lump-sum obligations

• good casf flow for dependents

• inflation

cash value insurance

combination of term insurance and a forced savings program

universal life policy

unbundles the insurance and savings element, so when you die your beneficiary will receive both

major benefit of universal life

savings portion is allowed to grow tax-free

convertible insurance

policy holder has the right to convert the face amount of the policy to any cash value plan w/o proving insurability

RSP vs RRSP

RRSP is tax deductible

RRSPs limitations

1. Does not provide you with adequate income when you retire 

2. Many penshion plans are not adjusted for inflation 

3. Fixed income stream making it hard to make major purchases 

What different ways can you invest within an RRSP? 

1. Cash 

2. Canada Savings Bonds 

3. Treasury Bills, Canadian corporate and government bonds 

4. Mutual funds 

most important variables in the investment equation

the rate of return and the length of time

transfer RRSP funds from ________________ to ______________ ________________

ownership; guaranteed investments

where to buy RRSPs

stockbrokers, life insurance agents, mutual funds salespeople

self-directed RRSP

you make all the investment decisions

what makes home ownership the ultimate savings program

you must make your mortgage payments on time by paying yourself first

mortgage and emor recommended

5 year term period

tips on mortgage

• pay weekly if possible

• shop the market for the best rate

• borrow all or part of the down payment from a relative

basic rules everyone must follow to be financially well-off

10% savings, RRSP contributions, insurance premiums

what does “a dollar saved is two dollars earned”

by the time all deductions are taken, it amounts to twist the value earned

best way to ppurchases wanted items

SAVE

small savings amounts

invest conservatively (GIC)

what must an investor have to not fail

patience, discipline, and an eye for value

when do you sell

sell when everyone is buying

area of investing that would most likely increase in value

real estate

what debt should you pay off first

the one with the highest interest rate

open a _______________________ ________ when your RRSP grows to 10,000

self-administered plan

self-administered plan

gives you freedom to choose the kinds of assets you want in the plan.

• all your capital is still gauranteed yet you are still reaping the benefits of ownership, dollar cost averaging, and professional money management

income splitting

Moving some of the income from the higher wage earner to the lower wage earner to lower the amount of taxes you pay.  

attribution rule

If income-producing property is transferred by a low interest loan or by a gift from one spouse to another or to any minor, the recipient’s income from that property is taxed on the donor. 

disability insurance questions

• what is the definition of disability (to what extent is it a disability)

• is the policy uncancellable

• is there a waver of premium clause

• does it offer benefits during rehab

• are the benefits indexed

who do you ask insurance questions?

the personnel department