Winter escapes, travels deals and tips for booking online

Many Canadians are making travel plans for the holiday season and may be trying to escape the cold weather.

It can be hard to know whether to book online, through a travel agent, or how to find the best deals on hotels, flights and more.

If you're thinking about a getaway, what is the first question you should ask yourself?

First, start with what type of experience do you want - adventure or relaxation, kids or no kids, etc. This means many things to many people. Get clear on what you and your family are looking for. It will help narrow down your possible choices.

How do you decide what's worth spending your money on?

That's where your budget comes in and what your family’s likes are.

Here’s a few scenario’s with costs for contemplation:

• Going to the mountains (here in Alberta for example). Factor in gas, your car, hotels starting at $200 plus a night for a couple, ski lift tickets and so on. For a 4 day long weekend, that will likely run you $600 - $1,500 or more with food and beverage. That’s not factoring all the extras or taking the kids along.
• Going to say Vancouver for a week at the Pan Pacific (I used the dates of mid January on Expedia.ca for this example) will run you about $1,500 for two including flights (leaving from Edmonton). I’ll get to online bookings in a moment.
• What about taking advantage of the low cost options down south? San Diego for a week in mid Jan at the Sheraton Hotel and Marina will run you about $1,300 for two with flights and accommodation, again, on Expeida.ca.
• Looking for some sun? Lastly, a week at the Mayan Riviera in Cancun will run you around $2,000 for two, but it’s all inclusive. You have to know yourself as a couple and how much food and drink you’ll usually consume. You don’t have to worry about this at an all inclusive. This one was a 3 star…if you’d like to bump that up, the Grand Cozumel for example…4 and ½ stars will run you around $3,400.

Can airlines make a different to the kind of trip I'm taking?

Absolutely! Keep in mind that almost every US carrier has some baggage fee and a few are simply outrageous (up to $50 for your second bag). Also, as a Canadian, I'm used to the back of the seat TV's on all Air Canada and WestJet flights. Not so with most US carriers. So be prepared to bring a great book, a plethora of magazines and games for the kids if you opt for this option.

Booking online? What should you keep in mind?

I recently came back from a trip to San Diego, and for the very first time, but with great trepidation, booked my trip online. Generally my trips are booked for me by the company that hires me and many companies still choose to use a travel agent. Why? Well, lots of things can go wrong and flying in the winter is particularly sketchy at times. Thus, a human being anticipating problems is a must. Plus, the cost is a write-off.

But if you're booking a trip for personal use or wouldn't mind saving a few bucks, going online is the way to go.

I booked with Expedia. ca and was highly impressed. I was waiting to be dinged for extra fees at the hotel or airline check-in, but everything was billed as promised (other than baggage fees - but I was warned about that). Plus, the hotel I stayed at was fantastic, a huge suite and I was able to get a club floor upgrade - all for less than $100 Canadian a night - including taxes, which is pretty much unheard of. Being skeptical, I did call the hotel in advance myself to see what type of deal I could muster on my own. Even with my corporate rate, the fact that I'm a preferred Starwood guest, I couldn't get a price under $220 USD, so, Expedia really did deliver.

Here's some other sites to check out:

http://www.travelocity.com/

http://www.tripadvisor.ca/

http://www.travelzoo.ca/

http://www.redtag.ca/

http://www.hotels.ca/

http://www.expedia.ca/

Happy travels!

Business travel - how to save money, your sanity and your health

I just returned from a week in Toronto on business. Although I was reimbursed for my travel and hotel costs by the company that hired me to conduct a corporate training piece for them, there were still a number of out of pocket costs that I incurred, along with the challenge of staying healthy and sane on the road.

Sounds simple, but with the H1N1 scare and a hectic schedule, it's not always an easy task.

Business travel is rarely glamorous, filled with deadlines and when flying in the winter, presents even greater stress. Couple the fact that I'm a solo female road warrior, safety is certainly a concern (for men too - I just think a little more for women.)

So, here's some of my simple tips on surviving a business trip for the novice to seasoned business traveller:

• Always bring snacks on the plane. Purchase snacks at the grocery store in advance of boarding a plane. First, it's good common sense that will save you money. Second, I can't tell you how many flights I've either had to sit on the tarmac for an hour or two before we took off, barely made a connection or arrived at 2am to the hotel only to find out that room service closed at 10pm (or there was none at all.)


• Buy a bottle of water or two right after you go through security. It's a sad fact that we still can't take liquids through past security, but don't skimp on the high priced airport water. Again, you might be sitting in the plane for a while before beverage service starts (especially if you're at the back of the plane) and with the dry air, you'll want to remain hydrated for many obvious reasons.


• Have an emergency kit in your carry-on! Factor that you may be stuck in an airport or plane for several to many, many hours with your luggage already checked. Always have an emergency pack in your carry-on with some items such as: your cell/pda charger, comfortable shoes, a travel blanket and pillow, cold/flu medication, tissues, energy bars, prescription medicine and contact lens solution/glasses if you wear them. I once got an almost instant cold and flu of sorts 30 minutes before boarding a very long flight. The airport convenience store didn't have an decongestants, limited products and no tissues (and the plane was out of tissue as well). Needless to say, by the time we descended, with a stuffed and plugged nose, a miserable flight, the excruciating pain of not having a decongestant is a lesson I'll not soon forget!


• Go to the restroom before you pick up your baggage. Sounds simple, but the first time I travelled on my own, I rushed to get my luggage, had a full cart and then headed to the ladies room only to realize that of course, my cart wouldn't fit in the stall.


• Never take a shuttle at night. Might I add, at all. Especially if you're a female traveller, are in a new city or are carrying lots of luggage. Even if your company is only footing the bill for a shuttle, buck up and take a cab. It's well worth your safety for the extra dollars spent.


• Eat warm food. This one took me years to realize it. I would always make what I thought were sensible food choices such as eating a large chicken caesar salad or Subway sandwich for dinner. And every time, I'd come home ill with a cold or flu. I can't prove that eating warm food on the road will stave off a virus, but it's worked for me thus far. I'll often order mash potatoes and two sides of grilled vegetables. It's relatively expensive and yummy comfort food.


• Take your vitamins. I'm not espousing any medical advice, but in my own experience, I have been taking echinacea and goldenseal (both immune supports) along with extra vitamin C, and colloidal silver and oil of oregano (the latter two just when needed - the first three daily) and I can report that I haven't had a cold or flu in over two years.

• Take advantage of points. Whether it's on your credit card, an airline or hotel. And consider staying with the same hotel chain as often as possible. As you build up points, you'll be treated to lots of perks and goodies, such as club floor access where you'll find continental breakfast included, coffee, tea and water all day along with snacks during cocktail hour.

Happy travelling!

Tough Questions Part III - Advantages and disadvantages of prepaying your funeral & other options

From my CBC Radioactive column with Peter Brown - October 15, 2009:

For the last few weeks, as Radioactive's personal finance columnist, we've been talking about the tough conversations you NEED to have with your loved ones and some of the tough financial decisions you have to make.

Last week we looked at the cost of funerals. Today, we're looking at the "how" you pay for a funeral and what your options exist.

Let's say you're relying on CPP to pay for a funeral. How much will it cover?

What we need to keep in mind is that if a person didn't pay into CPP (the Canada Pension Plan) their entire working career, the might receive less than the $2,500 maximum death benefit. From last week, we know that a funeral can average around $4,000 - 10,000, so even with the max benefit, there's a possible shortage.

Can you talk to the funeral home about a payment plan?

With many, yes, you can talk to the funeral home about a payment plan. They don't advertise it, but most will wait to receive the $2,500 after all the final tax returns and probate's been done if it is a matter of just not having liquid funds (i.e. there's a house left but it takes time to get the money from assets).

A lot of people look at pre-paid and pre-arranged funerals. First of all, what are the important differences between pre-paid and pre-arranged?

Prearranged is just that - you've met with a home and documented what you'd like but not necessarily paid for it. Pre-paid is where you've made the arrangements and pre-paid via life insurance, other payment forms, etc.

What are the advantages of a Prepaid Funeral?

1. Growth isn't taxable - As long as the expenses incurred are for eligible funeral expenses as defined by section 148.1 of the Canada Tax Act, the growth is non-taxable.

2. It's obviously much easier to think rationally when not grieving. It's difficult to think clearly while making so many decisions within days of losing someone. Being frugal is often the furthest thing on someones mind in the aftermath of death. It's simply easier to make those difficult decisions while not under so much stress.

3. Your wishes are honoured.

4. It's easy to get. Buying life insurance for someone in their 80s for example with major health issues is a challenge. Prepaid funerals, either as an insurance vehicle or as a trust fund don't require a health screening or age limit to qualify.

What are the drawbacks of a Prepaid Funeral?

1. They aren't a good investment. The interest they generate is minimal. The plan contributor has little control over where or how the money is invested.

2. There are scams out there. You will need to:

- Ensure the funds are held either in an income trust or as a part of an insurance policy at a recognized Canadian Financial Institution covered under the CDIC (Canada Deposit Insurance Corporation).
- Ensure the funeral home is a licensed funeral provider and is licensed under the Prearranged Funeral Act. In Alberta, check out www.afsrb.ab.ca/PrearrangingaFuneral.htm
- Confirm with the funeral home that you can transfer your prepaid arrangement anywhere in Canada.
- Keep track of the policy and let your family know where it is.

Overall, is prepaying a good idea?

I don't think so. If you're looking for tax free growth and think you have a few years, the money would best be put in a TFSA (Tax Free Savings Account). At least that way, you still have the control over how the money is invested and it's there when needed. You can still prearrange your funeral so that your wishes are carried out how you'd like.

Before we leave the difficult, but important subject of funerals.. anything else we should bear in mind?

Lastly, if you have a loved one in assisted living of any type, you need to let that facility know your wishes well in advance. You must be aware that these facilities do NOT have a morgue, so if you were out of town or unreachable during a death, obviously the costs would go up for transportation to a storage facility.

Next week, we'll tackle the dollars and cents of long-term care, the financial issues of when a spouse has to move out, OAS, AB seniors benefit and more.

Tough Questions Part II - Funeral planning and end of life costs

From my CBC Radioactive column with Peter Brown - October 8, 2009:

Continuing from last week, this month, as Radioactive's personal finance columnist, we're helping listeners look at some of the hard financial questions you need to ask your spouse or parents about funeral planning.

How tough is this discussion for most families?

Obviously, it's extremely emotional. Most individuals will only go through it once or very few times in their life and that's what the industry is counting on. There are some great folks out there in the biz, but the industry is counting on you not knowing what you're doing, feeling guilty to over spend and since it's such a quick process - usually just a few days after death - and so stressful, people don't always make the best decisions.

That's why we wanted to cover it in this week's tough questions. Remember too, funeral directors are not clergy, even though some people trust them implicitly. They're in the business to make money. You do not have to buy the whole bundle of services.

What does the average funeral cost?

I went to three different places in town for pricing and info. I was told that the average is $4,000 - $6,000 - but that number can vary widely. It all depends on the service, open casket or not (which costs much more), cremation, burial and more. According to AARP, funeral and burial costs can easily reach as much as $10,000. The average cost of a traditional adult funeral in 1999 was $5,020 without any extras. Flowers, obituary notices, burial liners or vaults, limousines, acknowledgement cards -- they all add up to a major expenditure.
and if you choose burial, the costs continue to rise.

What's the cost difference for burial?

A wood casket for example might run $250 and the Cadillac as high as $35,000. The average is around $3,500-$5,500. You can also rent one as well for cremation or viewing. The price for the actual plot and all that's required there will also add to the bill -- from about $1,700 at a city cemetery and upwards. That's not factoring in the head stone of course.

A funeral provider may not refuse or charge a fee to handle a casket you bought elsewhere.
And with burial comes embalming, something that is encouraged, but actually not a necessity in all cases.

Embalming is rarely required when the person will be buried within 24 to 48 hours.
Another thing to know is sealed caskets cannot preserve a body. Sealed caskets cost hundreds of dollars more than unsealed caskets It actually costs the casket manufacturers only about $12.00."

What kind of cost comes with cremation?

It's quite a bit less and if there's no viewing, even less. Cremation with pick-up and no service will run about $1,500 - $2,000. But you may still have costs like an obituary which averages $300 - $500 per day in Edmonton for example.

What are the questions we should be asking now?

First, that you can negotiate. And with a little advance thinking about it, hopefully we make better and less emotional decisions. After all, it can be an extremely costly event. Funeral services are one of the largest purchases consumers will make, right up there with a car and a house.

Second, if a parent for example is in long-term care at a non hospital facility, you need to make plans ahead. I know it's terribly morbid, but if the family is on vacation for example, these places don't have a morgue and need to address deaths quickly. If they have to make the decision, it might cost you hundreds of extra dollars.

Tune in next week and we'll discuss the "how" to be pay for a funeral, pre-planning and more.

Avoiding identity theft

From my CBC radio national column, September 24, 2009:

The story earlier this week about a BC couple on the hook for $20,000 in loans after their identity was stolen should have all consumers on high alert. And that’s not just because of the money that Mark Gorst and Shannon Werry say was stolen from them. As they try to dig themselves out of their mess, they’ve lost their credit rating along with peace of mind.

Let's talk about identify theft. How do you define it?

This is where someone applies for credit in your name, and starts racking up charges without your knowledge. Sometimes this goes on for months or even years before you learn of the situation.

When it comes down to it, identity theft is a form of fraud…with someone pretending to be you for personal gain.

According to a piece I saw this week on CBC.ca, more than 12,000 people fell victim to identity theft in 2008, with losses close to $10 million. Now nationwide that does represent a huge amount of money, but if it happens to you, your life can be turned upside down.

What if anything can I do to protect myself?

First of all you need to take small precautions, like checking your credit card and bank statements regularly. You can do this either on-line or making sure you pay attention to when your credit card statements are expected to show up in the mail. If they’re late, you should call your bank or department store to check on their status.

You want to make sure somebody hasn't redirected the bills to another address, which they can use as a base to start the process of stealing money - or assuming your identity.

Plus, if you don’t have one, invest in a shredder and use it for everything from phone bills to credit card statements. Basically, if a document has your name, address, an account number or more on it, it should be shredded not tossed.

Keep your passwords private and your phone calls about your finances behind closed doors. Your bank tells you this – to NEVER share your PIN or secret passwords with even a spouse – but I know, it’s hard to do when you live with someone.

Also, don’t make calls to your bank or credit card company from your office or in front of anyone in your home such as a room mate or a spouse. If someone you know intimately, such as a co-worker, ex-spouse or roommate, they might easily be able to access your SIN, date of birth and if they know your secret password, they have the ingredients for identity theft.

So those are some small steps.

But I recommend taking another critical one, and that's regularly checking your own credit report.

How would I go about doing that?

You can do that at Equifax.ca or Transunion.ca. It will cost you about $24 each time for the instant online report, but it’s well worth it for the peace of mind. That way, if someone applied for credit in your name for example, your credit report would show that new account or it would show that some institution pulled your report therefore tipping you off that someone was seeking new credit.

If you check your report regularly, at least there would be minimal damage done.

Lastly, if you’re a known or highly potential identify theft candidate, alert both Equifax and Transunion in writing to document your potential situation to set up something called a fraud alert.

I've heard about credit monitoring services. What are they exactly?

These services - such as with Equifax and Transunion Canada--will alert you via email if there's suspicious activity on your account. Because these two services are also offered by the agencies that collect, report and keep track of your credit, are the best ones in my opinion, will alert you if credit is being opened in your name, offers some insurance if you are a victim of fraud and also offer access to your credit report and real people to talk to if you have a problem. They'll set you back $12 - $20 bucks a month.

Now I haven't signed up for a credit monitoring service. I'm quite happy to check in on my own credit rating. It's cheaper, and once every 3 to 6 months is more than frequently enough for me. But if you know you wouldn't keep up with checking your own as often, the monthly services might make sense for you.

What's to prevent someone from impersonating me to check out my credit score?

That’s a great question, but I’m not sure how much of an issue that is. If a would-be thief has all the info you’d need to access your account, why would they want to check your credit – they’d just go ahead and apply for some type of credit.

Just so you know, when you sign up for the first time with Equifax or Transunion, they’ll ask you for all your personal info such as your SIN, date of birth, address and then they’ll ask you for past credit info that only you should know…such as an old 10 year loan and payment and such to try and securely identify you. Once you’ve done this, you don’t have to do it again.

So if I do learn of suspicious activity in my accounts, what do I do next?

Call your financial institution and the police if you think it's warranted. Part of the problem with the B.C. couple is that by the time they had noticed the money was missing it was too late to proceed with charges. According to a local police officer, if more than a year had passed since the initial crime, it becomes harder to get charges approved by the Crown. So the sooner you know about the problem the better.

Is it time to invest in the stock market or stay on the sidelines?

From my CBC radio national column, September 24, 2009:

When G20 leaders meet in Pittsburgh today, they’ll be weighing whether or not to start scale back the stimulus packages that were announced after last year’s financial crash. But many experts are warning against throwing caution to the wind.
The advice could apply to individual investors as well as the world’s treasurers

With the stock markets performing so well recently, investors could be forgiven for thinking that good times are back. What are the people you pay attention to saying?

Here’s one person I pay attention to--David Rosenberg. He’s recently returned to Canada as chief economist and strategist at investment firm Gluskin Sheff after several years at Merrill Lynch in New York, where he was chief economist. Rosenberg was been credited with predicting the U.S. housing bust.at a time when many of his contemporaries were saying that the effects of the sub-prime crisis could be contained. At the time he was seen as being perhaps overly bearish, but events have vindicated him. .

So his forecasts command attention from the media and investors. And in the financial post this week, Rosenberg states that he thinks the market is overvalued

What’s his reasoning?

Equity prices are up something like 60 per cent from their lows in March, and that has Rosenberg concerned. He looks at something called the price-earnings ratio…this is something that looks at stock price and relates it to the amount of money companies are making. When you compare the prices some stocks are commanding right now to the amount companies are earning per share, he feels the increases just aren’t justified. In a recent note to clients, he’s quoted as saying that “there is too much growth and too much risk embedded in the equity market right now."

Markets generally increase (or decrease for that matter) for two reasons:

-The companies that make up the stock market are growing - people are buying their products/services or they’ve cut expenses.
-The second reason is that investors “think” the stock is a good deal. That’s when we get stocks increasing because of hype, fear and a bunch of other non-fundamental emotions.

When you look at the history of markets you realize that things don’t go up forever.
And so that’s why the cautions he raises make sense for me.

You really have to step back when you hear about double-digit gains and wonder if the time to get in is when everyone else is getting in or when everyone is getting out. That was the environment this spring. It’s quite the opposite now.

Any other insights from history?

This market, like many others, should be a reminder of the huge swings markets can take.

We just have to look back to the tech bubble which burst in the year 2000 and how many years of flat or negative numbers it took to finally get a profit on your investment. That market wasn’t even as bad as this one according to the experts and it still took a great deal of time to get your money back if you had invested right before the bubble burst.

Investors waiting on the sidelines might want to cool off and see this market for the erratic beast that it is. Just keep in mind that for most people a dollar lost is more important than two dollars earned.

And there’s one other historical event I want to remind everyone of….Any idea what happened 140 years ago today.?

Today is the 140th anniversary of the gold market crash of 1869, which led to a major stock market crash and became known as Black Friday.

The date is another good reminder of the boom-bust nature of markets, and the dangers of trying to chase big profits.

Unfortunately, when markets are exuberant, we as investors feel that they’ll be that way forever. On the flip side, when there’s nothing but bad news, like earlier this year, we think they’ll never go up. It’s a good reminder that investing in the stock market requires not only a strong stomach, but a great deal of caution.

Any final words of advice?

Yes, even the pro’s can’t successfully time the market. Just look at the poor performance of many mutual funds over the past year. So if they can't predict the markets, how can the average investor be expected to get it right?

Step back and keep in mind that a prudent, balanced approach to saving and investment is the best way to gain long term. That means looking beyond stocks. Adding other investments to your portfolio such as good old bonds, fixed income and even real estate are what you need if you're going to be able to weather financial storms in the long term.

Tough Questions Part I - End of life questions

From my CBC Radioactive segment with Peter Brown - October 1, 2009:

For the month of October, as Radioactive's personal finance columnist, I'm going to walk listeners through some of the toughest questions we need to ask ourselves and our loved ones when it comes to finance.

This week, we are going to ask the tough questions about end of life issues: 10 tough questions to ask yourself, your spouse, parent and siblings. There is no good time to really ask these questions, but they've got to be asked - and ideally when someone is in good health.

What's the first tough question I need to ask?

I think the first important question for your parents, spouse etc., What do you want done with your remains.

Is it cremation? If so, where would you like your ashes, fully intact in one container or, most places offer the large urn and a little one for the fireplace.

Is it Burial? If so, where? Do you have a plot already purchased?

And the other thing we need to take into account is religion - would you like a minister, what kind, a certain denomination, prayer service, wake, non religious, other?

What about when it comes to health care?

You need to look at living wills and personal directives. If there is one in place, people need to know where to find it and know which hospital to deal with, who's the family doctor? It's amazing how many adult children don't know this about their own parents.

What are some of the tough questions that come with personal directives?

Basically, what type of care and when would you like administered during a time of illness. Do you want to be resuscitated for example? If the answer is no, that needs to be known by all family members. If 911 is called for example, the ambulance drivers will always try to resuscitate. So if that isn't a wish, a document should be posted on the fridge in plane site.

While it seems that living wills and personal directives are more of a seniors issue, you never know what can happen and when. These are issues for every age group.

And people should talk to their loved ones about things like organ donation too. Your family should know what you want, and you should know what family members would like to do.

There are also Last rights, anointing, prayer - at a time of sickness, would you like someone called for prayer and if so, what type (denomination, minister, anyone?)

What about legal issues....what questions should we be asking there?

Everyone should have an enduring power of attorney. This is different from a regular power of attorney - say, you travel a great deal and have someone look after your financial affairs while you're away. In the event of mental incapacity, even if only for a short while, a regular power of attorney would cease to be legal. This is where an "enduring" power of attorney is needed. It only springs into effect during a mental incapacity. Please secure your own legal advice as each province and situation may be different.

Who would you like to make these decisions (financial and otherwise) in the event of incapacity?
And then you need to know if there is a will and if there is one, where it's kept? That leads us to the safety deposit box. If there is one where are the keys kept and where is the box itself.

Lastly, you'll want to consider special gifts. Do you have any that are essential to pass out? Where are your pictures, for final planning and more?

Here's a link to my top 10 tough questions. Ensure that loved ones know where it's kept - http://www.kelleykeehn.com/documents/Endoflifequestionstoask.pdf

Tune in next week for part two of four in our tough questions series. Each Thursday at about 4:10 on Radioactie Edmonton - 93.9fm and 740am. And be sure to send us your tough questions.

Canadians investing in US real estate - learn the facts before heading south

From my CBC radio national column, September 17, 2009:

As we anticipate another chilly winter, Canadians may be tempted to play let's make a deal on U.S. real estate. Should you play or walk away?

We've all heard the reports. The Canadian dollar continues to climb toward parity with the U.S. greenback, while American real estate is stuck at rock bottom. So with winter approaching, who could blame you for thinking it's the perfect time to swoop in on some property in the sunny south. But before you do, here's some words of advice for would-be buyers.

We've heard this week that home prices are up in many parts of Canada. What's the U.S. real estate market looking like these days?

There have been huge dips in U.S. home prices over the past couple of years-especially in the south.

Home prices in Las Vegas for example have dropped by more than fifty per cent from their August 2006 peak. Prices in Phoenix are down just about the same amount.

With numbers like these, it's no wonder some Canadians are taking note. It's tempting, especially with our strong loonie allowing a buyer to get more bang for their buck than in the past, but there's certainly more to the story.

The head of the U.S. federal reserve, Ben Bernanke, said this week that the recession may have come to an end south of the border. Some might think that's a signal to buy now, before prices start to climb again. What's your take?

Although there have been recent reports of modest increases, the U.S. real estate market is still volatile.

According to the Wall Street Journal, home prices could drop again as job losses drive foreclosures higher. Mortgage defaults and foreclosures aren't likely to peak until unemployment ebbs.

Even when the U.S. economy starts to grow again it will take a while for job creation to kick in. That's why many experts say it really is too soon to see this juncture as a turning point.

Recently, I spoke with Canadian real estate expert, Don Campbell, president of the Real Estate Investment Network www.reincanada.com. He warns that people must look at the precarious financial situation of many U.S. homeowners.

Close to a quarter of mortgage holders in the US are upside down on their mortgages. That means they owe more on their mortgage than the property is worth. That was as of the second quarter of 2009. So they're very recent numbers.

And according to Deutsche Bank this figure could double, with almost 50 per cent of mortgage holders being under water by the first quarter of 2011.

Finally, a Globe and Mail article a few weeks ago, said that $3.4 trillion worth of US houses are at risk of default. So prices could drop still further.

That's a strong cautionary note. What else should potential buyers be aware of?

Three additional considerations: residency, health care and taxes should be other major considerations.

1. First, you can't simply up and move to the US.

There's a 183 day rule for visitors. Non citizens can't be in the U.S. for more than six months of the year.

So, what will do with that property the rest of the year? Rent it out, pay someone to maintain it? Consider the utilities and up keep needed.

2. Then there's the fact that you'll need health insurance when you're there. And what if you have a health issue that stops you from visiting your property at all?

3. And then last but never least, there's the tax issue. A Canadian who owns US real-estate will face capital gains taxes in both countries, when they eventually sell. Individual states also levy taxes of their own, and then there are estate taxes to consider, if the place as to be sold after a death.

All these issues depend on your personal tax rate, the state in which you buy and the cost of the property.

Added together, these factors add up to a complex buying decision.

What about trying to arrange financing in the US. What should people be aware of there?

If you're looking to the US, you may well have to come up with your own financing from Canada - don't expect to get a loan down there.

Final words of advice

Here's another thing to consider. Whenever you buy in another country, currency risk come into play. If our dollar continues to rise against theirs, you'll need to earn much more on your actual investment to get ahead.

Here's some additional words of wisdom from Don Campbell. He points out with no health care issues here at home, low interest rates, some deals still to be had on real estate here, and with better fundamentals in place, Campbell urges those interested in investing in real estate to look here first before ever being tempting to do so down south.

If, after all this is taken into account and you're still eager to escape the Canadian winter, you might consider renting. After all, it's a great deal with no risk.

Reverse mortgages - advantages and disadvantages

From my CBC radio national column, September 10, 2009:

You’ve probably seen them…those commercials telling seniors that thanks to their paid-off home, they’re sitting on a gold mine. Why not take a vacation, put the grand kids through school or help your kids with a down payment on a home of their own. The products these ads are promoting are called reverse mortgages, and here you'll find the straight goods on them.

So what exactly is a reverse mortgage?

• They’re an option for homeowners over the age of 60 years old.
• A senior is able to tap into the equity in the home up to 40% of its value.
• The ads are targeted at people who have already paid off their homes (although you can still qualify if you have an existing mortgage.)
• People taking out a reverse mortgage don’t make any payments unless they sell or move. Repayment would also be required in case of death. or pass away.
• The amount a person receives can be paid in a lump sum or even monthly or annual instalments.
• The company that most people know is CHIP, or Canadian Home Income Plan. But there’s another firm that offers reverse mortgages, called Seniors Money.

I must stress the fourth point that yes, you don't make a payment during the life of the reverse mortgage (unless you sell, move or pass away) and thus interest is compounding during that time period. This is the lure of the reverse mortgage but it needs to be fully comprehended by the senior that the longer the reverse mortgage is in place, the more it's depleting equity in your home.

Why would someone consider this strategy?

This might have appeal to cash-strapped retirees. If someone wants to stay in their home and simply doesn’t have the monthly income to manage the bills, wants to renovate their home, perhaps needs money for home care assistance, it could be an option worth considering.

What the experts have to say about reverse mortgages

I had last week with PJ Wade. She’s the author of Reverse Mortgages: Best Friend, Worst Enemy...Your Choice!. As an expert on the subject, she stressed that education is key. She points out that many seniors don’t realize that, while a reverse option might end up being the right choice for them, there are other options they should know to consider first. She suggested that seniors start by looking five years into the future.

So five years before they think they might need to tap into the value of their home, seniors should gather all available information on the options to them—everything from reverse mortgages to home equity loans.

This way if someone tries to sell them on a product like a reverse mortgage down the road or a desperate need comes along, they’ll be well prepared. We generally don’t make good, informed decisions when we’re stressed or under pressure.

The other thing to think about is inheritance. Maybe you want the value of the home to go to your children down the road or maybe that’s not a priority. But it should be thought about in terms of your advance or estate planning.

Consider that the sales pitch for these products is often "well, in theory your home will increase in value as the interest is accrued, so you could actually not dip into your equity at all." Sure, that's possible, but we all know that "in theory" and "in reality" are two very different things. We've also seen housing prices slashed in many provinces.

What do some other financial professionals have to say about reverse mortgages?

The big criticism of reverse mortgages are the fees involved.

Besides PJ Wade, I also spoke with Keith Costello, President of the Canadian Institute of Financial Planners. He cautions the high fees that exist with reverse mortgages including closing, appraisal, legal and administrative costs. These are all upfront costs. So you have to be aware of the fact that these fees will be taken right off the top of the amount they give you.

I called CHIP myself and asked about fees.

First there’s a fee of $1,495, that includes their legal and administration costs. Anyone arranging a reverse mortgage will also need to pay a lawyer – that cost of that typically ranges from $300-600. And lastly, there's an appraisal, which is also out of pocket - they range of $175-400.

Also, the interest rate on reverse mortgages tends to be higher than what you would negotiate for a traditional mortgage with your banker (see rates below.)

Finally as with any loan, which is really what a reverse mortgage is, the responsible use of the money is really important. What if all the funds are used on vacations and other spending and the senior out lives that money?

As a precaution, Mr. Costello, suggests that although you might be able to get up to 40% of the value of your home, ONLY take what you need.

What other options exist?

There are lots of other options that might exist including a line of credit or traditional mortgage with your bank if you have the cash flow to cover the payments.

Or you could consult a CFP might be able to help you restructure your investments to free up cash flow.

And when it comes to needing funds to renovate, a reverse mortgage might make sense if the money is being used to increase the overall value of the home and your enjoyment of living in it. But seniors should also remember that there might be some government grants out there that could pay or help them pay for things like windows and furnaces for example.

Would I recommend my mother take out a reverse mortgage?

As with any product, there’s no good or bad out there, it’s what’s good or bad for one’s situation.

If she had no other option, desperately needed the money and no other sources existed and she was adamant about staying in her home, then maybe yes. But, having said that, I would advise her that it should be a last resort option, not a quick fix as the commercials portray due to the high costs up front and compounding interest over time.

ADDITIONAL BACKGROUND:

More CHIP facts:
-they do have approx 7,000 rev. mortgages on the books
- totalling approx $833 million dollars
-their rates as of September 9 were more than RBCs for example
-As of Sept 10th, 2009 - CHIPs rates - 5.3 for variable, 6mth is 6.25, 1 year is 5.95, 3 year is 6.95 and 5 year 7.50

RBC's rates for example (Sept 10th, 2009 posted rates)
6 Month 4.55% 4.05%
Closed
1 Year 3.70% 3.20%
2 Year 3.85% Call for details
3 Year 4.35% Call for details
4 Year 4.94% 3.89%
5 Year 5.49% 4.19%

Advantages and disadvantages of using a mortgage broker

From my CBC radio national column, September 3, 2009:

To use a mortgage broker or not to use a mortgage broker? Once you've got that dream house picked out, here's some advice on how to pay for it .

There was news last week that the federal privacy commissioner is investigating a number of mortgage brokers because of the way they may be treating client information. So today we're looking at the advantages and disadvantages of using a mortgage broker. Here's everything you need to know before you sign on the dotted line.

The mortgage broker sector has grown in recent years

Once fairly rare, the use of brokers has become a lot more common, especially among younger, first-time buyers.

While mortgage brokers are responsible for about 30 per cent of the mortgage business in Canada, a CMHC survey from earlier this year showed that 44 per cent of first-time
buyers used mortgage brokers in 2009. Compare that to 35 per cent in 2007.

So the share of the $235 billion mortgage market handled by brokers is clearly growing.

Advantages of using a mortgage broker

There are many reasons for using a mortgage broker.

First, they can shop your mortgage to all of the big banks, non-traditional and event private lenders, so that raises the competition for your business.

Second, by pulling your credit report only once, they can shop your deal to numerous institutions without hurting your credit score.

Lastly, their marketed advantage is that they'll do the rate negotiation for you. If you have good credit, a stable job with good income numbers - basically, all the criteria the big banks are looking for and don't have the time or inclination to haggle with the banks over your interest
rate, then they can be a great idea. You know you're getting the best rate they can find.

That makes mortgage brokers sound like they could be a good option for many people. So why has the privacy commissioner decided to take a closer look at the business?

According to a Globe and Mail report out early this week, the privacy commissioner is auditing a number of mortgage brokerages because of concerns about the security of borrowers' personal financial information. The audit, which began this month, is looking into possible misuse of consumers' information. The commissioner is concerned about the potential for identity theft and fraud if this information ends up in the wrong hands, which is a serious issue. Here's a link to the Globe article - http://www.theglobeandmail.com/report-on-business/ottawa-probes-mortgage-brokerages/article1270036/

We've all heard about the sub-prime mortgage crisis in the US, with some of the blame being placed on overzealous brokers. So what should you look for if your considering using a mortgage broker for the first time?

Most mortgage brokers are above board. And many are in favour of tough privacy rules in order to protect the integrity of their industry.

Still you have to protect yourself. And if the main reason you're considering using a mortgage broker is that you're not an ideal candidate for a conventional mortgage at a Schedule one bank - that's the big guys that have to follow the rules of the bank charter--you should know that the broker may end up presenting ideas for private mortgage options, some that could be defined as sub prime.

This might seem like a good thing, because at least you're getting access to credit. But even though as a eager home owner you just want to get your hands on that house now, you need to step back and ask, at what cost?

Getting into a mortgage like this can be extremely expensive with high fees and interest rates.
So although home ownership is a worthy goal, not at any prince. And remember, the job of these individuals is to get you into a mortgage, period.

Anything else to keep in mind?

Yes, it's important to remember that you may not be getting a full selection of quotes. For example, the Bank of Montreal recently decided to stop offering its mortgages through mortgage brokers. This wasn't due to a specific problem with specific mortgage brokers; it was more of a
strategic decision about how they would sell their products. So you should know you're not going a full sense of what's available if you limit your mortgage shopping to one broker.

How should someone proceed if they want to do their own mortgage shopping?

First, get a copy of your credit report and score. You can do that for around $24 bucks at http://www.equifax.ca/ or http://www.transunion.ca/. With your score in hand, when you shop around at the different banks, you can tell them that you're not wanting to go through the approval process just yet. If your banker has your score and basic details such as income, net worth, etc. they can give you an idea of what rate they'll give you and if you'd be approved. Once you decide on a bank to deal with, they will have to pull your credit report, but by bringing it in yourself and asking doing a "pre approval" interview, you won't have a bunch of banks pulling your report and pulling down your score.

Some final tips for mortgage shoppers

Get on the internet before you call your banker and be armed with the best rates on the market. Remember, like everything else in your financial life, your mortgage is negotiable. Just asking for a simply rate reduction from your bank can save you thousands And don't feel you have to use the mortgage broker recommended by your real estate agent.

If you do choose to opt for a mortgage broker, I'd suggest calling up a Certified Financial Planner for some referrals. Unusually these pros have vetted a few and always shop around. A CFP isn't generally allowed to be paid a referral fee, so, they're likely to give a more honest referral. Plus, they have no vested interest in getting the deal approved, while the real estate agent does.

Before you even apply for a mortgage with these folks, get the bottom line costs to you, their fee, hidden fees, the interest rate and details if the deal will be with a sub-prime lender.

Attention students! Money saving with tips

In the Ottawa Sun and the Winnipeg Sun today, you can check out my tips for students:

http://www.winnipegsun.com/life/2009/09/05/10758931-sun.html

Leveraging - should you borrow to invest?

From my CBC radio national column, August 27, 2009:

Between the plunge in the stock market and a drop in home prices many Canadians saw their nest eggs shrivel over the past year. Now with talk that the recession may soon be over, some are so keen to make up lost ground, they're taking out loans to throw money into investments, a strategy that concerns me.

How much is this trend is catching on?

The conditions right now - interest rates are low and stock and real estate markets that have been considered low and on the upswing, creating a breeding ground for the return of leverage. Some can’t resist the lure of easy quick money.

Plus as they contemplate the end of their working lives, people in the baby boom generation are keen to maximize their retirement income

Their thinking is that their return will be greater than the interest on their loan. In addition, if they invest in an investment that produces possible income or a capital gain, the interest on the loan is tax deductible.

A lot of the evidence about the number of people doing this is anecdotal right now. In a recent story on advisor.ca--which is a website for those working in the investment industry--that referred to financial advisers having to discourage some clients from borrowing to invest.

www.advisor.ca/advisors/news/industrynews/article.jsp?content=20090820_145107_9112

I did manage however to dig up some numbers that might be indicative of a trend. In June of this year, the Investment Industry Regulatory Organization reports that Canadians had approx $10.5 billion in margin accounts. Just so you know - a margin account applies specifically to money that’s borrowed from a broker to purchase stock. That’s up nearly 15% from the low in December of 2008.

Should people borrow to invest?

There was a recent that was written about on another website - investopedia - that compared buying on margin to borrowing money to gambling at a casino. And that pretty much sums up my reaction.

Borrowing to invest in anything magnifies your risk plus remember, if your investments drop, you’re still on the hook for the loan payments or even a dreaded margin call when you may have to come up with big bucks to keep the strategy going

So remember that there’s a fine line between investing and gambling, and in my view, buying on leverage kicks you into gambling territory, where the chances of big gains are offset by big losses.

Buying on margin is not for someone who has a low tolerance for risk, someone who needs their money soon, or someone just fed up with low interest rate GICs. It's a very speculative and risky adventure that might work for some, but the percentage of those who should consider leveraging is very, very small

Now, some people will borrow to top up their RRSP. This can be a good strategy, because you get a tax refund that you can use to help pay off your debt quickly, and that can help your retirement savings grow. Because RRSP loans tend to be small and short-term, most experts would categorize them as leveraging.

But I feel strongly that if you have any debt in your life, you should focus on paying that off first before ever taking on more in the hopes of a profit. It’s always a guaranteed return when paying off your current debt.

With stock markets increasing over the past few months, does this signal that someone interested in borrowing to invest should do so now?

You might think it says that markets are headed up and this is a great buying opportunity.

But while that might have been true a few months ago when markets were at rock bottom, there’s no guarantee now that they’re going to keep going up at this rate. So betting on a further increase in the markets is by no means a sure thing.

And keep in mind that whether you're getting in or out of the stock market, this should always be done with a plan - one that suits you, your risk tolerance and more...not just because it looks like a quick buck can be made. Actually, it's usually an investor's biggest mistake jumping in an out. If the pro's can't do it and make money consistently, there's little chance the average investor can

Final words of advice

If you are considering borrowing to invest, don’t get caught up in the hype of short term market spikes and the possible tax incentive. Make sure the person recommending the strategy is qualified, is a CFP and provides all recommendations in writing. Then, take that to your accountant or a reputable 3rd party for validation.

Remember, if someone is pushing for you to borrow money to invest, they’re benefiting from you doing so. And if you’re an investor that likes to sleep at night, err on the side of caution.

Saving for your child's eduction - RESP vs. the Tax Free Savings Account

From my CBC radio national column, August 20, 2009:

While they're trolling the malls looking for new backpacks and back-to-school clothes, parents need to remember that they need to prepare for life after high school.

The back to school scramble. It's a dance parents know all too well. But between trips to the mall, I'm reminding moms and dads that they need to squeeze in some time to think about how
they're going to pay for their child's post-secondary education.

But with all the demands on family budgets this year in particular, isn't it asking too much of parents to take on another financial burden ?

I sympathize that this is a difficult time for many people, but when you consider that one year of university including tuition, books, room and board costs approximately $12,500 or $50,000 for a four year degree, you should really try to put some money away-even if it's less than you would like.

What's the cost?

It's amazing how much your savings can build over time. And that's important when you consider how much the cost of education is expected to grow. The Bank of Montreal estimates that the cost of a degree could grow to close to $100,0000 by 2021.

The other thing to realize is that there are a variety of options to consider when you're deciding on the best way to save. So even if you can't manage to set aside money this year, there's nothing stopping you from drawing up a long-term plan that you can start putting into place
next year when your financial situation is a little better, let's say.

What are my options?

Let's start with the obvious one-the RESP, or Registered Education Savings Plan. Basically, it's a tax shelter allowing you to save for your child's education. When I say shelter, what I mean is that the amount you put into an RESP grows tax deferred until your child takes it out for their
schooling. The idea is that the tax won't be much as it's taxed in their hands and they're not earning much income at that stage.

You can contribute up to $50,000 per child over the life of a plan and there is no longer an annual limit.

There's no tax deduction as there is with an RRSP, but there is a government grant

The government will provide 20% on the first $2,500 contributed each year to an RESP, up to $500 a year ($7,200 to your child's resp in a lifetime).

Is there another option that exists?

Something else you should think about is a tax-free savings account. With the tax-free savings account (TFSA), you can put $5,000 a year and not pay tax on its growth or what it returns. You need to keep in mind though that the account holder must be at least 18 years old, so you
can't start an account for a small child.

One big advantage though to this account is that there's no restriction with how the funds are used, unlike an RESP, which must be used for educational purposes.

So a tax-free savings account might make sense if you wanted to say purchase a condo or house to use while your child's at school, for example - this account would offer that flexibility. But of course, you'd be forgoing the guaranteed 20% grant from the RESP.

Many advisors suggest maxing out the RESP contribution first because you're guaranteed the 20 per cent minimum from the government grant and then if you're able to save more, allocate it to the TFSA.

What kinds of investments are eligible for RESPs?

Just as with an RRSP, most investments are eligible, such as GICs, mutual funds and more. If you wish to purchase individual stocks and bonds for your child's RESP, you will need to open a self-directed account. Check with this financial institution to see what options exist for your plan.

Are there any that you would recommend in particular? Or to stay away from?

Time is of the essence with an RESP. If you're starting when your child is say at the age of two, you have time to be a bit more aggressive. If they're much older, you'll need to reduce or eliminate exposure to equities or more risky investments.

Remember, as with your own investments, it's essential to understand the risk level you should take or not for your child's RESP.

And you should review your investments over time...you don't want to be moving in and out of stocks or mutual funds willy-nilly, but don't feel like you have to stick with an investment for 20 years if it's not working for you.

What happens if my child doesn't end up going to college or university ?

Any money the government added to the RESP will have to be paid back. But income generated from that money remains within the plan. There are also rules about what happens to the money that grew tax-free. You can transfer up to $50,000 to your RRSP - or your spouse's - if you have the contribution room.

A final word of advice

Remember that it's essential that you as a family survive first, then save for your kids next. During your child's early years, there's a great deal of debt and demands on your savings. So although yes, it's ideal if you can start early, don't feel that you can't catch up as your children are older and your debts are reduced.

Lastly, an effective strategy could be to invest in your RRSP and use the tax refund that it generates to then invest for your child's education.

Avoiding bankruptcy

From my CBC radio national column, August 13th:

Fed up with creditors calling? Before you turn to a bankruptcy trustee, you'll want to read some words of advice.

You've probably seen them on TV, the ads from firms specializing in bankruptcy using soothing tones to tell you THEY are the solution to your debt problems. However,there are plenty of things you should know before you pick up the phone to call for help.

New numbers out earlier this week showed that personal bankruptcies rose 54.3% compared to June of last year, which is not surprising in a recession like the one we're living through. But bankruptcy is an issue even in good years. On average, about 100,000 people a year file for bankruptcy.

Why? We tend to increase our level of debt as life improves, but then when we have a life altering event such as a job loss, divorce or disability, we rely on credit to replace income. Or, simple overspending. Unless income can be replaced or expenses slashed - which many people aren't willing to do - bankruptcy may seem like the only option.

But what about those bankruptcy ads? Many of them present bankruptcy as simply a chance to start over, with no mention of consequences.

Bankruptcy should be a LAST RESORT - not the first call when financial troubles hit. My message is this: if you or loved ones have debt problems, you're not alone. But, many times, you can and should look to yourself, not bankruptcy, as the starting point.

Also, one should keep in mind that by filing for bankruptcy, even though it drops off your credit bureau after 7 years, it may limit one's career potential for life especially in the financial industry for example.

And not every debt obligation such as student loans or child support payments would be discharged for example.

You should know that there are many costs associated with declaring bankruptcy that depend on your income, assets and other factors. The trustee fee varies from province to province. But all fees are paid by the person filing for bankruptcy. If not through their liquidated assets, then over time to the trustee. In addition to the provincially set bankruptcy fee, there is the money you have to pay back to creditors. That amount will depend on your income and assets. . Bankruptcy doesn't just mean walking away from debts free...unless one has absolutely no assets and is very low income.

What about credit counselling agencies. How do they differ from bankruptcy trustees? Or do they?

It's all very confusing. There are non-profit credit counselling agencies. But some of these agencies are in fact bankruptcy trustees who brand themselves as "credit counsellors" in their advertising. The problem again is that the rules vary so much from province to province.

So to help you along, here's a website where you can find a government listing of all the counsellors nationwide. Go to www.creditcounsellingcanada.ca to find a credit counsellor in your area.

Once you've got some names in hand, check with your Better Business Bureau to ensure they're a reputable counsellor. Then when you're making the call , at that point find out if they're for profit or not-for-profit.

And a couple of final resources:

1. www.bankruptcy-canada.ca. They have a fantastic free ebook explaining all the options from lowering your interest rate with your creditors, consolidation, consumer proposals and of course, if there's no other option, the process of bankruptcy.

2. www.nomoredebts.org. Although a western Canadian resource, anyone in Canada can call them any time with a credit question free of charge.

Intelligent frugality tip #4 - saving money on your grocery bill

I admit it. Financial guru or geek, I've not always been a conscientious shopper when it came to purchasing groceries.

Since my eyes have been opened, or, produce has simply sky rocketed in price, I've been more careful where I shop. Although living in a central location has it's perks, driving to the outlying areas of town to find a Superstore doesn't make much sense either.

Recently, I've found an urbanites dream spot - the Italian Centre downtown in Little Italy (Edmonton).

Not only have they recently renovated, making their store a refreshing environment from the old cramped one of the past, they also offer locally grown produce at a fraction of the price of Savon or Safeway.

Check out my recent grocery purchase:

All of this for a cost of $43 and change. Most notably, the red and yellow peppers which fetch a much high price at other retailers. Plus, the large bag of coffee at $10 obviously added to the bill.

For my price, I was able to purchase: 3 extra large red peppers, 3 yellow peppers, 3 exotic light yellow peppers, 4 long hot peppers, 5 red onions, 2 apples, 4 vine ripened tomatoes, 6 zucchini, 5 packages of pasta, a package of dates, biscotti, chocolate wafers, a large package of coffee and a pack of butter.

What I also love about the Italian Centre is their organic feel with most of their produce supplied by local farmers. Check them out and surprise yourself with their selection and savings.

Happy shopping!

Car Shopping - Putting you in the driver's seat

As Canadians we tend to wear politeness as a badge. And that means many of us feel uncomfortable haggling over prices--unless we’re on holiday in Mexico.

But when it comes to buying a car, there’s never been a better time to barter. So here's some tips to help you go head-to-head with the hardest-selling car dealers and some pointers to make you sound like you’re a negotiating force to be reckoned with.

It's still a buyers market

I recently visited 5 car dealerships to see what I could negotiate. Today even the luxury dealers that "never" moved on their prices years ago are certainly much more flexible.

But that doesn't mean dealing with your car salesperson will be a cake walk. They're still keen to get the most money they can from every vehicle they sell.

So while there are deals out there, you still need to nudge the salesperson.

Where should I start?

I would highly recommend lots of some research before you head out.

During my test shopping, I pretended that I had no preconceived notion of what I was looking for - from a sedan, to SUV to sports car, I let the sales person sell me. The result? I was exhausted and overwhelmed by the time I hit the 2nd dealership.

Check out books like lemonaid or consumer reports to help you narrow down your choices. They’re also jam-packed with information that will help you sound like you know what you’re talking about

From here I have different approaches depending on whether or not you`re interested in a new car or a used one. For new car purchases, at this point I recommend that people head to the company website. This will save you a considerable amount of time and money. Most sites tell you what models and features are available, the costs, loan/lease calculations and more. Plus, by doing some advanced research, you hopefully won't make an impulse buy that you'll regret later.

My most important tip that could save you money and a regretted purchase

A five minute test drive simply isn't enough.

Here's one not many people think of...I recommend renting the car that you're thinking of buying. Once you've nailed down the vehicle you "think" you love and want to purchase, wait, and rent it for a day or weekend.

Doing that can seem like an added expense, but it can also save you money. For example, my sister in law spent two months researching safety, costs, design and more of her vehicle and of course, took the test drive. Two months later, she's ready to take a few thousand dollar loss to trade the thing in because she hates it so much. If she would have rented the vehicle she was going to buy for a day or two and used it as she would have in life, she would have save herself a both time and money.

When renting the vehicle, ensure you use it as you would in real life. Do you travel on the highway a great deal? Lug the kids in and out with hockey equipment or are you an avid golfer? Plus, by trying out several features like a navigational system, sun roof, dual climate control and more, you can truly see what features are essential for you and your family and which ones you can do without.

What if I want to buy a used vehicle?

It's even more essential that you do your homework. With new cars, the price difference between dealerships is fairly slim. With used cars, depending on the make, model and km's, the price difference can be huge. For a used car, you can go to sites like autotrader.ca to get a sense of prices being offered. Ask around for recommendations of a reputable dealers. And wait to find a dream car. You may have to be patient. But you`ll find the right car at the right price.

A finance manager that I spoke with also highly recommends that buyers get their own independent inspection and check out the vehicle’s history using CarProof which can be purchased at a local registry or online from about $35-$65. An inspection can cost $140 - $500, but doing so could save you big bucks in the long run.

So now I have all my information and I'm ready to bargain. How do I start the negotiations?

Today most dealerships are willing to move on everything from sticker price, to free oil changes for life, the interest rate on your lease/loan and more.

To start the negotiating process, simply ask what’s the best price on the particular make you’re looking at. Not every vehicle in any one dealership has the same room to move on price, manufactures rebates, loan or lease rates. Usually the more incentives offered, the less likely that model is selling successfully and that’s why the dealer offering enticements. So although you want to negotiate a great price, make sure you’re not purchasing a vehicle simply on incentives.

Get the salesperson to first give you their best price and then ask for even more. More often than not, the more time you spend with that individual and them with you, the more they’re invested in making the sale. These sale people expect you to barter, so going back and forth on a deal 2 – 5 times is not out of the ordinary.

Since this is such a major purchase in one’s life, don’t rush the process. Time is money, but when car shopping, a little extra time could save you a mint.

Bring a “bad cop” with you or defer to them. If you’re new or a little squeamish at the thought of negotiating, after asking for the best price, let defer to the bad cop for approval.

Lastly, consider making your final purchase near month end. Most dealerships and sales people are looking to fill their quotas and might be able to move on prices even more than usual. Also, some dealer incentives expire at month end as well.

Today's Globe & Mail - We just hand them our money and shut our eyes

I had an interesting discussion with Sarah Hampson from the Globe on how investors can protect themselves from not only the obvious (to some) scam artists but also, how to keep your advisor in line and what questions you should be asking your financial professional.

Check out her article here - http://www.theglobeandmail.com/life/work/we-just-hand-them-our-money-and-shut-our-eyes/article1225111/

Canadian mutual fund industry gets a failing grade for fund fees

Generally, it's not considered good manners to ask people how much money they make. But, with a new study out that criticizes Canada's mutual funds for the high fees they charge, that's a rule you might want to start breaking, at least when it comes to dealing with investment advisors and the products they sell.

The study came from Morningstar USA, a leading independent investment research firm that's widely considered the authority on mutual fund performance.

In this study, Morningstar looked at funds in 16 countries, and the bad news is, when it comes to mutual fund fees, Canada gets a grade of "F" because of the level of our MERs--Management Expense Ratios. These are fees that cover everything from the salary of the fund manager to compensation for the investment advisors, like yours perhaps, who buy these funds for their clients.

Oddly enough, the report didn’t cite specific numbers or averages so I did a little research myself. Depending on the year, I found the average Canadian equity fund has an MER of 2¼% compared to 1.42% for the average American fund.

Now the report does admit that in many countries some costs are not bundled exactly the way they are in Canada, so that may account for some of the difference between Canadian funds and others around the world. And in fairness, we rated up to a B- for our mutual fund industry overall due to the safe regulations in place. But even taking all that into consideration, it still seems that the fees here are higher than elsewhere in the world.

Why should you care about the fees your fund is charging?

The idea of investment in mutual funds is that they take a lot of the worry away that can be associated with investing. Why spend your time and energy trying to pick individual stocks or bonds when you can hand the job over to a professional fund manager? Plus, over 90% of Canadians who invest, own mutual funds.

But here's why these fees matter. When you look at rates of return for mutual funds, you have to remember that they are calculated after the management expense fees are taken off. So the fee represents money that's going to the mutual fund company and possibly to your investment advisor.

Let's look at a $100,000 portfolio earning 6 per cent after fees over 10 years compared to one making 5 percent after fees. The difference over a decade is $13,284 and change. So over the years, even a one percentage point difference in fees between one company or fund and another could have a big impact on the quality of your retirement for example!

I'm not suggesting for a moment that your financial professional should work for free. Everybody deserves fair compensation but the investor should be aware of what those fees are and what their advisor is providing in exchange for advice and planning services.

But what concerns me is that a recent Angus Reid Poll found that of the people who have money invested in mutual funds more than 50% had "no idea" what they were being charged. The industry shouldn't be satisfied with that; they should want their customers to be well informed.

So if MERs and investment fees are new to you or you think you need a refresher, here's three questions to ask your financial professional:

#1 - what am I invested in exactly and why?

#2 - what fees am I paying - for everything - with my investments? And an even better qualifying question would be, If I cashed out everything tomorrow, what fees, if any would I have to pay?

#3 - lastly, every advisor has a bias and is limited by the licenses that they hold. Ask your advisor what theirs are. If they aren't licensed to sell stocks and bonds (only mutual funds for example), chances are they aren't going to recommend them to you.

And if your advisor appears reluctant to answer these kinds of questions?

Don't be afraid to shop around and get a second opinion if you don't get the answers you're seeking. You have a right to know so start with a simply dig out your most recent investment statement and call to your advisor today.

Kids and Money

Okay parents. We're in full summer mode, the kids are out of school and are busy finding new ways to spend your money.

No matter how many times you try to tell them that money does not, in fact, grow on trees, the message isn't getting through.

But first, if you as a parent have a difficult time communicating with your kids about money, you're not alone.

I want to emphasize how important this is: with a recent study citing that our consumer debt in Canada has swollen now to over $1.3 trillion dollars and with over 75% of Canadians possessing less than 3 months savings in a bank account, these adult problems with likely be passed on to our children.

We need to teach kids how to save, spend wisely and respect credit. But many parents find it extremely difficult to talk about finances at home, more difficult than talking to their kids about sex. Money (and might I add the lack of money) is the new taboo of today.

The problem is, most parents don't know where to start. It's not enough to burst into the occasional rant and rave about the cost of things when the kids want money to spend on yet another new video game, or they want to buy an expensive pair of jeans. That's not teaching kids about finances. That's just teaching them to go away and try you again when you might be in a better mood.

Parents need to start talking to their kids on a everyday basis about money.

So here's some suggestions for initiating the "money talk" with your child while having a little fun.

Step one: at any age, I encourage parents to have a piggy bank for their child. This should be a fun and simple account that encourages dialogue about coins, cash and foreign money. To ensure your child always has some fun with spending during their lifetime, allow your child to freely purchase what they desire from this bank without your approval.

Step two: at the age of around 5 - 7, depending on your child, introduce a short-term savings account. Whatever cash flow comes into your child's life (birthday gifts, allowances, etc.), discuss with them what percentage will be allocated to the piggy bank (for their own spending) and how much will be designated for the short-term savings account. The idea here is to teach your child that there are things in life that need to be "saved up" for as in adulthood. Make a list with your child of all the activities or items they wish to have in the next 30-90 days (a swim pass for the summer, a new game or pair of jeans) and figure out which ones will take priority and how your child will save up for them. Have them participate in deciding which to cross off this list, add, etc.

This summer, also try using cash as much as possible when shopping with your child. My fear is that our children will grow up not thinking that money grows on trees, but in little plastic cards such as credit and debit cards. When making purchases with cash, explain to your child the tangibility of such items and how long mom and dad had to work to purchase "x".

Step three: at the age of 15 or 16, I strongly encourage parents to set up a mock credit card with their child. Once they hit 18 and can get a real credit card of their own, the innocent mistakes that can and are made out the gate can haunt them on their credit report for 6 years.

This is a fake credit card extended by the "bank of mom and dad", but make it as official as possible. How much credit you're extending (it may only be $50 or much more), the interest associated, payment due dates, etc. That way, any mistakes made by your child can be easily corrected by you and when they are ready for the actual credit card, they'll be comfortable with responsible use of it.

Lastly, consider designating a monthly family money meeting. Consistency is the key - every 1st or 15th of the month and it doesn't need to last long. Set aside 5 minutes or more to discuss what's on your child's mind regarding finances, investments and how they feel about money (maybe there's been a layoff in your family or with a friend's parent and they're feeling scared.) And parents, don't worry if you don't have all the answers. With the plethora of information on the Internet and the ease of Googling almost anything you'd wish to know, you can learn together.

Catch me on CBC radio nationally

Starting July 2nd, you can now catch me weekly on CBC radio nationwide! Tune in Thursday's and please check your local station for air times. Cities included are: Whitehorse, Winnipeg, Victoria, Toronto, Quebec City, Regina, Vancouver, New Brunswick, Ottawa, Calgary, Thunder Bay, Edmonton, Montreal, Windsor, Charlottetown, Halifax, Cape Breton, and St. John's.

I'll still be in studio with the fabulous Peter Brown for Edmonton's Radio Active every Thursday at 4:10 MST. Over the summer, Peter and I will be answering YOUR financial questions. Please email me at wealth@kelleykeehn.com if you have a money problem on your mind.

Intelligent frugality tip #3 - go out for dinner but drink at home

Even the recession won't force me give up my summer cocktails! And when did prices skyrocket for a glass of wine at a restaurant?

This summer, consider enjoying the outdoor patios of your city, having a meal out now and then, but enjoying your beverages (when possible) at home. For the price of one glass of wine at a restaurant, you can purchase nearly an entire bottle to enjoy with your friends or loved ones in your own back yard.

And it goes without saying, please enjoy responsibly!

Intelligent frugality tip #2 - valuing your time.

Do you know what your time is worth? I see so many thrifty individuals proudly wearing their deal seeking badges, but some times I shake my head at their efforts when they forget to factor in the tangible value of their time.

I had a friend the other year, who's annual income is over $100,000, brow beat a consignment store for 30 minutes on a dress that cost $20 down to $10. As she told me the story, she was quite proud of herself until I pointed out that she's paid roughly $50 an hour, so that 30 minutes cost her $25 to save $10. Not intelligent frugality as far as I'm concerned.

What's the real cost of that deal? A family member of mine drives all over town and miles to get the "best" price on gas. He too wears his barging finding skills as a badge. As a very successful business owner, I calculated that his hourly wage is about $98 an hour and he'll often use up 40 minutes in traffic to save a few dollars at the pump.

Watch for discounts even after you buy! One case of intelligent frugality that impressed me was that of a friend's son. He was a student and had some extra time on his hands. He saved up for a big screen TV to the tune of about $2,000. When he bought it, he asked if it went on sale, would he then get the sale price? The manager told him that yes, if it dropped down within 30 days after he purchased it, they'd refund him the difference. It only took a little time to pay attention to the flyer that came in the mail and this fellow found a sale price twice in the month and the cumulative refund was over $150 which he then used for a lovely dinner out with his girlfriend. Even if he had been earning a sizable hourly wage, the few minutes it took to keep an eye on the flyers which came in the mail anyway and the relatively small hassle of revisiting the store for the refund is well worth a sizeable savings.

Hire it out! A smart spending decision, even in a recession, is to consider that you can hire out. You might think hiring a cleaning company for your home is extravagant, but consider all you could do if you had a couple of extra hours a week? If you're earning say $30 an hour and a cleaner is $20 an hour, this could be a wise spending decision. You could use the free time to upgrade your education, have more time with your children or take a much needed break. If you're not earning enough to justify the cost, start a networking group with your friends and see if you can swap services that the other despises. You might love cooking and making a little extra each week to prepare frozen meals for one friend that would enjoy returning the service by painting your deck could be a winning proposition.

Remember to know your worth and value your time - it's just as precious as money!

Intelligent frugality tip #1 - is buying organic worth the extra cost? Part one.

Last week, I had the honour to be a co-panellist with Dr. Ruth Collins-Nakai for the WXN Network. Dr. Ruth as she's affectionately referred to by her patients is not only one of Canada's premier wellness experts, she's also the past president of the Canadian Medical Association with a resume as impressive as she is delightful.

As Dr. Ruth shared her wisdom and nutritional insights, she vented her frustration with the food industry likening them to the stunts of the tobacco companies. She told us that if you were to locate a cereal box from 20 years ago, you'd see that most did not add salt or sugar to their products. Today, she lamented that you'd be hard pressed to find one that didn't add salt and sugar.

Her reasoning for this deceptive behaviour is that most cereal makers also sell beverages such as juice and pop. She explained, and I won't even try, how a person's insulin spikes from excess sugar which then make us hungry (we then eat foods with excess sodium) and of course, salt makes us thirsty. Thus, these food manufacturers have their products covered. Sugar to make us hungry, salt in the food to make us thristy, more sugar, etc. and the spiral of obesity continues.

She implored attendees to never eat processed food.

I beamed, sat up with a smirk on my face and nearly patting myself on the back for the fact that I rarely eat processed, fried or fatty foods and mostly made the healthiest of choices - or so I thought. Why I also read the label in supermarkets and take the experts advice to avoid the middle isles (focusing on veggies, fruit and not the packaged junk in the centre.)

I've had a break recentsly from work travel and have been in Edmonton enjoying the very warm weather we've had over the past few weeks and with a busy as ever schedule, have switched to my summer menu. After hearing Dr. Ruth's sage advice that morning, I further gloated to myself how healthy my dinner was that evening, even though it was prepared on the fly.

I had a vine ripened tomato and lettuce sandwich on whole wheat bread, a whole (but small) jar of salsa (lots of cayenne pepper for the metabolism and other health benefits), a quasi guacamole, a very small amount of sour cream and copious amounts of multi grain chips. Scrumptious, low in bad fats and what I thought was a perfectly healthy summer meal.

As someone who's always read the label for saturated fats and high calories, I thought I'd better have a look at the other label items from my meal.

From my viewpoint, it was as fresh and healthy as one could hope for. Oops, I forgot about the prepared salsa and yep, the chips. As I investigated further (and I'm not counting the other items as they were fresh other than the sour cream), here's what I found:

• One full jar of Western Family fire roasted salsa contained only 126 calories, 0 fat, 0 cholesterol but a whopping 2,386.80 mg of sodium - that's 94.5% of my daily allowable limit according to the label - yikes!
• The chips - and I figure I ate about 40 chips - that accounted for 540 calories, 26 grams of fat (but only 2 grams of saturated fat), 10 grams of fiber (they were the multi grain chips) or 40% of my daily recommended amount and 0 cholesterol. So again, I though I was doing pretty well. As for the sodium, again, it was higher than expected at 300 mg or 12% of my daily limit.

Even though I rarely purchase boxed cereal, frozen meals or eat at fast food restaurants, I figured I was eating better than most. Apparently, what we think is healthy can be deceiving.

The point of this missive is that your health is the most imporant investment on the market. Without it or life itself, money is literally worthless! To cheap out on our health and what we ingest would be the silliest of frugality stances.

I'll be heading out to the market in the coming week or so and will report back whether or not organic is really worth the extra cost (based on my menu of chips and salsa and a few other items), the health factor and what the actual cost will be.

Stay tuned for part two shortly.

Intelligent frugality - the new chic or just cheap?

With the recession continuing to loom in the news (although, I'm not sure how real it is in provinces like Alberta where everyone continues with the busyness plague and packed restaurants), I've been testing ideas for over a year now on ways to save money while still having fun.

The funny thing about focusing on cutting spending, getting a better deal or being more efficient with what you have actually becomes contagious.

There was a time, OK, pretty much my entire life (until a couple of years ago), that I recoiled at the word "frugal". I equated it with cheapness, lack, too much work and basically, just something that wasn't for me.

Boom, now bust, our economy and my consumer advocacy role in the media recently has forced me to economize to teach my readers, viewers and listeners how to save money.

However, over the past year or so of living what I preach, I've discovered that there's an enormous difference between being frugal (or use whatever adjective you'd like for the down right thrifty), and being smart about saving money - what I call Intelligent Frugality.

So, over the summer months, I'm going to share with you my tips and insights for saving money and time but with a more educated & playful spin.

Stay tuned!

CBC Money Makeover #2 - Solutions for Jeannine

Here's my letter to Jeannine with some solutions that could save her thousands of dollars and most importantly, save her and her husband over ten years on paying their credit cards. They're a young couple and if they make these changes now, it will significantly change their financial future.

My letter to Jeannine:

Preliminary Numbers/Calculations for Jeannine
April 17, 2009

The mortgage

If you have a good relationship with your lender, now might be the time to look at refinancing your mortgage only with respect to your rate. However, I’m not familiar with Wells Fargo and any hidden charges they might have. Since rates have dropped substantially, you can’t actually break your mortgage without fees if the term hasn’t expired (i.e. if you locked in to a 5 year term at 5.75% and let’s say you’re in year 2, if you broke that mortgage and went to another lender, you’d have to pay a huge fee). However, what most banks will do is give you a blended rate (an in-between the posted current rate and your existing rate without fees). Again though, I don’t know if/what Wells would charge and their policy…but it’s worth a try.

Here’s my assumption – with current 5 year terms at 4.5% (some even lower if you negotiate the rate down) and your current rate of 5.75%, you theoretically could get a blended rate of say 5.00%. Here’s my numbers on that assumption:

Current mortgage payment - $1,928.50 *
Total interest paid in the 40 year life - $560,456.66 **

New blended rate payment - $1,747.63
Total interest paid in the 40 year life - $473,868.28 **

Monthly savings of: $180.87
Yearly savings of: $2,170.44
Total mortgage life savings: $86,588.38 **


*You’re likely paying by-weekly, but I’m using monthly for ease of this example.
**This is assuming everything stayed the same for 40 years which of course it wouldn’t…but just for the sake of this example.

The Credit Cards

Assuming a minimum payment of 3% per month of the outstanding balance of all the credit cards/lines of credit combined would equal $1,296 per month in minimum payments.

If you only made this minimum payment, it would take 13 years and 5 months to pay the entire $43,191 in current outstanding balances. This would cost you $10,926.21 in interest payments.

If we could change your mortgage to the new blended rate and take that $181 per month in savings and allocate it to paying down the credit card debt, making your total monthly payments $1,477, it would only take you 2 years and 8 months to pay off all the credit card balances with interest charges only equaling $3,253.16 (a savings of $7,673.05 by paying just the minimum.)

Saving for Retirement

I just did a quick calculation … if you now took that just about $1,500 per month that is being used to pay off credit card debt and allocated it to RRSP savings, assuming a 6% rate of return and a 3% inflation rate for 35 years (till retirement), you’d have $3,002,881.


Disclaimer: Kelley Keehn is not a registered investment advisor and the information provided in this document should be considered educational in nature, but it is not a substitute for legal or professional financial advice. If you believe you need the help of a Certified Financial Planner or other investment counselor, please seek a qualified professional.