Archive for the ‘Tips’ Category

Ten Tips to Consider Before Buying a Home

Friday, December 18th, 2009

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You are about to invest in your most valuable asset. Many home buying steps are standard yet there might be slight variations depending on the real estate laws and regulations where you live. Here are our top 10 recommendations to make you more confident as you embark on your home buying journey.

1. Your Credit Rating
Getting your finances in order is probably the most important step you should take. Your credit reports are an ongoing look at how you manage your finances. You must know exactly what your credit reports say about your financial history before you apply for a mortgage, because the reports play an important role in the mortgage approval process and in determining the interest rate and other loan terms that a lender offers you.

2. Understanding How Mortgages Work
Get familiar with the mortgage laws, structure and options. That way, you will be able to decide on the right loan and lender — crucial to your home buying success. It’s up to you to determine which lender is best for your needs, and it’s always a good idea to have at least a bit of background about the loan process before you talk to a lender.

3. Getting a Mortgage Pre-Approval
Do you know how much house you can afford? Probably not, unless you’ve talked with a lender. Pre-approval helps you in other ways. Consider this scenario. A home seller gets two similar offers. One is accompanied by a letter from the buyer’s bank that states she is pre-approved for a mortgage in the amount of the offer. The other has no supporting documents. Which offer do you think the seller will consider first?

4. Sorting Out Your Needs and Wants
Buying a home isn’t as difficult as you might think, even if you’re short on funds. But the process will go a lot smoother if you get familiar with your real estate market and narrow down your wants and needs before you start looking at houses.

5. Preparing to Work with Real Estate Agents
Real estate agents represent buyers, sellers, or both — and in some states they can work as neutral facilitators for either party. It’s essential to understand agent duties and loyalties before you make that first phone call.

6. The Great Home Search
The Internet is a great tool — you can spend endless hours searching the public version of the Multiple Listing Service website. Plus, your agent will give you multiple listing sheets to study. You can also pick up House For Sale magazines and read classified ads in your local newspapers. You might even plan afternoon drives to preview neighbourhoods. These are all excellent ways to see what’s available out there.

7. Pre-Offer Investigation
Deciding whether or not you want to buy a house involves a look at its structure and its features, but there are many other topics that are every bit as important to your purchase. Appoint a professional to conduct the home inspection. Study what kind of house is it — site built, modular or manufactured. Consider its market value and resale potential. Do others have a right to use the property? Can you live with the deed restrictions? Is the reported square footage accurate? Is the heating system efficient? And so on.

8. Making the Offer
There’s no one set of instructions that can cover all the differences in real estate laws and customs that exist throughout, so the mechanics of making an offer and its specific contingencies depend greatly on your location. That’s why you should sit with your agent, attorney or advisor to fine-tune your offer and take care of all the contractual considerations.

9. Avoiding Last-Minute Changes
As your closing date nears, everyone involved in your real estate transaction should check its progress on a daily basis, because staying on top of things means you’ll know immediately if there’s a problem that must be dealt with.

10. Before Closing
Most of your home buying concerns are behind you now and you’re on your way to closing, also called settlement, or the event that transfers ownership of the property over to you. You will encounter issues specific to your location and your transaction, issues that can best be explained and handled by your local real estate agent, your lender, your attorney, your closing agent, or others who are helping you complete the home buying transaction.

Never hesitate to ask questions. Ask as many questions as necessary to help you understand the entire home buying process. You are making a long term commitment and spending a major amount of money–you’ll feel much better about the transaction if you stay informed and understand what’s happening every step along the way.

The HGTV.ca Editorial Team

Storage Ideas for Your Home

Tuesday, December 15th, 2009

Who doesn’t need more storage space in their home? From closets and attics to kitchens and laundry rooms, we’ll show you some innovative storage ideas that can help eliminate the clutter around your home. So what are you waiting for? It’s time to get busy cleaning up that mess!

707-storage-ideas-for-your-home-21Closets

Closets are the first place to look when improving storage in your home. Replacing old hanging rods and shelves with adjustable metal shelving and wire baskets should be high on your priority list. It’s not that hard to do, and can make a great DIY project.

Here’s how to go about it:

 

  • Start by cleaning everything out of the closet.
  • Remove the old shelf and rod.
  • Locate the wall studs and mark their position.
  • Secure the horizontal track to the studs on the back wall near the top of the closet.
  • Hang the vertical supports on the track and secure them to the wall.
  • Cut the wire shelves to length with a hacksaw or reciprocating saw.
  • Attach shelf supports to the vertical supports.
  • Install hanging rods, shelves, and baskets.

 

707-storage-ideas-for-your-home-31Under Bed

A lot of good storage space can be found under your bed. To access the stored items, build one or more large open boxes that fit under your bed from plywood or medium density fiberboard (MDF).

 Install casters to the bottom of the box and a handle on the front to allow it to easily roll in and out.

 

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Laundry Room

Your laundry room is another area of the house that can usually benefit from some serious organization. Some ideas for laundry room storage include:

 

  • Add a store bought or built-in storage unit that has been sized to hold an individual laundry basket for each member of the family.
  • Install shelving on your laundry room walls above the washer/dryer as well as along the area near the ceiling to store cleaning supplies and detergent, as well as tools and other items.
  • A great DIY project that can make your laundry room more functional is to install a built-in ironing board, complete with an electrical outlet and storage for your iron, into the laundry room wall.

 

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Attic

Attics are a great place to store items that aren’t damaged by extreme temperatures. To increase the storage space in your attic, consider building hanging shelves that are attached to the rafters.

 

Here’s how to go about it:

  • Determine the pitch of your roof and the width you want your shelves.
  • Using these measurements, build “L” shaped brackets cut from 2″x 4″ lumber to support the shelves.
  • Use a chalk line to mark the position of the brackets on the rafters.
  • Attach the brackets to the rafters with screws, making sure the shelf support is level.
  • Slide 1″ thick shelving onto the brackets.

 

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Kitchen

There are a number of ways, from lazy susans to sliding bins, to increase storage space in your kitchen. One simple way to free up a drawer and make the lids to your pots more accessible is to mount a bathroom towel rack to the inside of a cabinet door. Here’s how to go about it:

 

  • Start by attaching one of the towel rack brackets to the cabinet door stile at the proper height.
  • Next, hold the other bracket in place and measure the length of the towel rod.
  • Cut the towel rod to length with a hacksaw.
  • Insert the towel rod in the two brackets and screw the second bracket to door.
  • Place lids on the towel rack with the handles facing out.

 

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Bookcase

A DIY built-in bookcase in your living room or den makes the perfect place to store books or display memorabilia and photographs. Store bought models are also available.

 

To build a bookcase:

  • Start by making a cutting list and cutting the stock (plywood, MDF, or solid wood) to size for the bookcase and shelves.
  • Assemble the bookcase.
  • Construct a separate recessed base below the bookcase.
  • Assemble the bookcase and base.
  • Attach a frame to the front of the bookcase.
  • Prime and paint or stain and finish the bookcase and base.
  • Install bookcase in room.

 

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Bathroom

Bathrooms can always use some added storage space. There are a number of options available, including:

 

  • Build or buy a shallow hanging cabinet to attach to the wall above the toilet for storing towels, soap, and toilet paper.
  • Add a built-in window seat or a freestanding chest in your bathroom to serve as a place for clothes and to sit when dressing, as well as for storage space inside.
  • Install a built-in, recessed medicine cabinet, such as Nutone’s locking bath cabinet on the wall above the sink in the space between two studs.

 

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Charging Station

A recessed wall cabinet with an electrical outlet mounted inside is the perfect place to keep cell phones, iPods, and MP3 players while they’re charging. It also doubles as a convenient place to hang your keys.

 by Danny Lipford

$1000 Budget to Remodel Your Home

Monday, December 14th, 2009

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These days everyone’s on a budget, so we’ve come up with some inexpensive ideas on how you can remodel your kitchen, bath, or living room for under $1000

Bathroom

If you do the work yourself, remodeling your bathroom doesn’t have to be that expensive. Some projects, like painting, are not difficult to tackle while others, such as tiling a floor, require more expertise.

Here are some of the most common bathroom upgrades with approximate DIY prices:

  • Paint walls and trim ($75)
  • Replace bathroom accessories ($100)
  • Install new sink faucet ($100)
  • Replace sink and vanity ($400)
  • Tile floor ($225)

When tiling a floor, be sure to buy 10-15% extra for waste so you’ll have plenty of tile to finish the job.

 

Living Room

Most renovation efforts in living rooms, family rooms, dining rooms, and bedrooms involve painting, window treatments, ceiling light fixtures, and replacing the flooring, all of which can make great DIY projects.

For those on a budget, the least expensive flooring to install is either carpet or laminate flooring at about $2 per square foot. Though more expensive than carpet, laminate flooring makes a great do-it-yourself project while installing carpet often requires professional installation. Replacing the light fixture in the ceiling with either a new model or a ceiling fan is the perfect way to finish out the room.

Here’s approximately what it will cost to remodel your living room:

  • Paint ($150)
  • Window treatment ($50)
  • Ceiling fan or light fixture ($100)
  • Carpet or laminate flooring ($700)

Kitchen

A minor kitchen remodel is another great homeowner project that has a high rate of return on your investment should you decide to sell your house.

Start with a fresh coat of paint on the walls and cabinets. The kitchen receives a lot of traffic, so a kitchen and bath enamel is the best choice, since it holds up to repeated cleanings. The key to painting in the kitchen is to thoroughly clean the surfaces of any grease or grime before painting. You should also lightly sand or apply a liquid deglosser to cabinets before painting to improve adhesion.

Next, consider updating the knobs, handles, and hinges on your kitchen cabinets with new ones. Take your old hardware with you to home improvement center so you can match the size and holes to the new hardware.

A kitchen floor also take a lot of abuse, so replacing it may be high on your priority list. Ceramic tile is the obvious choice, with prices between $1 to $2 per square foot for materials if you do the work yourself.

If you have any money left over, consider replacing your countertops. There are a number of inexpensive choices available including plastic laminate and solid surface.

Here are the approximate costs to remodel the kitchen in your house:

  • Paint walls and cabinets ($300)
  • Hardware for cabinets ($100)
  • Tile floor ($340)
  • Replace countertops ($400-$800)

If you budget carefully and do the work yourself, you can make big improvements to every room in your house without spending a fortune.

Source: www.DannyLipford.com

Want to boost your home’s value?

Thursday, December 10th, 2009

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These simple do-it-yourself projects that can make a big difference, without taking too much out of your wallet.

 

Think spending $50,000 on a total kitchen remodel or $10,000 overhauling the bathroom is the only way to add value to a home? If large, expensive projects are beyond your grasp, you’re in luck: Increasing the value of your home doesn’t have to involve large outlays of cash, especially when you’re willing to put in a little sweat equity. Why spend big money when there are so many low-cost, do-it-yourself (DIY) projects? Whether you’re planning on selling or just want a nicer place to live, read on to find out what you can do to add value to your home for as little as a few dollars. (To read more about home improvements, see Fix It And Flip It: The Value of Remodeling.)

House-Wide Updates

The following are some changes that can be undertaken for surprisingly little money.

Freshen Up the Walls
If your walls have scratches and dirty paint, an outdated color or tacky wallpaper, a few cans of paint can make a dramatic difference. If you’re trying to maximize the value of your home, it’s best to choose a neutral color scheme that unifies the entire house, makes the space look bigger and will appeal to a wide variety of potential buyers.

Install Crown Molding
This task is surprisingly simple but adds a lot of character. You simply buy the molding, which is nothing more than decorative strips of wood from a home improvement store, cut it to the size that fits your room (or have the store cut it for you), and attach it to the top of the wall with a nail gun. It may even come already painted. This involves a bit of woodworking skill as well as the right tools, but is very inexpensive if you can do it yourself.

Update Fixtures
Switch plates, outlet covers, curtain rods, light fixtures and doorknobs are often boring or overlooked, but a few bucks can add major pizzazz. Attractive metal switch plates and outlet covers can cost as little as $5 apiece but look much more expensive. Light fixtures and decorative curtain rods can be a little pricier, but sometimes you can make an inexpensive piece look elegant with the right can of spray paint. Again, make sure to choose items in colors and finishes that will appeal to a wide audience.

Install Ceiling Fans
Everyone likes to save money on electricity bills, making ceiling fans an appealing addition to any home. Using ceiling fans can definitely cut down on air conditioning costs, and in fact, they can also reduce heating costs by circulating warm air away from the ceiling. A basic fan costs about $50, and a nice one can be had for no more than a couple hundred dollars. If you don’t already have overhead lighting in the room or rooms you want to install fans in, the electrical work needed to install them can significantly escalate the cost of this project as well as take it out of the DIY realm.

Improve Window Treatments
The cheap vertical plastic blinds, paper shades, or horizontal aluminum blinds that may have come with your house definitely don’t add any value to your home. Consider replacing them with plantation shutters, wooden blinds or nice drapes. By the way, it doesn’t matter whether the drapes will come with the house if you are in the market as a seller. The important thing is that they make it look nice while it’s on the market and help you get top dollar for your home.

Reveal and Restore Hardwood Floors
Older homes in particular are likely to have hardwood floors lurking beneath carpet. If your floor squeaks, that’s a decent sign that you may have wood floors. If you’re not sure, pull up your carpet in an unnoticeable corner and investigate. If you do have wood floors, there’s a good chance you’ll have to refinish them to restore them to their original splendor, but that will be much less expensive than installing new flooring from scratch.

Bathroom

Redo the Bathroom Floor
Many people can learn how to do this task themselves with a simple class (your local home improvement store may offer one). Because installation makes up a major part of the cost of most home improvements, saving all that money on labor may allow you to pick nicer flooring than you could otherwise afford. Opting for a neutral-colored tile will add the most value.

Update Fixtures
If you have generic, cheap and/or outdated fixtures, replacing them with newer, more customized versions can make your bathroom sparkle. For about $40-$100, you can replace a shabby bathroom vanity or ceiling light fixture with something elegant. A similar cash outlay will get you a new sink faucet. A spa-style chrome shower head adds a touch of luxury for about $80. Towel bars are the easiest and cheapest fix at about $20-30. Sometimes the upgrade can even be more energy efficient, increasing not only the aesthetics of your home but “greening” it up as well. (For more on saving energy, read Ten Ways To Save Energy And Money.)

Kitchen

Paint or Stain Kitchen Cabinets
You could buy all new cabinets and save money by purchasing prefabricated (rather than custom) cabinets and installing them yourself, but that’s more work and money than painting or staining your existing cabinets. White cabinets will brighten the room, don’t usually go out of style and are easy for future owners to repaint if they want something different. You’ll need to remove all the hardware from your cabinets, including removing the doors. You’ll also need to clean the cabinets first so that residue like grease won’t ruin your work. This renovation can be used to spruce up your bathroom cabinets as well.

Upgrade Cabinet Knobs and Drawer Handles
It’s surprising how a seemly innocuous element like a cabinet door knob can make your kitchen look cheap or dated. Updating this hardware can give your kitchen a face lift whether you redo your cabinets or not.

Living Room

Clean Fireplace Brick
If you have a brick fireplace and it’s ever been used, chances are some of the brick is stained with soot and creosote. Because a nice fireplace can be a major selling point in a home, you’ll want to make yours look as nice as possible. Just use a damp rag to wipe away some of the soot, then follow up with a fireplace cleaner designed to remove creosote. It will take some scrubbing with a stiff brush and possibly several applications, but you’ll have that brick looking spiffy when you’re finished.

Don’t Forget the Exterior

It may be easy for you to ignore your home’s exterior when you spend most of your time inside, but it’s the first and sometimes only impression that others get of your house. Here are a few simple ways to make it look its best.

Install a New Front Door
A very basic steel front door costs about $100, but for just another $100-$200, you can get a door with a lot more character that will improve your home’s curb appeal. If you can’t afford a new door, a fresh coat of paint in an inviting color may be all you need.

Replace the Front Door Mat
When you’ve had the same doormat for years, it can be easy to overlook how worn out or dirty it’s become, but it’s one of the first impressions people get of your home. This is one area where $20 can make a big difference.

Gutters
This is more an issue of maintaining your home’s value than increasing it, but it’s extremely important. Without properly functioning gutters, which are designed to carry water away from your home, rain may seep into your home or pool around it, causing problems like mold and mildew and eventually compromising the house’s structural integrity, leading to very expensive repair bills.

Power wash the Exterior of Your Home
For less time and money, a good washing can make your home’s exterior look almost as good as a fresh coat of paint.

Repaint the Exterior
If washing the exterior of your home didn’t brighten it up as much as you’d hoped, consider a new paint job. With the ladders and heights involved, this may not be a DIY task for everyone, but even if you have to hire others to do this job, it’s still pretty inexpensive as far as home improvements go and can make your house look almost new from the outside.

Power wash the Driveway, Walkways and Patio
As long as you’re renting the power washer, you might as well clean your driveway, your patio, and any walkways. You may be surprised by how new they’ll look afterward.

Upgrade Landscaping or Clean Up Existing Landscaping
Flowers and other plants are a great way to brighten your home’s exterior. Use greenery in front of your house and/or along walkways to draw attention to your house. To get the most for your buck, choose perennial plants, or ones that will come back year after year, rather than annuals, which will die in a year or less and not return. Patch any bald spots in the yard with fresh sod and trim existing trees and bushes to complete the yard’s new look.

Put on Your Tool belt
Upgrading your home doesn’t have to be expensive or difficult and it doesn’t have to involve contractors. There are a variety of projects for all price ranges and all levels of skill and enthusiasm that can improve your home’s value, whether to future buyers or, perhaps more importantly, to you. Putting a few of these home-improvement ideas into action will help you get the most value out of one of your biggest assets whether you’re staying in it or selling.

Amy Fontinelle  Investopedia.com

New Year’s Home Energy Resolutions

Thursday, December 10th, 2009

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Time to Put Your Home on an Energy Diet: Eight New Year’s Resolutions for Your Home

Bill Cunningham, an energy efficiency expert with Lennox – a leading provider of customized home heating and cooling systems – says homeowners can significantly curb their energy usage and reduce their energy bills in the coming year by making the following quick and easy home-related New Year’s resolutions:

1. Make a Light Switch. Replace your five most frequently used incandescent light bulbs with compact fluorescent bulbs, and save $65 each year. These bulbs use less energy and can last up to 10 times longer.

2. Get With the Program. Install an ENERGY STAR qualified programmable thermostat, and take the time to program it (the majority of consumers don’t). When used properly, these thermostats can save as much as $150 per year in energy costs.

3. Go with the (Low) Flow. Replace your existing shower head with a new 2.5-gallon-per-minute (low-flow) shower head. The new water efficient shower head coupled with a 10-minute shower will save five gallons of water over a typical bath and up to $145 each year on electricity used to heat the water.

4. Let the Laundry Chill. To save hot water – and the $24 to $40 in fuel that it takes to heat that water each year – wash your clothes in cold water. Be sure to choose a laundry detergent that is formulated for use in cold temperatures.

5. Make a Dent in the Lint. Clean the lint trap in your clothes dryer before every load of laundry, which will help increase the drying efficiency of the machine and save another $34 each year.

6. Dial it Back. Lower the temperature on your hot water heater from 145 degrees to 120 degrees – the only place you’ll notice the difference is on your utility bill. In fact, this slight reduction in temperature can save the average homeowner between $36 and $61 each year.

7. To Repair or Replace: That is the Question. Consider replacing an older furnace that is 60 percent efficient with one that is 95 percent efficient, and save approximately 57 percent on energy bills and up to a whopping $5,513 over a five-year period.

8. Stop the Standby Energy Use. Unplug digital devices when not in use, as “standby” energy consumption can add up. In fact, you can save about $165 per year just by unplugging a plasma TV.

This article is provided by Lennox. For more tips and advice on maintaining or purchasing a home comfort system, visit Lennox.com or ItPaysToLiveSmart.com.

Having kids? Pull out the wallet and get set to invest

Tuesday, December 8th, 2009

 

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Having kids? Here are 10 money tips to guide you.

It can be expensive to have a kid, especially saving for their education. Here are some tips to help.

After entering the work force and getting married, the next stage to start in life for many people is parenthood. Get the wallets out for this one. Parents have to dole out cash to insure yourselves against mortality risk, to start a college fund for the children, and to buy a family home.

These imperatives call for smart investment decisions – choosing where to allocate your funds to maximize returns for a given level of risk.

Here are 10 tips to help out with the decisions. They might not turn a parent into a Warren Buffett but could nonetheless leave their kids saying: “Thanks, Mom and Dad!”

1. To insure or self-insure?

“One of the first things I did when I found out my wife Edna was pregnant with my eldest daughter was to rush out and get some life insurance,” notes York University professor Moshe Milevsky. As he discusses in his book, Wealth Logic: Wisdom for Improving your Personal Finances , his own father had died early without life insurance while several of his children were still dependent on his income.

Mr. Milevsky and his siblings were nevertheless spared destitution because their father had accumulated a sizable estate through frugal living and investing in a diversified portfolio of financial assets. “In the insurance lingo, my father had decided to self-insure,” Mr. Milevsky reports.

Self insuring can be riskier than buying life insurance right off the bat. If the father had died earlier, his estate might not have been sufficient. However, someone who had aggressively saved prior to marriage (see Part 2 of the Investing for Life series: Getting married? Ten money tips ) would have minimized this early-stage risk (with a will in place). An aggressive saving and diversified investing plan early in a marriage might be another option for couples with frugal tendencies and an aversion to insurance premiums.

2. Best place for an education fund

One of the best places for a child’s education fund is inside a registered education savings plan (RESP). The government throws in grants of up to $7,200 through the Canada Education Savings Grant (CESG) plus additional grants for low-income families. Funds compound tax free and are taxed at the child’s lower marginal rate when they are withdrawn for post-secondary education.

It helps to become familiar with how the plans work. For example, some have higher administration fees than others. And not all providers transfer the low-income grants into the plan – so if your family is of modest means, “first ask the provider if they offer the extra grants before you sign up,” warns Mike of the Four Pillars blog.

In short, it is a good idea to know the nooks and crannies of RESPs. Sources include the RESP section on the Four Pillars blog, online discussion forums, CanLearn, and Human Resources and Skills Development Canada. And get an early start on opening an RESP to give time for the compounding of returns to work.

3. What will the kids think?

Some parents believe in a conservative approach when investing for their children’s sojourn in the halls of higher learning. Lower returns are acceptable to them as a trade-off for minimizing the risk of losses – something their kids might not look kindly upon.

“I look at it like I am the trustee of the funds and have a responsibility to be prudent with the investment choices,” explains Jim Yih, a fee-only financial adviser with financial firm Retirement Think Box in Edmonton. He has put half of the RESP funds for his four young kids into a balanced mutual fund and the other half into fixed-income instruments.

In the end, whether a parent goes with a high or low allocation to volatile investments such as equities is a matter for risk tolerances. Those who go with higher allocations will likely wind up ahead of the game given the superior long-run returns of stocks – see Jeremy Siegel’s Stocks for the Long Run – but the price of admission is a greater risk of ending up with sub-par returns.

4. Become a couch potato

A popular choice within the Canadian personal-finance blogosphere for investing RESP funds appears to be the Couch Potato Portfolio. It spreads money over a diversified basket of low-cost index funds. According to MoneySense magazine, the “classic” version has generated average annual returns greater than 10 per cent over the past three decades.

One of the more popular instruments for implementing the Couch Potato portfolio in an RESP is the TD e-Series Funds, a family of index mutual funds only available online – but at the lowest of annual fees for mutual funds. The Pre-Authorized Purchase Plan (PAPP) allows investors to automatically invest small amounts at regular intervals, without commissions.

The Couch Potato Portfolio from the author of the Million Dollar Journey blog is diversified across Canadian equity (30 per cent), U.S. equity (30 per cent), international equity (30 per cent), and Canadian bonds (10 per cent). It’s rebalanced annually. At the 10-year mark, the asset mix will begin a transition to a more conservative stance, which by the 18th year it will consist of guaranteed investment certificates (75 per cent) and money-market funds (25 per cent).

5. Automate asset shifts

Shifts in the asset mix of an educational fund from the aggressive to conservative, as described in the above tip, seek to maximize returns while controlling for the volatility of equities as your children’s university or college enrolment dates approach. Target-date funds automate this shift in asset mix. An example is the RBC Target 2025 Education Fund.

They offer the convenience of one-stop shopping to investors who don’t have the time or inclination to do their own research. In return, there are some trade-offs. One is higher fees. Another is that the fund’s asset mix may not be suitable for a family.

6. Fine tune the asset allocation

Mr. Milevsky urges investors to think of their total wealth as including their human capital (discounted value of salary, wages, and other income earned over one’s working life). “While conceptually this asset is different from your tangible, financial assets, it should be considered and diversified in tandem with your financial capital,” writes Mr. Milevsky in his book, Are You a Stock or a Bond?

Thus, the rule of thumb is to have an allocation to stocks equal to “100 minus your age” can be fine tuned. Couples with secure jobs, like tenured professors, could allot more to equities than what the rule suggests for their age group. Couples with variable commission income, such as stockbrokers, should go with lower equity allocations.

Another consideration is that the age-related rule of thumb is usually applied more to investing for retirement, where the investing horizon is 25 to 40 years. For children’s educational funds, the horizon usually runs from 10 to 15 years, which is less time for the superior returns on stocks to take shape. Lower equity allocations may perhaps be more prudent within this time frame.

7. Put those child benefits to work

Many parents funnel the Canada Child Tax Benefit (CCTB) and Universal Child Care Benefit (UCCB) into RESPs to get the government grants. However, if a family has a good income and savings rate, they could consider maxing out the RESP with their own funds and investing the CCTB/UCCB outside of the RESP.

That’s because income earned from investing the CCTB/UCCB in a separate account for a child is not attributed to the parents but to the child. The returns will compound virtually free of tax.

Charlene Walker of Nepean, Ont. directed monthly family allowance cheques after her daughter’s birth into a separate bank account and then into shares of Bell Canada through its Dividend Reinvestment Plan (DRIPs allow investors to automatically reinvest dividends and buy new shares at no cost). A few years later, Ms. Walker diversified into DRIPs at six companies. By 2008, her daughter’s nest egg was worth nearly $85,000.

8. Other ways to launch the kids

There are a number of ways to invest in children’s futures beside RESPs, as certified financial planner Alexandra Macqueen discusses in the February, 2009, edition of the Canadian MoneySaver magazine. The benefits of these alternatives include no limit on contributions and flexibility in the use of funds (which can be used to supplement RESPs or finance other ambitions such as starting a business).

One of the more popular seems to be informal in-trust accounts, which are easier to set up than formal trusts. Interest income is attributed to the contributing parent but capital gains are taxed in the child’s hands. Consequently, growth investments would appear to be more appropriate for this channel.

Paying down mortgage and other debt is desirable in itself but it can also be a strategy for helping one’s children get through college. That’s because extinguishing debt frees up cash flow that can be directed as required during the post-secondary years. Other methods include juvenile life insurance (savings component grows tax free and can be withdrawn), tax-free savings accounts (TFSAs) and the indoctrination of your offspring on the importance of saving allowances and working at part-time or summer jobs.

9. Let’s give them a really good start

Some families have more options for assisting their children. “Our kids have RESPs but we haven’t been diligent about maxing them out. We have also purchased income property for our kids’ futures,” says Dana from Ajax, Ont.

She expects the multi-residential properties will be paid off by the time each child is finishing high school. “They can use the income from the property to cover their expenses, or sell the property and use the proceeds to fund their endeavours, or live in one unit and use the cash flow from the others.”

“Not everybody pursues traditional post-secondary education and we want our kids to have an option should they decide to go into business for themselves, work or learn abroad, or pursue graduate programs that their RESPs and other savings wouldn’t have covered.”

10. Buy the house right

Ask people what their best or worse financial moves were and some aspect of buying a house is a frequent response.

“My best move would be never spending too much on a home,” says Tim Stobbs, author of the Canadian Dream: Free at 45 blog.

“We saved in our RRSPs for years and then bought a modest house [which was later sold]. On the next house, we made sure to keep the mortgage to around $150,000. We will likely be mortgage-free by the end of current term, which would mean we only had a mortgage for less than 10 years.”

Margot Bai, author of a personal-finance book, Spend Smarter, Save Bigger , says both her best and worse financial moves were directly related to buying a house.

“When I bought my first home, I locked in my mortgage for five years, a mistake that ultimately cost me about $10,000. By paying a penalty to break my mortgage contract, I was able to recover the penalty and gain another $5,000 over the next two years. Now I stick with open variable mortgages.”

This article is the fourth in a series on personal finance and investing at different stages of your life. As some issues may overlap the different stages of life, they could be covered in a prior or subsequent article.

By Larry MacDonald

Top-10 year-end tax tips

Friday, December 4th, 2009

 

 

 

With barely a month to go before the end of the year, it is time to get your house in order. Herewith, your top 10 end-of-year tax tips:

1. Tax-loss selling

This is the practice of selling investments that are in a loss position at year-end in order to offset capital gains elsewhere in your portfolio. To guarantee that a trade of public securities is settled in 2009, the trade date must be Dec. 24, 2009, or earlier. This will make sure that the settlement takes place in 2009 and that any losses realized are available to the taxpayer this year. Any trade made after Dec. 24, 2009 will not settle until 2010, so those losses would not be available until next year.

2. Fix your house

The deadline is fast approaching to qualify for the home renovation tax credit (HRTC). The HRTC is a 15% tax credit for eligible renovation expenditures made to your home or vacation property. The credit applies to any amounts spent over $1,000, up to a maximum of $10,000, producing a maximum credit of $1,350.

Although the deadline for the credit is Jan. 31, 2010, the Canada Revenue Agency (CRA) has stated that as long as any materials you purchase to be used in a renovation are acquired by this deadline, they will qualify for the credit, even if they are installed after January 2010. The same, however, does not hold true for labour expenses, as only work completed before February 2010 will qualify for the credit, even if the amount is prepaid.

3. Turning 71 in 2009?

If so, you must convert your RRSP into either a Registered Retirement Income Fund (RRIF) or a registered annuity by Dec. 31. In addition, you only have until Dec. 31 to make your last RRSP contribution — if you plan to do so. You don’t have the advantage of delaying until March 1, 2010. If, however, you have a spouse or partner who is under 72, you can continue contributing to a spousal RRSP in his or her name, provided you still have contribution room.

4. Contribute to your children’s future

If you have a child or grandchild who has never participated as a beneficiary in a Registered Education Savings Plan and who turned 15 sometime in 2009, Dec. 31 is the last chance to contribute at least $2,000 to his or her RESP to be allowed to collect the 20% Canada Education Savings Grant for 2009 and create eligibility for the grant in 2010 and 2011. If you miss the deadline, the child or grandchild will not be eligible for any grants in the future.

5. Give big

Dec. 31 is also the last day to make a donation and get a tax receipt for 2009. Keep in mind that gifting publicly-traded securities with accrued capital gains to a registered charity or a private foundation not only entitles you to a tax receipt for the fair market value of the security being donated, but eliminates any capital gains tax as well.

6. Contribute to a registered disability savings plan (RDSP)

The RDSP is a tax-deferred registered savings plan open to Canadian residents eligible for the Disability Tax Credit, as well as their parents and other eligible contributors. Up to $200,000 can be invested within the plan with no annual contribution limits. While contributions are not tax deductible, all earnings and growth accrue on a tax-deferred basis. Contribute before the Dec. 31 deadline to qualify for the 2009 matching Canada Disability Savings Grant and potentially, the Canada Disability Savings Bond.

7. Splurge on office furniture

If you are self-employed or a small-business owner, consider accelerating the purchase of new business equipment or office furniture that you may have been planning to do in 2010. You are permitted to deduct under the “half-year rule,” one-half of a full year’s tax depreciation in 2009, even if you bought it on Dec. 31. For 2010, you can then proceed to claim a full year’s depreciation. For computer equipment purchased after Jan. 27, 2009 and before February 2011, you can write off 100% of the cost in the year of acquisition — with no half-year rule.

8. Consider a low, low loan

The government’s prescribed interest rate is set at the all-time low of 1% until at least Dec. 31, 2009, providing couples with a significant income-splitting opportunity. Under this strategy, the higher-income spouse loans funds to the lower-income spouse at 1%, with interest paid annually by Jan. 30 of the following year.

If the loan is made before Dec. 31 while the prescribed rate is 1%, any investment returns above the 1% rate can be taxed in the hands of the lower-income spouse. Note that even though the prescribed rate varies quarterly, you need only use the rate in effect at the time the loan was originally extended.

9. Pay investment expenses

To deduct any investment-related expenses on your 2009 tax return, the amounts must be actually paid by year-end. Such expenses include interest you paid on money borrowed for investing, investment counselling fees for non-RRSP accounts, professional accounting services for tracking rental or business income and safety deposit box rental fees.

10. Get a head start for 2010

If you routinely get a large tax refund each spring due to RRSP contributions or child-care deductions, the CRA can authorize your employer to reduce the amount of income tax withheld on your employment income. Send a completed CRA Form T1213 “Request to Reduce Tax Deductions at Source,” with all supporting documents to the Client Services Division of your local tax services office.

 Financial Post

Getting married? Ten money tips

Tuesday, December 1st, 2009

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Money tips for engaged and married couples

After starting a career, the next life-cycle stage to begin for many people is marriage. Some say it is the most important in terms of financial success. No, they don’t mean marrying someone wealthy (although this wouldn’t hurt!). What they are referring to is financial compatibility between two individuals.

“Probably my best financial move has been choosing a spouse with similar money habits and views on personal finances,” says Scott McKibbon, a do-it-yourself investor in Hamilton, Ontario. “This seems to be particularly important in this day and age as broken marriages have destroyed more personal balance sheets than poor markets.”

Here are 10 tips to help sort through the financial risks and rewards of married life.

1. It takes two to tango. As a married person, one needs to realize they are not saving and investing just for themselves. Their spouse will likely have a different tolerance for risk and that should be taken into account

York University professor Moshe Milevsky, a leading expert in financial mathematics, came to the conclusion his personal exposure to stocks should be leveraged by 300 per cent to offset the predominately bond-like nature of his personal wealth (tenured job and pension plan).

“Are you out of your mind?” was his wife’s reaction (as quoted in the November issue of the Journal of Financial Planning). And so Mr. Milevsky went with a much lower level of leverage.

2. Set compatible goals. Also realize that one’s spouse may have different financial objectives, and compromise is in order on this count as well. On Tim Stobb’s blog, Canadian Dream: Free at 45, a recent post recounts a frugal husband’s attempt to interest his wife in buying a Tumbleweed Tiny House, which range from 65 to 800 square feet in living space.

The husband thought they could live in such a tiny house since they had no plans for children. His wife responded with: “I will not live in a garden shed, no matter how cool you think it is.” The solution settled upon in the end was a thousand-square-foot townhouse.

3. Talk about money, even if it hurts. Some spouses don’t like to compromise and may hide what they are doing with the family finances. They don’t communicate and that is when money issues can really spiral toward the tragedy of separation and divorce.

In Jonathan Chevreau’s financial novel, Findependence Day , the central character, Jamie, decides to borrow $60,000 – without telling his wife – to invest in stocks. But after taking the plunge, the market crashes hard. When his wife finds out about the losses, she tells her husband: “I can’t believe you’d be so stupid. That is the last straw.” A while later, Jamie receives an envelope from his wife’s lawyers requesting a split.

4. Two heads are better than one. But marriage, of course, is not all sacrifice and strife. A team working together can accomplish more than the individual members separately. “The other huge success I’ve had is finding a partner who enjoys taking part in our financial decisions,” declares Brad Ferris, the author of the blog: Triaging My Way to Financial Success.

He illustrates with an example. “As I mentioned in a post a while ago about investing in the stock of Reitmans Canada, my partner’s shopping experience and insights into their products … helped me see a different side of the fundamentals than what any analyst could pass on.”

5. No ‘I do’s’ without a financial chat first. It is no revelation that money issues are a leading cause of martial discord and dissolution. So head them off before getting married (if one is still at the stage of clubbing around). Don’t be blinded by those beefy biceps and a twinkle in the eye. Look for extremes in financial behaviour before saying “I do.” For a guide, check out the “lighthearted” Valentine quiz from the Australian Securities & Investments Commission.

Here’s a sampling on what to look for: Is your prospective partner up most the night trading oil futures on margin or do they keep “banknotes in the freezer, some gold bullion in the underwear drawer, and regard bank deposits as high-risk?” Do moths fly out of their wallet on the rare occasion they are forced to open it or “have they already spent more than the gross domestic product of a small nation?”

6. Get educated. For Emil Saumier, divorce was the worse thing that happened to him financially. He never paid much attention to the intricacies of family law in his province or realized how much marriage breakdown could devastate one’s financial situation. “I really think I would have been better prepared if I had been better educated in finance,” says Mr. Saumier, the owner of a martial-arts school in Ottawa.

Christine Van Cauwenberghe, director of tax and estate planning with Investors Group in Winnipeg, would likely agree. She observes that family law can indeed hold some surprises. For example, “In a few provinces the marital home is shareable even if acquired prior to the time of marriage.” Her book, Wealth Planning Strategies for Canadians: 2010 , points out other surprises that lurk in family legislation.

7. Know thy spouse-to-be. “It is surprising how many couples have never discussed finances before their wedding,” notes Brenda MacDonald, an independent financial counsellor living in Victoria. In the June, 2009, issue of Canadian MoneySaver, she offers a comprehensive checklist of topics that engaged couples should discuss before walking down the aisle. They include: financial goals (and how to reach them), where to invest savings, and debts brought into the marriage.

She also recommends comparing credit scores. If both persons have similar scores, above 750, shout “Hurray for us!” If one or both score lower than 650, the caution flag is waving. Not only could it signal an irresponsible personality but it may diminish the couple’s ability to borrow for a house, car and other items.

8. Use your spousal status as a benefit. Marriage presents many opportunities to protect assets and enhance after-tax income. An entrepreneur can protect the family house from creditors by putting it in the other spouse’s name. And they can split income by employing a spouse. Other income-splitting moves include contributions to a spousal registered retirement savings plan (RRSP).

The higher income spouse should pay household expenses while the lower income spouse uses their income for investing. If he or she doesn’t have enough funds, a loan from the higher income spouse (at “prescribed” loan rates) can be invested without attribution back to them. As well, contributions can be made to the other spouse’s tax-free savings plan (TFSA) without attribution.

9. A prenup shouldn’t be such a dirty word. Second and blended marriages raise additional considerations. Notably, one or both parties in such unions may be bringing substantial assets to the marriage. A properly executed prenuptial agreement can provide protection (family law may have grey areas and can be changed). And in blended families (both spouses have kids from previous marriages), prenups and other arrangements may be necessary for ensuring an estate is left behind for one’s children from the previous relationship.

10. Those who save together, stay together. A study, Fatal (Fiscal) Attraction: Spendthrifts and Tightwads in Marriage, conducted by researchers at Wharton Business School and Northwestern University, found that spendthrifts and tightwads tended to marry each other. Go figure. Anyway, that was not a good thing, the study said, because the greater the difference on the spending continuum, the more likely the marriage would encounter turbulence.

This martial tendency is all the more reason for engaged and married couples to zero in on the financial aspect of their relationship. One step often recommended for resolving disputes is to have separate and joint chequing accounts. But, above all, communication is the crucial factor.

“During marriage, I think one of the most important things that spouses need to do in dealing with financial issues is to communicate,” advises Ms. Van Cauwenberghe. “If the couple is experiencing financial difficulty, there are usually ways of resolving those issues, but many couples simply choose to ignore them and allow [problems like] debt to pile up. In many cases the solution is to speak to a neutral third party. A financial adviser is often able to state the obvious things that spouses don’t want to admit to each other.”

Source: Larry MacDonald from the Globe and Mail

Five Tips for a Quick Home Sale

Sunday, November 29th, 2009

Need to sell your home quickly and at a good price? Here’s how.

The real estate market is beginning to recover across the country. According to the Canadian Real Estate Association, prices have rebounded from an average selling price of $291,788 in September 2008 to $331,682 this September.

Whether it is historically low interest rates or optimism about Canada’s economic recovery, people are beginning to think about moving house.

So how do you ensure your house is not the one sitting on the market two months after you have decided to sell? Here are five tips to ensure you make a quick sale.

1. Price according to conditions
“The top five percentile of homes price-wise tend to take longer to sell because there is a smaller market, and it tends to be a more volatile market in a boom and bust cycle,” says Cameron Muir, an economist with the British Columbia Real Estate Association.

So, right from the outset, you want to make sure you do not price your home at the top of the market.

“Having your house priced according to current market conditions and having maximum exposure to the greatest number of buyers is always a good idea,” says Muir. “What you’re doing as a home seller is competing with a lot of other sellers in the marketplace.”

Julie Kinnear, a Toronto Realtor with 16 years of experience, agrees. “Price is critical in a soft market, but buying is (about) first impressions, and there are two: the look of the place and the price.”

Then, there is also what Kinnear calls social proof, meaning that if a house stays on the market for a long time, buyers automatically think there is something wrong with it.

Everyone connected to real estate seems to agree — you need to price it right the first time to avoid this stigma, especially if you are hoping for a quick sale.

2. Stage your home
To ensure a quick sale Getting your house ready to sell can help you make the emotional transition from one home to another. Some people like to do this before they call in a professional. Either way, this transition is important.

“It’s not home anymore, it’s product on the market,” says Tricia Scott, owner of Vancouver, British Columbia’s Ready Set Show Staging Inc. “You need to separate yourself from the personal side of the home. Staging helps — a staged home versus an unfurnished home sells much faster.”

With the popularity of home decorating and renovation programs on TV, people are more accustomed to looking at houses with an eye for design. Scott says there is a good reason why property developers use show suites to sell new homes — people want to come into a house and see themselves living there.

Kinnear agrees. “Have the house in good condition. When the market is soft, people are pickier. If you can renovate on a budget, then it’s worth it because a lot of people have no cash at all — they are looking for a turnkey operation.”

3. Work with a pro
To ensure a quick sale, you have to be sure your buyers can afford to pay what they offer. Working with a Realtor can help you do this, as Realtors take precautions to be sure their buyers are not overreaching their grasp. They have also been trained and licensed in working with buyers and negotiating contracts that do not, as a rule, tend to fall through.

Realtors also know what is selling. They have access to a database of statistics that the rest of us cannot use and can help you set a price that will make your house attractive to buyers without undercutting your bottom line.

An agent will also bear all the costs of advertising your home. This can seem minor at first, but newspaper ads and signage do add up.

When looking for a Realtor, pay attention to the sales in your neighborhood and attend open houses. Observe Realtors in action and ask friends for their referrals. Every Realtor is different. Your agent works for you, and it is up to you to be a good and thorough employer.

4. Go where the buyers are
If you want a quick sale at the best price, it only makes sense to compete on the biggest market — and there is no question that the biggest market in Canada is the Multiple Listing Service, or MLS. A full 90 percent of all home sales go through the MLS, and while the Canadian Competition Bureau recently suggested the MLS may be required to open its doors to non-Realtors, that has not happened yet.

Going it alone means relying on yourself, and while that may sound appealing, the numbers argue against it.

5. Create word of mouth
Finally, if you have a home that one of your friends or acquaintances has often admired, put the word out to your friends before you talk to anyone else, and ask them to spread the word. Doing so could help you avoid the stress of staging and hosting open houses and get you the quick sale you are after.

Source: MSN Money Article By: Stephanie Farrington is a writer based in Victoria, British Columbia.

Buried Under A Mountain of Debt?

Friday, November 27th, 2009

 

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Easy-to-obtain credit cards and student loans means many college and university grads enter the working world with more than diplomas and high hopes – they are also saddled with hefty debt loads. After graduation, they face the prospect of piling on more debt in the forms of mortgages and lines of credit. Before they know it, Gen Xers and Ys can find themselves buried more deeply in loans than their parents could ever have imagined.

One thing is certain: digging out from under the debt heap will prove more difficult than building the money mountain in the first place.

So just how do young families struggling with heavy debt loads deal with those financial institutions, once so eager to lend, now asking for payments on credit cards, lines of credit, mortgages and student loans? Unless an inheritance providentially appears, the formula for success consists of discipline, a plan and time.

Alex, an IT industry worker, and his school-teacher wife Sam (they did not want their last names used) are illustrative of how debts can quickly erase any post-graduate euphoria. The two mature university students, both in their early 30s, had accumulated nearly $110,000 in red ink – a combination of student loans, credit card debt and personal loans.

Personal circumstances forced Alex to become a part-time student, which meant his student loans immediately began accruing interest. He lost his new job and ran out of new sources of credit. The couple enrolled in Credit Canada’s credit counseling program and have graduate married, with a seven-year-old son and no debt. The couple is now redirecting the money that has for so long been paying off their debt load towards a down payment on their first home.

“We’re free and clear right now,” said Alex. Under the program, the two drew up a budget with a counselor. Going out for dinners and entertainment disappeared immediately, a lifestyle change that got easier when they had a child. “Really the biggest change is just being conscious about the money that is coming in, the money that is going out and not having that constant feeling of ‘Where did all my money go?’ which was definitely the case for both of us beforehand.”

The combination of young families and out-of-control debt is all too common, said Laurie Campbell, executive director of Credit Canada, which provides debt management programs in the greater Toronto area. Her group regularly sees young families with a child or two living in their parent’s basement. “They can’t handle living on their own because of their current debt situation which is usually high student loans and high credit debt.”

While financial experts often say people should look to pay off their most expensive debt first, such as those 28 per cent store credit cards, Ms. Campbell suggested those drowning in debt take a long, hard look at their lifestyles. Are two cars with their attendant loan payments, insurance, maintenance and parking costs really necessary? Many young families are also camped in more home than they can afford, barely scraping by with a 35 or 40-year mortgage. “It may mean they need to sell their home, significantly scale back in order to deal with this debt because it is not going to go away and their current lifestyle can not sustain it.”

Ms. Campbell singles out daycare costs (which can run as much as $700 to $800 a month) as a major household expense that might be offset with the assistance of family and friends.

Although much of her group’s debt relief advice seems pretty obvious – brown bagging lunch or ditching the family wheels for transit – it’s not always welcome. “There is a lot of reluctance, unless they have thought of these ideas on their own.”

While cutting costs on travel and entertainment may be the quickest way to free up cash, Ms. Campbell says most people overlook ways to earn more revenue such as taking a part-time job (admittedly tough in this economy) or renting out part of their property.

Margaret Johnson, president of Vancouver-based Solutions Credit Counselling Service Inc., has a straightforward approach to dealing with those drowning in too much debt. First of all, she advises clients to cut up the four, five or six credit cards populating their wallets and purses. It is not a popular recommendation: “Most people have an unbelievable fear of living in a cash world. They can’t imagine living without a credit card,” she said. “They say, ‘How will I book a trip?” Her answer: “You don’t have any money so you can’t go on a trip, you don’t need a card for that.”

Ms. Johnson’s favorite debt story concerns a couple who wanted to put a $2,500 fireplace in their house and the bank would not give them more credit or a personal loan. The couple, who had already maxed out their credit cards, decided to buy a bigger house. This house, which had a fireplace, cost $50,000 more and came with a larger mortgage. “Today they are divorced and the house is long gone.”

Although most couples likely will not face Alex and Sam’s seven-year journey to debt freedom, Ms. Campbell says young families can’t expect a quick financial turnaround. “A lot of people are shocked by this but it takes a lot of time to get into debt, it takes a lot of time to get out of debt,” she said. “It takes up to two to four years depending on their situation but then the beauty of this is that they have learned to manage their money and restrain their spending.”

Article By: Paul Brent of The Globe and Mail

The data included on this website is deemed to be reliable, but is not guaranteed to be accurate by the REALTORS® Association of Edmonton. The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license.