Head out for adventure

Looking for a different kind of family vacation this year? Toronto travel writers Dave Bouskill and Deb Corbeil propose some “action-packed” vacations that offer “more than a suntan” in their list of 2012’s top adrenaline-pumping holidays.

Enjoy a hearty brew

Before you head out for your morning latte, consider dietitian Leslie Beck’s answers to the age-old question: Which is healthier: tea or coffee?

Get organized online

Have you checked out Pinterest yet? The hot new social media site bills itself as “an online pinboard.” And that’s basically how it works. From meal planning to designing your new living room, ABC News provides Five ways to use the new social pinning site.

Plan for retirement

If you’re getting close to retirement, there are some important steps you can take to help ensure your transition from working life will be a smooth one. A few of the most important are included in the Investor Education Fund’s Seven ways to get financially prepared for retirement.

Look for love

Valentine’s Day may be over but for many the search for true love continues. A recent article in The Economist examines whether the algorithms of online dating sites can provide an edge when it comes to finding your perfect match in The modern matchmakers.

Tweet of the week

At what age do you expect to retire? New report indicates only 30% of Canadians expect to be fully retired at age 66. brighterlife.ca/2012/02/22/at-…

—
Brenda Spiering (@BrendaSpiering) February 23, 2012

If you’re an inverse paranoid, I know you’re having a great day. If you’re not, here’s your chance to experience one of life’s great game-changers.

By game-changer I simply mean a point in life when we experience an epiphany, a wake-up call or an aha-moment that changes everything. Becoming an inverse paranoid was one of those moments for me.

I have Jack Canfield to thank. Jack is the co-creator of the best-selling Chicken Soup for the Soul books and franchise. He also wrote one of my all-time favourite books: The Success Principles.

Principle #6 in that book, “How to become an inverse paranoid,” was one of my game-changers.

Paranoids are people who often feel as if the world is conspiring against them. They’re the graduates of the School of “Oh woe is me.” They believe that if they didn’t have bad luck they’d have no luck at all.

Inverse paranoids are the complete opposite. They are convinced the world is actually conspiring to help them. They believe that what many see as bad is good and the trials and tribulations we experience in life are teaching moments designed to make us better people.

Inverse paranoids don’t live in some kind of fantasy land. On the contrary, they’ve trained their brains to see the glass as half-full and are happy to refill it with every opportunity.

If you’d like to be converted and you have a thirst to see the glass in a different light, here are five keys to becoming an inverse paranoid, courtesy of Jack Canfield:

1. Look for the opportunity in everything. Ask yourself, “What’s the potential opportunity here?” Embrace the mantra, “When life hands you a lemon, make lemonade.”

2. Enter every conversation with the idea that something good will come from it. Your attitude dictates your altitude, so to reach greater heights, start by believing in positive results.

3. Take the approach that “good” is not an accident. This should come easily to those who believe that everything happens for a reason. But for non-believers, take a leap of faith and look for the good in every event.

4. See obstacles and negatives as a chance to grow and change. Whether you call it a       blessing in disguise or an attitude of gratitude, overcoming adversity is one of the most powerful human traits you can possess.

5. Start each day with the phrase, “I believe the world is plotting to do me good today. I can’t wait to see what it is.” Then open your mind and eyes to the possibilities.

A perfect example of how an inverse paranoid sees an event in a different light is a job loss. At one end of the spectrum, you will have people who see it as a catastrophic event loaded with self-doubt, self-pity and a sense of helplessness. But inverse paranoids can view the exact same situation as an incredible opportunity to better themselves and their lives. They frame these predicaments almost as a relief, a chance to re-energize or, in some cases, even as good fortune. They have an unmitigated belief they will land a better job with a higher salary and become more fulfilled than they were at their previous place of employment. More often than not, they’re right.

So how do you see the glass? Make today the day you become an inverse paranoid and drink up – it’s all good.

Which investment looks better to you? Obviously I haven’t given you enough information to do a proper analysis, but the two scenarios do illustrate the difference between what’s described as a growth stock (company A) and a value stock (company B).

A growth stock is a company that is growing quickly and/or consistently. It’s been doing well. It is expected to continue to do well. And its share price is expected to rise as a result of that success. That last point is important, because not all successful companies see their share price rise steadily.

Remember that the price of a company’s stock is not just a result of what the firm has done to date; it reflects what investors believe the company will earn in the future. So the challenge for growth investors is to estimate future rates of growth, understanding that past performance is not indicative. In fact, an investment is a bet that the company will not just continue to grow, but grow more than investors expect it to.

A value stock is one that is thought to be underpriced relative to its actual potential value. In our scenario, company B has been oversold as a result of the failed expansion two years ago. It has a bad reputation among investors relative to other companies in its industry right now, and so they’re being overly pessimistic about the company’s ability to produce earnings in the future.

Value investors seek companies trading at a 33% or better discount relative to what they believe the stock is worth. In other words, they’re cheap. The trick of course is not only to find these investments, but to identify those cheap stocks that are going to rise in price as other investors come to realize there is greater value there.

All of this means research. When done properly, that means poring over the company’s financial statements, reviewing its management team, looking at its competitive position and that of other companies in its industry. It means looking at the state of the industry itself and of the region or regions in which the company does business.

Benjamin Graham wrote the book on security analysis. Literally. At least he co-wrote it, with David Dodd. Security Analysis, first published in 1934 – along with The Intelligent Investor, originally published in 1949 – helped earn Graham the nickname Dean of Wall Street. Warren Buffett, whom Graham famously mentored, called The Intelligent Investor “the best book about investing ever written.”

The books contributed significantly to Graham’s reputation as the father of value investing, an approach he developed with Dodd in the years leading up to the release of Security Analysis. He contributed a great deal more though, as Benjamin Graham and the Power of Growth Stocks argues. Published last fall, author Frederick Martin makes an argument that he himself recognizes is “almost heretical.” While the man never fully endorsed growth investing – at least not at the expense of his value philosophy – Graham did come to see merit on the growth side. In making his argument, Martin challenges the reader to rethink the traditional growth versus value debate.

It’s a technical, yet practical book. Perhaps its greatest contribution is that it republishes a lost chapter from the 1962 edition of Security Analysis that Graham wrote called Newer Methods for Valuing Growth Stocks. The book as a whole has been well received though, in part because the writing is understandable and engaging.

It’s also a useful reminder, in today’s volatile capital markets, of the importance of good old fashioned research.

Among Canadians who expect to work past the traditional retirement age of 65, 61% say they plan to work because they need to and only 39% say it’s because they want to.

Of those planning to phase in their retirement:

• 21% plan to start the process between age 50 and 59.
• 43% plan to start the process between age 60 and 65.
• 8% plan to start the process between age 66 and 70.

“Interest in phased retirement has been growing over the past few years,” says Ian Markham, Canadian Retirement Innovation Leader with the professional services firm Towers Watson. “Baby boomers are looking at it as a way to prolong their careers, pay off some debts and make a smooth transition into retirement. Having additional income during this transition creates an additional financial safety net for Canadians – which we’re seeing as increasingly important in today’s economy.”

Consumer debt is having an impact on retirement planning:

• 47% are worried about debt in retirement.
• 44% say paying down debt is their number one financial priority.
• 20% say their number one financial priority is saving for retirement.

The good news is Canadians are also living longer. According to Statistics Canada, the average life expectancy for Canadians at age 65 is 20 years, with women living even longer than men. Stats Can also predicts that 17,000 Canadians could reach age 100 by the early 2030s.

“Canadians are living better and working longer,” said Moses Znaimer, President of CARP, Canada’s 350,000-member association for A New Vision Of Aging. “It’s no secret that my mantra has long been, ‘The best way to keep going is to keep going.’ For Zoomers, working past the traditional age of retirement can be both personally beneficial and financially necessary.”

At what age do you expect to retire? Can you relate to any of these results? We invite you to share your thoughts by posting a comment below.

For more information on the retirement expectations of working Canadians, read the full 2012 Sun Life Canadian Unretirement^TM Index.

And for some retirement planning tips and tools, check out:

Registered Retirement Savings Plan (RRSP) toolkit
Could gradual retirement work for you?

“Estate planning means planning for your death in an efficient way that costs as little as possible and makes sure the right people get your money,” explains John Coupar, a partner with Horne Coupar lawyers in Victoria, BC.

Coupar, who specializes in wills, probate and estate administration says married or common-law spouses have options when it comes to estate planning, with the most common being a mirror will, which he says 99% of couples choose.

Mirror will

“It is quite common for spouses to prepare wills that mirror the terms of the other,” says Chelsea Wilson, an associate focusing on estate planning with Ramsay Lampman Rhodes in Nanaimo, BC. One common distribution scheme, she says, is for each spouse’s will to provide that the estate goes to the other spouse, but if the spouse predeceases him or her, then the estate is to be shared equally by their children.

Where things may get more complicated is in the case of a second marriage or blended family.

“You will sometimes have clients who sit before us, husband and wife, who will raise the issue and say, ‘yikes, what happens if I die and my spouse remarries?’” says Coupar. “In fact, that happens every day.”

Mutual will

The possibility of a mutual will – two documents signed by two individuals who agree not to amend or revoke the wills in the future – could arise in the case of a second marriage, if one spouse has children from a first marriage and wants them to receive his or her estate.

But Coupar says he tends to steer clear of the “minefield” of mutual wills, as they can create acrimony, litigation and expense.

Joint will

Similarly, while some couples think that it might be more efficient and cheaper to create a joint will (one document signed by two people, which acts as a will for both) Coupar explains that joint wills are off the table in most Canadian provinces because of the added cost, lack of precedent and potential problems.

“There are virtually no advantages to joint wills and a huge bunch of disadvantages, so we don’t deal with joint wills,” says Coupar.

Spousal trust

For people concerned about leaving their assets to their chosen beneficiaries, a better alternative to a mutual will is a spousal trust, says Wilson. The spouse receives an interest in the will-maker’s assets during his or her lifetime but the remaining interest in the trust assets goes to the will-maker’s children after the spouse’s death.

“No clients do joint wills. Very few do mutual wills, most do mirror wills and within the context of ‘how do I protect this money for my kids,’ I would say the trust is probably the most common vehicle,” says Coupar.

While there are no major disadvantages to a spousal trust, some considerations include:

1. Cost: With a spousal trust, a trustee has to be appointed and a tax return has to be filed every year. While spousal trusts are available everywhere in Canada, their statutory and tax treatment varies from one province to another, says Coupar.

2. Jointly-registered assets: Coupar notes that registering some or all assets in joint names can create a problem if you wish to create a spousal trust. He says, “If you have a house and a bunch of bank accounts owned jointly with your spouse and you die, those assets may leap over the will and belong immediately to the joint survivor. People have to be aware that by transferring assets into joint names – this is more relevant for second marriages – they lose the ability to create trusts or do an awful lot of planning in their will.”

Other alternatives to a mutual will include transferring a percentage of your estate immediately to your chosen beneficiaries or having a lawyer draft a marriage agreement if you decide to remarry.

An important step when preparing your estate plan, says Wilson, is to work together with a lawyer, who will develop a good appreciation of your assets and liabilities, family tree, estate planning goals and other personal circumstances to ensure that you select the appropriate estate plan.

“Wills are technical but easy to put in place and I would encourage everyone to get some advice so they have the options when they make the final decision,” says Coupar.

Here are five key financial products that should be part of your plan:

1. Registered Retirement Savings Plan (RRSP)

As soon as you begin your working life, you should have a registered retirement savings plan (RRSP). It’s one of the most tax effective ways to save for retirement. You’re allowed to contribute up to 18% of your earned income from the previous year to a maximum of $22,450 for 2011. (If you’re a member of a group pension plan, your contribution room is reduced by your “pension adjustment,” an amount you’ll find listed on your T4.)

Contributions are tax deductible, meaning you can net a tidy tax refund while building your savings. Plus, you can turbo charge your RRSP savings by putting that tax refund back into your RRSP as soon as you receive your cheque.

2. Tax-Free Savings Account (TFSA)

TFSAs are the relatively new kid on the investment block in Canada. Introduced by the federal government in 2008, TFSAs let you save up to $5000 a year and, while contributions aren’t tax deductible, there’s no tax payable on investment growth and withdrawals are tax-free.

A TFSA is an ideal savings tool for both long-term and short-term goals such as a vacation or home renovation. Also, for younger Canadians who haven’t yet reached their earning years, a TFSA is a great way to start saving for the future.

3. Life insurance

While TFSAs and RRSPs help build wealth, you also need to think about protecting your financial future. That’s where life insurance comes in. If you’re married, have kids or own a business, you should have a life insurance policy in place in case anything happens to you. How much you need depends on your personal situation but it should be enough to cover any debts you may have (including your mortgage) and help cover your family financially for as long as possible.

4. Critical illness and disability insurance

It’s important to not only have life insurance but to ensure you’d be financially protected should you ever become unable to work due to illness or injury. Would your workplace benefits provide you with adequate coverage? If not, what would happen to you and your family?

Critical illness insurance helps pay the costs associated with a life-altering illness such as cancer or a stroke. You receive a lump sum payment if you become critically ill and you decide how you wish to spend the money.

Disability insurance protects you from a potential loss of income due to injury or illness. You receive a recurring monthly payment to cover ongoing financial costs. Even if you have workplace group disability benefits, it’s often wise to have your own personal policy to provide you with additional coverage.

5. Registered Education Savings Plan (RESP) 

If you have kids, an RESP is a must. It’s a special savings account that lets you save for your kids’ education after high school. Income earned inside the plan accumulates tax-free until it’s withdrawn and then it’s taxed in the hands of the child (meaning usually no tax is payable).

Not opening an RESP to save for your child’s education means you’re also turning down free money. That’s right. The Government of Canada will match 20% of your annual contributions up to a maximum of $500 per year to a lifetime maximum of $7,200 per child. That’s a big boost in savings!

Learn more by watching the following videos:

Registered Retirement Savings Plans (RRSPs) simply put
Term insurance, simply put
Registered Education Savings Plans (RESPs), simply put
Critical illness insurance, simply put

To learn how critical illness insurance can help cover the costs associated with a life-altering illness, watch:

To learn more about the potential impact of a critical illness, check out:

Critical illness: What are your chances?
Are you financially prepared for bad health?

On the off-chance it hasn’t crossed your radar yet, Pinterest is a kind of social media bulletin board. It’s used much more by women than men currently. Users post – or pin, as the site’s enthusiasts like to say – content from across the web on searchable pinboards. That’s an oversimplification of course, but that does seem to me to be the main gist of it. There is more detail on the site’s What is Pinterest? page.

Here’s the thing. After registering with the site yesterday afternoon, I received this message: “Hi!” I do so love emails that manage to work an exclamation point into the first three characters. It continued: “Thanks for joining the Pinterest waiting list…” The note went on to ensure me that an invitation will follow shortly and that in the meantime I can follow them on Twitter. Apparently Ben and the Pinterest team are excited to see me pinning soon. Exclamation point.

I really couldn’t believe my eyes. A waiting list? For a social media site with 10 million users? I emailed them for an explanation; that too is forthcoming. What I have learned is that you must either be invited by an existing user or you must ask Ben and the Pinterest team to invite you. There are a couple of theories out there as to why the site works this way. Either they’re growing faster than their server capacity will allow or they’re doing that annoying velvet rope thing commonly found outside busy nightclubs. Depends who you ask.

So no, not a good start.

Here’s the real question I’m interested in: Is Pinterest a good source of personal finance information? Because its content is user-generated, this is entirely up to the 10.4 million pinners in question. There already exist plenty of vehicles to search content on the economy. The question is; do Pinterest users post worthwhile links?

I’m not overwhelmed by what I see. Check it out for yourself; here’s what the site presents for the search terms personal finance, economy and investing.

Prepare yourself for a colourful array of cartoons and inspiring quotes. It’s not all bad of course. I recognize a number of first-rate bloggers linked to there and a few good books. But the picking is pretty slim.

Business Insider has been tracking Pinterest’s impressive growth closely in recent weeks. On Monday, it posted a list of 10 must-follow pinboards. The list includes treehouses, cars, fashion and more. It all looks like good fun, but not much else. I suspect their enthusiasm for the site has more to do with the potential for a juicy initial public offering down the road than it does with good financial content.

Maybe I’ll check back after they invite me in.

“Just because you don’t have a lot of money to spend doesn’t mean you can’t go out and have fun,” says Josée Pharand, creator of FrugalFunOttawa.ca. “It takes a little creativity, and you have to be willing to get outside of the box a bit. You can’t just go to dinner and a movie and expect it to be inexpensive.”

Pharand has always had a knack for budget-conscious dating. When dating her now husband, they used to sit on a bridge that overlooked the Ottawa River to watch the fireworks at a nearby casino. This not only provided a free show, but gave them a chance to talk. Eight years into their marriage, they continue to be careful with spending – especially now that they have two young children.

“I hate feeling like I’ve wasted money,” says Pharand. “If you’re on a budget you can still have a lot of fun and there is no need to spend a lot.”

Here are 10 ways to add a bit of creativity to date night while sticking to a budget.

1. Get to know your city. Most of us are so used to our surroundings that we never explore our local landmarks and tourist hotspots. So do a bit of online research and create a personalized walking tour to discover your area together.

2. Cook something new. Go recipe-hunting and grocery shopping together. Try something new, have fun in the kitchen and add a dash of romance as you enjoy a wonderful meal.

3. Take a free dance or martial arts class. This is a favourite of Pharand’s. She says, “Many dance studios and martial arts schools offer a free introductory lesson with no pressure to buy.”

4. Go high-tech treasure hunting. For less than a couple of bucks you can download a smartphone app that allows you to go geo-caching (treasure hunting with a GPS).

5. Plan a picnic. Whether at the park or the beach, picnics are a great way to get creative with food, spend quality time chatting and enjoy the environment in all its natural splendour.

6. Be an agritourist. Get to know where your food comes from. Check out the farms, wineries and orchards in your area.

7. Plan a hometown holiday. Have fun sharing your past by visiting your old stomping grounds. Tour the elementary school park where you used to play, sit under the trees you used to climb, drive past the house you grew up in and eat at your favourite high school chip truck.

8. Play sports. No matter the season, there’s always fun to be had – from skating and tobogganing to Frisbee in the park or beach volleyball. Going on an athletic date can be a great way to have fun on a budget.

9. Host a potluck. Inviting friends over for a themed potluck dinner is a great, interactive way to introduce your new love interest to all of your friends, without spending a lot of money.

10. Watch for coupons. Use deal-finding websites and apps like LivingSocial and Groupon which let you partake in fancy activities for a fraction of the regular price.

The numbers come from our fourth annual 2012 Sun Life Canadian Unretirement Index.

I want to highlight another finding from the infographic. Twenty-eight per cent of adult Canadians say they don’t have a detailed understanding of their family’s financial plan. Given that this is a self-reported result, the actual number is probably higher. Either way, it’s an alarming statistic.

We all know how this happens. One partner is more comfortable handling the finances, and that naturally extends to financial planning. Or perhaps there’s too little time for even important priorities and so it’s impossible for both spouses to meet with the advisor. There are reasonable, practical reasons why it’s difficult for couples to achieve a shared understanding of the family finances.

Obviously this becomes a problem in the case of a separation or if a spouse passes away. Not having a detailed understanding of your family’s financial plan leaves you in a genuinely vulnerable position that’s not hard to imagine.

But there are other ways this can cause a family financial problems, perhaps even severe ones. Let me tell you about a family I’m close to. Julie and Bill (not their real names) have two adult children. Bill had a successful professional career that provided him a solid defined benefit pension plan and an opportunity to retire in his 50s. Julie worked on and off after the kids got old enough. The couple had come to Canada with almost nothing, and in many ways they epitomized what it meant to be successful immigrants.

Bill handled the finances, and Julie had confidence in her husband. Even when he invested too heavily in tech stock mutual funds and had a real estate investment turn sour, they always had the pension plan to fall back on. They felt safe.

So safe, that Bill decided to cancel his life insurance after retiring. Julie was surprised, of course. And she questioned the decision vigorously. But he convinced her they didn’t need it anymore. They would be fine.

Bill’s doctor can’t tell Julie when her husband’s illness started to affect his decision-making. He suffers from frontotemporal dementia (FTD) now, which is triggered by the breakdown of his brain’s frontal lobe. It is the second most common form of dementia, behind Alzheimer’s disease. It’s impossible to know if the financial decisions he made a decade ago were influenced by FTD. What is clear is that they are having a very great impact on the family’s finances now, and that their impact will be felt for years to come.

Julie is paying health care expenses she didn’t anticipate. Right now she’s searching for a home that Bill can be moved into when his care needs are beyond her capabilities. She’s also begun thinking about going back to work. Bill’s pension plan will pay her a survivor pension, but that’ll be a fraction of what they receive now.

Of course Julie trusted her husband. He earned that trust over the lifetime they shared. He was a great provider. He was a dedicated father. But in retrospect, that wasn’t the point. The awful truth is that Julie’s lack of familiarity with the details of their financial plan prevented her from making a full contribution to the family’s well being. Sadly now, she’s beating herself up about that at the same time she’s mourning her husband’s illness.

Many of us could find ourselves in a similarly difficult spot. A study by the Alzheimer Society of Canada predicted that if current trends don’t slow down, more than a million Canadians could have Alzheimer’s disease or a related dementia within 25 years.

So here’s my Valentine wish. Sometime after you’ve enjoyed the 14^th with your better half, talk to him or her about your financial plan. Make the time to go see your advisor together. If you’re not fully aware of what’s in your plan, make it a priority to do so. It’ll make you both feel better.

Happy Valentine’s Day.