Blog

By: Shawn Todd, CFP

Most of us have golfed at one point or another during our lives. It may have been once, or it may have been many times throughout the summer. No matter how often you have golfed you will always remember the feeling of a firing a shot into a bunker [when you were going for the green], or just firing a ball into the water on a par 3. It’s tough, and it really starts to take the fun out of the game.

Most of the people reading this will have also invested at one point. Your home is one of your largest investments, and you may have several other investments in your portfolio. If you’ve been doing it as long as I have, then you also will have memories of the tech wreck, the financial crisis, and the market correction during Covid.

What does golf and investing during these market corrections have in common?

A well thought out gameplan.

If we approached golf without any consideration for the inherit risks of the game, well we would just feel the consequences. We’d lose a ball here, bogey there, it would be a miserable experience.  Some of us all can feel that pain. Playing the game more smartly, hitting more fairways, staying out of the bunkers, well of these efforts make for far better results.

Investing needs to be focused, and well thought out. Ensuring you understand the risks of the portfolio you are in, the timelines you have, the goals of each portfolio, and the risk of each investment in your portfolio; is incredibly important. There needs to be a well thought out plan for taxation, capital gains [this is the topic of the day – thanks to the recent budget], and a discussion of the solutions that make the most sense for each investor. Often what works for you, may not be what works for your neighbour or colleague. Like golf, we all have different risk tolerances, capability, and performance needs. You need to play your own game, and your own pace.

Unlike golf – there are some great opportunities that will enhance your experience. Portfolio management, risk management, diversification, and a deep understanding of your needs – will all allow for an exceptionally smooth ride.

Imagine golf is someone could just tap your shoulder right before you started your ill-fated swing and said – “I just wouldn’t take that shot”.

It might make the game a lot more fun.

Consider helping your investing experience by adding a professional wealth management team to help you understand your own gameplan.

My thoughts for the day.

“How One Advisor Doubled His Book in Six Years”

An article featuring our very own, Corey Butler, CIO – Chief Investment Officer, Wealth Advisor, Ecivda Financial Planning Boutique.

by: BMO Mutual Funds HQ

Corey Butler began his career as a bricklayer, where he learned the value of building a solid foundation. Now a successful Wealth Advisor and Chief Investment Officer at Ecivda Financial Planning Boutique, Butler shares the secrets that have allowed his advisory practice to more than double its assets under management in only six years, and why he sees the BMO Strategic Equity Yield Fund as an important building block for client portfolios.

Click HERE to read the full article!

#ECIVDA #ThinkForward #planningrighttoleft #BMO #BMOglobalassetmanagement

The traditional definition of a recession is two consecutive quarters of economic decline measured in Gross Domestic Product.  A more complex definition is a slowing of economic activity and an increasing unemployment rate.

Financial and lifestyle preparations should take place to lessen the effects of a recession.

What You Need to Do

1. Examine your monthly budget – You cannot save money that you have already spent.  Almost everyone has regular, recurring expenses that are not necessities.  Subscriptions to multiple streaming services are one example.  Find lower cost alternatives like a home, family movie night using a streaming service versus a $100 trip for four to the local cinema.  Delaying many small and large purchases can free your budget and your mind from stress.

2. Contribute to your Emergency Fund – Once you have identified unneeded expenditures in your regular spending, remove them from temptation by placing them into your Emergency Fund.  Having 3 to 6 months of income set aside is the recommendation and is almost impossible to achieve until a thorough examination of your budget occurs. Consider a TSFA.  A Tax-Free Savings Account (TFSA) containing liquid and low-risk investments provides tax exempt earnings and withdrawals.

3. Maintain your scheduled savings contributions – Whether a recession occurs or not, continue adding to your retirement savings in RRSPs and TFSAs, ad education savings in RESPs.  Skipping a few monthly contributions and the compounding of interest on them could free up a few thousand dollars but cost you tens of thousands of dollars at retirement.  The 20% grant (up to $500 annually) on RESP contributions and the $2,500 contribution to generate the maximum grant could grow into a year of tuition.  Treat savings like one of your bills that you pay first.  Your mortgage, insurance, and utilities must be paid.  Paying your savings first helps reinforce your budgeting efforts.

4. Reassess your investments – During a recession, like any other period, some types of investments can withstand the challenges better than others.  A frank conversation with your financial professional is an excellent step to preserve assets and investment income.

5. Eliminate, reduce, and avoid debt – Paying high interest rates is never a great idea, so it is best to pay them down as quickly as possible.  Interest rates are rising on the actions of central banks around the world, and those high interest rates will rise even higher.  Taking on new debt that will increase your monthly expenditures for both capital repayment and interest charges is not advisable.

6. Update your skills and resume – Should your employment be affected personally, it would be better to be prepared than react when feeling the pressure of replacing your existing income.  Revisit and update your resume with accurate dates and roles.  List your newly acquired skills and capabilities, and if applicable, don’t forget your online profile/s.  You can also consider investing in yourself by taking internal and external courses to bolster your skillset.

The Bottom Line

None of the six steps, above, require a recession or even the threat of recession to become valuable.  Each of them is prudent regardless of the overall economic and employment climate, so get ready for a rainy day, and you will be able to enjoy the sunshine, too.

By: Shawn Todd, CFP

Just before the New Year of 2023 – I was fortunate enough to go for a short adventure trip with my wife Michele, where we planned to do some extraordinary hiking in Arizona.  The first thing I did when I packed for my trip on the days we hiked – was making sure that I had packed a GPS, a compass, enough water, and had a plan.  It sounds simple, but you’d be surprised on how many people venture out with just their shoes.  I saw many with no gear, or the wrong gear.

Some short stats:

• 57.8 million hikers every year in the US.
• There are 4 deaths per 100,000 hikers
• 70% of hikers who die are male

Looking at these stats – right away it becomes a very good message to me that not only should I be careful, but I should always be packing a compass.  I’m male, I hike, I Iove my wife and family, and I’m planning a hiking trip.

When it comes to our personal lives, and our business lives, it’s very easy to overlook what you need to be packing in your ‘day to day’ backpack.  It’s very easy to be comfortable with life ‘as it is right now’. The home & your after-hours routine, and your work & your normal ‘day at the office’ routine all flow one day to the next without any issues.  Sometimes we neglect how each of these affects the other. How impactful our personal lives are with our work, and how significant a role our work plays in providing comfort in our personal lives.

The merging of our personal and business lives give way to four key themes on this Venn diagram above. These dual areas are:

Time – how much time can we spend with our loved ones, what kind of quality time is it?  How much flexibility does our business provide us, how hard have we worked to have it be this way?

Security – Our business without questions provides the security for us to make decisions that affect our spouse, our children and ourselves.  Where are the children going to post-secondary school?  Do we need to have two incomes or just one in the home? What will happen if one of our family is sick and needs care? Does our life feel safe and secure?

Income – We all start off with a life wanting to not be only concerned about money.  You may be more interested in your community, in charity, in just time with loved ones.  The income that comes in now, and the income that may or may not come in – if you weren’t working – will impact most of the decisions we make with the other three areas – time, security, and our goals.

Goals – This is where it’s always interesting.  Every single person has different goals, different needs, and different wants.  Spending a great deal of time here, really helps with a good foundation to mapping out where we want to go in life [and mapping out what trails we want to explore on that hike]

Many times, when we meet new clients – and we ask – “would you like us to spend time doing financial planning for you personally, and also for you corporately?” they may feel initially positive about it, but also feel slightly tentative about planning twice.  Why would I need to do this?

Some more short stats:

• 96 percent of small business [with 1-100 employees] survive for one full year
• 70 percent of small businesses [1-100 employees] survive for five full years
• There are over 1.3 million businesses in Canada with employees
• Small businesses provide over 70% of the total private labour market
• A healthy growth rate for a small business should be between 15%
• A business will double in 5 years at a 15% growth rate
• 350 people out of 100,000 [ages 45-49] will be diagnosed with Cancer [87 times the chance of dying hiking]
• 1,000 people out of 100,000 [ages 60 and older] will be diagnosed with Cancer [250 times the chance of dying hiking]

Spending time planning can’t take away all the risks of business failure, of financial stressors, or of getting a critical illness that impacts your business. It certainly can help make you aware of your blind spots.  Having an opportunity to see the risks, whether they are in your investment portfolio, in providing enough retirement income, or possibly in your business structure – really help make you more aware of your current situation, and your future situation combined.  You wouldn’t go on a hike without the proper gear, and I wouldn’t suggest you tackle life and business without the proper gear.

Take the time to review your own strategy and plan. If you’re unsure on areas, or need guidance, consider having a finanical plan completed, or updated.  Keeping both your personal and corporate worlds safe is key.  If you need to pack a compass to stay on track, I’d certainly recommend doing so.

Just my thoughts for the day,

Shawn Todd, CFP

By: Corey Butler, Wealth Advisor

2022 is in our rear-view mirror and 2023 is now staring us in the face with a sea of uncertainty. Inflation, supply chain, Covid, China, Ukraine war, stagflation, interest rates… it never ends. This is where you come to the realization that you can only control your own day to day decisions and life. The world has, and will always have, issues. As far back as we can look, there is always civil unrest, famine, war, and natural disasters. So why do we react with such negative assumptions when we know history always repeats itself? Markets go up and markets go down. Buyers and sellers get to make their decision on what something is worth and whether there is upside or downside.

If we look at real estate which is under pressure as of late with massive interest rate increases by both the Bank of Canada and Federal Reserve. Market values have certainly retreated as of late, offering a lower entry point for buyers, but with interest rates at current levels, we essentially end up in the same place with monthly payments vs 2021 pricing. The exposed variable rate debt has gotten much more expensive but when compared to the 5-year fixed rate, the variable is still cheaper option. We need to accept that these rates are going to stay much higher than what we experienced throughout the pandemic. Historical Prime Rate Average has been 5-6%.  If you look out over the next 20-25 years at a modest 5% growth rate on real estate, you still have more than doubled the home value.  It is an incredible asset class.

There are so many conflicting outlooks across all sectors which result in complete paralysis in making decisions or taking a stance. A well-diversified investment portfolio is truly the key to your success during turbulent times. “The trend is your friend until it’s not, and trying to catch a falling knife hurts a lot.” These are wise words bestowed on me from mentors that I have had the pleasure to work beside.

An Investment Policy Statement “IPS” is one of the best ways to keep yourself on the straight and narrow to not get tactical during turbulent times. An IPS becomes your compass to help you find the North Star. It should be reviewed annually with your wealth advisor to ensure risk, goals, and behaviour are on track. If you currently have not created an IPS roadmap, please feel free to reach out and we can grab a coffee to discuss.

By: Michael Lutes CFP, CLU

Certified Financial Planner

It’s a brand spankin’ new year, (2023 baby!). The calendar has turned, the slate is wiped clean, you’re at mile zero! You have twelve whole months to kick some butt when it comes to managing your money and financial planning! (Wow, I’m getting energized just writing this!!)

Perhaps you’ve already begun brainstorming ways to improve your finances in 2023. Maybe you’re hunting for new tax-efficient planning strategies. Or you think your investment portfolio could use a revamp. Or, after spending time with loved ones over the holidays, you’re inspired to audit your insurance and estate plans.

Or, like so many of us, you truly don’t know where to start.

Here’s a tip…

Start with your values. Let those values motivate your goals, life objectives, dreams. Whatever you want to call them, start there.

So, what are your values? Seriously, yours, what are they? Take a moment, take a minute, take whatever time you need…

No, no, no, not THOSE values…. those are the values you think you should have. The ones your brother incepted inside of you when you were chatting over the holidays. Or maybe those values are the ones your Instagram feed is telling you to have – fancy cars, fancy food, fancy vacations, fancy clothes, fancy blah blah blah.

Not those.

I’m talking about YOUR values. The ones that truly reflect the deepest sense of what cultivates happiness in you. The ones that make you feel authentically happy to just be. The ones that when you’re living in alignment with them you are at your most satisfied, most at peace, most content, and most fulfilled.

THOSE are your values.

(Ummm, I thought this was a financial planning blog…no?)

How does this apply to financial planning?

While considering all the calculator stuff – tax, investment returns, insurance, etc. – the best financial planning is done in a space where decisions of how to use your money – or capital (more on capital later) – are in alignment with your values. This is where financial confidence builds. This is where the real financial planning magic happens.

In this space, you stop obsessing over moves in the stock market, you don’t really care what shows up in the daily financial news, you can genuinely listen to your neighbor’s stock tip from their cousin who “worked on wall street” and effortlessly separate opinion from truth and move on.

This is the space where you can be totally and completely confident and fulfilled in your financial decision making, because you know it aligns to your values and your life objectives.

So, when it comes to financial planning this year, start with your values – dig deep, be real, be honest, be reflective – and let your values motivate your goals that ultimately drive your decision making.

Do this, and you’ll be kicking butt in 2023!

And if you’re one of us who, like most, need help uncovering their values and articulating their goals, we recommend talking to a trusted advisor who can help you through the process. If you don’t have a trusted advisor, schedule some time with us – we love to help!

Gender inequality affects almost all aspects of women’s lives, but perhaps none as much as their financial life. Canadian women earn on average only 88 cents to the dollar that men earn, and that number is even less for minorities and trans women. While progress is being made, there is still much work to be done. Luckily, there are simple steps we can all take to support women’s financial success.

What You Need to Know

1. Start Talking About Money: It is time to start talking to friends, family, and partners about money. We may find that we have a lot to learn from those around us. Money has been a taboo topic in our society for a long time and this taboo reinforces the wealth gap and money inequality. Talking about money can give you an idea of what is possible and where you stand financially. We tend to think we are falling behind others financially, or that no one else has ever had financial struggles. By starting meaningful conversations with those around you, you may find that they have similar experiences to you. This knowledge is empowering and can help you better navigate your own finances.
2. Spend Money on Women: Simply put, one of the best ways to be a financial feminist is to put money in women’s hands.  There are more women-owned businesses than ever and thanks to the internet, it is easy to be a mindful shopper. Take the time to search out businesses owned by women and prioritize supporting them when you can.
3. Raise Financially Savvy Girls: Financial inequality starts early. According to data analyzed by BusyKid, an allowance app for kids out of the US, parents pay boys twice as much for doing chores as the pay girls for the same chores. It also found that only 21% of parents talk to their kids about money, and only 10% talk to their kids about investing and debt. Talking to your kids about money, especially girls, will set them up for success later in life. Kids tend to think Mom and Dad have unlimited resources. Explain to them what your expenses are, including your investments and savings strategies. Get girls into the mindset of building wealth early.
4. Investing with Intention: Every dollar you invest has an impact. Therefore, it is important to choose investments that not only will be profitable, but that align with your values. Look for successful companies with gender-equal boards, women leadership, and good track records of equality in the workplace. Put your money to work in more ways than one.

Book an appointment with us today! Click Here

As each February concludes and RRSP contribution season ends, investors across Canada exhale feel a sense of relief and accomplishment. RRSPs are an extreme example of deferred gratification; doing something good now for a benefit that occurs much later.

As the North American society has moved away from employment-based pension plans everyone is responsible to save for their retirement, and Registered Retirement Savings Plan is a fundamental tool to save. This is especially true when publicly managed pensions like Canada Pension Plan (CPP) and Old Age Security (OAS) do not provide enough income for most.

Saving for retirement takes planning and discipline, it is not easy to manage the important (retirement savings) with the urgent (immediate expenditures).

An RRSP allows Canadians to defer income tax on both the initial deposit and any growth those assets generate. Making the maximum contribution could save you almost $15,000 on this year’s tax bill depending on your income level and associated tax rate.

What you need to know

• Contributions to your RRSP are deducted from your taxable income. If you earn $100,000 and make a $24,000 deposit, you are taxed on $76,000 for that year.
• Contributions and earnings are subject to income tax when withdrawn, or at death (unless the RRSP is transferred to a surviving spouse).
• Contribution amounts are based on your income level. 18% of your income can be deposited into your RRSP with the annual limit of $27,830 for the 2021 tax year and $29,210 for 2022.
• Contribution room from previous years that has not been used is carried forward.
• Contributions can be made at any time during the year, and until the end of February for the prior year’s tax return. This allows the prior year to conclude before the contribution amount is fully calculated.
• Contributions can be managed based on your unique situation, current and potential earnings and the tax brackets that you fall into. For an Ontario resident paying the highest marginal tax rate of 53.53%, a $24,000 deposit will reduce your income taxes by $12,874.
• Contributions can be managed between years to reduce overall taxes. Unused contribution room can be utilized for years when a higher tax bracket is being applied to your income. Depending on your situation it might be better to wait or make a deposit now.
• Contributions often generate a tax refund. When your payroll deductions are accurate most people will not pay or get a refund when filing their taxes. An RRSP is not typically factored into these calculations, and the tax savings generated by an RRSP deposit often appears as a refund!

And finally:

Contributions that are made monthly typically grow larger than the same yearly amount deposited annually after each year has concluded.

•  $2,000 deposited at the start of each month for 25 years grows @ 6% to $1,385,988
• $24,000 deposited at the end of each February for 25 years grows @ 6% to $1,316,748
• Without any additional deposits that’s a difference of   $69,240!!

This is often a conservative estimate. The difference is usually much larger because an investor who commits to monthly contributions and agrees to a PAC (Pre-Authorized Contribution) is much more disciplined. An annual, large payment is more susceptible to the negative effects of variations in year-end bonuses and a year of day-to-day spending. The temptation is to believe that, if skipped, payments can be caught-up later, which the effects of compound interest make it difficult to achieve.

The Bottom Line

Setting up an RRSP with a monthly PAC can help you retire sooner, because we cannot save what we have already spent.

Book an appointment with us to discuss setting up your RRSP or Monthly PAC – click HERE

A recent study, Understanding and Managing the Risks of Retirement, by the Society of Actuaries has shown that only 52% of pre-retirees and only 44% of retirees are consulting a Financial Advisor. That means that roughly half of the population is seeking financial advice outside of a financial professional, whether that be friends, family, colleagues, or Google. We live in a time where we turn to technology for everything. We can quickly search anything we want to know, and as a result, we are inundated with information. When it comes to dealing with our finances, this approach can be confusing and overwhelming. By making your financial advisor your first point of contact, you know that you are being provided with knowledge that is relevant to your financial situation.

What you Need to Know

Working regularly with your financial advisor can bring incredible value to your financial plan. A study by Morningstar found that investors who consistently work with an advisor generate returns that are 1.82% higher than those who do not. Their research also found that investors that actively seek out advice from their advisor accumulate 29% more wealth for retirement than those investors who do not.

A Financial advisor can provide you with the kind of expertise and guidance you deserve. You work hard for your money, and while seeking advice from the internet or advice from friends can be convenient, you can’t always trust that it is accurate or relevant. Every investor has specific needs, and there is no one size fits all when it comes to investing. Inaccurate or irrelevant information can lead you to make costly decisions. By talking to your advisor, they can act as a sounding board for the information you read or hear about. An advisor can offer guidance on whether a new concept or product could benefit your portfolio, or if it’s just a trend that offers you no value.

One of the greatest risks to your financial plan is making uninformed decisions during a downturn in the markets. In bearish markets, we are flooded with market information and down-right bad news. Before turning to potentially unreliable sources, consult with your advisor first. Research by the Investment Fund Institute of Canada has shown that individuals who have worked with a financial advisor and have a customized plan are twice as likely to rebalance appropriately during a downturn. Making your advisor you first contact will allow you to filter out the panic and allow you to see the facts, therefore keeping your goals on track!

The Bottom Line

By getting in the habit of talking to your financial advisor before looking for advice elsewhere, you can reduce the risk of falling prey to inaccurate and irrelevant information. If you trust in the expertise that your advisor can provide, you can reap the benefits of higher returns and higher level of wealth in retirement. In other words, you can reach your financial potential!

Click HERE to book an appointment with us today!

Lumber is an essential building material that dictates the price of housing in a way. The price of lumber has been on the increase for a few years now and it was later accompanied by shortage supply at the beginning of global lockdown engendered by the global pandemic in 2020. The effect of the price increase has been felt in the real estate sector as the prices of construction and homes have been on the increase. On the supply end, the gradual return to normal economic activities has seen an increase in the production of lumber flood the market. However, it is still yet to meet the already increased demand since the global lockdown.

How Does Lumber Pricing Work?

Lumber pricing works the way any other market commodity works. The forces of demand and supply dictate the price of lumber. The demand for lumber has witnessed an astronomic increase in the last six months which has inevitably driven up the prices almost at 170%. The lockdown forced people to work from home which afforded them time to take care of their home. Most people started to take on DIY projects of remodeling and home expansion which inevitably drove up the demand for lumber. During the lockdown, it was reported that home renovations increased by 40% in Canada during the lockdown up until late 2020. While there seems to be no problem with the demand side, the supply end has witnessed a bit of up and down, especially with the covid-19 pandemic. Health precaution imposed by the government meant that most of the sawmills had to close down or cut on production which caused a bit of unbalance between demand and supply. This also has had its fair share on the price increase of lumber.

What Does The High Lumber Pricing Hold For Your Real Estate Investment?

There have been a lot of questions and uncertainty on the implications of the increased lumber prices in the real estate sector. For house owners who either want to increase the taste of their home by remodeling or home expansion, the short supply and increase in the high price of lumber may put pay or delay your project. The Natural Resource Canada conducted a survey in which it was revealed that a square foot of lumber that cost $11 in March 2020 now goes for $35 in March 2021. When you consider the cost of transportation and the cost of labour if it is not a DIY project, then you may want to hold off on the remodeling. In research by the Canadian Home Builders’ Association, a renovation could cost you an additional $30,000 due to the high prices of lumber. For potential home buyers, it is not good news also. If a homeowner spends a considerable amount due to high lumber prices to renovate and remodel the property in order to increase the real estate value, it is only natural to want to recoup the money from the value placed on the property. This means that the value placed on properties will further increase. The high prices of lumber have made investing in real estate a tricky business.

How To Cushion The Investment On Your Home?

The situation of the real estate market may require that you engage the services of a professional financial advisor that will guide you on how to go about your real estate investment. For homeowners who want to take on a project of home expansion or renovation, you can get a home equity line of credit to help you achieve the desired result. You do not have to worry about the interest rate as a home equity line of credit offers a lower rate compared to other types of loan. It is calculated by subtracting your current mortgage liability from the market value of your home. You can also secure a second mortgage and use your home as collateral to access funds for your home renovation and expansion.  This is also available to potential home buyers as you can use the home equity line of credit of your existing property to finance the purchase of another property.

Conclusion

Experts are keenly watching the lumber market to make an accurate prediction on the future price of lumber. The full resumption of sawmills is a promising sign that supply will be able to level the high demand and mitigate the effect of the high prices of lumber. While prices may not drop drastically anytime soon, stakeholders are drawing encouragement from the fact that we are in a period where lumber dealers reduce their buying to take stock of their lumber purchase in the first quarter of the year.  Feel free to reach out if you would like to discuss outlook and portfolio construction to ensure that your wealth is being maximized.  #ThinkForward