From the great silk emporiums of India to the ubiquitous suburban mall in North America, shopping is a simple pleasure enjoyed throughout history by people of all cultures.

We’ve probably all hit the shops from time to time to give ourselves a little moral boost.  Most of the time, there is nothing particularly serious going on here — other than what to do with that gigantic driftwood rocking chair now that you’ve hauled it back from BC to your condo in Toronto.  But when does a little “retail therapy”, something innocuous and fun, become a more troublesome issue?

Psychologists have been looking at the reasons people deal with depression, anxiety and stress by taking a trip to the mall.  In fact, researchers in Australia have classified problem shopping as a psychological disorder called oniomania, or compulsive shopping disorder.

A consumer culture, easy credit, lack of planning and not having a clear vision of what one wants out of life has resulted in what I call in one of my courses, “The Madness of Money”.  Deepak Chopra puts it well:
“We have gotten into the habit of spending money we haven’t earned, to buy things we don’t need, to impress people that we don’t like. So get rid of that habit.”

So where do you place on the spectrum between shopping for fun and retail addiction?  Here are a few simple questions to ask yourself:

1) Are you experiencing signs of anxiety or depression around debts and spending?

2) Are you are having difficulty managing your finances, credit cards or debt load?

3) Are you are hiding or disguising your spending from your spouse or partner – or rationalizing it to yourself?  In other words, is there some denial at work here?

4) Do you or others frequently comment on your spending habits – even if they – or you – are “just joking”?

5) Are you juggling accounts or can’t cover important expenses, because you have overspent somewhere else? Remember, these don’t have to be major purchases either. Many people “nickel and dime” themselves into difficulty.

6) Have you put off your important life goals because you are spending money on things you neither really want nor need?

Chances are that you fall somewhere within a “normal range” on these questions, but like most Canadians, you could probably still use some help getting organized with a financial plan or a system to manage your money and your spending better.

The recent financial meltdown is a stark wake up call to remind us that we all need to take more personal responsibility for our money. Isn’t it time to take action and stop the madness? – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

First time home buyers are taking the lead in a resurgent real estate market. Depressed housing prices in many parts of Canada and historically low mortgage rates have enticed many into taking the plunge, especially women. But is this really a good idea?

Most financial experts will tell you that buying your own house makes good sense “otherwise you are just throwing your money away”, but the situation is much more complicated than it appears on the surface and renting can be the preferred option for many Canadians.

But first let’s look at some of the compelling reasons for buying now:

1. Interest rates are at an all-time low and housing prices are down significantly from a year ago;
2. Potential for appreciation;
3. Having a mortgage becomes an enforced savings plan;
4. Pride of ownership and sense of security.

These are all good points in favor of buying, however home ownership certainly has its drawbacks, including:

1. Ownership limits your flexibility, especially in a slow market. What happens if you lose your job or your hours are cut? What happens if an opportunity beckons in some other part of the country, but you can’t unload your house?
2. Unexpected costs can be devastating. Even condos can be a problem if a major expense occurs. Vancouver condo owners were caught off guard because of the “leaky condo syndrome” when they were asked to cough up serious money for communal repairs;
3. Routine expenses such as ongoing repair and maintenance costs, property taxes and the various costs of buying and selling can also add up;
4. Home ownership can prove very time consuming and worrisome.

The deciding factor for many buyers is that they think home ownership is a good investment, but the numbers don’t always add up.  You might be surprised to hear that real estate in Canada has only averaged a return of about 5% a year since 1950.  Compare that to the Canadian stock market at closer to a 10% rate of return, even when considering the recent downturn.  In most Canadian centres today, rent is actually cheap compared to what you’d have to pay monthly for the same condo or house if you bought and financed it.

The simple truth is that home ownership is not for everyone. Resist the temptation to jump into the market simply because everyone is telling you that you are throwing your money away by renting. Do the numbers for yourself – hopefully with a simple financial plan in hand or a trusted advisor by your side to help you determine what financial strategies works best for you and your family. Then ask yourself and your partner a few simple test questions: Are you planning to be in your home for at least 7 years?  Is your job secure or is there a chance you might have to move – or simply want to?  How committed are you to any one neighbourhood, community or region?  Do you feel trapped when you think of buying or do you value the sense of security that comes with home ownership?

I’m not saying that home ownership is a bad thing (I love my new home on Salt Spring Island!), but make sure that if you take the plunge into real estate that it’s in your best interest, not because you feel pressured into it by friends, family or the all “American” Dream. – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

A storm of controversy has recently erupted over an American study of mutual funds being sold in sixteen countries, including Canada. The problem in Canada, the researchers claim, is not with the mutual funds themselves, but with the “notoriously high” fees and expenses Canadian investors are being charged.

According to the Chicago-based Morningstar Global Fund Investor Experience, “Canada’s failing grade in fees is the lowest grade received” in any of the countries surveyed. We got the only “F” in this category. Ouch!

Naturally the investment industry on this side of the border quickly came to their own defense saying that their commissions and trailer fees are justified, because of the expert advice they dispense along with the sale of mutual funds. The real question Canadian consumers should then be asking themselves is what is this advice actually worth? In other words, are our Canadian financial advisors really earning those plump and juicy commissions?

There are a number of important points that the typically mild-mannered Canadian investor should keep in mind when deciding on an advisor:

1.)    First off — there is no such thing as free advice!

2.)    Get fully informed about what fees you are being charged in commissions and other fees. According to Morningstar, Canadians are comfortable with the fees they are paying – “because they don’t know how low those fees should actually be.”

3.)    What level and quality of “advice” should you expect for the “notoriously high” fees you are likely paying?

4.)    Is the advice you are being given directing you to products or services that pay higher commissions and trailers?

5.)    Does your salesperson have a conflict of interest? Are they just out to make a sale or do they have your best interests at heart?

6.)    Does the advice you are receiving include such things as competent tax, estate and insurance planning? (Those pricier trailer commissions are supposed to cover such things.)

7.)    Ask yourself: Does it really make sense to receive crucial financial advice from a commissioned salesperson – or is it finally time to seek out truly “independent” and unbiased financial advice? (Independent “fee-for-service” financial planners might still be difficult to find in Canada, but they do exist)

8.)    Do you have a personal financial plan yet? (Most Canadians do not!  Maybe its time you do?!)  If you do have one in place, how does the financial advice you are receiving fit in with your overall strategic plan?

9.)    A good financial plan allows you to keep the big picture of your life in mind and to maintain some personal objectivity and financial perspective in both good markets and bad.  (Now here’s something to think about: Maybe your financial advisor should insist you have a strong financial plan in place before dispensing any advice?)

Under our current advisor compensation system in Canada, it is simply too easy to blur the lines between what is best for the investor – and what is best for the salesperson and the institution they work for.  Ultimately, however it is up to the Canadian consumer to expect and demand more from their financial advisers and institutions. Much more! Seems you’re paying for it anyway!

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

The latest job statistics surprised a lot of experts.  The Canadian economy created 35,900 jobs when a drop of 50,000 was expected.  Does this mean that the “Great Recession” is over and we can go back to our pre-recession binge of spending and borrowing as if there was no tomorrow?  Well, unfortunately the seemingly good news was greeted with considerable skepticism in some quarters.

It seems that the majority of those new jobs were created by out of work people manufacturing their own jobs.  While this might show that the entrepreneurial spirit is alive and well in Canada and individual initiative has triumphed over adversity, it might also show that many have simply given up looking for a full-time job.

Other shakeups in the economy have spurred an increase in new business opportunities.  Past downturns in the Alberta oil patch led to petroleum geologists and others starting their own consultancy companies.  Many junior mining companies got their start when major employers shed jobs and Canadian mining expertise was exported around the globe.  The same phenomena was seen in the tech sector after the dot.com bust.  During the 1990s recession self-created jobs were reportedly a major source of new jobs.

Not to discourage the budding entrepreneurs among us, but the sobering news is that for most of those creating their own jobs the rate of success is mixed at best.

So, if we can’t count on traditional employers to give us our jobs back any time soon, what can we do to give us a better chance of success in creating our own jobs?  Fortunately there are some sources of help: Business Development Bank of Canada; Small Business BC.  Similar programs are offered in other provinces and even individual cities. If you qualify for unemployment insurance check out the self-employment program offered through the government.

No matter how brilliant your idea is for a self-designed job or business, you will still need to keep a few essential things in mind:

1.)    Make sure your own personal finances are given top priority. Look closely at your debts, expenses and income requirements for the next 6 months to a year;

2.)    Create a simple but realistic personal financial plan – before you create a business plan;

3.)    Develop a business plan for your idea. There are free or inexpensive software programs available online. Libraries and various business centres have numerous books to assist you. The above-mentioned agencies can also direct you to further sources of help;

4.)    How are you going to fund your enterprise? Are you seeking outside funding, re-financing your house; borrowing from friends, family or other associates? Remember that most commercial lenders are unlikely to finance someone who is not putting up some of their own capital.

5.)    Seek out professional advice before venturing too far. While you have to be wary of naysayers, there are also potential supporters as well.

Creating your own job can be a great idea.  Adversity can indeed be the mother of invention, but it also requires some practicality to go along with your bold vision. Above all do your homework.  The better prepared you are the more likely you are to gain support for your vision from financers, clients, friends and family. Now go forth and prosper! – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

Think retirement is out of your grasp? The current economic downturn and the consequent impact on investments have caused many people to worry about their pensions and to re-think their retirement options. The financial news these days can certainly be disheartening, but things might not be as bad as you think. Do you really know where you stand?

The fact is about 1/3 of Canadians people with less than 5 years to retirement don’t have a retirement plan. If you are one of those who haven’t mapped out a plan yet you might be worrying and putting off that next stage of life for nothing. Here are ten basic – but essential — strategies and considerations to think about:

1. Figure out how much your lifestyle will realistically cost you in retirement (focus on what really matters mortgage/rent, food, extra medical expenses, etc).
2. Consider downsizing before you retire. (Think of it as a dress rehearsal for retirement.) Can you get by with a smaller house or just one car or less expensive vacations?
3. Pay down your debts more aggressively – starting now. Credit card loans and other such high interest debts can add a tremendous burden on a reduced or fixed income.
4. Run some retirement income numbers including company and government pensions. Many people dismiss government pensions but they can total much as $17K per year per person and are more secure than many people realize.
5. Become familiar with one of the newest tools to assist your retirement savings program, namely Tax-Free savings Accounts.
6. And revisit one of the older ones – annuities. These financial products are purchased from insurance companies and are designed to provide you with peace of mind by providing you with a safe drawdown rate through regular payments for as long as you live.
7. Consider working past age 65 or working part time – especially if you love your job or you want to try something new.
8. Get aggressive with your savings! Even if you are in your fifties you can add substantial weight to your retirement income by saving more today. What if you took all of the income that you used to spend on your children for education, food, clothing etc and then placed that in your retirement fund?
9. Simplifying your life just might reduce your stress load and anxiety levels. Gearing down a notch or two can open you up to new possibilities of how you can live your life. Be creative in your thinking.
10. Consider doing something meaningful with your retirement years. Without the pressure of having to show up on the job every day, perhaps you dedicate some time to making the world a better place for your grandchildren. What would that look like for you?

Don’t worry needlessly – get the facts about how much you will need to retire comfortably. Maybe you will need more money that you think? Maybe less? The only way to know for sure is to get clear about your goals and to start crunching some numbers.  Get financial advice from someone you trust if you don’t want to go it alone. But make a plan today – so you can enjoy tomorrow! – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

The Canadian government, like most governments around the world, is looking for innovative ways to get the country’s economic engine rolling once again. Most of these stimulus projects are large-scale infrastructure developments – roads, bridges and rapid transit lines. Not much chance of the average Canadian tapping into those mega-bucks. If you’re a homeowner, there is one incentive program meant just for you – and you’re living in it!

The federal Home Renovation Tax Credit (HRTC) is one way that homeowners can directly benefit from the government’s attempt to kick start the Canadian economy and get people back to work, especially in manufacturing and construction. It comes in the form of a “tax credit” on home renovations and improvements.  More than 4.5 million Canadian families are expected to benefit. So how can you count yourself in?

There are some things you need to know. First the HRTC is designed as a “family-based” tax deduction and it is for principal residences only. It is a one-time-only program that applies to home renovations and improvements undertaken after January 27, 2009, and before February 1, 2010. A wide range of things can be covered such as fixing a roof or getting a new carpet, installing a more energy-efficient hot water tank or fireplace, or even repairing the swimming pool. The criteria are quite broad – as long the work amounts to an “enduring” improvement to your property. Unfortunately it won’t pay for that big screen TV you’ve been coveting!

Here are the basic numbers: Every Canadian family can deduct 15% of eligible expenditures (the first $1,000 you spend doesn’t qualify) to a maximum of a $1,350 credit.  To be eligible for the maximum credit you would have to spend $10,000. The costs of labor and professional services, building materials, fixtures, rentals, and permits can all be included.

The HRTC makes most sense if you were already wanting or needing to make the renovations to your home. Although by participating in the program you are stimulating the Canadian economy, the expenditures should still make sense for your household budget. This tax credit is just an added bonus. Find out if this incentive program works for you by checking out: Canada Revenue Agency.

Sheila Walkington is co-founder of the Women’s Financial Learning Centre.

While there are now numerous tax software packages that make tax filing simple and low cost, you still need to know some of the basic rules for proper tax filing and record keeping.  Here are some of the most common things that I find get missed, especially when someone is preparing their own tax return. Not paying attention to these simple points could cost you a lot of money!

• Not claiming for public transit costs, such as your monthly bus pass. The definition for what is eligible was expanded in 2007. Check out transitpass.ca.

• Not claiming the child fitness tax credit – you can claim up to $500 per eligible child

• Forgetting to claim the capital gain or loss that occurs when you sell a mutual fund, stock or bond that is outside your Registered Savings Plan (RSP) or Tax Free Savings Account (TFSA). You need to keep track of this information – you don’t get a slip from your investment company, but you can usually get the information that you need for taxes from them.

• Forgetting to make an RSP contribution at least enough to cover your minimum Home Buyers’ Plan repayment. If you don’t make the minimum required payment, it will be added to your income and you will have to pay tax on this amount.

• Not following up on missing “T3, T4, and T5 Slips”. Even if you don’t get a copy of these slips, the tax department does. Any taxes owing as a result of these slips will eventually catch up with you by way of a reassessment. You could get hit with hefty interest payments and the excuse that you didn’t get the slip won’t help.

• Not keeping tax records, including all appropriate receipts and income records – a big, big problem if you are ever audited. Keep records for a minimum of 6 years.

• Self-employed: Lost or misplaced information needed to claim home office and business expenses (rent, mileage records, business expenses). Remember that self employed income and expenses are often subject to review and/or audits. Keeping accurate records is crucial.

• Couples: Not taking advantage of pension income-splitting for qualified pension income.  Use form T1032 to claim.

Check out the Canada Revenue Agency website for more details. – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

In recent months governments around the world have announced various programs to stimulate their economies. Most of these stimulus projects are large-scale infrastructure developments – roads, bridges and rapid transit lines. Other programs are found closer to home. Literally!

The federal Home Renovation Tax Credit (HRTC) is one way that homeowners can directly benefit from the government’s attempt to stimulate the Canadian economy. It comes in the form of a “tax credit” on home renovations and improvements.  More than 4.5 million Canadian families are expected to benefit. Should you be one of them?

There are some things you need to know. First the HRTC is designed as a “family-based” tax deduction and it is for principal residences only. It is a one-time-only program that applies to home renovations and improvements undertaken after January 27, 2009, and before February 1, 2010. A wide range of things can be covered such as fixing a roof or getting a new carpet, installing a more energy-efficient hot water tank or fireplace, or even repairing the swimming pool. The criteria are quite broad – as long the work amounts to an “enduring” improvement to your property. Unfortunately it won’t pay for that big screen TV you’ve been coveting!

Here are the basic numbers: Every Canadian family can deduct 15% of eligible expenditures (the first $1,000 you spend doesn’t qualify) to a maximum of a $1,350 credit.  To be eligible for the maximum credit you would have to spend $10,000. The costs of labor and professional services, building materials, fixtures, rentals, and permits can all be included.

The HRTC makes most sense if you were already wanting or needing to make the renovations to your home. Although by participating in the program you are stimulating the Canadian economy, the expenditures should still make sense for your household budget. This tax credit is just an added bonus.

To learn more, check out Canada Revenue Agency. – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

With interest rates at historic lows you might be wondering if you should talk to your bank about lowering your interest rate.  What are people doing and what do you need to know before deciding?  Karin recently interviewed Corinne Schindler, RBC Mortgage Specialist to find out what’s happening in the mortgage world and how to get the best deal on your mortgage. Karin’s talk with Corinne is both lively and informative and you won’t want to miss it.

Click to listen to Karin’s interview with Corinne Schindler – Mortgage Rates Lowest in Years – Is It Time to Refinance?

If you want to consult with Corinne for advice on your mortgage, then you can contact her directly at: corinne.schindler@rbc.com or 604 274-2226.  You can also speak to Corinne at our next MoneyMastery Ask the Expert Class on May 14th.  She will be speaking on the topic: Is Now a Good Time to Invest in Real Estate? If you’re not registered for the MoneyMastery program yet, contact Karin to find out more.

Sheila Walkington is co-founder of the Women’s Financial Learning Centre.