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Personal Finance 101 with WealthBar
- 1. PERSONAL FINANCE 101 brought to you by
- 3. STRONG TO THE FINISH http://www.wealthbar.com/plans/start
- 5. RENTING VS OWNING Who will win? http://www.qwantz.com/index.php?comic=1636
- 6. MYTH #1 “Real Estate is a superior long-term investment”
- 7. MORTGAGE INTEREST MAINTENANCE UTILITIES STRATA FEES TAXES MYTH #2 “Paying rent is paying someone else’s mortgage”
- 8. It’s not a W. Van mansion but it’s ok. I can’t wait to start rain screening Oak and 7th Ave. - 964 sq. ft. GEORGE & LAURA $550k Vancouver Condo
- 9. Downpayment $110,000 Monthly Costs $2,950 Closing Costs $14,000 Appreciation ~3%/yr Comparable Rental $1,800/mo Investment Return ~5%/yr GEORGE & LAURA Costs of Housing
- 10. Owning Home $740k Mortgage ($302k) Closing Costs Renting ($29k) Investments Total $383k $409k Difference $383k $26k GEORGE & LAURA 10 Years Later
- 11. INSURANCE What is it good for!? http://www.qwantz.com/index.php?comic=1349
- 12. WHEN YOU NEED INSURANCE Marriage New Home Children
- 13. WHY YOU NEED INSURANCE Covering Debts Replacing Income
- 14. HOW MUCH IS ENOUGH? George Income Laura $35,000 $90,000 Mortgage $440,000 Children None Coverage $500k (T-10) @ $31/mo $1,150k (T-10) @ $59/mo
- 15. ADVANCED NEEDS • Tax owing at death • Charitable giving • Estate equalization • Legacy
- 16. COST OF INSURANCE Smoker Status Health Gender $$$ Size of Benefit
- 18. TERM VS. PERM $35,000# $30,000# $25,000# $20,000# $15,000# $10,000# $5,000# $0# 34# 44# 54# 64# 74#
- 19. DISABILITY The ability to work is your greatest asset • 42% chance of needing long term disability (90+ days) by age 65 • Some statistics on LTD • 8 times more likely than dying • 12 times more likely than a serious auto accident • 22 time more likely than a house fire • Average duration of LTD • 2.6 years @ age 25 • 4.9 years @ age 55
- 20. GROUP DISABILITY Not always enough • May be cancellable • Premiums may not be guaranteed • Regular or any occupation? • Coverage is not usually transferrable to another job/company
- 21. THE PRICE OF ADVICE Who is your advisor and what do they do? http://www.qwantz.com/index.php?comic=1076
- 22. QUESTIONS TO ASK • How is your advisor paid? • Who actually pays them? • What is advice you get? • Are you getting valuable advice?
- 23. 5% Cash Cash 5% Bonds 35%! 35% Bonds 60%! Stocks Stocks 60% COMMISSIONS & FEES On a typical mutual fund
- 24. Fund! Manager! 0.6% Advisor! Commission! 1% 2.35% Operations! 0.75% COMMISSIONS & FEES On a typical mutual fund
- 25. WHO WORKS FOR WHOM? Seeks advice Recommends investment Provides investment and pays advisor
- 26. WHO WORKS FOR WHOM? Issues with Commissions • Compensation by fund manager not you • Lack of transparency • Fees not deductible • Bias towards riskier investments (higher commissions) Typical Commissions Fixed Income (Bonds) Balanced Equities (Stocks) 0.5% 1.0% 1.15%-1.25%
- 27. WHO WORKS FOR WHOM? Seeks advice Pays advisor fee Recommends investment Provides investment at a reduced cost
- 28. FEE BASED ADVISOR • Charge fees directly based on assets managed (0.5-2.0%) • Forgo or refund trailers and commissions (only get paid once) • More transparency • Less biased investment recommendations • Bonus: Fees can be tax deductible THE ADVISOR WORKS FOR YOU NOT THE BANK
- 29. WHO WORKS FOR WHOM? which is better? • Both advisors earn a fee • Fee-based is less common for smaller portfolios (for now…) • What to look for… • Proper accreditation (CFP, CIM, CFA) • Transparency: Shows you your track record • Just investment advice or holistic financial planning?
- 30. DOING YOUR RESEARCH Online Research Tools
- 31. DOING YOUR RESEARCH Volatility and Risk
- 32. DOING YOUR RESEARCH Fees and Costs