Money Mechanics

Welcome to MoneyMechanics.net! We are a team of consultants who offer effective financial services that your typical financial planner cannot. Click here to learn more About Us and our Consulting Services. One of our most unique and most effective services is our ability to save our clients as much as 100% of their yearly income tax – click here to learn more about it.

This post originally appeared on Money Smarts Blog at www.moneysmartsblog.com

Most people who work with financial advisors honestly believe that they have an “excellent” advisor and that they only have their best interests at heart. I can’t even begin to tell you how many times I’ve shown, in excruciating detail, to people how their financial advisors are skinning them alive (financially, of course) and in the end they say, “Yes you’re right, but I’ve been with my financial advisor for so long and I couldn’t bear leaving him.” That almost makes as much sense as eating a stack of double bacon cheeseburgers in order to prevent yourself from having a heart attack.

The purpose of this article is to open your eyes to how the financial industry works and to help you realize that the system is built to put the financial institution first and the clients second. Hopefully the information contained in this article will significantly help you when you are choosing a financial advisor.

Of course, there is the odd financial advisor who really does have your best interests at heart and I apologize in advance if that really is the case. As for the rest of you, here is why your financial advisor should be locked away in a small room with a large alligator for all eternity:

Financial advisors are paid by commission

Whenever you, the client, buy a product from your financial advisor your advisor receives a nice fat commission for his or her efforts. That having been said, there is a very good reason why most of your advisor’s financial plans are product-centric.

Want to retire comfortably? Invest all the money you can into mutual funds!

Don’t have enough money to invest in mutual funds to sustain that comfortable retirement? Take this loan!

Oh and what happens if something happens to you that affects the repayment of your loan? You need life and creditor insurance!

And don’t forget to add all these useless riders that you really need!

Any good financial planner knows that your first step to increase profits should be to cut your expenses as much as possible, so why do they tend to brush over most peoples’ largest expense – taxes? That’s because they earn higher commissions from selling you mutual funds than they do from tax saving and debt reduction strategies.

According to Statistics Canada, the average family paid 42.6% of their income in taxes last year. That also means that the average family spends January to March working for free. Think back to all your meetings with your financial advisor, how much time did you spend talking about eliminating taxes versus investing? I’m willing to bet a lot of money that most of the time was allocated to the latter option. If you’d like to learn more about our tax situation in Canada, please read my article here.

Of course, maybe all the blame shouldn’t lie with these lowly financial advisors. Maybe the real culprits here are the ones that trained these advisors, the ones that spent many hours and thousands of dollars developing the advisors’ minds to think the way they do today. Is it possible that the financial institutions are really the ones to blame here?

The financial institutions want your money

In an article I wrote describing why mutual funds are horrible investments, I referenced a television interview with John Bogle, the founder of Vanguard Group (one of the largest mutual fund companies in the world). Here is what he had to say about mutual funds (the most sold product by financial advisors):

“The financial system put up zero percent of the capital and took zero percent of the risk and got almost 80 percent of the return. And you, the investor in this long time period, an investment lifetime, put up 100 percent of the capital, took 100 percent of the risk, and got only a little bit over 20 percent of the return. That’s a financial system that’s failing investors because of those costs of financial advice and brokerage, some hidden, some out in plain sight, that investors face today. So the system has to be fixed.”

Yes, you read that correctly. This is what thousands upon thousands of financial advisors are selling to their clients every single day.

The financial industry operates under four rules to make as much money as possible:

1. Get your money
2. Get it often
3. Keep it as long as possible
4. Give back as little as possible

Did you notice how all the financial plans offered by advisors always insist on systematic deposits? Did you notice how these plans span dozens of years into the future? And how many rules, taxes and penalties did you have to jump over in order to get your money back?

The fact of the matter is, the financial institutions want to keep your money as long as possible to keep making more and more money off of you – as the founder of Vanguard Group just told us.

Conclusion

To be completely honest – I can’t blame the financial institutions for operating this way. If I had access to a product that would have a third party absorb all the risk and provide me with the bulk of the profits, I would use every single man, woman, child and household pet at my disposal to sell as much of this product as humanly possible.

This is exactly what the financial institutions do.

There is only one difference – now you know the truth! What you decide to do with it is up to you.

Here is what you should look for in an advisor.

We’ve all heard Will Roger’s famous advice to “Buy land because God ain’t making any more of that” and it seems that the people have been doing just that. The markets in Toronto have been hotter than the Sun for the last while, with annual home sales rising from around 30,000 in 2000 to nearly 50,000 as of year to date and prices ballooning from roughly $225,000 to $375,000 on average (data from the Toronto Real Estate Board).

Now, anyone that knows me will know what I’m going to say: of the 50,000 people that bought houses this year – 49,999 of them made terrible investments. Although, I’m sure 40,001 of them made excellent decisions if they decide not to look at the home purchase as an investment. The rest probably bought homes they could not afford and are barely making ends meet – may their bank accounts rest in peace.

For those of you that still insist on investing your hard earned money into real estate, I am going to have to insist that you keep far away from our hugely over-saturated markets in Toronto and other metropolitan areas and instead go global.

Why global?

Well, as of right now most people are fighting tooth and nail over a piece of property with a backyard the size of a small mini-van that cost $150 per square foot to build (the average construction cost in Toronto) for well over $250 a square foot with limited growth prospects. Not only that, but prices have been doing almost nothing but rising (not in a good way – due to a high demand with an abysmal supply). Soon people will have to be taking out $500,000 mortgages to purchase a small shack – does this scenario seems like it abides well by the age old investment advice of “buy low and sell high”?

Compare that to Martin (he is one of our three treasured consultants) and how he was brokering a deal down in Costa Rica. Now, imagine the most beautiful patch of land that you will ever see – imagine it with lush foliage, at the top of a giant hill with a view of the ocean and imagine it spans 50 acres. Got the image? Good. Now multiply the beauty of that image by about 400 and that’s what this property was like.

So, what do you think this property would sell for – $5 million? $2 million? Try $380,000. Yes, you read that correctly.

Granted, at the top of the market this property was listed for $1.6 million, but over the last couple years it dropped to less than a quarter of its original price. Something tells me most of you reading this will attack me, saying that if you purchased the property and it had already fallen that much, what’s to say it won’t fall anymore? Well, historically speaking, prices almost never depreciate to less than a quarter of its value – meaning if you are buying something for 25 cents on the dollar, you can pretty much bet that you are getting in at or near rock bottom.

So, why would such a fantastic property be selling for so low?

Well, first of all, this was smack-dab in the middle of the credit crunch with real estate prices plummeting faster than the judge’s hammer when sentencing O.J. Simpson on his second conviction. Also, the developer was in the middle of a very bad divorce and as a result was in a very bad financial position (whoever said nobody wins from a divorce?).

Of course these types of deals are far and few in between but they do exist, and there are certainly more of these deals that exist in global markets than they do in our overly saturated Toronto.

Even just last week we met with the brokers of a substantial real estate deal in Barbados who are currently building a gorgeous resort there. If you get in during the pre-construction phase not only do you receive a prime piece of real estate (fractional ownership or outright) that is in a prime location with massive growth opportunity but you are also given a 14% compounded annual interest rate secured byland if you decide to back out of the deal before principal construction starts in a few years.

Where can you find a deal like this in Toronto? Can you even find a deal like this somewhere in Canada?

The fact of the matter is, the more people get into the markets up here (and they certainly are) the less great options we will have – or at least we will have to pay a significant premium for them.

Many of us have to get out of our comfort zones and look for opportunities abroad. If you are prepared to make a four hour trek down to check out a potential property with limited prospects, why not make it a three hour plane ride to a property with unlimited prospects instead?

Unfortunately, the world we live in isn’t perfect. As much as we would like to believe that our financial advisors are the descendants of fuzzy unicorns and are the epitome of ethics, oftentimes the sad reality is that they put their own interests in front of ours.

Now, we must all remember to put down our torches and pitchforks and wash away our putrid hate towards these seemingly selfish advisors for they, a lot like us, have their own families to feed. The secret, instead, is to simply know how to avoid the advisors that would rather line their own pockets over yours. Or if they do intend to line their own pockets, we want to make sure that their pockets are lined based on the performance of our financial plan.

Hopefully, this guide will be able to help you choose a financial advisor that fits you better than a glove…forged out of gold…encrusted with rubies.

Look for the following characteristics when considering your advisor:

Listens, Interprets, Implements

Does the advisor listen to what you have to say and implements strategies based on who you are? No two people are identical (even identical twins) therefore no two financial plans should be identical. Remember, what worked for Rooney may not work for Carlos. Your advisor must understand you.

Also, any good financial advisor knows that the customer is not always right – there’s a very good reason why you are seeking their expertise! If you were always right then you would have no need for your advisor, that’s why if you find them agreeing with every word you say – be very weary.

Looks at the big picture

Does your advisor take a holistic approach to financial planning and look at your entire financial standing or does he/she only focus on one or two areas? Advisors tend to make the biggest commissions from selling mutual funds and life insurance, so naturally they will focus on those two aspects the most.

Anyone that took accounting in high school knows that the first step to increase profits is to decrease expenses – that is precisely why the first thing you should talk to your advisor about is how to decrease the tax you pay each year. Many advisors will brush over this subject as quickly as possible as they make very little money by saving you tax (or getting you out of debt for that matter).

Most advisors will recommend you invest money into an RRSP (Registered Retirement Savings Plan) and to invest the money in the RRSP into mutual funds (which they get paid for). What they won’t tell you is that you can achieve the same results by simply depositing money into your RRSP without being exposed to mutual funds… which brings me to my next point:

Tells you like it is

If your financial advisor recommends you invest money into mutual funds and doesn’t tell you that expenses, taxes and inflation will almost completely eliminate any viable return plus the fact that mutual funds are as likely to under-perform the markets as they are to outperform them then you have a problem.  Either your advisor is outright lying to you or simply doesn’t know any better (which is oftentimes the case). If you would like to find out more about why mutual funds are some of the worst investments that have ever existed, please read this article.

If you have any questions, no matter how tough, your advisor should always answer them – and honestly.

If you ask him or her how they get paid by taking you on as a client, they must answer.

For instance, we always tell our clients how we are compensated for our services when asked. For certain services that we offer, yes, we are paid via commission. But you also want your interests to align; for example: the more tax that we save you, the more we are paid.  On the other hand, in regards to life insurance, we are paid commission depending on the type of policy and face value that you get.

[Apologies for that shameless plug!]

They are knowledgeable and aren’t afraid to hide it

Your financial advisor shouldn’t only be knowledgeable about his/her own offerings but should also know a great deal about other offerings that they do not or are not able to offer as well.

You want your advisor to be able to explain why one financial product is better than another and, more importantly, why this particular product is more suitable for you. They should be able to list all other alternatives at the snap of a finger and, if necessary, to explain what they are, how they work and how they affect you – in detail.

Also, if you ever mention that you are working with another financial professional (such as an accountant) and that you might want to run through the suggested plan with that person for a second opinion, your advisor should jump at the chance to sit down with the rest of your financial team and discuss Project YOU. If your advisor knows what he/she is talking about and stands by it, they should have absolutely no problem having a chat with other financial professionals and standing by their recommendations.

In Conclusion

If your prospective financial advisor meets all this criteria then you have little-to-no reason not to do business with this person!

[Another shameless plug: We would like to believe that we, your friendly neighborhood Money Mechanics, meet (and, in some cases, even exceed) all of the preceding criteria. Then again, that’s for you to decide!]

The reason I am writing this article is because whenever I tell anyone the fact that I can show them how to save as much as 100% of the income tax they pay every year for life they ask me the same two to three questions every single time.

The first question is an exaggerated “Really?” with a look of complete shock on their face (I’m assuming because they realized how much tax they’ve paid for no reason throughout the years).

The second question they ask, now more serious and oftentimes suspicious, “Is it legal?”

And the third question, “How is it done?”

First of all – yes, you can in fact save as much as 100% of the income tax you pay each year – guaranteed.

And yes, it is 100% within the confines of the law.

Now, for the fateful question – how is it done?

According to the definitions, guidelines, and parameters of the Income Tax Act (1917) of Canada, the deduction of any and all expenses regarding, stemming from, or incurring from the cost of doing research, exploring solutions or promoting investments are 100% tax deductible.

That having been said, research and development companies require cash to continue their day-to-day operations. The companies can be researching and developing solutions in the water purification, agronomy, natural health or electromagnetism sectors.

As most us know, millions of dollars are spent on research and development projects without any commercial realization of their solutions – which then leads to millions of dollars in losses.  For instance, there are myriad of companies researching a cure for cancer. Did any of them turn a profit yet?

Now of course the research and development companies can write off their losses for a 100% tax deduction as according to the Income Tax Act of Canada, but what they really need is new cash to fund new research – this is where we come in.

If you find yourself still scratching your head, let me explain further.

In order for the research and development companies to acquire new cash, they are willing to sell their losses for cash. In order for the individual tax payer to save tax, they are willing to purchase the losses for cash. Everyone wins.

If these losses are purchased at a certain quantity that is proportional to the income tax the person pays each year they will be able to deduct 100% of their income tax. The method and quantity of which you purchase these losses in order to save you all the income tax you pay is where we come in.

If the idea of potentially never paying income tax in your life again is something that sounds enticing to you, let’s set up a no obligation meeting and we can show you how to achieve this. As mentioned many times on this website – we absorb the entire cost of the initial consultation (e.g. time, transportation, energy, mental stability, etc).

Another question that I am typically asked is, “Why hasn’t my accountant or financial planner, who is extremely knowledgeable, offered this to me?” They haven’t offered it to you because they either:

a)      Didn’t know this strategy exists;

b)      Didn’t think it was possible on a smaller scale (corporations of all sizes such as Wal-Mart do the exact same thing for their income taxes);

c)       Don’t know anyone that deals directly with research and development companies in order to set up tax saving strategies such as this one.

In fact, we do encourage you to discuss this tax saving strategy with your accountant or financial planner. If they have never heard of this tax saving strategy then perhaps they would like to have another service they can offer their clients. On the other hand, if they are familiar with this tax saving strategy, they can vouch for its effectiveness.

And just so there is no mistaking it: this program is not anything even remotely similar to the “buy low, donate high” charitable donation programs that have been prominent in the last decade and neither is there any investment into a company’s stock whose value can fluctuate and therefore generate losses, such as the case with flow through shares. In other words, it is not an investment whose value will fluctuate and can lose you money.

If you have any more questions about how it all works, please contact us or even leave a comment at the end of this article. Better yet, let’s set up a meet (phone or in-person).

I’m assuming that the reason most people invest their money is to make more money. That seems like a reasonable assumption, wouldn’t we agree?

I would also assume that before most people decide to invest their hard-earned money they would investigate many different kinds of investments in order to find the one that suits them best. I would assume that some of the criteria they would investigate would include: risk, expected rate of return, expenses, work-load and whatever else they feel is important. I assume this because this is exactly how I choose which investments are right for me.

So, my question is: if people are looking for an investment that has a relatively low amount of risk, a decent rate of return, a small number of expenses, and a nigh existent work-load, why in the world would someone invest their money in a house?

Wait a minute – did this lunatic just imply that a house is a risky, low-yielding investment!?

Yes, yes he did. Let me explain:

A house is a risky investment

Any astute investor knows that diversification is crucial to protecting him/herself against risk. In which case, according to the Vanier Institute of the Family, why do Canadians have roughly 48% of their wealth tied up in real estate?

You have to remember, a house can’t be divided up and sold like a stock portfolio – it’s more like having an entire stock portfolio consisting of just one stock. As Moishe Milevsky (a professor at the Schulich School of Business at York University) says, “If I could buy a house where the bedroom is in Toronto, the kitchen is in Vancouver, and another bedroom is in South America, then that’s a diversified house.”

This is probably the point in which you seriously consider throwing a heavy object towards my general vicinity, stating that home prices always seem to be rising. At this point in time, I will point you to the 1989 speculator-driven housing bubble in Toronto that burst in 1989, with prices only recovering in 2007 (in real terms, factoring in inflation).

Can you imagine waiting 18 years to break even (if you had bought your house at the peak of a bubble)? That’s almost as bad as working for 17 years of your life for free.

A house is an expensive investment

Home inspection fees, appraisal fees, land registration fees, legal fees, title insurance, maintenance fees, property taxes, mortgage payments, moving costs, down payments, new home warranties, loans for furniture and appliances…does any of this sound familiar? All of these fees can easily amount to many thousands of dollars.

In fact, according to renowned personal finance authors Eric Tyson and Tony Martin, a home usually needs to appreciate by at least 15% in order for the buyer to break even after all the transaction and maintenance costs. That’s $75,000 for a house that was purchased for $500,000; and that doesn’t even include taxes or cost of new furniture and appliances.

Do you know how long it will take you to make that 15% back? Which leads me to my next point…

A house is a lousy investment

You may heard of your cousin’s friend’s mistresses’ daughter who made a killing by selling her house but, when you get down to the bare details, it’s more than likely that you should actually be sending her your condolences as opposed to praise and awe.

When taking inflation into account, according to Harvard professor Edward Glaeser, home prices increase on average of 1.7% annually. According to Milevsky (the guy mentioned earlier), Toronto provided the best return out of a dozen Canadian cities in the last 25 years – 5.75% (not including inflation).

Remember how your home needs to grow in value by at least 15% to break even from transaction and maintenance costs? With that growth, good luck!

In the end

In the end, a house provides a roof over a family’s head – a benefit no other investment can offer you. The problems begin when you start calling your home an investment as it can be an extremely lousy one at times – especially if it represents the bulk of your investment portfolio. If your main intention to purchase a home is for investing purposes, then you would be much better purchasing global real estate as opposed to our horrible offerings in these saturated markets. Remember, when you are looking to purchase a home you have to make the distinction of whether you are looking for a place to live in or an excellent investment (such as gold).

Saying that the key to wealth lies in mutual funds is the same thing as saying that smoking is the key to healthy lungs – it just doesn’t make any sense.

Mutual funds are typically sold by financial advisers on the premise that they give small investors access to professionally managed, expertly diversified portfolios of equities, bonds and other securities. At first glance that premise sounds quite enticing, a professionally managed and diversified portfolio of equities?   Giving small investors a chance to invest like the big fish out there? Who wouldn’t want to be a part of this magic!

That’s until you actually invest in said mutual funds and learn of the myriad of hidden (and not-so hidden) fees, the lack of transparency and the fact that the mutual fund companies make more money off of your investments than you do. And I’m not even going to go into the extreme bouts of volatility that mutual funds and any other market-based investments  (such as stocks or ETFs) are prone to, but simply the unique detriments of mutual funds.

Here are a few reasons why you should toss your financial adviser off a cliff for selling you mutual funds:

Fees, fees and more fees

The longer you invest in a mutual fund, the more you pay in fees. Mutual funds aren’t like stocks or real estate where you simply pay sales commission once; you pay every single year (called a management fee). This is one of the main reasons why financial planners recommend you invest for the long term – because the longer you keep your money invested, the more money they make.

Here are some more fees you can generally expect to pay with mutual funds:

-          Management fees (roughly 2% per year)

-          Front load fees (which is payment for simply giving them the money)

-          Back end fees (payment for taking your money back)

So, next time your financial advisor shows you a nice big chart of what your money is going to look like in 20, 30 or 40 years if invested in mutual funds – don’t believe them.

Lack of transparency

There is absolutely no way you can possibly know what the “professional” fund managers are doing with your money. Your monthly statement may show what securities your mutual fund has in its arsenal, but you have absolutely no idea (nor control) as to how they were chosen.

A message from our friendly neighbourhood mutual fund founder

In an interview on the TV show “Frontline” John Bogle, founder of Vanguard Group (one of the biggest mutual fund companies in the world) had this to share about the running of mutual funds:

The financial system put up zero percent of the capital and took zero percent of the risk and got almost 80 percent of the return. And you, the investor in this long time period, an investment lifetime, put up 100 percent of the capital, took 100 percent of the risk, and got only a little bit over 20 percent of the return. That’s a financial system that’s failing investors because of those costs of financial advice and brokerage, some hidden, some out in plain sight, that investors face today. So the system has to be fixed.

So after reading all that, do you still want to have your money invested in mutual funds?

If you answered a resounding “NO” to the preceding question or simply want to find out more, let’s meet up and discuss your options.

Major countries’ economies are falling like dominoes, world-wide debt is at a record high, governments are printing new money by the shipload, major currencies are depreciating faster than a housewife’s bank account on a shopping spree and, if that wasn’t enough, apparently the world is going to turn into a fiery ball of flame (thank you global warming!).

You’ve probably heard on the news about the trillions of dollars in bailout money that the United States (and now European governments as well) has been handing out like hot cakes to anyone that can officially prove they own a tie. I’m not going to argue about whether or not these efforts proved effective or what should have been done instead, but I will bring your attention to an underlying problem that all this spending causes: inflation.

Where do you think all of these trillions of dollars come from? No, unfortunately the US government does not follow common personal finance advice and have a rainy day fund (kind of hard when you’re trillions of dollars in debt). Actually, they just print this money – out of thin air (or paper).

And what does all of this printing of money entail? That’s right, inflation.  For those of you that slept through Grade 11 Economics, inflation simply means when your dollar can buy less today than it did yesterday. Remember all those times those darn bartenders diluted your martini with water, thus diluting the taste and effect of the martini itself? That’s exactly what is happening with our currency today, the new money is diluting the value and effect of the old money and thus making the final product inferior.

Let’s recap what we know: the government is under a crippling amount of debt and it’s only putting itself further and further in debt by printing more and more money. Not only is the value of the dollar falling faster than a ton of bricks but one must ask, how much longer can this possibly be sustained until the entire structure collapses underneath its own weight? Not long.

So, what can an ordinary person such as yourself possibly do so as not to be adversely affected by this impending financial doom? Get rid of all your cash and put your money into something that will always holds its value, is an excellent hedge against inflation, an even better hedge against deflation, something for which the value only rises over a long-term period as demand increases and is a fortress of stability in uncertain economic times.

Does such a thing even exist and if it does what is this magnificent specimen? Gold is the answer.

Click here to learn more about why you should have your money in gold.

You constantly hear the talking heads on the news commanding you to throw out all your other worthless currencies and investments and put all of your money into gold before the world collapses in on itself. “Buy why?” you ask.

Well, that’s exactly what I’m going to explain to you now.

Gold holds its value

Unlike buckets of cash, coins or other assets, gold has always maintained is value throughout the ages (going back thousands of years). If gold has been used as a way to pass on and preserve peoples’ wealth since the Dark Ages, what would make it stop now?

Gold as a hedge against currency weakness

It’s no secret that the US dollar isn’t faring so well lately but that’s not exactly a bad thing for those that own gold. As the value of the dollar falls, people flock like starving sharks towards the security of gold, which catapults gold prices upwards. Think back to the currency fiasco between 1998 and 2008 when the price of gold nearly tripled as a result of the United States’ economic woes.

Gold as a hedge against inflation

Historically, gold has been a more than excellent hedge against inflation, and you can bet we will experience a whole lot more of it. In the five years in which U.S. inflation was highest (1946, 1974, 1975, 1979 and 1980) the average real return of the markets was -12.33% as opposed to 130.4% for gold.

Gold as a hedge against deflation

As mentioned earlier, people flock to gold in times of economic distress – deflation is defined as a period in which all prices contract (that includes your salary). So, what do you think will happen in this situation? You got it.

Gold as a hedge against political instability

Tensions rise, bombs drop, war happens, politicians scream at each other – that’s life. In times like these people need to flock to something that will remain safe after everything is obliterated to smithereens, can you guess what they will flock to? Gold prices actually tend to rise most when confidence in governments are low.

Gold supply and demand

According to the economic commandments of supply and demand, if demand for something is high and supply is low, prices will rise. Taking into account that the production of new gold mines has been declining since 2000 and that it can take as long as five to ten years to bring a new mine into production, we can see that the supply of demand is only falling whereas the demand for gold is only rising (due to our not-so excellent economic status as of late). So, where do you think gold prices are going to go according to the rules of supply and demand?

So, the real question you should be asking yourself right now is, “Why don’t I own more gold?” It’s a very good question and it is one that we can help you solve. Let’s set up a no-obligation meet to talk about your options.

If you have ever lived in Canada or do live in Canada, it probably won’t come as a surprise to you to find out that we are paying A LOT of taxes. I still have yet to find someone who visited our fine country and has not complained about our impressive variety of taxes and proceeded to brag about the superiority of their homeland in a condescending tone while twirling their mustache.

Don’t believe me? Do any of these look familiar?

Income Tax, Canada Pension Tax, Employment Insurance Tax, Health Tax, Harmonized Sales Tax (the one that’s been causing this entire ruckus lately), Gasoline Tax, Liquor Tax, Tobacco Tax, Excise Tax, Environmental Tax, Sewer Tax, Electrical Delivery Tax, Debt Retirement Tax, Union Gas Delivery/Transportation Tax, Cell Phone Tax, TV Tax, Property Tax, WSIB Tax, WHIMIS Tax, Manufacturing Tax, Corporate Tax, Capital Gains Tax, Estate Tax, Driver Tax, Passport Tax, User Fees, Permits, Professional Licensing and Trade Licensing.

Are you still with me? Good.

What would you do with an extra 40,000 dollars a year?

According to the Statistics Canada, the average Canadian family paid $37,700 (42.6% of income) in taxes in 2009. That’s $37,700 that you can’t use to feed your family (or buy expensive sports cars, for those swinging bachelors out there). That also means that for five months out of the year you work in order to pay the government taxes.

Let’s assume that you enter the workforce at age 23 and retire at age 65 like the vast majority of us – that’s 42 years of work. And let’s assume that on average, approximately 40% of your income will go towards paying taxes (a bit less than the 42.6% quoted earlier) – that means that you have spent just under 17 years working for FREE. For 17 years of your life you dragged yourself out of bed in the wee hours of the morning after hitting the Snooze button four times, spent half an hour sighing and yawning in front of the closet while thinking what to wear, dropping the kids off at daycare, sitting in traffic on the way to work, dealing with the onslaught of mind-numbing minutiae at work and sitting in traffic on the way home from work, all to repeat the process the next day – all for nothing.

Oh and over that same time period,  you and your family also miss out on an average of  $1.6 million. Can you imagine what kind of house you could buy with $1.6 million?

Thank you income taxes.

Sure all that money pays to cover that annoying pot hole you drive over every morning and curse into the sky as you nearly spill steaming hot coffee over your lap or to build fake lakes for G20 conventions in Toronto in order to educate the masses about our wonderful cultural history. Yes, these things are crucially important for the functioning of our wonderful nation, but how much nicer would all that money look in your bank account?  Would you be able to live with running over a pot hole every now and then in exchange for not having to work from January to May for free? I know I would.

So, if there was a solution to significantly reduce the amount of income taxes you pay each year, would you be willing to sit down with someone to find out how?

If you have answered yes to either of the above questions then you are in luck! Yes, there is a way to pay less income tax – click here to learn more.

It’s probably not too far fetched of a thought to assume that nearly everyone at one point or another asks themselves the fateful question, “Do I need life insurance?” Well, the answer is: it depends.

Do you have a life? If you have answered yes to the preceding question then chances are, yes, you do need life insurance.

But in all seriousness, if you are married, if you have children or if you want to leave something behind for your beneficiary when you die then you need life insurance. Basically, at one point or another, everyone will have a need for life insurance (unless you never marry or have children…then I’m sorry for you!)

Would you ever seriously consider driving a car without auto insurance? Would you ever seriously consider owning a home without home insurance? So why would you ever consider living without insuring your livelihood?

Let’s take a look at case study to illustrate my point:

Steve is a Canadian in his early 30’s and has been married to Janet for five years, who is also in her early 30’s. They have a son who is eight years old. Together they rake in an income of $150,000 and have a house worth $500,000 with a mortgage of $350,000. They have two cars financed with $30,000 in loans and $60,000 in their RRSPs combined. The plan is to have the house fully paid off and retire with $2 million in retirement savings as well as pay for the son’s education. All in all, this is a very typical Canadian family.

Now what happens if one day, on one of his yearly check-ups, Steve finds out that he has cancer and as a result of his treatment will not be able to work for a year? What happens if his treatment proves unsuccessful and he dies?

Suddenly, all of the family’s perfect financial plans are thrown out and they are left with half of their original income, expenses the size of Wisconsin and, to top it all off, they have to cope with the emotional burden of losing a husband and a father.

No matter how perfect you may feel your financial plan is, the reality is that from just one unexpected event it will all be worthless – that is unless you have insurance.

Had Steve taken out a Critical Illness Insurance policy on his life, he would have received a big sack of cash (tax-free) in order to combat his cancer and help feed his family. Had Steve taken out a life insurance policy, his family would have been taken care of when died; no need to sell the house to pay off expenses and his son would be able to afford to attend the university of his choice.

Please, don’t put yourself in the same position.

What kind of insurance do I need?

Click here to find out.