Four Tips to Keep Your Household Finances on the Right Track

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By Erin Gendron, January 11, 2019

With a new year and the end of an often overindulgent holiday season, the “let’s get organized” side of me kicks into high gear. As with most people, it’s a time to reflect on what’s going well and what new opportunities lie ahead.

Top of mind for many is, unsurprisingly, household’s finances. According to a recent Forbes article, more than half surveyed wanted to save more in the coming year.

How to plan, be smart and make the most of every dollar while juggling multiple household financial priorities can be daunting. A financial planner by day and a wife and mom by night, I’ve put together four tips to help start you and your family down the path to money mindfulness in 2019.

Build your budget

You need to know where you’re starting from to know where to go next. For this reason, I’m going to come right out and say it: you need to prepare a budget.

Begin with a simple income vs. expenses (fixed and variable) = surplus or deficit, as well as a basic idea of your family’s net worth (net worth = assets – liabilities).

This is the hardest, most time-consuming part – and sometimes what stops us from even getting started. Let me assure you it’s well worth your time. Make use of great apps like mint.com or an Excel spreadsheet. If all else fails, break out your trusty pen and paper – whatever it takes.

Positive cash flow is key

Next, track your spending and understand where your money is going – in the financial world, this is called your cash flow. Is your cash flow positive or negative every month? Which direction is it trending?

An app like mint.com links all of your bank accounts and credit cards into one spot and makes this process relatively painless.

Remember the bigger picture

The third step is to think about what your bigger, long-term goals are – like retirement, child’s education, buying a recreation property or starting a business.

My husband and I had our kids in our mid-late 30s – a reality for many Canadian families. This means raising children, helping them pay for an education plus saving for retirement will become competing priorities over the next 20 years.

A big mistake is putting off retirement planning simply because it’s the furthest away. Don’t wait for a time when you can “afford it” – by that point it’ll be harder to make up for lost time. That’s because the power of tax free compounding, dollar cost averaging and good savings habits have a bigger payoff the sooner you start.

Small steps you take now will have a big impact later.

Insurance: What no one enjoys talking about it

A last consideration that can’t be overlooked: Insurance and Wills.

Having put some hard work and thought into your family’s financial plan, it’s worth going the extra step to ensure it’s all protected.

Specifically, when you have dependents, insurance and Wills are non-negotiable, as you don’t have the saving level to “self-fund” in the event of a worst-case scenario. Some questions for you and your partner to consider include:

  • Have we agreed on who will look after our children should something happen to both of us? How would this person cover the additional expenses?
  • If we were suddenly without one person’s income, would we be able to maintain our family’s standard of living? Most employees have life insurance that includes one or two times their salary but this is rarely enough.
  • Do we have a plan in place to carry on in the event of a disability or a critical illness?

The ability to earn an income is your biggest asset – especially when your children are small, debts are high and savings are low. Without this, even for a short time, the financial impact to your family could be severe.

Although it’s not a simple task, once you’ve thoughtfully taken the steps above, you can begin putting together a real life plan, one that gives you more confidence and peace of mind to move forward with clear goals and purpose.

And remember to review your plan periodically. It’s meant to evolve over time and to adapt to your family’s changing needs, wants and priorities.

This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

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Marketing Your Small Business

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By iA Private Wealth, October 04, 2021

Having a strong brand identity is one of the best ways you can differentiate your business from the competition. Whether it’s new or established, every business can benefit from effective marketing to enhance brand awareness and generate strong leads.

Marketing a small business takes commitment and persistence, but it doesn’t need to be onerous and you won’t need an outsized budget. Also, today’s online technological capabilities can make brand marketing very accessible and highly effective.

Here are five basic tips to help you build a solid plan to market your small business:

  1. Define your audience. Most small businesses are not geared to everyone, so identify your target audience. It’s useful to create sample profiles (known as “personas”) of the types of clients you want to attract. A persona will capture details like age group, job type, income, location, objectives, challenges, how someone likes to be engaged by a business, etc. Once that’s done, you can better understand your typical client (e.g., what they need, why they need it) and customize your marketing efforts so you can resonate with your niche audience.
  2. Define your value proposition. You might know your products or services are better than the competition, but your potential clients may not. That’s why it helps to create a value proposition highlighting how you can meet your clients’ needs and why they should choose you (e.g., maybe you’re faster and less expensive, or offer superior personalized service). Think about your business in relation to others in your field, and clearly articulate specific points of differentiation and reasons why you provide better value.
  3. Leverage referrals.It’s powerful when your clients are “brand ambassadors” and spread the word about why they like your business. Referrals are a lifeline for business growth as many people would rather interact with a business their family or friends recommend than seek out a company blindly. Satisfied clients typically won’t mind referring you when one of their contacts needs your products or services. Some may leave positive online reviews about your business or be receptive to being quoted in your marketing materials – just be sure to explain how you intend to use their testimonial and let them see the quote first, in case they want to make revisions.
  4. Leverage social media. Business owners often turn to digital marketing to promote their business and brand. They maintain a professional-looking website that makes it easy to learn who they are, what they offer and how to conduct business with them. They also utilize social media to deliver their message and connect with clients and prospects, perhaps offering tips or information related to their business, and then linking to their website so people can find out more. You may also consider advertising on social media channels to raise awareness and engagement. Whatever social media strategies you choose, track their effectiveness in driving interest and growth, and focus on the ones best suited for your business.
  5. Use automation tools. As your online presence gains more visibility, you’ll want to engage further and turn prospects into clients. For example, automation tools can collect email addresses and other valuable details from people who visit your website. Then you can send promotions or offers that may spark greater interest in your business. Just be sure that all of your email marketing activities fully comply with CASL – Canada’s anti-spam legislation, as the penalties for non-compliance are quite stiff. You can also use automation tools to segment email campaigns (e.g., an email may target a certain region or people who display interest in a specific service or product). Online analytics tools will track traffic on your website and tell you what content is most popular and pertinent. Knowing what attracts clients and prospects helps you refine your marketing strategy so it better aligns with people’s interests and needs.

There’s more to marketing your small business and brand, but these five tips provide a solid foundation to build upon. If you want more help, reach out to professionals who can support your marketing needs. Your contacts may recommend experts they’ve had a good experience with.

For more insight on how to grow your small business, speak with an iA Private Wealth Investment Advisor today.

Small Business Owners: Partner with a Trusted Advisor

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By iA Private Wealth, September 30, 2021

While operating a small business is challenging, it can also be highly rewarding and provide business owners with autonomy as they pursue their passion. That’s why they invest so much time, effort and money into running their businesses.

However, without a comprehensive wealth plan, your small business may not reach its potential – even if it’s generating significant revenue.

Benefit from professional advice

Fortunately, an Investment Advisor can help build and maintain a sound plan that considers the complexities of your business and how it fits into your overall financial circumstances. An advisor can help your business be more efficient and profitable by assessing all your income sources and expenses. Equipped with that information, an advisor may uncover strategies for earning more and spending less, paving the way for growth.

Professional advice can help you address day-to-day business finances. For instance, business owners need steady cash flow to meet operating costs, cover wages, ensure adequate inventory and pay product/service providers. An advisor can also offer guidance concerning tax obligations and help you manage your business finances in a tax-efficient manner.

Invest wisely

While it’s satisfying to generate healthy business income and profit, it’s equally important to invest for the future, including retirement. That’s another area where Investment Advisors deliver meaningful value. Advisors consider your professional and personal financial situation, including short- and long-term needs and goals, and then evaluate whether you’re on track. Your advisor will help you invest according to your financial objectives, risk tolerance and time horizon. A concrete wealth plan keeps you focused and disciplined, empowering you to invest regularly and stay invested – even when markets experience occasional periods of volatility.

Plan for the future

While Investment Advisors encourage saving and investing for retirement, another key aspect of wealth planning is creating a viable succession plan. Eventually you’ll need to transfer ownership of your business. With a strong succession plan – ideally as part of an estate plan that your advisor may help create – you can maintain business continuity while gaining the peace of mind that comes with establishing your future financial well-being. A good succession plan provides clarity to your heirs regarding how (and to whom) you intend to transfer your business.

Choosing an advisor

There are many benefits of working with an advisor, but it’s crucial to select one who’s right for you. During your search, find out if a candidate has experience with small business owners, since this background will be useful when addressing your financial needs.

The advisor-client partnership is built on trust and a long-term commitment to the process. To determine if your personalities mesh well, interview each candidate and request references, preferably from other business owners. Also inquire about an advisor’s employment history, such as where they’ve worked, years in the financial industry and field of practice. You’ll want to know about their professional and academic designations as well (e.g., CFA®, MBA, CFP®, CIM®).

Another important question pertains to compensation. Some Investment Advisors earn commission for each transaction – like a stock or mutual fund trade – while many are compensated based on a percentage of the assets under administration. There are other ways to be compensated, so find an advisor whose compensation model suits your service requirements.

It’s also useful to ask about their professional network. While Investment Advisors offer a range of capabilities, your circumstances as a small business owner may call for specific knowledge in other areas. For instance, your advisor may engage the services of external collaborators* such as accountants, lawyers and insurance professionals. Consider your Investment Advisor as the “quarterback” of the team, overseeing your comprehensive wealth plan and bringing in others when needed.

You can’t be an expert at everything. Just as you understand your business and industry, an Investment Advisor has deep knowledge of finances. By delegating complicated financial matters to your trusted advisory team, you can concentrate on running and growing your business.

An iA Private Wealth Investment Advisor can help your business succeed. Speak with one today.

Give Your Child the RESP Advantage

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By iA Private Wealth, September 22, 2021

As the school year begins, many parents devote more thought to saving for their child’s post-secondary education. Truth is, it’s always a good time to think about funding education as the cost of schooling continues to rise.

One of the best ways to save for post-secondary education is through a Registered Education Savings Plan (RESP).

How RESPs work

There are two types of RESP accounts: individual and family. As long as the person opening the account (the subscriber) and the beneficiary (student) reside in Canada, anyone can open an individual RESP account. The subscriber of a family RESP must be the beneficiary’s parents or grandparents, but an advantage of family RESPs is that the plan may be designated for one or more children in the family.

You can contribute any amount to an RESP in a given year, but keep in mind the current lifetime limit is $50,000 per RESP beneficiary. While RESP contributions are not tax deductible, any investment growth within the plan will compound on a tax-deferred basis until the beneficiary heads to college or university.

To encourage saving for education, the federal government matches up to 20% of contributions each year – until the beneficiary turns 17 – through its Canadian Education Savings Grant (CESG) program. The maximum annual grant is $500 and the CESG lifetime limit is $7,200. If you don’t take full advantage of the CESG in a given year, any unused grant room may be carried forward, to a maximum of $1,000 granted annually.

The earlier you contribute to an RESP, the more your child will benefit from compound, tax-sheltered growth. RESP contributions can be invested in a wide range of products, including mutual funds, ETFs, stocks and bonds. Your Investment Advisor can help you decide which investments are suitable for your particular circumstances.

5 common RESP questions

  1. How many RESPs can I open?
    You may open as may plans as you wish at different financial institutions, but the lifetime combined contribution limit of $50,000 per beneficiary remains.
  2. How does my child use RESP funds?
    Contributions may be withdrawn to pay for the child’s qualifying post-secondary education program. Withdrawals from CESG (and other) grants, or the interest earned, can be used to pay for tuition, books or transportation. These withdrawals are taxed in the hands of the beneficiary, who is typically in a lower income tax bracket.
  3. Can I transfer an RESP to another child?
    Yes. For example, if one child does not attend post-secondary school, you may change the RESP beneficiary or add another child to an existing family RESP.
  4. What happens to unused RESP funds?
    RESPs mature after 36 years and unused contributions are returned to the subscriber. Any income from the contributions may be transferred (up to $50,000) to the subscriber’s (or their spouse’s) RRSP, or taxed at the marginal rate plus a 20% surtax. Unused CESG-related funds must be repaid to the government.
  5. Can I withdraw RESP funds?
    Contributions can be withdrawn tax-free at any time by the subscriber, but certain restrictions may apply on future CESG payments.

An RESP is a great vehicle to help save for your child’s education in a tax-efficient manner. To learn more, speak to an iA Private Wealth Investment Advisor.

Investing as a Post-secondary Student

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By iA Private Wealth, September 15, 2021

Apartment rented for the school year? Check. Class schedule finalized? Check. Laptop in good working order? Check. Investment portfolio optimized? Check.

If the last point seems out of place to you, you’re not alone. Most post-secondary students have many things on their mind, but investing usually isn’t one of them.

It should be. Paying bills and managing student debt are legitimate concerns, but so is planning for the future. As life progresses from school to career and possibly to marriage, home ownership and starting a family, building enough wealth to meet basic needs is always important.

Benefit from compounding

One significant advantage that young investors have is a long time horizon. When they start investing at an early age, they’ve got the power of compound growth on their side. As the value of their investments gradually rises, that growth in invested capital will grow as well, and it’s this ongoing compounding that results in accumulated wealth over time.

Also, having an extended time horizon means they can invest more aggressively than someone older. Why? Because when younger investors experience the inevitable short-term market declines, they have the time to stay invested and ride out these downturns until the markets resume their long-term upward trend.

This advantage allows younger investors to invest more of their money in stocks and equity mutual funds, which historically have generated higher returns than conservative securities like bonds and GICs. Rather than panic when markets become volatile, younger investors can remain disciplined knowing their long-term financial goals should not be impacted.

Getting started

Few post-secondary students have a lot of money laying around, but it’s no reason to put off investing. Maybe they received cash gifts for birthdays or other special occasions. Many students have part-time jobs during the school year and perhaps full-time work in the summer. Of course it makes sense to ease their debt load when possible to reduce interest charges, but earmarking even a few dollars per month for investing can help create long-term wealth.

Assuming they have some money available to invest, what can they do with those funds? They might consider a Tax-Free Savings Account (TFSA). If they’re at least 18 years old with a valid Social Insurance Number, they can open a TFSA at any qualifying financial institution in Canada. The maximum annual contribution amount is currently $6,000. The good thing is, if they don’t contribute the full amount each year, they accumulate contribution room for future years. Whatever investment growth is earned in a TFSA is completely tax free.

If they have employment income, they might consider a Registered Retirement Savings Plan (RRSP). They can get a tax deduction each year, which may be useful depending on their income level, but the main benefit is that any growth of RRSP assets is tax deferred until withdrawn, which is typically not until retirement.

If students aren’t sure what to invest in, they can conduct their own research to learn the fundamentals of investing. They may also consider working with an Investment Advisor who can guide them and be available to help with more complex financial issues as they progress through the various phases of life.

Regardless of what they choose to invest in, it’s often valuable to set up a pre-authorized contribution plan (PAC) that devotes a certain amount of money at pre-determined intervals (e.g., monthly). PACs are useful and convenient because they help investors be disciplined and automatically invest on a regular basis to build long-term wealth.

If you have an undergraduate student in your household, an iA Private Wealth Investment Advisor can help them prepare for their financial future. Speak to an advisor today.

Getting Financially Fit for Your Newborn’s Arrival

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By iA Private Wealth, September 07, 2021

Having a child is an exciting time in life. Before the baby arrives, it’s useful to think about your finances, since raising a child can be both incredibly rewarding and very expensive.

While each family is different and costs vary, expect to budget roughly $10,000 to $15,000 a year until your child turns 18 – and then the potential for post-secondary education will add to this cost. Aside from expenses related to food, clothing, personal care, toys, activities, etc., your daycare/babysitting costs largely depend on where you live and how many hours of supervised care your child will require.

Funding your family addition

Clearly, the more money you can put away, the better your financial situation will be when baby enters the picture. You don’t have to do it all on your own, however. Family and friends might be able to help with gifts, babysitting and hand-me-downs, plus you may qualify for government support.

Parents who are away from work to look after their newborn or newly adopted child may receive up to 55% of their earnings in standard Employment Insurance (EI) benefits, to a current weekly maximum of $595. As the chart below illustrates, parents can share the benefits. The eligible period for benefits may last from 55 weeks to 69 weeks (although ‘extended’ benefits beyond 55 weeks provide less support).

Benefit name Maximum weeks Benefit rate Weekly max
Maternity (for the person giving birth) up to 15 weeks 55% up to $595

Maternity benefits can be followed by parental benefits. You can apply for both at once.

Benefit name Maximum weeks Benefit rate Weekly max
Standard parental up to 40 weeks, but one parent cannot receive more than 35 weeks of standard benefits 55% up to $595
Extended parental up to 69 weeks, but one parent cannot receive more than 61 weeks of extended benefits 33% up to $357

Source: Government of Canada

Canada Child Benefit (CCB)

In addition to EI benefits, your family may qualify for the CCB. Payments are based on your adjusted family net income (AFNI) for the previous tax year. For the 2021 benefit period (July 2021 to June 2022), if your family’s AFNI is below $32,028, you qualify for the maximum regular CCB of $6,833 per year for children under six years old, and $5,765 annually for children between six and 17 years old. The maximum benefit gradually decreases for AFNIs above $32,028.

Given the pandemic’s impact on many families, there’s also a special 2021 CCB of $300 per quarter for children under six years old, if the AFNI is below $120,000.

Registered Education Savings Plan (RESP)

The cost of post-secondary education continues to rise. It’s good to consider an RESP, which is a savings and investing program designed to cover some of these costs. Currently, the lifetime RESP contribution limit is $50,000 per student (beneficiary). You may invest in many types of securities, from mutual funds and stocks to bonds and GICs – and the investment growth compounds, tax deferred, until the RESP beneficiary begins withdrawing assets.

As an incentive to save, the federal government offers the Canadian Education Savings Grant that matches up to 20% of your contributions, to an annual maximum of $500 and lifetime limit of $7,200.

Each province and territory has some form of student grant or loan, so it’s worthwhile to look into programs available in your area. Talk to your Investment Advisor for more details about how RESP contributions and withdrawals work.

Other things to consider

  • Review your insurance coverage when preparing to have children. You may want to upgrade your life, disability and critical illness insurance plans to reflect your family addition(s). Also, if you’re covered under a group insurance plan, your children may qualify for certain medical and dental care needs.
  • Update your will as your family grows, so you can include your children as estate beneficiaries. You may also use your will to make physical and financial care arrangements for your children in the event that they’re still minors when you (or both parents) pass away.

iA Private Wealth can help you financially prepare for your new arrival. Start by contacting your local iA Private Wealth Investment Advisor today.