Money 101: Every Canadian's Guide to Personal Finance

289 Pages·2002·0.58 MB·English

by  Ellen Roseman

money101
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money101
Every Canadian’s Guide
to Personal Finance
E l l e n R o s e m a n
WILEY
Copyright © 2002 by Ellen Roseman
All rights reserved. No part of this work covered by the
copyright herein may be reproduced or used in any form
or by any means—graphic, electronic or mechanical—
without the prior written permission of the publisher. Any
request for photocopying, recording, taping or informa-
tion storage and retrieval systems of any part of this book
shal be directed in writing to CANCOPY,
1 Yonge Street, Suite 1900, Toronto, Ontario, M5E 1E5.
Care has been taken to trace ownership of copyright mate-
rial contained in this book. The publishers will gladly
receive any information that will enable them to rectify any
reference or credit line in subsequent editions.
This publication contains opinions and ideas of the
author. They are not presented to provide a basis of
action for any particular circumstances without consider-
ation by a competent professional. The author and pub-
lisher expressly disclaim any liability, loss, or risk, person-
al or otherwise, which is incurred as a consequence, direct
or indirect, of the use or application of the contents of
this book.
National Library of Canada Cataloguing in Publication
Roseman, Ellen, 1947-
Money 101 : every Canadian's guide to personal
finance / Ellen Roseman.
Includes index.
ISBN 0-470-83236-3
1. Finance, Personal--Canada. I. Title. II. Title:
Money one hundred one.
HG179.R674 2002 332.024'00971 C2002-905390-0
Production Credits
Cover & interior text design: Interrobang Graphic
John Wiley & Sons Design Inc.
Canada, Ltd Printer: Tri-Graphic Printing Ltd.
22 Worcester Road
Printed in Canada
Etobicoke, Ontario
10 9 8 7 6 5 4 3 2 1
M9W 1L1
Contents
1 Introduction
5 Part One: Getting Started
7 Keep track of your spending
9 Find areas where you can cut back
11 Seven easy ways to save money
13 Get the best deal on banking
17 Save money with online banking
20 Consider joining a credit union
23 Take care when using debit cards
26 Know how your savings are protected
30 Put your savings to work
32 Set aside money for emergencies
34 Protect yourself with life and disability
insurance
38 Top up your health insurance
Contents
41 Insure your home and belongings
45 Protect your car against theft and accidents
50 Keep in touch with your auto insurer
52 Be cautious about buying extended warranties
55 Part Two: Borrowing Money
57 Shop around for a mortgage
62 An RRSP loan can cut mortgage costs
64 Are you pre-qualified or pre-approved?
68 Save money on your car loans
72 Check out zero per cent financing
74 Don’t think car leasing is cheaper
78 Watch out for car lease penalties
82 Don’t carry a balance on credit cards
86 Pick the right card for your needs
91 Find out how interest is calculated
93 Check out the benefits of premium cards
96 Preserve your good credit rating
99 Check out your credit report
103 Protect yourself from identity theft
107 Part Three: Saving for Retirement
109 Deal with debt before saving for retirement
113 Don’t count on early retirement
117 Maybe you’ll never retire
121 Get to know your retirement benefits
126 Find out how your company pension works
131 Top up your pensions with an RRSP
136 It’s never too late to start an RRSP
140 Build a nest egg outside an RRSP
144 Your home is not your retirement plan
vi
Contents
148 Find a good financial adviser
152 Do you want to pay for advice?
156 Beware of free investment seminars
161 Part Four: Investing Money
163 Get a handle on your emotions with investing
168 Put your investments on autopilot
171 Buy stocks with dividend reinvestment plans
173 Buy stocks as an inflation hedge
178 Test drive your broker before signing up
181 A few things to ask your broker
184 Buy bonds for income and stability
189 How to pick mutual funds
192 How many funds do you need?
194 How to save money buying funds
198 Look at low-cost index funds
201 Beware of the year-end surprise
204 Wrap accounts can be costly
206 Surf your way to investment knowledge
209 Part Five: Financial Planning
211 Practise safe income splitting
215 Get Ottawa to subsidize your kids’ education
220 Questions to ask about RESPs
225 Look at in-trust accounts for kids
228 Life insurance can be used for education
230 Search for scholarships and bursaries
232 Think of marriage as a business partnership
234 Understand obligations of common-law
partners
237 New rights for same-sex partners
vii
Contents
239 How to share assets after divorce
243 Ending fights about child support
245 Preserving financial health for widows
247 Dealing with a terminal illness
251 Write a will for family harmony
255 How to cut probate taxes
258 How to cut estate taxes
262 Don’t forget a power of attorney
268 Read a good estate planning book
270 Now get going!
273 Index
viii
Introduction
You want to make your money go further and set a little aside for sav-
ings. But your eyes glaze over when you hear about the dividend tax
credit, dollar-cost averaging or derivatives.
This book is for you.
Money 101 is about mastering personal finance without pain. Think of
it as a slow jog along the highway from idiocy to literacy.
My aim is to make the information understandable to everyone.
This means breaking each topic into bite-sized chunks and keeping the
writing simple (but not condescending), lively and opinionated.
The goal is to demystify money, to defeat the impression that only
a math whiz can grasp the ins and outs of the subject. That’s why there
are no graphs or charts in these pages.
I want you to sense the urgency of getting a handle on your
finances, even if you’re uncomfortable with numbers and never follow
the business news.
Why is it so important for everyone to go through a basic course in
financial literacy?