Skype Unlimited Calling

Skype is introducing new monthly subscription to its unlimited calling. There are three plans, $2.95/month for unlimited US&Canada, $5.95/month for unlimited Mexico, and $9.95/month for unlimited World. All plans include voice mail and Skype To Go (unfortunately, not available in Canada).

In terms of call quality, based on my previous experience, it is not superior, but acceptable. As I call overseas very frequently to my family and friends, I think I will try the unlimited world.(Skype is having Save 1/3 when you buy a 3 or 12 month subscription promotion until June 1st as well).

You can find more information here.

Book Review: The Wealthy Barber

I just finished reading this all-time Canadian bestseller, The Wealthy Barber,which I bought from Chapters around two weeks ago. I could not believe how fast I finished reading this book. It only took me two weeks to finish all ten chapters. I remember that sometimes I need more than a hour to just flip one page of the text books. With this book, I simply have problems putting it down.

The Wealthy Barber covers many financial planning topics, including Investment, Wills, Life Insurance, RRSP, Mortgage, and Income Tax. It is very understandable and entertaining financial planning book. It explains everything without intimidating charts and graphs and a series of lifeless numbers. After reading this book, you will find out a good financial planning is nothing but common sense.
I would like to quote some words from the book, which I think either very useful or entertaining.
In the chapters talking about basic financial planning, it says:
“Wealth beyond your wildest dreams is possible if you learn the golden secret: Invest ten percent of all you make for long-term growth” Now you know the famous ten percent rule.
Ever wondering why your personal budget never works while business budget always do? See below:
“a business only has to budget for needs. It’s in the best interest of the business to limit those needs as much as possible. An individual, on the other hand, must budget for both needs and wants. It is a rare person who can do that successfully because, for too many people, a want becomes a need”
Afraid of risk when investing and would rather to have all your money sitting in your bank account earning interest? The wealthy barber says:
“Be an owner not a loaner over the long run.If it were consistently more profitable for businesses and individuals to leave their money in the bank than to invest it in North American enterprises, we’d all be in big trouble.”
I could not help laughing when I read the following:
” A broker is someone who invests your money until it’s his.” Haha, I feel the financial advisor is no difference. So be your own financial advisor because nobody cares about your money more than you do.
Wants to time the market and think somebody might have the forecast power?
“As for consistently accurate short-term forecasts, there is no such animal”; “Patience is always one of the most valuable attributes in investing.”
What about real estates?
“With real estate, it’s a matter of timing. There is no dollar cost averaging here.” Know nothing about dollar cost averaging? You need to pick up the book right now.

OK, I could not quote more from the book. In fact, the above is less than 1/3 of the highlighted in the book I have. I actually know about most of the points in the book, but still I learnt something I never knew before, especially for the wills and insurances. I used to think that we all need life insurance when we get older. But the fact is actually opposite because we should be self-insured already when we are old. It is the time when we are young that we need life insurance.(If you are single and have no dependents, you don’t need insurance.)
So if you know nothing about ten-percent rule, dollar cost averaging, when and how much life insurance you need, how to use income split technique to lower your tax bill, so on and so forth, you need to read this book. You will be glad you did.

ING STREET WISE FUND

It has been more than three months since ING Direct Canada introduced its new and first Index fund series (it is actually a fund of index funds), ING StreetWise Fund. I have been thinking if I should put some money into it every month as my investment outside RRSP.
After I did some more in-depth study of the fund, I think it is NOT a good idea to hold it as an investment outside RRSP. One simple reason is that the StreetWise Fund will be balanced every quarter to maintain its original assets allocation. In order to be rebalanced, this wrapped fund will have to sell one or more index funds within it. That will force the investor to realize some unnecessary capital gains. Hence, there will be more tax payable at the end of the year.
If you know how to buy ETFs and rebalance them once a year, it will be better to go with the ETFs route. It is cheaper and more tax efficient.
Just my 2cents.

More on TFSA, TFSA vs. RRSP

So now, we have the TFSA. Compared with RRSP, which one is more favorable depends on a lot of factors including your marginal and average tax rate, the pension you will receive when you retire, if you are going to use this money to buy your first home, etc. Let's look at one of the most important factor, your tax rate, for this comparison first. The following tables show you three scenario:

a) you have the same tax rate when you contribute to your TFSA or RRSP as when you withdraw money from then. As you can see in the table, the overall return from TFSA and RRSP is the same.

Reference: http://www.budget.gc.ca/2008/plan/ann4a-eng.asp#personal

b) & c) If you have higher tax rate when you contribute to your TFSA/RRSP than the time when you withdraw money from the account, you are better off to contribute the money into RRSP first. On the opposite side, it will be better for you to contribute into TFSA rather than RRSP.

If we look at the tax rate alone, the answer seems to be very simple. If your tax rate is going to be lower than the time you contributed into this type of account, RRSP is better. Otherwise, TFSA is better. If you expect to be in the same tax rate for your whole life, then it does not matter to contribute into RRSP or TFSA.

However, it is not THAT simple. There are still many other factors might affect the decision. For example, even if you are going to have the same tax rate for your whole life, the RRSP will still be better for the first $20,000 if you are ever going to buy a house since you can withdraw it tax free from RRSP account. If not, it looks like they are equally good. But since Income earned inside the account and withdrawals from the account WILL NOT affect eligibility for federal income-tested benefits and credits(Income from RRSP does), TFSA is actually better since you will not affect the CPP, OAS benefits that you might receive from the government.

Scenario c) actually makes me wonder for the people who save a lot, there must be a point when contribute into TFSA is better than into RRSP. I have not quite figured out what that point is yet.

K.I.S.S

Will you live in the log style home as follows for 7 days a week? Personally, I don’t mind live in such a house for maybe one week. Anytime longer than that, I cannot deal with. Nevertheless, this is a house with a very different style, personality and characteristics. However, it is a style more suitable for a cottage rather than a regular HOME. The possible market size for this kind of home is very small due to its unique style. It explains why the house has been on the market for around 2 years with 20% price reduce from its original asking price and yet to be sold.

When you build/buy your house, if you might want to sell it in the future, try to neutralize it as much as possible. “Keep it simple and stupid” has its root in real estate invesment as well.

Tax, Done!

Finally, I got the T3 from Questrade yesterday. I could not wait to enter all the information in Studio Tax and netfile my tax right away. It looks like I am going to get round $8000 in tax refund this year! Sweet!

Tracking Networth with NetworthIQ

I have been using NetworthIQ to track my networth for a while. Besides the fact that you can easily see where your networth is heading to by using it, there is another feature that I really like. I can run various comparison reports with NetworhIQ.

After updating my networth this month, I wanted to see where I am standing now. So I ran following comparison reports and discovered some interesting trends.

1. Networth Comparison Report

As you can see you can compare yourself among the people who have the same age, income, occupation, education as you do. I usually look at the median value in my age and income group since it will reflect how I am doing more clearly and correctly. Average value tends to be more skew. There might be some persons born with a silver spoon and drag the average networth ridicularly high in my age and income group. Also, I don’t look at the networth data in my occupation and education group since I don’t want to compare myself with a people with 10 more years experiences than me. They will and should be having more networth than me. Right?

So how am I doing in terms of networth? In my income group, I am doing pretty well and my networht is above the median value of $13,919, which means I have been well ahead of 50% of the people in my income group. And for the first time, I am almost there for the median value of $33,100 in my age group, just $61 short. I hope I will exceed the median networth of my age group next month!

2. Home Ownership

Interesting enough, it looks like in my age and income group nobody is owning a home or having a home mortgage now. Hum…….

3. Credit Card Debt

Wee~~~, I don’t have any credit card debt at all,which is a very good thing, while the median number of the debt is $800 and $700 for my age and income group.

4. Cash

I am well behind in this category. As I am building up my emergency fund now, I expect to see the situation got changed next month. The target for my emergency fund is $5000.

There are more reports you can check out in NetworthIQ other than those four mentioned above. Although the number will not be 100% correct and perfect, it is still nice to see where you are standing, well, roughly.