Author: hazel.fluke

Yikes! The Stock Markets are Falling!

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Or, Yay! Stocks are on sale!

Watching stock markets decline is uncomfortable.  Real losses to our savings can occur when we give in to fear and withdraw our investments (sell).  We have all heard of “Buy low, sell high” but putting that advice into practice is another matter altogether.

On the other hand, professional investors, as in fund managers, can and do apply that investment advice.  These pros are delighted to see stock prices fall and eagerly go on a buying spree.  They keep a cash reserve in their funds for this purpose.

Think of a market decline the way professional investors do.  Your mutual or segregated fund has a professional investor who is buying up quality stocks at bargain prices.  So, when the markets recover (they always have, they always will), your own portfolio will have benefited.

Life Insurance and the Ancient Romans

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colosseum coliseum flavian amphitheatre rome
Photo by Anastasia Zhenina on Pexels.com

Insurance is about mitigating risk.  Throughout history, every insurance idea arose from the financial loss and devastation caused by real life experience.  For example, life insurance may have had its roots in Ancient Rome.

The Ancient Romans had strong beliefs associated with burials.  If not done correctly, the result would be tortured spirits for an eternity.  Thus, they were prone to invest large sums of money in a proper burial.  Since many Roman citizens lacked the resources to pay for elaborate funerals, “burial clubs” were created.

Members met for the payment of the contributions, and each club may have had something in common, whether it be a common ancestor, or a common craft or trade.

Today, we make payments to an insurance company for pretty much the same reasons as those ancient Romans did – to cover the costs associated with death.

The Long Arm of the … CRA

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As the story goes, notorious gangster, Alphonse (Al) Capone, who engaged in a wide variety of criminal activity was finally captured, not for the bootlegging, prostitution, or extortion, but for tax evasion.  Didn’t he know that he had to report his gains for the purpose of income tax?

In Canada, the CRA (Canada Revenue Agency) makes sure that we understand that the proceeds of crime must be reported as income in the year it was received.

Really.

Under section 1.30 of Income Tax Folio S3-F9-C1, it states:

Gains from theft or embezzlement as well as cash or property received as a result of extortion, blackmail, bribery, or other similar acts are income from a source and as such these funds or property are taxable in the hands of the recipient.  The cash or fair market value of property received will be added into the recipient’s income in the year of receipt.

It does not say what line to enter it on.  I’m guessing, Line 130, “Other Income.”

Managing Credit Card Debt

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I make it a habit to look for sales when I’m in the market to purchase a product, whether it’s groceries or a new string trimmer.  In other words, I seek to pay less than the retail price.  Imagine the opposite.  That is, making it a habit to pay more than the retail price.  It happens whenever a credit card purchase is not paid in full by the due date on the credit card invoice.

Here’s an example.  If you purchase a product for $1000 using your credit card, but only make the minimum payments on the balance each month, the product priced at $1000 ends up costing you $1799!  (This assumes a credit card interest rate of 18%.)

Take a look at the Credit Card Payment Calculator at this Service Canada site, and try out your own examples.

And consider this:  If you are running a balance on your credit card (i.e., not paying in full each month), then the interest charges are applied at the point of every new purchase.  A balance on your credit card eliminates the 25 day grace period for no interest charges.

Charging Room & Board

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Parents who charge their grown-up children room and board are passing on a valuable life lesson as well as an important life skill.

The lesson is that things we want or need come at a price.  It is unrealistic to believe that we can find a place to live for free–especially a place where meals are provided.  Where better to learn this than in the nurturing safety of one’s family home.

And charging room and board teaches our adult children the mechanics of periodic savings.  It is not difficult to transfer the habit of putting aside a portion of income to the process of a monthly savings plan.  Some parents keep a separate account of the room and board receipts, with the intention of gifting back the accumulation on some special occasion such as wedding or first home purchase.  I like this gesture because it demonstrates quite concretely the benefits of savings, albeit forced savings.

Whether parents charge room and board to help meet household expenses, or to gift back at some future date, the benefits remain the same.  Their children learn about life and develop the skill of the savings process.