Business Generation

One of the challenges of the privacy laws and the current regulatory system is the bias for spouses to invest on an individual basis, not for spouses investing together.  I’ve written in the past about how this is causing all investing to look the same.

When a couple goes in to buy RRSPs, the financial institution must set up separate accounts and acknowledge the separate risk tolerances, time horizons and investment objectives for each spouse.  Although you might expect that spouses will get two different and unique portfolios, many couples are walking out with extremely similar portfolios.

Although there can be benefits of spouses having individual portfolios to reflect unique wants and needs, there are also situations where spouses can benefit from working together to maximize tax efficiency and minimize risk.  Here’s a great example of a couple working together as a team.

Rick and Cyndi working together on their investments

Rick and Cyndi are in their late 50’s and getting ready for retirement in a few years.  They have lived in what I will call the traditional relationship where Rick was the primary income earner and Cyndi stayed at home to raise their three children.  Cyndi entered the work force much later in life after staying home to raise the kids.

When looking at their retirement assets, Rick has an excellent defined benefit pension and over $200,000 in his RRSPs.  Cyndi has no pension and only $60,000 in her RRSPs.  They will both qualify for Old Age Security (OAS) as well as Canada Pension (CPP) but Rick will get more CPP than Cyndi.

Conservative or aggressive?

When it comes to investing, Rick is by nature more aggressive.  He likes to play the stock market a little and there have been times he has done quite well.  Cyndi is more conservative because she feels she has so much less than Rick and needs to keep it safe.  As a result, his portfolio is much more aggressive.

Although Rick has a higher tolerance for risk, one might argue that he does not need to take more risks when investing.  In other words, there is s difference between how much risk Rick wants to take and how much risk he needs to take.  I call this the difference between his risk tolerance and risk capacity.

Rick and Cyndi feel they can easily live off the Pensions and government benefits alone in retirement.  That means the RRSPs are ‘extra’ and Rick does not need to take any risks in his RRSPs.  Even if Rick, theoretically, put all his RRSPs in a sock drawer with no interest, they should still be able to enjoy their retirement because of Rick’s work pension, their CPP and OAS.

Growth can cause tax problems

One of the challenges that Rick potentially has with having a good pension is that he may find it difficult to get the RRSPs out in a lower tax bracket in retirement.  Even with some of the pension splitting opportunities in retirement, some future income projections show that Rick will be in the 32% marginal tax rate (MTR) for any RRSP withdrawals in retirement.  If he continues investing for growth, the RRSPs could potentially become a bigger tax burden at higher levels in the future.  Cyndi on the other hand has a lot of room at the lower levels (25% MTR) to get RRSPs out at the lower marginal tax rates.

In fact, when you look at the bigger picture, there may be advantages in keeping Rick’s portfolio more conservative and Cyndi’s portfolio more aggressive, which is the opposite of what risk tolerance suggests.  Since higher rates of return in Rick’s portfolio could actually mean more tax in retirement, putting the higher risk investments in Cyndi’s name is better because higher growth rates does not mean more tax for Cyndi because she has more wiggle room to get the RRSPs out in the lower tax 25% bracket.

Overall, from a tax and risk perspective, Rick and Cyndi are better off working as a team on their investments.  Rick should invest his RRSPs more conservatively, while Cyndi puts all the growth oriented investments into her RRSP.  Overall, they might target the same balance between stocks, bonds and cash but instead of balancing the mix within each of their RRSP accounts to reflect their individual needs, Rick might be loaded with the safer investments and Cyndi’s with the growth investments.

Utilizing other accounts like the Tax Free Savings Accounts (TFSA) is another great place for Rick and Cyndi to invest in higher growth investments because there will be no tax on the growth.

There are many examples and strategies where couples can implement good financial strategies together like spousal RRSPs, income splitting, and cashflow strategies but don’t lose sight of the merits of working together when it comes to investing as well.  Good planning makes all the difference.

Managing cash flow for your small business is not all about managing and controlling expenses. Of course, a major part of cash flow is the money that comes into your business. While there are many forms of cash inflow, such as owner paid-in capital, loans, partners, and lines of credit, your main source of income is from your own sales.

Managing how you collect from your customers can be the key to maintaining a positive cash flow. Here are a few tips for managing your receivables:

Require Payment Upon Delivery

Payment for goods and services should be required at the time they are delivered or rendered. The quickest way to start a cash flow problem is by allowing too much credit and allowing customers to pay at a later date. Make it your main policy to collect payment immediately.

Accept Other Forms of Payment

Cash is king.

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I took my 12-year-old son to see his first concert two months ago. We had more than our fair share of good luck – Los Lobos, the East L.A. band that has been performing for 37 years now and that I last saw in Tokyo in the mid-80’s – was playing literally down the street from our house.

The show itself was fantastic. But the real story was what the band did after the show was over, and it holds a lesson for every brand – and band – that is striving for loyalty in an increasingly jaded world.

As the show ended, the band announced that they would be out front to meet and greet fans. My son, who is a budding guitarist himself, elbowed his way into line – third, in a line that now stretched hundreds deep. As we stepp

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Many Canadians are reasonably well set for retirement, financially speaking, thanks to personal investments and social security provided by the Canada Pension Plan (CPP) and Old Age Security (OAS). However, many Canadians avoid thinking about some worst-case scenarios – that they may end up requiring long-term care or may suffer from Alzheimer’s Disease or otherwise require extended care. No one likes to think this will happen to them or their parents but these kinds of things happen everyday.

Two case studies of families caught up in the need for senior care show how worst case scenarios can play out. In those stories, told here, one turns out better than the other.

The need for long term care insurance

Jim Ames and his daughter Margaret thought he was set for retirement. Had he looked at it several years before his early retirement, Jim might have realized that he was set to receive income of about $30,000 per year. With no mortgage to pay and no dependents he might have been able to live reasonably comfortably on this income, pulled together from a work pension, along with CPP and OAS.

However, sadly, he had not really accounted for the eventuality that he might some day require assisted living services in one of Ontario’s retirement homes. Coupled with the fact that he had to quit work at the age of 58 and begin drawing his pension early, Jim and Margaret faced an annual shortfall of over $12,000.

There are a number of ways that they could have been “luckier,” of course. One way is that Jim might have purchased long term care insurance. The insurance premiums over 30 years of working would have cost Jim less than one year’s shortfall that his family currently faces.  Across Canada, there are more cautionary tales like that of the Ames’.

None of us likes to think that the worst can happen but it is always best to plan for the worst, even as we hope for the best.

On the other hand, not all stories end in financial strife.

Benefits of financial planning

Helene is a Hull, Quebec senior who, regrettably, has been stricken with Alzheimer’s disease. Helene’s son and daughter-in-law took on care giving for a while but they eventually admitted that Helene required more care than they could give. When they opted to put her in a retirement home with Alzheimer’s support, they needed one they could afford, also, of course.

They found a home near their city that offered Alzheimer’s care, at a cost of $6000 per month for full service. Had they been short of available funds, this would have only compounded the difficult times they were facing. Helene had a pension from her career as a federal employee, along with CPP and OAS but this was still not quite enough. However, Helene had accumulated $80,000 in a Registered Retirement Savings Plan (RRSP); by converting this into a Registered Retirement Income Fund (RRIF) her children could cover the monthly shortfall they would have faced.

While she continues to degenerate, their sadness for Helene isn’t compounded by financial stress. As long as her RRIF capital earns at least five percent per year, her income will last long enough to cover her through five years, more time than doctors have given her. While the story of her failing health is indeed sad, the family has more than enough to cover care costs as Helene nears the end of her life.

While we all hope for the best in retirement it is a simple fact that a percentage of us will be unpleasantly surprised at our state of affairs in retirement. Buying long-term care insurance and using sound financial advice on savings and funds are two ways that we can ensure our security in retirement.

On the other hand, the worst thing that can happen to you if you over-prepare is that you might end up with too much money or too much security. In some cases, people are pleasantly surprised to find that they can afford to retire more luxuriously than they might have thought possible.

The U.S. government offers many resources and programs to help small business owners expand into overseas markets. But, you might be surprised at just how much Uncle Sam has to offer.

For example, did you know the government can help target and facilitate meetings with potential partners and buyers? Or that Uncle Sam provides U.S. exporters with international marketing and promotion opportunities?

Let me introduce you to Export.gov.

Operated by the U.S. Department of Commerce as a collaborative effort with 19 other agencies, Export.gov is quite literally a goldmine of information, tools, and programs for anyone looking to navigate the exporting business and succeed in the global marketplace.

Whether you are new to exporting, looking to expand your existing exports or ready to take your export business online, here are eight essential resources that Export.gov offers small business owners.

1.

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In-house payroll for small businesses seems the likely choice for those with just a few employees. However, whether you have 10 employees or 1,000, there still are certain payroll laws and IRS reporting guidelines to which you must adhere, not to mention your own cash flow to manage.

Here are four tips to help you make payroll a smooth operation every month:

1. Use Software

   Whatever you do, utilize a software program to help you with payroll. Alternatively, simply use an excel spreadsheet that helps you calculate and save payroll data. The old way of doing payroll by hand in a ledger is outdated and invites too many errors.

   Many small to medium businesses have great success with payroll software like Intuit Payroll, which integrates easily with Quickbooks, and EZPaycheck from HalfPriceSoft.

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