Investing 101-Investing in the Stock Market Basics


Okay, so you’ve managed to balance your budget and now you have some money put aside….what now? Where should you put your money so it grows, instead of just sitting there, tempting you?

The answer, of course, is going to be different for everybody. They call it “personal” finance for a reason, after all. You have lots of options and it can get pretty overwhelming trying to decide where to invest your money. Don’t let it get too stressful, just take it one step at a time.

How much risk are you comfortable with?

Each different type of investment comes with its own level of risk. My husband would call this the “gambling” factor. The level of risk you can take on will have to do with:

  • how much money you have saved up
  • how many years there are until you need the money
  • your earning potential between now and when you need the money
  • how secure your job is
  • the state of your health and its effect on your potential future earnings
  • your ability to stay relaxed in the face of market downturns
  • your level of investing knowledge

It almost goes without saying that the safer the investment, though, the less annual return you can expect on your money.  So, you can go ahead and just put your money into a good, old-fashioned savings account, but those types of accounts only pay you between 0.5% interest and 2.5% interest annually. A higher risk usually comes with a bigger potential reward. So, of course, the closer you are to needing the money, the less risk you should be assuming. What some people like to do is mix it up, putting a percentage of their savings in safer vehicles, for protection. And the closer you get to needing the money, the larger the percentage you should put in safer investments.

Let’s take a look at some options for investing in the stock market.

Where should the money live?

In order to invest in the stock market, the first decision to make is what type of account to hold the money in. You can choose to open a trading account with a bank/financial institution, investment brokerage firm, or online/virtual investment broker. Usually the only difference between them will be the fee structures and your level of comfort/familiarity with the company holding your money.

Registered vs. Non-Registered accounts:

Non-registered accounts are just regular, run-of-the-mill accounts that can be owned just by you or jointly with someone else. There are no special advantages to this type of account and in most cases you will receive T-forms and be taxed on any income you make on investments within them.

Registered accounts have tax advantages to them and can only be owned by you alone, because they’re linked to your social insurance number. Because of the tax advantage, you’ll be limited in how much money you can deposit into them each year. TFSA’s have a dollar amount that’s the maximum allowable deposit each year and RRSP’s have a percentage amount that’s calculated from your income tax returns. TFSA limits are cumulative and you can check your personal limit on the Canada Revenue Agency website, while your personal RRSP limits are noted on your annual Notice of Assessment once you’ve filed your taxes.

Whether the account is registered or non-registered, once the money is in the account, you can usually do all the same types of investing (i.e: mutual funds, GIC’s, stocks, etc), so you should definitely put the maximum amount you can into registered investments each year. There’s really no need to pay unnecessary taxes on the money you make.

RRSP’s vs. TFSA’s:

I’ll save my detailed rant on this topic for another post, but suffice it to say that I think you should put your money into TFSA’s and ONLY put your money into RRSP’s if your employer has a contribution matching program.

Potential Returns on Your Money:

To note, returns are never guaranteed unless expressly stated, so these numbers are averages based on past performance, not a statement of how much you will actually make if you invest in them.

Guaranteed Returns:

  • GIC’s: GIC’s come in all configurations; locked-in or open, for all time periods from 6 months to 10 years. You can find GIC’s right now ranging between about 1.5% and 3.5% annual return. Generally speaking, the longer you lock your money into a GIC, the higher the return it will generate.
  • Money markets: Money market accounts are usually used as a temporary holding place for your money in between investments and usually only return about 1%.

Variable Returns:

  • Mutual Funds: These are groups of investments in the stock market that are managed by professional portfolio managers. The manager develops a portfolio of investments with a certain goal in mind (i.e: dividend income or to achieve a certain balance of assets). They pool your money with other investors’ money to buy within that portfolio. Usually if you buy mutual funds that are held by the same institution where your account is held, there is no commission charged to buy or sell these investments. Instead, each fund has a built in fee structure (MER) that is invisible to you, but basically shows you how much the manager is getting to manage the fund. If you buy another institution’s mutual funds, you’ll get charged the usual trading fees when you buy or sell them. These investments tend to be “safer” because a professional is choosing which stocks to hold within the portfolio, but keep in mind that nobody can predict the movements of the stock market. When I buy mutual funds, I assume a 6% return on that investment, on average, over the long term (long term meaning more than a year; usually several years).
  • Stocks: When you buy stocks, you’re basically purchasing a small piece of the company you’re investing in. If they do well, you do well, and if they have a bad year, so do you. There are ways to mitigate your risk when choosing stocks and there are lots of schools of thought on how to effectively choose stocks. Again, I’ll save the details for a later post because this article has to end sometime, but I can elaborate quickly to tell you that you can choose between dividend paying stocks and non-dividend paying stocks. A dividend is basically a pay cheque that the company pays you on each share you own, either on a monthly, quarterly, or annual basis. You can also choose stocks that follow the basic trends of the stock market in general, called index funds. Index funds can also follow the general trends within certain sectors, like the real estate or energy industries. When you buy or sell shares, you’ll be charged a trading fee so of course, the fewer trades you place, the less of your profit goes into those fees. Again, when I buy shares, I assume a 6% return on my money, on average, in the long term, plus whatever percentage the dividends are, if applicable.

Placing Trades:

When you’re buying mutual funds, it’s rare to worry about the cost of them. The price of mutual funds is only updated at the end of each trading day, so you usually just place an order to buy them at whatever the most recent price was. You can also choose to automatically reinvest any dividends generated by your purchase. 

When you’re buying shares, you can place a stop limit on the price you’re offering to buy them at. Because the prices of stocks fluctuate daily and often during each day, you’ll want to try to buy them at the best price possible. If you look at the share’s stats, you’ll see the highs and lows that it has traded at in the last day, week, month, year, etc. Set a price that you feel is reasonable based on those stats.Keep in mind that if it’s currently trading at a high point, you may want to watch it for a few days or even weeks to get a feel for its movements and to try and catch it for a good price.Similarly, when you’re selling them, you can set a limit price as well.

Trust No One:

In my opinion, you are the only person on this planet who cares if your money grows or not, so I definitely encourage you to learn enough about your chosen method of investment to confidently manage your own money.

Once You’ve Invested:

This is, by no means, an all-inclusive list of your investing options, but it’s a good starting point of the most common investments people make inside the stock market. Until you get your money invested, it’s not growing, so I suggest you get it at least into a savings account until you decide on which investments suit your needs.

And once you’ve got your money invested you don’t need to hover over your investments by checking them daily. Unless you have very little time before you’ll need the money, you can probably look at your investments monthly or quarterly and still manage them effectively.

How to budget when your income is irregular


Budgeting is already a challenge, but what do you do when your income is irregular? And by irregular, I mean that it’s either unpredictable or it comes in on an irregular schedule.

It’s a tricky proposition, because a budget is basically a means to spread your yearly income evenly across the board, allotting certain amounts of it to pay for certain things. So, if your pay is irregular, it gets hard to make sure the money’s where it should be when the bills are due.

Well, this is our reality; my husband has a regular income, but he also has an irregular income as a volunteer firefighter. Don’t let the name fool you, he does get paid for it, but only twice a year. And the amount fluctuates depending on the number of pages he received in the 6 month period he’s being paid for. I also have some irregular income in the form of coaching fees and freelance writing, both of which are hard to predict.

So, how do I handle all this uncertainty? With math, of course! Those of you who regularly read my articles know by now that in my world, math solves everything.

I simply make my budget for the whole year, using reasonable and conservative estimates for the uncertain income amounts. Using last years’ numbers usually helps me to guess how much fire pay will come in this year, for example. I calculate all our expenses for the year, again using last years’ numbers as a starting point. I roll all the predictable and regular bill payments into one category called “already spent”.

I account for all the uncertainty by calculating what percentage of the total income is being spent in each category. Then, as I track the money coming in, only that percentage of the pay that came in is allotted to each given category as being “available” to spend.

You will very likely have some over-spending in some of the categories, but you can manage general over-spending by simultaneously watching the balance of the total that’s come in minus the total that’s been spent.

Let me demonstrate using an example from my budget:

I’ve budgeted the entire year’s worth of groceries into bi-weekly chunks, but in the six months preceding the fire pay being paid, we will very likely start to run a deficit in this category. To manage this, I watch the total balance and make sure it never goes in the red. So, I know I’ve over-spent on groceries, but there will be an amount accumulating, unspent, in a variable category somewhere to balance this out. When the fire pay finally comes in, the amount “available” in each category will get padded to help bring us to the next fire pay.

The longer you’re budgeting this way, the less this over-spending will happen as the long-term padding effect starts to kick in.

It’s not perfect, but there really is no easy solution to this irregular income dilemma. At least this method helps to make sure that money’s accumulating in each category and that you never go into your overdraft.

Watch my video on how to use this method in Excel and let me know if you have any questions.

  For better viewing: click on the YouTube icon in the bottom right hand corner of the video’s window.


How much life insurance do you need?


I was surprised lately when I was speaking to a friend and learned they don’t have any life insurance! We just automatically bought some when we had kids and I thought everyone else did the same. Looking into it some more I was shocked to find out that only 34% of people considered life insurance essential to their financial plan and only 40% of people bought it because of a life event, like having a baby (check out this survey by State Farm).

I guess for a lot of people, deciding how much insurance coverage they need is a daunting task. And maybe people assume that the coverage they get through work is enough (usually somewhere between 2 to 5 times your salary). Well, you know me….I’m not happy until some math has been done, so let’s explore different ways to figure out how much is “enough” coverage.

Firstly, there are a couple of things to keep in mind:

  • Don’t assume that a stay-at-home spouse doesn’t need to be insured. There are paid services involved with raising kids that aren’t in the family’s budget now, but might become expensive if a stay-at-home spouse dies. It’s a worthwhile exercise to calculate what monthly expenses would cost more if that person wasn’t there. Things like daycare, transportation, and the cost of meals might increase if the stay-at-home parent wasn’t there to provide them.
  • Funerals are costly and it’s much easier to deal with the stress of that unexpected expense when it’s in the context of a hypothetical and unlikely event.
  • Straight-up life insurance policies are a better value and more flexible than dedicated policies that pay out in the event of death (i.e. mortgage insurance or credit card balance insurance).

Now, when it comes to actually coming up with a number, consider these things:

  • How dependent the family is on the insured person’s income.

If there are 2 incomes in the household, can they each sustain all the monthly expenses on their own, without any dependence on the other salary? If not, then you need to assess what the deficit would be.

  • Will the family stay in the same home if one spouse dies?

In other words, would the surviving spouse need to maintain the current mortgage and other household expenses on their own if tragedy were to strike?

  • What is the plan for managing the insurance money?

For example, is the intention to pay off some major expenses with the life insurance policy and then have the surviving spouse manage all other monthly expenses on their own? Or alternatively, would the insurance money be invested and only the interest earned used to replace the deceased’s salary on an on-going basis? Both are feasible options, but if the intention is to spend the money, make sure and calculate amounts needed for future large expenses as well (i.e. college costs or supporting aging parents).

Personally, I think a combination of those 2 strategies is smart. We figured out the amount of the salary we would need to replace in order to maintain the status quo in our house. We calculated how much we would need to invest in order to generate that amount, only using the interest and never touching the principal. Then we added the amounts we would need to cover certain large expenses off the top, like funeral expenses.

When you’re calculating how much capital you need in order to generate a certain income, make sure that the numbers you use for estimating are conservative and align with your investing strategy. If you only intend to invest in no-risk GIC’s, then you need to assume you will only be making 1 to 3 percent on your investments and you need to insure yourself accordingly. Alternatively, if you are a savvy investor and confident in your abilities to invest in the stock market, you can probably use a number somewhere between 6 and 15 percent in your calculations.

Once you’ve found a percentage you’re comfortable estimating with, you simply take the amount of annual income you need to generate from the investment and divide it by the percentage. This will tell you how much you need to be insured for in order to generate a perpetual income from the principal, without ever using the principal itself.

Ex: If you need to replace a salary of $50,000/year and you want to assume an 8% return on your investment, and you want to make sure the cost of a funeral is covered up front, then the calculation looks like this:

$50,000 ÷ .08 = $625,000 + cost of funeral = amount of insurance policy

Of course, life insurance is one of those things we buy hoping to never need it, but a little forethought goes such a long way. Most life insurance is very affordable, and really, how can you put a value on peace of mind?

Disclosure: This blog post was written as part of a sponsored program for State Farm to raise awareness about the importance of life insurance. All views expressed are entirely my own, and were not influenced or directed by State Farm. You can learn more about this blogger program and life insurance at,, and by following #StartLiving on Twitter.

Should you roll your consumer debt into your mortgage?


Big question: Should you use the equity in your home to pay off your consumer debt?

Quick answer: Maybe.

Long answer: Let’s do some analysis…whether or not it makes sense to use your mortgage to pay your consumer debt depends on:

  • the amount you owe in consumer debt

If you only owe a small amount, then there’s no need and no point in rolling it into your mortgage. Even if the interest on your mortgage is very low and the interest on your consumer debt is very high, paying the debt over 20 to 30 years would result in paying a lot more in interest in the long run.

  • the amount of equity you have in your home

If using the equity in your home would only pay off a very small portion of the debt, then there’s probably no point in doing it. You wouldn’t achieve the desired effects of freeing up money in your budget or paying down your debt.

  • the % of interest being charged on your debt

I consider anything below 10% to be a low amount to pay on consumer debt and anything above 10% to be high. If all your consumer debt is on vehicles that charge below 10% then there may be no huge benefit to using the equity in your home to pay it down. Chances are it’s possible to pay it down in a reasonable time and stretching it out over 20 to 30 years would result in more coming out of your pocket in the log run.

  • how long it would take you to pay your debt down if you just keep paying it as you are

If you can afford to pay the debt down in as little as 2 to 4 years then there’s no need to stretch it out over 20 to 30 years. Do the math though, you may be surprised at how long it will take to pay the debt down to $0. You can use the calculator here to see how long it will take you to pay it down and how much interest you’ll pay.

  • how much cash you would free up every month

You can use the calculator here to see how much more your mortgage payments would be. Compare your old mortgage payments + the amounts you were paying towards your debt to the new mortgage payments. Would you free up a significant amount of cash each month?

  • how tight your budget is

Are you currently accumulating more debt each month simply because of the payments to the debt? In other words, you just can’t afford the amount of debt you currently have? If that’s the case, then your equity may be your saving grace. As long as you can afford the new mortgage payments and you do not charge one more dollar to a credit card or line of credit, using your mortgage to pay the debt may be a feasible solution.

  • your ability to stay debt-free

If you use up the equity in your home to pay down debt, but are not disciplined enough to stop accumulating more debt, then there is NO POINT in using your equity to help get rid of the debt. If you don’t stop accumulating new consumer debt then all that will happen is you will push yourself closer to a desperate situation where credit counselling and possibly bankruptcy will be your only options.

  • what you’ll do with the “extra” money you now have every month

If all the stars align and this is a feasible way to get rid of your consumer debt, make sure that you use the “extra” money you now have for good instead of evil. My suggestion? Put a portion aside for emergencies, use a portion of it to start a “fun” fund, and invest the rest. Do this every month and the debt should stay gone for good!

 For better viewing: click on the YouTube icon in the bottom right hand corner of the video’s window.


Why I Won’t Pay Down My Mortgage


Paying down your mortgage; for most, that’s the goal. Pile every spare dollar onto it and get it gone as soon as possible. I have to say that in today’s financial world, when mortgage rates are so low, I couldn’t disagree more.

I don’t consider my mortgage to be “debt”. I actually see my mortgage as a valuable tool for helping me increase my wealth! Using the equity in my mortgage to add to my nest egg is part of my long-term strategy for getting ahead.

The math is simple, really: My mortgage costs me 3% (or less, these days), but if that equity was invested, I could be making anywhere from 6% to 25% or more on it in the stock market.

I think the people who are opposed have this to say: “But once my mortgage is paid off, I can invest the amount of my mortgage payment each month instead.”

All right. Let’s run the numbers:

Using the following facts for each scenario:

  • a house worth $300,000
  • a fixed rate mortgage at 2.99% renewed every 5 years
  • a 20 year amortization
  • bi-weekly payments on the mortgage
  • 6% return on investments
  • Scenario A: you pay off your mortgage at 50 years old and thereafter invest your $765.94 bi-weekly for the next 15 years. You end up with about $480,000 in your investment account at 65 years old.
  • Scenario B: starting at 30 years old, you take the equity available to you each 5 years when you renew your mortgage (about $60,000 every 5 years) and invest it. You would have about $1.1 Million in your investment account at 65 years old. Go ahead at that point and pay off your mortgage all at once (about $240,000 owing), and you’ll still have about $860,000 invested.

Another opposition I hear is: “You shouldn’t retire with a mortgage still owing.”

Oh wait, I just solved that problem too.

Add to this the facts that:

  • In both scenarios you paid about the same amount out of your pocket over the 35 year period (in scenario A you pay the bi-weekly payment to the mortgage and then into your investments, and in scenario B you pay the bi-weekly payments into the mortgage for the entire 35 year period).
  • You and a spouse could almost put that entire $60,000 into TFSA’s ($5,500 each allowable per year), so now, when you withdraw the entire amount to pay the mortgage down when you’re 65, there are no tax implications.
  • In Canada, when you borrow for the purpose of investing, the interest on the loan is a tax deduction.
  • The value of your house will increase regularly, making the amount of equity available to you more and more each time you renew the mortgage.
  • Since you paid the mortgage down at 65, you now have an extra $765.94 bi-weekly burning a whole in your pocket from that point forward.

Of course, the fundamentals are what make this work; i.e: the fact that the amount of interest you can reasonably expect to make on investments is about twice what you’ll pay for a mortgage. When these stats change, so do the end results. But until then, I won’t be paying off my mortgage!


The Numbers Don’t Lie


Household finances are such a chore for most already, so some fun people have come up with some fun challenges to help you accumulate savings and have fun at the same time! Yippee! Except for one small detail…..if you don’t have the money that the challenge requires, then putting that money into savings is going to cause you problems….not fun.

Basically, in order to do anything financial, you have to do the math. Math is the only thing that’s going to tell you whether or not you can afford to do something. Ignoring the math will get you into trouble every time. So, sorry to burst your bubble, but unless you think math is fun (which I do, BTW), taking care of your money is not a super fun activity.

It is a super necessary activity though, so let’s find ways to get around the math, shall we? By using a spreadsheet or another kind of software that will do the math for you, you can get straight to the fun part of finances, which is seeing your debt disappear, your savings accumulate, and your investments multiply! Yippee (for real this time)!

So, you can’t just arbitrarily pick numbers out of thin air when you’re making financial decisions. Just because the experts say to save 10%, or whatever, of your money doesn’t mean you can afford to do that. Just plug the numbers into your budget software of choice and see what happens…..maybe you can afford to save more than 10%. But you won’t know until you do the math.

Same goes for retirement goals. You can’t just blindly follow advice, taking the numbers for granted.

Personal finance is just that; personal. The answers will be different for everybody. The good news is, a little math goes a looooong way.

The REAL Value of a Dollar


The truth is, a dollar is worth exactly what you think it is. In other words, if you’re prone to saying, “It’s only $100.”, then the value of $100 gets reduced in your world. In my world, $100 is a lot of money!

If you’re guilty of reducing the value of your hard-earned money, then it’s time to re-adjust your attitude towards money. Start valuing money as if it were time. I guarantee you you’ll be more hesitant about spending 4 months of your salary on a car or 5 hours of your salary on one meal at a restaurant.

You worked hard for that money, sacrificing time with your family, so don’t sell yourself short! When you really value every dollar of your money you’ll start to naturally look for ways to save on things you buy. And I’m not talking about any huge, time-consuming efforts here, I just mean that you’ll start to notice things like:

  • a can of pop can cost $1.50, but you can get a whole case on sale for $3.99.
  • a new bicycle costs $100+, but you can pick up a 10 speed at a garage sale for $10 (we just did!)
  • take-out pizza can cost $20+, but the frozen ones go on sale for $5

You can gain a lot from a new outlook on the value of a dollar and those little savings add up over time!