The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
With all the demands on our time and energy Ð from work to elder care, parenting to paying the bills Ð many people feel that life is running them rather than the other way around. But there's an alternative, and it's part of an increasingly popular movement: voluntary simplicity. Embracing voluntary simplicity doesn't mean packing it all in. It means devoting your time and energy to getting what you want from life. Streamlining your financial life plays a big part in creating the simpler life you may be seeking, freeing time to do things that many value more than money or work Ð a hobby, a long walk, a craft with the kids. Sound good? Here's how to do it. Step 1: Order, streamline, plan and manage your finances. Get a handle on the money that's coming in and going out of your household. There are a million ways to control expenditures Ð all the books, tapes, TV shows and magazines on the subject prove it. Whatever method you adopt, your goal is to understand where your money goes, approve of it, develop a spending plan and stick to it. Step 2: Eliminate unnecessary financial activity. It wastes your money and your time. Use just one credit card if possible (two if you have business expenses) and one debit card; pay bills by pre-authorized withdrawals; bank your paycheque with a direct deposit plan; transfer savings to investments (RRSPs, education plans, etc.) automatically. Many people like the convenience of Internet banking, if they have reasonably up-to-date computer systems at home. With Internet banking you can pay bills and transfer money between chequing and savings accounts, in the convenience of your home. Step 3: Get the most for your money when investing. Do you want, or need, independent professional advice from a licensed investment advisor or financial planner, or do you want to take the time to study and choose investment options yourself? Consider the trading and ownership costs of buying and selling investments through a full-service brokerage firm that wraps in advice, versus a discount firm that will process your order but offer no advice. Consider what mutual funds have to offer in growing your savings; for a built-in fee (called MER or management expense ratio), your money is managed by professionals with the expertise to make sound investment decisions. Some examples of ways to get the most for your money are: In a low interest rate environment, within the fixed income portion of your investment portfolio, it makes sense to buy individual investment grade bonds (rated BBB or betterÉ see DBRS website for ratings information), rather than owning them within a bond mutual fund. This is because the MER (management expense ratio) of a bond mutual fund eats up a disproportionate amount of the interest yield during periods of low interest rates (like now, when 5-yr. Manitoba bonds are earning only 3.7%/year). You pay no MER when you own an individual bond and hold it till maturity On the other hand, owning corporate bonds of BBB or lower within a high yield bond mutual fund is prudent, in my opinion, because your risk of bond issuer bankruptcy/default is lessened when your investment is spread amongst several corporate issues within a mutual fund, and because the interest paid on the bonds is high enough that the MER is not disproportionate. There are several Canadian equity (stock) mutual funds that have outperformed the TSX Composite index on a net average annual compounded basis in the last 5 years, with less volatility. Ask your advisor to help you select these funds that "win by not losing". If you study individual stocks yourself, or hire yourself a broker, you can purchase stocks without incurring an annual MER, but you will pay trading costs to buy and sell. Voluntary simplicity advocates often have an interest in investing in a socially responsible manner. These investors may prefer to buy only individual stocks of companies that they respect, or to choose a mutual fund that specializes in filtering stocks using social screening. Monitoring your investments nowadays is as simple as checking the newspaper or Internet in many cases. Have your savings invested in such a way as to have the long-term growth potential reflect your philosophy and situation and needs. This is just one more contribution to the peace of mind you seek in simplifying your finances and your life. Julie Leefe is a Certified Financial Planner and Investment Advisor with Bieber Securities Inc. in Winnipeg (website www.biebersecurities.com, toll free 1-800-205-9070). Since she visits extended family when in Flin Flon, she meets with her Flin Flon clients in their homes, or when they're in Winnipeg. Bieber Securities Inc. is a member of the Canadian Investor Protection Fund.
