BUSINESS MANAGING MONEY Simplicity is the key to personal finances KEEP IT simple. Always remember those three words when you plan your per- sonal finances. Because for most of us, the simple approach is the most effective way to get the most from our money. That was the message I received during an interview here with Steven Kelman, former investment editor of the Financial Times and still a contributing editor responsi- ble for the paper’s monthly survey of investment funds. While Kelman might believe in a very basic approach to managing money, he has written hundreds of pages of financial advice in three books: Investment Strategies (co- authoréd with Seymour Friedland), Understanding Mutual Funds and RRSPs 1989. dollars and sense Michael Grenby (The books are available from the Financial Times, 1231 Yonge Street, Suite 300, Toronto M4T 2Z1 for $14.95 each or all three for $29.90 — with a full refund ‘‘if for any reason you are not satisfied.” Penguin Books plans to sell the three titles through bookstores ear- ly next year.) ‘Books and columns in news- papers provide the financial tool kit you need,’’ said Kelman, who is also vice-president, corporate and public relations for Dynamic Capital Corporation in Toronto. “Do what the professionals do: educate yourself and keep up to date by reading all the news about personal financial matters.’” Being a successful investor can be as simple as putting $1,000 a year into an RRSP, where the growth will be tax sheltered. ‘At 10 per cent interest, that savings program will produce $108,182 in 25 years,” he said. ‘If you could manage $5,000 a year, you’d have more than half a mil- lion dollars.”” Whether $1,000, $5,000 or $10,000 a year is all you can save at the moment, you could aim to increase that amount every few years — producing even more spectacular results. The secret is compounding: your interest is added to your principal and both earn additional interest which is added to the principal ... and so on. Kelman said increasing your rate of return even a small amount re- ally pays off. , If you invest $1,000 a year for 20 years at 10 per cent, you will have $63,002. You will have in- vested $20,000 and the remaining $43,002 will be interest. But if you could earn 12 per cent instead, you would have $80,699 — or $60,699 interest. That’s a 41 per cent higher return for investing at only a 20 per cent higher rate — 12 instead of 10 per cent. Sticking with your program makes your money grow faster and faster. With your $1,000-a-year pro- gram at 10 per cent, it takes you 20 years to earn $43,000 interest — but not even five more years to earn another $43,000 interest. Getting started is the hardest part, followed by staying on track. That’s why I always suggest you use pre-authorized cheques or a similar automatic sav- ings/investment program. While you must take the first step, you can then slip out of the ongoing responsibility by letting somebody else impose the discipline. Kelman listed some basic princi- ples for investing successfully: © Get your house in order. Be businesslike and write down your income and expenses, what you own and what you owe. That takes time and effort, but you need the results so you can move to the next steps. ® Pay off non-deductible debts. Establish a savings habit. Learn about investment alternatives. © Set your objectives: how much money you want by when for what. © Decide how you will achieve your objectives. Develop a suitable investment program ‘‘that won't have any surprises.’’ Diversify. ® Monitor your investments regularly. Make changes as need- © Minimize income tax by ar- ranging your finances and invest- Ments in particular in the most tax-effective way. ef necessary, use a financial adviser to help you with the preceding steps. Kelman, 43, said he and wife Barbara bought their first home in 1973, a couple of years after they were married. ‘*We put everything toward pay- ing off the mortgage although by the time I was in my 30s, I was also making RRSP contributions and using the refunds to further pay down the mortgage,”’ he said. Kelman now favors mutual funds and real estate as invest- ments but warns: ‘‘You have to look 10 to 15 years ahead for the growth that mutual funds can produce. With revenue property, make sure it pays for itself, and also realize you are in for the long term.’’ Based locally, Mike Grenby writes a ‘‘money’’ column which appears in newspapers across Canada; he also provides individ- ual financial counselling. If you have a question or story idea, write to Mike Grenby, Money Columnist, North Shore News, 1139 Lonsdale, North Van- couver V7M 2H4. Mike cannot reply individually but will answer as many of your letters as possible through his column. 75 - Wednesday, November 16, 1988 - North Shore News PRICES EFFECTIVE lay "Saturday NOVEMBER 16 TO NOVEMBER 19, 1988. FRESH BAKED OSOGOOD sesame we Bread 600 g LOAF FRESH BAKED Kaiser Rolis PACKAGE OF 12 FRESH Pretzels PACKAGE OF 4 McGAVIN’ S HOMESTEAD ran & Fone Bread | 695 g LOAF WE RESERVE THE RIGHT TO LIMIT QUANTITIES. WE SELL SAFEWAY Y FLYER ITEMS FOR LESS. .