36 - Wednesday ‘Febuary 1995 -

MONEY MATTERS=

Sibi roe Le A RN,

iC

KEEP IT simple when you

set Out to improve your fi-
nancial situation.

“Don't worry about or look for
complex. investment plans, or fan-
cy ways to save tax,’’ advises one
certified general accountant

' (CGA), part of a study group

which recently reviewed the most

‘common fields in which ordinary

people invest...

“Stick to — at least start with
~— the basics to get the most for
your money, and still sleep well,”
she added.

. While the four basic investment
categories are the same -for
everybody, each individual plan —
how much. money you’ put -into
each. category and which invest-

., ments you choose — will differ.

~ “Again, ‘don’t lock for
‘right’, plan,’? said the CGA, who
advises clients on various aspects
ot investing : and tax. planning.
“De. simply what’s tight for you.

the’

North Shore News
SERN:

t!

“And realize your situation will
change over time. It’s important
to regularly review and revise your
investment program as you go
along.”’ ‘ .

Normally, you should own your
home (or have a suitable rental
arrangement), and have paid off -
most of your non-deductible debts
before launching into a_ serious
investment program, said the
CGA.

However, another approach is
to diversify by investing as you go
along, and perhaps use your in-
vestment proceeds to help buy a
home and pay off debt.

-Here are the four basic invest-
ment choices.. Choose the one(s)
with which you feel comfortable
or would like to learn more about.
(1) Guaranteed investments like
term deposits, guaranteed invest-
ment certificates, Canada Savings
Bonds, mortgage-backed
securities, money’ market funds
and Treasury bills: (to name the

Some things ne never change.

pio) as

te

Si,

LIE OY AR cited Ob

e basics

most common) generally guaran-
tee the interest as well as the
return of your original capital.
Hold these iastruments outside
your registered retirement savings
plan (RRSP) as.a reserve for
emergencies and opportunities.
You might stagger the maturity
dates of the deposits and GICs. If
interest ‘rates drop, at least some
of your money will be locked in at
the higher rates. If rates rise, you
will benefit when you reinvest the
deposits that are maturing.
(2) The stock market gives you:a
chance not oaly to_earn income
byt also to increase the value of
your invested capital. If you sell
after your stocks or bonds have
goné up in price, you will profit.
Dividends and’: capital gains
receive a tax bréak-"— compared
to having interest fully taxed. If
you have both interest-bearing in-
struments and stocks, for the best
tax treatment hold: the interest in-
struments in your. RRSP and the

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stocks outside.

You can buy individual stocks
and bonds, .or choose mutual
funds which hold a variety of in-
strunients. The more you wnder-
stand about ihe market, the better
.your chances of success.

But be prevared: for higher

tisks: prices can drop as well as
climb, and dividend payments can
be suspended or stopped,
(3) Revenue property. provides
rental income. and has the poten-
tial to increase in value. (Again
there's risk: a vacant house or
suite produces ‘no rent and prop-
erty values can fall, tco.)

Many investors have done very
well in real estate: while’ others
hated being landlords.

There are people who invest in.-

real estate with their parents or

aduit children — a partnership

that suits some but not others.
Look for. undervalued property
in a good facation. Find a slightiy
tun-down place you. can fix ‘up
with more effort than cash
paint, new carpet, perhaps. com-
pleting an unfinished basement
that has ‘the wiring and plumbing
for a suite.: Always aim to max-
imize- both the -rent. and the

“number and/or quality of tenants.

It pays io have a large enough
down payment so the rent comes

Close: to. covering all expenses...

While you may claim ‘rental losses

“FINANCIAL CONCEPTS

vest results

-against other income, make sue
the after-tax appreciation ‘of the
property’s value exceeds your
after-tax loss.

(4) Investing in your own sideline
or full-time business. can yield
both personal .and. financial
satisfaction, But many ° small
businesses go broke, . :

You might consider testing the
waters by sturting a sideline
business while you (or your part-.
ner) can continue at a regular job.
Major financial institutions and ©
accounting firms, plus government
agencies like the Federal Business
Development Bank, have free
booklets and other literature to
help you start and run a business.

You could jcin others in a real :
esiate or business venture. -Eut>:.
with tax-driven investments, make
sure the long-term bottom’ line

_ will reflect a reasonable profit for.
‘the risk you are taking.’

Having self-employment income
or revenue property also. allows.
you to: save tax by. deducting
related expenses —~ - including Ppay-
ing family members in a lower tax
bracket to werk for you. ~

You can even claim losses: typi-
cally incurred during. the. startup -
years against other (employment,” |
pension, investment)’: income:
but. you must have a reasonable™
expectation of profi te. “ :

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