Quotations by Eric Tyson

Stock dividends and capital gains do benefit from lower tax rates. Additionally, increasing numbers of fund companies offer tax-friendly stock funds, which are appropriate if you don't want current income or you're in a high tax bracket and you want to minimize receiving taxable distributions on your funds. Index funds tend to have the best returns after taxes are accounted for. [2019] - Eric Tyson

The approximate maximum you can borrow when buying a home: mortgage rate = 3% -> 5 times your annual income; 4% -> 4.6; 5% -> 4.2; 6% -> 3.8; 7% -> 3.5; 8% -> 3.2; 9% -> 2.9; 10% -> 2.7; 11% -> 2.5 [2019] - Eric Tyson

If falling rates are too tough to resist, but you want something less risky than a variable rate, consider a fixed open mortgage. Your rate is guaranteed, but if rates fall to an even more attractive level, you can lock in at that point without any penalty. It's usually not worth paying the premium that lenders charge for open mortgages (usually a percent or so), though, and you have other options. [2019] - Eric Tyson

A convertible mortgage is one of the best-kept secrets in the mortgage game. A convertible loan offers many of the benefits of a variable-rate mortgage, with very little downside. You get a mortgage with a term of six months - or sometimes a year - typically with the same interest rate available for fixed mortgages for the same term. This is generally the best mortgage rate available. At any point during the term of your convertible mortgage, you can "convert" your mortgage to a different term; you can also choose between an open or closed loan.  [2019] - Eric Tyson

Avoid loans with prepayment penalties. You pay this charge, usually 2-3 percent of the loan amount, when you pay off your loan before you're supposed to. The only way to know whether a loan has a prepayment penalty is to ask. If the answer is yes, find yourself another mortgage. [2019] - Eric Tyson

Each month, the reverse mortgage lender sends you a check that you can spend on food, clothing, travel, or whatever you want. The money you receive each month is really a loan from the bank against the value of your home, which makes the monthly check free from taxation. The main drawback of a reverse mortgage is that it can diminish the estate that you may want to pass on to your heirs or use for some other purpose. Also, some loans require repayment within a certain number of years. The fees and the effective interest rate you're charged to borrow the money can be quite high. You have other alternatives to tapping the equity in your home. Simply selling your home and buying a less expensive property (or renting) is one option. [2019] - Eric Tyson

Avoid small-potato insurance policies such as extended-warranty and repair plans, home-warranty plans (unless you're required by provincial regulations), dental insurance, credit life and credit disability policies, insuring packages in the mail, cellphone insurance, contact-lens insurance and little-stuff riders (small insurance policies that are sold as add-ons to bigger insurance policies such as auto and disability insurance). [2019] - Eric Tyson

If you're having problems getting a fair settlement from the insurer of a policy you bought on our own, try contacting the provincial department that overseas insurance companies or the provincial regulator. You can find the phone number online or possibly in your insurance policy. Hiring a public adjuster who, for a percentage of the payment (typically 5-10 percent), can negotiate with insurers on your behalf is another option. When all else fails and you have a major claim at stake, try contacting a lawyer who specializes in insurance matters. Expect to pay at least $150 per hour. [2019] - Eric Tyson

You generally need life insurance only when other people depend on your income. The following folks don't need life insurance to protect their incomes: 1) Single people with no children; 2) Working couples who could maintain a lifestyle acceptable to them on one of their incomes; 3) Independently wealthy people wo don't need to work; 4) Retired people who are living off their retirement nest egg; 5) Minor children (because you're not financially dependent upon them). [2019] - Eric Tyson

Most disabilities are caused by medical problems, such as arthritis, heart conditions, hypertension, and back/spine or hip/leg impairments. The vast majority of these medical problems can't be predicted in advance, particularly those caused by random accidents. Being without disability insurance is a risky proposition, especially if, like most working people, you need your employment income to live on. If you're married and your spouse earns a large enough income that you can make do without yours, consider skipping disability coverage. The same is true if you're already accumulated enough money for your future years (in other words, you're financially independent). [2019] - Eric Tyson

In order to receive CPP or QPP disability benefits, you generally must have paid into the CPP or QPP for at least four of the six years leading up to the point at which you became disabled. Your disability must be severe, which means it prevents you from doing not only your former job but also any job on a regular basis, in order to qualify. The disability must also be prolonged, meaning it's expected to last at least a year or be likely to result in death. CPP/QPP disability payments are quite low because they're intended to provide only for the basic, subsistence-level living expenses. [2019] - Eric Tyson

The majority of people who stay in a nursing home are there for less than a year, because they either die or move out. If you have relatives or a spouse who will likely care for you in the event of a major illness, you definitely should not waste your money on long-term-care (LTC) insurance. You can also bypass this coverage if you have and don't mind using retirement assets to help pay nursing-home costs. Even if you do deplete your assets, remember that you have a backup: government-assistance programs. However, this will usually cover only basic accommodations. [2019] - Eric Tyson

Some of the low-cost travel medical insurance providers include Canadian Automobile Association (www.caa.ca), Ingle International (www.ingleinternational.com) and travelcuts (www.travelcuts.com). [2019] - Eric Tyson

The following list features companies that historically offer lower-cost homeowner's or renter's insurance policies for most people and have decent track records regarding customer satisfaction and the payment of claims: 1) belaidirect (www.belairdirect.com); 2) COSECO Insurance Company (www.coseco.ca); 3) Desjardins Insurance (www.desjardinsgeneralinsurance.com); 4) President's Insurance (www.pcinsurance.ca). [2019] - Eric Tyson

Umbrella insurance (also referred to as excess-liability insurance) is liability insurance that's added on top of the liability protection on your home and cars. Each year, thousands of people suffer lawsuits of more than $1 million related to their cars and homes. Umbrella insurance is generally sold in increments of $1 million. You should have at least enough liability insurance to protect your assets and preferably enough to cover twice the value of those assets. [2019] - Eric Tyson

Having a will makes good sense even if you don't have kids, because it gives instructions on how to handle and distribute all your worldly possessions. A living will (also known as an advance healthcare directive) tells your doctor what, if any, life-support measures you prefer. A medical (or healthcare) power of attorney grants authority to someone you trust to make decisions regarding your medical-care options. The simplest and least costly way to prepare a will, a living will, and a medical power of attorney is to use a high-quality, user-friendly software package (e.g. Complete Canadian Wills Kit), and then, if you prefer to be cautious, have them looked over by a lawyer. Be sure to give copies of these documents to the guardians and executors named in the documents. What makes a will valid is that two people witness your signing it. [2019] - Eric Tyson

The advantage of a living trust is that upon your death, assets can pass directly to your beneficiaries without going through probate. Living trusts are likely to be of greatest value to people who meet one or more of the following criteria (the more that apply, the more value trusts have): 1) Age 60 or older; 2) Single; 3) Assets worth more than $1 million that must pass through probate (including real estate, nonregistered retirement plans and accounts, and small businesses). You can use a software package (e.g. Complete Canadian Wills Kit) to establish a legal and valid living trust. [2019] - Eric Tyson

Your best bet for professional help with you personal finance may be a financial planner who charges for his time. Some planners charge a fixed fee to whip up a financial plan for you. If you just need someone to act as a sounding board for ideas or to recommend a specific strategy or product, you can hire an hourly planner for one or two session advice. Hiring someone incompetent is the primary risk you face when selecting an hourly planner. Be sure to check references and find out enough about finances on your own to discern between good and bad financial advice. [2019] - Eric Tyson