Summer 2005
4 Steps to Financial Peace

You work hard for your money - wouldn't it be nice if your money could work for you? David So & The Mortgage Centre have come up with the following 4 simple steps to help you achieve financial peace, so that you have more money to enjoy the things you really love instead of worrying about your finances.

Step One: The Cushion

Currently, many of us are literally living from pay cheque to pay cheque. That is to say, if the unexpected were to happen, such as being laid off from work or having to take an extended sick leave or leave of absence to care for an ill family member, many of us would not have enough money saved to sustain us during that period.

In fact, according to two reports released in January 2003, one from the Vanier Institute of the Family in Ottawa and the other by the Ministry of Labour, each Canadian household put away approximately $2,700 in savings in 2002, compared with an average of about $6,500 a year throughout the 1990s. Neither amount would sustain a family with a mortgage and other financial commitments for very long.

With no other source of income, many people go into “survival mode” and resort to the use of their credit card. The problem with this is that a few months down the road, they have accumulated a considerable credit card debt that they are unable to pay off immediately due to their situation, but are paying large sums of interest that are absorbing any free cash they might have, and the debt continues to grow even more out of control.

The easy solution is to ensure that you have a financial “cushion” to protect you from the unexpected. David So & The Mortgage Centre can advise you on how to create a cushion of at lease 3 months’ worth of after-tax income (preferably 1 year), as well as appropriate health insurance, disability insurance and life insurance coverage to protect both yourself and your loved ones in case of unemployment or unexpected illness.

Step Two: Debt-Free

Unfortunately, David So & The Mortgage Centre frequently see debts on credit cards, lines of credit and more in the range of $30,000 or more. Alarmingly, the average Canadian household had accumulated $57,400 in debt by 2001, according to the Vanier Institute and the Ministry of Labour. When you consider that average monthly payments often range from 3 to 5 percent per month, this is equal to a staggering $900 to $1,500 each month. Unfortunately, the amount of debt that most Canadians have directly affects the lack of money that we put into investments.

If we eliminate our debts, we will be left with our monthly payments of $900 to $1,500 for investments. Being debt-free is an important step in allowing our money to work effectively for us. Let David So & The Mortgage Centre show you how easy it is to consolidate and gradually eliminate your debt, which will allow you to invest in your future, instead of the credit card company’s.

Step Three: Mortgage-Free

In Canada, it is common to set amortization to 25 years for new mortgages. But if you review your amortization schedule, you might be surprised to discover that you will pay almost double the amount of the mortgage money over the full term.

As a basic example, if you can pay your mortgage off in 15 years instead of 25 years, with a monthly payment of $1,000, you will be saving $1,000 X 12 months X 10 years, or approximately $120,000! So the sooner you can be mortgage-free, the less interest you will have to pay, which means that you will have more money free for other investments.

David So & The Mortgage Centre are experts in mortgages, and we would be happy to speak with you about how you can pay your mortgage off faster, bringing you one step closer to financial peace.

Step Four: Passive Income

Passive income is classified as steady income that will come to you whether you are working or not. While this may seem like a dream that’s too good to be true, the reality is that everyone can achieve passive income for the future with some planning and investing now.

A good example of this is retirement savings. Chances are that for most of us, the government assistance we receive when we retire will not be enough to support us for the rest of our lives. And while many companies offer group retirement plans, you should still be investing in your retirement with a Registered Retirement Savings Plan (RRSP) to help make the dream of freedom 55 (or at least 65) a reality.

And even though you won’t see your passive income start for several years or even, in some cases, decades, your RRSP will benefit you now because everything you contribute up to your maximum allowable yearly contribution will be considered tax-free income when tax time rolls around, keeping more money in your pocket now.

While a financial planner may suggest traditional passive income generators like the stock market, David So & The Mortgage Centre will tailor a plan to make the most of your money, taking into consideration different factors like your age and the amount of time you can wait to be financially free.

We currently have mortgage investors who have been consistently receiving 12 percent passive income for more than a decade, and real estate investors who bought a single property 10 to 15 years ago and now own a number of properties mortgage-free and receive rental income as passive income.

David So & The Mortgage Centre can help you choose the right investments to maximum your passive income earning potential, whether through RRSP contributions, property investment, or something unique to your needs. Call us today to find out more.

Nobody wants to have to worry about their finances, but the reality for most Canadians is that money is a primary cause of stress. In fact, according to a February 2000 study by the Heart and Stroke Foundation, approximately one in five Canadians, or 21 percent, has financial stress.

Let your money work for you and achieve financial freedom with David So & The Mortgage Centre’s 4 Steps to Financial Peace. For a free, no-commitment consultation, please contact David So by email at davidso@mortgagecentre.com, or by calling 416-410-6663.

Please contact David So directly by email, visit online or call 416-410-6663 ext. 31. We’ll show you financing opportunities that can enhance your home today - and its resale value tomorrow!