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My Finances are a 'Mess'
by Stephen Horwood, B.Math.
My Finances are a 'Mess' … Can I do something BEFORE year-end to get back on track?

YES !!  You can.  You can do some long-term planning and some short-term 1999 planning to help you this year (later in this article).  It all starts with a backward glance.  Let me explain.

The first thing anyone should do when they realise that they are in the proverbial mess with their finances, is begin to understand what has happened with their finances over the past while, and then decide what to do to change that.  Easier said than done.  The key here is to have the will to change things for the better (or if you’re already doing the right things, you could be pleasantly surprised).

First, make a budget of where you spend your money.  This sounds daunting if you haven’t done this before, but it really is not that difficult as long as you can come up with reasonable estimates of where your money is spent.  Don’t worry about the exact cost of last month’s phone bill, as long as you can accurately predict an average monthly bill amount.  There are plenty of budgeting one-pagers which allow you to simply fill in the blanks and add up the numbers.  Next, take a look at your major expenses and decide which ones are mandatory (e.g. taxes) and which are discretionary.  This is a good start in highlighting those expenses which may be pared down slightly.

Without going into too much nitty gritty, I find that people can usually “get by” with a few less extravagant dinners and movies here or there, and with some careful shopping (read: bargain hunting) techniques.  BUT, I think one of the major expenses a lot of people face is the high cost of debt, especially credit card debt.  This is where you might be best to have the advice of a financial advisor in order to get it right the first time!

For some end-of-year tips to try to get your finances back on track, there are several tax strategies people take in order to minimise their current-year taxes.  I am not an accountant, and you should consult an accountant for tax advice, but here are some general no-brainers that help.  With couples, since they are not considered spouses for tax purposes yet (see my previous column on this topic), it makes sense for one of the partners to contribute all charity money for the couple and thus claim all charitable donations on his/her tax return.  You may also consider giving next year's charity contributions late this year, thus lumping 2 years' worth of donations in one year.

Anyone with children may investigate the 1998 rule changes for RESPs which make them more attractive in certain situations.

Contributing to an RRSP also gives you a tax deduction, although you have until the end of February to consider that (you may hear more about this soon) - in general though, the sooner you start preparing for your future, the better.  Procrastinators may be interested in my columns in January!

I’ll end this column with a new addition, called the Mutual Fund Moment.  If you have a question about mutual funds, I’d like to hear it and answer it in a ‘Moment’.

Mutual Fund Moment

If you think your mutual fund took a dive this past week, you may want to read the fine print - a lot of funds paid out a distribution in mid-December, which in past years was paid out on December 31st.  Simply put, a distribution is the capital gains/income that a fund has made over the year, which it deems to pay out to unitholders.  This year, some of the fund companies changed their distribution date to mid-December.  If you simply look at the NAVPS (i.e. the price in the newspaper) of a particular mutual fund that paid a distribution, it may have dropped.  However, if you look at your year-end statement, you will notice that you received more shares of that mutual fund.  So the price dropped but you have more shares, thus counteracting the drop in price due to the distribution.

Stephen Horwood is a Personal Financial Advisor with Money Concepts.  He may be contacted at  Tel: (888) 615-2130.  Fax: (613) 925-1063