US Gov't taking more control

Last week, the Senate approved legislation that put auto dealers under the auspices of a new consumer board with power to regulate financial products. But on Monday, the Senate voted 60-30 to instruct members preparing to meet with their House counterparts to settle differences between their versions of the bill to exclude auto dealers from the new board's purview. So, according to the recent bill passed, it now sounds like the U.S. Government wants control over all financial products, but they currently want to exclude Auto Dealers. This is probably because there doesn’t seem to be much profits in Auto Manufacturing and sales, but there sure are large profits in financial products, sold by Banks, Mutual Fund Dealers, Insurance Companies and more. Although Obama had originally pushed for Auto Dealers to be included in this new reform, it may just begin with Financial Products that the government will control. Originally the Government was set up to serve the people, but as we can see today it is moving more and more to the time where we serve the government. There has not been such a financial reform in the U.S. since the Great Depression of the 30’s. Obama and the Democrats are moving very quickly with 2 major reforms this year: health and finance. Slowly, but surely you can see government taking more and more control. Make sure to learn your rights and understand enough of the system to survive in the day and age we are in. If you learn and apply enough you can not just survive under this world reform, you can even thrive!

EUROPE’S FINANCIAL TROUBLE

The global financial crisis, which had been stirring for a while, really started to show its effects in the middle of 2007 and into 2008. Around the world stock markets had fallen, large financial institutions had collapsed or been bought out, and governments in even the wealthiest nations had to come up with rescue packages to bail out their financial systems. Now comes recovery, a time where the economy is supposed to rebound…but is it rebounding? Look at where Europe is at currently. January 1^st, 1999 the Euro made its debut, and now just over 10 years later the continent is in its own major financial crisis while the world is supposed to be rebounding from the global financial crisis. Europe has many countries, each with distinct financial and cultural histories, that have made this transition and are caught up together in this European Financial Crisis. Maybe if each country didn’t abolish their own currency to turn to the Euro each country could have stood stronger to help the ones that were failing, however they are now all in the same pot and it is taking other continents and countries around the world to look at bailing them out. The issue in Europe is already affecting the world wide economy and the rebound tougher for many countries especially the U.S. Recently the European Union has been working on limiting Europeans from investing in world markets to keep most European investing to Europe only. The issue has also caused the E.U. and G20 to look at developing another world wide tax, and other measures that would hinder the progress of recovering economies. Many are accrediting this financial crisis to Portugal, Italy and Greece not collecting their taxes. Why is it that taxing seems to be the solution. If taxation is increased more than it has already over the last 50 years most people will not be able to adequately manage a household budget without continuously going into further debt. Where will the taxing stop? There are two ways to increase cash flow, increase incoming and decrease outgoing. It seems like governments always to look at more coming in as more important than cutting back on what is going out!

THE NEW HST

The Harmonized Sales Tax or HST is on for British Columbia and Ontario. British Columbia And Ontario will harmonize their provincial sales tax (PST) with the Federal goods and services tax (GST) effective July 1, 2010. The current provincial sales tax (PST) rate in BC is 7%, which, when combined with the goods and services tax (GST) results in a harmonized sales tax (HST) rate of 12%. The current provincial sales tax (PST) rate in Ontario is 8%, which, when combined with the goods and services tax (GST) results in a harmonized sales tax (HST) rate of 13%. The initialization of this will be costly and result in extra time spent understanding the rules, however in the long run it should benefit, more than harm, as it eliminates an entire level of bureaucracy, which is always a good thing! One tax means only one reporting, no longer 2! There will be a slight increased cost to consumers to start, but because this is a consumption tax, those who spend the most will pay the most. Those with low incomes will be affected the least, because they spend the least, and a higher proportion of items purchased by low-income people are not subject to the harmonized sales tax (HST), such as basic groceries. The new harmonized sales tax (HST) allows business owners to claim HST paid as input tax credits which could allow for less tax paid to CRA. There are also changes in the goods and services tax (GST) Benefits paid to lower income families, especially in Ontario which could result in higher benefits being paid. As we know with any tax things do change over time though. There are lots of different implications with the harmonized sales tax (HST), including what is taxed and what isn’t, transitional rules and more. For more information please refer to http://taxtips.ca/whatsnew.htm

You can't tax an economy to prosperity

“You can't tax an economy into prosperity; likewise you can't tax a financial sector into stability.” These are words by Stephen Harper in addressing the new international bank tax proposal. This proposed global bank tax would enforce banks in many countries of the world to pay a tax that is to help with the Bailouts that are happening around the world in this economic downturn. Many countries who have been beneficiary to the bailouts or think they may need bailouts in the future are for this plan, while Canada is not. Obama has also been backing this as he has been pushing towards the one world governing platform. The Prime Minister, Finance Minister and others from the Canadian Political arms are stepping up to try and stop this from happening. Canada will host extraordinary back-to-back meetings of the G8 and G20 next month in Huntsville, Ont., and Toronto. Harper said he will use his position as host to push the G20 to adopt a more sustainable system of financial regulation as a corrective to the economic meltdown. Canada has so far avoided the bailouts’ toxic assets and are continuing to put measures in place to strengthen Canada’s financial system, so why put more burden on a recovering financial system. We cannot continue to add taxes every time the economy is in trouble. Taxes are already a big cause of the downfall of many societies, on this Fiat system they are built on! Canada is standing up against this possible world tax and at the same time proposing a different solution: Rather than a more formal tax on bank earnings, Canada has championed a plan it calls "embedded contingent capital" as a way of strengthening the financial system and mitigating the need for bank bailouts. Essentially, the system would allow banks to sell bonds to pad their reserves, but the bonds would automatically be converted to equity during bad times, thus avoiding the need for a taxpayer bailout. The system theoretically would encourage bondholders to keep a closer eye on management because they would be unwillingly converted into shareholders if anything goes wrong. Will the Global Tax go through, will Canada’s proposal emerge on world platforms as a serious alternative, or will others come forward with other plans? …Only time will tell!

4th Step to Financial Freedom: Wealth Accumulation & Increase Passive Cash Flow part 3

Here are more places where you can find money to free up to generate passive income for wealth accumulation:

Business Equity – If you are self employed or you have a corporation with assets, you can leverage the assets and borrow against them to invest, providing more cash flow for your business.

What if you have money in retained earnings but you want to invest personally and you no not want to take the money out because you are worried about tax? Paying dividends can be really useful in this situation.

RRSP’s – The good thing about an RRSP is that you obligate yourself to put money aside for retirement. The second benefit is that you are deferring tax to pay it later.

Most RRSP’s are invested in Mutual Funds and many people who have mutual funds are not happy about the returns. Most of the people invest in mutual funds blindly because they do not know what stocks or bonds the fund holds. We need retirement plans but they do not need to be registered with the government.

To free up money from an RRSP, you have to check first if the RRSP is locked or unlocked. If the RRSP is unlocked, you can use a melt down strategy minimizing the tax you pay to pull out your RRSP. This is done by withdrawing your RRSP in increments of $5,000 to keep your withholding tax to 10% and then having a proper tax plan to offset that extra income. It is also good to withdraw RRSP in lower income years.

Once you free up the money, you can put it to work and make it your slave! Making money our slave allows us to become wealth with purpose.

Remember that investments come and go. We need to continually be open to new investments and opportunities. Make sure to consult a professional for new investment opportunities.

4th Step to Financial Freedom: Wealth Accumulation & Increase Passive Cash Flow part 2

In looking at your assets or your family’s assets, you can see what are income producing and which are not. The goal in this 4^th step is to produce more income producing assets, thus providing more cash flow and asset growth.

Some people have cash to invest. However, the majority of people do not have cash sitting around doing nothing. We have to free up money and generate passive income to start wealth accumulation.

Here are some of the places you can find money to free up:

Home Equity - When your are planning to free up money from your home, you should make sure that the investment that you are going to put the money into is as secure as your home is. You have to feel comfortable with that guarantee as you feel with your home or land. You also need to know how much equity you have:

Equity = Value of your Home - Mortgage

There are three ways to free up money from home equity: 1. Second Mortgages work for people that do not have good credit.

2. Line of Credit on your home equity; with a line of credit you pay interest only with no principle, or you can pay as much principle as you’d like, anytime with no penalty.

3. Adjustable Mortgage is a mortgage and a line of credit all attached in one. This has a locked in portion and a line of credit portion. If you are worried about interest rates, you still have a regular mortgage locked in and a line of credit that fluctuates with prime rate. So every time you pay principle on your mortgage, your line of credit lending goes up. So you do not have to re-evaluate your house every time you need money.

More place to find money to free up on my next blog!

4th Step to Financial Freedom: Wealth Accumulation & Increase Passive Cash Flow part 1

The end of the Tax Season has finally come! After a week of covering some important tips on tax savings, let’s now get back to learning more about the 5 Steps to Financial Freedom. We have already discussed Steps 1 to 3 (please see my previous blog entries) and we are now at the 4^th Step which is Wealth Accumulation and Increase Passive Cash Flow so let’s get going . . .

Wealth is for the next generations and cash flow is used for retirement. Cash flow allows you to retire and have time to fulfill your purpose. We need to make money our slave so it can work for us to produce cash flow and wealth.

Invest in 3 Asset Classes (True Diversification)

True Diversification means investing in the 3 following asset classes:

1. Real Estate
2. Paper
3. Business

When we have investments in all 3 of these asset classes, we can weather most economic storms!

It is good to become an expert in at least one of the asset classes. The better you become at something, the more successful you will be. All it requires is the following:

1. a little of some acquired abilities vs. special natural abilities
2. a little bit of well-spent time vs. lots of free time
3. a little well-placed money vs. massive amounts of money

Do your Due Diligence! I cannot stress enough the importance of due diligence. You should do as much as you can to know more about the investments that you are going into. Here is a list of some of the things to do due diligence on:

1. Entity used for the investment
2. People involved – shareholders, directors, officers, management, etc.
3. Testimonies
4. Track Record
5. Compliance
6. History
7. Performance
8. Asset/s
9. Liabilities
10. Market Potential

Look at the minimums and maximums and the risk vs. reward. What is the minimum and maximum investment? What is the minimum and maximum potential Return on Investment? How much risk will I be taking in comparison to the potential maximums?