Tenant Insurance

According to Statistics Canada, in 2008, 4.4 million households in Canada rent their home, but only 41.8% covered with insurance. Insurance Bureau of Canada said tenants are not required to have insurance, but they can purchase it for about $ 20 to $ 30 a month. It seems that Tenant Insurance is unpopular in Canada. Here we will look at some basic information about Tenant Insurance.

What is Tenant Insurance?

Tenant Insurance is a form of insurance where the tenant of a house, condo or apartment can have insurance to protect the contents of his place. Tenant or Renters Insurance provides coverage for your personal belongings in case they are stolen, damaged, destroy, or if your actions (e.g., leaving the bathtub running) caused damage to: your apartment, your neighbor’s apartment, and the apartment building itself.

Why Do We Need Tenant Insurance?

Tenant insurance protects you from having to cover the damaged costs out of your own pocket and also gives you a peace of mind.

How Much the Tenant Insurance Premium?

A basic tenant’s insurance package for an apartment in a building can cost between $125 and $200 a year for the coverage of $ 15,000 to $ 30,000 of personal property. The premium is largely determined by the amount value of coverage a tenant needs for personal property. Premiums will vary according to location, insurance history, optional coverage, etc.

The insurance cost increases if you live over a store or restaurant. The risk increases if you add additional coverage for items of higher value, or if the space also is used for business purposes.

What Is Standard Tenant Insurance Coverage?

All Risk Contents Coverage insures all your belongings inside your home for the most common types of losses. When you have All Risk coverage, your contents are insured for everything. Named-Perils coverage includes a list of the most common types of things covered under your insurance. Named-Perils include fire, theft and water damage.

The Additional Living Expense coverage pays for your reasonable and necessary expenses to temporarily live away from home if you are forced to leave your home because of a loss. Hotel and food costs are the type of expenses that would be covered under such circumstances. There is usually a limit on this kind of additional living expense coverage.

Tenant Insurance also covers Personal Liability that protects you from having to pay damages to people, if you've been found responsible for unintentionally injuring them or damaging their property.

How to Make Claims Easier?

As soon as you get the tenant insurance you need to document, take picture or list all your belongings. A record of your things will be valuable in settling claims with insurance company.

What Are Nominal Income and Real Income?

There is a difference between nominal income and real income. Nominal income is the amount of money that we receive as wages, rent, or interest, while real income is the purchasing power of nominal income.

The formula is:

Real income =    Nominal income  :  Price index (in hundredths)

For example: (source : Statcan)

The Nominal Income of Canada based on median total income in 2007 is $ 66,550, and the consumer price index in 2007 is 111.5. So the Real Income becomes: $ 66,550 / 1.115 = $ 57,870

In 2008 the nominal income is $ 68,860, and the consumer price index is 114.1. The Real Income now is: $ 68,850 / 1.141 = $ 60,350.

In 2009 the nominal income is $ 68,410, and the consumer price index is 114.4. The Real Income is: $69,410 / 1.144 = $ 59,799.

The rule that tells us by how much approximately the real income will change:

Percentage change in real income = percentage change in nominal income – percentage change in price level.

Between 2007 and 2008, the nominal income changes 3.47%, the price changes 2.6%, so the real income increases 0.87%.

Between 2008 and 2009, the nominal income changes – 0.65%, the price changes 0.3%, so the real income decreases 0.95%.

If the percentage change in nominal income is similar to the price level, so the real income will remain the same.   

Basic Information about Canada Retirement Plans

Basically there are two kind of retirement income in Canada: public and private. The public retirement income is from the Government of Canada which provides these pension benefits: the Canada Pension Plan (CPP) retirement pension, the Old Age Security (OAS) pension, the Guaranteed Income Supplement (GIS), the Allowance and the Allowance for the Survivor. The private retirement income comes from the savings and investments you accumulate during your working years that include: money in savings accounts, investments in stocks and bonds, Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs), and Tax-Free Savings Accounts.
The information below will explain four major retirement plans which are: OAS, GIS, CPP and RRSP.

OAS (Old Age Security)
OAS pension is a monthly income from government that available for most Canadians age 65 or older. You are eligible to receive OAS if your age is 65 or older, you are living in Canada and have lived here for 10 years after turning 18, or you are not living in Canada but have lived here for 20 years after turning 18. You can apply for OAS 6 months before you reach age 65. If you live in Canada for 40 years after turning 18 you will get a full pension, if not you’ll get partial pension. For October 2011 the average amount OAS received is $ 508.35. If there is any increases in the cost of living, government will increase the pension payment.
Your OAS pension will stop: if you did not live in Canada for at least 20 years after you turned 18 and if you are out of the country for more than six months after the month of your departure, or if you make a request to have your pension stopped, or when you die.
The Old Age Security pension is taxable income, like most other retirement income. Pensioners who earn individual net income of $66,335 or more as of 2009 (including the Old Age Security pension) have to repay part of their pension benefits.

GIS (Guaranteed Income Supplement)
The GIS is provided to OAS pensioners with little or no other income. Not like OAS, GIS is not taxable. The single recipient of GIS will receive lower amount than both spouse recipients. The yearly income of applicant and or spouse can not exceed certain limit. For October 2011, if you are single and your income per year is below $ 16,368 you will get GIS monthly of $ 491.40 (average amount). If you are a married couple, both of you are retired and both of your income does not exceed $ 21,648, the average amount each of you will get monthly is $ 309.05 (source: servicecanada.gc.ca).

CPP (Canada Pension Plan)
CPP is a contributory, earnings-related social insurance program. The CPP program mandates all employed Canadians who are 18 years of age and over to contribute a prescribed portion of their earnings income to a nationally administered pension plan. If you are an employee, the employer contributes 4.95% for you and you yourself also contribute 4.95% in paying the pension plan. But if you are self employed you have to contribute 9.9% to CPP. The minimum pensionable earning for year 2006 is $3,500 and maximum is $ 42,100. If your annual salary is $ 30,000, the CPP contribution is $ 30,000 - $ 3,500 x 0.0495 = $ 1,312 /year, and your employer contributes the same amount, so the total contribution is $ 2,624.
As an example, if you have lived and worked in Canada most years between the ages of 18 and 65 (47 years) and earned about the average Canadian wage ($40,500 in 2004), at age 65 you would receive a CPP retirement pension of about $814.17 a month. So if you have worked for only 20 years the amount you get is less 30% to 40%.
To calculate the exact amount how much you will get from OAS, GIS and CPP you can go to servicecanada.gc.ca.

RRSP
RRSP (Registered Retirement Savings Plan) is an investment account designed primarily for saving toward your retirement years. RRSP is regulated by the Canadian government and have special tax benefits. RRSP can help you maintain your standard of living when you retire, because you can’t rely only on government pension. RRSP is available through chartered banks, trust companies and other financial institutions. By law, when you turn 71 your RRSP must be converted to other retirement income form like RIF (Retirement Income Fund). When you die your RRSP is paid to your beneficiary (spouse or anyone you have designated). The earlier you accumulate RRSP the more balance you’ll get. For example with the total amount invested is the same, but look at the difference in results.
Total RSP balance after 40 years of $500 annual contributions equals $77,381.
Total RSP balance after 20 years of $1,000 annual contributions equals $36,786.
The calculation based on 6% rate of return (source: tdcanadatrust.com).

4 Tips to Use Credit Card Wisely

A credit card is something that you must have. It’s as important as a bank account. One benefit of credit card is to build up your credit history, so in the future you can use the credit card score to purchase a house or a car.  In other side some people do not know how to use the credit card wisely. They use credit cards to buy anything from clothes, electronic, or furniture, and all consumers stuff in the same time, and it’s ended up with a pile of debts. They start paying with a minimum pay every month and finally make a higher delinquency rate.

According to Equifax Canada, total outstanding credit-card debt hit $78 billion in September 2009, up $ 2 million from $76 billion in September 2008. Ninety-day credit card delinquencies jumped 53 per cent between September 2008 and September 2009, hitting $3.6 billion (source: Canada.creditcards.com).

To avoid using credit card unwisely, here are some tips that may be useful.

Do Not Own Too Many Credit Cards

Managing more than one credit card is not easy, if you do not limit the usage and make record of every purchase.

Purpose of Using Credit Card

It’s better if you use credit card only for emergency situation like paying a tow truck when your car broke down, or paying a doctor or hospital when you are travelling out of country.

Limit in Using Credit Card

Every month you must use the card or risk having your account closed, but you have to use it in moderate purchase, let say $ 50 for buying clothes or shoes, or grocery. You need to know how much you can afford to pay the debt and avoid overspending.

Pay Off Your Debt in Full and Pay On Time

Pay off the entire or most of the outstanding balance each month and pay it on time or before the due date. Late payments cause you penalty, raise your interest rate, and damage your credit report.

Why the CEO Gets Paid Differently

CEO pay is financial compensation received by an officer of a firm, often as a mixture of salary, bonuses, shares of stock, benefits, insurance, etc. The amount of pay is determined by the board of directors. For example, last year, AT&T’s CEO Edward Whitacre had a pay package worth more than $38 million. That included $9.2 million in salary and bonus, $4.7 million in long-term incentive payouts and $24.8 million worth of long-term incentive grants.  Llyod Blankfein of Goldman Sachs pulled in all package of compensation of $21.7 million in 2009 (source: MSN Money).There are some factors that made the compensation differently among the CEOs.

Sales Revenue

The CEO salary gets higher when the sales/revenue also higher. One boss in US company with annual sales $ 500 million get paid $ 2.16 million.

Type of Company/ Sector

Rates of executive compensation are also high within the financial, IT, telecommunication, oil and gas sectors.

Country

Rates of executive compensation are notably higher in Western than Asian countries and it is reasonable to conclude that high rate of executive compensation is primarily a Western phenomenon. In 2003, the Bank of China CEO demonstrates the more modest rates of executive pay of $ 229,720, while the Bank of America CEO got paid $ 9,959,080 (source: itcilo.org).

Gender

Based on survey of 3,242 US and Canadian-based companies in 2008, the female CEO pay packages are only about 85% of male total actual pay (which includes stock option profits and other realized equity) at the median: $1,746,000 compared to $2,049,000 (source:businessweek.com).

Government Control

China government put ‘caps’ upon level of executive pay in various instances. In February 2009, the Chinese Ministry of Finance put a limit upon the pay of executives at state institutions of 2.8 million Yuan ($410,000).

Rewarding Risk

Some argue it makes sense that U.S. CEOs have greater potential rewards, because they accept the risk of having a big chunk of their pay linked to options. The more risk the job, the more they get the compensation. 

Executive Pay and Worker Wage

Yesterday I’ve read that the 100 highest paid CEO whose companies are listed on the S&P/TSX (Toronto Stock Exchange) composite index made an average of $ 8.38 million in 2010. It said that’s 189 times higher than the $ 44,366 an average Canadian full time worker made in 2010. It’s a sad new while the average worker’s wages fell comparing to 2009 data and the CEO compensation raise 27% from $ 6.6 million in 2009.

To understand more about these CEO pay and average worker wage, I look up at Wikipedia and I found out as follows:

Executive pay is financial compensation received by an officer of a firm, often as a mixture of salary, short term incentive (bonuses), long term incentive plans, shares of and/or call options on the company stock, employee benefits, paid expenses, and insurance.

Executive pay is an important part of corporate governance and is often determined by a company's board of directors.

An average worker's wage is the mean salary of a group of workers. This measure is often monitored and used by government or other organization as a benchmark for the wage level of individual workers in an industry, area or country.

I also found out some information about average CEO pay and average worker pay in some countries (year between 2009 and 2010).

Country	CEO Salary/yr (Can$)	Worker Salary/yr	Times higher
Canada	$ 8.38 million	$ 44,366	189
USA	$ 11.5 million	$ 33,910	300
Britain	$ 4.3 million	$ 52,039	83
Europe	$ 6.6 million	$ 35,257	187
Japan	$ 1.5 million	$ 45,180	34
China	$ 631,700	$  3,600	175
Indonesia	$ 295,000	$  2,125	139

Sources: Wikipedia, MSN Money, Forbes, Payscale

This article is not meaning to disagree with the amount of executive pay, but this issue proved that the richest gained more rich and there is a big gap between the CEO pay and average worker wage.

How to Determine What You Are Worth

Do you think you are wealthy enough? You think you already have an abundance of material possessions. May be you already have one Honda Odyssey and one BMW 750, one  house in Toronto and  one bungalow in Muskoka, you have three bank accounts, but you also have mortgage loans, car loans and four different credit cards. You need to understand that wealth is not what possessions that you have, but is how much net possessions you have. In economics, the term wealth means the net worth of a person, household, or nation, that is the value of all assets owned minus of all liabilities owed at a point in time.

A simple net worth statement consists of the following categories.

Investments

Bank accounts, mutual funds, common and preferred stocks, municipal bonds/corporate bonds, investments in real estate, miscellaneous investments.

Assets

Residence, automobiles, collectibles, other personal property

Retirement and Child Education Assets

RRSP investment, RESP investment

Liabilities

Home mortgage, automobile loan, investment loan, line of credit, other loan, credit card debt, other debt

The formula is simple:

Net Worth = Investments + Assets + RRSP + RESP – Liabilities

But remember when you calculate your net worth do not include your personal items like clothes, CD, furniture, only count those items that have monetary or significant value.

Now after you finished your net worth analysis, you need to understand the meaning of the result.

If your net worth is negative it means your debt exceeds your assets, so you need to focus managing your money and reduce your debt levels.

If your net worth is less than one or two times your annual income, you are not in bad situation. Example your annual income $ 48,000, but your net worth is only $ 60,000 (1.25 times your annual income), it's still good, but you need to manage your debts and saving more.

You can visit TD Canada Trust website to help you calculate your net worth with net worth calculator online.

Some facts about wealth that  the total household wealth in the world has been estimated at $125 trillion (USD 125 x10¹²) in year 2000, and about 90% of global wealth is distributed in North America, Europe, and "rich Asia-Pacific" countries (not including India).  

Based on Statistics Canada data in 2005, the total Canadians net worth is $ 4.86 million. From 13.6 million family units, 6.5% has negative net worth, 15.5% with net worth up to $ 15,000, 20.5% with net worth $ 15,000 - $ 100,000, 35.6% with net worth $ 100,000 to $ 500,000, and 21.7% with net worth above $ 500,000. So in general almost 60% of Canadians have net worth above $ 100,000.

What is Money

Money is something which is widely accepted in payment for goods and services and in settling debts. People have used many items as money, such as whale’s teeth, circular stones, elephant-tail bristles, gold coins, furs, cigarettes, and so on as a means of payment.  Nowadays, money consists of two items: currency (coins and paper money) and bank money (chequing or saving account deposit in a bank). Now we are going to look at the three functions of money.

1.Medium of exchange

Money is a medium of exchange that is usable for buying and selling goods and services. People have exchanged one good or service for another good or service through barter, say, wheat for apples. But barter poses serious problems for the economy because it requires a coincidence of wants between the buyer and seller. So that people use money to facilitate exchanges of goods and services.

2.Unit of account

A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions. Like, in Canada we use dollars to measure the value of goods and services.

3.Store of value

To act as a store of value, money must be able to be reliably saved, stored, and retrieved – and be predictably usable as a medium of exchange when it is retrieved. The value of the money must also remain stable over time that enables people to transfer purchasing power from the present to the future.

We value the money because its acceptability and its legal tender. We accept currency and deposits because we are confident it will be exchangeable for real goods, services, and resources when we spend it. The paper money is also known as a fiat money, because the government has declared it as legal tender. We can see the bill contains the statement “This note is legal tender for all debts, public and private”.

The word "money" is believed from Uni (which means "the one", "unique", "unit", "union", "united") and "moneta" either from the Latin word "monere" (remind, warn, or instruct) or the Greek word "moneres" (alone, unique).

How to Save Money Every Day

There are two types of spenders in this world – cheapskates and spendthrifts. One is a stingy person and the other is one who spends money recklessly. Being a cheapskate in day to day living may have a far better shot at ending up rich. These helpful hints show you how to save money every day.

1. Buy clothes, shoes at the end of season sale, you’ll get 50% to 60% off  the price.

2. Buy some household needs from Dollarama store, like kitchen and bathroom cleaners, broom and mop, stationary stuffs.

3. Furnish home with used furniture, like coffee table, drawers, TV stand, or book case. But I don’t think buying the used mattress or sofa and chairs are good idea.

4. Take your own lunch instead of buying fast food.

5. Reduce your coffee consumption from Tim Horton or Starbuck. Drink from recycle bottle water is cheaper and healthier.

6. Use the rechargeable battery, it’s not expensive and environmentally friendly.

7. Turn off your lights when you leave home, it’s worth saving your electricity bill.

8. Do your own sit ups, aerobic, or yoga at home instead of paying for the gym.

9. Use the train to go to work. Driving a car to work is an overrated and expensive luxury. You can extend the life of your car and save money on gas, parking, insurance and maintenance.

10. Use coupons when you buy grocery stuffs, don’t be ashamed of using it.

11. Plan ahead and buy your electronic appliances, gadgets, or furniture on the boxing day.