The Loney Letter

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WATCH: Dan focuses this month on the various forms of Insurance that can help your life.

Interest rates drop after 2001/911 in order to stimulate the economy and make larger purchases more affordable such as houses. The government benefits because, with all of these increased purchases, they increase the tax base on this consumption. Much of the consumption is fuelled by line of credit purchases such as cars and new homes and toys that we all enjoy.

Leverage increases in investments backed by debt from lines of credits or cheap interest rates for leverage accounts. All is well until we hit the subprime crisis, which is a house of cards in the United States, and is bailed out by the US government.

Pension funds now realize that they are in a very precarious position. With low interest rates they cannot meet their obligations to pensioners, who are no longer dying at age 72 but living into the early 90s. With this increased demand for more pension income paid over a longer period of time, the pensions delve into the stock market in 2005 and 2006 and position pensioners money in great investments such as Nortel and Blackberry. 2008 further damages pension funds as stock prices, which have declined, are being sold to meet the monthly pensioners income, allowing for no recovery of every stock they sell.

Interest rates begin to slowly chip higher but any drastic moves upward would knowingly create an economic meltdown in housing and businesses that supply the housing industry. For every 1% that mortgage rates increase, home purchasers lose $95,000 of purchasing power. House prices then plateau and home equity begins to shrink again, creating less capacity to borrow and therefore less capacity to purchase larger items.

Consumer purchases slow down and we begin to roll back to essentials: food, light and heat, but no more fancy cars and snowmobiles. Decreased sales mean decreased profits, which leads to decreased cash flow and growth for companies. Economy is based on consumption and not production, as Pres. Obama so errantly stated on national TV after the 2008 crash.

As interest rates increase, home budgets are further compressed by increasing mortgage rates and cost consumption. Homes begin to be put up for sale so that families can get out of the increasing debt and the burden of shrinking family budgets. Home prices then begin to drop in price, more homeowners walk away from homes and claim bankruptcy. All to increase monthly cash flow and put cornflakes on the breakfast table tomorrow morning. Food, roof, light and heat become the essentials of cash flow.

The economy turns down with the decrease in consumption. The very process that created the prosperity [assumed], will reverse creating the loss of prosperity for those who are not prepared. The solution for every house, every business and every nation is they need a storehouse account.

The secret is to live the 80/20 lifestyle, live off 80% of what you bring home and put 20% into a storehouse for those inevitable downturns in the cycle of life and business.

In 2008 many of my colleagues were crushed by the downturn in the markets and the fact that they had built larger offices and took on more debt to enjoy the good life of success. Taking our own medicine, we put 20% into the storehouse that carried us through the dark cycle after 2008 and 2009.

This is the heart of the Joseph Principle. It is a concept over 3000 years old and clearly described in the life of Joseph of Egypt. There is nothing new under the sun (Solomon).

Last months winner for Guess Where? Helen Brown who guessed correctly with: Las Vegas.

B.C. to boost minimum wage by 50 cents to $11.35
Government also commits to raising minimum wage to $15 per hour by 2021

The B.C. NDP is following up on the previous government's promise to increase the minimum wage by 50 cents to $11.35 per hour, effective Sept. 15, 2017.

Labour Minister Harry Bains made the announcement Tuesday.

"The 50 cents increase was a commitment made by the previous government that we as the new government will honour and legally implement, thereby creating a stepping stone towards our $15-an-hour goal," said Bains.

The liquor servers' wage will also rise by 50 cents to $10.10 per hour, while other minimum wage provisions will receive increases of 4.6 per cent.

Barring changes from any other provinces, this increase will give B.C. the third highest minimum wage among the provinces, moving up from seventh.

Canada's highest minimum wage is held by Nunavut at $13, while the lowest is Saskatchewan at $10.72.

In a statement, Premier John Horgan said the increase is long overdue.

"British Columbia's lowest-paid workers need a raise," said Horgan. "The action we're taking will make life better for working parents, seniors, new Canadians, students and more — these are people struggling to get by."

Bains says the NDP government still plans to meet its campaign promise of raising the minimum wage to $15 per hour by 2021.

Alberta has promised to raise its minimum wage to $15 by October 2018, while Ontario plans to follow suit in January 2019.

B.C. Federation of Labour president, Irene Lanzinger says the NDP's 2021 deadline is too late and insists the province should keep up with Alberta and Ontario.

"$11.35 will not lift a single worker out of poverty. Hundreds of thousands of workers will still be working full time and living in poverty, said Lanzinger.

"We really need to get to 15, because that is the wage that gets you just slightly above the poverty line. And then we need to talk about how we actually have a minimum wage that is a living wage."

Fair wages commission

Bains says a fair wages commission will meet in a couple weeks and embark on a consultation process with stakeholders to determine how the wage will incrementally increase to $15.

"We've listened to business owners, who have told us gradual, predictable increases are the way to go to minimize the impact on their businesses," said Bains.

The B.C. Liberal government had said previously it would tie the increase in the minimum wage to the Consumer Price Index.

Bains says the commission is expected to report back on its decision by late December or early January.

The government of B.C. says there were 93,800 people who earned minimum wage in the province in 2016, 54 per cent of whom were youths aged 15 to 24.

http://www.cbc.ca/news/canada/british-columbia/bc-minimum-wage-september-2017-1.4248636

Are you covered for a disability or critical illness?

Most people think it’s too expensive to pay for coverage. That it’s like betting against yourself. Can you take that risk?

Others feel that they have sufficient coverage through their employee benefits at work, but what if you are injured away from the job, are you covered?

Did you know that between the ages 40-55 you have a 27 – 31% chance of a disability before age 65? And a 24% chance of developing a critical illness before age 65?

Compared to the 5% chance you will die before age 65, it seems silly to protect yourself for that, but not take into consideration what would happen if you didn’t die?

Complete the Calculator below and see if you are protected!

Why not pay yourself instead?
Start a Pre-Authorized Contribution (PAC) into your RRSPs to save money, reduce taxes and avoid the hassle of borrowing at the beginning of the year.

Undeniable fact: Filling up your RRSP contribution room each year is a great way to maximize tax savings and the size of your retirement nest egg. But many Canadians have trouble coming up with a sizable chunk of money before the tax deadline.

There is an easy solution! So easy you just may forget you are contributing! As much or little as you want on a monthly basis.

A PAC delivers some significant financial benefits: The regular contributions have longer to grow, and thanks to the magic of compounding, it significantly adds to your nest egg, and you get to enjoy the benefits of dollar-cost-averaging – meaning that you can buy fewer units of an RRSP when prices are high and more units when prices are low. Over time, this strategy reduces the impact of volatility and usually results in a lower average cost to you and the accumulation of more units.

Contact us today to set up your monthly PAC and start saving! Just respond to alysha.smith@LoneyFinancial.com with the amount you would like to save monthly and I will send you the paperwork to sign and return to get started as soon as possible.

WATCH: Manulife One - Live More Freely
A MORTGAGE DONE DIFFERENTLY

I think it only fitting that I highlight Francis’s book because last week I spent time with him in San Francisco.

Francis was a young seminary student who started a Christian church in his home front living room that grew to over 4000 people over a 15 year period. One day he went to China and visited the persecuted church of the country that met in homes throughout the land.

He came back to Los Angeles and basically said: “We spend $4 million each year for you to come and look at the backs of each others heads and listen to me teach you what the bible says about living and we are not doing it.”

He stepped down as pastor moved his family into a 1500 square foot house in inner city San Francisco and began all over again in his living room in the poor part of town. That meeting has grown to 14 home churches now that go out into the community and feed the poor and help the downtrodden. He put his family at risk to live out the calling of the New Testament church.

During that time he wrote this book “Crazy Love” and when the publisher read it they said this book will sell a million copies to which Francis said “ if this book makes me a millionaire then I don’t want any money from it, it will just wreck me so put all the money in a trust that the trustees decide where it goes to help the poor.” To date the book has sold over 2.5 million copies and funded the trust with over $5 million dollars.

Meeting Francis was humbling, he is the real deal. If you read this book whether you believe in God or not be ready to be challenged about living not just for ourselves but also for the interests of others.

I loved this book!
Dan.

Click here to see the story of a 35 year dream come true and learn about Loney Financial’s support of rescuing homeless children in Guatemala. Thank you to all the clients and associates that have helped to make this a reality.