Tanner Hassell, CFP, CIM - Springleaf Financial Group

Investing can feel overwhelming, especially with constant news of market fluctuations. Many professionals find themselves holding cash, worried about making the wrong move. However, markets are forward-looking and often price in news before it becomes widespread. This means waiting for 'clarity' could lead to missed recovery opportunities, as seen in the 2008 financial crisis.

Switching from high-fee investments can also be daunting due to potential tax hits. Yet, over time, the savings from reduced fees can significantly boost your portfolio. For example, moving to a lower-cost portfolio could lead to over $2 million in extra growth over 30 years, even after an initial tax cost.

The temptation to chase hot investment trends is another challenge. Despite rapid innovations, history shows that exciting sectors often underperform. Between 1989 and 2022, railway stocks outperformed tech stocks, highlighting the benefits of broad diversification and low fees. Focusing on long-term goals and not letting short-term fears dictate your strategy is key. Understanding these principles can help make more informed and confident investment decisions.

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For incorporated professionals in Canada, deciding on CPP and EI contributions is more than just a tax decision—it's about understanding the benefits. These programs offer essential protections, but with flexibility comes trade-offs.

The Canada Pension Plan (CPP) offers more than just retirement benefits. It includes disability support, survivor pensions, and a child-rearing provision. As one of the most respected pension systems globally, CPP ensures a lifetime pension that's indexed to inflation.

By paying yourself a salary, you contribute to CPP, which can be a strategic move. With long-term returns around 5% per year, it's a stable investment, especially during market downturns.

While Employment Insurance (EI) might seem less relevant, its special benefits program is valuable for those planning parental leave or needing compassionate care. If family planning is on your horizon, this could be crucial.

Opting for a dividend-only strategy might save on premiums, but it sacrifices CPP accumulation and RRSP room creation. Short-term tax savings can lead to long-term regrets.

A blend of salary and dividends can offer the best of both worlds. It allows for RRSP room creation and TFSA maximization. Your strategy should align with personal goals and be revisited as your needs evolve.

As your advisor, I can help tailor a strategy that leverages these programs for long-term value, ensuring every decision supports your financial future.

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Many people equate investing with gambling, but they are fundamentally different. While both involve risk and can be thrilling, investing is about making informed, long-term decisions, while gambling relies on chance. Imagine spending 20 years at a blackjack table—you'd likely end up losing money. In contrast, investing in the S&P 500 over the same period has always resulted in gains.

The key difference lies in expected returns. Gambling typically has a negative expected return, with the odds against you. Investing, when done properly, offers positive returns by rewarding smart, long-term risk-taking. This distinction underscores the importance of a disciplined investment approach.

True investing involves diversification and evidence-based strategies, avoiding the speculative nature of gambling. It might seem less exciting, but this approach maximizes your chances of long-term success. By sticking to a plan, staying diversified, and keeping costs low, you can build wealth over time and secure your financial future. Patience and consistency are crucial to making investing work for you.

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Term Life Insurance is a simple and affordable way to protect your family's future. It provides a tax-free lump sum to your beneficiaries if you pass away during the policy term. This money can be used for anything, from paying off debts to covering education costs or maintaining your spouse’s lifestyle.

This insurance is especially popular with young families, homeowners, and business owners because it offers substantial coverage for relatively low premiums. For example, a healthy 35-year-old male might pay around $25–$35 per month for $500,000 on a 20-year term.

Unlike mortgage insurance, term life insurance gives you more flexibility and control. You own the policy, so you choose the amount, term length, and beneficiaries. Plus, you can convert to permanent life insurance without new medical underwriting if your needs change. For business owners, term insurance is crucial for buy-sell agreements and key person coverage, ensuring stability during challenging times. It's a cornerstone of a solid financial plan, providing clarity and peace of mind.

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The Spousal Loan Strategy is a straightforward, legal method to split income and reduce taxes. In Canada, taxation is on an individual basis, not by household. This can lead to higher taxes for families with significant income disparities. If one partner earns significantly more, their investment income might be taxed at the top marginal rate, sometimes over 50%. By using a spousal loan, you can legally shift some of that income to a lower-income spouse. This method is not only effective but also CRA-approved. It involves setting up a formal agreement and ensuring annual interest payments. This strategy can lead to substantial tax savings. For families planning long-term, this can make a noticeable difference. It's a smart approach to maximize your household's financial efficiency.

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When investing in a non-registered account, it's crucial to understand the tax implications of your choices. Many investors are drawn to high-yielding dividends, thinking they're a bonus. However, in taxable accounts, dividends are not free money—they trigger a tax bill as soon as they're received. It's like moving money from one pocket to another while paying a fee.

Research shows that dividend yield isn't the key driver of returns. Factors such as size, value, and profitability have a more significant impact. Chasing dividends can lead to concentrated portfolios, especially in sectors like financials or energy, increasing unnecessary risks.

Instead, focusing on total return provides a more flexible and tax-efficient strategy. Whether you derive income from dividends or sell part of your portfolio, the outcomes can be similar. Prioritizing total return often results in better tax treatment and aligns more effectively with long-term financial goals.

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When we discuss financial planning, it often starts with returns and taxes. But the real question is: What makes life good? What truly brings happiness and fulfillment?

Psychologists and researchers have studied this deeply. The way we spend and plan doesn't just affect our bank account—it affects our happiness and how we view our life in retrospect.

Happiness is divided into two types: hedonic, the joy of the moment, and eudaimonic, deeper life satisfaction. Balancing these can guide our financial choices.

Dr. Martin Seligman’s PERMA model outlines what makes life flourish: Positive Emotions, Engagement, Relationships, Meaning, and Accomplishment. Aligning spending with these elements enhances well-being.

Morgan Housel’s 'The Psychology of Money' teaches us the importance of recognizing when enough is enough. It’s about stopping the endless pursuit of more.

Interestingly, 40% of our happiness is within our control through choices and behaviors. This is where financial planning intersects with personal fulfillment.

Regrets at life’s end often revolve around missed connections and meaningful pursuits. Planning for these connections can lead to a more fulfilling life.

Align your spending with what truly matters. It's not just about money—it's about enriching life through thoughtful planning.

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Running your own corporation gives you unmatched control over your income, allowing you to strategically decide when and how it reaches your personal accounts. This flexibility can lead to significant lifetime tax savings and reduced paperwork stress. By understanding options like salary, dividends, shareholder loans, capital dividends, and income-splitting, you can optimize your financial strategy.

Balancing salary and dividends is essential. A salary is straightforward, generates RRSP room, and ensures CPP contributions, which act as a valuable, inflation-indexed pension. Dividends, however, offer the advantage of deferring personal tax and managing refundable taxes within the corporation.

Consider your corporation as an income 'shock absorber.' Retain surplus cash during prosperous years to avoid high tax brackets, and draw on those earnings during lean times. This strategy helps maintain a lower tax bracket and plan for large expenses efficiently.

For urgent financial needs, shareholder loans and the capital-dividend account provide flexibility. Shareholder loans require careful timing, while the CDA offers tax-free access to funds, perfect for significant purchases without affecting your income mix.

Income-splitting remains a viable strategy, despite tighter rules. Opportunities exist for those over 65 or with spouses actively involved in the business. Regularly reviewing your financial structure ensures it adapts to changes and continues to meet your long-term goals effectively. By leveraging each financial tool wisely, you can maintain a smooth, low-tax cash flow throughout your life.

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The temptation to invest with last year's top-performing fund manager is strong. If they’ve recently outperformed the market, it feels like they’ve cracked the code to success. But data shows this assumption is often misleading. Chasing performance is a costly mistake many investors make.

Why don’t top managers maintain their status? Investment returns are shaped by numerous factors, many outside a manager's control. Short-term success is often more about luck or favorable market conditions than repeatable skill. Even highly skilled managers can underperform when their style falls out of favor or markets become unpredictable.

Research consistently finds that most funds in the top quartile fail to repeat their performance. Leadership shifts as different market segments rise and fall. Dimensional Fund Advisors’ analysis highlights how frequently the largest stocks drop from top rankings.

Instead of chasing past winners, focus on a disciplined investment process. Diversification across managers, asset classes, and strategies helps reduce risk. Costs matter, too—high fees can quickly erode any potential gains. Academic studies support that broad diversification, low costs, and disciplined rebalancing are more effective than betting on the next top performer.

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Feeling overwhelmed by the complexities of corporate investing? For incorporated professionals, building wealth within a corporation can be a smart strategy, but the details can easily become confusing. With layers of tax rules, notional accounts, and passive income limits, navigating these waters requires regular attention.

The key advantage of a corporation is tax deferral. Business income left in the corporation is taxed at a lower rate, freeing up capital to invest. However, this is only temporary as funds must eventually be withdrawn and taxed personally. The goal is to defer and manage taxes in a way that aligns with your life, especially if you anticipate being in a lower tax bracket during retirement.

Understanding your notional accounts, such as RDTOH and CDA, is crucial. These accounts track tax opportunities, like refundable taxes on passive income and tax-free distributions from capital gains. Many professionals miss out on these benefits simply because their balances aren’t monitored.

The decision between salary and dividends isn’t a straightforward choice. A dynamic approach, adjusting year by year, can offer a better after-tax outcome. This strategy provides flexibility and opens up options like Individual Pension Plans (IPPs) and strategic RRSP contributions.

Don’t overlook the power of registered accounts like RRSPs and TFSAs. These accounts offer tax-sheltered growth and work alongside corporate assets to enhance long-term income planning. Even personal non-registered accounts can diversify your withdrawal strategy when funds are withdrawn at a low tax rate.

Investing through a corporation offers significant advantages, but it requires thoughtful planning. By understanding the nuances and aligning your strategy with your broader financial picture, you can ensure a more efficient approach. Let’s work together to optimize your financial life and secure a prosperous future.

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