BC Finance Minster Colin Hansen presented BC’s 2010 budget this week.  He projects that BC will return to balanced budgets within three years by clamping down on virtually all spending except that on healthcare and education.  The budget forecasts a deficit of $1.7 billion, an improvement from the $2.8-billion deficit from an updated forecast last September. The provincial debt is forecast to rise to $47.7 billion, from $41.3 billion this year and the debt will top $55.8 billion by the 2012/2013 budget year.  Hansen said British Columbia did not escape the world economic meltdown as provincial revenues—especially in natural resources and taxes—plummeted by almost $3 billion.  But those revenues are expected to recover over the next three years, with British Columbia forecasting economic growth of 2.2% this year, rising to 2.7% in 2012.

Here are some of the budget highlights.

-Budget 2010 includes a new property tax deferral program for families with children under 18 for the 2010 tax year. Beginning July 1, 2010, homeowners who are financially responsible for a child under the age of 18 and have at least 15 per cent equity in their homes will be able to defer property taxes on their principal residence. Deferred taxes must be paid if the home is sold, ownership is transferred or it becomes part of an estate.  Interest on deferred taxes will be charged at the prime lending rate of interest. The rate will be set twice annually. To be eligible for the program, homeowners with financial responsibility for a child under 18 must also meet the basic eligibility requirements of the current property tax deferral programs. They must be the registered owner of the home; be a Canadian citizen or permanent resident; have lived in B.C. for at least one year prior to applying and have a currrent fire insurance policy on their home.

-Increase in homeowner grant for northern and rural home owners up to $200, bringing to $770 the amount some people will be able to receive towards their property taxes. Seniors in those areas will be able to receive up to $1,045.

- Medical Service Premiums, increased last year, are going up again for individuals and families. Individuals will pay $3.50 more per month while the premiums rise $7 per family.

-$26 million more for child-care subsidies over the next three years.

-Increased funding for full-day kindergarten to $129 million in 2012-2013, up from $44 million in 2010-2011, the first year for the program.

-An additional $150 million over three years to fully fund teachers’ wages and benefits and offset cost pressures.

- $320 million in reduced ministry spending over the next three years.

- A reduction in the number of full-time equivalents working for the government, not including service delivery agencies, from 31,284 in 2009-2010 to 27,732 by 2012-2013

In order to forestall the possibility of a housing bubble and subsequent housing market crash the federal government has tightened up mortgage lending regulations. The following changes are to be effective April 19, 2010 but it is expected that most banks and lending institutions will implement the changes effective immediately. These rules apply to all government backed (CMHC) insured mortgages. The new rules are as follows.

-Borrowers are required to meet the standards for a five year fixed rate mortgage even if they actually choose a mortgage with a lower interest rate and a shorter term. For example you may wish to borrow $200,000 amortized over 20 years with a one year fixed rate mortgage at 2.65% which results in a monthly mortgage payment of $1,035. Well under the new rules you will have to prove that you have the finances to afford a $1,260 monthly mortgage payment which is what a fixed five year mortgage would cost at the current 5 year rate of 4.5%.

-The maximum amount that consumers can borrow to refinance their mortgages is being lowered to 90% of the value of their home, down from 95%.

-Investors wishing to buy investment or rental property in which they do not live will now have to have a 20% down payment instead of the current 5% required to get a government backed mortgage.

We feel that these rules make sense. If a person gets in over his head and can’t pay the mortgage he has a big problem.  If many people get in over their heads and can’t pay their mortgages then we all have a big problem. Look what happened in the U.S.

We don’t know if it is true or not but we have heard that sometimes people do not always open all the investment statements that they receive in the mail.  Naw, that can’t be true!  We respectfully remind you that at this time of year it is more important than ever to check your mail to make sure you do not discard any valuable documents. Mutual Fund companies are now mailing out RRSP receipts that you will need when completing your 2009 income tax returns in the spring of 2010.  For RRSP investments made in 2009 you will receive receipts up to December 31, 2009. For RRSP investments made in 2010 you will receive “First 60 Days of 2010” receipts which must be entered on your 2009 tax returns even if you are not planning to deduct the entire amount for 2009 and are planning to carry some over to 2010 tax year.

Also mutual fund companies, banks and other financial institutions will soon be issuing T3 and T5 receipts reporting your 2009 investment income of interest, dividends and capital gains.  Alas, should you not receive an expected statement or should you misplace a receipt for an investment or RRSP arranged through us please just contact us and we will obtain a duplicate for you. Spring is coming and that means another wonderful and exciting tax season will soon be upon us. Make sure you have all your documents in order so you don’t miss any of the fun!

When you bought Mutual Funds from us, most of you selected the “Deferred Sales Charge” option.  This means that if you make a withdrawal within 6 or 7 years of the original investment date (depending on the company), you will have to pay a withdrawal charge.  Each company allows you to withdraw 10% each year without a penalty. This 10% does not carry over from one year to the next. Use it or lose it!

When you come to the office for your annual review, we always transfer this 10% to a fund without any deferred sales charges.  This is recommended, as it will build up your available “free money” for future use.  For those of you who didn’t come in this year, we are doing our best to send forms by the end of the year. 

Please contact us if you haven’t received forms from us yet and ensure to return these forms right away to allow enough time before the deadline of December 31.

We get this question a lot.  If you invest $2,500 in your child’s Registered Education Savings Plan (RESP) you will receive a 20% or $500 Canada Education Savings Grant (CESG) from the Canadian government.

But when is it too late to get a grant?  When is your child too old?

If your child is 18 years old then it is too late. There are simply no more grants available; end of story; forget about it.

If your child is age 16 or 17 the grant is available if and only if you had already invested $2,000 in an RESP before the child had turned age 16 or you had invested a minimum of $100 in any 4 years before the child turned 16.

In other words if your child is turning age 15 in the current year 2009 and if he or she has never had an RESP then you must invest at least $2,000 between now and December 31, 2009 to qualify for grants. By doing this the child will qualify for a grant in 2009 the year they turn age 15; in 2010 the year they turn age 16; and in 2011 the year they turn age 17 .  That’s a total of $1,500 in available grants if you invest $2,500 in each of these 3 years.

So to repeat; if your child turns 15 in 2009 and they have never had an RESP in the past then this is your last chance to make an RESP contribution for them in order to qualify for the grant now at age 15 and at age 16 and age 17.

“If they only worked as hard at legitimate, honest work just think how well they would do!” Yes, we must be talking about fraud artists, also known as hucksters, tricksters, swindlers, conmen, confidence men, charlatans, cheats, connivers, deceivers, scammers, fraudsters, sleeveens and flimflammers.  Their terms of “endearment” are surpassed only by their variety of techniques in separating you from your hard earned money. Though we cannot totally safeguard from being victims of fraud there are many steps that we can take to fortify ourselves.  Scam artists want to obtain as much personal information as possible in order to make false credit card purchases, create fake cheques, obtain fraudulent loans and through other nefarious methods steal your money. If you can keep your personal information away from them you can minimize your chances of becoming a victim. Some basic protective measures would include:

-Do not give out personal information over the telephone, by mail or through the Internet unless you initiated the contact or know with whom you are dealing.

-Do not disclose or share passwords and PINs. Do not write them down and carry them around with you. Make it difficult for them to be compromised by making a selection that is not easily guessed.  Shield your PIN when using automated teller machines.

-Carry only the identification and other personal information you need and keep other documents, such as your social insurance number, birth certificate and passport, in a safe place.

-Shred documents containing sensitive personal and financial data, such as account statements before throwing them out. This includes pre-addressed offers for credit cards. Basically, shred anything that contains your name and address and other information.

-Guard your mail and be alert for regular mail that you expect but mysteriously does not arrive. If you usually receive your credit card statement on the last week of the month there may be something amiss if it does not arrive this month.

-Regularly check account statements to ensure all transactions were actually authorized by you.

To conclude, be vigilant because the scammers certainly are.vigilant in seeking opportunities to steal your information and your money.

We are pleased to announce that Anthony Sabti has joined our team.  Anthony is our new Investment Analyst and Licensed Assistant.  He holds a Business Administration Degree and comes to us from the Royal Bank.  He will be responsible for analysing, monitoring and the evaluation of our investment line up as well as helping us review your investment mix annually.  Anthony will soon be ready to answer your questions.  You may contact him directly anytime you have questions about your portfolio.

Terry and I are on our way to two restful weeks vacation at the cottage.  We could not feel better to go now after such a year of stressfull market news . The consensus is clear.  The recession is ending at last.  This is music to my ears and I feel like having a party to celebrate it but going on vacation will do it.  Here is why we feel more and more confident by the day:

The Bank of Canada has brightened its outlook for the Canadian economy, saying Tuesday it now thinks this year’s downturn won’t be as deep as previously forecast and 2010 growth will be stronger. The bank did as expected in keeping its key policy rate at the historic 0.25-per-cent low and repeating a pledge to keep it there until the spring of 2010.

US housing starts unexpectedly rose by 3.6% in June. Building permits rose the most in a year.  The housing market is stabilizing.

Better outlook for the US also. The Federal Reserve Board expects the economy to shrink between 1% and 1.5% revised down from previous forecast 1.3% to 2%.

US retail sales were positive in June. 

China, Japan and Brazil are all showing recovery signs also.

Bank of Canada close to declaring recession over

Recession is ending

Back from vacation on Aug 10. The office remains open.  The team will be there to help if you need anything!

Wishing you all a fun and safe summer with family and friends!