Are you a ONE or TWO Marshmallow Person?

The marshmallow experiment is a famous test focused on the concept of DEFERRED GRATIFICATION (which is highly important in both medium term & long term financial planning). It was conducted by psychologist Walter Mischel of Stanford University with over 600 children aged 4-6 taking part. 

These children were given a delicious fluffy white marshmallow and told that they can either have it right away or they can wait to eat it. If they didn't eat it after a certain period of time they would get TWO fluffy sweet marshmallows (100% return!).

As you can see with this video, most children chose instant gratification (and lost the chance of a second marshmallow (getting 0% return)) but one third of those who deferred their gratification, got to enjoy double the amount of the sweet treat (and gain that 100% return they knew they wanted). Ironically enough, many years later there seemed to be an unexpected correlation between the results of the marshmallow test and the success of the children!

This seems to be the same story for financial planning. Most people plan for 'today' and worry about tomorrow, 'tomorrow.' It doesn’t take all that much (in this case it was 20 minutes) to gain EVEN more gratification than available instantly (even if you have to wait for it). The wait will make gratification BETTER, BIGGER and STRONGER!

Creating that financial plan for the purposes of your ‘tomorrow’ is HIGHLY important and STRONGLY encouraged as it could change everything for you. Starting now will give you that HUGE gratification at that time in the future.

Rather than buying a new cell phone (because you HAVE to have the new model... even though yours is working fine) or a new dress for that one occasion, put the funds toward your finances and enjoy the BIGGER gratification you truly want and deserve 'tomorrow'.

Become a TWO marshmallow person 

Here is the video link in case it didn't work in the text:
http://www.youtube.com/watch?v=x3S0xS2hdi4

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(Video provided by Youtube. Information on study gathered from bottom of Youtube video, Wikipedia and Time.com)
(Photo of marshmallows from http://www.transparencyrevolution.com/2012/02/getting-both-marshmallows/)

The Top 10 Keys to Financial Security

1. Learn about money, finance and opportunity.  (You've made the first step by coming here)
2. Invest in yourself. (Get an education; establish good income).
3. Start as soon as you can. (I will be posting about this soon!)
4. Set goals, plan.
5. Treat your savings like an expense.
6. Seek advice from professionals.
7. Diversify, diversify, diversify. (Did I mention diversify?)
8. Manage debt wisely and establish good credit. (Take advantage of tax-deductible credit).
9. Reduce taxes payable. (Your financial planner should keep you abreast of all potential savings).
10. Protect yourself, your loved ones and your assets. (Insurance is the answer).

Own a House? Plan to Own? Know Someone Who Does? You Better Read This!

I hope everyone had a fantastic holiday season and are looking forward to the 2012th year:) One of my main New Year’s Resolutions is to become a blogette who posts regularly (alongside drinking more water) and I begin by getting straight to the chase.

Today's topic is one that I feel VERY passionate about as I see clients, friends, family and acquaintances get sucked in almost EVERY time when they get a mortgage (recall the words ‘EVERY time’… not just once… I will elaborate below). Also, I know you have probably heard me mention the topic, email you about the topic, post about this topic, chat your ear off about this topic (well basically everything short of screaming about it from rooftops) but I’m sure life got in the way and you haven’t had the time to review. So now is your chance (make it a very easy New Year’s Resolution ;p).

Recall the time you went to whatever financial institution/broker to finalize your mortgage. Now, remember when they asked you/convinced you to add the mortgage insurance to your monthly payments because having that ‘insurance’ would pay off your mortgage if something were to happen to you or your spouse(and give them a bonus for doing so)? Chances are you took it (because hey, they did recommend it and it didn’t seem too expensive). First and foremost, the most ironic part of it all is that the mortgage agent LEGALLY has to offer you this type of protection but IS NOT licensed or educated in insurance whatsoever. I actually talked to a few bankers I know who offer this ‘protection’ and asked what they knew about it. They all said the EXACT same thing (benefit was you were covered even if the mortgage wasn’t funded yet… big whoop. Apply for a personal policy before owning a home and you get the same result. Or lock in a personal policy now and don’t worry about it come refinancing time etc.) and they had NO idea of the risks involved (which I am about to list). I was shocked they didn’t know and so were they.

You have probably noticed I keep writing ‘protection’ and ‘insurance’ when I talk about creditor provided mortgage ‘insurance’. Here is the bottom line why (I have also recapped this in a very clear table for review or for the purpose of not yet convincing you to read why you need to replace this junky product).

1. Underwriting is done at claim. This means that if you or your spouse passes and the survivor goes to claim this ‘insurance’ THAT is when they investigate the deceased person’s health. Therefore they can deny you of paying off the mortgage if they find something from the past (too many horror stories here to list). This is one of the most risky parts of this ‘insurance’; you pay and pay without having full knowledge if you will even be protected. This is a big reason why this nonsense should be replaced with a personal life insurance policy (term is a popular choice, but permanent works just as well) because underwriting is done right away and you are either accepted or denied and that’s the end of the story… no stress there.

 2. We know insurance gets more expensive as we age. Well, did you know that every time you change your mortgage they are RE-QUOTING your mortgage ‘insurance’ at your new (older) age!!!!? So every few years expect it to go up! If that isn’t enough, the lender can adjust it at anytime! This is what I meant by getting sucked in EVERY time. Get a personal policy, it locks in your rate.

3.  The lending institution controls and owns the mortgage ‘insurance’ and they can cancel it at ANY time without your approval… YIKES (personal policy is at your mercy, YOU can choose to cancel but the insurance provider can’t legally cancel)

4. Here’s another good reason to replace your lender provided mortgage ‘insurance.’ Your premium is increasing (as your mortgages change) but your mortgage is decreasing! What bologna is that?! You pay an increasing amount for coverage that is decreasing. I call that robbery. Again, lock in your rates with a personal policy.

5. Next. You can risk losing your insurability. Meaning, say you are covered for your mortgage term (3-5 years) and during that time you incur an illness or get this, your parents do… you can be denied at renewal time for that mortgage ‘insurance.’ Again, another stress! Not knowing if you will be covered at the next interim because of a relative’s health! Get a personal policy instead as you lock in your insurability for the life of the policy.  

6. Still need more reasons? No problem. The lender (institution who gave you the mortgage) is the beneficiary… meaning, they get the benefit! Yes, that means your mortgage might get paid off but you had no choice in the matter to where the money goes! Again, they only pay the amount owing (whooppie if there is $2000 left. Not worth the premium at that point). Getting a personal policy allows you to get the FULL amount you applied for (for example… Say you applied for a $250,000 (amount of your mortgage) benefit and got approved and your spouse did pass away, YOU would get the FULL $250,000 AND be able to use it on anything you wanted (mortgage, vacation, new car… the list goes on). A personal policy gives you FULL control. This creditor mortgage ‘insurance’ has absolutely NO flexibility!

As you can see, I could really go on and on and on of how horrible lender provided ‘insurance’ is (in my opinion). It really is to protect the lenders own butts (and not yours). With that being said, I really hope you don’t go racing out and cancel this product without protecting yourself first. Even with how horrible and unrealistic this mortgage product is… it is better than nothing (that was hard to swallow). Inquire about personal policies and get approved for a personal policy before deleting the lender mortgage ‘insurance’ (as it can be cancelled by one easy phone call).

Bottom line, get a personal life insurance policy for the purpose of covering the mortgage if anything were to happen but with the freedom of flexibility, tailored to your needs, at a locked in rate that becomes MUCH cheaper over time, and with a guaranteed benefit you choose how to use. Why even think twice about it? Start the process now! While you do that, share this information with those who mean something to you (or anyone who owns a home), I'm sure they would really appreciate it.

Here’s a SHORTER article (as I tend to be very detailed) and a video that demonstrates two different families who got sucked in because they weren’t truly educated. http://www.cbc.ca/marketplace/2008/02/06/in_denial/

 Have more Questions? Email me at camillakocwin@gmail.com.

Simplified Version
YES!                                                                             NO!

House Image from http://www.dreamstime.com/stock-image-cartoon-house-image16120661

Stop 'Buying' Number 2

I am always intrigued to read articles or posts that consist of 'top 5' or 'top 10' lists, especially if they involve the financial field. So when I came across this one I clicked right away! I was SOOO happy when I read option #2! These types of insurances are money grabbing SCAMS (and they are already getting you to pay crazy interest rates)! There are so many fine print regulations and the probability of winning a claim is so low that you are basically gambling for the benefit (what a waste of money). Plus, insurance can't be 'bought' it has to be applied for (red flag there!). If you are really interested in the type of insurance it provides, get it in a PERSONAL policy. Personal policies are formed to YOUR needs and wants. In addition, personal policies give YOU control (creditor insurance gives the lender full control, including cancelling at any time. Personal policies legally bind the insurance company (they cannot cancel on you) but YOU can cancel). Ahhh, the freedom of control.

A personal policy can be life insurance (term or permanent), disability insurance (to cover you if an injury occurs), critical illness insurance (when a life threatening illness enters your life) or long term care (when you cannot perform two activities of daily the insurance helps cover either a nursing home or at home care including nurses, cooking, cleaning etc).

I found the higher SPF an interesting concept!

Here's the link http://moneyland.time.com/2011/08/19/12-things-you-really-should-just-stop-buying/#all

What Led Me Here....

It all started at the tender age of five when I had my first bank account opened and a ceramic piggy bank given to me. I was excited to have that piggy bank filled as quickly as possible. So at the tender age of 5, I embarked on my goals of filling it and started my first business venture. I painted rocks that I had found and sold them to the neighbourhood children. My mother was mortified. Year by year I continued my ventures but continuously changed ‘products’ from gimp bracelets, beaded bracelets, baked goods to garage sales. I was dedicated. So dedicated, that I was never the child who ran to the ice cream truck as it blasted it beats down the streets. Teenage years finally came and I was hired at my first job. Although I worked and still didn’t spend unnecessary money, those few teenage ‘necessities’ were purchased and the savings pot started to diminish. The diminishing of the pot is what has led me to Financial Planning. 

I wish that at the tender ages of 6, 8, 12, 14, 17, 20’s and so forth, someone in the financial field could have guided me and my finances. I wish that someone could have showed me a better way than a ceramic piggy bank. I wish that that same person would have recommended options to safe keep my money for specific goals. Ultimately, I wish someone in the financial field could have taken a proactive approach rather than a reactive approach to my finances. Instead of only providing me with things I had asked for (ex: “can I please open a Tax Free Savings Account (TFSA)” because I knew they had value) they would recommend opportunities and help me learn the whys and hows.

This short story is what has led me to Financial Planning and has created the drive and passion for what I do. As someone who has experienced saving but had limited professional guidance, I know the importance of that professional  guidance and how much further ahead it can get someone. It always excites me to help build and grow someone’s goals. I make it a commitment to take a proactive approach (rather than a reactive one) and am ultimately here to fill more than one piggy bank for the purpose of more than one goal. I am here to show you how, where, when and most importantly why.


(Image from iconspedia.com)

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