The lion’s share of the roughly 400 million shares up for grabs will go to institutional investors and to their clients with portfolios in the hundreds of thousands of dollars. But there are ways average Canadian investors can own a piece of the social media giant before it’s expected to begin trading on the Nasdaq Friday starting at between $34 and $38 a share.

Here’s how:

-Buy a Nasdaq-only publicly traded fund that has a piece of the IPO. You can buy into these funds just like you would buy any U.S. stock through your broker or online discount brokerage, said James Telfser, an associate portfolio manager at Caldwell Investment Management in Toronto.

Firsthand Technology Value Fund (SVVC) for instance owns 600,000 pre-IPO class B Facebook shares. GSV Capital (GSVC) bought 225,000 shares at an average price of $29.28 in the middle of last year. Hercules Technology Growth Capital (HTGC) also lists pre-IPO Facebook stock as a holding.

Telfser cautioned that these funds have been fairly volatile leading up to the IPO and that he has not looked into the funds to see what else they specifically hold.

“But if you have a bullish feel on Facebook when it IPOs, there is a good chance these will participate,” he said.

-Buy a token share through an online service such as GiveAShare.com. The company, which sells single shares of consumer brands including Disney and Playboy, is selling Facebook shares at market price plus a $39 fee complete with a paper stock certificate.

“It’s more than a novelty than anything,” said Telfser. “If you wanted to make the smart investment, you’d be better off going through a broker or discount brokerage.”

Or you could just wait

Facebook shares are expected to be extremely “liquid” on opening day as tons of shares trade hands, Telfser said.

The price you’ll pay for the shares is a different story. Although the shares are expected to hit the market at between $34 and $38, they are expected to jump considerably.

“If you want to get in for a short-term trade there may be money there, I’ve never seen an IPO this hot before and it could come back to earth very quickly.”

But Telfser is skeptical of the so-called “glamour stock.”

Facebook is currently valued at 80-to-90-times earnings.

“You’re growth has to be pretty strong going forward to justify that kind of multiple. And we just don’t know if that kind of revenue growth is possible,” he said. If Facebook misses expectations, the share price could take a big hit.

“We’re suggesting that you sit on the sidelines a bit, let this thing blow over even if you miss the initial pop in the share price.”

The good news is even investors who take a wait-and-see approach are likely to benefit from the Facebook IPO, especially those with exposure of big tech firms.

Confidence in Facebook could bode well for other market players such as Google, Amazon, LinkedIn and Zynga, which makes highly profitable games for Facebook.

“I think it’s going to have a positive effect on technology stocks right out of the gate,” Telfser said.

An ETF tracking the tech sector (iShares has a few) may be a great way to dabble in Facebook without putting all your eggs in one basket, Telfser said. “The risk here is that you have to like Apple, which is a huge component of these ETFs now.”

Test your knowledge and take the Canadian Business Facebook IPO quiz.

Iman (not her real name), 26, works in the Greater Toronto Area as a part-time communications professional. Her graduate studies left her saddled with $20,175 in Ontario Student Assistance Program (OSAP) debt and a roughly $8,500 student line of credit from her bank.

While OSAP has temporarily waived Iman’s 5.5% interest rate because she’s only working 24 hours per week, her line of credit carries a 4% interest rate.

Beyond minimum payments, Iman’s strategy is to pay off her line of credit in full before shifting her attention to the OSAP loan. She hopes to have her bank loan paid off by September at which point she plans to open a high-interest savings account until she has the full OSAP balance saved up and can pay it off in one shot.

Iman is following a tried-and-true debt repayment model.

“When looking at debt, the majority of funds should be applied to the debt with the highest interest rate, while paying the minimums on the others,” said Brenda Hiscock, a financial planner at Guilfoyle Financial in Toronto and a member of Advocis, the Financial Advisors Association of Canada.

“Once the first debt has been paid off, the funds that were being applied to that debt now go to the debt with the second highest interest rate, and so on.”

Iman’s may be a solid plan but it’s not fool-proof.

“The one risk that she may face is if that 4% (on her student line of credit) is a variable rate,” Hiscock said.

“We’re in a rising interest rate environment and that will eventually be bigger than the 5.5% OSAP loan.”

Iman will also have to stay on top of the OSAP repayment assistance program by reapplying every six months and there’s no guarantee she’ll qualify every time.

If she doesn’t, she’ll have to switch gears and focus on paying down her OSAP loan instead since it costs more to carry.

Iman’s lump sum payment strategy for the OSAP loan only makes sense providing she continues to receive interest forgiveness.

She shouldn’t be sinking any excess money in OSAP until the time comes, Hiscock said.

“I’d be throwing money into a high-interest account and the day that the forgiveness ends, is the day I put that whole lump sum of money toward OSAP.”

Even with a more than $28,500 debt burden, the future looks bright for Iman. She looks forward to the day when she can start growing her savings for travel and eventually parenthood.

“I get the sense she’s a good money manager,” Hiscock said.

Iman’s diligence means she’s not having cash-flow problems so debt consolidation isn’t necessary.

Not everyone is so lucky. Roughly one in 10 Canadians is in a vulnerable financial position–meaning that the cost of servicing their debt consumes more than 40% of their income. That’s when most people start to have issues in making their debt service payments.

Hiscock’s rules of thumb for indebted Canadians:

Have a 3-year plan. If debt repayment seems impossible within three years, then consider a consolidation loan, trimming your budget, or boosting your income.  Sometimes people have to take a second job in order to get their finances in order in the short term. Exceptions to this are student loans which can go up to 5-7 years, and of course a mortgage.

The 40% rule. No more than 40% of income should be used to pay household expenses and debt combined (ie. rent/mortgage, property taxes, heat/hydro, loans etc.) If you’re spending more than 40%, it’s time to consider downsizing. Track your expenses by downloading Hiscock’s monthly budget spreadsheet.

Watch your credit cards. If you have multiple credit cards with balances, and they are not reducing over time, consolidate the balances, get rid of all cards except one and reduce the credit limit on that card.

Make saving a priority. Make sure that funds are being put away for savings, regardless of your financial situation.  Even when dealing with debt, 5% of income should go into savings, working towards 10% in the future.

I get a warm and fuzzy feeling every time a wedding invite is delivered to my doorstep. It means someone close to me is preparing to celebrate a truly joyous occasion.

But that feeling fades just as quickly as it came and is inevitably replaced with another: dread. It hits me at precise moment I realize how much the couple’s union will cost me.

I’ve easily spent $1,000 on couples in the past. (Now you can appreciate the pain I feel after receiving a half-dozen invites in one season, in case you didn’t before.)

I may be a romantic at heart but the reality is I can’t afford to attend every wedding-related event I’m invited to. The good news is I don’t have to.

Lew Bayer is the president and CEO of Civility Experts Worldwide teaching etiquette in 12 countries.

She says invitees are free to decline any or all nuptial-related events, including showers.

The old-fashion etiquette used to be that if you were invited, you were expected to send a gift regardless of whether you could attend. These days, attitudes have shifted.

“There is an expectation in response to being invited, which is in theory recognition of a valued relationship, that you would do something. At least respond in a timely fashion that you can’t go,” Bayer said.

“And then, if you have the means, give some gift, maybe it’s even flowers that you send the day of the bridal shower as a token of esteem.”

Don’t try and explain why you’ve declined an invite either, especially if money is the reason. “Sometimes it turns out to be more offensive,” Bayer said.

It’s better just to decline graciously and say, “Thank you so much for the invitation, but unfortunately I can’t come.” A polite couple will not demand to know why.

If you’re like me, you enjoy weddings and do in fact hope to attend. But deciding how much to give can be tricky.

Luckily, Bayer has a formula for that. She recommends giving a sufficient amount to cover the cost of each person attending, plus one. That means a swanky wedding at the Four Seasons requires a more substantial gift than a simple backyard celebration, keeping in mind the average Canadian couple spends roughly $23,000 on their big day.

For a typical wedding, give $100 per attendee and an extra $100 (as if there were one more person in your group). Using this formula, each couple would give $300 worth in cash or gifts.

Shower gifts can be less.

Technically, you don’t ever have to “match” a gift given to you, Bayer said, however, there is sometimes the unspoken expectation of reciprocity in families.

“The primary guideline for gift giving no matter what the occasson or circumstance is that you should give what you can afford and sincerely give, and do so in a thoughtful way, with no expectation of return,” Bayer said.

“And the gift receiver should graciously accept each gift with gratitude and show appreciation.”

These days, more brides are requesting “presentation,” or monetary, gifts only.

“Soliciting cash is really quite rude,” Bayer said. “Presentation graciously accepted,” is a slightly more polite way of saying, “We prefer cash.”

Some brides have even gone as far as to recommend a specific dollar amount or “donations” to their registered retirement savings plans (RRSPs).

“They actually dictate how much money you’ll be giving, which is very, very rude,” Bayer said.

Fortunately, I’ve never received an invite like this. Until I do, I will continue to assume that each pearlescent envelope that finds its way into my mailbox is a sincere gesture and not just a callous way to collect. This approach has worked well for me. It keeps finances from getting in the way of a good party.

Going it alone can save you money upfront but it’s not always worth the hassle, especially if you are likely to miss out on important tax credits, said Brian Quinlan, chartered accountant at Campbell Lawless in Toronto and author of Taxes for Canadians for Dummies.

“For very straightforward returns, there is no reason why a person shouldn’t do their own return,” Quinlan said.

Landlords, self-employed persons, employees with numerous work-related expenses and high-level investors on the other hand should probably consider hiring an expert.

“It really comes down to the personality, if they want to spend the time or they are not comfortable working with it.”

Hiring a professional? Buyer beware: not all tax pros are created equal. A walk-in tax preparer can charge upwards of $70 for a basic filing and while they do a decent job done in a short amount of time, these pop-up shops are not ultimately responsible for making sure all relevant information is submitted to the Canada Revenue Agency (CRA).

“They can only prepare what you give them,” Quinlan said.

A tax preparer may not ask the prying questions whereas an accountant will probe you, your bank and investment adviser for information to take advantage of all applicable tax deductions and credits.

And if there’s a discrepancy between what was submitted on your behalf and what the government has on file, the CRA will want to deal with you directly, not your tax preparer.

Going it alone? The good news is tax software kits have never been more user friendly. Don’t take my word for it. Canadians submitted some 16.5 million electronic returns using software products to the CRA in the 2010 filing year.

NETFILE is the federal government’s online tax-filing service and information is sent directly to the CRA over the Internet. But for NETFILE to work, you must first use compatible software.

The government provides a list of free certified software packages and web-based programs for taxpayers. A full list of all certified DIY options is also available. There’s even an option to file directly from your iPhone. SnapTax is available for download at Apple’s iTunes. The app allows you to snap a photo of your T4 slip with iPhone’s built-in camera before asking you a few basic questions. Within minutes SnapTax is ready to file your information directly to NETFILE, for a fee of $9.99. (Read more about SnapTax here.)

Canadian Capitalist blogger Ram Balakrishnan’s top software picks are TurboTax (starting at $19.99), UFile (starting at $15.95) and H&R Block at Home (starting at $15.95). Balakrishnan also tried the free StudioTax software and liked it despite it being “a bit clunky.”

Whatever kit you use, Quinlan suggests you start by asking yourself: “What’s changed in my life in the past year?”

A new marriage, divorce, baby or death in the family all have tax implications and more often than not they involve some sort of tax break.

The CRA has a full list of tax breaks. In the meantime, here are few tips:

• Report student loans because they are tax deductible. Still in school? Students can claim tuition and textbooks.
• Got young kids? Have the lower income spouse claim the childcare expenses for maximum benefits. And don’t forget to show claim extra-curricular activities. Families may be able to qualify for a non-refundable tax credit of up to $75 per child for eligible expenses like an after-school art workshop. A similar tax credit is also available for physical activities.
• Remember to report your pension and RRSP contributions to lower your overall taxable income for year.
• First-time homebuyers can claim $5,000 on the purchase of a new home and save up to $750 in tax.
• And new this year is the ability to transfer medical expenses from dependants to caregivers as well as extended medical credits for children over 18.

If you are feeling overwhelmed, rest assured most home software kits will walk you through these and other tax credits step-by-step.

“But if people aren’t that focused then they should really hire somebody to do it. And really hurry, there’s only a week and a half to go,” Quinlan said.

Filing after the April 30 deadline could result in a delayed tax return, if you are entitled to one. If you owe money to the federal coffers, you’ll be dinged a minimum of 5% of the balance owing, plus another 1% penalty on unpaid tax for every month that it’s late, up to a maximum of 12 months. If you have a balance owing from last year that also needs to be paid by April 30.

The first thing you should do is read it, closely, said Jason Round, Financial Planning Support head at RBC.

The pink and red form has some powerful insights into how efficiently you are saving, he said.

The little boxes that capture your pension contributions are especially important. Line 207 for example is your
registered pension plan (RPP) deduction for the year.

“If you look and there’s nothing in that box, it’s probably a good idea to do some investigating,” Round said.  Find out if your employer offers an RPP that you aren’t taking advantage of. Enrollment isn’t always automatic so it may take a little extra effort on your part but the payoff is worth it.

“Quite often if you do enroll it’s free money and it’s going to help with taxes.”

That’s because pension contributions work to lower your overall taxable income for the current year. Same goes for your personal Registered Retirement Saving Plan (RRSP) contributions.

If you make regular RRSP contributions on your own and you haven’t notified your employer, you should.

“There is an opportunity, for next year, to reduce your taxes at source so that your employer is taking less off of each paycheque in recognition that you are making regular RRSP contributions on your own,” Round said.

This can amount to significant savings, especially for young professionals. Eighteen to 34-year-old are the most likely group to make regular bi-weekly RRSP contributions, RBC research shows.

As far as this tax season is concerned, there are still ways to minimize your tax bill, and if you’re lucky, maximize your refund.

First and foremost, Round said, file on time. The April 30 income tax deadline is approaching fast and late filing can cost you. If you owe money to the federal coffers, you’ll be dinged a minimum of 5% of the balance owing, plus another 1% penalty on unpaid tax for every month that it’s late, up to a maximum of 12 months.

Not knowing is no excuse. The Canada Revenue Agency (CRA) will come knocking regardless.

With just over a month before the deadline, now’s the time to familiarize yourself with all the tax credits available to you.

New this year is the children’s arts tax credit. Families may be able to claim a non-refundable tax credit of up to $75 per child for eligible expenses like an afterschool paint workshop. A similar tax credit is also available for physical activities.

If you take public transit to work every day, you can also claim the cost of your monthly pass. And there’s a $750 tax credit for first-time homebuyers.

Still chipping away at your student debt?

“With student loans you can actually deduct the interest and receive a tax credit back,” Round said.

Tax preparation software is pretty intelligent these days and easy-to-use questionnaires will help point you to the right deductions if you prefer not to take your receipts to a tax preparation specialist. The CRA publishes a list of NETFILE-certified tax software. Every program on this list is compatible with the CRA’s do-it-yourself online tax filing system and many of them are free.

I was speechless.

I know things get broken and destroyed all the time. It’s a part of life. But when it happens at the hands of someone you’ve trusted (and paid) to fix your property, it’s harder to accept.

“I’ve never been in this position before,” I conceded to John. “Where do we go from here?”

After listing the inventory of hardware that formerly comprised my machine, John told me the shop was willing to compensate me to the tune of $100, plus refund the $45 I had already spent.

There was a long pause.

Considering I was prepared to pay more than $100 to have it fixed, I found this offer rather less than impressive.

It’s at this point that many Canadians would sigh, roll their eyes and acquiesce. Unfortunately, negotiation is not one of our prominent national traits. In fact, apart from a few sectors (notably real estate) our consumer culture discourages it. This is a shame, considering the extent to which other cultures negotiate to strike a more favourable deal. Being firm and persistent is a good way to open doors to opportunities that other people would miss, so it pays to hold out for a better offer.

Assuming the $100 figure was a low-ball tactic, I told John I would revisit the contract I had signed and get back to him. I then went in search of professional advice. What were my rights? Surely I was entitled to more than $100.

According to Tina Hill, a lawyer with Ogilvy Renault LLP in Ottawa, the disclaimer I had signed lacked a limit of liability, meaning there was no defined monetary amount at which they would cap compensation. Good news for me, but bad news for the company.

Armed with this knowledge (and ready for some ruthless negotiating) I called John back and told him the $100 wasn’t going to cut it. But before I even mentioned the word “lawyer”, he told me he was willing to offer me a computer with superior components than my previous machine, free of charge.

I have to admit; I smelled blood and part of me wanted to push for the best deal I could get. How high up the quality scale was he willing to go? Would he throw in a free monitor? What about an operating system?

However, while John’s initial offer left much to be desired, he had treated me in a professional and courteous manner, and now he had sweetened the pot. Plus, he was probably dealing with irate customers daily, and since I was now getting a brand new computer for my troubles, I decided to quit while I was ahead.

A few days later, I picked up my new machine from the company’s new shop, which had quickly sprung into existence right across the street from the former location.

But what if things hadn’t gone so smoothly? What recourse would I have?

For starters, each province has its own set of consumer protection laws which prohibit unfair practices. If you sign a waiver or agreement that runs afoul of such legislation, it will not be recognized by any court, period.

However, laws don’t necessarily protect people in all situations, so in the event you feel unfairly treated by a vendor, your next recourse is small claims court.

But you’ll have to do some serious cost/benefit analysis before going down this road. Although the system is designed to settle minor financial conflicts on the cheap, it will still cost you.

In Ontario (where the computer shop was located) it will cost you $75 just to file your claim. Once the defendant has filed a statement of defense, you’ll be brought to meet with a judge to see if this all can’t be settled out of court. Failing this, getting your day in court will cost you an additional $100. If letters need to be sent or witnesses called, the cost goes up even further. Add to this your time, missed work and hassle, and it quickly becomes an expensive endeavor.

On the plus side, if you win you’ll get all your disbursements back. However, it may turn out that the judge grants you only some of your disbursements. Worse case scenario, you lose and you’re on the hook for the defendant’s costs. Not a pretty picture.

In this case, the lesson is simple. Hold out for a better offer. You have nothing to lose and everything (sometimes even a new computer) to gain.
]]> http://www.moneysense.ca/2010/10/19/you-did-what-to-my-computer/feed/ 175 http://www.moneysense.ca/2010/02/04/what-im-reading/ http://www.moneysense.ca/2010/02/04/what-im-reading/#comments Thu, 04 Feb 2010 22:09:47 +0000 Rob Gerlsbeck http://www.moneysense.ca/?p=2899 One of the perks of being a writer at MoneySense is I get review copies of all the new personal finance books hitting the market. Did I say perk? Okay, what I really meant is I get to spend my evenings plowing through tomb after tomb of get-rich-quick books.

I’m usually sent a book a week in the mail, but lately I’ve been inundated and I’m starting to fall behind. I’ll recommend a few of the books I like next week, but for now I’ll mention the first one that caught my eye: Earn, Spend, Save: The Savvy Guide to a Richer, Smarter, Debt-free Life (Wiley). The book is from Chatelaine and written by the magazine’s financial columnist, Kira Vermond. Naturally, it’s aimed at women.

Normally, I’m suspicious of personal finance books for women. The principles of saving and investing are no different for men than women. So why buy a female-focused book when there are plenty of classics already out there? (The Wealthy Barber, The Millionaire Next Door and The Four Pillars of Investing, to name a couple.)

Plus, I’ve not been impressed with a lot of these books so far. They seem to approach the topic of money as if the readers were in an episode of Sex in the City. (“Hellooo! Do you really need another Prada purse. Those RRSPs aren’t going to take care of themselves, sister.”)

Earn, Spend, Save is a vast improvement on what’s already out there. The advice is easy to digest but doesn’t sacrifice solid information for style. This book seems to be targeted to younger women just starting to build their careers. In that respect, it provides a nice overview of investing, debt, credit scores, taxes, RRSPs and mortgages. Reading it won’t steer you on a path to riches, but it will provide a solid foundation of personal finance know-how.

Now, back to all those other books I have to read. Stay tuned…

That means 2010 should be the best year ever to snag that two-bedroom condo in California for next to nothing, right? Perhaps. But before you buy, listen to what Philip McKernan has to say. He’s the author of the recently published book South of 49: The Canadian Guide to Buying Residential Real Estate in the United States (Wiley).

McKernan’s a nice Irish gent who lives in Vancouver, where he runs a real estate investment company called Maple Leaf Property. He worries that many Canadians are going to buy for the wrong reasons in 2010.

Wrong reason No. 1: The dollar. Investing in U.S. real estate because of the fabulous exchange rate is, as McKernan puts it, “insane.” The last time the Canadian and U.S. dollars hit parity a couple of years ago, a stampede of Canadians bought in the U.S. Back then, around 2007, home prices were at record highs. Now these people are sitting on properties with negative equity and “any savings on the dollar was just wiped off the plate,” he says. “It’s a bonus if the dollar is strong, but it shouldn’t be your prime motivator to buy.”

What should be your prime motivator? Lifestyle is a good one. If you simply detest Canadian winters and have the cash to buy a Florida condo, by all means go ahead. Just keep in mind that your reason for purchasing hasn’t anything to do with making money. Your return should be measured in sunny days swatting a nine iron and/or relaxing by the pool.

Which brings us to wrong reason No. 2: Buying as an investment. Fewer people used to do that, McKernan says. The old snowbirds were in it for leisure, not to become landlords. But if your prime motivator is to make money off this house, keep the following in mind:

The best investment properties aren’t all in the sunbelt. You’ll never hear a Canadian at a dinner party brag about the fabulous rental income he’s earning from his landlocked two-storey in Iowa. Too bad. There are real estate opportunities in every state, McKernan says. So don’t limit yourself to the usual hot spots like Florida, Arizona or Nevada.

The trick to investing in U.S. real estate is to find up-and-coming cities. Look for ones with employment rates and incomes that are above the national average. Then drill down to neighbourhoods with the best income potential. Stay away from the cheapest and the most expensive parts of town. Look for neighbourhoods with plenty of young people and public transit, and pay attention to vacancy rates and the going rate for rents.

Be wary of auctions. The hype surrounding an auction can actually drive up the value of the house being sold to more than it’s worth. Worse, houses on the auction block are sold “as is.” Yours could include an undesirable tenant, or have a lien, or have some kind of structural damage. To protect yourself, look for Real Estate Owned, or REO, homes. These are houses that have been foreclosed by a bank or mortgage company, but the bank has repaired the walls and windows, kicked out the motorcycle club member living inside and made sure the repo man isn’t going to come after you. “It means there’s less risk involved for you.” McKernan says.

Visit the property yourself. Seems like an obvious thing to do when plunking down six figures for a house. But McKernan says he’s met plenty of Canadians who purchased American homes without seeing them first.

Your best investment may be in… Edmonton? One thing people fail to do when they buy property in the U.S. is to compare their return on investment to real estate where they live in Canada. “If I have $200,000 to invest, could I get the same kind of returns in Canada without the tax hassles and geographic hassles of the States? If yes, buy an investment property in Canada instead,” he says.