In week two of the Kustom Design Level 1 Financial boot camp we covered budgeting, good debt vs. bad debt, and we discussed some advice that is now obsolete.

Below are my notes from the class.

Financial Calculator:

E.G. How many years if you could only contribute $400 monthly? FV = 700000 PV = 0 I = 6% PMT = -$400 N = 38.05 (38 years 1 month or 457 months)

Top 3 Credit Bureau’s:

Steps to fix your credit report

  1. deal directly with the company.
  2. order investigation by equifax.
  3. make a note on your credit report.

Always pull your own score before you go to borrow (soft check).

RBC credit alert notifies you when something happens to your credit score or report.

Improving Your Credit Score

5 Main Ares Used in Calculating Your Credit Score

  1. Your payment history
  2. Amounts you owe
  3. Length of your credit history
  4. Types of credit used.
  5. Your new credit

Top 5 Ways to Improve Your Credit Score

Some agreements allow lenders to check your credit when they want.

Brokers are good, they check your credit once then shop it around for you.

If you have a good score you can negotiate a lower rate with your lender. If your write them a letter, then it is documented.

The Closed Circle

  1. Issue a tracking system.
  2. Total of expenditures.
  3. Capture sources of income.
  4. Determine material wants.
  5. Determine between Obligations, Necessities or Wants.
  6. Prepare the closed circle.
  7. Compare income and expenses.


Calculate your expenses first.

Only take what you need from your business, nothing more.

When you take good care of what you have been given, you will receive more to take care of!


Overflow can be used for: * eliminating bad debt. * planned giving. * investing. * other agreed upon items that help you achieve your goals.

What about cash flow?

2 ways to increase cash flow: * more cash flow coming in * less expenses going out

incoming cash flow can be active or passive.

Step 2: Eliminate Bad Debt

Good Debt: * Has asset attached. * Is tax deductible. * leverage used to invest. (rental property)

Bad Debt: * Consumer (credit cards) * Non Deductible (Mortgage) * High Interest


You owe $10,000.00 on your credit cards with an average interest rate of 20%. The standard minimum payment for $10,000.00 is $250.00. If that is all you pay each month, it will be 37 years and more than $19,000.00 in interest charges before your balance is paid off.

What if you have more than one credit card to pay off?

  1. List outstanding credit card balances.
  2. Divide each balance by the minimum payment required.
  3. Do this for all of your credit cards.
  4. List them in order of payments from lowest to highest.
  5. Apply your extra $10.00 a day to the one with the least amount of payments.


##### Mastercard * balance of $3000 @ 19.99% * Minimum payment of $300.00


Pay off your Visa first, then your mastercard.

Eliminating Bad Debt

### Don’t be a slave to interest * all credit card interest. * high interest loans, notes and credit lines. * non deductible loans, notes and credit lines. * all non deductible mortgages. * family debt with no repayment structure.

Bad Debt elimination strategies * refinancing at lower interest rates * consolidation * depositing paychecks to line of credit. * smith maneuver

What We Were Taught

Why working hard is obsolete advice

Therefore, the harder you work as an employee the more you pay in taxes.


Positives: * tax deductions * long term growth for future income * forced savings program

Negatives: * eventually taxed * limit on amount * no collateral advantage * investment restrictions * age and income restrictions * government control * interest on load not deductible * liquidity * cannot claim losses * no tax savings on capital gains or dividends


Why “Save Money” is obsolete advice


Why “Get Out of Debt” is Obsolete Advice

Why “Invest for the Long Term” is Obsolete Advice

“Rule number one is don’t lose money” - Warren Buffet “Rule number two is always remember rule number one.” - Warren Buffet “Diversification is required when investors do not know what they are doing.” - Warren Buffet

Why “Diversify” is Obsolete Advice

The five biggest markets to invest in are: * The Stock Market * The Bond Market * The Real Estate Market * The Currency Market * The Commodities Market

The Smith Manoeuvre

  1. Get a re-advanceable mortgage
  2. Liquidate non-registered assets (like stocks held outside of an RRSP) into cash.
  3. Use this cash as a down payment on your mortgage.
  4. Make mortgage payments like normal.
  5. Re-borrow $1 for every $1 of mortgage principle you pay each month.
  6. Invest that borrowed money at a higher rate of return than the loan interest you pay.
  7. Deduct your investment loan interest and use the tax savings to pre-pay your mortgage.

Repeat steps 3-7 until your mortage is paid off!

This one is a little confusing, because now you have an extra interest payment to make against the line of credit portion of the re-advanceable mortgage. I’ve read that you’re supposed to capitalize the interest by borrowing from your line of credit to pay the interest payment on your line of credit. This sounds very risky! - mo

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