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Time to get creative when thinking about your finances

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TORONTO -- A quick tour of the world news can turn up no end of reasons to worry about the future. And almost all of them will have their reverberations here in Canada.

Canada, too, has its own issues to deal with, from provinces that have no choices left about raising fees and cutting spending (Ontario and Quebec, for instance) to real estate markets that priced themselves out of reach and now must come back to equilibrium.

However, it doesn't all have to be a worry. You can thrive no matter how the changes arrive, if you think differently about your own economic life.

Protect your future. If you're not in the habit of buying for the pantry shelf, now's a good time to start. This year's droughts will put pressure on food prices: if you have things put away you'll be eating at a much lower price than the person who just buys for their weekly needs. A pantry filled with supplies is also good insurance against job loss: less to buy when you don't have money coming in.

Take a wander over to your local farmers market one afternoon and talk to the vendors. Haven't heard about community-sponsored agriculture? Now's a good time to learn: It's a good way to help keep your food costs in line.

Look for non-traditional investments. They often pay better than traditional ones do and are just as safe. In Ontario, for instance, SolarShare is a not-for-profit co-operative that allows investors to purchase $1,000 bonds with a five-year term and a five per cent annual interest payment -- the money goes to fund solar-power installations. (If you don't have these sorts of opportunities available, you might want to start one -- it'll help transform your community and could provide you with a second job or second career.)

If there's one lesson we should have learned over the past few years (think Stanford, Madoff, MF Global, PFGbest, the various bank collapses and runs worldwide and other upheavals in the financial world) it's that a safe return and a high return are usually mutually exclusive.

Right now, your mutual fund or pension fund manager may be obligated to take risks you wouldn't. Many pension fund managers, for instance, have to buy assets that return eight per cent or better; many types of mutual fund require 100 per cent investment in their asset classes at all times -- in other words, if there are no good buys, they can't sit with cash on the sidelines and wait. They have to buy, and then they lose money.

In other words, if you're using these types of vehicles, you need to be more vigilant.

Real estate's going to be the big problem depending on where you live. Some markets -- Vancouver, Toronto come immediately to mind -- have a lot of correction left ahead of them. Canadian home ownership has never been higher relative to the general population, and there just aren't that many more buyers waiting for their chance to jump in. Meanwhile, housing prices in some provinces have gotten ahead of a buyer's reasonable ability to pay.

In the frothy world of B.C., southern Ontario, or Alberta, price adjustments will take years to work out, while other Canadian markets (New Brunswick and P.E.I. come to mind) have remained sensible through the past few years. If you're in one of them, there won't be a problem.

Employment's the last worry. Turning skills you have into part-time earning potential is something we all need to think about. As the decade unfolds, more of us will have "portfolios" of income: A little from this, a drop from that, something from over there. The more you live like that, the less losing one of the pieces hurts.

We're also less likely to simply up and retire going forward. Instead, we'll dial our work up and down, doing things that are age- and health-appropriate while still maintaining the "portfolio." Staying active like this makes for longer, healthier and happier years anyway.

What all this adds up to is simple: Going to school for the degree, getting a job, getting on the real estate ladder, and trusting others to handle investments is so yesterday.

Now we have to be more creative and more disciplined about securing our futures.


Troy Media columnist Bruce Stewart is a Toronto-based management consultant.

Republished from the Winnipeg Free Press print edition August 11, 2012 A1

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