A stronger, better you: Why it’s important to look after your financial health

We all know how important it is to take care of our physical health – it keeps us strong and helps ensure we’ll be around for years to come. But what about looking after our financial health? It’s just as important but often doesn’t receive the attention it deserves.

Even if it seems like you don’t have enough money to invest or buy insurance, it doesn’t take much. If you cut down on extra lattes or meals out, you could set yourself up with a plan for a successful financial future.

Build your personal road map

When it comes to financial security planning, it pays to start small. If you change your spending habits, even just a little bit, the long-term results could be big.

For example, let’s say you made your morning coffee at home instead of picking it up on the way to work. It may not seem like much but the amount you save could be enough for a $500,000 life insurance policy.1

If you cut down on your dining-out expenses by even $20 a week and invested that money, it could grow to almost $37,000 over a 20-year period.2

No matter what you’re saving for, you’re on the road to achieve your future goals.

Other savings ideas:

  • Leave the car at home, carpool, use public transit or ride your bike
  • Shop around for better auto and home insurance rates
  • Install LED light bulbs to reduce energy costs
  • Go to the movies on “cheap Tuesdays”
  • Clip coupons for groceries or buy in bulk
  • Cook at home instead of dining out

With those savings each month, you could:

Invest and watch it grow

A small but regular contribution into something like a tax-free savings account (TFSA) or registered retirement savings plan (RRSP) could grow substantially, if it’s invested wisely and given enough time to grow. Use this money to help fund your retirement or perhaps go on the dream vacation you’ve always wanted.

Protect your family

What would your family do if something happened to you? Insurance is a flexible and cost-effective way to protect yourself and your loved ones financially. It can help pay down your mortgage, cover outstanding debt or fund education or retirement plans.

How we can help

Spending money feels good, but knowing you’re not only protecting yourself and loved ones – but unlocking future potential – feels even better.

I can help you build a customized financial security plan to help you achieve your goals.

1Cost of coffee based on $1.70 per cup. Assumes 30 cups a month. This comparison is based on London Life term 10 life insurance, male and female, up to age 45, non-smokers, standard risk, monthly premium payments. Monthly premium depends on your age, amount of coverage and general health information. Life insurance coverage amounts represent the policy’s death benefit. Rates as of December 2015. Term 10 life insurance premiums increase on renewal after 10 years. The example provided is not complete without the London Life illustration, including the cover page, reduced example and product features pages all having the same date. Read each page carefully as they contain important information about the policy.

2Assumes $80 is invested in a balanced mutual fund portfolio on a monthly basis with a six per cent annual rate of return. Rates of return are hypothetical and provided for illustrative purposes only. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated. Unit values and investment returns will fluctuate.

Top Ten Questions to Consider for Retirement

You’ve saved well, invested wisely and built a sizeable nest egg. Retirement is within your grasp – or so you think. Here are 10 thought-provoking questions to help you determine your readiness to retire (whatever retirement means to you).

1. When do you want to retire? In a year? Six months? At a particular age?

In retirement, you’ll experience a fundamental shift – from saving to spending. The timing of your retirement is crucial to building your retirement nest egg and assessing how long it will need to last.

These 10 questions can be your roadmap to becoming retirement ready.

2. What percentage of your current income do you expect to need in retirement?

The amount of your current income you’ll need in retirement depends on how much you plan to spend in retirement. Plot out your current budget, then create a projected retirement budget and see where the gaps are.Retirement Checklist

3. How do you plan to spend your money in retirement?

Think about your current spending habits. Are you a penny-pincher or a lover of luxury? These habits will be amplified in retirement, so make sure your savings reflect this. Don’t forget to plan for events that may be out of your control.

4. Have you considered your lifestyle needs in retirement?

Travel lovers, take heed. Your lifestyle needs in retirement play a big part in how you save. For example, buying a condominium and being saddled with condo fees may not be the best idea if you plan on travelling extensively.

5. What guaranteed sources of income can you count on in retirement?

Calculate how much guaranteed income you’ll receive during retirement – such as Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) payments. Then, determine how much additional income you’ll need and where this will come from. While investment income is a nice bonus, you shouldn’t rely on it to pay for necessities.

6. Do you plan to work part-time or full-time in retirement?

Perhaps you want to continue using your existing work skills or explore new career opportunities. Debt and family matters may also influence your decision.

7. How do health and wellness factor into your retirement plan?

Retirement is the perfect time to focus on your mental and physical fitness. Leave room in your budget for activities that exercise your mind and body – the good news is that many of them are free!

8. Are you ready for the unexpected events in life?

When you consider retirement planning, make sure to account for unpredictable events – both financial and personal. Check if your retirement savings are strong enough to support you through a future economic downturn, a rise in the cost of living and a long life.

9. How will you keep your money working in retirement?

Think about how you’ll keep your money growing. Talk to me about investment solutions for retirees.

10. Do you plan to leave a legacy?

You might want to leave an inheritance to your family or favourite charity. Once again, I can help you put this in place.

The answers to these questions can help form a dependable roadmap for your retirement. While you can’t predict the future, you can plan for it.

Two Incomes One Financial Household

Instead of letting money become a source of tension, couples can work together to manage household finances. Their relationship will benefit, as will their financial future.

By sharing the role, both spouses can better grasp the financial components of managing and maintaining a household. This understanding and transparency can help show the importance of avoiding ill-considered splurges.

Working together can also help couples reach their goals faster and more equitably.

The incentives

Building a budget and financial security plan and sticking to it isn’t always easy. By definition, saving means not consuming, and for many people, that doesn’t sound like as much fun. We all need goals to keep us motivated.

For younger couples, this is a fantastic opportunity to understand each other’s aspirations. It can also be a great Couple Financesequalizer. Even if one spouse makes considerably more money, decisions should be unanimous.

Cash flow – the ins and outs

Think of your household as a company, except with co-bosses. Earnings come in and bill payments go out. Whatever is left each month is profit, or in this case, savings.

Managing household expenses together in the early days of your relationship sets the foundation for lifelong financial security planning success.

Online tools make it easy to build a budget document of monthly income and expenses.

Utility bills, insurance payments, property taxes, car expenses, student loans and rent or mortgage payments will make up the biggest chunk of monthly expenses. Other household costs include groceries, keeping vehicles fuelled and insured, eating out and entertainment.

Instead of breaking down individual personal expenses, such as clothing, gym memberships and pocket money, you can set a monthly amount for each of you.

Income is the easy part. You know how much you each take home and when deposits are made. If either of you contributes to a pension plan or registered retirement savings plan (RRSP) through work, that money should be included as savings.

Joint venture

A joint bank account may be an ideal way to manage day-to-day expenses, even if one spouse looks after bill payment using the joint account.

Reoccurring bills can be paid automatically from this account. You can also set up automatic transfers to one or more shared high interest savings accounts for big ticket items like a new car or down payment for a house. Like exercising, saving money is easier when you have someone with whom to do it.

All this transparency also provides checks and balances to help prevent one partner from making a rash spending decision or putting money into an ill-advised investment.

Sharing credit

Credit cards with the highest rewards and other benefits have annual fees of $100 or more. But typically, they don’t charge extra for adding someone to the account. You’ll save on fees and your combined spending means you’re accumulating rewards faster.

You may also wish to consider having separate no-fee, low-limit credit cards. These cards can serve as a backup if one of your main credit cards is lost or stolen. Plus, it may be difficult to surprise your partner with a birthday gift if he/she has already seen the charge on a credit card statement.

Having your own credit card can also help build your credit rating score.

Sharing debt

Paying off debt offers better returns than most investments, especially high-interest debt such as outstanding credit card balances. As a family, it doesn’t matter whose name is on the debt. Paying it off should be a shared priority.

Practice makes perfect

Managing household expenses together in the early days of your relationship sets the foundation for lifelong financial security planning success. Expenses and spending are easier to track. Once kids come along, the budget will expand but the system is already in place.

Early success saving together for something special such as an exotic trip sets the stage for bigger and more important objectives – an automobile, home, kids and retirement. Understanding finances and working as a unit are essential ingredients for making money work for you to help attain financial independence.

Good Savings Habits Lead to Financial Independence

Regardless of what you’re saving for – a down payment on a home, a dream vacation, a child’s education or your eventual retirement – developing good saving habits can definitely pay off. Even relatively small but regular contributions can quickly gain momentum thanks to the power of compounding, or making interest on your interest.

Most people can rationalize buying new bedroom furniture or a better and more reliable car by using small monthly payments spread over several years. However, you can also use this strategy to build hefty savings.

For some, saving is instinctive. Chipmunks know they must save enough nuts and seeds to get them through the winter. They even build storage rooms in their burrows.

But it’s important everyone – even humans – realize the importance of saving.

Good Savings Habits

Deciding on your goals for the future

The first step is determining an investment strategy and that means carefully evaluating your financial goals. After all, saving for a down payment on a house or a new car requires a different approach than long-term retirement planning.

So, ask yourself this: what do you want to do with your money?

Crunching the numbers

Next, set up a spending plan to help you determine how much you can afford to put away each month. Plenty of online tools can help you.

Start by going over your chequing and savings accounts and credit card statements, including ATM withdrawals. Make sure to include everything – even those pricey takeout lunches. This exercise can help you trim excessive spending.

  • Setting up a regular, automatic savings plan is an essential part of anyone’s financial health.

Once you have a better understanding of your income and expenses, determine your savings “payment.” Be bold, as you can always dial it back a bit later on. Or better yet, keep the amount steady and reduce your overall spending. Then, as your income grows, continue to raise the amount you put away each week.

Choosing the right investment solution

I can help you choose the right mix of investments and help you achieve your unique savings goals. Find out more about the features and benefits of various investment solutions.

Why it’s crucial to start saving now

Setting up a regular, automatic savings plan is an essential part of anyone’s financial health. The sooner you start, the better off you’ll be and the sooner you’ll achieve your goals.

Financial Planning Process

FINANCIAL PLANNING PROCESS

  1. Introduction
  • Who I am
  • What I do
  1. Understand Situation
  2. Determine Goals & Objectives
  3. Review Investment and Risk Management
  4. Present Financial Security Plan
  5. Present Analysis and Go-Forward Strategy
  6. Implement Plan
  7. Annual Review and Monitoring

Financial Planning Overview

I work with my clients to create a financial security plan that addresses their concerns in four key areas: financial security at death, living benefits, liquidity and retirement. Their financial security plan will be tailored to their needs, risk tolerance and the goals they want to achieve.

Cash Flow and Debt Management

My financial planning process will involve an analysis of your current cash flow and debt levels through a comprehensive budget review.  I will make recommendations on how you can make the most effective and efficient use of your cash, expenses and what you can do to best structure your debt and most effectively pay it down.

Investment Services

I pride my practice on my commitment to a proven process. Before ever making any investment, I first work with clients to develop a complete understanding of their financial position, concerns, tax position, goals & objectives and estate planning. I then work with my clients to help them determine their financial goals and objectives in short, medium and long term. I create a financial forecaster assessment that quantifies my clients ability to meet their goals and objectives given their current financial realities with varying growth assumptions. I believe this is an important tool in determining how much risk NOT to take and establishes baseline investment parameters. I believe this holistic approach allows me to make unique and tailored investment recommendations.

Risk Management

In most cases, the ability of my clients to achieve their intended financial objectives relies on their ability to earn an income. I work with my clients to help ensure the sustainability of income in the event of a disability or critical illness. Using an innovative array of products designed for families, business owners and professionals. I can help mitigate the financial impact in the event of an unexpected medical event.

Estate Planning

I work with families, business owners and professionals to build an estate plan to help ensure their financial matters are distributed the way they would like them to be after their death. It can also help reduce taxes, so more of the estate is left for heirs.

Insurance Solutions

Unexpected events can leave your family without the cash flow needed for day-to-day expenses. I offer a range of products that can provide temporary or permanent coverage to replace your income, fund expenditures that arise due to a death (ie. taxes or final expenses). I can help determine your needs and decide which insurance product solution is best for you.

However, there are other features of life insurance that benefit families, business owners and professionals depending upon their current and long term financial positions. I provide three basic insurance solutions to my clients.

  • Insurance needs over time
  • Alternative investment vehicle for fixed income
  • A strategy for corporate asset efficiency
  1. Temporary and permanent needs over time

Life insurance meets different needs at different stages of your life. You should update your coverage to reflect important events in your life.

  1. Insurance as an alternative investment asset class for taxable fixed income

The major advantage of using life insurance (permanent participating) as an alternative asset class is:

  • Tax advantage on growth
  • Low fees
  • Asset protection
  • Estate tax reduction
  • Stable yields

Tax advantage life insurance products are structured such that a certain amount of life insurance is purchased to ensure that the policy will qualify under the MTAR rules and therefore remain an exempt policy, while at the same time providing the maximum amount of tax advantage income accumulation.

Depending upon client circumstances, funds can either be used to provide an income stream during their lifetime (living benefits) or enhance the value of their estate upon their death.

  1. A strategy for corporate asset efficiency

Save it – Redirect your company’s excess cash from taxable investments to tax advantaged permanent insurance. Growth inside the policy is not eroded by income tax, within prescribed limits. Save on taxes to keep more money working for you.

Spend it – Access the policy’s accumulated cash value by using the policy as collateral for a line of credit. Use loan advances to provide your business or yourself with a stream of income.

Leave it – At death, the policy’s death benefit pays off the loan. The full death benefit payable to your company (less adjusted cost basis, if any) is eligible for distribution to shareholders – including your successors or heirs – as tax-free dividends.

 

The Team Behind Your Financial Security Plan

My support team consists of specialists in:

–       Retirement and investment –       Living benefits
–       Life insurance –       Employee benefits
–       Banking and mortgages –       Tax and estate planning

 

Protect Your RRSP with Critical Illness Insurance

You’ve got a plan

You’re well on your way to meeting your retirement goals. You’ve taken the steps needed to build a retirement plan, including setting up a registered retirement savings plan (RRSP). By contributing on a regular basis, you’re helping to secure funds for your retirement. You may already have an idea of how you’ll use those funds and what you’d like life after work to look like.

Heart Attack, Stroke or Cancer

What if illness interrupts your plan?

Some people think of an RRSP as the key to retirement and a safety net for unexpected events. However, what would happen to your financial security if you became critically ill? A life-threatening illness can affect your family, your ability to work and your future, well beyond recovery.

A serious, life-altering illness strikes one in three Canadians in their lifetime.*

Cancer, heart attack and stroke account for 85 per cent of critical illness insurance claims paid up until 2013 in Canada.*

*Source: Munich Re, Individual Insurance Survey, 2013

Would you need to withdraw from your RRSP early?

If you had to withdraw funds unexpectedly, how much would the money from your RRSP be worth? It might be less than you expect after taxes and applicable fees if it’s withdrawn earlier than planned. You’d also miss out on accumulated long-term growth.

Could you get back on track?

If you’re unable to work because of a critical illness and have to withdraw money from your RRSP to cover expenses, what would you do once you recovered?

Ten years of retirement savings could quickly disappear in just one year. How would you get your retirement plan back on track? In this situation, you could:

  • Retire with less and change your retirement lifestyle,
  • Work longer and retire later

Help protect your retirement

By protecting your retirement now, you’re helping to ensure you have the retirement lifestyle you
want. Creating a safety net will help protect your retirement savings so your long-term financial plans aren’t interrupted by a serious illness.

With Great-West Life critical illness insurance, you’ll receive a one-time payment if you are diagnosed with a critical illness as defined in your policy and the survival period (usually 30 days) has been satisfied.* You can use these funds however you want—supplement lost income, pay for private nursing or cover mortgage payments.

great-west-life-insurance-critical-illness

The choice is yours.

How critical illness insurance can work for you

Let’s say you have invested $50,000 in an RRSP and contribute $500 a month. You expect to retire with $359,274.** However, your savings at retirement could be very different if you become critically ill. To understand how you can help protect your family, lifestyle and retirement savings, let’s look at how critical illness insurance could work for you.

Retire with$359,274

  • No critical illness insurance
  • No critical illness
  • Contribute to RRSP as planned

Retire with $333,847

  • Buy critical illness insurance with return-of-premium
  • Reduce monthly RRSP contribution
  • Never make a claim
  • RRSP grows to $286,067
  • At retirement premiums returned ($47,780)

Retire with $314,152

  • Buy critical illness insurance with return-of-premium
  • Reduce monthly RRSP contribution
  • Get $100,000 insurance benefit if sick
  • Return to work, continue RRSP contributions

Retire with $105,825

  • No critical illness insurance
  • Critical illness (cancer or heart attack)
  • Withdraw $166,667 from RRSP
  • Taxes are $66,667
  • Return to work, continue RRSP contributions
The above example is for illustrative purposes only. Situations may vary according to specific circumstances. Based on the example above, if you suffer a critical illness, aren’t protected and dip into your RRSP to cover expenses and replace income, when you recover, you’ll retire with only $105,825. But if you become ill* and are protected by critical illness insurance, you could still retire with $314,152.
  These scenarios do not take into account the tax savings at time of RRSP contribution.

**Case assumptions: Male, 38, non-smoker, standard risk earning $120,000 per year with $50,000 invested in an RRSP, making RRSP contributions of $500 per month, plans on retiring at age 65; marginal tax rate of 40 per cent, and interest rate of three per cent. Where critical illness options are indicated, premiums are $147 per month for 27 years, based on a policy that includes a return-of-premium rider (age 60+). Critical illness insurance policy is Oasis level benefit lifetime, paid-up at age 100, with $100,000 benefit.

Source: Great-West Life’s living benefits illustration (version 5.4).

Plan for a safety net

By taking part of your regular RRSP contributions and purchasing critical illness insurance, you’re creating a backup plan that could help protect your retirement but doesn’t restrict your lifestyle. Your retirement is worth protecting. Isn’t having a safety net worth it?

Protect your retirement with critical illness insurance

Help cover unexpected financial expenses that can arise due to a critical illness with Great-West Life critical illness insurance.

What if you never make a claim?

Enjoy the added benefit of setting up your policy so that if you never make a claim, you can get back up to 100 per cent of the money spent on premium. Either way, protecting your retirement pays off.

Talk to me to understand how critical illness insurance fits with your retirement plan.

Support retirement planning with RRSP options and Oasis critical illness insurance from Great-West Life.

At Great-West Life, we take pride in our history of serving the financial security needs of Canadians. For more than a century, we have helped clients develop their financial security plans.

Founded in Winnipeg in 1891, Great-West Life is a leading Canadian insurer. We offer a wide range of investment, retirement savings and income plans, as well as life, disability, critical illness and health insurance for individuals and families.

At Great-West Life, personal service is the key to helping clients find the right solution to their financial security planning needs. We are committed to providing the highest quality service, backed by our history of strength and stability. Great-West Life is a member of the Power Financial Corporation group of companies.

The information provided is based on current tax legislation and interpretations for Canadian residents and is accurate to the best of our knowledge as of the date of publication. Future changes to tax legislation and interpretations may affect this information. The information provided is general in nature and is not intended to be legal or tax advice. You are encouraged to consult with your professional tax and/or legal advisor about your particular circumstances.