In today’s world, we are constantly bombarded with “opportunities to spend” our hard-earned money.
Unfortunately, this “desire-based” spending may put you in a position where there really isn’t enough left-over at the end of the day to take care of the things that are really important to you.
As your financial advisor in Winnipeg, we here at SmartWealth, helps you uncover these important things, then develop a plan to ensure they do not get left behind.
We also work with you to identify certain risks that may “roadblock” your plan and together, we design a solution that mitigates or eliminates their potential financial impact.
Throughout the planning process, we apply high level, unbiased, independent quality advice to ensure you have a secure financial future through a proven step by step financial compass process.
Risk management safeguards your financial security and gives you a solid financial foundation that helps mitigate the risks of serious life events that could affect you and your loved ones’ financial security, lifestyle and future.
If you’re anything like most of us, your financial security depends on your ability to earn a living.
This means that if you lose your ability to actively work at a job, profession or business, your income STOPS.
A well-planned risk management strategy takes into account the most common serious life events that could potentially affect you and your loved ones’ financial well-being.
The Financial Risks of Illness or Disability
Unfortunately, it isn’t unusual that most of us know or at least have heard of someone who has had cancer, heart-attack or stroke.
Most of the times, a person inflicted with a serious medical condition or injury often survives and live on but most of them simply find it difficult to recover financially and get back on track years after recovering from the illness or injury.
When a person gets sick or become disabled, he or she may not be able to perform his or her regular activities to earn a living; a solid living benefits plan ensures that you don’t have to worry as to when your next paycheck is coming should you ever find yourself in a position when you’re unable to actively work for income because of a serious illness or disability so you could focus more on getting well instead of worrying about money.
How to Financially Protect Yourself and Loved Ones
Critical illness insurance and disability insurance are living benefits policies that could serve as your financial safety net against potential loss of or reduced income which often results from a serious illness or injury.
Think of these living benefits solutions as your silent partners, your hedge against the economic risks of injury or illness, thereby safeguarding your financial security, lifestyle and your loved financial ones’ future.
The Financial Risk of Death
As responsible providers for our loved-ones, we work hard at our professions or businesses to provide for their needs, maintain their lifestyle and guarantee their future.
Sad thing though, not everyone of us will get to see that we have actually guaranteed their future as some of us may pass-away before our financial obligations are done.
There are times when families find themselves in a situation where the person whom they rely upon for financial support is no longer around to provide for them.
Sudden or unexpected death is one of those “difficult” conversations that many of us turn away from, simply because we’re not comfortable talking or even thinking about the potential of us, passing away during our prime.
As much as possible, everyone would want to think of ourselves as someone who would live long passed our prime; hence, some people would simply ignore the risk of untimely passing and think that “it won’t happen to me”.
From what I’ve seen so far, in almost a decade of protecting Winnipeg families’ financial security; “it won’t happen to me”, isn’t a viable financial security plan.
By avoiding such a difficult yet important conversation, most people tend to make the worst financial decision of their lives of not protecting their loved ones’ from sudden reduction or loss of income.
Planning for the worst, even if you don’t think that it will happen to you will ensure your loved ones financial security and future in the event that they find themselves in a situation where the one who provides for them is no longer around to guarantee their future.
How to Financially Protect Your Loved Ones Against the Financial Risk of Death
A well though-out life insurance policy shields your loved ones from your financial obligations as well as from loss or reduced income should you or one of the breadwinners in your family passes-away unexpectedly.
Implementing a life insurance policy to protect your loved ones’ financial interest does not mean, in any way, shape or form that you’re planning your own death or that you’re expecting to die soon; it simply means that you’re aware of the facts and that as a human being, death is one of those uncanny life events that none of us have control over so far.
Recognizing this fact, you know that it is imperative to put a financial plan in place that at least protects your income so your family can continue on living without necessarily struggling financially which often results from an unexpected death of a breadwinner.
It’s like when you’re driving a car, you carry a spare not because you’re expecting to get a flat but because it may happen.
Life insurance ensures your loved ones’ financial security so they can still live the same lifestyle and achieve the financial future you’ve always wanted for them; even when you’re no longer around to see it through.
Why Is Insurance Important?
Insurance is an important part of your risk management portfolio because it protects you and your loved ones against the financial risks of life events that are beyond anyone’s control.
As mentioned, an insurance protection is like carrying a spare tire, you don’t wish for a flat but you carry one so you can continue on your journey; just in case.
Insurance gives you and your family the peace of mind in knowing that life can continue on without the risk of a financial struggle regardless of what serious event life might throw at you.
Who Needs Insurance?
You Need Insurance if:
- You actively work for income.
- You have people depending on you for financial support
- You’re financially accountable to a person or an entity
- You have a business that needs to survive for your loved ones and/or employees even if you can no longer actively work in it.
- You have material assets or a size-able estate that you want to pass on to your next generation or favorite charity.
- You want to leave a tax-free legacy to your loved ones.
Basically, anyone who has obligations or responsibilities need insurance on themselves.
What Are the Things Insurance Protect You or Your Loved Ones’ From?
Insurance protects you and your loved ones from the following:
- Loss of or Reduced Income
- Consumer Debts (credit cards, car loans, etc.)
- Mortgage Debt
- Children’s Post Secondary Education Costs
- Funeral & Interment Costs
- Taxes at Death
As breadwinners, the income that we contribute to our family’s coffer is one of our most important obligations.
Should we lose our jobs or encounter business setbacks, it is but natural for us to look for alternative sources of income so income continues to flow-in but unfortunately, there are times when loss or reduced income isn’t simply because of a job loss or a business setback; sometimes loss of income may be due to a serious illness, disability or unexpected death.
Not to sound negative or morbid but unfortunately, these serious life events does happen and could affect anyone.
As human beings and mere mortals, anyone of us could get inflicted with a serious illness, become disabled or pass away during our active working years.
This is the unfortunate reality of life; of course, we don’t want these events ever happening to anyone of us but then it could happen.
The best thing that we can do to protect ourselves and our loved ones against the financial impact of these events is to plan ahead, to aim at protecting our and our loved ones’ financial well-being, even if we don’t think that these things will ever hit our household.
Keep in mind that if a person gets sick, become disabled or pass-away unexpectedly, his or her financial obligations don’t necessarily stop but most of the times, a person’s income does stop coming in when his ability to earn a living is affected.
Consumer debt servicing like credit card payments, car amortization, utility bills, mortgage and whatever else monthly obligations an individual may have will continue collecting payments on a monthly or bi-weekly basis which may put a strain on your loved ones’ finances when the family income is reduced due to any of these aforementioned events.
Wills and Powers of Attorney
Wills and Powers of Attorney are integral parts of a risk management plan as both of these legal documents empower you to take care of your affairs (especially financial) should you lose the ability to do so due to illness, disability or death through another person or the document itself through your lawyer in the case of a Will.
Who Needs a Will?
You may think that only the rich and the affluent needs a will. That is wrong thinking, if you have young kids, you should have a will and if you have assets or investments that are not protected by an insurance blanket, you need a will so the people whom you want to receive these assets will rightfully receive them.
Why Is Power of Attorney Important?
A Power of Attorney is a legal document that empowers another individual to act on your behalf when it comes to financial matters should you lose the ability to make decisions on your own due to an illness or disability.
Please note that we are not lawyers ourselves and we don’t want you to get the impression that we are; you can ask your lawyer about how you can implement these documents or we can introduce you one we trust if you’re working with our team.
Wealth Building and/or Asset Accumulation
A sound financial plan is made up of both risk management and wealth accumulation and no financial plan is complete without a plan to build wealth over time.
An emergency fund helps take away the financial strain of emergency spending such as vehicle and home repairs which helps you avoid dipping on credit cards and lines of credit for unplanned expenditures like the ones mentioned herein as well as a buffer in case of job loss.
On average, a person should build at least six month’s worth of salary or earnings on his or her emergency fund which protects the fund owner against monthly obligations in case he or she loses his or her job due to a lay off or job shortage.
An emergency fund serves as an interim source of cash flow to take care of your basic costs of living while you’re searching for another source of income.
RESP [Registered Education Savings Plan]
As we all well know, a post-secondary, college or university education in Canada is one of the most expensive in the world but yet we can not deny the fact that our children will have a better shot in building their financial lives if they finish their post-secondary degrees.
RESP is a great program for parents or grandparents who are looking to give their kids or grandchildren a head-start in life by investing in building their post-secondary education funds.
Without an RESP, a child who wants to secure a post-secondary degree have the option of getting student loans to finance their education or they can have their parents dip into their home equity or try and work their way throughout their university years, hoping that they earn enough to pay for their tuition fees.
Just like any future financial obligations, the cost of a post-secondary degree or at least part of it can be financed by planning ahead, by saving an elected amount on a consistent basis, by taking advantage of compounded growth as well as the underlying government grants that your children’s RESP account receive simply by saving for your children’s education in the right account.
This will lessen or completely eliminate the financial stress on your children when it’s time for them to take the steps toward their post-secondary education.
Most people never really think of retirement until it’s about time for them to retire, not realizing that the best time to start investing for retirement is the moment they earn their first paycheck.
Now, don’t be too hard on yourself if you think you’ve missed this because almost all hardworking Canadian professionals do.
Come to think of it, most Canadian adults are pretty much on the same boat when it comes to their financial education after finishing school.
This is due to the fact that financial literacy was never taught in school.
School equips us with the education and skills we need to empower us to make a living; unfortunately, our traditional educational system never taught us what to do with our money after we earn it, how money works, how to make it grow and how to make it work for us so we can eventually stop working for money and instead have that money work hard for us.
Most Canadians actually save too little while most live paycheck to paycheck regardless of how much they make from their jobs or professions, putting off or entirely crossing-out retirement planning and instead putting their hopes for retirement on government or company pensions.
Keep in mind that the company or the organization you work for will only give you just enough salary and just enough benefits to keep you at your job and the government can only take care of some of your financial needs at retirement.
According to then Finance Minister, late Jim Flaherty; while it’s good that we have government pensions in place, the problem is that it’s too small.
That’s why he actively urged Canadians NOT to put all their hopes for retirement on government pensions and instead to save their own funds for retirement.
We have to understand that the Canadian government pensions are never meant to fully replace our active income, it’s rather designed to supplement our own retirement funds and not the other way around.
Around 16% of Canadians at age 65 continue working at least on a part-time basis to supplement their pension income and roughly half of Canadians find it difficult to retire at the age of 65 due to financial reasons.
The Canadian dollar you know today will most-likely have half of its value when you retire not to mention the fact that you will probably have more time and more opportunities for spending at retirement than when you’re actively working full time when you only have 1 – 2 days a week for leisure.
Remember that on your retirement years, your weekdays will all be Saturdays!
You will have a lot of free time for fun, leisure, hobbies, travel or whatever else you want to do with your time and each of this represents an opportunity to spend your retirement funds.
The challenge is to have enough income and NOT to run out of cash flow at retirement
There are two problems most retirees are facing today and they are as follows:
- Not enough retirement income, and
- Outliving their retirement funds.
It is expected that the majority of the population will not have saved enough money for retirement.
Planning your retirement early on will make a huge difference and yet, this is one of the major financial mistakes many of us make.
A lot of us don’t necessarily think about retirement when we’re young and just starting out in our careers and the majority will keep on putting it off for the most part of their working lives, amassing obligations instead of assets, only to realize it a little too late.
According to one of my favorite Chinese proverb:
The best time to plant a tree was twenty years ago. The second best time is now.
When it comes to your finances, the very best time to actually start saving for retirement is the moment you earn your first paycheck but then again, most people miss this opportunity as personal finance was never taught in school.
The sooner you start saving and growing funds for retirement, the sooner you can retire and even if you don’t plan to retire at all; having money working for you at old age means you can still work at a job, business or career because you want to but not because you have to.
As Winnipeg financial advisors, aside from helping you mitigate the financial risks of serious life events, we’ll also help you implement a simple yet effective retirement saving strategy that will help you slowly build wealth over time.
Slow and steady still wins the race!
“Get rich slow” is the key and if you keep at it, you will have more than enough money that will provide you with passive income at retirement.
Whatever stage you are in your life right now, either you’re just starting out with your career or you already have an established career, it’s never too late to start planning!
A well-thought-out risk management and wealth accumulation strategy will help you and your family plan for the unexpected and plan ahead for your future; whatever the future holds for you and your loved ones, we’ll help you implement the financial solutions that that are specific to your needs.
As your Winnipeg financial advisors, my associates and I are here to guide you through the intricacies of living benefits, insurance planning, savings, and retirement planning to help you protect yourself and your family from the unexpected while silently building your financial future.