The Big 3 Life Changing Events that can Significantly Affect Your Finances


In my practice as Financial Security Advisor I hear variations of these themes almost every day, my job of course is the help people live life to the fullest, get out of debt, build wealth and leave a legacy but that’s a lot harder than it sounds, especially when one of these large uncontrollable and unpredictable events occurs. But there are a few things we can do to prepare, and throw you a life line when you need it.

1 – Serious Illness

According to a Statistics Canada report from 2011, about 8% of full-time employees are away from their jobs for part or all of any given week due to illness, disability, or personal and family responsibilities. When you add it all up people miss an average of just over nine days at work every year. Illnesses very greatly in intensity and cost, they can range from a head-ache with the sniffles to Ebola. They can be acute (and over relatively quickly) or chronic (and last a long time). Whether an illness affects you or a close family member, it may lead to unpaid absences from work as well as a wide range of additional expenses that aren’t covered by provincial health plans or employer benefits.

Check with your employer or your benefits manual to find out exactly what is, and isn’t covered, and consider purchasing additional coverage in the form of Long Term Disability or Critical Illness Insurance to avoid some of the financial losses that could occur should something like this happen to you.

2 – Job Loss

Again, according to Statistics Canada, in 2015, the economy created 151,000 full-time jobs.

Yay?

On the surface this looks like good news, but it doesn’t tell the whole story. The unemployment rate still rose by 0.4% to 7.1% with 110,000 more people looking for work at the end of the year. Some of the people were of course new to the work force, newly graduated from colleges and universities, or new immigrants but others were established and experienced workers who had lost their jobs. Job loss can sweep through a specific industry, like manufacturing in Ontario or the oil patch in Alberta. Or it can happen individually. Some lucky workers are offered severance packages but too often they receive nothing and families face an immediate drop in income.

Job loss is the very definition of a financial emergency and the number one reason you should have an emergency fund of at least 3 months of expenses. Knowing your bills will be paid while you look for work and wait for other forms of support like government employment insurance to kick in can relieve a lot of stress associated with losing your job.

3 – Divorce

About 70,000 divorces are finalized every year in Canada, not to mention the breakdown of common-law relationships that never make it into the official numbers. Separation and divorce carry with them far more considerations than the merely financial concerns that come up and I don’t mean to over simplify and minimize what can be a significantly painful and personal experience. It may be the result of years of discord, or sudden and unexpected but the fact is that managing two households is significantly more expensive than one and when one party makes considerably less income than the other the impact is often felt disproportionately.

Not to mention the potential for a large legal bill at the end of it all. Engaging the help of a financial security advisor to help separate financial assets, like joint retirement accounts, life insurance policies and RESPs is a must for any separating couple.

This is by no means an exhaustive list but keeping these three things in mind when designing your financial plan could go a long way to avoiding a lot of extra head-ache, heart-ache and stress down the road.

Lauren C. Sheil is a serial entrepreneur who has been in business for over 25 years. He has operated a small farm, a recording studio and a music manufacturing plant, and has written 3 books on Economics, Ethics and Spirituality.  He has presented his ideas to business owners and leaders from all over the world. His latest book “Meekoethics: What Happens When Life Gets Messy and the Rules Aren’t Enough” is available on Amazon.com.

Mr. Sheil is currently a Financial Security Advisor and Business Planning Specialist with one of Canada’s premier financial planning organizations.  He brings to his work a passion for people and a desire to teach everyone to live life to the fullest while Eliminating Debt, Building Wealth and Leaving a Legacy.  

He can be reached at themeekonomicsproject@gmail.com or by calling 613-295-4141.

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Suddenly Jobless – Ryan’s Story


Continuing with the idea I started last week, gleaning insight from some of my client interactions here’s Ryan’s Story (again not his real name).

ryan

Ryan is a work from home, computer support technician for a multinational corporation.  His job is to log in to various computer systems and perform diagnostics and maintenance.  Due to the nature of the industry he can do that from anywhere with a computer and an internet connection, thus he works from home.  What I don’t know about computers could full a room so that’s about as much as I can coherently articulate about Ryan’s job.

A couple of weeks ago Ryan found out that the company he works for has lost the contract to service one of their biggest clients.  Therefore, at the end of March Ryan’s services will no longer be required and he will be out of a job.  After the dust settled and Ryan started to face reality, he called me in to do a review of his financial situation.

I won’t go into a lot of detail here, but the bottom line is, if he doesn’t find a new job within a month or two, Ryan is screwed.  After doing full review, taking a look at savings, pensions, debt etc, I told him as much.  But then we got down to business.

Coincidentally the January/ February issue of Forum, the member publication of The Financial Advisors Association of Canada (ADVOCIS), carried a cover story on this very topic.  Freelance writer Deanne Gage interviewed a number of financial advisors all over the country about how they council clients facing a job loss.  One of her interviewees was Dr. Roberta Neault, president of Life Strategies Ltd. In Aldergrove, B.C.

“It’s not a great time to be making big decisions”,  says Neault, noting that a client who has just lost her job should take some time – even just a few days or a week – to think through all their options. [Gage, Deanne. (2014 January/February). Suddenly Jobless. Forum p. 10.]

When I met with Ryan he was still in shock.  He wanted to cash out his pension, stop contributing to his RRSP and take out a line of credit on the house, all bad ideas for a 49 year old with 16 years left before retirement.  Ryan needs cash, no doubt but to close all of his long term savings accounts at once he would be taking a huge tax hit and would actually end up with more money than he needs, especially if he were to find a new job fairly quickly.

Elsewhere in the article Gage reminded her readers of the importance of having an emergency fund.

Setting up an emergency fund at this juncture is key.  Clients could us part of the severance towards one, and set up a line of credit through their financial institution.  [Gage, Deanne. (2014 January/ February).  Suddenly Jobless. Forum p. 12.]

Now I’m not going to say that it is ever a good idea to go into debt, especially when you are facing an uncertain future brought about by a job loss but the idea of setting up an emergency fund is very solid.  In fact, if you’ve waited until faced with an imminent change in your lifestyle to set one up it’s probably already too late.  Using part of your severance to do it now it a great idea though, that and staying as far away as possible from additional debt would be my advice.

In the end Ryan decided to pull a small amount of money from one of his longer term savings accounts to live off of for a couple of months with the hope that he will be able to find work relatively quickly.  Computer technicians with his particular expertise are in demand so he shouldn’t have too much trouble.  If things drag on for more than 2 or 3 months we can always revisit that plan.  We will also likely move his pension money out of the company sponsored plan and into something he can manage on his own but not until he is officially let go, who knows, maybe his employer will land another big account and he will be asked to stay on.

The next few months are going to be uncertain times for Ryan and his family.  I’m glad he is thinking long term and taking things slow, even if he was a bit panicked when he first called me.  Sometimes a little distance is all it takes to gain perspective.  I think Ryan will be okay, but if he’s not I’ll be there to help him in any way I can.

For more information on managing through a job loss or other financial transition, or for information on Meekonomist approved methods for getting out of debt and saving an emergency fund write to themeekonomicsproject@gmail.com

If you’re interested in a broad strokes overview of Economics from a Christian perspective buy the book.  From now until Mar 23, all proceeds go to AIDS Care at The Meeting House.com