Whole-Life Life Insurance


The Emergency Fund You Didn’t Even Know You Had

“COVID-19 has shut down my business, I need cash now!”

I have had clients start phone calls with that line, or something similar, at least twice a day for the past three weeks. Thankfully, most of them were smart enough to take my advice and set aside some emergency money, those that did not are wishing they had and are ready to push the panic button. But not all emergency funds are created equal and so yesterday I took to YouTube to discuss the most overlooked source of emergency cash that a lot of people have at their disposal; check it out here.

Once you get past my riff on breakfast nutrition I get into the meat and potatoes of the discussion around the 1:55 mark, hang in there, its worth it. Or you could just pause the playback while it downloads and skip ahead if you really want to.

For those of you who do not have a Whole-Life Life Insurance policy, I want to take a few minutes today to ask you one simple question. Why not?

I get that some people think Life Insurance is a waste of money. Why pay for something that you will not reap the benefit from directly? While I understand the sentiment, I have to say, dying without a plan in place to provide for your family and pay off your debts is just rude. If you are independently wealthy, that’s one thing, but my mother taught me never to expect anyone to clean up my messes for me. Even wealthy people have Life Insurance because Life Insurance, when built properly can be the final broom that comes along and sweeps your life into a tidy little pile and makes things easy to dispose of.

Not that I am saying you’re dirt that you family is just going to toss away. Let’s assume you love your family, and in turn they don’t think you’re dirt, let’s also assume you’re not independently wealthy and you’re not rude.

You probably have some Life Insurance already. Most employers provide at least a small amount of income replacement for your family to help them through a difficult time as part of your health plan. That’s nice but it’s not generally going to be enough to clear your debts and provide for your family long term. In addition to your employer sponsored plan most people will purchase some term Life Insurance to cover off major debts and provide income for their families for a few years. This is all good stuff but it’s not Whole-Life Life Insurance and it’s not going to provide you with any emergency money while you are living.

While term coverage resets at a higher premium at the end of a specific number of years, a Whole-Life Life Insurance policy is designed to give you coverage for one guaranteed premium amount throughout your entire life. It also provides you with the opportunity to participate in the financial returns of the insurance company and grow a cash surrender value which you can access while you are living. Term policies only payout once on death.

In the world of COVID-19 it’s the cash surrender value in Whole-Life policies that many of my clients are finding can form the basis of an emergency fund. You don’t need to die to gain access to this cash value, you can instead surrender some of the death benefit or take a loan from insurance company to bridge through a difficult time. The beauty of this plan is that you don’t have to submit to a credit check, it’s technically your own money, and you don’t have to commit to a specific time frame to pay any of it back. If you die while the loan is still outstanding the insurance company will just deduct whatever is left from the final death benefit and pay your heirs the rest.

This is not all sunshine and roses. The CRA may consider some of the advanced funds as income and expect you to pay tax on them and the insurance company may charge you interest if you take it as a loan. But if your other sources of income have taken a huge hit paying some tax is not a bad thing and the interest rate is about a third of that charged by most credit cards. Win-win.

Experts agree that everyone should have about 3 months of expenses in an emergency fund. Most people find this hard to do but by paying a premium of say $50 a month you can build up a cash value well in excess of that number over time. In the past week I have advanced an average of $6,500 from Whole-Life Life Insurance policies to everyone of my client’s who have qualified. Not bad for a commitment of $50 per month and a whole lot more than the government is offering through some of their emergency financing programs.

So, if you have a Whole-Life Life Insurance policy you might have a significant emergency fund at your disposal. If you don’t have a Whole-Life Life Insurance policy now might be the perfect time to check with your financial advisor and put something in place for the next “once in a life-time” financial emergency like we are living through right now.

Stay healthy and safe, and stay home if you can.

Lauren

The Three Question Fact Find for Business Owners (Part One)


Part 1 of 3

For the past couple of weeks, I’ve been working on a series focusing on what I call The Three Question Fact Find.  For me every new client relationship starts with the same three questions.  If you’re just joining the conversation you might want to catch up by walking through those questions and the accompanying videos here:

Question One – Do you have any Debt?  Blog and video.

Question Two – Do you have a plan to sustainably protect and grow your assets?  Blog and video

Question Three – Where do you want your money to go after you die?  Blog and video

Since I tend to work with a lot of business owners and their employees, I have found that these individuals come to the table with a unique set of circumstances. As a result, I have developed a second Three Question Fact Find for Business Owners.  Depending on the nature of my relationship with the business I may start with the original three questions and then move on to these additional questions or I may start here and circle back to the first set of questions later.  Regardless of how I get there, the ultimate result is the same, for business owners the Three Question Fact Find is six.

Question One – What happens to you, your business and the people you care most about if you or a key employee don’t make it to work tomorrow?

We aren’t talking about something minor keeping you away from work for a few days, or even a couple of weeks, like the flu or a broken finger.  We’re talking about a major, life altering event that keeps you home, or heaven forbid in hospital and unable to see to day to day operations, for several weeks or even months.  Who runs the business then?  How do you get paid?

Statistics Canada reports that people under the age of 65 are three times more likely to be off work for 90 days or more at some point in their career than they are to die.  What’s more, business owners tend to push the envelope and come back to work before they are physically ready often ending up re-injuring themselves or re-aggravating whatever ailment it was that sidelined them in the first place.

Most business owners understand the value of life insurance to protect their families and provide a way for business partners to buy out their shares.  Very few however have considered the consequences of living through a long-term illness only to watch their only source of income fizzle away.  Long Term Disability Insurance structured as either income replacement or overhead expense coverage can go a long way to keeping your business viable while you are concentrating on recovery.  Coupled with Critical Illness Insurance to offset one-time expenses associated with specified illnesses, like a heart-attack or cancer, and you can have most of your bases covered in terms of long-term health related concerns.

Each of these options can also be extended to key employees should there be people within the organization whose services can’t be easily duplicated.  What if your top salesperson for instance had a car accident on the way home tonight, heaven forbid, and needed six months of rehab to learn how to walk again?

In most cases once we’ve dealt with the personal needs of the business owner and their family the next most important question for any owner must turn the focus to the long-term viability of their business.  So, the question remains, what would happen if you or a key employee didn’t show up to work tomorrow?

For more information or help with your financial plan contact:  lauren.sheil@f55f.com or simply leave a comment below.

The Three Question Fact Find (Part Three)


Part 3 of 3 (For Families)

The third and final question for the family market turns the focus off yourself and on to the people that will be left behind when you die.  If you haven’t been tracking through the first two posts in this series take a minute now to review where we’ve come from.

Question One – Do you have any Debt?  Blog and video.

Question Two – Do you have a plan to sustainably protect and grow your assets?  Blog and video.

 

Question Three – Where do you want your money to go after you die?

 

This one seems obvious.  The answers I receive most often focus around some version of “my family”, occasionally people will name a favourite charity.  That’s all well and good and I never take issue with any answer people might give, it’s your money after all and whatever legacy you choose to leave is up to you.  The answer I have never received however is; “I want to leave a large percentage of my life savings to the government.”  The sad fact is that without proper planning that’s exactly what’s going to happen.

When it comes to your final estate your money will essentially be in one of four buckets.  Registered Investments (RRSP/ RRIF), Non-Registered Investments, Real Estate and Cash.  If you are married or in a common law relationship all your assets can transfer to the surviving spouse relatively smoothly and tax free.  If however, you are unmarried, your spouse has predeceased you or you wish to transfer a portion of your assets to anyone other than your spouse on your passing, the government has stipulated some rules in terms of who can get what and whether or not there will be any taxes to pay first.

Quick disclaimer:  I am neither an accountant, nor a lawyer so be sure to consult an expert in those fields first before you make any final decisions.

For the sake of argument let’s assume you have limited cash and your real estate is your primary residence.  Let’s also assume that your non-registered investments are in the form of common stocks and your registered investments are in the form of mutual funds.

So, what happens when you die?

First, the executor of your estate will want to sell your house.  No problem, the proceeds of that sale transfer to your heirs tax-free.  It’s been said that your home is the only tax shelter you can live in.  If there is any additional property, like a cottage or a rental home then those would generate a capital gains inclusion but that is beyond the scope of this article.

Next, the executor will want to liquidate the rest of your assets and transfer the resulting cash to your heirs.  This is where it can get sticky and the government can really mess with what ultimately ends up in the hands of your heirs.

Your stocks will be sold at whatever the market rate is on that day.  This will result in either a capital loss or a capital gain.  Either way 50% will be considered income (or loss) on your final tax return.  Depending on how long you’ve held the stock this could result in a significant increase to your annual income in your final year of life.  Consider what a few shares of Amazon were worth even just 5 years ago vs today?  The mutual funds in the RRSP/RRIF will also be sold but because you received a tax credit when you originally bought those investments 100% of the value of those assets will be added to your income regardless of whether they have gone up or down.

Now consider this, as of this writing income over approximately $215,000 in any given year is taxed in Ontario at 46.16%.  It doesn’t take long for an individual with a $75,000 annual income and $150,000 in assets when they die to end up paying in excess of $100,000 or more in income tax on their final estate.

Have you picked your jaw up off the floor yet?

Now, there is a way we can fix that, or at least make somebody else pay the government so your heirs receive more of your estate.  By using life insurance to create a fifth bucket of money you can transfer a portion of your assets to a participating, (tax advantaged) life insurance policy while you are living.  Thereby reducing the taxable value of your estate and generating a payout to your heirs that is completely tax-free.  In most cases we can offset a large portion, if not all, of the income tax that will come due on your final estate and preserve your wealth for the next generation.

This tactic works best when your assets are evenly distributed between registered and non-registered money so that the act of transferring funds to life insurance does not attract income tax while you are living.  If that is not possible and you have to pull money from an RRSP to fund the life insurance policy, it’s still better to pay the tax gradually, while you are living, than to generate a massive tax bill on your final estate.  This tactic also works well in the situation of a blended family when you are trying to make sure assets accumulated prior to the second marriage remain with the children of the first marriage.

Of course, this is just one possible scenario, there are many others.  The bottom line is, where do you want your money to go after you die?

For more information or help with your financial plan contact:  lauren.sheil@f55f.com or simply leave a comment below.

The Three Question Fact Find (Part Two)


Part 2 of 3 (For Families)

Continuing where we left off the other day.  The second question for the family market starts to focus in on your hopes and dreams for the future while still living your best life now.  Before we go any further though you might want to review where we came from and read the first post in this series.  Question One – Do you have any debt and watch the video on the same topic here.  Da L-Dawg Show – Episode 5 – Do you have any debt?

Now, let’s move on.

Question Two – Do you have a plan to sustainably protect and grow your assets?

I believe it was Charles Schwab who said that the only thing that matters to investors is yield.  While yield (or percentage growth) is important the key concept in my question for families isn’t how fast we grow your assets, it’s how we sustain that growth over the long haul through market cycles and the overall eb and flow of life.  Growing assets is easy, protecting them from market volatility and personal setbacks takes discipline, planning and a little grace.

Just about anyone can help you save for retirement.  Banks, Credit Unions and Investment Advisors can all provide you with investment vehicles designed to help you grow your assets but a financial plan is more that just an investment plan and making a mad rush to beat the RRSP income tax deadline every February isn’t sustainable.  A good financial plan answers two additional questions; “How much is enough?” and “What happens if I die too soon, live too long or my plans get interrupted?”

Answering the how much question is the easy part.  By looking at your current lifestyle, discussing your goals, and taking into consideration your life expectancy we can make a reasonable assessment of how much money you’re going to need, when, and for how long.  At that point it’s just a matter of reverse engineering where you are now, versus where you need to get to and determining how much money to set aside, for how long and at what yield.

Presto!  You now have an investment plan.  But that is still not a complete financial plan.

The tricky part comes in answering the second question.  If you die too soon your family could be put in a difficult situation, forced to make drastic changes just to survive.  The loss of your income due to death, disability or other economic pressures could present challenges keeping debts paid, funding children’s education or just keeping the lights turned on.  Not to mention the very real possibility of our medical system figuring out ways to keep you alive longer than your money can reasonably last.  This is were old school investment planning, the how much and now long discussion, meets insurance planning and becomes a full-fledged financial plan.  The effective use of life, disability and critical illness insurance, along with certain principle protected investment funds are an often-overlooked part of the planning process no matter your stage of life.

So, do you have a plan to sustainably protect and grow your assets?

Stay tuned for question three – Where do you want your money to go after you die?

For more information or help with your financial plan contact:  lauren.sheil@f55f.com or simply leave a comment below.

A Tale of Two Financial Advisors


Once upon a time there were a lot of people who bought Life Insurance and opened Small Investment Accounts from an independent financial advisor.  Unfortunately, this advisor never stayed in touch once the policy was delivered and the premium cheques were cashed.

Every day, these people wondered what had happened to the friendly advisor who seemed to genuinely care about their needs one minute and had disappeared from their lives the next.  As their life circumstances changed and their needs evolved, they wondered if they had done the right thing, if they were adequately protected, and if they would ever be able to retire.

One day they decided to take matters into their own hands, but they didn’t know where to turn, who to trust, or what questions to ask.

Because of that, they felt confused, let down, worried and distrustful of independent experts.

Because of that, they gravitated toward simple and easy solutions offered by banks and store-front brokers that gave limited advice and parked their money in simple, low risk and low return investments.

Until finally their greatest fears came true, they realized they hadn’t saved enough for retirement or someone died prematurely without adequate life insurance and it was too late to change anything.

As a result, these people had to make radical decisions just to survive.  They delayed retirement until they could no longer physically do their jobs, remortgaged or sold their homes and used the money to live on.  They lived out their golden years in a general state of stress and eventually died leaving behind little to no legacy for their loved ones.

But…

On the other side of town their lived another financial advisor who valued customer service above everything else.

Every day, he called a subset of his clients to ask if anything in their lives had changed since the last time they’d talked.  Everyone got a call at least twice a year, once on their birthday and once again throughout the year.  As their life circumstanced changed and their needs evolved, these clients knew that their advisor would make sure that they were adequately protected and were putting enough money away to eventually retire.

One day these clients decided to see if they were getting close to being able to retire and they knew exactly who to call because they trusted their advisor to always take their best interests to heart while he answered their questions and made recommendations.

Because of that, they took his advice and felt confident, calm and cared for.

Because of that, they invested their money wisely, made strong returns over a long time and carried just a little bit more Life Insurance in-case something bad and unexpected happened.

Until finally their dreams came true, they were able to retire with confidence and not worry about what might happen if someone died too soon.

As a result, these clients retired on their own terms and had the energy and time to live out their golden years in stress free comfort.  They too eventually died but they left behind a significant monetary legacy for their loved ones and many sweet memories of a life well lived.

Which advisor’s client would you like to be?  Reach out in the comments below for a no obligation consultation…

Definitely, Maybe


That’s what my business is all about.

I use a number of different “elevator” pitches when talking to perspective clients.  One of my new favorites is to begin by telling people that I help mitigate the impact of the Definitely, Maybes in our lives.  Regardless of when or even if these things happen the impact on our lives and the lives of those around us can be devastating if not properly planned for.

Here they are;

Definitely

We are all going to die.  The only question is when and what that might mean for the plans of the people we love.

Pretty much everyone can agree that the younger you are when you die the more tragic it seems.  The death of a child is almost always met with disbelief and regret for the senselessness of it all.  Such limitless potential cut short for no apparent reason.  Just about every parent I know would gladly trade places with their dying child.  Few parents put in that situation would ever consider that the collateral damage caused by their death would have a lasting impact on the life that child now gets to lead.  When a parent dies without having made adequate plans for their family the resulting financial difficulty can and most often does lead to lost opportunities and permanently alters the life trajectory of their children.

It may seem counter intuitive but the younger you are the more life insurance you should potentially have.  It’s not quite a straight line from birth to old age, more of a bell curve, peaking somewhere in middle age when your children are still young and your debts are still high but everybody dies and regardless of when that happens everyone should have some form of Life Insurance.

Maybe

When I first started in this business one statistic surprised me.  According to StatsCanada one in three Canadians between the age of 25-65 will be out of work due to illness or injury for more than 90 consecutive days at some point during their working lives.  Three months may not seem like a long time at first but considering the fact that over 90% of Canadians are only one missed pay-cheque away from serious financial stress and you have a recipe for disaster.

Without adequate insurance a prolonged period of disability is in many cases a fate worse than death.  While the financial struggles brought about by the premature death of a bread winner are tragic, the person who caused them is gone.  What if that person wasn’t gone but had to sit by, helpless and watch his or her family struggle because they failed to adequately prepare for this very strong possibility.

Thankfully most employers in Canada offer some form of Disability Insurance through a Group Health Plan but these plans are often inadequate for maintaining your lifestyle long term and many smaller employers don’t offer any coverage at all.  Which would you rather have, a job that offers you a high salary with no guarantees of continued income or a job with a slightly lower salary and guarantees an income for life if you contract a serious illness or injure yourself long term?  Personally, I think the answer is a no brainer, sadly too many people disagree with me and don’t realize how short sighted their mistake made them until it’s too late.

What if you own a small business?  There are a lot of rewards to being your own boss but insurance benefits aren’t one of them.  The high stress of running a business, coupled with the fact that business owners tend to be the least likely to own any form of disability insurance makes owning a business, regardless of what the business does, among the most vulnerable sectors of the economy to long term illness and injury.  Not to mention what could happen to the people you employ if the business suffers because you don’t show up to work for six months.

Maybe #2 (R-2.0)

Increasingly in Canada more and more people are foregoing retirement and continuing to work in some capacity well into their 70s and 80s.  The reasons for this are varied.  Some haven’t saved enough and need to keep working to survive, others are still healthy and want to stay active.  As a result, the traditional retirement age of 65 is a thing of the past but regardless of when or even if you fully retire there will come a day when you either don’t want to or simply can’t keep going.

This phase of life is what I call Retirement 2.0.   Planning for R-2.0 is about more than just saving money to live on for the next 20-30 years.  It’s about deciding what you want to do with yourself and how to fund it.  And it’s about planning for the impact of declining health.

In preR-2.0 planning is about growing your nest-egg just like always, but once you start your R2.0 life it’s about guaranteeing income and securing your legacy.

 

So that’s what I do.  I help people plan for definitely and maybes.  I can definitely help you.  Maybe you’ll contact me.

Lauren C Sheil is a Serial Entrepreneur and Financial Security Advisor.  He helps people live life to the fullest along the way teaching them to Eliminate Debt, Build Wealth and Leave a Legacy.  Write to themeekonomicsproject@gmail.com 

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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7 Tips to Recover from a Financial Setback


why-meBad things happen to good people. Overcoming financial challenges – in whatever form – takes dedication, patience and planning.

In life, you will have trouble, that’s a given. This can include losing your job, going through a divorce, or experiencing a serious illness. Then there are all those unexpected expenses life throws at you. A leaky roof, flooded basement, major car repair – any one of these could cost thousand, with no time to waste and room to negotiate.

And to add insult to injury, often times, more than one of these situations occur at once. It’s fairly obvious to think that these challenges often affect your finances – so how do you recover?

Here are seven tips for getting back in track after a financial setback, as recently published in “Solutions for Financial Planning”, a periodical publication from Manulife Financial.

  1. Get Professional Advice – A professional perspective can be invaluable, no matter the size of your problem. An financial advisor can help you assess the impact on both your short-term and long-term plans, adjust your goals, and develop a plan that helps lead to recovery. Getting advice first, will help you avoid making bad decisions like, racking up a large credit card balance that could only serve to prolong your troubles. Your advisor should help you gain perspective, relax a bit and offer constructive solutions to your problem.
  2. Tighten You Budget – Your budget probably has some slack. Regardless of the cause of your troubles, it’s time to eliminate that slack and get your budget back in balance. Take a hard look at your non-essential costs. I encourage all of my clients to play a little game call “Every Dollar Has A Name” in order to find the margin in their budget. Are there free or lower-cost alternatives to the things you do on a regular basis? Borrowing books, magazines and videos from the library, activities in a local park or at a community centre, or the ever popular staycation versus expensive vacation can all help save thousands. You could even take a look at negotiating a better deal on certain products and services without cutting back.
  3. changesExplore Big-Ticket Cost Savings – If things look as if they could have a lasting impact, and a high cost, it may be time to make some significant changes to your lifestyle. Changes that go beyond simple trimming and include some of the biggest line items in your budget. Consider moving to a smaller home a more affordable area and can you make do with one car? Major changes are difficult, but they may be the key to helping protect your future.
  4. Earn Extra Income – Spending less can only go so far, can you bring in more money? Can you sell something of value like art, an antique or a collectible? Maybe you can work more hours or even take a second job. Or course, working more takes time away from other commitments and might increase certain expenses like child care. And don’t forget the tax implications of earning more income. Ask your advisor to help you run all the numbers to ensure your extra income will more than pay for those extra costs.
  5. Talk To Your Mortgage Provider – If you have a mortgage, you may be able negotiate more manageable terms. You could switch from accelerated to more standard payments or if you’ve made lump-sum prepayments in the past, you may qualify for a short-term holiday from payments. It might also be possible to lengthening your mortgage’s amortization and add any payments you’ve missed to your balance. Lastly, if you are close to the renewal date on your mortgage, a full scale consolidation and change of provider may be in order.
  6. Talk To Other Creditors Too – Don’t letting bills slide, call your creditors, explain your situation and ask to lower your interest rate or reduce your payments. Most companies recognize the value of keeping you as a customer long term and are willing to negotiate rather than take a hard line and risk losing your as a customer forever. This can give you the breathing room you need to get through the worst of a setback and help protect your credit rating.
  7. Borrow Sensibly – If you simply can’t find any more savings or increase your piggywaterincome and you’ve run through your savings, check into the lowest-cost sources of borrowing. This can usually take the form of a secured line of credit or the aforementioned consolidation loan. Your advisor can help you identify the best solution for you.

 

Recovery from a financial shock is a journey. It will likely take several months or even years to get back to where you once were. But with a little determination, patience, planning and hard work, it can be done!

As things start to improve, make sure you stick to a streamlined budget and put extra money towards your long term debts. Start building a substantial emergency fund (three to six months of expenses) so you have resources on hand the next time you hit a financial speed bump.

Once you are in a stronger position, with more a bit more margin, look at other ways to help protect yourself from future shocks, such as various forms of personal insurance including, health, dental, critical illness and disability coverage. Start to set some money aside for the future too in one of the many government sponsored tax advantaged savings vehicles like a Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) or even a Registered Education Savings Plan (RESP).

After enough time has passed and you have recovered emotionally from the stress, take some time to look back and think about what you might have done differently. Hindsight is 20/20 so use it to your advantage. Learn from the experience, without assigning blame and make sure you’re in a stronger financial position in case another difficult situation occurs.

balancingLastly, and I can’t stress this enough, go back to the very first tip and engage the help of professional financial advisor. Strong financial advice means a strong financial future. Households with an advisor are more likely to:

  • Have enough money to live the life they want (61 per cent compared to 31 per cent with no financial plan)
  • Be able to take an annual vacation (74 per cent compared to 44 per cent with no financial plan)
  • Have enough money for splurges (65 per cent compared to 31 per cent with no financial plan)

It doesn’t “just happen.” But it does happen if you have the right plan and support.

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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Weathering Stormy Seas


stormatseaI start a lot of my initial client meetings with the following a metaphor.

Picture yourself on a sea voyage to a place called “retirement island”.  Our job today is to make sure your ship is sea worthy, that you have adequate supplies for the journey, (including life preservers) and that you bring enough cargo with you to survive once you get there.  As we all know,  retirement island, is a desert island and apart from the monthly visits of the S.S. Government Pension, everything you will need to live on retirement island will need to brought with you.

A lot of Canadians are jittery about investing. And who can say they’re wrong to worry? Between slumping oil prices, and the Canadian dollar’s dramatic ups and downs, the economy has taken a big hit in recent years. So has investor morale. Market volatility, along with economic uncertainty seems to be the new normal. The sea we are traveling on is choppy to say the least.

But even in a harder investment climate, diversification, with at least some stocks and bonds, is in my opinion the only way to beat inflation. This is specifically why today’s stormy conditions are leading some investors to consider taking a look at included segregated funds as part of the investment portfolio in the cargo hold of their ship.

A recent issue of “Solutions for Financial Planning” the client periodical from Manulife Financial, contained a fantastic article on the features and benefits of segregated funds. Much of the following information has been gleaned from that article and my personal experience in the financial planning industry.

What is a segregated fund? I’m glad you asked.

moneylifepreserverOne way to look at it is to say that a segregated fund is a way to put a life preserver around your money.

A segregated fund incorporates the potential for growth offered by a broad range of investment funds with the particular wealth protection features of a life insurance policy. Segregated fund contracts can help reduce vulnerability to loss through a number of different guarantees. These guarantees include things like income levels, death and maturity, potential protection from creditors, and estate planning, all from one product.

For most investors worried about market risk and volatility, a segregated fund’s most attractive features are it guarantees. After all, there are very few in guarantees life.

With a segregated fund contract, you will positively receive at least 75 per cent of your deposits (up to 100 per cent in some cases), minus any withdrawals, when the contract matures. This is called the maturity guarantee, and it applies on a set date. The maturity date occurs after a minimum number of years have elapsed or when the owner attains a certain age, (usually age 100). Even if markets decline during the period you will still receive the minimum guaranteed amount. If markets rise, your savings grow. Some contracts will even allow you to reset your maturity date so you can lock in growth.

One important detail about segregated fund contracts is that they are actually life insurance policies. Only life insurance companies can offer them, and only licensed life insurance representatives can sell them.

Segregated fund contracts vary widely. They can offer a diverse range of guarantees, features and fees. We are here to help and can explain the differences and recommend the various options that are available to you.

smoothsailingSegregated funds commonly suit more conservative investors, especially during stormier seas and more volatile markets. For investors who don’t want to lose sleep over the market ups and downs, the guarantees that come with segregated funds can provide some peace of mind and help offer smoother sailing. They also appeal to people for whom estate planning and the potential for protection from creditors is a top priority.

Segregated fund contracts also include a death benefit guarantee, similar to the maturity guarantee, if you die while the markets are down your estate or named beneficiary will receive a pre-determined percentage of the original deposit, regardless of the market value of the fund at the time. The guarantee can be up to 100 per cent, depending on the type of contract selected and the age of the purchaser. Your named beneficiary gets the death benefit in the event of your untimely passing. You can name anyone as your beneficiary, family member, friend or even your favourite charity.

Keep in mind that the guarantees are a type of life insurance, which you are going to pay for. Segregated fund costs are similar to the fees charged for comparable mutual funds and include management fees, insurance fees, operating costs and applicable sales tax. A contract might also include a charge for early with drawl. We can provide you with an itemized list of all fees prior to making any investment decision.

retiredcoupleonabeachGiven all of these advanced features a segregated fund contract could be just the answer for investors looking to minimize their exposure to risk and still take advantage of the upside potential of stock based investing. So that when you finally arrive at retirement island, your ship is intact and you can relax on the beach for the rest of your days. Given the ups and downs of today’s markets, they certainly deserve a closer look. Why not give me a call to discuss whether segregated funds are right for you?

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, has written 3 books on Economics and Ethics and 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 is passionate about helping entrepreneurs and everyday families 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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Don’t Tax My Health Benefits!


taxRecent media reports suggest the Government of Canada is considering a new federal tax on the employer-paid portion of your health and dental plan coverage.

In 1993, a similar provincial income tax on the employer-paid portion of benefit plans was introduced in Quebec. It resulted in almost 20 per cent of Quebec employers (including up to 50 per cent of small business employers) terminating their group benefit plans. Under the proposed legislation, employee coverage would be considered a taxable benefit (additional income).  So that $500 visit to the dentist, would now have to be declared, not as an expense but as income on your T4.

So What?

Taxing the employer-paid portion of benefit plans may have the following implications:

  • As an employee, you would have to pay tax on the amount of the employer-paid portion of health and dental coverage, as it would be a taxable benefit. While it’s not clear how much such a tax could cost, the additional amount subject to tax might be hundreds or even thousands of dollars.
  • Termination of employer-paid health and dental benefit plans could lead to serious public health issues. According to a recent IPSOS poll, without coverage through group benefit plan, 84% of Canadians would end up delaying or forgoing treatment or medication if they didn’t have coverage. This will ultimately drive up treatment wait times and public health costs.mental-health
  • Among many other health outcomes, Canadians’ mental health will suffer as their covered access to needed psychological and other mental health supports will be reduced.

Take action

You can help protect the health care coverage that over 22 million Canadians rely on. Visit www.donttaxmyhealthbenefits.ca to tell your Member of Parliament and the Minister of Finance that you oppose a tax on your health and dental coverage. To ensure your voice is heard, use the hashtag #donttaxmyhealthbenefits on Facebook, Twitter.

 

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