Monday, January 24th, 2011
If getting in better financial health is a goal for the coming year, start with ensuring these ‘3 essentials’ are in place
1. Have an up to date Will.
It is important that everyone have a Will and one that is properly drafted by a professional. This is especially important if you have young children. If you do not have a Will and should pass away, the Government will decide how to distribute your assets and to whom. And most importantly, they will decide who will be the guardians of your children according to the law. This may not be who you wish it to be.
If you have a Will already, remember to review it any time a life change occurs- marriage, birth of a child or grandchild, divorce or a passing of a loved one. And don’t forget to change your Will if you should separate from your spouse or your assets could pass along to them should you die.
Finally, name someone you trust and who will be around to handle the settling of your estate- an ‘Executor’. This often is an adult child, sibling or close family friend.
I would also suggest setting up a Power of Attorney/Representation Agreement at the same time you are meeting with a professional to draft your Will. So if you are ever incapacitated, someone you trust can act on your behalf.
2. Make sure you are sufficiently insured.
Just as you would protect your car or home from misfortune, you need to also protect your family should you pass away while they are still financially dependant upon you. How much insurance will vary according to each person’s unique situation. Do you have dependants, are you the main ‘bread winner’, are there future costs, such as education or a spouses’ retirement, you want to ensure are taken care of if you were not around? Generally, you need to have enough insurance to pay down the mortgage, any debts or outstanding bills and burial costs. It is then recommended that you have enough funds remaining to provide income for your family for the number of years you deem necessary.
In addition to life insurance, consider having adequate disability insurance in place. It is advised to have enough coverage to provide 60 to 70 per cent of your household’s income.
3. Have an emergency fund.
As they say, “life happens when you’re busy making other plans” and life tends to cost money. Having enough money put aside for such unexpected events can be the difference between staying afloat or sinking financially. One of the most important elements of your financial health is to ensure an emergency fund is in place – and sooner rather than later.
The general rule of thumb is to have 3 to 6 months of your current living expenses set aside for emergency situations. However, this depends on many factors specific to each person’s situation such as, how employable you are, whether or not you carry substantial debt, if you have adequate insurance, if you are a dual income household and/or if you have children.
A Will, insurance and an emergency fund should be seriously considered by everyone. If you find it a bit daunting to get the ball rolling, find a trusted financial advisor who can help guide you in the process. An advisor should not only be able to provide guidance and recommendations unique to your individual situation but they should also have trusted sources to refer you with regards to your Will and putting Powers of Attorneys’ into place.
Start 2011 right, by protecting your loved one’s from hardship when and if, tough times come. And best to do it sooner than later, as we don’t always know nor have warning when things derail us from our intended plan.
Thursday, March 19th, 2009
What the heck is a recession?
Well we now know that we are officially in one, so what the heck is it? In simple terms, a recession is when the economy stops growing and for the most part, starts going in reverse. Technically it is described as two or more consecutive quarters of negative growth and job losses.
Why does a recession get worse?
As companies start making less money they cannot continue to hire people or employ some of their existing workforce and layoffs start to happen. You may buckle down and start to spend less because you are now either out of a job or worried that you soon will be. Guess what happens if we all stop spending? Businesses sell even less and profits go down even more and it all starts all over again with more layoffs.
So how does a recession end?
The short answer, when the reverse starts happening. For the most part, a recession will correct itself as interest rates drop to a level that encourages borrowing and spending again.
Is this why interest rates keep dropping?
Yes. When the Bank of Canada drops the interest rates, it’s as if they are putting our money on sale. When things go on sale, people tend to buy. Imagine that you borrow $100,000 at 7% to buy a home. Your monthly payment is about $700. Today you can get a mortgage anywhere from 4 to 6%. So lets say you got a 4% mortgage today, then your monthly payment will be about $530.00. That’s almost $200 cheaper a month. This means that more people can now afford to get into the housing market.
So if it costs me less to borrow money, I more inclined to do so.
Exactly, when rates are low and money is cheap, people and businesses will borrow and start spending again. If we are all spending again, the economy will start expanding.
Isn’t credit and spending how we got into this mess to begin with?
It wasn’t that simple but more a deadly mix of easy money, predatory lending, an unsustainable housing boom, a lack of rules and regulations and the fabrication of complex and treacherous financial instruments that have basically caused this global recession
Last thoughts
Well we will come out of this, we always do but it takes time…………..
Rhonda Sherwood, CFP, FMA
Wealth Advisor
ScotiaMcLeod
rhondasherwood.com
itshermoney.com
Wednesday, April 2nd, 2008
The flowers are blooming and the birds are singing – Spring seems to have finally sprung. It’s a great time to start new and clean out those cobwebs hiding within each nook and cranny of our homes. And although our intentions start off good, somehow we always find an excuse to dodge the hefty job of cleaning our ‘financial house’. This is usually the largest and most cluttered areas that we need to sort through.
Here are three simple strategies to help make decluttering and reorganizing your financial papers a less daunting task:
- Preparation: first we must understand what makes up our ‘financial house; it’s our personal debt, our savings plans, retirement plans, estate plans and insurance needs. Our financial papers should be sorted and filed in these 5 groups.
- Declutter: once we have sorted all of our papers into the 5 groups, it is time to go through them and start shredding. The rule of thumb is to keep your last two statements plus your original documents and shred the rest. If you haven’t gone paperless yet, it’s definitely time to do so. Most banks and financial companies offer on-line services.
- Develop a ongoing process to manage your financial papers
If you do not keep on top of the heaps of incoming papers you’re bound to find yourself surrounded by the same clutter next year. So to avoid this trap, develop a process on how you will manage your ‘financial house’. One woman I know created five folders for each financial group. Once a week she sets aside 15 minutes to briefly review the papers she received that week. If there is nothing that needs to be acted upon, she just files each one away accordingly. And in keeping with the rule of thumb, she keeps only the last two statements. When she has her annual meeting with her financial planner, she brings her five folders so the advisor has a good understanding of all aspects of her financial affairs.
When you are organized, you feel more in control of your life and when it comes to your finances, it’s important to be in control. Not only will you sleep easier at night, you will also be better prepared if something unforeseen should happen. In the coming blogs we will discuss the significance that each of these 5 financial groups have to you and your financial wellbeing.
