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.

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

1. 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.
2. 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.
3.  Develop a ongoing process to manage your financial papers