Budget is not a 4 Letter Word

Businesses and non-profit organizations make budgets every year and they track every penny and plan each expenditure.

As an individual or family it is also important to budget yet most of us fail to do so. We make plans for the weekend or vacations, but we don’t make plans for our money. A budget helps you see exactly how you spend your cash. Then you can make informed decisions about what you can afford right now, start saving for future purchases and build in room for longer-term investments that can help you achieve objectives such as retirement income.

The first step is to record all your income and expenses for a month. You will soon learn how to analyze your spending habits and find ways to improve.

Under income, include your after-tax salary as well as any other sources of money such as investments. Under expenses, consider everything from your rent or mortgage payments to the coffee and muffin you buy on your way to work. Common categories of expenses include housing, utilities, communications, food, clothing, transportation, entertainment and insurance. To make sure your list is as complete as possible, carry around a notepad with you for one complete month and jot down every purchase.
Eventually you will see if your expenses are exceeding your income or vice versa. If they are then it’s time to cut back, if not you will know how much you can save each month for retirement, a holiday or that new fridge.

Once you know where you are spending your money it’s easy to prioritize and find ways to reduce your expenses. You would be surprised to know how much money you can save without changing your lifestyle. Sometimes just a quick call to your cell phone provider can get you a better plan for less money.

What you’ll discover is that small amounts add up quickly over time, so making minor changes that don’t have a big impact on your lifestyle can help you set aside significantly more money. Need some incentive to save? Write down your short-term and long-term goals and post the list in a place where you’ll see them all the time – for example, your fridge door. A daily reminder that you’re working towards a trip to Europe and a down payment on a new home will go a long way towards curbing the urge to splurge.

There is another way to create more from less by transferring some of your savings from your chequing account earning no interest to a high interest savings account. Even better open up a tax free savings account where the interest grows tax free.

A more sophisticated solution is an all-in-one account that combines your chequing, deposit and borrowing activities to reduce the interest you pay on your debt. An all-in-one account is designed for people who have a mortgage and perhaps other debts such as car loans and credit card balances. By consolidating this debt, you can lower the total amount of interest you’re paying each month, immediately increasing your budget surplus. Then add in your savings. An all-in-one account puts your money to work right away to reduce your debt – but you can still access it (up to your borrowing limit) whenever you want. Finally, you can deposit your income directly into your all-in-one account so it reduces your debt until you need the money to cover your monthly expenses.

There are ideas to reduce the amount of income tax you pay each year as well, especially if you are self-employed.
Talk to your accountant or advisor to analyze your budget and see if there are expenses that are tax deductible.
Your advisor can help you design a plan with a streamlined package of solutions that make your budget work more efficiently, boost your savings in the short and long term and improve your overall financial plan. If you dont have any Advisor, Contact us Discovery Insurance.

Tax Free Savings Accounts

Tax free savings accounts were first made available in 2009 and allow Canadians a way to invest money and have the growth grow tax free. Future withdrawals are also tax free. Unused contribution room can also be carried forward to future years, you need to be at least 18 years old and have a valid social insurance number.

Many people do not understand that a TFSA is not in itself an ‘account’, just like an RRSP is not in itself an investment. Both of these are ways to register an investment which can be many types including a daily savings account, GIC’s, mutual funds, or stocks, to name a few.

If you register an investment as a RRSP you can deduct the money you invest from your income that year but the money withdrawn is taxable.

If you register an investment as a TFSA you cannot deduct that contribution but the money withdrawn is tax free.

The primary purpose of a TFSA is to provide a tax-sheltered way to save money, which can be used for any medium or long-term purpose. For example, you may want to lay away funds for unexpected emergencies or save up for a large purchase.

In comparison RRSP’s are primarily intended to help Canadians save for retirement, but it’s important to understand that TFSAs and RRSPs can effectively complement each other in a comprehensive investment portfolio. In fact, you may benefit greatly from contributing the annual maximum to each in order to meet different savings goals.

Investment earnings within a TFSA and any withdrawals won’t affect other government programs such as GIS, old age security, or Canada child tax benefits, so it still may be advantageous to use this as a retirement program.

Many studies have been done as whether to register your investment as a TFSA or an RRSP, and the answer cannot be given until many questions are answered, such as your tax bracket today versus your expected tax bracket when you retire, as well as the type of investment you’re willing to hold. It’s best to talk to an advisor first to determine your unique situation.

Need more information?
You can visit the Government of Canada’s website at www.tfsa.gc.ca to learn more about TFSAs. To understand how TFSAs can benefit your unique situation and financial strategy, speak with an advisor.

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For a thorough evaluation of your insurance needs, please speak with our advisor.

Things to know about House and Home Insurance

This blog will cover some of the major issues that people face when taking out insurance in Victoria BC and how to avoid major pitfalls. If you are looking for an Insurance Broker in Victoria BC please contact us for a quote.

For those who aren't aware, House insurance in Victoria BC covers the owners private house for the financial costs against a range of eventualities (see below). As a policy, it combines a range of personal insurance protections, which generally include damage or loss to one's house, its contents, loss of its use (additional living expenses), or loss of other personal possessions of the house owner, as well as liability insurance for accidents that may happen at the house.

A major issue that people fail to take into account when taking out house insurance is to ensure that the policy covers the full cost of the rebuild, not just the market value. It is also worth taking into account that similar houses in different neighborhoods will differ in market value but actually cost the same in terms of rebuilding costs (this is obviously dependent on the housing market and should be addressed when taking out a home insurance  in Victoria BC). Henceforth it is highly advisable for anyone looking for Home insurance In Victoria BC to explicitly ensure that the terms of the policy cover the entire rebuilding cost and take into account the market value fluctuations.

The exact cost of house insurance usually is dependent on what it would cost to replace the house and what extra riders (extra items or properties to be insured) are attached to the policy.

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Are you financially ready for a major health event?

According to a major life insurance company’s survey, nearly half of Canadians facing a major health incident such as cancer or stroke are struggling financially as a result of their illness.
Many people realize that a serious health event could impact their personal finances, but only a handful actually set aside money for such an event.

Most feel that the health care system is going to look after them but a lot of the care you need at home and in recovery is not necessarily covered. Even though these are covered by company health plans, most people still have to pay a percentage of the cost themselves.

Thousands of people across the country are self-employed or employed with no benefit plan.
Disability insurance protects your income if you cannot work due to illness or accident. And critical illness insurance pays a lump sum if you are diagnosed with a serious illness covered in the policy. But even with this coverage, it may not be enough.

The cost of prescription drugs have gone through the roof. It is not uncommon to have a prescription drug cost of $80,000 a year or more, and many people are found to tap into retirement savings, borrow from loved ones or remortgage or sell their home to pay these costs.

Such choices add to peoples stress levels as they battle a major illness. But despite knowing this most Canadians feel good about their physical and emotional health which add to a false sense of security.
Life insurance has been designed to relieve some of this stress for pennies on the dollar, but it may be time to add health insurance as well.

Health insurance can protect you against the high cost of catastrophic drugs and the stress it causes.

SPEAK WITH YOUR ADVISOR

For a thorough evaluation of your insurance needs, please speak with our advisor.

Disability Insurance for Seniors in Victoria, BC

If you have had a long term disability insurance plan either through your work or you purchased a personal policy you’ll know that it probably expires at age 65. No problem, you’re retired now and don’t need it anyway. Your pension and or savings resources are calculated perfectly to allow you just the right amount of income to last out your golden years.

However what would happen if your plans are all of a sudden disrupted by serious illness and you could no longer take care of yourself. A health problem can happen any time and it could seriously change your retirement plans. In fact, according to a Sunlife Canada Health Index just over three in four Canadians say their personal finances would be impacted if they were to develop a chronic health condition and a 2013 report on the health of Canadians, Heart and Stroke Foundation says that the average Canadian will live a decade in sickness, disability and immobility in life.

A Munich Re report in 2011 says the average 65 year old couple has an 82% chance that at least one of them will need long term care in their retirement. I realize this is a lot of statistics to grasp however if you are concerned about the financial challenges that would come about if this were to happen to you it’s time to look at a disability policy for seniors called Long Term Care Insurance.
Like disability insurance the amount you pay for long term care insurance depends on a number of factors.

How much you want – Depending on the plan some pay out a monthly benefit, some pay per day, some pay a lump sum spread out over a period of time.

How long you wait – You can start your payments immediately in some cases or have a 30, 90, or 180 days. Of course the shorter the waiting the more expensive it is.

How long does it last – Some as I indicated pay a lump sum but in most cases your benefit per day or month has a benefit period you choose.

There are other factors as well, depending on whether you want home care or facility care, and some companies will pay the benefit to you regardless. As long as you qualify according to the definition in the contract as being ‘disabled’ you receive the benefits.

The one thing to keep in mind is the reason for having the long term care insurance in the first place is to allow you choices. There are many government facilities, but many have a long waiting list and still ‘cost’ depending on your personal worth. However, is this you want? When you know of someone that has been placed in a public institution more than 250 kilometres away from home, the motivation for this insurance is much greater.

Make a list of the ten most important activities in your life. Imagine that you are 65 years old. Cross off three. Imagine that you are 75 years old. Cross off three more. Imagine that you are 85 years old. Cross off another three. Now imagine your reaction. 

SPEAK WITH YOUR ADVISOR

For a thorough evaluation of your insurance needs, please speak with our advisor.

Term Life Insurance or Term Insurance

Term Insurance is a Life Insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant time.  Once the relevant time expires, coverage at the previous rate of premiums is no longer guaranteed and the client must either go without coverage or potentially obtain further coverage by different payment or conditions.  If the life insured dies during the term then the benefit will be paid to the beneficiary. 

Term Insurance is not generally used for estate planning needs or for charitable giving strategies, but it is used for pure income replacement needs for an individual. Because term life insurance is a pure death benefit, its primary use is to provide coverage of financial responsibilities for the insured or his or her beneficiaries. Such responsibilities may include, but are not limited to, consumer debt, dependent care, and university education for dependents, funeral costs, and mortgages. Term Insurance are categorized in two areas standard (also known as regular) and preferred which includes following factors.

• Age
• Gender
• Blood Pressure
• Build (height and weight)
•  Driving Habbits
• Medical/ Family History 

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The Need for Disability Insurance

When we think of our most valuable asset, I suppose our house comes to mind first, and then our vehicles. We would not go to sleep at night knowing our fire insurance was not paid for or drive on the road before insuring our brand new car.
But our most valuable asset is the very thing that pays for everything else – our ability to work. Yet too many people ignore the most important insurance we should own – long term disability insurance.

Consider that one in three people will be disabled for 90 days or longer at least once before age 65 and the average length of a disability that lasts over 90 days is 2.9 years.

Could you afford to take a holiday for three years without a pay check?
If you are one of the lucky ones that has disability insurance through your group plan at work you might be alright, but if not, or you are self-employed, it is time to think about insuring your most valued asset. And P.S., don’t rely on your ‘work safe’ insurance policy as your long term disability insurance plan; remember it only pays for accidents at work, leaving you uninsured for sickness and accident off the job. It’s like having fire insurance on your home that only pays if it burns down on a Sunday.

When considering long term disability insurance for yourself, there are several things to keep in mind and the price you pay will be dependent on several things. I will go through some of the most important aspects on purchasing disability insurance to help you familiarize yourself with the details.

First is-- how much do I need?
Consider all of your monthly expenses: mortgage, food, rent, utilities, loans, auto expenses, other insurance premiums, clothing, etc. You are allowed approximately 66% or your taxable income as a maximum benefit, but anything under that is your choice.

Second is-- how long does it pay?
You can purchase a plan that has a benefit period of two years, 5 years, 10 years, or to age 65. So the choice as to how long the money lasts is up to you.

Third is-- how long do I wait?
This means if you get sick tomorrow, how long do you wait before you receive your first cheque – 30 days, 60 days, 90 days or longer?

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