Recent
events in Alberta have pointed out how essential it is to have an emergency
plan to deal with unforeseen
circumstances. The meltdown in oil
prices has put 44,000 Albertans out of work in the last year, and the fires at
Fort McMurray has devastated thousands of families, many whom may never
recover. The social safety net of EI
helps a few, but for many the EI is running out and they are having to resort
to using retirement savings and credit card debt to survive.
Having a
plan that protects against the unpredictable is essential, it is just good risk
management. Here are six simple steps
that can help build a strong safety net, that allows for independence in tough
times and good.
1. Reduce credit card debt, car loans and unsecured lines of credit - These kinds of high interest
debts are costly and strain the family budget.
Get some help, find an advisor who can assist with reorganizing and
reducing the interest payments. There are ways to do this that can be crafted
to meet just about everyone’s needs.
Taking control of debt and reducing the interest payments relieves
stress on the family and the budget. It
would be easy to suggest to just get rid of the credit card but that can be difficult,
however with proper planning and wise
use of credit it is possible to pay off the credit card every month and
not have the high interest payments.
2. Use the savings made in step one to begin building a safety net -
One excellent way to do this is to set up a Tax Free Savings Account and begin making monthly automatic
deposits. The investment can be a investment
fund or other investment vehicle that has higher potential earnings than a
savings account and the added advantage of being a bit harder to get at than a
savings account. Resistance to
temptation to spend is essential.
3. Review all employee benefits, especially disability benefits -
A sudden illness or injury can cause havoc if there is not adequate
insurance to replace at least seventy five percent of monthly income. Often group plans cover long term disability
and leave the short term disability to Employment Insurance which is about
$450.00 per week maximum for 17 weeks.
If $1,800 a month is not adequate to meet your needs consider purchasing
additional individual coverage. You may not see the value today but if you are
ever disabled it will pay you back tenfold.
It doesn’t have to be expensive often an accident only plan with a
critical illness rider is enough. Know what you are covered for before you need
it.
4. Consider purchasing Critical Illness insurance - This coverage will pay a lump sum
30 days after a diagnosis of a critical illness such as heart attack, stroke,
cancer or open heart surgery. A number
of other illnesses covered, but the big four are the key’s . The lump sum payment in the event of a claim,
helps with the costs not covered by other plans such as travel or making the
mortgage payment.
5. Life insurance - No one wants to talk about dying too soon however it is a risk and
needs to be addressed if there are loved ones who will be left behind. Buying life insurance is not quite the hassle
it used to be several companies now have electronic applications with
guaranteed issue up to $500,000 and the premiums are affordable less than 20.00
a month for $500,000 of coverage for a male non smoker age 25. Protecting the family has never been easier.
6. Think long term - Reducing debt takes time,
building a nest egg also takes time. Having an emergency plan only makes sense,
you may never use it but if you do you will be very glad you did the
preparation in the first place.
It is your right to live your life by design
not default. You can take charge and
with the help of a qualified financial counsellor you can achieve your
objectives. Life does not have to be a
rat race nor do you have to live in a
rut. Make the decision today to take the
first step call a reputable financial councillor and get started today. The
rest will be easy.
At Guidance
Planning Strategies we believe offering sound financial planning ideas is our
obligation, the first consultation is free, we will provide a written summary
with recommendations at no charge or obligation. Call us today to set up an appointment, you owe
it to the rest of your life to make sound decisions today.
Colin J.
Campbell CFP, CLU, is managing partner of Guidance Planning Strategies Ltd. in
Cranbrook BC. Guidance Planning
Strategies Ltd. is an wealth management
firm serving the Kootenay’s since 1995.
Specializing in helping families and entrepreneurs live life by design
not default.
colin.campbell@gpsbc.ca
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