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Financial Planning 101
- 1. FINANCIAL SEMINAR Brett Cranson, Insurance & Investment Broker
- 2. Agenda Introduction Reduce Your Debt& Budget Planning Financial Strategies To Help You Reach Your Goals Protection You Can Count On
- 3. Good Debt vs.Bad Debt • Element of Good Debt: 1. Underlying Assets Expected to Appreciate in Value • Reconsider Canadian Debt Type of Debt Tax Deductible Asset Appreciation Good or Bad? Credit Card X X Bad Car Loan X X Bad Mortgage/RRSP X Good Loan
- 4. Credit Card Debt Payoff high interest credit cards first Look for lower interest rate credit cards Pay more than the minimum payment Transfer credit card balances
- 5. Create A Budget 1.Determine your monthly net income 2. List your expenses Fixed expenses (rent/mortgage payment, loans, car payment, credit card debt,etc.) Variable expenses (Food, entertainment, etc.) 3. Set money aside for savings 4. Stick to your budget
- 6. Establish Your FutureShort, Medium, And Long-Term Goals! Buying a house Having a family/more children Travel Buying a car
- 7. Financial Strategies ToHelp You Reach Your Goals Retirement savings The best way to save more The benefits of starting early Tax-Free Savings Account
- 8. There Are ThreeSources of Retirement Income 1. Government Benefits 2. Employer Programs 3. Personal Assets
- 9. Government Retirement Benefits Canada Pension Plan (CPP) Old Age Security (OAS) 2010 Maximum payouts OAS only OAS/GIS $8,429.64 CPP/QPP 11,210.04 19,639.68 Low-income cut-off Single: $19,000 - $22,000 (2008) Couple: $23,600 - $27,600 (Source: Statistics Canada 75F002M)
- 10. Saving options What arethe options for filling the savings gap? • Savings account • Investments in Tax-Free Savings Accounts or Open Accounts • Investments in RRSPs
- 11. RRSP Investing BenefitsYou You get: •Tax benefits – contributions are tax deductible •Compounding – investments compound tax- free as long as they are in the plan •Selection – a wide range of investment choices
- 12. The best wayto save MORE Save automatically through a pre-authorized chequing plan (PAC) Take money from your paycheque before you see it Out of sight, out of mind 12
- 13. Maximize Your Efforts InvestmentStrategies •Start investing now – start a Pre-Authorized Chequing Plan (PAC) •Diversify •Benefit from a spousal RRSP •Consider borrowing to contribute
- 14. The Benefits OfStarting Early Jennifer $930,511 Age: 30 Invests $5,000 / year @ 8% for 35 years Lucy $247,115 Age: 45 Invests $5,000 / year @ 8% for 20 years
- 15. The power ofcompounding $100,000 Amount contributed $91,484 Investment value $80,000 $60,000 $57,266 $40,000 $33,978 $30,000 $24,000 $20,000 $18,128 $18,000 $12,000 $6,000 $7,341 $0 5 years 10 years 15 years 20 years 25 years This hypothetical example is based on monthly $100 contributions and assumes an average annual return of 8%. 15
- 16. Tax-Free Savings Account! •Non-deductiblecontributions - $5,000 per year •Investment income AND withdrawals tax-free •Withdrawals allowed at any time for any purpose •Unused contribution room accumulates AND withdrawals create new contribution room
- 17. Advantage TFSA??? TFSA RRSP Non-registered Deductible contributions? Tax-exempt income/withdrawals? Re-contribution of withdrawals? No maximum age for contributions? No impact on government benefits? Advantage? 4 1 2
- 18. TFSA Growth -$5,000 Per Year Over 20 Years $173,596 *Assumes 5% rate of return
- 19. Registered Education SavingsPlan! •The best way to save for your children’s education •Money that you contribute to the plan gets to grow tax-deferred •Contribute any amount up to a lifetime maximum of $50,000 •To help you save for your children’s education, the government offers a grant of 20% on the first $2,500 contributed
- 20. What if thebeneficiary doesn’t pursue post-secondary education? •Wait a while. Accounts can remain open for 36 years •Choose a new beneficiary •Roll over to RRSP •Withdraw contributions
- 21. •Life Insurance •Critical IllnessInsurance How does it fit into my financial plan? Why do I need it? What should I look for when I look at this type of coverage?
- 22. Life Insurance •Provides capitalin an estate to cover taxes, expenses, etc. payable on death •Can provide for children •Low cost when compared to other alternatives •Creditor protection may be available •Tax-free accumulation of cash values •Access to cash value through policy loans, withdrawals, collateral loans
- 23. What types ofLife Insurance are there? •Term T10 T20 T100 •Permanent Universal Life Whole Life
- 24. Term Life Insurance Lowupfront cost Temporary protection for time of high risk Coverage will end at a certain age Cost may increase each 10 or 20 years
- 25. Whole Life Insurance Stablelifelong protection Over long term generally a better financial choice than Term Life Insurance Premiums do not change Guaranteed lifetime protection Accumulates cash value
- 26. Universal Life Insurance MoreFlexible type of Insurance Combines long term insurance with an opportunity for tax-deferred savings Guaranteed lifetime protection Policy features many options to tailor it to your needs
- 27. Life Insurance -What to look for in a contract •Healthstyles underwriting Rewards the healthy •Conversion privledges Gives the ability to purchase something affordable (term) and move to a permanent product with no underwriting
- 28. Beyond healthiness –why buy young • $500,000 of T10 coverage male/female – average health (monthly); 25 - $25 / $19 30 - $30 / $21 40 - $37 / $30 50 - $82 / $57 60 – $226 / $159
- 29. What is criticalillness insurance? • One-time lump sum if diagnosed and survive a covered condition • Monthly benefit if Long Term Care benefit is included • Flexible use of benefits • Payment based on diagnosis, not functional ability or loss of income
- 30. Who Do YouKnow? • Life-Threatening Cancer • Heart Attack • Stroke • Alzheimer’s Disease • Loss of Speech • Aortic Surgery • Major Organ Transplant • Benign Brain Tumor • Motor Neuron Disease • Blindness • Multiple Sclerosis • Coma • Occupational HIV • Coronary Artery Bypass • Parkinson’s Disease • Deafness • Paralysis • Heart Valve Replacement • Severe Burns • Kidney Failure • Loss of Limbs
- 31. Incidence… Male Female Risk to age 65 Risk to Risk to Risk to age 75 age 65 age 75 30 27.2% 55.3% 21.5% 42.7% 40 25.4% 54.2% 19.9% 41.5% 50 20.6% 51.4% 15.5% 38.4% 55 16.6% 49.0% 12.0% 35.8% Source: Munich Re.
- 32. Survival is onething •9/10 heart attack victims survive 30 days •75% of stroke victims survive the initial event •On average 3,340 Canadians will be diagnosed with Cancer every week •In the last 30 years, the cancer survival rate has nearly doubled Source: Manulife Marketing Database & Taddingstone Group
- 33. CI realities summarized 1.These things happen a lot 2. The good news is people aren’t dying nearly as much, but their lives are still hugely impacted 3. And unfortunately, it’s often the healthiest person you know
- 34. Why do Ineed this insurance? • Accessing of alternate •Taking stock / catching care your breath • Lessening family impact •Costs to retrofit a home or • Mortgage pre-payment vehicle • Comforts during •Fund career or schedule treatment change • “Yes” pot of funds •Debt reduction • Accessing medications •Early retirement • Accessing non-traditional •Pebble Beach / Paris treatments
- 35. It’s not alwaysabout treatment •Hotel beside the hospital •Cafeteria or eat out during treatment •Hire a nanny (even though you never had one) •Flat screen for home, visits from buddies •Book trip for post-recovery – Pebble Beach / Paris
- 36. What does mysolution look like? •Term or Permanent •Return of Premium •Definitions
- 37. Plan Ahead • Seekprofessional advice • Set your objectives and goals • Put together a plan • Stay focused on your long-term investment plan • Today’s market presents many opportunities
- 38. Taking charge… The biggest risk you can take is to do nothing at ALL!
- 39. THANK YOU! Questions & Comments Draw for Baby R Us Gift Cards