Calling All Millennial Women: Your Finances Need You

Calling All MillennialsIn our last blog we discussed the results from the USB survey indicating the deferral of financial planning by women to their partners. If you recall, the highest demographic for this was millennial women. Millennials are famous for being an easy target for mockery but perhaps it’s time for the prior generations to help them pull up their bootstraps when it comes to financial planning.

Millennials are the fastest growing group in the workforce and are dealing with the challenges of graduating during a recession and the continued wage gap. Combine these factors with the likelihood of taking time away to have children and a longer lifespan, it’s more important than ever to master finances and long-term planning.

Another layer of complexity is that most millennials are raised by parents who live with high debt-ratios. Baby-boomers were raised with a fear of owing money and made a concentrated effort to avoid it and to pay it back as quickly as possible. The next generations were handed credit like candy and indulged. Learning by example may not be the best course of action, so we’ve compiled some advice for the up-and-coming.

  1. Spend Carefully. Along the same lines as “think before you speak”, think before you buy. Evaluate what long-term benefit that item is going to bring to you. When it comes to the nickel and dime type expenses such as your daily dose of fancy coffee, invest in a fancy espresso machine at home.
  2. Build an Escape Plan. Life often throws challenges our way and true power comes from being able to choose your own path. Having some cash squirrelled away allows you to make the choices which are right for you and prevent you from returning back to what was keeping you in debt.
    1. Set up an automatic deposit from your paycheck to an account which you are not able to easily access. That way you never had the money, so you can’t miss it.
    2. Funnel your wins. Instead of “treating” yourself with your birthday gifts, tax return or bonus, treat your future self by putting it into your savings account.
    3. Manage Your Debt. You’ve grown up in an era of credit and debts from student loans to car loans to credit cards. Make a list of all you owe and the corresponding interest rates. This will enable you to prioritize which debts you want to pay off the quickest. High-interest debts should be the first target to stop the cycle of handing your money to an institution.
    4. Save for Your Future. It’s hard to look that far forward when you’re in your 20’s, but imagine the freedom of being able to live your life your way when you’re older. With a few sacrifices, you can save now and play later.

The millennial generation espouses the importance of equality, empowerment and independence. As a millennial, it is your responsibility to implement changes in your life which align with your values. If you want to be in control of your destiny, you need to control your money. Money brings freedom and freedom brings independence. If you’d like some help taking your first steps towards your financial future, we’d love to meet with you.

Empowerment and Equality and Your Finances

Financial SuperheroThe slogan “girl power” has been used for decades to encourage and celebrate female empowerment, independence, and confidence. The term used most often relates to sports and employment; however, new studies are showing that women need to exert their girl power when it comes to finances and financial planning.

A recent study released by UBS shows that 58% of women worldwide defer long-term financial decisions to their spouses. This study included nearly 3,700 high-net-worth married women, widows and divorcees in nine countries. The results of the study showed that 85% of women were responsible for the day-to-day finances; just not the long-term. Continue reading

Your Heart Can Affect Your Income

Protect Your HeartAn article recently published by Sheryl Ubelacker, The Canadian Press, provides insight into the result of a study in the Canadian Medical Association Journal on the effects of heart and stroke episodes and its impact on income. Some of the statistics are quite staggering.

The study shows one-third of heart attacks, a quarter of strokes and 40 per cent of cardiac arrests occur in working people under 65. These medical issues are occurring during prime income earning years and are leaving some with physical or cognitive disabilities. In comparing two years of earnings prior to the health event and three years afterwards with their unaffected equals, it became evident those who were affected by cardiovascular events were less likely to be working and therefore less likely earning. The reductions ranged from 8 to 31 percent in lost earnings.

Those who suffered a stroke, suffered the most significant loss of income at 31 percent, representing a third of their income. As strokes affect brain cells, the likelihood of physical limitations is increased compared to a heart related event. While labourers immediately come to mind as those most likely unable to continue in their role, the limitation of using your hand and arm can prevent one from being able to operate a computer.

In conjunction with the person’s own inability to continue earning, members of their family may also be affected. If the family consists of younger children, the spouse who is now the main bread-winner may be required to spend more time with the family and less at work thereby further affecting their income. Should it be a parent whom is affected, the adult children may be required to take time away from work to attend to their medical care or appointments.

The positive outcome to this study is the attention it will bring to those who require additional resources to manage the after-effects of the medical event, which is long overdue. With government bodies, change takes time – which you and your loved ones may not have. However, there are options for helping yourself.

Critical Illness Insurance pays a lump sum benefit if you are diagnosed with a dreaded disease such as Multiple Sclerosis, Alzheimer’s, Cancer or Parkinson’s Disease. Other conditions covered may include coma, stroke, heart attack, and kidney failure. Benefits are paid for the first occurrence and may be used to pay medical expenses, modify your home or even take a vacation. In May, we shared a real-life story of the benefits of this insurance in the blog Money Can’t Buy You Love. By purchasing Critical Illness Insurance, this family was able to spend the last bit of time they had with their loved one without affecting their financial situation. When a situation such as this arises, that is all we can ever ask for.

Planning for tomorrow is a key aspect to financial planning, so is planning for the unknown and unexpected. Medical circumstances are never convenient and rarely scheduled. If you’d like to prepare yourself, we’d like to help.

I Can Make Money by Saving Money?

I CAN MAKE MONEY BY SAVING MONEY_It seems like a polar opposite philosophy: “Spend Money to Make Money”, but it’s true. Gone are the days of 8 – 10% deposit interest. Now you’re lucky if you make pennies on a thousand dollars, especially with the penny now obsolete.

If you have cash in the bank, there are options for investing beyond RRSPs and GICs. In 2009, the TFSA or Tax-Free Savings Account was introduced. The initial contribution limit was $5000 per annum, growing to $5,500 for a number of years. The inflationary increase in 2018 was high enough to push the maximum annual contribution to $6000. An added feature of the TFSA is that the annual contribution room accumulates so $63,500 can now be contributed overall.

There are a number of reasons why a TFSA may be the right choice for you. The first is the fact they truly are tax-free. Any income or gains from the accumulated funds are tax-free for life. Funds can also be withdrawn without penalty or taxes at any time. Because of this status, TFSA withdrawals do not negatively affect any other benefits available to you such as Old Age Security (OAS). If the account is set up correctly, in the tragic event of a loss of the primary account holder, the successor annuitant would receive the full value of the TFSA without going through the estate.

Age is not a factor. Other options such as RRSPs require the contributor to be under a certain age and be earning income. Anyone over the age of 18 can contribute to a TFSA. They are a popular choice for those in their Golden Years because they allow for continued tax-sheltering of money even after age 71. There are no forced withdrawals or tax consequences when amounts are withdrawn.

The flexibility offered with the TFSA allows for withdrawals to be recontributed in the following year without reducing the contribution amount. Meaning, if you withdrew $1000 in 2018 you are able to contribute the $6000 for 2019 and top it up with the $1000 withdrawn the prior year.

If you are an investor with money, maximizing your RRSP and TFSA would make the most sense. For those who don’t have a lot of money to spare but want to save for an event in their life such as a home or car, a TFSA offers a great way to protect, invest and grow your funds.

There are many options available when it comes to savings and long-term planning and the information available may become overwhelming. This is why working with a Certified Financial Planner (CFP) and having the RIGHT plan in place can make all the difference.

The Time to Invest in Your Future is Now. Not Next Year.

RRSP AdviceAs 2018 becomes a shadow of the past and 2019 shines its opportunity upon us, it brings us closer to “that time of year”. Tax time. If you’ve ever seen The Lion King, saying tax time is like whispering Mufasa and watching the Hyena’s shiver. Now is the time where talk turns to deductions and retirement investments before the February cut-off for contributions.

Now the shadow of 2018 is rearing its ugly head as it’s there to remind you that you had all year. You’re not alone. Millions of Canadians wait until Spring to start thinking about their RRSPs, and with a heavy heart they sigh and think “I’ll do better next year”. However, next year is already this year and it’s unlikely any signification changes have been made. Life has gotten back to normal after the holidays and lives have become a whirlwind of school, work, sports, family and just trying to manage life. Soon it will be summer and Manitoba will do it’s typical slow down where cottages become priority. Then school starts again and before you know it, it’s already the holiday season again. After which, you’ll sigh and say “I’ll do better next year”. Continue reading