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Financial Planning 101
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Financial Planning 101


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  • 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 DebtType of Debt Tax Deductible Asset Appreciation Good or Bad?Credit Card X X BadCar Loan X X BadMortgage/RRSP X GoodLoan
  • 4. Credit Card DebtPay off 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 Budget1. Determine your monthly net income2. 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 savings4. Stick to your budget
  • 6. Establish Your Future Short, Medium, And Long-Term Goals! Buying a house Having a family/more children Travel Buying a car
  • 7. Financial Strategies To Help You Reach Your GoalsRetirement savingsThe best way to save moreThe benefits of starting earlyTax-Free Savings Account
  • 8. There Are Three Sources of Retirement Income1. Government Benefits2. Employer Programs3. Personal Assets
  • 9. Government Retirement Benefits Canada Pension Plan (CPP) Old Age Security (OAS) 2010 Maximum payouts OAS onlyOAS/GIS $8,429.64CPP/QPP 11,210.04 19,639.68Low-income cut-off Single: $19,000 - $22,000 (2008) Couple: $23,600 - $27,600 (Source: Statistics Canada 75F002M)
  • 10. Saving optionsWhat are the options for filling the savings gap?• Savings account• Investments in Tax-Free Savings Accounts or Open Accounts• Investments in RRSPs
  • 11. RRSP Investing Benefits YouYou 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 way to 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 mind12
  • 13. Maximize Your EffortsInvestment Strategies•Start investing now – start a Pre-Authorized Chequing Plan (PAC)•Diversify•Benefit from a spousal RRSP•Consider borrowing to contribute
  • 14. The Benefits Of Starting 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 of compounding $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-deductible contributions - $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-registeredDeductiblecontributions?Tax-exemptincome/withdrawals?Re-contribution ofwithdrawals?No maximum age forcontributions?No impact ongovernment 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 Savings Plan!•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 the beneficiary 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 Illness Insurance  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 capital in 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 of Life Insurance are there?•Term  T10  T20  T100•Permanent  Universal Life  Whole Life
  • 24. Term Life InsuranceLow upfront 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Stable lifelong 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More Flexible 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 critical illness 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 You Know?• 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 one thing•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 Cancerevery week•In the last 30 years, the cancer survival rate has nearlydoubled Source: Manulife Marketing Database & Taddingstone Group
  • 33. CI realities summarized1. These things happen a lot2. The good news is people aren’t dying nearly as much, but their lives are still hugely impacted3. And unfortunately, it’s often the healthiest person you know
  • 34. Why do I need 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 always about 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 my solution look like?•Term or Permanent•Return of Premium•Definitions
  • 37. Plan Ahead• Seek professional 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 & CommentsDraw for Baby R Us Gift Cards