Identifying the 12 things that EVERYONE gets wrong about financial planning, Understanding insurance, Demystifying savings and investments, Wading through the banking and lending challenges, Effective tax and estate planning

1. CHRIS HYLTON
CG HYLTON INC.
Financial Planning
Workshop

2. Disclaimer
2
The information presented to you today is considered
to be general best practices for personal financial
planning. This is not intended to replace qualified
advice specific to your situation.

3. Learning objectives
 Identifying the 12 things that EVERYONE gets
wrong about financial planning
 Understanding insurance
 Demystifying savings and investments
 Wading through the banking and lending
challenges
 Effective tax and estate planning
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4. This is your show
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 Are there any questions that you have now that I can
blend in to today’s presentation please?
 1.
 2.
 3.
 4.
 5.
 If you think of anything as we go along please ask!

5. 5

6. 6
Twelve financial mistakes
EVERYONE makes

7. Critical financial planning mistakes
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 Living paycheck to paycheck
 Not working with family members to
understand current financial situation
 Failing to set financial goals
 Not involving children in discussions about
money and financial planning

8. Critical financial planning mistakes
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 Loaning money
 Lack of an emergency fund
 No plan to address income shortfall if
primary income earner is unable to work
 Lack of a spending limit

9. Critical financial planning mistakes
 Spending to keep up appearances
 Under utilizing employee benefits
 Financing major purchases with credit
 A lack of diversified investments

10. 10
Identifying the 12 most common
financial planning mistakes is the
key to overcoming them.
• Identify these
patterns in
your own
financial
planning
process
• Begin to create
systems or
habits to
eliminate these
12 common
mistakes

11. 11
Insurance

12. Needs analysis
12

13. Immediate cash needs Ongoing income
 Mortgage
 Loans and debt
 Emergency savings
 Children’s education
 Funeral expenses
 Final taxes
 Income required to
meet monthly
expenses
 Experts recommend using
60% - 70% of your current
annual income
 Number of years
family would need to
rely on this income
13
Needs analysis

14. Types of life insurance
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 Temporary (term) insurance
 Provides protection for a specified period of time and
pays out a benefit if you die
 Permanent insurance
 Provides a death benefit for your entire life and acts as an
investment vehicle with a portion of each premium
allocated into a cash value account that grows on a tax-
deferred basis

15. Pros Cons
 Affordable
 Easy to purchase
 Easy to understand
 Premiums do not
fluctuate during Term
 Benefit amount is
predetermined
 Premiums will be
more expensive if you
have to renew
 In some cases more
than double the cost
15
Term insurance

16. Pros Cons
 Contains an
investment
component
 Some of the
investment portion
accumulates tax free
 Can access the money
during your lifetime
 More expensive than
term life insurance
 More complicated
 Can yield huge tax
gains
16
Permanent insurance

17. Types of permanent life insurance
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 Whole life
 Offers a guaranteed death benefit, fixed annual premium,
and guaranteed rate of return on the cash value
 Universal life
 Similar to whole life but this option does not guarantee
the rate of return on the cash value

18. Mortgage protection insurance
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19. Pros Cons
 Can help alleviate
financial hardship
caused by critical
illness or death
 Premiums decrease as
mortgage balance
decreases
 May lose coverage if
you change mortgage
lenders
 Value declines over
time
 Policy exclusions may
affect eligibility to
claim this benefit
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Mortgage insurance

20. PROS CONS
 Simple and easy to sign
up
 You just tick one more
box on the application
 If you buy thru
mortgage lender you
may be paying too
much
 Shop from
independent insurance
broker
20
Mortgage Insurance

21. 21
Critical illness insurance offers
a lump sum payment to policy holders
that develop a critical illness.
Some critical
illness insurance
plans offer
additional
benefits including
• Access to
health care
experts,
• Counselling
services,
• Assistance with
activities of
daily living.

22. Pros Cons
 Flexibility to choose
how to use the benefit
 Debt
 Daily living expenses
 Home modifications
 Additional medication
or therapies not
otherwise covered
 Coverage for select
illnesses
 Strict diagnostic
criteria
 Accidental injury is
not covered
 Premiums can get
expensive
22
Critical illness insurance

23. Disability insurance
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 A typical 30 year old is 4 times more
likely to become disabled than die
before age 65.
 1 in 6 Canadians will become disabled
for three months or more before they
are 50 years old.

24. Types of disability insurance
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Short term
 Provides income
replacement benefits at
the beginning of a
medically confirmed
period of disability
 Calculated based on a %
of weekly earnings
 Benefits typically last 26
weeks
Long term
 Income replacement
benefits for a confirmed
disability that lasts
longer than 26 weeks
 Calculated based on a
percentage of regular
monthly earnings
 Can receive benefits for
up to 2 years or longer

25. Pros of disability insurance
25
 Guaranteed monthly income for as long as the
policy holder meets the definition of disability
 Covers disability caused by illness or injury
 Many disability insurance plans offer additional
support such as assistance with returning to work
 If you pay the premium, benefit if tax free!

26. Cons of disability insurance
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 Monthly benefit is only a portion of regular monthly
earnings
 There may be a waiting period during which no
benefits are payable
 Benefits may be reduced by other forms of income
such as CPP disability payments
 Policy may have a maximum benefit period
 Most policies automatically terminate coverage at
age 65, even if you planned to work beyond that age

27. Do you
need to
supplement
employer
benefits
with
additional
individual
insurance ?
Step 1: Confirm coverage
available from employer benefits.
Step 2: Compare coverage to
expenses included in your needs
analysis.
Step 3: If benefits do not
adequately cover expenses,
consider purchasing additional
insurance.
Important with respect to LTD!
27

28. 28
Savings and investments

29. Registered investments
29
 Registered with the federal government for tax
purposes
 Offer the opportunity for tax-deferred growth
 Often subject to annual contribution maximums
 Examples include
 RRSP
 Tax Free Savings Account

30. Non registered investments
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 Not required to be registered with the federal
government
 Contributions do not ease tax burden by lowering
annual taxable income
 Interest earned is taxable
 No annual contribution maximums

31. Registered Retirement Savings Plan
31
 Anyone under the age of 72 that earns income can
contribute to an RRSP
 RRSP contributions are tax deductible up to an
annual maximum amount
 RRSPs can contain a variety of different
investments
 Savings deposits
 Guaranteed investment certificates (GICs)
 Mutual funds
 Equities

32. Registered Retirement Savings Plan
32

33. RRSP and debt repayment
 Some people use RRSPs to repay outstanding debt
 In many cases, a financial penalty is applied to
withdrawals from an RRSP
 Withholding tax
 Income becomes taxable and must be reported to federal
government
 Contribution room is permanently forfeited once the
money is withdrawn

34. Registered
Education
Savings
Plans
(RESP)
provide the
opportunity
to save for
future
education
costs.
34

35. Registered Education Savings Plan
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 Contributions are not tax deductible by the
contributor does not pay tax on earned interest
 If the RESP is not used by the designated
beneficiary, the contributor can use the RESP
contributions without having to declare that
money as additional income
 Interest earned is taxable
 Lifetime contribution limit of $50,000

36. Registered Education Savings Plan
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 Government contributes, too!
 RESP contributions may be eligible for additional
government grants via the Canada Education Savings
Grant, Canada Learning Bond, or designated provincial
education savings program
 If the beneficiary does not pursue post secondary
education, the government contributions must be
repaid

37. Tax Free Savings Account
37
 Individuals 18 years and older can set aside money
that grows tax free
 Annual contribution maximum of $5500
 Can still realize contribution limits from past
years, even if you are just starting your TSFA now
 Contribution limits began accumulating in 2009

38. Risk tolerance
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Risk tolerance is the
amount of risk or degree of
uncertainty that you are
willing to take in order to
meet your financial goals.

39. Risk capacity
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Risk capacity is an
assessment of how much
risk you must take in order
to achieve your financial
goals.

40. High risk Low risk
 Potential for high rate
of return but no
guarantee
 Examples: hedge
funds, commodities,
futures, derivatives,
private company
investment
 Generally offer
guaranteed but low
rate of return
 Examples: savings
account, savings
bonds, GIC,
government treasury
bills
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High risk vs. low risk investments

41. Risk Return Ratio
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42. Ideal investment portfolio
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43. Attributes of an ideal investment portfolio
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Designed with goals and
risk tolerance in mind
Diversified
Easy to understand

44. Banking
and
Lending
44

45. Interest rates
 Two types of interest rates that can affect your
financial plans
 Interest on savings
 Interest on debt
 Interest rates on debt are usually more important
to people because it directly affects how quickly the
debt is paid and the actual cost of the debt
 Interest rates are typically negotiable

46. Cash flow
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Personal cash flow is a reflection of your money in
and your money out. Ideally, cash flow should
remain positive meaning you have more money
coming in than money going out.

47. Cash flow
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Inflow
 Salary
 Investment income
 Money from sale of
assets
Outflow
 Mortgage payments
 Debt repayment
 Utilities
 Daily expenses
 Entertainment

48. Calculate your personal cash flow
48
Cash inflow – cash outflow = net cash flow
Negative cash flow is a red flag that you may
be headed for financial hardship and should
be a prompt to have you assess your income
and spending to identify areas you can
increase inflow and decrease outflow.

49. Debt management
49

50. Types of debt
50
 Mortgage
 Car loan
 Credit card
 Line of credit
 Student loans
 Personal loans
 Overdue bill payments

51. Debt can be overwhelming
51
 When feeling overwhelmed by debt, many people
choose to ignore debt instead of addressing it
 Ignoring debt makes the situation worse by
causing
 Poor credit history
 Personal bankruptcy
 Dealing with collections agencies
 Over paying on interest

52. Debt repayment
 Low interest consolidation loans
 Transferring balances to low or no interest credit
cards or line of credit
 Most banks and companies are willing to negotiate
debt repayment options including
 Interest rates
 Waiving penalties and late fees
 Payment terms

53. Debt management programs
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 Professional organizations that assist with debt
management and repayment
 Credit counselling to help develop a realistic and
achievable debt repayment plan
 Support with creditor negotiations
 Monthly budgeting support
 Tools to help track and manage spending
 Assistance setting financial goals

54. 54
Tax and Estate Planning

55. Wills
55
 This legally binding document ensures that your
estate is allocated to family, friends, and charities
as per your wishes and protects some of your
assets from taxation
 When drafted properly, a will can allow you to
transfer RRSP and RRIF accounts tax-free to a
spouse as well as to a child or grandchild who is
under 18 years of age

56. Testamentary Spouse Trust
56
 Allows for the transfer of assets to a surviving
spouse on a tax-deferred basis
 When the spouse passes away, remaining assets
are distributed to beneficiaries named in the
original will
 This type of trust remains unaffected by new
marriages or family quarrels

57. Allocating resources to family
57
 If your spouse is the sole beneficiary of your
healthy RRSP, you can consider making other
family members the beneficiary of life
insurance policies or other accounts
 Money from different sources may be subject to
different tax rules and an account can help you
allocate resources so that your family members,
and not the CRA, are the sole beneficiaries

58. Sharing property
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 Property that has joint ownership will automatically
transfer to the surviving owner upon your death
 Depending on your individual situation, it may make
the most financial sense for you to enter into a joint
ownership agreement with a spouse, family member,
or even a business partner

59. 59
Charitable giving
In the year of
your death or
the preceding
year, you can
claim up to
100% of your
net income as a
charitable
donation to
help ease any
outstanding tax
liability facing
your estate.

60. 60
Questions?

61. THANK YOU!
61
Thank you for the opportunity to
present to you today!

62. About us
62
Our services
 Employer benefit plans
 Travel insurance
 Health spending
accounts
 Salary grids
 Policy review and writing
 Pension plans
 Employee wellness
 Employer of choice
 Charitable giving
 Charitable tax
information
 Employee mental health

63. Contact us
63
#517-7620 Elbow Drive SW
Calgary, AB T2V 1K2
403-264-5288 www.hylton.ca
800-449-5866 chris@hylton.ca

64. Let’s get social!
64
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