Financial Security, What is it?

Financial Security, What is it?

Financial security refers to the peace of mind you feel when you aren’t worried about your income being enough to cover your expenses. It also means that you have enough money saved to cover emergencies and your future financial goals. When you are financially secure, your stress levels goes down, leaving you free to focus on other issues.

Budgeting for Success

Feeling financially secure requires knowing what your assets and liabilities are, as well as how your income compares to your expenses. If you aren’t tracking these, you might not know you’re struggling, but that’s like an ostrich sticking its head in the sand and hoping for the best. For true financial security, create a budget that addresses both your current needs, like food, clothing and shelter, and your long-term goals, like paying down debt and saving. You should also include insurance to cover the what-ifs in life.

Prioritizing Long-Term Goals

Pay yourself first, when it comes to making your budget. No, that doesn’t mean take the first fruits of your paycheck and go out to eat. Instead, it means make sure you’re setting aside money for long-range goals, like an education fund for your kids, a down payment for a future home or a retirement account for your golden years. If you’re struggling to find enough remaining money to pay down debt, look for discretionary expenses that you can cut.

Building an Emergency Fund

Whether you call it an emergency account, your safe money or a rainy day fund, setting aside several months worth of living expenses is critical for your financial security. That way, when something unexpected like a job loss, refrigerator breaking down, or a child having to go to the hospital pops up, you have the funds to deal with it rather than having to go into debt, especially high interest debt like a payday loan or a balance on your credit card.

Tracking Long-Term Goals

You can’t just set it and forget it when it comes to your budget. Instead, your budget requires maintenance and fine tuning over time to make sure you’re adhering to your goals. For example, if you haven’t been tracking your spending in the past, you might think you’re only spending $100 a month eating out, but could be spending two or three times that amount if you’re not tracking it. If you need help staying on top of your money, contact us at info@henleyfinancial.ca for your free budgeting template. Let us help you achieve your financial goals.

Get started on your Estate Planning

Get started on your Estate Planning

 

By Henley Financial and Wealth Management

As we journey through the various stages of life, we spend considerable time building relationships and accumulating assets. Passing on a legacy to family and friends and avoiding unnecessary taxes and administrative delays takes good planning. Your estate plan is as individual as you are, and taking the time to complete your arrangements now will give you control over how you provide for those closest to you.

We would like to send you a free booklet on Estate Planning including a step by step checklist.  Please contact us at info@henleyfinancial.ca for your copy.

Estate planning

Estate planning is about life – in the present and in the future. Most importantly, estate planning is about the life of your family and loved ones – and the peace of mind you get from helping to preserve their financial security. By its very nature, estate planning is a difficult subject to discuss – even more so to plan for because it forces us to come to terms with our own mortality. Yet it’s something you need to talk about openly with your loved ones today because you can’t do so after you’re gone – or after they’re gone.

Each person will approach estate planning differently, with personal motivations and expectations. No estate plan will be exactly like another. Estate planning should be reflection of your personal priorities and choices.

Estate planning is generally guided by three rational motivations

  1. Provide adequately for family members and/or other loved ones
  2. Ensure that your estate is distributed in the timeliest manner possible after your death
  3. Minimize taxes – during your lifetime and, equally important, for the beneficiaries of your estate

…and three emotional motivations

  1. Gain comfort from knowing your loved ones are well looked after
  2. Feel secure knowing that settling your affairs will not add more stress to those grieving for you
  3. Rest assured that your estate will be distributed the way you wish

Why you need an estate plan and the Benefits of estate planning

  • Distributes your assets as you intended; provides funds to cover funeral expenses, as well as immediate and/or long-term family living costs
  • Keeps more of your money in the hands of your heirs
  • Minimizes income tax and probate fees (no probate fees in Quebec); designates charitable gifts; declares your personal care preferences, including terminal medical treatment and organ donation intentions
  • Provides for the tax advantages of income splitting
  • Ensures business continuity for business owners
  • Identifies the people chosen to carry out your last wishes and care for your children

Taking action now 

Too often, advisors and estate planning professionals hear, “I wish I’d known about this sooner” from distressed family members. Whatever your status – male, female, married, widowed, divorced, single, young, old, middle class or wealthy – everyone can benefit from estate planning. Unfortunately, too few people follow this advice. Planning your estate and communicating your wishes as appropriate can protect your estate and, as importantly, allow your heirs the opportunity to prepare themselves for their changed circumstances. The “do nothing” option is not in the best interests of your family, your business or other relationships. As the world we live in becomes increasingly characterized by legal action and government intervention, estate planning is something everyone should do.

Creating your estate plan – step by step 

Step 1: Consult and retain appropriate professionals. The complexity of your situation will determine the assistance you will require from professionals to create your estate plan. Your team should include an advisor, lawyer and tax planner

Step 2: Draw up a household balance sheet. A household balance sheet is a summary of your financial situation that ultimately determines your overall net worth. Your net worth is the value of your assets (what you own) minus your liabilities (what you owe). If you don’t already have one, work with your advisor to develop your household balance sheet.

Step 3: Understand your life insurance needs. It’s important to work with your advisor or insurance expert to match your long-term financial objectives with your insurance needs.

Step 4: Draw up your Will.

Contact us at Henley Financial and Wealth Management  if you would like us to provide you with a Will Kit.

Step 5: Establish power of attorney for property. At some point in the future you may be unable to make your own financial or personal care decisions. But you can prearrange for someone to make these decisions according to your wishes by having a lawyer draft a separate power of attorney for property and personal care.

Step 6: Establish power of personal care. Medical and lifestyle decisions must often be made quickly when someone is seriously ill; hence, one or more family members are often granted this power of attorney to make decisions for you.

Step 7: Minimize taxes and administration fees. Your estate may encounter certain obligations for income tax and probate taxes on your death, which may reduce the proceeds intended for the beneficiaries of your estate. If any part of your estate must go through probate to validate the Will before transferring ownership of assets, the entire estate value may be subject to probate taxes.

Step 8: Keep track of accounts and important information. One of the most difficult roles for an executor and family members is gathering the information required to settle the estate. Eliminate this concern by centralizing all household information from birth certificates, passports and other legal documents, to bank accounts and insurance policy numbers, to phone company and hydro account details. Once you have documented your important information, store a copy in a safe place and let someone close to you know where it is.

Step 9: Let someone know.  After you have gone through all the steps of developing an estate plan, the final piece of the puzzle is communication. It’s really important to communicate your plans to a family member or close friend whom you can trust, and who is capable of working with your advisor to execute your estate plan. There’s nothing more disturbing than for someone to have to deal with incomplete information or requests. As such, not only is it important to share your plans with someone, but it can also be very helpful to document your plans to help eliminate any potential misunderstandings. As difficult as it may be, making sure that those affected by your plans know what is expected of them and where critical information is kept is essential to the smooth execution of your estate plan.

Step 10: Review and update regularly. Review and, if necessary, update all information at least once a year. By updating your estate plan, you’ll get a snap shot of where you are on an annual basis.

 

 

 

 

 

 

 

 

 

What is Wealth Management?

What is Wealth Management?

Wealth management can be more than just investment advice, as it can encompass all parts of a person’s financial life. The idea is that rather than trying to integrate pieces of advice and various products from different managers the client benefits from a holistic approach in which a single manager coordinates all the services needed to manage their money and plan for their own or their family’s current and future financial needs.

The concept of a wealth manager is based on the theory that he or she can provide services in any aspect of the financial field, while many mangers choose to specialize in particular areas. This would be based on the expertise of the wealth manager in question, or the primary focus of the business within which the wealth manager operates.

A wealth management advisor will coordinate input from outside financial experts such as the client’s own lawyers and, accountants, to create the best strategy to benefit the client. Some wealth managers also provide banking services or advice on philanthropic activities.

So, in short wealth management is an investment advisory service that combines other financial services to address the needs of a person’s financial life. Clients benefit from a holistic approach in which a single manager coordinates all the services needed to manage their money and plan for their own or their family’s current and future needs. This service is usually appropriate for individuals with an array of diverse needs.

Wealth managers may work as part of a small-scale business or as part of a larger firm, one generally associated with the finance industry. Depending on the business, wealth managers may function under different titles, like financial adviser. A client may receive services from a single designated wealth manager or may have access to members of a specified wealth management team.

The wealth manager starts by developing a plan that will maintain and increase a client’s wealth based on that individual’s financial situation, goals and comfort level of risk. After the plan is developed, the manager meets regularly with clients to update goals, review and rebalance the financial portfolio, and investigate whether additional services are needed, with the ultimate goal being to remain in the client’s service throughout their lifetime.

This brings us to financial security planning within Wealth Management

A sound financial security plan should protect you against uncontrollable events such as disabilities or death, while helping you plan for controllable events such as buying a new home and retiring comfortably. To do this, Henley Financial & Wealth Management planning process is based on four areas of financial security planning:

  • Financial security at death
  • Retirement
  • Liquidity
  • Disability and critical illness

Financial security at death

 All financial security plans start here because death is inevitable and an uncontrollable event. As part of the financial security planning process, we’ll discuss:

  • How much income will your family need if you die?
  • How will inflation affect this income?
  • How to preserve your estate for your family when you die

Retirement

 When we discuss retirement planning, we consider:

  • What kind of lifestyle do you see for yourself in retirement?
  • How much money will you need to retire comfortably?
  • What impact will inflation have on your income?
  • Would you like to have the freedom to slow down or retire early?

Time and planning are two factors that influence whether or not you accomplish your retirement goals. Therefore, you must work towards your retirement goals over time.

Liquidity

Liquidity is your ability to access cash or assets that are easily convertible to cash. Liquidity can be a short-term savings option that can regenerate over time and need your constant hard work.

Disability and critical illness

Mitigating your risk against uncontrollable events such as disability or critical illness is key to your financial security. When building your financial security plan, we’ll consider:

  • Will your income be reduced in the event of disability or critical illness?
  • If your income is reduced, will it be difficult for you to maintain your lifestyle and retirement savings?
  • How much disability or critical illness insurance coverage is enough?
  • What impact will inflation have on your income if you’re unable to work for a long time?
  • Do you know if your group benefits provide a provision to allow you to continue your retirement savings if you become disabled or suffer a critical condition or illness?

 

 

Screen Shot 2020-04-23 at 10.51.30 AM

What types of insurance are available?

What types of insurance are available?

Life insurance in the beginning was the benefit which was realized at the death of the policy holder. It was really “death insurance” which in today’s world would be a hard idea to sell. Today, the world of insurance has expanded to different types of insurance where you don’t have to die to win. While also providing benefits to the policy holders who are alive – a living benefit. Living benefit plans are insurance policies that provide financial benefits to survivors who face issues due to aging, illness, accidents and dependency.

Disability insurance

Disability insurance (sometimes referred to as DI) is an insurance policy that pays out a stream of monthly income in case you get disabled and cannot work. The injury or disability does not have to have happened at work but it must severe enough to prevent you from working and earning an income. Many people have both short-term disability and long-term disability coverage through work but you can buy personal disability policies if there is not coverage like in the case of some self-employed individuals.

 Health and dental coverage

Health and dental plans are often covered through group benefits. These plans are designed to help with the unexpected cost of healthcare needs when you need it. There is a growing concern that governments will have significant cut backs in the health care industry and as a result, the financial burden of prescription drugs, visits to the dentist, eye exams, and paramedical services may increase in the future. Individual Health and Dental insurance policies can also be purchased through insurance companies.

Travel insurance

Travel insurance is something you can buy when you travel outside of Canada in case you get sick or have an accident while you are away. Travel insurance can cover the cost of your medical emergencies. Travel insurance may or may not include trip cancellation coverage. Most travel agencies will offer travel insurance coverage. However, you can also choose to purchase from a third party. If you’re planning your trip online or on your own, you’ll have to research which insurance companies are best for your needs.

Critical illness insurance

Critical illness insurance is a type of insurance that helps you if you become critically ill. There are many different conditions that might be covered under a critical illness policy but the most common are heart attacks, strokes, and cancer. Typically, critical illness insurance provides a lump sum payment when a specific condition is diagnosed. The money can then be used for any purpose. Some examples include finding alternative medical treatments anywhere in the world, hiring a caregiver, paying debts, covering expenses that are not covered under government health care, paying for private nursing homes, or providing income support.

 Long term care insurance

Long-term care insurance is another coverage that is rapidly growing in popularity. It pays a daily or monthly benefit for medical or custodial care received in a nursing facility, in a hospital, or at home if you are unable to carry out some of the common activities of daily living (ADLs). Some examples include:
· Bathing
· Dressing and undressing
· Eating
· Transferring from bed to chair, and back
· Voluntarily controlling urinary and fecal discharge
· Using the toilet
· Walking (not bedridden)

Few people plan to get injured or ill. Getting insurance of any kind is a form of risk management . . . preparing for unfortunate circumstances in life. Be sure to include a review of living benefits when you review other types of insurance.

 

 

Market volatility does not mean the sky is falling

Market volatility does not mean the sky is falling

Rudyard Kipling’s famous poem “If” starts with “If you can keep your head when all about you are losing theirs…” That is good advice for all of us, but especially investors.

The Covid19 pandemic has mixed health concerns with financial concerns. Unprecedented market drops, continued volatility, stimulus packages, layoffs and the fear of recession or depression is weighing on most people’s minds. The human and health toll is substantial and not one that anyone can, or should, dismiss lightly.

From an investment perspective, redemption activity is picking up pace and will likely continue. Globally, equity funds saw record outflows of $43 billion in the first 2 weeks of March 2020, according to the Financial Times. Flight from equities is typical in these situations. However, investors fleeing investment-grade corporate debt and sovereign bond funds underscores the fear-inducing sell-off in the market. According to market data provided by EPFR Global, mutual funds and ETFs that invest in bonds had $109 billion in outflows for the week ending Wednesday, March 18th. This rush towards cash has exacerbated already volatile markets – and there is no indication that this will change any time soon.

 

When Q1 statements arrive at investor homes in a few weeks, there will be a rush by many to redeem some or all of their investments. Before investors decide to do so, they should keep a few things in mind:

  1. The sky is not falling: investment legend Peter Lynch once observed that most investors sit in excess cash or redeem investments because they fear a doomsday scenario. Lynch argued that the end of the world has been predicted for thousands of years and that the sun has still risen every morning. He also argued that in a doomsday scenario, people will be focused on food and shelter. So, whether you hold stocks or cash is not likely to matter. His advice? Act like the sun will rise tomorrow and invest accordingly.
  2. People will still buy stuff: when we get to the other side of the Covid19 crisis – and we will – people will still need food, clothing, shelter, services, etc. As Warren Buffett said in 2012, “Our country’s businesses will continue to efficiently deliver goods and services wanted by our citizens.” He also said “In the future, the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce.” So, businesses will continue to exist, continue to produce, continue to employ, and continue to reward investors.
  3. Market corrections are natural: in Europe and North America, prescribed burning has been used for over a hundred years to rid a forest of dead leaves, tree limbs, and other debris. This can help prevent a much more destructive wildfire. It also enables the hardier trees to receive more nutrients, water, and sunlight so that they may thrive. Joseph Schumpeter, the Austrian economist, coined the term “creative destruction” whereby more nimble, innovative practices displace more complacent ones. After the longest bull market in history, there was bound to be a market correction – of course, it is deeper and faster than anyone anticipated. A dispassionate investor would view the current economic turmoil as shaking out some of the less nimble public companies, reducing over-valuations and directing capital and resources to the best-positioned businesses.
  4. Don’t try and time the market: even the most successful professional investors don’t believe in their ability to time the market. Peter Lynch said “When stocks are attractive, you buy them. Sure, they can go lower. I’ve bought stocks at $12 that went to $2, but then they later went to $30. You just don’t know when you can find the bottom.”
  5. Don’t forget your long-term goals: most stock market investors originally invested with a time horizon of 5, 10 or more years. Most would have known that stock markets can and will correct, and sometimes violently, and so they should have invested only those monies that they did not need in the short-term. When the rebound comes, it will come quickly and those who are out of the market, and miss it, will have to dramatically revise their long-term goals.

Yes, the Covid19 crisis is a new crisis – but Canadians, the Canadian economy and Canadian portfolios have experienced and survived world wars, depressions, and pandemics before. There is little reason to believe that this time will be any different. Investors would do well to keep that in mind.

How to look through the panic of our markets.

How to look through the panic of our markets.

By Winston L. Cook, President Henley Financial and Wealth Management

March 23, 2020

As you know, stock markets around the world have experienced unprecedented volatility, primarily because of the COVID-19 pandemic, PANIC, and what we may learn in the future “market manipulation”. In these crazy times, we thought it might be helpful to offer some information and insights in an effort to address the implications it has on your investments.

Over the past couple of weeks, the value of most investments has fallen considerably. There are lots of opinions out there on why this is happening but it’s not something anyone could control or predict accurately. When it comes to investing, it’s really important to make sure our decisions are logical more than emotional so rather than trying to figure out what’s driving other people’s decisions, it’s much simpler to focus on asking what makes the best sense for you. From our perspective, there are 3 general courses of action to consider:

It’s not easy to watch your investments drop in value. For some people their instinct will be to run to safety but be careful before you move forward with this course of action for the following reasons:

  1. A lot of the damage is done already. If you trust the logic that successful investing is all about “BUY LOW, SELL HIGH” then selling low after a big drop of 20%, 30%, or more doesn’t make logical sense.
  2. You could miss out when the market starts to go back up. If you move all of your money into a ‘safer’ place, you will miss the opportunity to recover in a low-interest environment. In the past, we have seen lots of people miss the opportunity with no chance to participate in the recovery.
  3. Successful market timing is really difficult. We’ve always said the decision to sell at the top is extremely difficult to time. The decision to buy back in at the bottom is also extremely difficult to time. The ability to time both the sell decision and the buy decision properly is near impossible. You may instinctively want to move to safety for a period of time but the next challenge is to decide when to get back in.

Remember that you only make or lose money at the point where you sell your investments. If the market drop is causing you stress and stopping you from sleeping at night then it might make sense to cut your losses and either shift to something less aggressive or get out of the markets altogether. However, before you make the decision to sell, you might want to consider the next strategy.

Could this be the buying opportunity of a lifetime?

Although this strategy is not for the faint of heart, some will look at the downturn in the markets as an opportunity to buy. We want to be clear that we’re not trying to downplay the significance of the COVID-19 virus or minimize the experience that people are currently dealing with but, when you look back at other major downturns in the stock markets (in 2008 for example) you can see how events like these could create opportunity from an investment perspective.

For those of you who’ve been in one of our information sessions, you’ll have heard us say that times like these are when investments go on sale. If big-screen TVs go on sale 20% to 50% off, people line up for hours to get a chance at getting those deals.

In hindsight, many of us would agree that buying more investments in 2008 after the world financial crisis caused markets to go down 50% would have been a great thing. Similarly, buying more investments back in 2001 after the tech bust would have paid off down the road. While our industry likes to remind us that “past performance is never an indicator of future performance”, years from now, we suspect many of us will look back and see that this recent downturn in 2020 was the best investment opportunity in our present day lifetime.

If you have a group rrsp or pension plan through work, the good news is contributions continue to happen every month. This is known as Dollar Cost Averaging and, over time, it tends to create higher investment returns than if you were to make just one contribution per year. This is because making multiple investment purchases over the year helps you buy more when the markets are low. Right now, with every new contribution you make, you’re essentially getting a far better bang for your buck than you were in February simply because lower investment values mean you can buy more investment units with each contribution.

Here are a few market statistics to think about:

      • Markets typically rebound within 12 months after big drops.
      • Markets have gone down 20 of the past 80 years. In 18 of those 20 years, the markets rebounded with positive returns in the following calendar year.
      • The average return that followed a negative year was 14.6%, We know it can be tough to invest more (or more aggressively) when the markets are falling so, if you’re not so panicked that you need to sell but still nervous of investing more, there’s one more strategy to consider.

Stay the course…

Most of the financial industry will preach the buy and hold strategy. There are many reasons why but most people will believe that markets will eventually recover. The key word here is ‘eventually’. Often the reason that people are fearful is that we just don’t know how long the recovery will take. While it’s easy to let doom and gloom take over our decision-making process, it’s important to take a logical rather than an emotional approach to decision making.  So, let’s look at some additional realities of the stock market:

      • Markets go up more often than they go down. Over the past 90 years, markets have gone up 74% of the time and down 26% of the time.
      • Markets have lost more than 20% only 4.5% of the time.
      • Markets rarely experience back to back negative years. It’s only happened twice in the past 75 years the bottom line is that markets go up and down. As much as we hope markets will stay positive all the time, the risk of a correction is always there.

Every correction or bear market is a test of patience.  It’s not easy but a necessary reality of the markets.  From the beginning of time the stock markets have steadily increased and will continue to do so in the future, there will always be a down turn, correction or crisis to recover from along the way. What you must understand is that this unprecedented sell off has been created more by panic and fear than smart economic metrics.

We realize that the position of many is not being able to invest more at this time and that is understandable given the circumstance surrounding our present situation. Having faith in the future of our world, it’s population and our inevitable economic return is what we all want. We will survive this and we will return stronger than ever as a population because it’s human nature to survive and conquer the elements placed before us.

Please be well and stay the course we will get through this together.

I’m going to see other Banks

I’m going to see other Banks

At Henley Financial and Wealth Management we are here to help you save money wherever we can, we want to help you save money being spent unknowingly and unwillingly.

So, let’s start with something we know that everyone has… a bank account.

Why do you pay a monthly fee just to keep your money in a bank account?  Canada’s big 5 banks have been raking in the profits from monthly chequing account fees and additional transaction charges. We’ll even go out on a limb and say you do most if not all of your transactions online.

We have all fallen into this category once we got out of school and were no longer eligible for a free student chequing account. We use debit cards for everything, so our banks recommended that we sign-up for the “unlimited” chequing account for $14.95 per month. Again, we ask why do you pay to keep your money at the bank when you do all the work? You put your pay check in the bank and take it out of the bank without any assistance from them and you pay for that service – but there is no service.  Spending money Unwillingly because this is not an option. We will come back to that “option” part later.

Since most of us lived paycheque-to-paycheque in the first few years out of school we didn’t even realize how much money we were wasting on fees. You can have those monthly fees waived by always carrying a minimum balance, but how many people could do that on a fixed start up budget.

You probably pay up to $179 a year for the privilege of using your own money in your chequing account at your bank.  So, think of that as a household, your Husband/Wife, and children also have accounts so as a family (of four) you are paying over $717 a year in bank fees! That is the Unknowingly because you never stopped to do the math. Now it does not seem like much but remember you are doing all the work and it’s your money that was put in their hands.

So now that you know and are willing to save the money, would you stop paying the bank fees and switch to no fee bank account?

Here is the “Option” part we spoke of earlier, Manulife Bank has an advantage checking a online account (personal or business) that pays you an interest percentage to keep your money with them. Now that’s a service that makes sense to us, you get paid to keep your money in your own account with no penalty for using your own money. A bank with several unique features such as listed below:

  • no fee daily chequing
  • pays interest
  • 24/7 live support
  • free email money transfers
  • free ABM access through the banking network
  • mobile banking

Now that free chequing accounts are becoming more popular in Canada, there are many more non brick and mortar banks with high interest savings accounts than Manulife. We like Manulife because of their willingness to help with other financial needs we all need as adults, such as Mortgages, Credit cards, lines of credit, with the emphasis on keeping the money in your hands. No more Fees Lost Unknowingly or Unknowingly!!!!

Contact Us at Henley Financial and Wealth Management and we will help you set up a No Fee, High Interest Paying, Account with Manulife Bank.

%d bloggers like this: