Building Your Future
Five Financial Principles
Getting Married
As you and your partner tie the knot, there are a few things for you to consider. Here are four tips to help you on the pathway to starting your lives together.
Update Your Personal Identification
- Driver’s license
- Bank account information (including personal cheques)
- Passport
- Health card
Update Your Beneficiaries
Your beneficiary is the person who will own your assets one day. Consider making your new partner your beneficiary for all your key assets, which may include:
- Bank accounts
- Investment accounts
- Tax-Free Savings Accounts (TFSA)
- Registered Retirement Savings Plans (RRSP)
- Pension plan(s)
- Insurance policies (life, health, auto, home)
- Home and other real estate (e.g. Cottage)
Review Your Insurance Policies
It’s important to know which insurances you have and whether or not you have enough coverage.
- Life insurance is designed to help your beneficiary
- Pay off debts and funeral expenses
- Pay off the mortgage
- Save for the future
- Provide for children’s education
- Health insurance. If both of you have health insurance coverage, review the plans closely to see if it makes more sense financially and from a benefits standpoint to cancel one of the plans or keep both. In most cases you have 30 days after your marriage to add your spouse as a dependent without having to provide evidence of insurability. This means your spouse does not need to take a medical exam to show that he or she is in good health and “insurable” under your policy.
Budget Wisely
Budgeting helps you to create a spending plan for your money. It’s a ways to ensure you have enough money for the things you need and the things you want to save for. Following a budget or spending plan will also help you to manage debt.
- Identify fixed monthly expenses
- Watch your daily flexible expenses
- Use a budgeting method to help you stay on track i.e. envelope or jar method for cash
There are many online budgeting apps that are low-cost or free. It’s a matter of finding the one that works for you and sticking with it.
Buying a Home
Buying a home is a big deal. For most people, purchasing a home is one of the largest investments of a lifetime.
Saving for a Down Payment
Depending on your financial situation, a Tax Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) could be a good tool to save for a down payment on a home. A TFSA is great way to grow money tax-free and it is easily accessible when needed. With an RRSP, contributions will reduce your taxable income for the year and may lead to a refund on your taxes which can also be applied to your down payment or TFSA. In an RRSP, all income earned and growth is tax-deferred. Unlike a TSFA, funds withdrawn from an RRSP are taxable.
The primary benefit of using a RRSP for a down payment on a house is the Home Buyers Plan. This plan allows you to withdraw up to $25,000 from your RRSP as a tax-free and interest-free loan that must be repaid within 15 years.
The Home Buyers Plan can be attractive option for some people, but you should speak with a financial advisor who can help you decide whether it is a TFSA or an RRSP that would work best for your financial plan.
Insurance to Cover Your Mortgage
Protecting against setbacks is one of the most important things you can do to protect your family’s financial future.
Having an insurance plan in place to cover your mortgage will ensure that your family is taken care of in the event that something happens to you. The chart below is a helpful comparison to show the differences between owning individual life insurance and mortgage insurance offered through a lender.
| FaithLife Financial Term Insurance | Mortgage Insurance | |
|---|---|---|
| Ownership | You own and control the policy. | Lender owns the policy. |
| Amount of coverage | Coverage will never decrease and you can protect more than just your home. | Covers remaining mortgage only. As your debt decreases, so does the coverage. |
| Premium Rate | Guaranteed level of premium for 10, 20 or 30 years. | Level premiums. |
| Portability | You can refinance with another bank without re-qualifying or buying a new insurance policy. | Coverage may terminate if you refinance with another lender or if lender forecloses on the mortgage. |
| Qualifying | Your coverage is underwritten at the time of approval. | The underwriting is often done once a claim is made. If it is determined you answered a question incorrectly on the application, your claim could be denied. |
| Flexibility | You can use your insurance for a different purpose altogether. | Insurance is used for mortgage protection only. |
| Convertibility | Regardless of your health, the policy is convertible to permanent insurance. | Not convertible. |
| Beneficiary | You choose your beneficiary. Upon death, your beneficiary receives the proceeds. | The lender is typically the beneficiary and the death benefit is used to pay off the mortgage only. |
| Sales Credentials | You work with a licensed representative – trained to understand your life insurance and investment needs. | You work with the lender’s employee who is not always a licensed financial services professional. |
| Added Benefits | You automatically become a Member and are eligible for unique Member benefits and outreach opportunities. | None offered. |
Having Children
Saving for their Education
In Canada, we have a great financial tool to help save for a child’s education. It’s called the Registered Education Savings Plan (RESP). The government will provide a grant to increase your contribution by 20% to a maximum of $500 per child per year, with a lifetime maximum of $7,200 per child. Plus, based on your province of residence or level of income, there may be additional grants for which you could qualify. Below are a few additional details about the RESP.
Contribution Limit: Lifetime maximum of $50,000 per child
Government Grants: Canada Education Savings Grant (CESG) provides a grant of 20% on the first $2,500 contribution for an annual total of $500 (2)
Unused Contribution Room: CESG grant room carried over every year (3)
Taxation on Growth: Growth is tax-deferred
Tax Deductions: No tax deductions
Insure Your Children and Plan For Their Tomorrow
Below are 5 reasons why life insurance for children is a wise choice.
- Financial Foundation: Purchasing life insurance for a child ensures that they have coverage as an adult regardless of how their health might change. The Guaranteed Purchase Option (GPO) rider guarantees that a child will be able to purchase additional insurance as an adult, without medical underwriting.
- Lifetime of Value: Dividends paid to policyholders offer flexibility in managing the policy and can provide significant growth in both the insurance amount and cash value.
- Lifetime Guarantee: With a guaranteed premium, cash value and insurance amount, life insurance is a unique asset for children.
- Cost Effective: Life insurance for children is affordable and you can buy a plan where the cost remains the same throughout their lifetime.
- Easy to Get: Life insurance is usually easy to get for children based on the health status of the average youth.
Having a Will in Place
When it comes to protecting the important people in your life, having a Will is as important as having a health card or a social insurance number.
Whether you are single or married, you need a Last Will and Testament to outline and describe the distribution of your assets and possessions. A Will provides the opportunity to appoint an Executor who will carry out the instructions in your Will and manage everything on your behalf. Within your Will, you should also appoint a guardian for minor children – not a decision to be taken lightly and something you may want to discuss with your family and loved ones in advance.
Without a Will, you may miss out on the opportunity to designate your assets to benefit others, beyond your immediate family, in the following ways:
- Leave a lasting legacy gift to your favourite church, ministry or charity
- Help a sibling, a grandchild or nieces and nephews with their education or a down payment on a home
- Donate an “In Memory” gift from yourself or your spouse to your local hospital
- Create a scholarship fund in your name
- Leave a cherished possession to someone who will really appreciate it
| Making a Will | |
|---|---|
| Write it all down |
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| Hire a lawyer |
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| Keep it current |
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A Will is a living document that is really as much about life as it is about death. Your Will is all about passing along property and keepsakes to the next generation – allowing you to leave a lasting legacy.
A FaithLife Financial Representative will be happy to guide on your journey to building a solid financial future.
