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Social Distancing Financial Planning Ideas

The past month has been one that we will never forget.  The coronavirus and its related impacts are the largest stress-test that many of us have ever experienced and may ever experience.  Our lives will continue to be changed forever, and we are finding ourselves with time to fill while we are social distancing or self-isolating.  This article can hopefully provide you with some ideas to help make productive use of your time in the world of personal finance.

Social Distancing Financial Planning Ideas:

  1. Refinance your mortgage

Interest rates have dropped significantly in recent weeks. The cumulative 1% rate cuts made by the Bank of Canada could leave you paying more interest with your current mortgage than you need to.

Refinancing your mortgage could allow you to realize some immediate savings and lower your monthly payments.

When refinancing, “break fees” or penalties are usually charged based on the terms that you agreed to with your lender.

Working with a mortgage broker can help give you access to multiple lenders, and the broker can help do the math for you to determine if there are attractive options for you, given your current situation.  The big banks tend to charge more than smaller lenders, so when in doubt, use a broker.  An added benefit is that working with a broker costs you nothing.

 

  1. Consolidate your debt

If you are carrying multiple balances, you can explore options to consolidate your debt and reduce the interest rate that you are paying.

Credit cards may offer balance transfer options, or your bank could look to roll your debts into a line of credit.

If you are working on refinancing your mortgage, it is also a possibility to roll your other debts into your mortgage and take advantage of the low mortgage rates.

 

  1. Rebalance your portfolio

Markets have changed dramatically over the past month. A typical balanced portfolio is down roughly 14% since the market peak in February.  If you are managing your own investments, you likely now find yourself with your asset allocation out of line with your target allocation.  Most likely, the equity portion of your portfolio has performed poorly, and you might be under-allocated to equity.

 

  1. Contribute to your Investment accounts

If you haven’t made your annual TFSA or RRSP contributions yet, now may be a more attractive period to enter the market than it would have been at the peak on Feb 21.

To quote Warren Buffet,

“Be fearful when others are greedy, and be greedy when others are fearful.”

Make sure to always invest in line with your risk tolerance, and consult with a professional if you are unsure if investments are appropriate for you.

 

  1. File your taxes

It’s not the most fun exercise, but it is that time of year.  An added benefit of this step is that if you are entitled to a refund, you could get your payment sooner rather than later.

That said, investment income slips (T3s and T5s) are due to be sent out by March 30, so make sure that you have all the required tax slips before filing.

If working with a professional tax filer, they now have temporary approval to utilize electronic signatures by the CRA (welcome to 2020!)  The deadline for personal tax filing has also been extended to June 1.  You can read more about the Government of Canada’s changes on their website.

Novel is pleased to be able to offer tax filing services.  Contact us for a no-obligation quote if you need assistance filing your tax taxes.

 

  1. Develop a budget

Doing a review of your spending is never a bad idea. Given our current situation, and the income uncertainty that many are facing, there may never be a more appropriate time.

There are many products/services out there that can assist you

Something to keep in mind with some of these products is their security.

These apps can sync your various accounts and could void the terms of your bank or financial institution.  Consider these risks before you make use of any of these types of products.

 

  1. Shop around for insurance

If you have gone through a home or auto insurance renewal recently, your insurance premiums may have increased significantly.  The insurance industry has been raising rates due to profitability issues all around.

That said, perhaps your carrier may have raised rates more than others.

As such, work with your broker to explore options with other carriers and bundle your home and auto for a multi-product discount.

When shopping for insurance, it is critical to compare options on an apples-to-apples basis.  Coverage limits and deductibles should be similar (or identical where possible) to make sure that pricing differences are due to a lower price and not due to reduced coverage.

 

  1. Get a will

Roughly half of Canadians don’t have a will, which is half too many.

There are many reasons why you need a will.

Schedule a video chat with your executor of choice, and those you wish to care for your children.  Scheduling might also be easier right now, given everyone’s desire to fill some downtime.

Novel recommends Willful as its online will product of choice.  Use the code Novel10 at checkout to save 10% off your will preparation.

If you go the online will preparation route, getting a witness for your will may take some time.  Wills are not considered legal if they have an electronic signature.  As such, once we can re-connect in person, you can get your will signed and make it final.

Don’t let the signature hurdle prevent you from putting the wheels in motion, however.

 

  1. Develop a plan

Financial planning can be completed entirely virtually and digitally.  What better time than now to take control of your financial future?  Working with a planner will allow you to

      • Re-evaluate your investment approach
      • Identify opportunities to save on financial product fees
      • Assess your insurance adequacy
        • Critical Illness
        • Long Term Disability
        • Home/Auto Property and Liability
        • Life Insurance
      • Plan for education savings
      • Plan for retirement
      • Develop an estate plan

Contact us if you would like to schedule a free no-obligation consultation call.

 

Income Generating Ideas While Social Distancing

 

  1. Learn a new skill

The world we live in will be a different place when we come out on the other side of COVID-19.  Perhaps this is an opportunity for you to expand your skill set to better align with the needs of the job market.

Learn to code, graphic design, UX, web design, photography, copywriting, personal trainer, sell insurance, etc.

Skills that are in demand in 2030 may look very different than where we sit today at the start of the decade.  Keeping up with the times in terms of your skills makes sure that you are marketable when the next wave of jobs becomes the norm.

Here are some free online course options available:

  1. Start a side hustle

For those currently unable to work, government benefits may be on the way to assist.  However, creating new income streams is something that someone can do even while fully employed.  Diversifying your income also provides an insurance policy, of sorts, in the event that you were unable to perform your primary job due to injury, illness or change in circumstance.

Several side hustles can also be 100% virtual, which is of increasing importance right now.

Always wanted to be a blogger?

What about being a freelance ghostwriter or blog post editor?

Have you dreamed of starting your own YouTube or Twitch video game channel?

Thought of launching a virtual yoga or TRX studio from your living room?

Currently, content is king with people’s attention up for grabs.  Be creative and go for it!

 

  1. Prep for a garage sale/classified ads sale

Now that you are social distancing, maybe its time to go through your stuff and purge.

Meeting up with a buyer from a classifieds site isn’t recommended right now, but identifying items that you would want to sell is an exercise that you can go through any time.

Selling the goods online via a site like eBay and shipping them remains an option.  At a minimum, now might be an opportunity to take all of the photos needed to post your ads when you are ready to sell.

 

The Brass Tacks

Collectively, we are going through a period that will change us forever.  You can use this time as an opportunity to make positive changes in your life as well.  There are several personal finance and financial planning opportunities that you can implement while social distancing or self-isolating. Stay safe, stay positive, and we will all get through this together.


Why You Need A Will

Why You Need A Will

Do you have a will?

Talking about death is something that we all look forward to, no doubt…  But the reality is that contemplating our own mortality is less about the impact that it has on ourselves, but rather the effect that it has on those around us.  Estate planning is not just for the uber-rich, but rather a critical aspect of financial planning for all Canadians.

According to a recent study by the Angus Reid Institute, 49% of Canadians surveyed either don’t have a will in place, or their will is outdated.  This number skyrockets to 85% for those in the 18-34 age bracket.  With so many Canadians leaving themselves exposed, it is probably a good idea to go over what happens if you die without a will.

NOTE: This post should not be considered legal advice.  If you have any estate planning questions, please consult with a professional to assess your individual situation.

Why You Need A Will

In Ontario, the Succession Law Reform Act governs what happens when someone passes away without a will in place, known as dying “intestate”.  In this case, your affairs will be handled in a prescribed manner.

Personal Representative

A key reason why you need a will is that you can name the executor of your estate.  The executor is responsible for the administration and distribution of your estate along with the wishes that you have expressed in your will.  When you pass away intestate, you have no executor named.  As such, your closest relative will likely be appointed as your personal representative.  In many cases, this may not be an issue.  However, in some cases, you may not want the individual named to be acting on your estate’s behalf.

The added benefit of naming an executor is that they can be adequately prepared for the responsibility.  Before appointing someone as your executor, you should have a conversation with them to ensure that they are up to the task and related responsibilities.  The role of executor tends to be time-consuming, and you should be mindful of this when naming someone to the position.

Child Care Without a Will

If you have children, it is non-negotiable that you have a will.  If you die intestate, you will have lost the opportunity to dictate who should be responsible for your children.  In this scenario, the courts will determine who is the most suitable to become your children’s guardian.

An added piece of importance is in the situation where you have a dependent child.  Without leaving instructions for their care, or setting aside specific funds, your dependent child may not receive the long-term care that you had intended.

Division of Estate Property

Your property is distributed based on the following:

1) You have a spouse, but no children

Your entire estate goes to your spouse. However, this only applies to legally married spouses. Common-law spouses are not automatically entitled to receive anything if you die intestate.

2) You have a spouse and children

Your spouse is entitled to a preferential share of your estate, up-to-the first $200,000. What remains is now referred to as the residue. If anything is left over, the residue will be divided between your spouse and your children.

3) You have children, but no spouse

The children each inherit an equal portion of your estate. If any of your children have passed away, then their share would pass on to their children (i.e. your grandchildren).

4) You have no spouse and no children

Your parents inherit your estate.

5) You have no spouse, no children, and no parents

Your brothers and sisters (or their children if a sibling has passed away) receive an equal share of your estate.

6) You also have no brothers and sisters

Your nieces and nephews each inherit an equal portion of your estate.

7) You have no nieces and nephews

All other next of kin inherit an equal portion of your estate.  The determination of next of kin is performed using the table of Consanguinity (courtesy of Wikipedia).

8) You have no living next of kin:

Your estate goes to the Ontario government.  Not who you had in mind for a charitable donation to as part of your estate plan was it?

Here is a helpful infographic on the topic.

How your property is distributed in Ontario if you die without a will

Pet Care Without a Will

Unlike your children, the courts will not make a separate determination of whom the best caregiver will be.  Pets under Ontario law are considered Property.  As such, they will be subject to the division of property rules above.

Tax Efficiency

When you pass away, your representatives must file a final income tax return on your behalf.  This return comes with very particular tax planning opportunities, which are lost when you don’t leave a will behind.

When it comes time to validate your will, it goes through a process called probate. Probate is also required for those that die without a will.  According to the Ministry of the Attorney General, the probate process exists to:

  • give a person the authority to act as the estate trustee of an estate; or
  • confirm the authority of a person named as the estate trustee in the deceased’s will
  • formally approve that the deceased’s will is their valid last will.

Part of the process involves the Estate Administration Tax (EAT), or what is more commonly referred to as the ‘Probate Tax’.  EAT is charged on your residual estate (i.e. everything that is left over after filing your final tax return).  Between your final income tax return and the EAT, significant taxes could end up being paid that could have been avoided if you do not have a legal will in place.

Funeral and Burial Arrangements

Without a legal will in place, the arrangements will be left solely up to the discretion of your personal representative.  As mentioned above, this individual will be court appointed and may not know your wishes.

So, What’s Keeping Canadians From Getting A Will?

As per the Angus Reid study, there are a few key reasons that our estates are not adequately planned for.

“Of course, 18-34-year-olds without a will are significantly more likely than other Canadians to say they are too young to worry about having one written – nearly half (46%) indicate as much. As they get older, Canadians are more likely to cite a lack of assets as the reason they do not have a will in place.”

Surprisingly, only 8% of respondents listed “not wanting to think about death” as their primary reason for not having a legal will in place.  So, it appears the morbidity of the topic is not the deterrent that we may have thought it was.

The 3rd most frequent answer provided as their deterrent was cost.  18% of respondents indicated that ‘It’s too expensive to get a will written’.  As with many industries, estate planning has seen its share of ‘disruption’.  No longer do you have to travel to a stuffy lawyer’s office and be gouged for their expertise. Not requiring a lawyer is especially true for the average Canadian whose estates are not very complicated.  This is likely the case for the 48% of respondents who thought that they were either too young or didn’t have any assets to consider.

For those with simple estates, who live in Alberta or Ontario, Novel recommends Willful as a great option to obtain a legal will in as little as 30 minutes. Their premium package includes a will as well as a power of attorney for property and a living will for $150 plus tax.  Also, we have negotiated a 10% discount with them if you use the promotional code ‘Novel10’ at checkout (read more about our affiliate policy).

The best part of using Willful’s service is that your will can be updated as many times as you would like, for free, forever!
Yes, free.
Yes, forever!

That means that there won’t be any legal costs incurred to update your estate when you move to a new home, purchase a new car, or welcome a newborn for example.  Just remember, when you do make updates to your will, all previous copies should be destroyed.

Do I Need A Lawyer To Write My Will?

No!

Similar to Willful, there are a number of options out there that can provide you with templates or documents that you can work with.  That said, you should never draft your own documents and any templates that you use should have been reviewed by a lawyer.  And rest assured, Willful has had a many lawyers aid in the drafting of their documents.

Once you have a will drafted using one of the various methods out there, you need to have the documents witnessed/signed by two parties who are not named in the will.  For example, your executor cannot serve as the witness.

Once signed, the hard copy location needs to be shared with your executor.  This will ensure that your executor can quickly access it and begin the process.  Unfortunately, at present, digital wills are not acceptable.  Hard copies with signatures must be kept as the official document for your will and power of attorneys.

That’s it.  You now have a legal will!

The Brass Tacks On Why You Need A Will

In 2019, far too many Canadians still either don’t have a will or their will is out of date.  Don’t leave your loved ones in a precarious position, by not having a will.  Not having an up to date legal will can create many complications for your estate, and your wishes may not be addressed appropriately.  Many tools are available for you to create your will and keep it up to date.

If you would like to discuss your estate planning or discuss it as part of a Fee-Only Financial Plan, please contact us to set up a consultation.

Did you find this article helpful?  Did we miss anything?  Please let us know in the comments.