Saving for a home -- HOW?

I was pleased to read an article in the Financial Post today if couples (or singles!) should use an RRSP or a Tax Freee Savings Account (TFSA) as a vehicle to save for a new home.

In the past Financial Advisors would recommend to their clients, who were buying their FIRST home, to possibly utilize their RRSP under the Home Buyers Plan. Under this plan, you can take out maximum $25,000 of your RRSP as a loan to purchase your first home, tax free. You must repay this loan starting in 2 years from when you take it out, and must pay it back into your RRSPs within 15 years. This is a great tool for someone who is young enough to repay the loan back and who has some savings in their RRSP.

However, the problems some people faced in the past was repaying the loan from the RRSP back. And it is only available to first time home buyers.

Now, I would recommend saving for your down payment in a TFSA. I like the idea of not touching your RRSPs. Your RRSPs should be set up as a pre-authorized payment each time you are paid (remember: PAY YOURSELF FIRST!) and those savings should be kept specifically for retirement purposes.

EXAMPLE 1: Each spouse saves $400/month and has this amount taken from their account automatically on the 1st of each month. If they put it into a non-risky investment earning 3% interest, at the end of 3 years they would have $30,171.69 saved for a down payment on a new home!

EXAMPLE 2: If the couple decides they can incur some risk and saves it into a riskier investment and if the markets turn around and go back up, they could earn up to 8%. They would have $32,644.64 saved for a down payment on a new home. And they would be able to take out these savings TAX FREE!

The major differences between saving for a down payment in the RRSP Home Buyers Plan, or using a TFSA:

1. You do not have to repay the loan you take out from your TFSA; With a Home Buyers Plan you have to pay it back within 15 years.
2. You can use the TFSA for any down payment or expense; With the Home Buyers Plan you can only use it for first time home purchase, no other purchase.
3. If you earn little or no income you can invest with a TFSA; you must have earned income to invest in an RRSP.

Each individual has a different scenario therefore it is advisable to sit down with an Advisor and find out which route is best for you. Your Advisor will be able to show you which plan is more suitable to your lifestyle!

Canadian Cancer Society 2008 Statistics

Click here for the full report

• Cancer incidence is rising in women age 20-39
• On the basis of current incidence rates, almost 40% of Canadian women and almost 45% of men will develop cancer during their lifetimes
• On the basis of current mortality rates, 24% of women and almost 29% of men, or approximately 1 out of every 4 Canadians, will die from cancer

Cancer in children creates a disproportionate impact on health, economic and social welfare systems, as a consequence of the loss of young lives. As well, both child and family are affected by emotional trauma and life-long consequences. Families affected by childhood cancer must often provide care for other young children in the home while attempting, at the same time, to navigate their way through the health and social welfare systems. Parents often work less or stop working altogether, which creates financial stress.

You can survive cancer...but can your bank account?

I recently read the article that was posted in the Star Phoenix and Leaderpost entitled "Life After Lung Cancer". Randy Moore describes how he was healthy, he never saw it coming, and then one day BOOM, he is diagnosed with lung cancer and his whole life changes.

I love this quote he says:

I think there's a lack of education where people don't realize that in fact you can live if you are diagnosed with something like this [lung cancer]. So I think there should be more education.

I love it Randy Moore. You are right on with what I strongly believe. With advances in medical technology today, your chance of survival is very high. In fact the Canadian Cancer Society says you have a 55% chance of survival from cancer (includes all types). And the Heart and Stroke Foundation says you have a 95% of surviving a heart attack and an 85% chance of surviving a stroke.

So again, I put the questions out there. What are you going to do about your bills, your mortgage, your retirement fund, your child's education, if you find yourself sick one day and realize that your provincial health plan is not covering 100% of the costs of your medication. It sure as heck isn't covering any of the new drugs out there -- as those take months/years to pass through legislation. So if you want the best and newest drugs to cure your cancer, heart attack or stroke, how are you going to afford? Do you think your doctor is going to order you back to work asap? Probably not.

You need time to heal, regain your strength, beat cancer. But can you do this with no income? Some people believe that their disability plans will cover them. But disability plans only pay out 60% of your current salary, and they don't cover the added costs of medication and treatment.

Look at Randy Moore. Who do you think paid for his flight to Vancouver? He did. And the PET scan he talks about is not covered by most provincial health plans. The Canadian Cancer Advocacy stated in April 2008 that the average cost of a PET Scan is $22,000. I wonder how Randy Moore afforded this.

This is why Dr. Marius and Dr. Christian Barnard created critical illness insurance. It wasn't created by actuaries and insurance people, it was created by doctors. So you can heal yourself and still pay your bills. So you don't have to rush back to work. So you can take care of life's money problems and only worry about getting better.

Because chances are you will survive!

The following article is an extract from a speech given at the MDRT Meeting in 2003 by top Australian insurance advisor Godfrey Phillips. MDRT is the world organization supporting life insurance and those who promote the benefits of life and serious illness insurance worldwide. I offer critical illness insurance as part of your life insurance plan. It can also be arranged on its own (please contact me directly for a quote on this). Read on for some logical arguments for taking out this type of coverage...

"In 1999, I was able to secure Dr. Marius Barnard as a speaker for our annual meeting of life insurance advisors in New Orleans. This is the same Dr. Marius Barnard who assisted his brother, Dr. Christian Barnard, perform the first successful human heart transplant more than 30 years ago.

By speaking at this meeting, he achieved one of his life long goals and I’m delighted to have assisted him towards this achievement. Dr. Barnard noticed that many of his surviving patients faced difficult financial situations due to the cost of recovery, rehabilitation, on-going therapy and an inability to return to work. His concern led him to develop the concept of “Critical (Serious) Illness” Insurance for patients surviving the diagnosis and treatment of critical illnesses, firstly in South Africa, then the U.K., Australia, N.Z, Canada and only in recent years in the U.S.A and wider Europe.

In the Australian Financial Review (AFR) on the 25/05/2002, Dr. M. Barnard stated, “Claims experience shows the 3 major reasons for Trauma Insurance claims are Heart Attack, Stroke and Cancer. 75% of the population will suffer from one of these in their lifetime.”

To understand Critical Illness Insurance successfully, it’s important for you to be aware of the statistics of 100 years ago, compared to what they are today. People are living longer today (because of improved medicine and science) after suffering a Critical Illness, but it’s their Financial Health that suffers. The World Health Organisation says health consists of 3 parts:

- Physical Health
- Social Health
- Financial Health

Health is seen as a resource for everyday life. The basic resources for health are Income, Shelter and Food. We get out of bed each day to go to work to earn money. Why did we get out of bed? BECAUSE WE ARE HEALTHY. Without our health, there’s a threat for those resources for everyday life. It is very easy to understand that the concept of Health consists of 2 parts:

1. Your Physical Health, which is needed to bring out your opportunities in life to earn yourself money
2. Your Financial Health, which gives you the definition of MENTAL, SOCIAL & PHYSICAL well-being. Health, wealth & happiness are the basic fabric for our everyday lives.

Dr. Marius Barnard warns us that our Health WILL go wrong, and permit me to share some statistics with you. Since 1901, we are living longer; however, along with an increased lifespan comes an increasing risk of suffering a life-threatening medical condition. Look at the major causes of death: From 1900 to 1999: Heart Disease, Stroke and Cancer increased from 18% to 59%. That’s a staggering increase of 41%.

Over the last century the major causes of death shifted dramatically from infectious diseases like T.B. to lifestyle conditions, such as Heart Disease, Stroke and Cancer. So Lifestyle is now our biggest threat. Permit me to share some frightening Australian statistics for the “BIG 3”, Cancer, Heart Disease and Stroke.

CANCER

- 1 in 12 Australian women will develop Breast Cancer.
- 33% of the population will suffer from Cancer during their lifetime. That’s 1 in 3 in this room!

HEART DISEASE

Every year:
- 160,000 Australians are hospitalized for coronary heart disease
- 28,000 die from heart disease
- 17,150 undergo by-pass surgery

STROKE

Every year:
- 52,000 Australians suffer a Stroke
- 60% are women
- 40% are under age 65

In fact, you have a greater chance of suffering a Critical Illness and surviving, than you have of remaining healthy or of dying prematurely! Nearly 46% of males aged 40-65 will suffer a Critical Illness and survive.

- 20% die and
- 1/3 are healthy

And my question always is, “Mr. P. knowing this horrific statistic will affect your Financial Health, do you still want to self-insure, or would you like me to show you how you could be Financially Insured against a Critical Illness, for just DOLLARS (EUROS) a day?” The average age of a Critical Illness claimant is 43 years. Critical Illness Insurance is necessary not because you die but because you survive.

Medically – you may or will survive
Financially – you may die

Survival is increasing for Critical Illness. If we look at Coronary Artery By-Pass operations from 1970 to 1990, we see the number of By-Pass operations has gone up from 50 operations done in 1970 to nearly 11,000 in 1990. AND the death rate in 1970 was 20% compared to a low 2% in 1990. So, survival is increasing.

The message is clear – Critical Illness Insurance is critical to your financial independence."

Tell Me Your Story | Janea Bellay

Tell Me Your Story | Janea Bellay
I want to hear your story. How has Critical Illness Insurance affected your life? If you have a loved one that has been diagnosed with a Critical Illness, how would $100,000 of tax free cash affected their life?

Saskatchewan has longest surgical wait lines in Canada

October is Breast Cancer Awareness month, so how fitting that I was reading the Star Phoenix today and it made me sick to read the article on how Saskatchewan has the longest surgical wait lines in Canada: Click here for the article.

Imagine this.....
You have just been diagnosed with Cancer

• By the way the statistics are that you have a 1 in 2 chance of getting it sometime during your lifetime - Click here for the stats

You need to have surgery to remove the tumor because the cancer is spreading.

But -- there is a 6 month waiting list because you live in Saskatchewan.


I Don`t Think So, Dr. Whatshisname.

That`s when I get to tell him I have Critical Illness Insurance. In 30 days my financial advisor is going to hand me a cheque for $100,000 tax free, and I am going to Mayo Clinic to get this cancer out of me NOW. I am paying for it, but my life depends on it. I need this surgery to live.

And what`s worse about these wait times, is that it isn`t going to get better. The number of baby-boomers in our country is increasing at a rapid rate. By the year 2020, our country is going to look like the state of Florida, all white hairs! And this is going to put an even bigger drain on the health care system because the older you get, the more health problems you will incur.

This is why I ask clients, "In the event you are diagnosed with cancer, have a heart attack or stroke or some other critical illness, do you have enough money in your savings to pay your bills, take care of your family, and seek alternative medical treatment?"

Most of the time, its a no, I don't.

Then I ask, "Do you know of someone that has cancer and had to host a fundraiser so they can ask for money from friends and family in a really nice way because their medical bills and household bills are too steep that they can't manage on their own?"

Most of the time, its yes, I have been to a fundraiser.

Then I ask, "Ok, now do you want to ask your friends and family for money when you get sick, or do you want an insurance company to hand you cheque for $100,000 tax free so that you don't have to worry about your family's financial well-being and you can get better."

This is what Critical Illness Insurance does for people. I am so glad the Star Phoenix ran that artical today because it just proves how this insurance is the one you need.

Probability of Developing/Dying from Cancer

• On the basis of current incidence rates, almost 40% of Canadian women and almost 45% of men will develop cancer during their lifetimes.
• On the basis of current mortality rates, 24% of women and almost 29% of men, or approximately 1 out of every 4 Canadians, will die from cancer.

Click here for more information on Critical Illness Insurance.

Visit www.janeabellay.com for more up to date information.

Not taking advantage of free money

I came across a 55 year old gentleman who has been working for the same company for the last 30 years, he wants to retire in 5 years. He has roughly $30,000 saved in his pension through work, but he has only contributed to his pension in the last 7 years.

I had bad news for him -- He is not retiring in 5 years.

I asked him why he didn't start contributing to his work pension when he first started his job? He told me

• He didn't mean to stay at his job for so long, he planned on staying there a few years and then moving on to a different company
  
• He figured he would just start saving later in life, he didn't need to save when he was young

This is why it is so important to start young!! If you find that you may be in this situation, here are some ideas you may want to consider:

• If you are employed, start contributing to your pension NOW! If you leave the company, you can always take what is vested to you with you. If you transfer jobs, you can have your financial representative transfer your pension into your control, not your previous employers. Once you leave a company, they don't care about your pension money anymore, so make sure your money is working FOR you!
• Start investing and saving young. If you start young, you don't have to contribute as much because you can take advantage of compound interest. Take a look at this example: http://janeabellay.com/investments-money/
  
• Sarah who starts contributing at age 20 ends up with more money in her retirement fund than John who starts at age 30. Only because of compound interest. Get your money working for you. You work hard for it, so now make it work hard for you.
• The earlier you start the easier it is.
• Take advantage of free money. If your employer offers a profit sharing program, an RRSP sharing program or pension program, MAXIMIZE IT! Its free money. But its up to you to get on it and make sure that you are taking full advantage of everything the employer will offer you. Check your employee handbook or talk to your HR Manager.
  

Besides the fact my gentleman above doesn't have enough in his retirement plan to retire, he really should have taken advantage of all the opportunity that was offered to him.

These opinions are exclusively those of Janea Bellay. You should seek out a licensed financial representative before incorporating any strategy into your financial plan.

What about my retirement fund?

Hello:
As most of your read the newspapers this week and read about the US economy in a deep decline and wonder how this will impact the Canadian economy. Most of you are probably watching the endless news of how the stock market is in a deep decline, stocks are falling, retirement funds are decreasing, and most of us are sweating bullets right now, wondering what is happening to our investments. Most of you are wondering what is going to happen to yourself and your retirement fund.

Don’t panic. Don’t fret. Keep your cool.

Here are a couple of proven strategies that you want to keep in mind when in a recessionary period:

1. Dollar Cost Averaging – Do you have an automatic payment plan set up? If not, you should. What happens with dollar cost averaging is that you buy funds when they are low and you buy funds when they are high, so in the end, you have a weighted average of the fund price you paid.

2. Learn about the market - One of the best ways to reduce anxiety is to brush up on your financial knowledge, and understand how the stock market works. This can be a good way to "de-mystify" the information you hear from the economic experts and stock market analysts, so you can make clear, independent investment decisions in all market conditions.

3. Do your homework - In the same way, in-depth knowledge about the individual holdings within your portfolio can go a long way to alleviate investment anxiety. The more you know about why you've chosen a particular investment, how that investment works and how it fits into your overall portfolio, the better you'll be able to stomach a market downturn.

4. Focus on your goals - All too often, investors make rash financial decisions because they read a report or hear some news that the end of the financial world is coming. How do you stop this? By staying focused on your long-term investment goals. If you haven't already, write some specific, reasonable financial goals for yourself, and refer to them whenever you feel anxious about your finances. It will help you focus on your goals, rather than the current crisis. Long term investing means investing for 10, 20 or 30 years, and sticking with your plan.

5. Invest regularly - Do you have a large sum to invest? Anxious about investing right before a downturn? One way to rid yourself of the anxiety is to take the market out of the equation. By investing on a regular basis, you don't have to worry about predicting the best time to invest.

6. Everything happens in cycles – The market goes up and down. Its a given. Case in point, the Canadian market dropped 10% or more 11 times since January 1970. But between January 1970 and December 2007, the stock market has had an average annual return of 10.5% in Canada. Each time the market drops, and it will frequently and without warning, many investors stray from their plan. Yet, most market gains occur in just a few strong, but unpredictable short-term periods. To maximize your plan’s long-term performance, you have to be in the market during those periods.

7. Its a great time to invest! – Buy low, sell high, not the other way around. If you haven’t started a regular investing plan, now is a great time to start.

When it comes to investing, there will always be a reason to be anxious. The real challenge is to look past those reasons and stick to your long-term financial plan. Stay focused on your financial goals, do your homework and seek out a professional opinion before you make any decisions. That's the best way to prevent investment anxiety from wrecking your financial future.

I have attached some information if you would like to read further on investing in volatile times.

Contact me anytime should you have questions/concerns.
Best wishes,
Janea Bellay
www.janeabellay.com


More documents on investing in volatile times:
Investing in Turbulent Times: http://ficl.distributech.ca/uploads/61108103E.pdf
Putting Market Volatility Into Perspective: http://www.ci.com/orderform/pdf/tk_market_volatility_e.pdf
Dollar Cost Averaging: http://www.ci.com/orderform/pdf/tk_dollar_cost_avg_e.pdf

Mortgage Insurance - Banks vs Financial Advisor

The banks make it seem like the client MUST take the insurance out at the bank. When in fact, they don't have to at all. It is not a requirement to get a mortgage. However if you want your loved ones protected in the event of your death (and guess what, you are going to die someday, we just don't know when), then you absolutely need mortgage insurance, which is essentially life insurance.

So what happens at the bank --

· Your premiums will remain the same price, but your coverage will decline as you pay off your mortgage

· When you die, your beneficiary does not receive the insurance to decide how to pay off all the debt, the bank gets the insurance money to pay off the mortgage only. Your family doesn't see a dime of the insurance.

· If you change banks where your mortgage is at, your mortgage insurance will also be cancelled, and then you will have to reapply at higher rates

· When you die, the bank will then determine if they should have sold it to you in the first place, and in some cases it has been declined. If you are a detailed person, you would have read the small print on the mortgage insurance application. One of the questions is "Have you ever had a cancer exam, if yes, you will be declined the insurance". Guess what, if you have had a breast exam, a pap smear, or a prostate check by your doctor...you have had a cancer exam.

· Banks are not licensed to sell insurance. They buy it in bulk and then sell off each of the policies. Would you deal with a doctor that didn't have a valid license? Then why deal with an unlicensed person at a bank who is handling the second most important thing to living well, your money.

In any case if you purchase mortgage insurance from a licensed representative, someone with a life insurance license, these things won't happen because all the pre-work is done up front and honestly.

Most life insurance licensed professionals work with about 12 difference insurance companies so they are able to shop around and get the best prices, and in some cases cheaper than what the bank is quoting.

Who do you want to put your trust into? Someone who is licensed and trained at what they do, or someone who is doing what their bank manager told them they should do....make a sale.

More information on mortgage insurance can be found on my website at www.janeabellay.com