You Faced Critical Illness, How will Your Finances Recover?
Budget. Budget. Budget…
- Create a budget for your expenses if you do not have one already
- Write down all the things you spend your money on currently
- Create a new budget with new anticipated expenses
- Have someone you trust to become your Budget and Financial Buddy (they can help keep you on track), and you can give them insight into your short and long-term money goals
- Before you apply for credit check your credit report
- Consolidate all debts into a low-interest loan or line of credit
- Confirm cash on hand and hidden cash in ( GIC’s life insurance policies, employee profit sharing plans) credit union shares, holiday pay and RRSP’s invested for the short term)
- Consider unlocking some of your locked in RSP’s for short-term cashflow needs
- Examine your company’s short-term disability plan to determine how long you’re receiving 100 percent of your income (usually 4 to 6 weeks)
- Determine how long you will be able to live on cash coming (including disability income and employment income) in before going into debt
Avoid Paying more than your share….
- Confirm the state of your disability plan-if you pay for it out of pocket then the benefits are non-taxable
- Any short-term investments in GICs should immediately move to a tax-free savings account
- Tax implications on any RRSP’s withdrawn for the 2015 tax year are deferred until 2016 tax year
- Disability income from other sources are fully taxable (IE, CPP, EI, Accident plans) exception Workers Compensation
- If you are retired consider splitting CPP, private-pension/ RRSP income with spouse
Understand your Insurance rights :
- Understand the key terms in your disability insurance policy ( i.e. definition of disability) occupation, classes
- Confirm how long your insurance company will pay in your profession for a disability
- Take stock of how much insurance coverage you have and what you are entitled to
- Take share of hidden insurance in group insurance policies, old term policies for conversion opportunities
- Discuss your options for protection with an insurance professional after you have recovered from your illness
Building Cashflow for the future. Is this still possible?
- Consider current market conditions and your mid and long-term investment strategy
- You may opt to make your investment strategy more conservative should you need to liquidate a portion of your investments in the short term
- You may also want to make your portfolio more conservative to protect it for your heirs
- Consult with an investment professional to ensure they understand your short and long-term needs
- Look at your current age and stage and determine if your in a position to take an early retirement
The Cashflow you leave behind: Protecting it from creditors and the taxman
- Please review all assets and ensure you have named beneficiaries to protect the assets from being tied up in your estate
- Consider segregated funds you want to avoid paying probate fees on to protect your privacy
- Please ensure names on insurance policies and assets are up to date
- Review or create a will and power of attorney
- Also review and or produce a power of attorney of care
- It would be a good idea to look at who are your executors are and ensure they understand their roles and responsibilities
- Please note; Not all of your assets need to pass through your will
- Create a final letter to ensure your loved ones uphold your last wishes
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Jackie Porter is a Financial Literacy Empowerment Ambassador with a Specialty with Single Women By Choice Or Chance. If you are over 45, single by choice or chance, living in Canada today and are examining the options for your future, Jackie can help you. As a Financial LIteracy Empowerment Ambassador, her my book and empowerment programs will help assist you in designing a life plan that encompasses not only financial goals but also your other life priorities- such as career, relationship and other personal goals.