CHRIS HYLTONCG HYLTON INC.

Financial Planning Workshop

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Disclaimer

The information presented to you today is considered to be general best practices for

personal financial planning. This is not intended to replace qualified advice specific

to your situation.

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Learning objectives

Identifying the 12 things that EVERYONE gets wrong about financial planning

Understanding insurance

Demystifying savings and investments

Wading through the banking and lending challenges

Effective tax and estate planning

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This is your show

Are there any questions that you have now that I can blend in to today’s presentation please?

1.2. 3. 4. 5.

If you think of anything as we go along please ask!

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Twelve financial mistakes EVERYONE makes

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Critical financial planning mistakes

Living paycheck to paycheck

Not working with family members to understand current financial situation

Failing to set financial goals

Not involving children in discussions about money and financial planning

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Critical financial planning mistakes

Loaning money

Lack of an emergency fund

No plan to address income shortfall if primary income earner is unable to work

Lack of a spending limit

Critical financial planning mistakes

Spending to keep up appearances

Under utilizing employee benefits

Financing major purchases with credit

A lack of diversified investments

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Identifying the 12 most common financial planning mistakes is the key to overcoming them.

• Identify these patterns in your own financial planning process

• Begin to create systems or habits to eliminate these 12 common mistakes

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Insurance

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Needs analysis

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Immediate cash needs Ongoing income

MortgageLoans and debtEmergency savingsChildren’s

educationFuneral expensesFinal taxes

Income required to meet monthly expenses Experts recommend

using 60% - 70% of your current annual income

Number of years family would need to rely on this income

Needs analysis

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Types of life insurance

Temporary (term) insurance Provides protection for a specified period of time

and pays out a benefit if you die

Permanent insurance Provides a death benefit for your entire life and

acts as an investment vehicle with a portion of each premium allocated into a cash value account that grows on a tax-deferred basis

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Pros Cons AffordableEasy to purchaseEasy to understandPremiums do not

fluctuate during Term

Benefit amount is predetermined

Premiums will be more expensive if you have to renew

In some cases more than double the cost

Term insurance

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Pros ConsContains an

investment component

Some of the investment portion accumulates tax free

Can access the money during your lifetime

More expensive than term life insurance

More complicated Can yield huge tax

gains

Permanent insurance

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Types of permanent life insurance

Whole life Offers a guaranteed death benefit, fixed annual

premium, and guaranteed rate of return on the cash value

Universal life Similar to whole life but this option does not

guarantee the rate of return on the cash value

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Mortgage protection insurance

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Pros ConsCan help alleviate

financial hardship caused by critical illness or death

Premiums decrease as mortgage balance decreases

May lose coverage if you change mortgage lenders

Value declines over time

Policy exclusions may affect eligibility to claim this benefit

Mortgage insurance

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PROS CONS

Simple and easy to sign up

You just tick one more box on the application

If you buy thru mortgage lender you may be paying too much

Shop from independent insurance broker

Mortgage Insurance

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Critical illness insurance offers a lump sum payment to policy holders that develop a critical illness.

Some critical illness insurance plans offer additional benefits including • Access to

health care experts,

• Counselling services,

• Assistance with activities of daily living.

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Pros ConsFlexibility to

choose how to use the benefit Debt Daily living expenses Home modifications Additional

medication or therapies not otherwise covered

Coverage for select illnesses

Strict diagnostic criteria

Accidental injury is not covered

Premiums can get expensive

Critical illness insurance

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Disability insurance

A typical 30 year old is 4 times more likely to become disabled than die before age 65.

1 in 6 Canadians will become disabled for three months or more before they are 50 years old.

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Types of disability insurance

Short term Provides income

replacement benefits at the beginning of a medically confirmed period of disability

Calculated based on a % of weekly earnings

Benefits typically last 26 weeks

Long termIncome replacement

benefits for a confirmed disability that lasts longer than 26 weeks

Calculated based on a percentage of regular monthly earnings

Can receive benefits for up to 2 years or longer

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Pros of disability insurance

Guaranteed monthly income for as long as the policy holder meets the definition of disability

Covers disability caused by illness or injury

Many disability insurance plans offer additional support such as assistance with returning to work

If you pay the premium, benefit if tax free!

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Cons of disability insurance

Monthly benefit is only a portion of regular monthly earnings

There may be a waiting period during which no benefits are payable

Benefits may be reduced by other forms of income such as CPP disability payments

Policy may have a maximum benefit period Most policies automatically terminate

coverage at age 65, even if you planned to work beyond that age

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Do you need to supplement employer benefits with additional individual insurance ?

Step 1: Confirm coverage available from employer benefits.Step 2: Compare coverage to expenses included in your needs analysis.Step 3: If benefits do not adequately cover expenses, consider purchasing additional insurance.

Important with respect to LTD!

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Savings and investments

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Registered investments

Registered with the federal government for tax purposes

Offer the opportunity for tax-deferred growth

Often subject to annual contribution maximums

Examples include RRSP Tax Free Savings Account

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Non registered investments

Not required to be registered with the federal government

Contributions do not ease tax burden by lowering annual taxable income

Interest earned is taxable

No annual contribution maximums

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Registered Retirement Savings Plan

Anyone under the age of 72 that earns income can contribute to an RRSP

RRSP contributions are tax deductible up to an annual maximum amount

RRSPs can contain a variety of different investments Savings deposits Guaranteed investment certificates (GICs) Mutual funds Equities

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Registered Retirement Savings Plan

RRSP and debt repayment

Some people use RRSPs to repay outstanding debt

In many cases, a financial penalty is applied to withdrawals from an RRSP Withholding tax Income becomes taxable and must be reported to

federal government Contribution room is permanently forfeited once

the money is withdrawn

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Registered Education Savings Plans (RESP) provide the opportunity to save for future education costs.

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Registered Education Savings Plan

Contributions are not tax deductible by the contributor does not pay tax on earned interest

If the RESP is not used by the designated beneficiary, the contributor can use the RESP contributions without having to declare that money as additional income Interest earned is taxable

Lifetime contribution limit of $50,000

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Registered Education Savings Plan

Government contributes, too! RESP contributions may be eligible for additional

government grants via the Canada Education Savings Grant, Canada Learning Bond, or designated provincial education savings program

If the beneficiary does not pursue post secondary education, the government contributions must be repaid

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Tax Free Savings Account

Individuals 18 years and older can set aside money that grows tax free

Annual contribution maximum of $5500

Can still realize contribution limits from past years, even if you are just starting your TSFA now Contribution limits began accumulating in 2009

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Risk tolerance

Risk tolerance is the amount of risk or

degree of uncertainty that you are willing to take in order to meet your financial goals.

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Risk capacity

Risk capacity is an assessment of how much risk you must

take in order to achieve your financial goals.

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High risk Low risk

Potential for high rate of return but no guarantee

Examples: hedge funds, commodities, futures, derivatives, private company investment

Generally offer guaranteed but low rate of return

Examples: savings account, savings bonds, GIC, government treasury bills

High risk vs. low risk investments

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Risk Return Ratio

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Ideal investment portfolio

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Attributes of an ideal investment portfolio

Designed with goals and risk tolerance in mind

Diversified

Easy to understand

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Banking and Lending

Interest rates

Two types of interest rates that can affect your financial plans Interest on savings Interest on debt

Interest rates on debt are usually more important to people because it directly affects how quickly the debt is paid and the actual cost of the debt Interest rates are typically negotiable

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Cash flow

Personal cash flow is a reflection of your money in and your money out. Ideally, cash

flow should remain positive meaning you have more money coming in than money

going out.

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Cash flow

InflowSalaryInvestment incomeMoney from sale of

assets

OutflowMortgage

payments Debt repaymentUtilitiesDaily expensesEntertainment

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Calculate your personal cash flow

Cash inflow – cash outflow = net cash flow

Negative cash flow is a red flag that you may be headed for financial hardship and should be a prompt to have you assess your income and spending to

identify areas you can increase inflow and decrease outflow.

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Debt management

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Types of debt

Mortgage

Car loan

Credit card

Line of credit

Student loans

Personal loans

Overdue bill payments

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Debt can be overwhelming

When feeling overwhelmed by debt, many people choose to ignore debt instead of addressing it

Ignoring debt makes the situation worse by causing Poor credit history Personal bankruptcy Dealing with collections agencies Over paying on interest

Debt repayment

Low interest consolidation loans

Transferring balances to low or no interest credit cards or line of credit

Most banks and companies are willing to negotiate debt repayment options including Interest rates Waiving penalties and late fees Payment terms

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Debt management programs

Professional organizations that assist with debt management and repayment Credit counselling to help develop a realistic and

achievable debt repayment plan Support with creditor negotiations Monthly budgeting support Tools to help track and manage spending Assistance setting financial goals

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Tax and Estate Planning

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Wills

This legally binding document ensures that your estate is allocated to family, friends, and charities as per your wishes and protects some of your assets from taxation

When drafted properly, a will can allow you

to transfer RRSP and RRIF accounts tax-free to a spouse as well as to a child or grandchild who is under 18 years of age 

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Testamentary Spouse Trust

Allows for the transfer of assets to a surviving spouse on a tax-deferred basis

When the spouse passes away, remaining assets are distributed to beneficiaries named in the original will

This type of trust remains unaffected by new marriages or family quarrels

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Allocating resources to family

If your spouse is the sole beneficiary of your healthy RRSP, you can consider making other family members the beneficiary of life insurance policies or other accounts 

Money from different sources may be subject to different tax rules and an account can help you allocate resources so that your family members, and not the CRA, are the sole beneficiaries

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Sharing property

Property that has joint ownership will automatically transfer to the surviving owner upon your death 

Depending on your individual situation, it may make the most financial sense for you to enter into a joint ownership agreement with a spouse, family member, or even a business partner

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Charitable givingIn the year of your death or the preceding year, you can claim up to 100% of your net income as a charitable donation to help ease any outstanding tax liability facing your estate.

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Questions?

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THANK YOU!

Thank you for the opportunity to present to you today!

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About us

Our servicesEmployer benefit

plansTravel insuranceHealth spending

accountsSalary gridsPolicy review and

writingPension plans

Employee wellnessEmployer of choiceCharitable givingCharitable tax

informationEmployee mental

health

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Contact us

#517-7620 Elbow Drive SWCalgary, AB T2V 1K2

403-264-5288 www.hylton.ca800-449-5866 chris@hylton.ca

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