With interest rates higher, GICs have become more attractive as an investment option and a 5-year GIC ladder can be a great addition to your portfolio. GICs can be considered part of your fixed-income allocation and in some cases GICs can even outperform bonds of equal length.
If you’re adding GICs to your investment portfolio then you’ll want to consider building a GIC ladder. A GIC ladder is a common way to invest in GICs.
When investing in GICs, a GIC ladder can help take advantage of the benefits of GICs while reducing the downsides.
GICs are typically locked in for a specific term. This could be shorter-term like 90-days or longer-term like 1-year, 2-years, 3-years, 4-years, 5-years etc.
Laddering GICs will help take advantage of longer-term GIC rates while also improving liquidity with some shorter-term GICs.
When a GIC ladder is working well, there will always be at least one GIC maturing every year which can then be used to purchase a new longer-term GIC. Here’s why you may want to set up a GIC ladder and how to do it…
Life insurance is important, but how much life insurance should you purchase? How much money does life insurance cost? And how can you fit the monthly premiums into your current budget?
These are important questions. Life insurance is an important tool, and it can be relatively inexpensive, but the cost of life insurance can quickly change depending on certain factors.
Life insurance is important when you have people who are dependent on your income. Young families in particular have a high need for life insurance, but at the same time, young families also have a lot of demands on their cash flow.
Purchasing affordable life insurance is an important part of a financial plan and the cost of life insurance needs to fit into monthly spending without causing a lot of stress.
In this post we’ll explore some life insurance costs for a family in their 30’s with a young child. We’ll see how life insurance costs can vary depending on certain factors. We’ll also see how much life insurance costs in a real life situation.
Is it safe to use your HELOC as an emergency fund? A typical emergency fund is between 3 months and 6 months of expenses, but that’s a lot of cash to have lying around!
Cash is the enemy of long-term goals. Holding too much cash makes it more difficult to achieve long-term goals like retirement. The more cash-on-hand there is, the lower the average investment return.
Holding some cash is good. A certain amount of cash-on-hand protects us against unexpected emergencies like a job loss, a disability, a health emergency etc. etc. But holding too much cash is bad.
For homeowners with a certain amount of home equity there is another option. This option allows homeowners to decrease the size of their emergency fund and put more into RRSPs and TFSA sooner. This can provide more investment growth and potentially a reduction in income tax and an increase in government benefits.
Homeowners with a certain amount of home equity could choose a hybrid option, with a smaller amount of cash-on-hand but leaning on a Home Equity Line of Credit (HELOC) for larger emergencies.
But is this hybrid option safe? Is it safe to use your HELOC as an emergency fund? Let’s take a look at why, and why not, to use your HELOC as an emergency fund.
When you’re thinking about your financial future it’s important to consider risk. There are your typical risks, like the risk of losing money with investments, the risk of passing away unexpectedly, or the risk of not being able to work for an extended period of time. These are all common risks we need to plan for.
But there are also other risks too, ones that many of us might not include in our plans. These risks are less common, more speculative, but can be just as damaging. Risks like changes to government benefits, increasing tax rates, or changes to tax-advantaged accounts like the RRSP and the TFSA.
Based on age alone, the TFSA is relatively young, it’s barely entering the double digits. Although it was only introduced in 2009 it has already experienced a few dramatic changes during that time.
Anticipating changes to tax-advantaged accounts is an important part of any financial plan. A good plan should have enough room to absorb a few of these unexpected changes without causing major stress.
To ensure your plan is robust you need to anticipate these changes and understand how they might impact your plans.
In this post we’re going to speculate on a few ways that the TFSA could change in the future. This is pure speculation but it’s a good exercise to understand what changes might be possible in the future and how your plan can absorb them if they were to actually happen.
No financial plan is immune from risk. No amount of planning is going to eliminate risk entirely. In fact, there are many common risks in a financial plan that may cause issues down the road. What we need to do is identify what types of risk a financial plan may face and find ways to reduce risk or mitigate it where possible.
When we talk about risk we naturally assume that means investment risk. While this is one common type of risk, there are also many other risks we need to watch out for.
A lot of these risks can be reduced or sometimes even eliminated with proper planning. For each major type of risk below, we’ve highlighted a few ways to help mitigate the impact it may cause. But even with these tips, its usually impossible to eliminate risk entirely.
A financial plan will typically cover 30-50+ years. Over this time span there are many unknowns that may occur. A good financial plan will be flexible enough to absorb these unknowns and still be able to reach the same goals with only minor tweaks.
This flexibility is important. It’s impossible to eliminate all risk. It’s very likely that even the best laid plans will experience some disruption along the way. Having some flexibility, and knowing where that flexibility exists, will help reduce the stress and impact if the unfortunate were to happen.
If we knew how things would unfold in the future, then financial planning would be easy.
If we knew things like future investment returns and future inflation rates, then that would remove a lot of uncertainty in a financial plan.
If we also knew when we’re going to die, then we could make sure that we spend every penny and “bounce the last check”.
But because of all the unknowns, we have a lot of uncertainty within a financial plan. To create a great financial plan, we have to evaluate and plan for that uncertainty. We have to understand both the average and the extremes. We don’t want to run out of money in the future, so it’s important that we manage this uncertainty properly and avoid making bad assumptions.
Life expectancy is one of those assumptions and it’s a big assumption within a financial plan. Assume a life expectancy that is too short and there could be years (or possibly decades) of meager retirement income.
When it comes to life expectancy, we can’t just assume the average, we need to know how much longer our money needs to last. Is it 5-years past the average, 10-years, 20-years, or more? Hopefully it’s for a very long time.