Home - Financial Freedom

On Job Security And Preparing For The Worst

By Robb Engen | March 10, 2013 |

The funny thing about job security is that everyone thinks they have it until they don’t. Most of us can’t imagine a scenario where we’ll get laid off until something unexpected sneaks up on us.

In 1993-94, Alberta Premier Ralph Klein set out to eliminate a provincial debt of $23 billion. I was only 14 and too young to understand the impact of Klein’s budget cuts.

After a decade of pain, closing schools and hospitals and laying off thousands of public sector workers, the debt was finally paid off in 2004.

Alberta Budget 2013

Fast forward 10 years later and Alberta is back in debt and faced with similar financial challenges.

The latest provincial budget was released last week and, as a University employee, I was particularly interested in the funding announcement for post-secondary schools.

Premier Redford had made it clear that post-secondary institutions could count on a 2% increase in their operating grants for the next three years. That was before the province discovered they’d be short $6 billion in revenue this year.

Now all bets were off. Universities scrambled to make plans for a worst-case budget scenario, a 2% decrease in funding.

It turned out to be a nightmare scenario. Funding was cut by $147 million – or 7.3%. This is going to be ugly.

Expect the unexpected

Job security is no guarantee these days. That’s why it’s important to stress test your finances against the worst case scenarios, and then test them even further against a nightmare scenario. You never know what might happen.

While you may never be completely prepared for a layoff or other financial disaster, there are certain things you can do to mitigate the risk.

I’ve built in a few financial cushions to help ease the fall if things go bad.

Cash reserve – Call it an emergency fund or an opportunity fund, it doesn’t matter. What matters is you have access to a cash reserve that can help you through a period of unemployment. I’ve got $15,000 in a high interest savings account with ING Direct.

Extra mortgage payments – I’m not a fan of taking a mortgage payment vacation, but I’m putting an extra $1,100 per month on top of my regular mortgage payment. If we were faced with a financial challenge I would suspend the extra mortgage payments and add that back to my monthly cash flow.

Saving and Investing – It would be great to be able to live off my investments but unfortunately my portfolio is only churning out a few thousand in dividends per year. I’d put an end to my RRSP and TFSA contributions if I were laid off. I’d also stop adding to my cash reserve. That would free up $2,500 per month.

Side Income – Blogging started out as a fun hobby but it’s also been a good source of secondary income. If I were to get laid off my full time job I would look to expand my online business by increasing the content on Boomer & Echo and picking up another freelance writing gig.

Final Thoughts on Job Security

It’s not pleasant to think about layoffs and worst case financial scenarios.

Most of us like to believe we’re good at our jobs and that we provide enough value to our employers that they’d never consider letting us go.

Sadly, that’s not always the case, especially in the face of sweeping budgetary cuts like those just announced by the Alberta government.

I’ve got a good financial cushion in place so that, if I do lose my job, I can take the time to find the right opportunity and not be forced to accept the first job that comes along.

How confident are you in your job security?

Are Road Trips Really Cheaper Than Flying?

By Andrew @ She Think's I'm Cheap | March 8, 2013 |

Canadians love to escape the cold, dark and slushy days of winter in favor of warm, sunny destinations. One popular option is Florida. With it’s beautiful beaches, water parks, golf courses, theme parks and more, the state bursts at the seams with Canadians in the winter.

The path to Florida is well worn with lots of daily flights and families taking road trips. The decision to drive south is usually influenced by price. The perception is that it is more expensive to fly to Florida than it is to drive, but is this true?

Driving

To drive round trip from Toronto to Orlando, you will be looking at about 4100 kilometers over 40 hours, that’s a lot of driving!

Contrast this with about 10 hours including 2 flights and check in.

On the cost front, there are many variables to consider. First of all, your car’s fuel efficiency plays a part in the cost equation. There will be a big difference in cost between an efficient midsize car and a gas guzzling SUV.

We’ll also have to factor in meals, a room in a hotel, and even the cost of taking extra time off work to drive the 40 hours. Also, if you have kids in the car, they are likely to get bored and restless after 3-4 hours which will not make for a fun journey.

Flying

There are fewer costs to consider when flying south; there’s the cost of the flight along with the cost of a rental car to get around with once you reach your destination.

The US is a car loving nation, public transit is simply not an option in most places. For those going to Disney World, there’s an airport shuttle service which might eliminate the need for your own car.

The comparison

Here are the costs for two adults and one child to either drive or fly from Toronto to Orlando. The flight departs Saturday March 30^th and returns Saturday April 6^th.

In order to drive and still have the same amount of time, we need to add two additional days onto the road trip scenario, one on each end.

Driving

Car Make/Model	2012 Toyota Camry 6cl City: 21mpg Hwy: 30mpg	2012 Toyota Sienna 6cl City: 16mpg Hwy: 23mpg	2003 Ford Expedition 8cl City: 12mpg Hwy: 16mpg
Gas Cost	$303	$407	$586
Hotel Cost	$209	$209	$209
Meals	$120	$120	$120
Extra days off	$756	$756	$756
Total	$1,388.00	$1,492.00	$1,671

As you can see, fuel efficiency makes a sizable difference here. I used a website called GasBuddy.com to estimate the cost of the trip based on the different car types.

The US government runs a great site called fueleconomy.gov which has a database of fuel economy details for thousands of cars.

You can also have a little fun sorting by best or worst cars in terms of mileage.

Did you know a Bugatti Veyron gets around 10mpg or 28 litres per 100km?! Don’t think I’ll include that one in the comparison.

You’ll also need to fuel yourself, not just the car! I roughly estimated $120 for meals for two adults and one child over both days of driving. This includes lunch on the road both days, one dinner and some snacks.

Given the 40 hour trip length (20 hrs per day) you’ll need to sleep somewhere.

North Carolina is a popular rest stop along the way, a decent hotel will add roughly $200 to the trip for two nights.

While I haven’t assigned a dollar figure to it, don’t forget about the added wear and tear on your car. After driving 4,000km you’ll at least need an oil change!

One of the most overlooked factors to consider in driving is the time involved. By taking the time to drive, you’ll need to add an additional two days to your trip in order to have the same amount of leisure time in Florida.

For two people both making $65,000 per year, those extra days are worth over $700!

Flying

	Air Transat	SunWing	AirCanada
Flight	$900	$1,116	$1,230
Midsize Rental Car	$475	$475	$475
Total	$1,375	$1,591	$1,705

At this time of year, flying to Orlando can be cheap or expensive. If you are travelling during March Break, prices may be up to 50% higher.

The table above shows the price for two adults and one child to fly round trip from Toronto to Orlando from March 30th to April 6th with 3 different carriers. The end of March isn’t peak season so prices are more reasonable.

Since you won’t be driving your own car down south, you’ll need to pick up a rental to get around. A midsize car will cost some where between $450-$600 depending on the rental company and type of car. I used expedia.com for the comparison.

What about Buffalo?

For those of you thinking that it might be cheaper to fly out of Buffalo – a common tactic Ontarians use to get a better deal – you’ll be surprised to know that this option is far more expensive.

A flight for two from Buffalo to Orlando on these dates costs $1400!

The conclusion

In this case, flying and driving carry roughly the same cost. One of the big factors here is the value of your vacation days.

If only one spouse works or you have so much vacation time you can’t use it all this could vary significantly. You’ll have to ask yourself “how much do I value my time?”.

While the costs are similar, there is far less headache if you fly. Driving really becomes cost effective when you have a family of 4 or more or if you want to head south during the peak season for March Break.

So next time you’re thinking of taking a road trip to Florida to save some money, make sure you do your homework and consider the options!

Andrew Martin is a personal finance and investing blogger from Toronto, Ontario with a background in technology and a passion for travel. His blog, She Thinks I’m Cheap aims to help Canadians make more money by sharing facts, stories and advice.

5 Misconceptions About Retirement Planning

By Boomer | March 6, 2013 |

Are you planning to retire soon? Everyone is concerned about ensuring a good income in retirement, but, according to many surveys, very few are really doing much about it.

Here are some popular misconceptions about retirement planning that will give you something to think about.

You can get by on government pensions

Yes, you probably can, but you might not enjoy life very much.

According to Service Canada, the maximum CPP benefit (2013) is $1,012.50 per month, with the average being $528.49.

Related: Do We Need To Beef Up Our CPP?

Combine this with the maximum OAS payment of $546 per month, GIS of $165 per month (single, income under $16,560) and you’ll be provided with little more than subsistence income.

You need less money in retirement

Financial professionals always bandy about the statement that you’ll need 70% of your pre-retirement income – but this may give a false sense of security.

The only way to know with some degree of certainty what you’ll need is to go through your own spending patterns and plans.

It’s true that employment and child raising expenses may decrease, but what are your plans?

Do you hope to travel? Do you intend to play more golf, and does that entail a local club membership, or a condo in the South? What about future medical needs?

Your future lifestyle (and its cost) might surprise you.

A paid-off home is a good source of retirement capital

A principal residence is likely a substantial investment, but it may not be a good source of future cash flow.

Consider the strong sentimental attachment most people have to their homes. Having to move out to raise capital would be a major step.

Household expenses can be high and many people think to lower them by purchasing a smaller residence and investing the remaining sale proceeds.

However, your home’s value and saleability will fluctuate. Most recently, the general price trend in many areas has been on the down side.

Consider realtor’s fees, closing costs and moving expenses and your anticipated nest egg may not be as big as you think.

Your new home may come with additional unexpected expenses, such as condo fees or higher travel costs.

Other strategies such as taking out a Home Equity Line of Credit or a Reverse Mortgage may give you the cash flow you need, but they need to be researched carefully.

Retirees don’t need insurance

Insurance is not just for the young these days. It can be used for many purposes in addition to protecting dependents from the untimely demise of the family breadwinner.

Many wise investors use life insurance to provide cash on death to pay for capital gains tax liabilities. Other seniors use insurance products to draw tax-efficient income and then leave a substantial estate. Insurance can have a role in charitable giving.

Finally, newer products such as long-term care and critical care insurance may be appropriate.

Retirees should not invest in equities

This old chestnut needs to be put out of its misery. In the ‘60s, a retiree needed to plan on providing retirement income for say, 10 to 15 years.

He or she likely had a company pension plan and good savings habits. GICs and other fixed income investments providing secure income but limited growth opportunities were just fine.

Today, life expectancies have grown dramatically. Moreover, retirees are living healthier, more active lives – which is likely to cost more money.

Financial advisors warn about the danger of outliving your assets. To offset this danger, a common planning horizon for retirement income now is to age 90.

Continued growth of assets to meet this challenge is important and the prudent use of equities is an excellent way to provide it. No other financial asset has historically matched the performance of stocks.

Short-term volatility should not be overemphasized, even in an income program for seniors, especially when your total time horizon may be as long as 30 years or more.

« Previous
1
…
450
451
452
453
454
…
597
Next »