Power Of Attorney: Why It’s So Important

By Boomer | October 20, 2011 |

Although it’s grim to think about being incapacitated by illness or an accident, it does happen and it’s best to be prepared just in case.  When you appoint a person with “power of attorney”, you trust that person to make decisions for you in case you’re unable to because of illness, accident or absence.

You can appoint you partner, an adult child or a friend as long as they are willing to act on your behalf and are trustworthy. You may even prefer to select an impartial power of attorney from a trust company.

Here’s why it’s so important. Without a power of attorney, no one can sign legal documents or cheques for you. This means bills can be left unpaid, and your dependents may go indefinitely without the benefit of your financial support.  Your assets will be locked up.  If you have people depending on you, there’s nothing they can do except apply to the court for the power to act, unless you’ve given someone legal permission to take care of your financial business.

You don’t need a lawyer in most provinces to appoint someone.  You can even sign a power of attorney document at your bank for your accounts there.  A notary can offer a more encompassing one.  It’s a good idea to have a professional attorney from law firms like Legalzoom review the document to ensure that everything’s clear and you haven’t missed anything.

Be careful whom you appoint and how much power you give to your attorney.  A power of attorney is a very powerful tool and gives permission to the appointee to do whatever you can do, except make a will.  You can give unlimited power or it could be restricted to a period of time, type of property or specific conditions.

Be aware that a power of attorney is void upon your death.

Living Wills

A power of attorney for property takes care of your property.  A living will takes care of you.  It’s a document that outlines life-support measures you would or would not accept, or other details regarding your medical care in case you’re unable to make decisions for yourself.

Living wills do not have full legal status in some provinces and the rules can very by province.  Without a living will, decisions concerning your body and your life could be made by a provincial government agency or by medical professionals.

Bury Me Out On The Lone Prairie

Don’t let the people you love try to guess how you’d like to leave this world.  You may not want to think about your funeral but if you do, you’ll spare others the pain of making what should really be your decision.  When my father-in-law passed away there was a disagreement as to whether he wanted to be cremated or buried in the family plot intact.  It caused a severe rift in family relationships.  Be sure to include this information in your will.

Pay Now, Die Later

You can plan your funeral in advance so that when you die and your family is in mourning, they will know exactly what you wanted.  You can arrange everything in advance and pre-pay your funeral.  Your will should contain all the details and costs so that no one has to guess what has been done and what still needs to be done.

It’s important to think about these things because whatever you do to lessen the pain of your death for the people you care about is a loving and generous act.

11 Steps To Financial Freedom – Step 5: Set Your Top Three Goals

By Robb Engen | October 19, 2011 |

After reading an article called 11 Steps To Financial Freedom in the latest MoneySense magazine, I thought it would be interesting to go through each of these steps one-by-one and share my results on this blog.  Each week I’ll go through one of the 11 steps to financial freedom, with the intention of creating a complete financial plan by the end of the series.

Over the past month I have prioritized my goals, determined my net worth, recorded my cash flow and compared my spending to my goals.  Now it’s time for step 5: set your top three goals.

Set Your Life Goals

According to the MoneySense article, your financial goals don’t just happen.  You make them happen.  This step requires you to assess where you want to be five, ten and twenty years from now and answer some big questions, such as where you want to live in retirement and when you want to stop working.

Goal setting is a big part of my financial plan, and there is no time like the present to get started on some financial goals that may take 5-20 years to develop.  I’ve written before about my medium term goals as well as my long term goals which I called my retirement plan.

Here’s a quick recap of those goals:

  • Upgrade our house (completed in August 2011)
  • Triple our total investment portfolio in 5 years
  • Increase RRSP and TFSA dividend income in 5 years
  • Increase net worth by $300,000 in 5 years
  • Retire at 55 with $44,000 in annual investment income and $13,000 in annual pension income (bridge benefit)
  • Receive full pension income of approximately $62,400 starting at age 65.

Action Step #5: Set Your Top Three Goals

For this step we needed to fill in “Worksheet 5-Your life and financial goals” and “Worksheet 6-Your top three goals.”  Earlier in this process my wife and I sat down to examine our goals and how they fit in with our spending and saving patterns.  Now we needed to list each of our top four or five goals and assign a dollar value to each, as well as a time frame for achieving the goal.  After comparing how closely our goals align, we listed the three most important goals that we both agreed on, in order of priority.

Achieving balance is important to us when developing our financial plan.  Just over three years ago my wife was diagnosed with Multiple Sclerosis, and since then we have completely changed our philosophy in terms of our financial priorities and life balance.  We ended up starting a family right away and decided that my wife would stay home full time to look after our daughter.  We felt this was the best decision for her long term health as well, and so far she hasn’t had any major issues with her MS.

Long term planning  is always difficult for us because we just don’t know the impact MS will have on our lives in 10-20 years.  Still, it’s important to plan and with that in mind we set out to determine our three most important goals:

Take a 4 week vacation in Ireland

They say you should travel before you get married and start a family, and that certainly was our intention.  Unfortunately life got in the way for us and this trip was put on hold indefinitely.  Instead of dreaming about this vacation we want to make it a reality.   Between airfare, accommodation, car rental, food and entertainment we are budgeting $12,000 for this trip.

We want our daughter to be older so she can enjoy the trip as much as we will, so we’ve set an 8 year deadline to complete this goal.  That will require savings of $1,500 a year, which I will set aside in our high interest savings account.  Time off work won’t be an issue since I get 5 weeks of holidays and should be able to take 4 consecutive weeks off in the late Spring.

  • Goal – Trip to Ireland
  • Cost – $12,000
  • Deadline – 8 years
  • Obstacles – n/a
  • Action steps – Save $1,500 a year for 8 years

Pay off mortgage in 15 years

Looking back at my previous goals, I found it interesting that I was focused more on investing and less on paying off our mortgage.  But that was before we upgraded our house and took on a mortgage nearly twice the size of our last one.  Even though interest rates are low, we want to pay this mortgage off as quickly as possible.

We started with a mortgage of $315,750 and took out a 5-year term at the variable rate of 2.20% interest.  We’ve already increased our mortgage payments by $500 a month, which reduced our amortization to 16 years.  In order to pay off our mortgage sooner we’ll have to make additional contributions at some point.  An extra $100 a month should get us there.

  • Goal – Pay off mortgage
  • Cost – $108,000 (extra payments)
  • Deadline – 15 years
  • Obstacles – As a single income family, we have many competing savings priorities.
  • Action steps – $7,200 a year in extra payments

Retire by age 55

We often joke about freedom 55 being just a dream that happens only in television commercials.  But with my defined benefit pension, I’ll reach my maximum benefit by the time I’m 57.  Retiring by age 55 is not out of the question when you consider that our mortgage will be paid off by the time I turn 47.  For the next 8 years we can turn our attention towards maxing out our RRSP and TFSA with the extra $20,000 a year that we were spending on our mortgage.

While I’m still unsure on what to do with my RRSP, I like the fact that this approach really gives us the ability to catch up in what should be my highest earning years.  I’m still targeting a retirement income of $60,000 – $70,000 a year.

  • Goal – Retire by 55
  • Cost – TBA
  • Deadline – 23 years
  • Obstacles – Changes in pension plan.  Change of career.
  • Action steps – Pay off mortgage in 15 years.  Determine how much money we will need to save outside of my pension in order to reach our target income in retirement

This was an eye-opening exercise for us and one that we found extremely helpful as we put our plan together.  It gives us something to strive for, and I think that focusing on these goals gives us a nice balance of family/lifestyle, debt reduction, saving and investing.  Every year something is bound to come up that impacts our finances in the short term, but we can achieve these goals if we stay committed to our financial plan.

Next week we’ll develop our strategies with step 6: chart a path to your goals.

Does Your Job Define You?

By Boomer | October 18, 2011 |

One of the first questions a new acquaintance will ask you is, “What type of work do you do?”  Do you define yourself by what you do for a living?  Are you a salesperson, teacher or office administrator – or do you work in sales, teach or run an office?  Who are you when you’re not working?

Why Do We Work So Hard?

A Statistics Canada survey reported that one third of Canadians between the ages of 25 and 44 consider themselves workaholics.  It’s perceived as a necessity.  The rise of dual income families has as much to do with financial need as it has with choice.  A dual income household is not a guarantee of wealth.  Many working parents do not earn enough to hire a nanny or finance professional daycare for their children.  The earnings of a single person – or the single breadwinner of a family – has not kept up with inflation.  In fact it has declined.

Another reason for feverish work schedules is job insecurity.  Intense competition leads to longer hours and higher levels of stress when employees strive to distinguish themselves from one another, either in the eyes of their employer or potential clients.

People who work reduced hours pay a huge penalty in career terms.  It’s taken as a negative signal about their commitment to their employer.

Workaholics are less likely to seek personal fulfillment in their work.  Instead they come to see work simply as a way to pay the bills, a grind they must endure each day, sometimes settling for the first well-paying (albeit miserable) job that comes along.

Job Satisfaction

Given that we spend half of our daylight hours at work (and more like ¾ in the winter) it’s astounding that only about half of us get personal satisfaction from work activities.  If this is true, think of the huge untapped potential in the Canadian workforce that could be unleashed in the form of energy, commitment and productivity if more employers could figure out better ways to motivate their workers.

Many workers are looking to embrace ways of earning money that allow the most freedom and control such as self-employment and working for smaller businesses.

Technology is now allowing many of us to do what we have wanted to do for some time – be mobile, independent and have control over our own schedule and workspaces.  More people work from home.

Personal fulfillment on the job is seen as desirable as, or more so, than salary alone.  Many workers increasingly desire certain rewards including freedom to dress as they wish, take breaks when they wish, take regular vacations and work independently in a manner they find most comfortable.

To what degree do you feel your identity is symbolized by your employment?  Or do you identify more with activities outside of work such as family, religious institution or volunteer work for meaning in your life?

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