Safeguarding your financial security

Life sometimes has its uncertainties. Major economic events, such as a deep recession, or personal challenges, such as job loss or divorce, can shake our financial stability.

Corporations and governments establish contingency plans to protect against unexpected calamities, but individuals can also put a plan in place. Here are three ways you can help safeguard your financial security.

Be properly insured

Life insurance provides financial protection for your loved ones if you pass away unexpectedly; disability insurance helps replace your income if a disability or injury prevents you from working; and critical illness insurance helps you cope financially if you’re diagnosed with cancer, heart disease, stroke or another covered illness. You’ll have insurance tailored to your needs if you purchase any of these products from an insurance specialist.

However, if you only have insurance from group life and health benefits through your employer, you might have gaps in your coverage. In some cases, even the maximum life insurance benefit is not enough to protect your family’s future. Your disability insurance coverage may not meet your needs when it comes to the waiting period before benefits begin, maximum monthly amount, duration of benefit payments or definition of disability. Critical illness insurance might not be part of your plan and, even when it is provided, you may prefer a larger benefit amount or the choice to include more covered conditions.

You can always consult an insurance specialist to see if you need to supplement your group benefits with individual insurance.

In case of emergency

A common guideline is to save enough in an emergency fund to cover three to six months of living expenses. The fund would typically hold high-interest savings, money market funds or redeemable guaranteed investment certificates (GICs). This way, if you face a job loss or another unexpected financial crisis, you won’t need to tap your retirement savings—which could mean paying tax or selling when the value is down.

When you think of these savings as a way to manage risk, having an emergency fund can bring you peace of mind. You won’t worry about an unexpected financial challenge, and the money is always yours.

However, some people have a different perspective. They see a large, low-interest emergency fund as idle money that’s better invested, becoming retirement savings. Anyone with this view is wise to at least have an emergency plan. For example, you can create a modest emergency fund for smaller unexpected costs and use a home equity line of credit to cover a major financial crisis.

Managing your money

Whether or not to follow a budget is a personal decision—and there are several approaches you can choose from to track your spending and saving. For example, the 50-30-20 budget allots 50% of your income to essential needs, 30% to personal wants, and 20% to investments and paying off debt. Others are content with the reverse budget: for each pay period, you simply pay yourself first, dedicating a specified amount to savings and investments, with no need to track expenses.

Should you ever face a financial crisis, you may prefer a budgeting system where you monitor and control your spending. If the crisis involves a loss of income, please discuss the situation with us. Beyond budgeting, you would need to determine when and how to save for goals such as education costs or your retirement, and how to stay on top of managing debt.

Insurance in retirement

You don’t actually need life or health insurance in retirement, but you may benefit from having coverage.

Critical illness insurance. You can have critical illness insurance coverage during your retirement years, but you must purchase the policy by age 65.

Health insurance. Retirees can purchase private health insurance that covers dental care, vision care and various other health services.

Long-term care insurance. You can choose long-term care insurance that covers care at home or in a residence. Another option is to set aside funds that would cover personal or nursing care expenses if needed.

Life insurance. Permanent life insurance can meet different estate planning needs, such as covering the tax payable on estate assets, funding a trust for a child with a disability, making a charitable gift or equalizing inheritances. For example, one child may receive vacation property or your business, while another child receives the life insurance proceeds