I recently finished reading a novel, “The Whistler”, by one of my favorite authors John Grisham. The book is made up of 42 chapters plus an Epilogue. These chapters are little stories that help make up a whole adventure.
It strikes me that our lives can be likened to that of a great novel. It has been my observation that we all have chapters or stages of life that we go through.
The formal financial planning processes that Certified Financial Planners help clients plan through are: Starting out, young family, established Ffmily, retiree and single.
Over the years we have helped clients within these five categories. Here are some real life scenarios that those with a plan were able to use to transition from one chapter to another chapter within their life’s novel. The stories are real but the names and genders are purposely vague so as to protect the identities of my local Kootenay clients.
Real Life Story #1 – Being healthy is not a guarantee that you won’t get sick!
In 1998, a small business person chose to purchase two Disability Insurance policies. One policy covered the client’s Business Overhead Expenses, in the event that this person could not perform their regular duties due to illness or injury. The other disability policy insured this person’s T4 income. This past spring, the client suffered a medical event. After the waiting periods were fulfilled, the client received the financial payments while he was off work for 6 months. The client’s business received the benefit of $10,000 per month which helped meet payroll, rent and utilities and the client also received the benefit of 3,000/month tax free from the personal coverage. The payout of benefits were significantly more than the premiums paid! Our client is back to work full time and the business continues to prosper!
Real Life Story #2 – Life is fragile!
This past summer, a couple that was struggling financially, got the bad news that an illness which had been in remission, flared up again with a vengeance. The couple, who had often complained about paying the life insurance premiums, were very thankful that they had not cancelled the coverage. After a few short months, the sick spouse passed away. The insurance paid out to the surviving spouse and as a result, all debts were paid off and the remainder of the policy was invested. The income from the policy covers the majority of the family’s fixed living costs including the surviving spouse’s life insurance premiums and children’s RESP’s contributions. The departed parent’s hope was that all the children would be able to get a degree or a diploma at the institution of their choice. The planning that this couple put into effect fully underwrites their hope for their children’s future education.
Real Life Story #3 – It’s amazing how money can just pile up!
This fall, a couple reviewed their financial plan with me. Each of them had rough starts in their early personal lives. Like many great love stories, once they found each other in their early 40’s, they were able to get focused on their big future, rather than their unfortunate pasts. They started a business and after a dozen years, they were able to become debt and mortgage free two years ago. This couple did something rare after they paid off all their bills… they invested that “new” money, rather than increasing their consumption.
The mortgage and debt payments that they were obliged to pay amounted to $1460 per month. Assuming all things stay equal, over the next ten years, they should be able to save an additional $226,712* over what they had already saved!
(*This assumes payments of $1460/month, 10 years, 0 $ present value, 5% net of taxes and fees and solving for future value).
I hope that these three little vignettes are helpful and inspiring to you!
The team at AC Dyck Finnancial wishes you and yours a wonderful holiday season and all the best for 2018!