Author: CPF

Term life insurance – advanced saving techniques

Term life insurance – advanced saving techniques

You’re looking for term life insurance, so you’re scouring the web running quotes from different websites. Comparing the quotes and trying to pick the cheapest, right? But what if those quotes are not indicative of the least expensive premiums you could pay? What if there 

Budgeting and Cash Flow

Budgeting and Cash Flow

By: Joe Barbieri (Joe the Investor) Summary This series has described budgeting in 2 main parts. The first part is building your budget accounting for the income sources and expense sources which can be fixed or variable in nature. The budget is broken down into 

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Disability Insurance

Disability Insurance

What Is Disability Insurance?

When it comes to insurance, Canadians simply do not have a good enough understanding of what their needs and options are. Insurance can be both confusing and boring, meaning that you likely have not invested the time to research what coverage makes the most sense for you and your family, or what risks you remain exposed to. While it’s highly likely that you have heard of life insurance, you may not have heard about disability insurance.

I am sure that you realize how important your income is, but have you taken the time to think about how your life would change if you no longer received a paycheque? The purpose of this guide is to help you better understand how you can use disability insurance to protect your income in the event of an injury or illness.

So, what is disability insurance? It is an insurance contract designed to replace a loss of income in the event of an injury or illness. A more suitable name may be income protection or paycheque protection.

While many may think of a disability as a freak accident that caused you to never work again, it is quite the opposite. The most common form of claims are mental health issues such as depression and anxiety. This is closely followed by musculoskeletal issues such as back and neck pain. Many times, these types of disabilities do not prevent you from working altogether, however they may cause you to work part time or at a reduced income. A good income protection plan will pay out while you are still working in these modified roles, to top your income back up.

Your Ability to Earn Income is Likely Your Most Important Asset

Ask yourself, how important is your income to you and your family? If you still depend on your income, you may find that your ability to work is likely the most valuable asset you have.

Based on your annual income, here is how much you could earn cumulatively over your lifetime (by the time you are 65 years old).


*Assuming a 2.5% increase in income each year.

We all know the story about The Goose that Laid the Golden Eggs. The story is about a poor farmer and his wife who had no money for food or clothes. After several days of starvation, the farmer decided to go hunting for food. He came across a goose, who was too small to satisfy his appetite. He brought that goose home and to their surprise, it laid a golden egg. He took that golden egg and sold it for clothes and food. The next day, that same goose laid another golden egg, which in return they used for more food. That goose continued to lay golden eggs every day until the farmer and his wife got greedy and decided to kill the goose, thinking it was full of golden eggs. After they cut open the goose, they learned that they made a mistake as there were no golden eggs inside. The farmer and his wife returned to poverty.

When it comes to insurance, the golden eggs represent your house, your car and other valuable assets you may own. Most of these which you already insure. The goose represents your earning power, which is the financial means to provide for yourself and your family. What’s more important to insure, the goose or the golden egg? I agree, it’s the goose and I sincerely encourage you to invest the time to ensure that your income is adequately protected. The risk of disability is very real, and the financial impact can be devastating.

What happens if you suffer an injury or illness that prevents you from working or earning the same level of income that you currently are accustomed to? It’s this paycheque that allows you to pay for the necessities such as a roof over your head, food on your table and shoes on your feet. It’s also this paycheque that allows you to go out for dinners, enjoy your hobbies and take vacations. For many of us, it’s this paycheque that affords us the lifestyles we live, and we couldn’t imagine having this source of income eliminated from our lives.

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Personal Bankruptcy

Personal Bankruptcy

Series by Victor Fong Introduction: Finding Debt Relief and Rehabilitation Bankruptcy is a scary word. It conjures up images of losing your home, destroying your credit, and other unpleasant thoughts. But it can provide relief from a crushing debt burden, so for some people it 

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Index Investing

Index Investing

Written by John Robertson Part 1: What is a Stock Saving for the future is very important, but savings alone can make reaching your financial goals very hard. If every dollar you want to spend in the future – say, for retirement – you have 

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Understanding Critical Illness Insurance

Understanding Critical Illness Insurance

Understanding Critical Illness Insurance

By Glenn Cooke


Critical Illness insurance seems pretty straightforward – if you get a critical illness, you get paid a flat benefit. Unfortunately when it comes time to claim, consumers often find that they weren’t covered for what they though they were.

There’s also a number of important policy attribures that don’t get discussed that can lead to misunderstandings as to what’s covered and what’s not. In particular there’s a simple sales phrase used to sell critical illness which is “If you get cancer, you get paid a benefit. If you don’t, you get all your premiums back’, something that’s not nearly as ‘true’ as a consumer might initially believe.

In the following pages we’re going to take a more fact-based approach to critical illness insurance in Canada. This will give you a better foundation for your purchase of critical illness insurance.

We’ll do so by breaking the problem down into two steps:

  1. How Much Critical Illness Insurance
  2. Best Type of Critical Illness Insurance

Following these two steps, in order, will ensure that we’ve purchased the best insurance coverage available.

It will also help in background understanding if you’ve read our Understanding Life insurance ebook prior to going through this one.

Catastrophic Financial Loss

Critical Illness insurance is often sold based on emotion. The fear is that we get cancer or have a heart attack. The payoff is a cheque. This connection is why critical illness insurance is called ‘cancer insurance’ or ‘the cancer lottery’ in the insurance industry. While using fear to self insurance works like crazy, it can lead to incorrect insurance coverage. Ask yourself, if you get cancer, why do you need $100,000? If you don’t have an immediate answer to this, you likely are leaning too much towards an emotional purchase instead of an insurance purchase.

To avoid this, we’re going to introduce a concept I call Catastrophic Financial Loss. We’re going to use this phrase to ‘test’ our insurance purchases. If we fail this test, it indicates we are not looking at the right thing.

  1. Catastrophic – if we are using insurance to cover a financial loss, the amount of the loss should be huge enough to be life altering – or catastrophic. By contrast, consumer warranties on electronic items are not really insurance. A $500 phone loss shouldn’t be catastrophic for most of us. A $100,000 loss on the other hand is absolutely a catastrophic loss.
  2. Financial – for insurance to make sense, a loss must be financial. This is opposed to emotional. Take for example the sales phrase I mentioned above – “If you get cancer, you get paid a benefit. If you don’t, you get all your premiums back”. Getting your premiums back – is that a strictly financial decision? Or more of an emotional one? In most cases, it’s an emotional decision. If that’s your motivation, be cautious and evaluate.
  3. Loss – Mathematically, lotteries and insurance work the same way. A large group of people pool their money. A random event occurs (your numbers come up, or you get cancer) and the recipient of the event receives a payout from the pool. The difference between a lottery and insurance is in the intent – a lottery increases wealth. Insurance means you suffer a loss and the insurance puts you back to where you were; it preserves wealth. Lets say you’re looking at critical illness insurance to pay for out of country medical costs (a common sales approach). Is that a loss? Turns out that it’s not – if you don’t have the money for out of country medical costs, then critical illness is creating this wealth and this is now a lottery. That doesn’t mean you shouldn’t purchase critical illness, it does mean you should pause and evaluate your assumptions.

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Life Insurance as an Investment

Life Insurance as an Investment

Introduction The financial triangle has a variety of stages – cash flow, insurance, retirement savings, estate and tax planning, and speculative investing. Using life insurance as an investment falls squarely in the upper estate and tax planning level. That means that you should only start 

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Understanding Life Insurance

Understanding Life Insurance

Introduction Life insurance is confusing to many consumers. What product is best? Should I get cash values? Is life insurance a good investment? It’s overwhelming and difficult to know even where to start. In this e-book we’re going to clear up that confusion. We’re going 

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It’s RRSP Season in Canada, here’s why you need to start saving now.

It’s RRSP Season in Canada, here’s why you need to start saving now.

It’s RRSP Season, and here’s why you should contribute NOW.

It’s February in Canada, which means it’s RRSP season once again. Every year we can save money in RRSP’s, and receive a tax deduction for our contributions. The tax deduction alone makes this a great thing, but it’s not the only important part of your retirement savings.

What is possibly the biggest factor in your retirement savings isn’t your interest rate earned, or your investment strategy. It’s your TIME. Starting to save earlier has a huge impact on your end goals – far more than most people realize. Let me illustrate.

Let’s take Canadian RRSP contributions people A and B. Both are 20 years old. They earn 5%.

Canadian A saves $1 each year from ages 20-29 (so for 10 years).

Canadian B saves $1 each year from ages 30-64 (so for 35 years).

How much do they have at retirement? Get ready……almost the same amount. At age 65:

Canadian A has $91.

Canadian B has $94.

No substantial differences in their retirement lifestyle between those two numbers.

Now lets see what happens if they both earn 7%:

Canadian A has $207.

Canadian B has $147.

Canadian A, who started early and only saved for 10 years has noticeably more money at retirement than B who saved for 30 years.

The point? Start saving now – today. Don’t wait another year. The time factor in long term investing is huge.

But there’s another hidden point here – fees on your investments. Let’s compare A and B, but against themselves at different interest rates.

Canadian A earns 5% until retirement. At retirement they have $91.

Canadian A earns 7% until retirement. At retirement they have $207.

Wow. I’m not going to advise you on how to ‘pick’ investments focused on higher returns, because higher returns alone is bad (you need to balance returns with risk). But there’s a relatively easy way to increase your rate of return on your retirement savings.

The answer is fees. Mutual funds and similiar investments charge fees on your savings. We’ve already seen this comparison but lets look at it again.

Canadian A earns 7% and pays 2% in fees. Ultimately they are earning 5%. At retirement they have $91.

Canadian A earns 7% and pays 0% in fees. At retirement they have $207.

In this example, if they eliminated 2% fees, they would more than double their retirement savings for the same amount of money they deposited into their retirement savings. That’s almost unbelievable – but it’s also true. This is why unbiased experts and Canadian financial advocates recommend that you attempt to minimize fees on your retirement savings.

The 2% difference in fees isn’t an arbitrary example. Mutual funds often charge in that range, while other investment types may offer fees closer to 0%. Shop around and make sure you’re paying the lowest fees available.

Here’s the summary. Start saving now, right now. Doing so will have dramatic impacts on your retirement lifestyle. And watch your fees, small fees can have a huge impact on your retirement as well.

5 Simple Ways That Personal Loans Help You

5 Simple Ways That Personal Loans Help You

Personal loans come in handy for all sorts of purposes. They can make things simpler and even help position you so that it’s easier to get another loan in the future. Would looking into the options for MagicalCredit personal loans help you with some kind of financial