Watch out for the windfall syndrome

A sum of money lands in your lap, perhaps a tax refund or an inheritance, and you’re overcome with the urge to splurge on lavish purchases. That’s the windfall syndrome – if it’s not from your regular paycheque, it’s free money.

In fact, you may experience this very temptation just around now if you’ve already received or are about to receive an annual bonus from your employer. Before you shop for the ultimate home theatre or book a flight to Tahiti, remember that the annual bonus isn’t all that different from a paycheque. It’s a form of income, and it’s taxable.

Quick, name your most valuable asset  

Did you name your house? Your Registered Retirement Savings Plan (RRSP)? An investment account? Your most valuable asset is arguably what funds everything else – your income. It stands to reason, therefore, that your income should be protected. That’s where disability insurance enters the picture. In fact, disability insurance is often referred to as income protection insurance.

Disability insurance provides a monthly benefit when an illness or injury prevents you from working. The most common long-term disability claims in Canada are related to musculoskeletal conditions, mental health and cancer. Musculoskeletal conditions include back pain and arthritic ailments involving pain, flexibility or mobility issues. Other common causes of claims are heart disease and injuries. A Statistics Canada survey shows that one in five working-age Canadians has a disability that limits their performance of daily activities, with 43% classifying their disability as severe or very severe.1

Couples without children approach financial planning differently

When you think of the messaging and imagery in financial media stories and advertising, do you ever get the impression that financial planning is mainly for a couple with three kids, a new SUV and a dog? Yet the latest census tells us the so-called traditional family is no longer Canada’s most common household – that title now belongs to the one-person household.

One hidden demographic is couples without children. Yet, among Canadian households with couples, most provinces have more households of couples without children than couples with children. Nationally, it’s almost an even split between couple households – 51% with children, 49% without children.1

Here’s a look at some of the financial planning issues and opportunities unique to couples without children.

RRSP versus TFSA: Did you ever have to make up your mind?

If you make your maximum allowable contributions each year to your Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA), you won’t face the often difficult RRSP versus TFSA decision. But many families have one or more members who must decide which vehicle is best for their available investment dollars – quite often a lower-income spouse or adult child starting out.

Want to see into the future?

Want to see into the future?

Say that a couple is struggling with a decision about whether to help their child purchase a home. The couple wonders, and worries, if the cash outlay will interfere with their retirement. We often help with this type of financial planning situation – when you must look to the future to make a decision today. In this case, the look to the future is estimating the amount that the couple needs to retire. With that projection, we can ultimately determine how much of a cash outlay the couple can afford.

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