Would you fail a liquidity test too?

The inspiration for this article comes from two sources. One the article about BCE takeover falling apart and the other today being Black Friday in the US. At first glance you may have a hard time figuring out how these two events are connected, however upon closer inspection they are essentially about the same thing.

The Ontario Teachers Pension Plan take over of BCE (Bell Canada Enterprise) quickly evaporated this week thanks to a 5 line clause in their agreement. The basis of that clause was a solvency test which they failed, in layman’s terms, their debts outweighed their assets. Black Friday, the day where retailers hope to finely get into the black (profitability).

Take a look at your own life, if you were faced with a life emergency and were forced to liquidate everything, would your debts outweigh your assets? Answering the following questions will give you a better idea.

Do you own your own home or do you rent?

Did you use 100% financing to purchase your home?

Are you leasing your car, truck or van?

Do you have money put away for a rainy day? The rule of thumb is 3 months salary.

Are you saving for your retirement? If not you should start and soon. See my friend Steve and think about direct deposit so you would not miss it. Retirement may come sooner than you think and the government may not have any money left ( thanks to all these bailouts) to subsidize your retirement with OAS or CPP.

The point that I am trying to make is this, do you own your stuff or does someone else? If you rent you are helping someone else build equity. If you bought your home with zero down (100% financing) you run the risk of not being able to get what you paid for it if you were forced to sell it if your local market is now depreciating. Also if you leased your vehicle you also run the risk now more than ever of having to pay more than it is worth at the end of  your lease to keep it.  

There is no better time than now to take a look at your own personal financial situation. Call my office today for a no obligation debt analysis so you can see where you are at and to get an opportunity to get a plan to eliminate all your debts in a very short period of time.




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