Tag Archive for: Estate planning

5 Ways to Avoid a Personal Financial Crisis

Here are some tips on what you should do to avoid a personal financial crisis:

1) Have an emergency slush fund

You should have at least 3 months of living expenses put away in case the worst happens. I am not talking about putting it in your mattress or in a coffee can. These funds should be liquid and fairly easy to access quickly but not so that you can dip into them & buy something if the whim strikes you. My wife and I have used an ING investment savings account, you could do something similar or open a Tax Free Savings account, that way your emergency fund is tax protected.

2) Know your income and expenses

Most people might know how much they make but have no idea how much they are spending. When I got out of University I worked as a personal trainer for a few years. When I took on a new client, I would have them keep track of what and when they ate for a week to give them a better idea of what is really going on in regards to their health. Your finances are no different, take a 30 day period, create an excel spreadsheet for example and track all income and expenses. Then sit down and take a real good look at it and decided if it is needed or not. Trim the fat and put the saving’s into your newly developed emergency fund.

3) Diversify your income

What I mean by this is don’t put all your eggs into one basket. Develop a secondary income stream incase something were to happen to your day job. Turn that passion or hobby into a business. Invest in real estate. Build a residual income stream by joining a network marketing or direct selling company. Make sure that what ever you do, it’s something that you are passionate about and will allow you to add to your bottom line. The other advantage is that your new business could become a great tax deduction, check with your accountant to make sure that it is structured properly.

4) Give your self an immediate 18-20% return!

How is this possible you may ask? It’s easier than you may think. Do it by paying off your debt. Start with your higher interest debt, your credit cards which are anywhere from 12%-18%, or if it is a department store card, it could be as high as 24%. Next your car payment, unless you have a 0% loan, you are probally paying 7-9%. Lastly your mortgage 3-7%. If you need a detailed plan on how to do this quickly, let me know I have designed quite a few of them.

5) Lastly make sure that your affairs are in order.

I am not trying to sound morbid, but we don’t live forever. Have a proper estate plan, have health insurance for your and your loved ones, and have an insurance policy big enough so that the one’s you leave behind are not faced with an immediate financial crisis. For this point I suggest consulting with your personal estate lawyer as well as your financial planner. If you don’t have one I can suggest for legal advice or here are two good options for financial planning.

Bonus point….and this should be a no brainer.

To achieve anything on this list, you should have a plan. Start with a clear picture of the current state of your finances. How much time do you have between where you are now and where you want to be? With the help of one of the financial planners above or your own, develop your plan and work your plan. Remember to be flexible in your approach, know what’s working or not, and be willing to make the necessary changes to insure that you achieve your goal.

*Note that I receive no gain monetary or other wise from promoting the services or products in this post.

As always, feel free to contact me if you have any questions and I look forward to hearing from you.

Cheers,

Pat

p.s- You can find me on Twitter,Linkedin, Facebookand friendfeed.

Your last day….

Yup, you read that correctly. What would you do if today was your last day? I am not sure if this article was inspired by watching “The Bucket List” last night or hearing Nickelback’s song “If today was your last day”. There is a sad truth that we all have to face is that none of us get out of here alive. However we can make a difference while we are here. You can make an impact (in the world of business, the arts or for a cause), but better yet you could leave a legacy.

Leaving a legacy is a much better move than leaving your family holding the bag. That is what could happen if you leave pre-maturely intestate, that is what they call it when you die without a will. What could also happen in this case is you could also make the government your largest beneficiary. Here is the alternative, get in-touch with a good family lawyer to help you do up a will. It is actually a relatively simple and painless process. At this point you may think that’s all there is to it. However I know this from personal experience of having lost both my Mom and my wife’s Mom, that there is more to be considered.

Life insurance, yes life insurance. As exciting as that sounds it is necessary if you have dependents and or debts that exceed the total of your assets. At least that is what most insurance salesman or financial planners would tell you. If this is the case then they are leaving out something very important. The other reason you should consider insurance is to offset any potential estate taxes.

Picture this, you have worked very hard all your life and have built up a sizable nest egg and have very little debt. You have thought ahead and prepared your will and even have insurance. However your insurance policy is old and has not been updated and your nest egg has grown very well over the years. What happens when you pass is your will goes into probate and the end result is your dependents will get what is left after the government takes a huge chunk for estate taxes. So the moral of this story is, get a will and talk with a financial advisor or insurance expert to make sure that you have adequate insurance to provide for your family and to offset any potential estate taxes.

This article was written for the sole purpose of illustrating that estate planning should be part of any complete financial plan. Live each day as if it were your last. Find joy in what you do, see the good in others and pass it on.

As Always, I look forward to hearing from you.

Cheers,

Pat

p.s- You can find me on Twitter,Linkedin, Facebookand friendfeed.