As much as we’d like to believe that if we stick to a solid financial plan all will work out, things often beyond our control may derail our plans. For lack of a better word, luck, both good and bad, plays a role in our financial future.
Relationship Breakdown – There are lots of statistics to choose from, but according to ottawadivorce.com, “it’s expected that 37.7% of all Canadian marriages will end in a divorce before the 30th anniversary.” Second marriages are even more likely to fail and the failure rate of common-law relationships is even higher. A financial do-over can be emotionally and financially devastating, and set back and derail financial plans for many years or even decades.
Periods of Unemployment – It is recommended that we have a minimum of three to six months of income set aside for emergencies. A short interruption in employment can wipe out these savings very quickly. All too often, a lifestyle is established based on 100% of an income, assumed to remain at a certain uninterrupted level, “if life were like that we wouldn’t need visa”. However, life isn’t like that and a financial strain is swift with even a short period of unemployment, that emergency fund can disappear.
Accident and Sickness – According to the 1985 Commissioner’s Individual Disability Table, a 35-
year old has a 34% chance of becoming disabled for a period of 90-days or longer before age 65. Ask yourself, can you afford to take a 90-day vacation, starting right now? How about 6-months or a year?
Critical Illness – Statistics compiled from various sources for the same 35-year old indicate a 26% chance of suffering from cancer, heart attack or stroke before age 65. While survival rates from these conditions continually improve, the financial impact can be severe.
Death – With the average life expectancy about age 80 (slight differences by gender), this means statistically we have about a 50-50 chance of living to this age. Death at younger ages when starting a family can mean financial catastrophe.
Investment Returns – Extremely low current interest rates and several memorable market corrections
have affected just about everyone’s retirement savings. Employer pension plans are not what they used to be, either. Low interest rates have contributed largely to the high debt levels Canadians are servicing today.
The reality is life is not fair. Some will experience more good luck than others and vice versa. There are some bad luck events we can be prepared for while others, like divorce, may just have to be dealt with when they occur.
John worked at the same job for 35 years and benefited from a very good pension plan. He was fortunate to remain married for the entire time and did not experience any unemployment or disabilities. Paul worked in the same occupation for 35 years but with several employers and used his savings when unemployed. He was disabled for two years in his thirties and only accumulated a small pension. Insurance paid a benefit while he was sick and some of his RSP savings provided a guaranteed income. The end result for these two is worlds apart. With the correct type of insurance products and amounts it didn’t have to be. – M Dumond
Come and talk to one of our Insurance Specialists we can help you decide what coverage is best suited for your needs.