It's Your Money  

A sign(ature) of the times

In May, in response to the global pandemic, the B.C. government issued two emergency orders that suspended in-person execution requirements for:

  • Wills
  • Health representative agreements
  • Enduring power of attorney documents.

These emergency orders allow legal professionals to assist their clients, especially seniors and immune-compromised people, who wanted or needed to execute these documents, but couldn’t or shouldn’t travel from their homes.

The orders are tied to the provincial state of emergency and will expire when it is lifted.

But in this day and age, when you can sign most other legal documents digitally, why is this only a temporary measure?

Well, good news was announced last week by Attorney General David Eby in the form of proposed changes to the province’s legislation governing wills and estates that would make these provisions permanent.

“This modernization initiative was underway before the pandemic, but COVID-19 has made the reasons for these changes obvious to all British Columbians,” Eby said.

“With this change, lawyers and notaries will no longer have to tell very sick people that there needs to be a personal visit in the hospital, or a court application, before their wishes can be recognized,” he added.

Similar proposed legislative changes are being looked at across the country based on work by the Uniform Law Conference of Canada, which makes recommendations to harmonize and reform laws across the country.

This is great news for British Columbians, as well as other provinces that follow suit.

A recent survey found that 51% of Canadians don’t have a will and it is safe to assume that even fewer have a health representative agreement or enduring power of attorney document.

At the same time, the interest in getting ones’ estate affairs in order has risen dramatically.

A Toronto-based online will service reported a 620% increase in sales in early April vs the same time a month before. A similar spike in life insurance applications has been seen during the same period.

These very important things that many have been putting off for far too long are finally getting the attention they deserve.

Dying without a will risks having your assets distributed according to a provincial formula, which varies across the country. Minor children would go to whoever applies to be the guardian, even if it’s a relative they didn’t like. And pets most often end up in shelters.

It typically takes much longer to administer an estate and often leads to arguments among family members.

If one good thing comes out of the COVID pandemic, it will be that many people are finally taking the time to get their estate affairs in order. And these proposed changes to legislation will make it that much easier to do so.


Save money on a rainy day

With July starting in two more days, many are patiently waiting for summer to finally get started. A lot of people find themselves with a little more free time than usual this year while they sit indoors and wait for the storms to pass.

Good news, I have a simple idea for you to pass some time! Your next rainy-day project is to lower your interest rates on any debt that you pay. It helps to be prepared so during the next big thunderstorm, sit down and get started on a plan.

Before making any calls, you need to do your research. Compile a list of all of your debts and loans including what interest rates you pay on each one. Be sure to confirm which loans are locked in and which ones allow for early or penalty free repayments. 

Go online and find out what the best available rates are for the type of loan you are holding (mortgage, line of credit, car loan, etc.). Request a free copy of your credit score and see if there are any easy ways to boost it up a little higher. 

Once all of your research is done, it’s time to formulate a plan of attack. Depending on the flexibility of your debts, you may need to wait for a certain period of time with some accounts, but many changes can be done right away.  

If you are able to prepay your mortgage, or if it’s up for renewal, your advanced research can be very important. You need to know what others are paying right now. Securing a rate reduction of 0.5 per cent can mean knocking an extra $7,638 off your principal owing on a $500,000 home after five years! People do this all the time, but you often need to fight for it.  

Set up an appointment with your current mortgage provider and start by asking them what options they have for reducing your interest rate. If they don’t come down enough, you can next show them your research with the best options out there and ask them to match it. If they’re not willing to match, it might be time to start looking elsewhere.  

Your approach to your line of credit should be similar. Book an appointment with your lender and ask them what they’re willing to do. The more prepared you are for this meeting, the better your odds of coming out with a lower rate. For those who find the research and meeting preparation too difficult or overwhelming, speak to a certified financial planner to help you build your game plan.  

With credit card debt, you have two main options. Much like above, you can consider contacting the lenders and negotiating rates, but you may not get very far. A better plan could be to construct a debt consolidation plan and pay off any higher interest loans first while making only minimum payments on the rest. The common approach of “paying a bit down on every debt” is hurting you more than you know.  

Regardless of what approach you take, any small interest rate reduction can have a significant impact on your overall finances. Sometimes all it takes is a bit of effort to prioritize which debts to tackle first or moving a higher interest debt to a lower interest solution.   

It’s amazing to me that people will drive across town (and spend a couple of bucks in gas) to save $5 on the price of a small item but won’t put any effort into lowering their interest costs. For the same amount of effort that it takes to save that $5, you could save thousands of dollars per year in wasted interest.  

So on the next rainy Okanagan afternoon, set aside an hour to construct your own interest rate reduction plans.         

Don't spend more money!

I’m going to be really clear on this so listen up – please don’t go out and spend money right now. 

Tiff Macklem, the new Bank of Canada Governor addressed the House of Commons Finance Committee last week and said that “we’re in a deep hole, and it’s going to be a long way out of this hole.” He then went on to say that he has no intention of raising interest rates any time soon. 

That last part is likely all that some people heard. Interest rates are going to stay low for awhile so there’s no need to worry about over-extending on a new home purchase, right? 

Yes, it sounds like borrowing money will continue to be “cheap” for the foreseeable future, but this does not mean you should continue to rack up more debt. 

The Canadian consumer has been the primary supporter of the economy for quite some time now, but the money they’re spending to prop the economy up is not money that they actually have. Instead, Canadians keep taking on more and more debt in order to live a lifestyle that is well above their means. 

Digging our economy out of the mess that it is in (and has been in long before COVID-19 came around) will take some time, but it can’t be the consumer who continues to propel it along as the majority are quite simply broke. Canadian consumer debt is now a staggering 177 per cent of disposable income, and that globally record-setting figure is set to climb further still.  

As things start to reopen and various industries put out promotional offers to lure you in to spend money, it's imperative that you stop and think about what you can really afford. Due to the low interest rates, the monthly payments on that new car, financed purchase item or even a mortgage on a new home might sound “doable” in your monthly budget. But can you really afford it? And will that add to the debt load you are already carrying?

How exactly are you going to save enough for a comfortable retirement if you’re still paying off debt in the later stages of your working years? 

The highest risk category is definitely Canadians in their 30s who are taking on a first mortgage, kids, new cars, etc., all at the same time. But this addiction to debt spreads across Canadians of all age brackets. Everyone needs to start spending a little less.

The downside to this is that the economy is heavily relying on consumer spending to have any hope of a quick rebound but to be quite blunt, that’s not your problem. Your responsibility needs to rest solely on your own family and providing for your future. 

So, if you’re still reading at this point, and not too mad at me for ruining all your planned fun, please take a few moments before you make your next big (or small) purchase to consider what you can really afford. The interest rates are being kept at historical lows so that the economy can do its best to recover, not so that you can go on another shopping spree.


Be wary of market rebound?

Global stock markets have been climbing steadily for the past 2 1/2 months from their late March lows and that rebound came to a screeching halt on June 11 when various markets closed the day down around five per cent on average.

On Friday (the next day), the markets rebounded but only made up a portion of the ground from the previous day’s losses. Is this a minor blip in the continued recovery or the start of a second market pullback? 

While history has shown that many of the strongest growth periods occur immediately after major drops, this rapid rebound has left many wondering why it's so strong and if it will last?

There are certainly many people wondering if investors are getting a bit ahead of reality. Sure, central bankers have responded with overwhelming force to the pandemic, and public health authorities are gradually increasing the re-opening measures – but there is still a lot we don’t know about what comes next. 

At this point, we really don’t know how well contained the virus is and if it will produce a second (or even third) wave. Another wave would very likely re-shut parts of the economy that are slowly restarting. 

The way the markets have surged back to pre-pandemic levels (not the Canadian market so much but U.S. and global ones) suggest investors have all but relegated the idea of a second wave to zero. I would suggest that we don’t know quite enough just yet to make such a call. 

Having said all of that, we have seen many times in the past where a rebound like this directly after a major market downturn does, in fact, last and the markets continue to make new highs. The point is, we don’t know yet and your investment decisions need to take this into account.

In addition, we have growing renewed trade tension between China and the U.S. which could put further strains on company earning outlooks. 

And to add more fuel to the volatility, we have a U.S. election that is just around the corner – an event that will very likely increase market volatility on its own. But it is very important to remember that market volatility surrounding U.S. elections is typically due to investor emotions and not fundamentals and should not sway your investment decisions. 

So, to be clear, I am not suggesting we are definitely going to have another pullback and you should sell everything to cash. But at the same time, I don’t think this is the time to get extremely aggressive with your investment plans either. Like most other environments, the reasonable approach would be to stick to a well diversified allocation that is within your risk tolerance comfort.

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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and took over as board chairman in 2019. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected]

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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