How to save for your first home: Four steps

How to save for your first home: Four steps

It may seem overwhelming to save enough for a down payment on your first home, but with a solid plan it can be done.

Recently, my boyfriend and I received the news no one likes to hear from their landlord: “I’ve decided to sell.” So, in a few months we’ll be packing up our place and moving to a new home: another rental.

If you rent, you probably know that little pain you feel every month when a significant amount of money flies out of your account into thin air, never to return again.

So, with the thought of signing a new lease in mind, I asked my boyfriend, “How long before we can stop paying off someone else’s mortgage and start investing in our own?”

If you’re a professional 20-something, buying a place of your own is becoming increasingly difficult. With graduates leaving school with more and more debt and housing prices continuing to climb, home ownership can seem further and further out of reach.

With some hard work, my boyfriend and I have managed to pay off the student loans we’d racked up from university and started saving with the idea of someday owning a place. But what’s next?

So many questions: How do we get to our goal? Are we saving in the right way? Are we saving enough? Is there something we’re forgetting? For an over-thinker like me, the questions quickly started to mount up. We needed advice!

Four steps to home ownership

Cue my financial advisor, Sara Zollo¹ from Sun Life Financial. She helped put things into perspective and, with her great advice I was able to create the ultimate first-time homebuyer’s preparation plan:

1. Figure out how much it will cost you

Sure, you may want a three-bedroom, detached home downtown, but can you afford it? Be realistic. “Work backwards to figure out what size of asset you’re able to take on,” instructs Zollo. “In other words, what kind of monthly mortgage payment could you handle and what would you be approved for?” You can work with a mortgage broker to figure this out. The size of the mortgage you can take on, plus what you can save for a down payment, equals the price of the house you can afford. If you want more house, you’ll have to save more for the down payment.

But before you start budgeting and planning based on that number, don’t underestimate the additional costs buying a home entails. Remember realtor and lawyer fees, not to mention taxes, can add up. Many individuals also forget that buying a new place generally means furnishing one, which isn’t cheap. “Ensure you have a clear idea of what these fees are going to be and, as a rule of thumb, round up,” says Zollo. “It’s better to overestimate the costs!” Once you have that information, you’re ready to budget.

2. Make a budget and save, save, save

Sure, you’ve been saving for the last couple of years, but this will likely be the biggest purchase of your life, so it’ll take more than putting away birthday money from Grandma! Work with your financial advisor to make a plan and begin saving right away; every cent counts.

To save, Zollo suggests mixing it up: “An RRSP is always a good spot for the first $25,000 if you qualify for the First Time Home Buyer’s Plan and a TFSA can help, since the funds that accumulate there are tax sheltered.”

Figure out how much money you will need to save monthly to attain your goal on time, and create an automated transfer if possible, either monthly or bi-weekly, depending on your pay period. I strongly believe in the motto “out of sight, out of mind,” so I’ve opted into my workplace group RRSP. That way the money goes into my RRSP before I can even see it.

3. Plan for emergencies

How many times have you heard someone say, “Don’t put all your eggs into one basket”? You’ve saved up enough for your down payment and now you’re ready to buy, but throwing every penny of your savings into a mortgage might not be the best idea.

“Real estate is a great investment, but the importance of diversification never gets old,” says Zollo. She recommends ensuring you have some savings left over in a TFSA, where it can easily be withdrawn, tax free, in case of an emergency. After all, a broken furnace in your new home won’t be a cheap fix, and now it’s your responsibility, not your landlord’s!

4. Surround yourself with trusted professionals and take the plunge

You’ve estimated costs, budgeted and even managed to save a little extra in your “just in case” account. Now you’re ready to find that perfect place. Work with your mortgage broker and financial advisor to make sure you haven’t missed anything and once you’ve found “home,” have a lawyer review everything before you sign on the dotted line.

After you’ve completed the process, you’ll likely be a little dumbfounded to think that you just spent all of that money. But you should also feel insanely proud of yourself: You set a goal and, with a lot of hard work and dedication, you accomplished it!

Five reasons to stay in Canada this summer

With the loonie struggling against the U.S. dollar, there are lots of reasons to plan a domestic summer vacation. Here are five great ones.

In an effort to cheer us all up, I’m going to ignore the fact that the Bank of Canada lowered its target for the overnight rate by another 25 basis points last week because it, too, believes the economy contracted in the first half. I won’t mention that oil fell back below $50 a barrel on Monday, or that gold, too, is now sliding, taking the S&P/TSX Composite index along for the ride.

Instead, welcome to this edition of the Today’s travel blog.

Top five destinations for the stay-in-Canada vacationer:

1. Montreal’s Just for Laughs Festival runs to July 28. Great lineup this year, featuring Norm Macdonald, Wanda Sykes, Mike Myers and more.
2. Vancouver’s 25^th anniversary Celebration of Light offers up fireworks, music and more, from July 25 to Aug. 1.
3. Folklorama is a great folk music festival in Winnipeg that goes Aug. 2 to 15. Celebrating its 46^th year, the event has evolved into a world-class celebration of multiculturalism.
4. Come visit us in Toronto for Dusk Dances, Aug. 3 to 9 in Riverdale’s Withrow Park. This much-loved outdoor dance festival attracts thousands each year, including my family and me. Additional dates are scheduled in Peterborough, Hamilton and Pickering, Ont.
5. Fredericton hosts its 25^th annual Harvest Jazz & Blues Festival, September 15 to 20. Check out Michael Franti & Spearhead, Colin James, Galactic and more.

Were this still the Today’s economy blog, I might make an argument in favour of these excellent events given the weak state of the Canadian dollar relative to its U.S. counterpart, and the benefit of spending our hard-earned loonies here at home. But then, you probably don’t need a travel writer to spell that out for you.

Receiving insurance benefits for retirement.

MUST READ! Call me to talk about your plan. 226-779-2433

The number of Alzheimer’s patients is expected to explode in the coming years as boomers get older and begin to lose their ability to think and act for themselves. This reality, suggests Montreal-area living benefits specialist Tim Landry, is a big reason why long-term care insurance is going to gain more traction in an industry that so far hasn’t been so keen to get on board.

“I primarily sell disability, critical illness, and lon…g-term care,” Landry told WP. “If I had to quit two and only keep one I’d keep long-term care.”

To explain his rationale for choosing long-term care over the others, Landry discussed the situation in the U.S. and Canada.

In the U.S. the LTC business faced three specific problems that hurt the insurance carrier’s ability to generate profits.

“When the products [LTC] were established and the pricing was set up, interest rates were higher than they are today. Nobody believed we’d see 1% interest rates. So, the insurance company’s not making enough money on their investments.”

The second problem is they assumed the lapse rate would be much higher than the 1 per cent that actually do. Because the 3-5% projection didn’t pan out, they were paying out more than they had coming in.

The third problem was that they allowed an additional trigger which doesn’t exist in Canada. If your doctor said you needed LTC, it made it far easier to claim and the insurance companies were flooded with claims.

Here in Canada we have a far more difficult problem that’s tied to our belief in socialized medicine.

“What’s hurt Canada is the absolute belief because of Medicare that everything is covered. The government will cover me. Everybody believes that and the government has made it abundantly clear ‘we aren’t covering long-term care,’ we don’t cover care that maintains. People don’t understand it. They don’t understand the costs.”

UCCB and what it means for you

With the implementation of the new UCCB it is a perfect time to consider investing in your child’s future (RESPs etc).

How can you benefit?

http://www.cra-arc.gc.ca/bnfts/uccb-puge/menu-eng.html

What should you hold inside an RESP?

So you’ve decided to open a Registered Education Savings Plan (RESP) to save for your child’s education. What next? When you meet with an advisor to set up the plan, you’ll be asked how you want your contributions to be invested. There are two options:

1. Fixed-income investments:

These include short-term bonds, guaranteed investment certificates and cash held in an investment savings account. Why are they are called “fixed”? Because they offer a fixed rate of return. They pay you a set interest rate and provide you with the security of knowing your investment is guaranteed not to drop in value. The downside? When interest rates are low, the amount you earn on your contributions is also low.

2. Equity investments:

These include stocks, which are publicly traded shares of a company or corporation, and equity mutual funds, which are pooled investments consisting of a group of stocks selected by a fund manager. They are called “equity” because they provide you with a percentage equity ownership. This means you will profit if the companies you’ve invested in go up in value. Historically, equity investments have provided the highest long-term rate of return. The downside? Their short-term value can go up and down. The advisor who sets up your plan can help you determine the best mix of investments for your particular situation, based on:

• The age of the child you’re saving for. Equity investments can be a good choice for a younger child’s plan, as the money won’t be needed for a while and they provide the greatest opportunity for long-term growth. But they’re not so good for teens who have only a couple of years until college, since their short-term value can fluctuate. For older kids, fixed-income investments may be a safer investment alternative.

• Your personal risk tolerance. This is something only you (with the help of your financial advisor) can determine. You may be asked to complete a questionnaire to help determine a specific investment ratio that corresponds with your personal comfort level.

Simply put: Selecting a balanced mix of investments for an RESP, and working with a financial advisor to gradually shift the balance of investments from equity over to fixed-income as you approach the date when the funds will be withdrawn, can help ensure the plan will grow and the money will be there when it’s needed.

More about paying for your child’s education:

• Registered Education Savings Plans (RESPs), simply put (Video)
• Five smart ways to save for your child’s education
• RESPs: What happens if your child doesn’t go to university?
• The cost of college and university in Canada
• How to find a scholarship

Get more bright ideas for back-to-school.

Summer fun, Canadian style

Summer fun, Canadian style

The Brighter Life weekly roundup of recommended reads about money, health, family, working life and retirement:

You know it has to be summer in Canada when it hits 28^o in Whitehorse (as it did on June 29). That said, our summers are short, so smart Canadians know how to make hay while the sun shines. Check out these ideas for fun from across the country:

Show off your stylish Dad bod
Canadian Dad blogger Chris Read of Ottawa shares some of his family’s favourite summertime activities. Nothing fancy here, just lots of tried and true fun: pool parties (for rocking that Dad bod), road hockey, community fairs and BBQs, bike rides and a lemonade stand.
What to do now that summer is finally here!

How to take a vacation without leaving Vancouver
If you’re lucky enough to live in Vancouver (or if you’re planning a visit there this summer), here are some great ideas for fun close to home, courtesy of the Savvy Mom blog, as well as some suggestions for family day trips in the area. For instance, take the ferry to Bowen Island, try out the Sea to Sky Gondola in Squamish or cool off at the Cultus Lake Waterpark.
Summer staycation

Entertaining the troops in the Rockies
The Family Adventures in the Canadian Rockies blog has five great, inexpensive ideas for keeping your kids busy, including going geocaching in a Calgary park or natural area (nature meets high tech: genius!), hiking and biking the Paskapoo Slopes and hitting the beach within the city limits at Fish Creek Provincial Park.
DIY summer camp on a budget

How to stay on budget while having fun
Toronto’s Common Cents Mom blog offers eight ways to enjoy the summer without splurging (too much). Once you’ve decided how much you can afford to spend between now and September, stretch your funds by cashing in rewards card points, grabbing a booklet of discount attractions coupons from a tourist office and taking advantage of what’s on offer at your local library. At certain branches, that includes the Sun Life Financial Museum + Arts Pass, which will get two adults and up to five kids into fun spots such as Black Creek Pioneer Village, the Toronto Zoo and the Ontario Science Centre – for free!
Create a summer budget and have fun

Quitting your job? Don’t quit your health insurance

If you’re planning to leave your job, you might want to think about continuing your supplementary health and dental insurance.

You may be retiring, changing jobs or striking out on your own. Whatever the reason for leaving your employer, under most group plans, you’re insured only as long as you remain part of the group being covered. So generally speaking, if your job ends, your coverage ends, too.

However, if you’re leaving because you’ve been laid off, your benefits may continue for a few weeks. In some cases, you can get individual coverage to replace your group insurance if you apply within a specified time, usually 90 days.

Even if it’s your decision to go, you may be able to make sure you’re still covered: Check with your benefits provider to find out whether you can switch over from your group plan to individual coverage. You may be able to include your spouse and dependent children in your new plan, as long as they had been covered under the group plan with the company you’re leaving, and there may be no medical requirements (such as a questionnaire or an exam) as long as you sign up as soon as your group coverage lapses; terms and conditions vary among insurance providers.

Provincial plans don’t cover all health-care costs

As Canadians, we benefit from insurance coverage through our provincial governments. But it’s important to remember that government insurance doesn’t cover many medical expenses included in a group or individual supplementary health and dental plan.

Health-care costs vary from province to province, but generally speaking, most provinces do not cover:

• routine eye exams for those aged 19-64
• glasses or contact lenses
• prescription drugs outside a hospital setting
• acupuncture, physiotherapists, naturopaths and nutritionists
• regular dental services, orthodontia and dentures
• anything other than a standard ward room in a hospital

Expenses such as dentistry, prescription drugs, para-health services (such as physiotherapy), ambulance, medical equipment and in-home nursing can add up very quickly. That’s where supplementary health insurance can come in.

Quebec: All residents of Quebec must be covered by prescription drug insurance through the Régie de l’Assurance Maladie du Québec (RAMQ) or through group benefits plans. An individual plan does not take the place of a group plan. You cannot opt out of RAMQ because you have an individual plan.

Don’t forget disability, critical illness and long-term care insurance

Think carefully as well about continuing some of the other kinds of coverage you may currently have, especially disability, critical illness and long-term care insurance. This is particularly important if you decide you want to work for yourself and don’t have access to a supplementary group plan. Disability insurance replaces a portion of your income if you become disabled and unable to work. Critical illness insurance will help you protect your savings in the event of certain serious illnesses, while long-term care insurance will provide you with funds for longer-term care expenses later in life.

Contact 226-779-2433 to speak with an Advisor.

More ways to protect your health and your finances.

Money for Life : Options for care as you age

Money for Life

Newly Wed Guide

Taking that trip down the aisle ranks as one of the biggest life-changing events most of us will ever experience. So, if you’re in the midst of preparing for an upcoming wedding or have recently gotten married, now is a good time to step back and do some careful planning.

Check out the Brighter Life newlywed guide for bright ideas to help you start off life together right. Plus, here are some handy tips and tools to help you with everything from planning the big day to managing your finances, so you can live happily ever after:

	How to cut wedding costs The average expected cost of a Canadian wedding in 2014 was $31,685. But you can save big with a little creativity. How to plan a debt-free wedding		Remember safety first Safety isn’t the first thing that comes to mind when planning a wedding. But if something bad happens, it can spell disaster. Tips for planning a safe wedding
	Fatherly advice for newlyweds Brighter Life’s retirement journey columnist, Dave Dineen, shares a note he wrote to his 24-year-old son, two days after watching him marry his high-school sweetheart. How to live happily ever after		Planning your financial future You don’t need to be born with a silver spoon in your mouth to build wealth. With the right products, you can grow and protect a healthy nest egg. Five financial products you should own
	Buying your first home If you’re applying for a mortgage to buy a home, it’s a good time to also review your insurance coverage. Buying a home? Consider life insurance		Protecting your valuables That sparkler on your left hand can carry a lot of financial as well as sentimental value. What would you do if you lost it? What you might not know about jewellery insurance
	Tips to avoid fighting over money Learn five smart ways to help you and your spouse reach agreement when it comes to financial matters. How to agree with your spouse about money		How to live happily ever after The follow-up to Dave Dineen’s article providing fatherly advice. His daughter-in-law shares tips on how to make it all work, a year after her wedding. Living happily ever after

Get more bright ideas for starting life together right.