Family Formation & Housing

For young couples starting families, buying their first home and/or other real estate. Covers mortgages, credit cards, interest rates, children’s education savings plans, joint accounts for couples and the like.

12 Insights on Building Emergency Funds for Family Financial Security

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Photo by Puwadon Sang-ngern on Pexels

In the quest for financial stability amidst major life milestones, we gathered wisdom from Finance Experts to CEOs, compiling twelve diverse strategies.

From establishing a safety net to applying the 50-30-20 budgeting rule, these professionals share how they’ve successfully built and maintained emergency funds while pursuing family formation and homeownership.

 

 

 

  • Establish a Safety Net
  • Adopt Frugal Living Practices
  • Set Achievable Saving Goals
  • Automate Savings Allocation
  • Implement Disciplined Saving
  • Live Below Your Means
  • Reduce the Temptation to Spend
  • Diversify Income with Side Hustles
  • Maintain Emergency Fund While Home Owning
  • Strategize with Automatic Transfers
  • Manage Spending, Build Runway
  • Apply the 50-30-20 Budgeting Rule

Establish a Safety Net

As a seasoned finance expert, I understand the critical importance of establishing and maintaining emergency funds, especially when navigating major life milestones like family formation and homeownership. Here are some strategies I recommend for achieving financial security while pursuing these goals:

Building the Safety Net: We suggest a reserve that equals three to six months’ worth of living costs, which acts as a buffer for matters like falling sick, fixing a car, or losing employment. You can begin by making small deposits into a high-interest savings account and then building on it gradually. Save everything!

Goal-Oriented Saving: After setting up an emergency fund, the next step is to save towards your dream house. Consider putting money into Fixed Deposits or Recurring Deposits, as they have guaranteed returns and help inculcate discipline, too. Remember to stay consistent! — Arifful Islam, Finance Expert, Sterlinx Global LTD

Adopt Frugal Living Practices

My husband and I have built and maintained emergency funds by continuing to employ financial tactics we had to use early on in the pandemic, when COVID-19 lockdown-related issues resulted in his salary being temporarily reduced and my hours being cut back.

We were adamant about the need to continue adding even a small amount to our emergency fund since we had purchased a home only the year before. Thanks to friends’ and family’s experiences, we were well aware of the ever-present chance of a home-related emergency.

We decided on a two-pronged approach: We lived beneath our means by greatly curtailing our travel, cultural, and dining-out budget, finding free and low-cost alternatives to enjoy closer to home, as well as cooking new items at home.

We also became savvy consumers. We started comparison shopping for budget items, both big and small. Our biggest savings came from comparing car and home insurance companies: When we switched to a new company, we saved over $700 a year.

Given today’s inflation, these tactics still serve us well. — Michelle Robbins, Licensed Insurance Agent, Clearsurance.com

Set Achievable Saving Goals

The strategy I followed for building my emergency fund took a decent amount of time. My plan was to cover three to six months of living costs. I was well aware that saving that much money would take time. So, I started with simple goals like saving $10 a day.

I somewhat understood that the savings goal depends on income and expenses. So, I tried to cover essential expenses first, rather than transferring all my income to savings. I paid off costs such as housing, utilities, transportation, food, and credit-card/loan payments before anything else. Then, I added up my monthly spending and multiplied it by six months. I got the estimated total amount I need to save as an emergency fund.

I decided to keep my funds in a high-yield savings account. These types of accounts are convenient to access and offer good interest rates. As a result, your funds will grow gradually. However, I suggest choosing banks and credit unions insured by the National Credit Union Administration (NCUA) or the Federal Deposit Insurance Corporation (FDIC).

Last but not least, it is better to use a direct deposit service to transfer your money into your bank or savings account. Contact your bank and activate the direct deposit service. It would be wise to split direct deposits and put a certain amount in your emergency fund and the rest in your checking account. — Loretta Kilday, DebtCC Spokesperson, Debt Consolidation Care

Automate Savings Allocation

I’ve always prioritized building an emergency fund because it’s crucial for my family’s financial security and peace of mind. Early in my career, I adopted a simple yet effective strategy: automate and allocate.

I set up automatic transfers from my business income to a separate high-yield savings account every month. Initially, I aimed to save at least six months of living expenses, which I gradually expanded to cover an entire year.

Treating this fund as untouchable for everyday expenses became a safety net that allowed my wife and me to comfortably pursue family goals like buying a home. To balance this security with growth, I also invested in low-risk, highly liquid bonds and money market funds for a portion of the emergency fund. — Michael Sena, CEO and Lead Analytics Consultant, Senacea Ltd.

Implement Disciplined Saving

Building and maintaining an emergency fund has been a cornerstone of ensuring my family’s financial security, especially as we pursued significant goals like family formation and homeownership. From my experience, the key has been a disciplined, proactive approach to saving, paired with a clear understanding of our financial priorities and potential emergencies.

Initially, I established a strict budgeting process where setting aside money for an emergency fund became a non-negotiable monthly expense, similar to mortgage or utility bills. I targeted saving at least three to six months’ worth of living expenses, a common benchmark that provided a safety net capable of covering unexpected events such as medical emergencies or job loss.

To stay disciplined, I automated the transfer of funds from our checking account to a high-yield savings account specifically designated for emergencies. This automation ensured that the savings occurred without requiring active management on my part each month, reducing the temptation to skip or divert these funds toward other uses. Choosing a high-yield account also helped the fund grow faster through interest, maximizing the efficiency of our savings.

As our family grew and our financial situation evolved with goals like buying a home, we reassessed our emergency fund needs regularly. For example, when planning for homeownership, we increased our emergency savings target to account for potential home repairs and maintenance, which are typically more costly than many renters anticipate. This adjustment was crucial in maintaining our financial security after transitioning to homeownership.

Throughout these phases, maintaining open communication about our financial goals and progress has been vital. Regular discussions with my spouse ensured that we were both aligned on our savings goals, understood the reasons behind them, and could track our progress together. — Michael Dion, Chief Finance Nerd, F9 Finance

Live below your Means

The secret to building wealth is living below your means. You need to be clear on the income coming in and the expenses going out. Pay yourself fi rst. The results of compound interest are powerful.

As your income increases, lifestyle inflation creeps in. Lifestyle creep occurs when an individual’s standard of living improves as their discretionary income rises and former luxuries become new necessities.

Avoid the urge to spend more as you make more. Instead, save more. Invest the difference. As you get a raise, give yourself a raise. Increase your 401(k) contribution. Add to your emergency fund. Your future self will thank you. — Melissa Pavone, Director, Investments CFP, and CDFA, Oppenheimer & Co. Inc. Continue Reading…

Managing a Windfall: Sudden increases in Net Worth and how to handle them

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Image courtesy Pexels/Tima Miroshnichenko

By Devin Partida

Special to Financial Independence Hub

The initial excitement of suddenly receiving an inheritance, lottery win or large bonus is palpable, presenting what seems like endless possibilities. However, this euphoria gives way to the daunting reality of managing significant amounts of money.

You face complex decisions that involve managing your new wealth responsibly and planning for your future in ways you might not have considered before. This transformative moment calls for careful consideration and strategic financial planning to ensure your sudden wealth leads to long-term security and success.

The Reality of Sudden Wealth

Many people believe sudden wealth is a one-way ticket to lifelong happiness, but the reality is far more complex. Despite the number of U.S. adults in the upper-income tier rising from 14% in 1971 to 20% in 2019, managing significant financial resources introduces many new challenges.

You might think money will solve all your problems, but it often brings issues, including increased responsibility, potential isolation and the need for meticulous financial planning. Instead of viewing wealth as a simple solution, recognize it as a valuable tool requiring savvy management to benefit your life. This approach ensures you handle your finances wisely, considering the intricate balance between enjoying your wealth and maintaining it for the future.

Understanding the Psychological Impacts

When you receive a sudden windfall, confusion and stress quickly cloud the initial rush of joy as you face unexpected financial decisions. People sometimes refer to this whirlwind of emotions as “sudden wealth syndrome” — a phenomenon that can lead to anxiety, poor judgment and hasty financial decisions.

Taking deliberate steps is crucial to maintaining emotional stability. They include the following:

  • Pause and allow yourself time to adjust
  • Consult with a financial advisor and tax expert
  • Seek support from professionals or support groups

These help you manage your new circumstances wisely and guarantee you make the most of your windfall without emotional turmoil.

Practical steps to manage a Windfall

Create a budget tailored to your new financial situation to manage a sudden windfall adeptly. Start by calculating your net worth to gain a clear understanding of where you stand money-wise. Before making any major decisions, place your funds in a temporary, safe location like a high-yield savings account to ensure they remain secure while you explore your options.

Additionally, take the time to educate yourself on financial management and investment strategies. Enhancing your knowledge in these areas will empower you to make informed decisions that align with your long-term financial goals. This proactive approach will help you maximize the benefits of your newfound wealth.

The Importance of a Structured Financial Plan

A comprehensive financial plan is essential to manage and sustain your wealth effectively. Harness the power of technological advancements like AI and machine learning, which can predict upcoming financial trends and assess investment risks precisely. Moreover, seek the expertise of professional financial advisors who can tailor a plan specifically suited to your unique needs and goals. Continue Reading…

Capital Gains Tax Increase? This new Calculator helps Corporation and Trust accounts

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By Ted Rechtshaffen, CFP

Special to Financial Independence Hub

As you may know, the recent Federal Budget announcement had a few important changes that can have an impact for some, but certainly not all.  The most discussed has been the increase to the capital gains tax.

The most directly impacted are those with investments in a Corporation or a Trust.  Not only will they face an increase in taxes on every dollar of capital gains (not just after $250,000 as it is on personal accounts), but this is forcing some important near term decision making.

For many people in this situation, the question for investments with unrealized capital gains is whether to hold those securities longer term or sell them prior to June 25th to avoid the new higher tax rate.

To help with that choice, we have just launched a new calculator aimed at this group.

It is free for anyone to access.  They don’t have to provide any details.

The calculator can be found at New Capital Gains Tax – Sell or Hold Calculator – TriDelta Private Wealth

Continue Reading…

7 crucial tips for Homebuyers navigating the market in 2024

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By Jack Roberts

Special to Financial Independence Hub

2024 brings exciting opportunities for homebuyers in the real estate market. The market is poised for growth with the ongoing demand for housing and favorable economic conditions. However, buyers must navigate this landscape with informed decision-making. 

With interest rates expected to be cut by the Fed, the real estate market could experience a boom, and there are various options available for homebuyers. That said, it’s essential for potential buyers to prepare their finances ahead of time and explore affordable mortgage options. In addition, buyers should prioritize must-have features and location preferences to narrow their search. 

Below, you’ll discover 7 crucial tips for homebuyers in 2024. Homebuyers can confidently navigate the market by following these tips and achieve successful results in 2024.

 

Importance of Informed Decision-Making

In the competitive real estate market of 2024, informed decision-making is crucial for homebuyers. Buyers can make well-informed choices that align with their goals and preferences by conducting thorough research and staying updated on market trends. 

Being informed allows buyers to understand the current market conditions, such as housing inventory and pricing trends, enabling them to make competitive offers and negotiate effectively. 

Moreover, buyers can ensure they are investing in a desirable location by gathering information about the neighborhood, schools, amenities, and future development plans. 

Informed decision-making also involves assessing the property’s condition, conducting inspections, and considering potential renovations or repairs. By making informed decisions, homebuyers can minimize risks, maximize their investment, and achieve long-term satisfaction with their purchase.

Financial Readiness and Budgeting

Financial readiness and budgeting are essential for homebuyers to navigate the 2024 real estate market. It is crucial to carefully assess personal finances and establish a realistic budget to ensure a successful buying process. 

Typically, banks have more stringent requirements than other lenders when trying to secure a mortgage to buy a home. That said, homebuyers should strive to save for a down payment and maintain a strong credit score to increase their chances of securing a favorable mortgage rate. 

Buyers can enhance their financial position and have a stronger negotiating stance by managing debts and ensuring sufficient savings. 

Additionally, it is important to consider other costs associated with homeownership, such as property taxes, insurance, and maintenance. 

By creating a comprehensive budget and sticking to it, homebuyers can confidently navigate the market and make informed decisions that align with their financial capabilities and long-term goals.

Now, if you’re looking to buy a home to fix and flip it — there’s financing for house flipping available.

Must-have Features and Location Prioritization

When buying a home in 2024, it is important to identify the must-have features and prioritize the location based on personal preferences and needs. Homebuyers should consider factors such as the number of bedrooms and bathrooms, the size of the yard, and the availability of amenities like parking and storage space. 

It’s also important to assess the proximity to schools, healthcare facilities, and transportation options. Making a list of non-negotiable features will help streamline the home search process and ensure that the chosen property aligns with the buyer’s lifestyle and long-term goals. 

By prioritizing the features and the location, homebuyers can find a property that meets their needs and enhances their overall living experience.

Due Diligence: Inspections and Property Conditions

During the home buying process, one critical step is conducting due diligence, specifically inspections and assessing property conditions. It is crucial to thoroughly examine the property to identify any potential issues or concerns before making a final decision. Hiring a certified home inspector can provide a comprehensive report on the property’s structural integrity, electrical systems, plumbing, and other essential components. 

Inspecting the property’s exterior, including the roof, foundation, and drainage systems, is also recommended. Evaluating property conditions helps buyers understand the potential costs and repairs they may incur. 

Homebuyers can make informed decisions by conducting due diligence and negotiate any necessary repairs or modifications with the seller.

Crafting competitive offers and managing Negotiations

Once you have found your ideal home, it’s time to craft a competitive offer and effectively manage negotiations. Start by determining the property’s fair market value based on recent sales and comparable properties in the area. This will help you make a strong, yet reasonable, offer.

Consider including contingencies in your offer, such as a home inspection or appraisal contingency, to protect yourself from potential issues. Remember, negotiations are a give-and-take process. Be prepared to negotiate on price, repairs, or other terms with the seller. Continue Reading…

Federal Budget 2024 features $53 billion new spending over 5 years; rise in capital gains inclusion rate for wealthy

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Prime Minister Justin Trudeau’s 8th federal budget features $52.9 billion in new spending over five years, according to the CBC.

You can find the 430-page budget — titled Fairness for Every Generation — at the Department of Finance website here.

Released at 4 pm Tuesday, the wealthiest 0.13% of Canadians will be hit with a higher capital gains inclusion rate: as of June 25, the inclusion rate will rise to 66% for capital gains  in excess of $250,000 a year, and this will also apply to corporations.

You can find details at the Globe & Mail’s coverage here. (may only be viewable by subscribers.) For those who can’t access, it says:

“The budget doesn’t make any changes to income tax rates, nor does it include an explicit wealth tax. Instead, the tax hikes are focused on capital gains … as of June 25, the inclusion rate on capital gains realized annually above $250,000 by individuals – and on all capital gains realized by corporations and trusts – will rise from one-half to two-thirds.­”

The lifetime capital-gains exemption for Canadians will rise from $1-million to $1.25-million, the Globe says, and “The total capital-gains exemption from the sale of a principal residence will not change.” Speaking on CBC, G&M columnist Andrew Coyne called it an “underwhelming” document.

Coyne’s G&M column on the budget bore the scathing headline A government with no priorities, no anchors, and when it comes to growth, no clue. Subscribers can read it here.

A typical passage from his piece:

“…. there is not a single measure in the budget aimed at boosting investment generally – as opposed to the usual slew of measures aimed at diverting investment

into the government’s favoured sectors: artificial intelligence, ‘clean’ technologies, and so on.”

Jamie Golombek’s take on Taxes

Here is  what CIBC Wealth’s tax guru, Jamie Golombek, had to say in the Financial Post.

The federal budget released on Tuesday did not contain a general tax rate increase for the wealthy, but the government did announce that the capital gains inclusion rate will be going up and it amended the draft alternative minimum tax rules in response to concerns of the charitable sector .

On the rise in the capital gains inclusion rate, Golombek says “the $250,000 threshold will apply to capital gains realized by an individual, net of any capital losses either in the current year or carried forward from prior years  .. Capital losses carried forward from prior years will continue to be deductible against taxable capital gains in the current year by adjusting their value to reflect the inclusion rate of the capital gains being offset. This effectively means that a capital loss realized at the current 50 per cent allowable rate will be fully available to offset an equivalent capital gain realized after the rate change.”

MoneySense’s Jason Heath

Fee-only financial planner Jason Heath penned this insightful analysis for MoneySense. He covers everything from the higher capital gains inclusion rate to impact on entrepreneurs, housing, renters and much more.

Rob Carrick’s Personal Finance report card

G&M personal finance columnist Rob Carrick created a personal finance Budget report card here. He gave Taxes a C-minus grade, Housing a B, Junk Fees a C and Open Banking a D, and Saving for postsecondary education an A.

On the other side, the Finance department says an Improving economy means higher tax revenue: $20 billion in new revenue in five years. The $40 billion deficit is projected to stay more or less pat till 2025/2026, after which it starts to inch down.

$46 billion next year on payments on the Debt

Here’s initial coverage of the budget from National Post. There, it reports that Ottawa will spend $480 billion next year, including $46 billion in payments on the national debt. Among the highlights mentioned:

“Among the new spending is more money for home building, including tax measures that allow first time buyers to take more money out of their RRSP for a down payment and to delay when they start repaying the money.There is also $1.1 billion for interest-free student loans and grants, more funding for the Liberal daycare program and for the first phases of national pharmacare that will cover insulin and contraceptives. There is also funding for a new disability benefit and money for artificial intelligence research.”

Mix of Bad Economics and Bad Politics

Also in the National Post, Philip Cross dubbed the budget “a continuation of the Trudeau government’s orgy of spending financed by debt and higher taxes.”

Sample passage:

“Besides being bad economics, the government’s massive spending is bad politics because it antagonizes most provinces without any obvious electoral return from its spending.” Continue Reading…