Rainy Days and Your Backup Plan

Life can be unpredictable. One moment, everything is running smoothly, and the next, your car needs repairs, a family member is unwell, or your income is interrupted.

The world is in a wildly unpredictable place – and has been for the last handful of years. The negative news keeps flying in and a lot of people aren’t hopeful. We highly recommend limiting your exposure to negative news as much as possible. Your sanity is pretty important.

When we’re feeling stressed and anxious, taking action is one route to easing that anxiety. But let’s be thoughtful about how we approach that action, especially when things are unpredictable. Taking a big risk might make sense – or might not – depending on how well you could roll with the punches.

How might you judge your rolling capacity?

You don’t need to have all the answers, but you do need a risk management plan.

It might be the most boring part of financial planning but we really do love it. Taking advantage of our risk management tools means creating a stable foundation in an unstable world. It means making it possible to take risks, knowing that if you do take a punch, you have a nice soft landing spot – and so do the people you love.

Where do we start first? With the most boring tool of all: Emergency Savings

During positive times, emergency savings, that little stack of cash sitting there in a boring old savings account, earning pretty limited interest, feels like wasted potential. But it’s not.

Emergency Savings are your first line of defense when the unexpected happens

Wouldn’t you know it: the unexpected just keeps happening.

While we love it when people make lots of money and reach lots of goals, we haven’t been able to beat the feeling we got during the pandemic when so many people thanked us for insisting they create an emergency fund. Those dollars in a boring little account wasting away made all the difference for the people we’re delighted to support.

Emergency savings are there to support you through life’s financial surprises. Whether it’s an unexpected dental bill, car trouble, a sudden job loss, or a worldwide economic shutdown, having cash set aside helps you avoid going into debt or dipping into long-term investments.

How much should you save?

A good target is three to six months’ worth of essential expenses. This includes rent or mortgage payments, groceries, utilities, and other non-negotiables. That’s the basic, back-of-the-napkin number.

However, you might need something different. If you don’t have disability insurance, and can’t get it for any reason, you’ll want a larger fund. If your business lacks financial stability, as they often do in the first few years, you’ll want a larger fund. If you have committed to significant outlays of cash for projects that are going to take several months or years, you’ll want a larger fund.

Your specific emergency fund needs are based on all the ways that you’re unique in the world.

Where should you keep your emergency fund?

Keep it boring. The emergency is all the excitement you’ll ever need. The solution is the opposite.

Store your emergency funds in a “high-interest” savings account or similar low-risk, easily accessible place. Avoid mixing it with your everyday spending account so you’re not tempted to use it for non-emergencies.

This money should be easily accessible if you need it immediately. Emergencies tend to lack patience.

Tip: Use this fund only for true emergencies. Not for travel, not for a sale at your favourite store—just the things that truly can’t wait.

Your Next Line of Defense…

It’s just as boring as cash. It feels even more like wasted potential. It annoys everyone, regularly.

Yep: it’s insurance.

Insurance is all about transferring the risk to someone else – the insurance company. We hate paying the premiums but boy, do we love collecting the benefits. Especially because qualifying for those benefits often means that we need them quite badly.

Disability & Critical Illness Insurance: Replacing income when your health takes a hit

Your ability to earn an income is one of your most valuable assets. If you haven’t achieved financial independence and you need to work to support yourself, your family, and your future independence, it’s probably your most valuable asset.

Disability insurance protects you by providing monthly income if an illness or injury keeps you from working.

Short-term disability insurance typically covers you for a few months, while long-term disability insurance can support you for several years or even until retirement, depending on the policy.

Critical illness insurance provides you with a tax-free lump sum if you are diagnosed with a covered illness. This can help bridge the difference between your disability benefit – which is structured to pay less than your income as an incentive to return to work – and your actual lifestyle and savings needs. Many retirement plans are set back multiple years, even with disability insurance.

If you’re employed, your workplace may offer some coverage. However, many plans only cover a percentage of your income or may not last long enough. If you’re self-employed, you may need to arrange your own coverage. We’re huge fans of disability insurance and critical illness insurance at Spring. We’ve seen what happens without them. We don’t love that.

Tip: Review your employer’s policy and consider a personal plan if your employer’s coverage doesn’t provide enough support for your needs.

Life Insurance: Financial support for the people who rely on you

Life insurance ensures your family or dependents are financially protected if you pass away. It pays out a tax-free lump sum to your chosen beneficiaries, helping them cover:

• Outstanding debts or a mortgage
• Ongoing living expenses
• Childcare and education
• The loss of your income

There are different types of life insurance. Term insurance is simple and cost-effective, offering coverage for a set period, such as 10 or 20 years. Permanent insurance lasts a lifetime and may include an investment component.

Remember that if someone in your household doesn’t earn an income but does a lot of work that is expensive to replace, such as childcare and household management, that is a financial hit and it’s worth insuring.

Tip: Your insurance needs may change over time. Revisit your coverage after major life events such as getting married, having children, or buying a home.

Property and Liability Insurance: Protecting your home, belongings, and reputation

Whether you rent or own, property insurance helps protect your physical space and possessions from damage or loss due to events like fire, theft, or flooding. A few months back, Julia’s car window was smashed so someone could enjoy the contents of her gym bag. After factoring in insurance coverage, it cost about $500 out of pocket to replace the window and the gym stuff. Realistically, both Julia and the thief would have been better off if she’d just handed the thief $100, as the sweaty gym shoes probably didn’t get much at the pawn shop. But without insurance, it definitely would have cost more.

Equally important is liability insurance. It covers you in situations where someone is injured on your property or if you accidentally cause damage to someone else’s property. For example, if a guest is injured at your home or your child breaks a neighbour’s window, liability insurance can help cover the costs and the potential lawsuit.

Most homeowners and renters insurance includes both property and liability coverage. Be sure to review the details to make sure your coverage limits match the value of your belongings and the level of protection you need.

Tip: If you have high-value items like jewelry, art, or specialized equipment, you may need additional coverage or endorsements.

Risk Management Is Annoying… But worth it.

Emergency savings and insurance premiums really do feel like wasted energy. But they are incredibly powerful tools, despite their relative simplicity. With a well-funded emergency account and the right insurance coverage in place, you can handle those punches when they come, landing softly, and jumping up, ready to move forward.

That resilience is actually what makes all the difference when it comes to success. Yes, we read stories about people who hit it big with this real estate purchase, that investment, or that business. But those people – we know some of them – experienced incredible hits that could have set them further back than when they started.

They survived and thrived because they implemented really, really boring strategies. They had cash when they were told it was a waste. They had insurance that paid for that giant flood. They had the legal documents in place (another important component of your risk management strategy) that protected their livelihoods, their own well-being, and their families.

Boring strategies make it possible to take risks. They may not make the news, but they do make for good lives.

Want to check in on your boring risk management strategies? You know where to find us!

Your Spring Planning Team

Practice Notes:

We believe that summer doesn’t actually end until about October. However, most of the holidays are over and it will feel a bit like a whole new year, even if you don’t have children returning to school.

This September, we’ll be honouring Labour Day (September 1) and Truth & Reconciliation Day (September 30) by closing our laptops. Julia will be attending conferences September 8 – 10 and September 24 – 26. She’s hopeful that these will be the last of the conferences for the year. There’s just so much to know, and of course, to share, as she will be speaking about family businesses and financial planning both on and off stage.

Spring in the News:

Most Canadians want to stay in their own homes as they age, but do they know the costs? Julia joins the Steadyhand Coffee Break video series to unpack how families can plan for their long-term care and aging in place needs. Watch the full podcast here.

Julia was interviewed on Behind the Advice on her personal story. She speaks with Brenda about growing up with hippie parents, her initial reluctance to accept a leadership role at FPAC, and why we’re seeing more women in leadership positions within the financial services industry. Check out the full interview here.

Julia recently joined Cory Gagnon on the Legacy Builders Podcast to chat about building and maintaining a successful family enterprise. Check out the podcast here.

Please check out our media page here for videos, podcasts, interviews and more.

Planning News Digest:

• Freakonomics: Elder Swell – One of our all-time favourite podcasts, Freakonomics, did a three part series called “Cradle to Grave” that we loved. Part three focuses on what they’re calling the “Elder Swell”. People are living longer, and systems are not necessarily keeping up. Listen (or read the transcript) right here.
• RESPs and … divorce? – Yes, it’s something to think about. Anita Bruisma, who we’re often delighted to collaborate with for investment reviews, provides this important summary of what to think about when it comes to a separation agreement and an account that is often forgotten. Check out the article here.
• Top 10 Investing Lessons – The 10 most important lessons in investing: an evergreen video by Ben Felix at PWL. Check out all the tips here.

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