Money all over the place. What to do, what to do? | Page 3 | General financial discussion | Discussion forum

I like the idea of critical illness insurance. But, unfortunately, the policies I've seen are not like life insurance and disability insurance. Critical illness policies seem to cover specific listed illnesses. If one becomes critically ill and the illness is not one of the ones in the list, then there's no payout.

I think it is good to have a look at the policy and be aware of what would be covered and what would not be covered.

I went over the policies again today, turns out short and long term disability is what he has... not critical illness. The amounts aren't great.... short term wouldn't even cover the mortgage, and long term just barely does. But at least it's something. I'm going to look into increasing that too. His work policy is through GWS so probably just go with them to make coordination of benefits simpler.

In my digging, I also found out they increased the optional life insurance coverage amounts last February, so we've put in an application to bump that up. They also added optional spousal insurance, so we'll sign up for that too. We would still be considered "under insured" by industry standards (since it doesn't pay off our mortgage and give us enough money to live lavishly for years), but it would be enough to cover my living expenses for 5 years at our current lifestyle, and I wouldn't maintain this lifestyle if it was just me (e.g. I hate this big stupid house, I would move into a much smaller home).

EDIT: clarified 2nd paragraph

Loonie said

I'm not sure which kind of insurance you're referring to in the second paragraph, but having adequate disability insurance trumps critical illness insurance any day as a "must have". It should provide enough income for you to live until you can get on your feet.

Does he not have sick days? Normally that's what passes for short-term, and is paid at full salary. After the sick days are used up, then the long term kicks in. At least that has been my experience.

Whoops, that was about life insurance. He has explicit short-term disability insurance that goes for 3 months at a ridiculously low amount. No paid sick days. We'd definitely be digging into the 6-month emergency fund at that point.

Then the LTD kicks in and is good for 5 years at 55% his base salary. We were just now talking about all this, and we've made some plans and contingencies. A lot of it amounts to the fact that I'm unhappy with our "Keeping up with the Jones" type lifestyle that we have now and yearning for a simpler life, which just happens to be exceedingly compatible with cutting down expenses. It just doesn't feel like a good "fit" to spend over a hundred dollars a month to buy additional coverage to maintain a lifestyle that isn't right for me in the first place. And in 3-4 months, I'll have a degree with excellent earning potential if it comes to that.

Odds are pretty good that he will develop COPD at some point. Depending on how strenuous the job is, that may preclude him working at the same job thereafter.
How long does he have to go before he can retire?

Yeah that would be a problem. He's on the radio a lot. His job isn't physically demanding, but he coordinates dozens of workers over several miles of track and it's pretty fast-paced. And screwing up gets people killed. That said, there are lots of easier jobs in the workforce that he could do if he had to. The yards have office jobs that are pretty lush, they just don't pay as much (no OT) and drive him crazy with boredom. But push come to shove, there are options.

I really hope he can quit smoking. The disability insurance, if you buy it outside the group plan, is going to be more expensive, just like the life insurance, because of this. And COPD is a miserable way to go. My father had it. I wonder if he realizes what he's letting himself in for.

Me too. I never expected to date a smoker, let alone marry one. I guess life doesn't always care about your expectations! But knowing how well he responds to nagging (extremely negatively), there's not a lot I can do about it. So I choose not to worry, because that would just affect my own health and happiness and do nothing about the problem.

Loonie said

All I can say is, you have a lot on your plate. Good luck!

Heh. How much fun would life be if everything was simple??

Update:

I read a few books and made some big and small changes. On personal finances in general, Wealthy Barber and WB Returns were both great, I really enjoyed "Stop Over-Thinking Your Money!" and "Wealthing Like Rabbits" was ok but I didn't feel it added much after the other 3. On investing, I really enjoyed "Naked Investor: Why Almost Everybody But You Gets Rich On Your RRSP." It didn't really change any of what I was planning (since indexed e-series funds fit in well with not buying mutual funds that only make your adviser rich), but it gave me a lot of confidence that I wasn't making a huge mistake going at it without an advisor. As I suspected, there's not much an adviser can do that you can't do yourself, if you get educated about finances and stick to a plan. There's another book I read, "Fight Back: 81 Ways to Help You Save Money and Protect Yourself from Corporate Trickery" which was a worthwhile read but incredibly dry and poorly written; but it did have some good tips I hadn't thought of myself, so I reluctantly recommend it.

I think I've got it mostly under control now. I've moved our Investors Group assets to e-series (Couch Potato Assertive portfolio), set-up a 10% savings plan and 20% RRSP as per Wealthy Barber, gotten our life insurance in order, written wills (with a lawyer), and eliminated much of our cash positions in favour of using an LOC if necessary (if the $5000 we keep at TD in chequeing to make our account fee-free isn't enough). Because I've always been a strict budgeter, those percentages are just my "pay yourself first" money, then I pay the bills and set aside the money for my virtual envelopes, and then the balance also goes into savings. We've also put aside money for a trip to Thailand in January (a little prematurely I think, since now it's sitting in cash for the next 6 months for no reason).

I've still got more liquid cash than I'd like, mainly because it's tied up in bank TFSAs and the fees to transfer it will outweigh any difference in growth, likewise if I withdraw it the taxes will do the same. I'll take care of that in December.

RRSP-wise, we have a bit of a mix. Some of it is still at Tangerine, again because of the TFSA transfer fees. Some of it is in DH's Sunlife group plan, but the fees are quite reasonable (~0.5%) and it comes right off the paycheque which is convenient. The investments seem to track their benchmarks, so I think they're good enough. When we cashed out of IG, we put the lot into a spousal RRSP in my name, so this year's tax refund should also provide a nice savings boost.

In the process, my husband's RV bit the dust and we paid cash for a new-to-him 40' beast. All-in, that ate up $47,000 of our savings, but he's paying it back at 4% interest out of his per diem, so that works. More importantly, he's now happy in his home-away-from-home. Can't put a price on sanity! He also loves bragging to all his co-workers that he paid cash after sacrificing for 5 years in a '87 Winnebago... (It's funny to me how effortlessly he can live off $300 less a week when he's "paying back a loan" but not to "save up" for the exact same thing. He's a product of the times I guess...)

Come December, I'll be able to amalgamate a lot more and it will simplify even further. That will be important if I happen to die first, because DH is terrible with bookkeeping so the few accounts he has to close, the better.

Loonie said I still think you're a bit short on emergency cash. Personally, I wouldn't want to have to access LOC, but that's up to you. I have to shell out about 7K for new AC and new furnace this week.

Ahh, but you're forgetting about my dear Big Spender!

Most of the financial planning books I read recommend only a few thousand for emergency and a low interest secured LOC for emergencies, mostly because true emergencies are rare and "emergency wants" get more and more likely the more cash you have sitting around. My husband is hugely susceptible to that syndrome! Whereas you and your wife seem to be much more sensible in that department, so cash isn't as "risky" for you as it is for me.

Another consideration is his income... we put a lot in savings every month while still living a high quality of life, so if something came up, we have LOTS of room to scale back for a month or two.

We have 3 months living expenses saved plus we could move into our basement suite, rent out the upstairs for the cost of the mortgage, and pay utilities only. Or move into the RV and rent them both out!! Speaking of the RV, with our credit ratings and his income, we should be able to get a secured LOC with a fairly low rate.

But the biggest consideration is the "Husband Factor." Accounts full of cash offend him to no end. "Wants" become "needs" very quickly, and I can only object so much. They are his earnings, after all. For whatever reason, investment assets don't seem to tempt him. Maybe because they have better growth potential? Savings accounts just sit there, not even keeping up with inflation. And honestly, I agree with that being a problem... just not with the method to protect purchasing power. My solution is invest so it grows faster than inflation. His solution is to power purchase now before he's dead!

Bottom line, investing it and risking the use of LOC is unquestionably preferable to keeping it liquid only to have him find excuses to spend it. I'd much rather lose the interest borrowing $10,000 once than lose the $10,000 principle every 3 months!