Brad Willems Team

The People

• Early 30s
• Married
• Three boys ages 7, 5 & 2

The Situation

Bryan has a good job and makes approximately $90,000 working in management for a large window manufacturer. Erin is a stay-at-home mom and would like to continue to do so until the kids are all in school. They purchased a home four years ago, but would like to move into a larger home when they can afford it. Their house is currently valued at $475,000, and mortgaged for $325,000. When they came to us, they communicated that they would like to get more serious about saving for retirement and for their kids’ education, but that they would also like to pay down a line of credit that they’ve begun to tap into for extra cash.

After talking through their situation, we decided to begin by evaluating their cash flow and monthly budgeting. We advised Bryan and Erin to track their monthly spending for three months to get a clearer picture of how they were allocating their monthly capital. We also looked at the cost of servicing their mortgage and line of credit debt.

Bryan participates in a profit sharing plan through his employer, but he hasn’t started any formal retirement savings plan. He would like to be financially secure enough to retire at the age of 60 if he chooses. Erin thinks that she will probably be receiving an inheritance of approximately $500,000 within the next 15 years, and would like to designate most of that money for their own retirement income needs.

When Bryan and Erin purchased their home, they applied for mortgage insurance at the bank. They weren’t made aware of the difference between mortgage insurance and personally owned insurance, and don’t have any life, disability, or critical illness insurance.

How We Helped

After compiling this information, together we decided on a couple of immediate action steps to take to get things started. They were:

• Open up an RRSP in Bryan’s name and start a monthly contribution so that by the time he reaches age 60, he has the potential of having over $150,000 accumulated.
• Structure a two year pay down for their line of credit by reducing their non-essential monthly expenses.
• Open up a Registered Educational Savings Plan for the kids’ post-secondary education. Bryan and Erin would like to save enough so that each child will have $10,000 saved towards their education.
• We replaced the mortgage insurance with personally owned life insurance. Their cost of insurance is cheaper, and they can now name each other as beneficiaries on the policy. Their cost of insurance is fixed for a given term and their coverage remains the same. They also took out a disability insurance policy on Bryan so that they cover off the risk of losing his income in the case of a disability. The disability coverage will replace approximately 70% of his after-tax income.
• We agreed to continue regular reviews of their financial situation every six months to keep up to speed on changes or updates to their situation.

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