Are we becoming too comfortable with debt? A Money Coach weighs in!

When the Bank of Canada recently ratcheted down its decades-high prime rate, we wondered if millions of debt-holding Canadians would start to breathe easier.

Or, are they comfortable with having a lot of debt and not following the ups and downs of interest rates?

We reached out to Janet Gray, CFP, advice-only planner with Money Coaches Canada to find out more on the topic of debt, and its distant cousins budgeting and saving.

“Everyone’s perception of debt is different,” says Gray. We all have a “different threshold of comfort/discomfort” with the idea of being in debt. That level of comfort – unheard of in our parents’ and grandparents’ day – can impact whether or not we can step up and manage our debt, says Gray.

While some folks may still live off their credit cards, it’s harder to do in an era where credit cards carry interest rates of 21 to 30 per cent.

That sort of high interest debt should be targeted first if you ever set out on a plan to reduce or eliminate indebtedness, she adds.

It’s more common these days for people to leverage the equity in their homes for extra cash. “We are living in our largest savings account,” she explains, mentioning the easy access we have to home equity lines of credit or reverse mortgages. Even today’s higher interest rates on lines of credit – in the 7.25 per cent range – are small compared to the rates charged by credit cards.

“In an emergency, many people have to access their lines of credit if they don’t have enough savings,” she explains.

Gray agrees that the recent period of ultra-low interest rates has “normalized” debt. She says it was not that long ago that we saw 1.99 per cent mortgages and zero per cent car loans. “It has been so easy to get credit – everything has been so easy – but management of credit is not so intuitive,” she explains.

Debt is like “a machine that feeds itself,” she explains, with such drivers as the feeling of denial when you can’t afford something, the lack of tools to cope with debt, and the fact that “people don’t comprehend where credit use is taking them – the stress, wear and tear, the impact on relationships.”

So how do we turn things around, and manage debt while building savings?

Part of the solution is acceptance – recognizing that there’s a problem – and then having the perseverance “to get there” and solve it, she says.

Know your numbers, and quantify the true cost of credit – what you are paying in interest, and how that impacts the real cost of credit card purchases. “Make that your mission – don’t spend unless you have a plan to pay (debt) back,” she explains.

Budgeting – every dollar has a job

Gray explains that we need to realize that every dollar we have needs to have a job. It needs a specific goal, a plan for that dollar. Some can go to debt, but others can be put away for long-term savings, or to help pay for a vacation trip.

Problems can happen with your money if “you don’t have the jobs well identified,” she explains. “You need to know what you need your money to do. You have to define jobs for every dollar, and then (after you pay for your required expenses) align your investment and savings with those goals.”

If you are thinking about short-term money goals, your money should be in something that is less risky and more oriented towards short-term savings – perhaps via a Tax Free Savings Account invested in fixed-income investments which is usually safe, secure and readily accessible.

Your longer-term money, for such things as retirement, should be focused on growth investments, like equity, and can live in a registered retirement savings plan (RRSP) or, increasingly these days, a TFSA so there is no tax when you withdraw the money in retirement, she says.

“Find the job, then find the vehicle,” she explains.

Looking ahead

While we are seeing more consumer proposals and bankruptcies caused by improper use of credit, there are some good signs out there.

Gray says she was pleased to learn that Grade 10 students in Ontario will soon be getting financial literacy training, beginning at age 15. “That’s the perfect age for it, since they are still in school until age 16 but some are working part time and earning money. They are still (maybe) moldable at 15.

The hope, she adds, is that younger people will begin to learn that you need to align the money you make with your needs, to “have the dollars working for you, and not you working for the dollars.”

We thank Janet Gray for taking the time to chat with us again!

Thinking about saving for retirement? But don’t know how to get started? The Saskatchewan Pension Plan may be just the program for you. It’s open to any Canadian with RRSP room, and you can start small and ratchet things up as you progress through your working career. SPP will professionally invest and grow your savings via a low-cost, pooled investment fund. At retirement, you can choose from several options – money for life via an SPP annuity, or the flexibility of the Variable Benefit. Check out SPP today.

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For Carole Fawcett of Vernon, BC, it’s time for seniors across Canada to let governments of all stripes know that the current retirement benefits available to older Canadians aren’t sufficient – and many seniors are facing poverty in their golden years.

Fawcett, a freelance writer and editor and a retired counsellor, spoke recently to Save with SPP by telephone and email.

She agrees that government programs like the Canada Pension Plan, Old Age Security, and the Guaranteed Income Supplement were, when first created, “expected to `supplement’ the pensions that people would get from their job when they retired.”

“People used to stay with one company forever, so they built up a good pension. But now… very few people have pensions or can afford to put money aside for when they retire, as they were too busy just trying to exist,” she notes.

For that reason, Fawcett, and her group TINCUP, hope to get the word out to politicians and citizens that current government benefits just aren’t enough.

“I am hoping that with our demonstrations and creating awareness that something might change. We can only hope,” she says. “I also plan to contact media that broadcast to all of Canada – in hopes of getting attention for seniors. We also plan to write to politicians. We will be heard!”

We asked how life is for people who are 100 per cent dependent on programs like CPP, OAS and GIS.

Fawcett said seniors living solely on benefits can manage – barely – if they own their own residence. “Seniors who have to pay rent would be in dire straits. One fellow I met said he got $1,700 a month from his pension, but his rent was $1,800 a month. He has to dip into his savings in order to live somewhere. This means his savings won’t last that long,” she explains.

She knew of another senior who had to live in her car for 14 months – including the winter – before she could be placed in emergency housing.

“I interviewed a woman who was `renovicted,’ she adds. “She had lived in the apartment for 20-plus years, is a senior, and was told she had to leave. They said their son was going to move in and that they were going to do renovations. She took them to court and she lost. I still don’t know how that happened. She found another place one year ago and now has been evicted once again. She doesn’t know what she will do.” She is 73 years old, notes Fawcett, calling it a “sad situation.”

“A lot of seniors are living ‘small’ and I’m sure there is a lot of misery behind many a door,” she notes.

While she is supportive of efforts to house refugees and the homeless, Fawcett said our impoverished seniors also need governments to increase the level of support they are given.

The goals of the TINCUP movement, notes Fawcett, are as follows:

• Creating awareness for all as to how low senior pensions are – below the poverty line.
• Getting attention of politicians (provincial and federal) and hope that they will increase pensions up to the level of poverty – as many seniors live below that level.
• More medical coverage for many health issues.
• Encourage people to treat seniors with respect.
• Tapping into the Boomer generation’s ability to make changes.

Fawcett explains that “health care needs to be affordable for seniors. Someone who lives in Kamloops and has to have cancer treatments in Kelowna has to pay for gas in order to get to the cancer treatment facility,” she explains. Medications for cancer can be very expensive. If you are on a tight budget, that can lead to tough choices, she says, noting that “we shouldn’t have to choose between healthy food or hearing aids.”

Fawcett adds that seniors should have better access to allied health services like massage, physiotherapy, and chiropractic care.

On respect, Fawcett says that whenever she gets called “dear, sweetie, or honey” by a younger person, that person gets a short lecture on why such names are condescending and disrespectful to seniors. “They get a little talk from me,” she says with a laugh.

On the power of Boomers, Fawcett notes that her generation “made a lot of changes – and we can do this again. Look at the women’s movement, the Viet Nam war, control over our bodies, and nuclear war. If we join together, we will be heard once again. We are tired of being unheard, invisible, and ignored, and given barely enough money to live with respect.”

“We are angry, and we won’t be silenced anymore,” she says.

Fawcett says her movement is focused on retirement income adequacy.

“There are many seniors who are living below the poverty line. The poverty line is approximately $25,750, and lots of seniors don’t even get that. It would be great if the government would top up the very low-income seniors,” she notes.

“It’s not like we are asking for trips to the Caribbean. We just want enough money to live on with respect. So that we can afford a cup of coffee or a lunch out occasionally with a friend. Everyone is more than horrified by how many seniors are living belove the poverty line,” she concludes.

A TINCUP website and social media presence are both in development; anyone interested in finding out more can contact Fawcett at Ca*****@sh**.ca.

We thank Carole Fawcett of TINCUP for taking the time to speak with us.

The Saskatchewan Pension Plan has been helping Canadians save for retirement since 1986. SPP is designed for those of us who don’t have a retirement program through work. Find out how SPP can help individuals save for retirement – or how it can be deployed as a pension plan in the workplace! Check out SPP today.

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In the concluding edition of a four-part series, Save with SPP talks to Janet Gray, CFP, of Money Coaches Canada about how money coaching helps people align their finances with their goals

In her career, which now spans more than 23 years, Janet Gray, CFP, of Money Coaches Canada says she’s learned that many people “really do need assistance around their money decisions… there are fires they may need to put out, and there is often an opportunity for financial literacy.”

And, she says, “it doesn’t matter how many zeroes you have in your income,” those with virtually any level of income can have money problems.

Speaking by telephone to Save with SPP, Gray said most people try to find their own way through the tricky waters of finance. “They don’t know how you are supposed to do it, so they may keep doing things wrong,” she explains – thinking that the ‘status quo’ approach is a correct one.

But continuing on that wrong path typically leads to an “acknowledgement point” where folks realize that their do-it-yourself approach isn’t working – and that they need some help.

So, given that, why don’t more people look for help?

“Pride can be a reason,” Gray explains. “They may be too proud to ask for help… it may be embarrassing for them.”

Other reasons for not seeking help, and “muddling along on your own,” include fears about costs, the time and effort it takes, and being comfortable with the way you’ve always done things (i.e., the status quo). Some people (incorrectly) fear the money coach will scold them, or shake a finger at them, and thus they “keep the blinders on,” and continue as they were.

But it is through coaching, she says, they gain perspective – they see there is more than one way to do things, and that there is probably a more efficient way to handle their finances.

It’s interesting, Save with SPP asks, to think about people with all those zeroes in their income having problems.

Those with higher incomes may feel they need a bigger house to keep up appearances, with a flashy car to top it all off, Gray says. But those may be just signs of runaway debt, rather than wealth, Gray explains. She cites the book The Millionaire Next Door, which found that the richest people in the ‘hood tend to live in smaller bungalows for decades, and drive sensible, older cars rather than leasing expensive ones, with low or no debt.

So for everyone with debt, be they high-income earners or not, education on “wants versus needs” is necessary, she explains.

These days, through the science of behavioural finance, there are ways to help “nudge” people into adopting more responsible practices with their finances, she explains.

“Instead of doing this, do that,” she suggests. “It will get you to your goals sooner.” Talking people through “the soft side of it,” will help them see for themselves why they shouldn’t “keep doing things that don’t succeed,” and encourage them to behaviours that will teach them a different, more sustainable and successful way of coping with their finances.

For an example, Gray says, think of getting an inheritance. In a lot of cases, we hear that those receiving inheritances burn through the money quickly, perhaps because they have no plan for dealing with extra, unexpected money.

A plan is key, says Gray.

“Look after the fires first,” she says, such as paying down or paying off debt. “It’s an emotional thing, inheriting money. So for sure, do something fun, maybe in memory of your relative.” But also consider longer-term goals, like saving for retirement, for at least some of the money.

“Go to the goals you have set for yourself financially – what would you do if you didn’t inherit the money?” It would probably be just that – spend some on current debts, save some, and put some away for retirement, she explains.

Asked what she sees as some success stories, she says the ones that stick out for her are from people who – once coached – realized they could afford to retire earlier than planned.

Many people, she explains, work away thinking they can’t afford to retire – but if they do the math, and take a look at what income they can expect from pensions, savings, and other sources, “they might already have everything they need now to go,” she says. “I have had several clients thank me, because they were able to see that they could retire earlier than they had planned.”

Retirees have a unique set of challenges as well.

She says recent research in the U.S. found that many retirees are spending less than they could have, which is basically “making the kids millionaires.” She advises some clients to spend a little more on themselves – “go to the five-star hotel instead of Motel 6… uplevel things a bit!”

Many retirees aren’t sure about how to spend money in their retirement, and worry “they are going to run out of money.” That’s not always the case, and emotions like that can get in the way of clear planning.

It’s also important for retirees not only to understand their cashflow, but to think about their estate plan, and to manage their taxes, says Gray.

When you are working, tax management is easy – it is all deducted from your pay, and you typically get a refund when you file your taxes.

But for retirees, taxes are far less predictable due to receiving multiple streams of income, and must be carefully managed.

Estate planning is also crucial at this stage, she adds. “What do you want to see done with your money upon your death? Do you want to leave money for your kids? Then here’s how much you have to live on. And you have to plan for longevity, and account for taxes,” she says.

You also want to keep things simple for your surviving spouse.

“If you have seven bank accounts, and five registered retirement income funds (RRIFs), and a mile-long spreadsheet, will the spouse be able to figure that all out?” she asks.

It’s critical for spouses to be on the same page about their money. “If one is a leader, and the other is a follower,” there can be problems if the leader passes on first.

“I spend a lot of time helping clients with questions like `will we have to sell the house,’ and `how will we pay for (expensive) long-term care in a memory ward,’ so it is important to keep the finances simple. One of you will be standing longer than the other.”

We thank Janet Gray of Money Coaches Canada very much for taking the time to talk with us for this four-part series!

Great news! The Saskatchewan Pension Plan now offers its Variable Benefit to all SPP members! This flexible benefit option allows you to decide how much to withdraw each year, while the rest of your money continues to be invested by SPP. And, you can still transfer money in from other registered sources! Check out SPP today!

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In this third of a four-part series, Save with SPP talks to Janet Gray, CFP, of Money Coaches Canada about the stress and worry of debt, and how to get it under control.

There’s no doubt, says Janet Gray, CFP, of Money Coaches Canada, that debt is a “nemesis” for many people today. It causes “stress, worry, anxiety, hopelessness,” and people can “just get ground down by it,” she tells Save with SPP.

“There’s no simple way to get out of it; it can seem like quicksand. Many users feel stuck,” she explains.

These days, the sources of debt she helps clients battle include “consumer debt and credit cards, and I’ll include variable rate mortgages and lines of credit too,” she says.

Credit cards, she says are the worst “because they are toxic,” and can carry very high interest rates in the 19 to 21 per cent rate. “If you miss even the minimum payment, the credit card interest rates will go even higher,” she warns. Or, worse, you could get your card cancelled and still owe all the money and interest.

While credit can lead you into trouble, it is a bit of a “necessary evil,” she explains. You need to establish credit so you have a borrowing record, so that you can qualify for things like car loans and mortgages, she says. So having bad credit can make those dreams less possible – it can take two or more years to repair a bad credit score.

We hear that credit cards work well for those who are able to pay off their balance each month, and Gray states that it’s about 70 per cent of Canadians who fully pay their balance monthly.

But many people feel that just paying the minimum amount on a credit card is good enough, when all it means is that you are mostly paying the interest down, but not the principal. They see the credit card as money, rather than a source of debt, she explains. “For some people, a credit card is the only cash flow they have,” she explains.

So, if you are barely able to cover all your minimum payments each month, how do you get out of debt?

“First,” says Gray, “you have to recognize that it is going to be a challenge – and will take some time.”

Next, look at each individual debt that you have. There are several ways to attack the debt.

The “avalanche” method involves paying extra on your highest interest rate debt first. Then, when that’s paid off, you add what you were paying on it to your next-highest interest rate debt, and continue “down the hill” until everything is paid off. This method can minimize high interest charges.

An alternative approach is the “snowball” approach, where you pay the smallest debt amount first, then go on to the next smallest, and so on, she says. This can provide motivation as you see your successes along the way.

“There are all kinds of ways to get there,” she says. “I recommend people pick one, and then, just do it!”

Other ways out of debt include consolidation loans, where you take a loan to pay everything off and then pay off the loan over time, say three to five years. Gray says if you go this route you might be tempted to start using credit cards again – don’t.

Beyond those approaches, the only ways out of debt are via a consumer proposal, where a trustee negotiates a lower settlement price for your debt, or bankruptcy, which will mean “six years with no or little credit. No one really wants to do this, but for some it may be the only option,” she notes.

A lot of people get lulled into using credit cards because they offer reward points or cash back. “If you are carrying a balance on a credit cards, those points aren’t free – you are paying 21 per cent interest to get points that are maybe worth one per cent of your balance,” she warns.

She concludes by noting that those who are piling up debt on credit cards, and creating a cycle of having no cash flow, need to look at credit “more starkly, to see it for what it is.” They have to break the cycle of credit dependency – that “I deserve to spend, instant gratification mentality.”

In the fourth and final part of this series, we’ll look at setting goals for life.

Did you know that the Saskatchewan Pension Plan now offers its Variable Benefit to all SPP members? Under this flexible retirement option, you can decide how much income you want to withdraw from your account while it continues to be invested. As well, you can continue to transfer money in from other registered sources! Check out SPP today!

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In this second of a four-part series, Save with SPP talks to Janet Gray, CFP, of Money Coaches Canada about the difference between saving, and investing for your future

Any discussion about saving should begin by setting out the difference between saving and investing, says Janet Gray, CFP, of Money Coaches Canada.

“Saving money is something that is imminent or short term (less than 12 months),” she explains. You are protecting its value, and the use of that money is soon – so your savings need to be “secure and liquid,” she says. An example might be putting money in a savings account or a GIC.

“Investing is where you want the money to work for you. You are delaying the use of that money” while allowing it to increase in value (hopefully) and will use it in the future for something more mid to long-term, such as retirement or a large goal. Examples would be investments in mutual funds, exchange-traded funds, bonds and other securities.

“You have to save to invest,” she explains, “but don’t need to invest to save. Investing is a longer-term thing, saving is a shorter-term thing.”

OK, we now see the distinction. But why, we asked, don’t more people save?

Gray says there are a lot of factors at play.

“There is the issue of why – why do I need to set money aside,” she explains.

Many people get hung up on their everyday living costs and can’t imagine a future where there’s no mortgage, no kids to feed, and no car payments. But for most of us, the future will be just like that – less expenses, but less income. So saving and planning is important.

“That awareness… can possibly help you to save better,” she explains.

Some people think they don’t have to save because they have a good pension plan at work. But things can change – you may change jobs, and in some fairly rare cases, pension plans serving the private sector, like Nortel or Sears, run into financial trouble.

There are those who could save, but who simply are “in denial,” or are naïve, and have developed a “keep spending” lifestyle, she says. When you “avoid looking at your finances… and you are spending without awareness,” it’s easy to simply disregard saving, she explains.

“Some with low incomes simply can’t save. They can’t find any excess to save, they are spending every bit of their income. They lack the means to save,” she says.

But for others, “knowing where your money is going” is how to turn things around and get on the path to saving. Start keeping track of where your money is going.

“Maybe you have dinner out three times a week, or travel a lot, or give expensive birthday presents to the kids,” she says.

“These are all examples of discretionary spending that can be reduced,” she says. We can all fall into the trap of spending all our money on “what’s comfortable and pleasant,” but a careful review of “all your categories of spending” can help identify areas where you could cut back and begin saving.

“I tell people that once the bills are all paid, they should include saving as a ‘bill’,” she explains. You can start small with the saving habit, maybe $10 a week, and gradually grow that amount over time, she explains.

Once you really think about spending, you will find there is a lot of room for change, she says. “Start questioning every payment amount – are there discounts, or coupons? Can you use a savings app? Are there special shopping days, like Cyber Monday, to take advantage of?”

She agrees that it is time-consuming to find dollars to save by looking at all flyers and comparison shopping, but it pays off. “If you shop for convenience, without a list, you will find that convenience costs money,” she explains. Focusing on getting as much as you can for your spending dollar will lead to savings and more satisfaction, she says.

If you are craving a pizza, “make your own, and put $25 in a savings account,” she says.

She says that a recent read of the book The Millionaire Next Door shows the importance of frugality. Really rich people, like investor Warren Buffett, got there because they didn’t spend their money on flashy items and big houses. Instead, they live in modest homes and drive older, sensible cars, she says.

“The unassuming ones are the millionaires… they are superconscious about their money. They try to avoid large fees, and refuse to pay full price for items they want,” she explains.

Even if you have a big house in a nice area, the higher costs of taxes and maintenance can impact your ability to spend when you’re older, she says. “When you see big fancy cars pulling up to the food bank, those are people who are often deep in debt,” she says.

We concluded our chat with a look at the two main savings vehicles in Canada – the registered retirement savings plan (RRSP) and the Tax-Free Savings Account (TFSA). What are the differences between the two?

“In choosing between these two, it all depends on the eventual use of the money,” she explains.

With an RRSP, you get a tax deduction on the money you contribute. That money grows tax-free until you start withdrawing money from the RRSP or from a registered retirement income fund (where RRSP funds can go after you reach age 71).

An RRSP, she notes, “is best for retirement savings, especially for those who are now working and making a good wage – say $70,000 a year or more.” Generally speaking, she explains, if you put the money into an RRSP while you are earning a higher income, the income you receive from it in the future will be taxed when you are earning a lower income/lower tax rate in retirement.

That’s why for those with a lower income – say $40,000 or so – there isn’t as much of a benefit from an RRSP, she says.

“If you are making less than $40,000 or $50,000, you don’t get the same tax benefit from an RRSP, so you might be better off with a TFSA,” she explains.

With a TFSA, there’s no tax deduction for putting money into an account, but your savings grow tax free, and there’s no income tax implications when you withdraw money from your TFSA.

TFSA income, unlike money from an RRSP or RRIF, does not impact your ability to receive Old Age Security, she adds.

TFSAs are a nice place to save, and enjoy a shelter from taxation. “Almost everyone can take advantage of the features of a TFSA,” she says. If you fill yours up, help your spouse fill theirs, she advises.

So, summing it up, if you think you can’t possibly save, it may be because you don’t know where your spending is currently going. Lock the spending part down, and try to take advantage of sales, flyers, and coupons, and by spending less you’ll have more to put away in a savings vehicle. Think of savings as a bill you have to pay, set it as auto payment and increase it every month.

In the next part of our series, we’ll take a look at debt.

If you are saving for retirement on your own, take a look at the Saskatchewan Pension Plan. You can start small, and ramp up your saving over time. SPP will do the hard part – investing your money in a pooled fund at a low cost – and at the end of the day, you’ll have a new source of retirement income for life after work.

Great news! SPP’s flexible Variable Benefit option is no longer limited to those members living within the borders of Saskatchewan. Now all retiring SPP members across the country can take advantage of this provision, which puts you in control of how much income you want to withdraw, and when you want to withdraw it. You can also transfer in additional savings from other unlocked registered sources. For full details see SaskPension.com.

Check out SPP today!

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In this first of a four-part series, Save with SPP talks to Janet Gray, CFP of Money Coaches Canada about what a money coach does and how they can help

Fresh from an interview with CTV Ottawa on record-high credit card debt, Janet Gray of Money Coaches Canada says that while money advice is a key part of her role, there is more to being a money coach than setting up budgets and financial plans.

“Yes, we coach people about money,” she begins. “But what’s a bit unusual about being a money coach is that unlike investment, insurance companies or most other financial planners, we aren’t product focused.” Money Coaches Canada doesn’t sell any investment or insurance products — their purpose is to offer advice and coaching, she explains. All the coaches are certified financial planners (CFP), she adds.

“We are CFP professionals who talk to you about how to optimally manage your money — taking the worry out of it,” she explains. “We help people to see the big picture — here’s your money in black and white, here are systems to manage your cash flow, your taxes. And assist in making your life plans like retirement or estate wishes a reality” And while money coaches can help you manage debts, they are not credit counsellors, she adds.

The money coach, she adds, is someone who can provide “a safe and non-judgmental space to have conversations about managing your money, and how to make things better.” And while getting people to understand their personal cash flow — “where is your money going” — is important, the goal is to have more of a relationship about money and life decisions between coach and client.

Money coaches can “aid in key life decisions — like having your daughter’s wedding coming up or a desired retirement lifestyle, and how to get there financially.” She notes that if you aren’t aware of where your money is currently going, it’s more difficult to save.

Some of the clients she helps already have plans, but no longer have an advisor, so things get stalled. A coach can get them back on track “to implement their plans, despite all the potholes that keep coming at us in life. It’s an ongoing lifetime relationship, not a `one and done’ thing,” she explains.

A key result of coaching is building people’s financial literacy, Gray explains. Beyond the basics of cash flow and financial plan, coaches find they spend “a lot more (time) on financial literacy; we are educating people all the time.”

“There is great information available that they hopefully can share with their kids — do they know about Tax Free Savings Accounts, and when they can be opened? Do they understand the importance of having a power of attorney document? These are things to know that can help them support their kids’ financial literacy as well” she explains.

Money, she says, is a topic many people are uncomfortable talking about. Years ago, she jokes, people didn’t like talking about sex — but now, it’s money and finances.

“I was on CTV Ottawa today talking about the fact that the average credit card debt in Canada is around $21,000. But we’ve seen clients with triple that debt or more. And it’s not the credit card interest rates that are the problem — they haven’t changed much. It’s the fact that everything else is going up — rent, mortgage interest, gas, and groceries. So there is less left over to pay off credit card debt.”

Gray has been a CFP for 23 years and helping Money Coaches Canada clients for about nine years. “It becomes like a relationship, and I also benefit from those ongoing relationships. I get to know these people and can counsel them for everything — financial decisions, are you still on track. And when you get close to people, and know them, they have someone to talk to about their finances in plain English.” Trust builds up and the relationships tend to grow over the longer term, she says.

She had one client who, facing terminal cancer, wanted to make sure his wife had a trusted advisor to talk to about money after he was gone.

“That’s a key point — it’s not just about money, it’s about lifestyle,” she concludes.

In part two of our four-part series, we’ll ask Janet Gray about one of our favourite topics — saving. Watch for part two next month.

What’s 36 years old, has more than 33,000 members, and manages more than $700 million in retirement assets? Why it’s the Saskatchewan Pension Plan! Find out what SPP can do for you when it comes to saving for retirement — check out SPP today!

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It’s no secret that Canadians are living longer lives than ever. According to Macrotrends, life expectancy in this country is now, on average, 82.96 years — in 1950, it was around 68 years.

What may be more of a secret is the tips that those age 90 and beyond know — what things they do and live by that account for their extremely long lifespan. Save with SPP took a look around to see what the extremely elderly think are key tips for living a long and happy life.

When the CBC looked into this topic, they found there was no single “right way” to go.

“For each healthy-living centenarian who stayed active in family and community, you’ll find an equally aged whisky-loving example who smoked unfiltered cigarettes and shunned company,” the broadcaster reports.

Toronto resident Mohammed, 110 at the time CBC interviewed him, had three tips, the report notes. “Stay active. Chew your food longer than you thought possible, and eat fruit every morning.”

Toronto’s Zoltan Sarosy, 107 years young, “stays sharp by reading the news and emailing friends and family — he bought his first computer at age 95,” the CBC notes.

Finally, the CBC says that Agnes Fenton of New Jersey, now 111 years old, “says a daily beer and whiskey are her keys to longevity.”

Writing for CNBC, minister Lydia Sohn says her preconceptions about the elderly “went out the window” once her work brought her in touch with many long-lived members of her community.

While her many interviews with the elderly did uncover common regrets — not having as good a relationship as they could have with kids, not putting kids on the right career path, and regrets about “not being a better listener,” there was consensus on what helped make a long life a happy one.

“According to my 90-something interviewees, the secret to happy and regret-free life is to savour every second you spend with the people you love,” writes Sohn.

“Put another way, when I asked one man if he wishes he had accomplished more, he responded, `No, I wish I had loved more,’” she continues.

The seniors she met may have had regrets, like not having enough time with their late spouses or family members, but all liked to “laugh like crazy, fall madly in love and fiercely pursue happiness,” the article concludes.

Okay, so attitude is essential — look forward, not back. What other tips do people have?

Across the pond in the U.K., the Guardian offers up a few more ideas.

Falkirk’s Jean Miller, age 94, worked in a salon up until a year ago and says it is essential “to keep active and interested in things.”

“The moment you stop and sit in a chair is when you struggle,” she warns. “Life is an education and if you don’t learn as go along then that’s bad. I’ve learned to see things in a different way over time. My biggest lesson is to be more patient. I used to worry about things but now I don’t. I’ve realized there’s a rhyme and reason for everything. In life you’ve got to take things as they come.”

Pam Zeldin, 94, from Manchester tells the Guardian “my main advice for people who want to live to a good age is to look after your health and live moderately. Also, get enough sleep, and don’t drink to excess.” Her older sister, who she lives with, still enjoys a little gin and tonic in the evening, she confides.

Finally, in an article in the New York Post, entrepreneur Sahil Bloom shares the advice he got from older people — via social media — when he asked for their life advice prior to his 32^nd birthday.

Among the responses were “now and then, break out the fancy china and drink the good wine for no reason at all,” the newspaper reports. “Tell your partner you love them every night before falling asleep,” another elderly person advised, since “someday you’ll find the other side of the bed empty and wish you could.”

Other gems included “do one good deed a day, but never tell anyone about it,” and to not delay difficult conversations. Finally, the article reports, the seniors advised him to “find the things in life that make your eyes light up,” and “laugh loudly and unapologetically whenever you feel like it.”

These are great little bits of advice. Recently our local TV news interviewed a 100-year-old, again asking him for his tips on longevity. He told the reporter that it was important to deal with problems promptly, and to resolve them, rather than hoping they will go away on their own. Also a nice bit of advice.

If we are going to live to see a birthday cake with 90 candles on it, our younger selves should be setting aside some money for that future birthday party. If you have a retirement program at work, be sure to sign up and contribute to the max. If you don’t, have a look at the Saskatchewan Pension Plan, an open, voluntary defined contribution pension plan that any Canadian with registered retirement savings plan room can join. You decide how much to contribute, and SPP does the heavy lifting of investing and growing that money. When it’s time to retire, your options include getting a lifetime monthly annuity payment based on some or all of your savings. Check out SPP today!

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New research commissioned by the Canadian Pension Plan Leadership Council (CPPLC) finds that Canadians want steady retirement income — and worry about running out of money in retirement.

We reached out to Alison McKay, who is the Co-Chair of the CPPLC, to ask a few questions about the findings.

The research suggests Canadians prefer plans that offered inflation-protected guaranteed income, and that fear of running out of money is a primary stress driver. While defined benefit (DB) style plans offer this sort of income you can’t run out of, defined contribution (DC) plans and registered retirement savings plans (RRSPs) don’t automatically do this. Should there be more awareness of the value of annuities in capital accumulation plans?

The stress many people feel planning for retirement underscores the need to enhance financial literacy among Canadians and raise awareness about their retirement planning options. Increasing costs of living and how to draw down on savings are two major challenges that retirees can better overcome with the right plan and planning. The research shows that promoting education, awareness, and incentives that highlight the value of retirement income options can improve retirement readiness, including options that offer a solution to safeguard against longevity risks if their workplace plan does not include such features.

It was encouraging to see the stat that a quarter of respondents rate retirement planning as an 8/10 factor when choosing careers. Does this mean that people are (finally) starting to focus on workplace retirement benefits as being as important as salary?

The research indicates that Canadians are considering their personal well-being in addition to traditional career-related factors, like salary, when making their career decisions and choosing employers. Given the potential impact of retirement planning stress on personal health, Canadians may view workplace pension plans as a benefit that serves their financial savings and well-being goals. It is notable that in both surveys, Canadians highly rated plans that provide predictable and monthly income, that is guaranteed to be paid for life, and that has inflation protection.

Is the fear of running out of money in retirement (hence the desire by so many for the lifetime, inflation protected monthly pensions) driven by the lack of independence this might create – such as having to downsize or rent unexpectedly, or depend on friends and family for financial help?

Canadians consistently rated “running out of money once retired” (47 per cent) as their biggest retirement savings stress. The next top concerns were consistently “being dependent on family once retired” (38 per cent) and “being dependent on social programs once retired” (34 per cent). This aligns with your suggestion that a lack of independence may drive some Canadians’ retirement planning stress.

We also see that Canadians express a strong desire for predictable, lifetime guaranteed income that is inflation-adjusted, while also placing priority on maintaining of their standard of living during retirement. However, the report highlights a significant gap in retirement income coverage, with only 29 per cent of Canadians feeling confident about retiring at their desired age and maintaining their desired standard of living.

Making a significant change like unexpectedly needing to move or depend on family can be a stressful situation at any point in a person’s life; it’s more stressful when you’re not earning a wage or salary, as in the case of retirees. The report emphasizes the importance of expanding retirement income coverage in Canada to address the concerns of Canadians and enhance overall retirement preparedness to achieve retirement goals and secure financial well-being during retirement.

The study’s results suggest that people are dipping into their retirement savings due to factors like higher prices, and as well, taking on more debt than usual. Are these the chief reasons that those without workplace pensions aren’t able to save for retirement?

Canadians have lost confidence in retiring on-time and debt-free. While we have seen significant economic volatility in recent years, the low confidence is specifically affecting Canadians without access to a workplace pension. Only one-in-five feel confident in their ability to retire when they want and maintain their standard of living, compared to the one-in-three with access to a workplace pension who lack confidence about reaching the same goals.

The lack of confidence in managing their own retirement savings plans further highlights the need for workplace pension plans that help Canadians save efficiently and automatically. The study also found that Canadians consistently report they are not well informed about sources of retirement income. Expanding retirement income coverage in Canada and investing in financial literacy programs can contribute to improving retirement readiness for Canadians.

What finding surprised you the most from this research?

The survey presented a valuable opportunity to gauge Canadians’ sentiments regarding their finances and retirement plans. While the results are somewhat expected given the economic climate in 2022, a surprising finding is the effects of retirement-related stress on individuals and families.

Something that differentiates the survey from many others is that we specifically asked about stress related to retirement planning, not general financial stress. The study points out that stress, specifically about retirement, permeates various aspects of Canadians’ lives. Notably, the research reveals an increase in retirement-related stress from 2016 to 2022, impacting both Canadians’ personal health and career decisions.

Almost half of those surveyed (47 per cent ) reported that the stress of planning for retirement affects their health, at least moderately. Of that group, 28 per cent said that stress about retirement highly effects their personal health. As 60 per cent of Canadians do not have a workplace pension plan, these findings underscore the significance of addressing retirement planning concerns and the importance of expanding retirement income coverage in Canada.

We thank Alison McKay and CPPLC for taking the time to answer our questions!

If you don’t have a workplace savings program, and are relying on your own investment skills to save for retirement, you may want to take a look at the Saskatchewan Pension Plan. Open to any Canadian with RRSP room, SPP is a voluntary defined contribution plan featuring pooled investing at a low cost. You decide how much to contribute, and SPP looks after growing your savings until it’s time to turn them into income. Check out SPP today!

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In a recent research paper published by the Canada Mortgage and Housing Corporation (CMHC), economist Aled ab Iorwerth found that Canada’s “very high levels of household debt — the highest in the G7 — makes the economy vulnerable to any global economic crisis.”

Save with SPP spoke to ab Iorwerth, who is CMHC’s Deputy Chief Economist, by telephone recently.

His paper notes that household debt in Canada “stood at about 80 per cent of the size of the economy” in 2008, rose to 95 per cent by 2010, and as of 2021 stands at 107 per cent of the nation’s gross domestic product.

That high level of debt, his paper notes, will “do most damage when a significantly negative external economic event happens — such as a global economic crisis – which leads to widespread job losses, as discussed above. It becomes difficult, if not impossible, for many mortgage holders to service their debt.”

Should we see any sort of economic turndown that leads to job losses, carrying high levels of debt into a time when unemployment is higher will “make any recession more severe,” his paper predicts.

We asked him if housing costs were one of the leading factors in the high levels of household debt here.

“I think so,” he replied, noting that mortgages represent “three quarters of that debt.” The rest, he explained, comes from credit cards and other forms of debt. This high level of indebtedness, he says, is nothing new — it is a “long-term trend” in Canada.

He added that high housing prices (which lead to large mortgages) are a particular problem “in big cities like Vancouver, Toronto, Montreal, and even Ottawa. It is a real issue in big cities.”

We asked if high levels of household debt restrict, or limit, the ability of people to save for long-term goals like retirement.

ab Iorwerth says that while he generally agrees with that statement, it gets complicated when you consider that housing is a type of debt (through a mortgage) but “also a form of savings,” since when the mortgage is discharged, you have an asset that is worth something.

“There are risks involved in saving through housing,” he adds, pointing to what happened in 2008-09 with the collapse of world’s credit markets. And he says households “tie up so much money in housing” that it does have a restrictive impact on other forms of saving.

We then asked for his thoughts on inflation’s impacts on lower-income Canadians.

There are a lot of impacts, he says, and again, some subtleties. For lower-income families, he explains, we are usually talking about rental payments rather than mortgage payments. But rental rates tend to go up in times of inflation. “If someone was living in a rent-controlled apartment, if they are looking to move, they will be facing a sharp jump in rental rates,” he says.

At the grocery store, inflation’s impacts “are felt more keenly.”

Overall, however, ab Iorwerth says “the situation is not good in the rental system — you are going to see a really big jump in rents.”

Asked if there is any sort of step governments could take to help with the country’s housing situation, ab Iorwerth says it has long been CMHC’s position that Canada needs “a dramatic increase in housing supply, right across the board.” More housing is needed not only for lower-income Canadians, but for the middle class as well, he explained.

“We need more apartments, more rental properties — more supply right across the board,” he adds.

Longer term, his research paper notes, “re-establishing housing affordability in Canada will be key to reducing household debt if (more Canadians) want to become homeowners.”

Asked what he found most surprising in his latest research, ab Iorwerth says it was really looking at “the international picture” and noting that Canada’s household debt was second only to Australia’s.

By contrast, his paper notes, the U.S. level of household debt was at 100 per cent of GDP in 2008 but has since dropped to 75 per cent as of 2021. Over the same time period, the paper notes, the U.K.’s level of debt versus GDP went from 96 per cent to 86 per cent.

We thank Aled ab Iorwerth for taking the time to speak with us.

Thinking about saving for retirement? If you don’t have a workplace retirement program of any kind, the Saskatchewan Pension Plan may be the plan for you. Any Canadian with registered retirement savings plan room can join. Check out SPP today, and find out how it has been helping Canadians save for retirement for more than 35 years.

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There’s been much written of late about the lack of financial literacy in Canada, and the need to make people better equipped to deal with complex financial situations. Save with SPP reached out by email to Léonie Laflamme-Savoie, Media Relations Strategist at the Financial Consumer Agency of Canada (FCAC) for more information on this important topic.

We asked her first for a bit of background on the FCAC.

“The FCAC’s role is to strengthen the financial literacy of Canadians and supervise the compliance of federally regulated financial entities, including banks, with their legislative obligations, codes of conduct and public commitments,” she writes. “As part of its commitment to strengthening the financial literacy of Canadians, FCAC provides unbiased and fact-based information to help consumers make informed financial decisions on topics such as banking services for seniors and saving for retirement,” she continues.

We also asked FCAC about the programs it has established to promote financial literacy.

“In 2021, the Agency published the National Financial Literacy Strategy which aims to achieve better financial outcomes for Canadians by fostering changes in the ecosystem – either by removing barriers or by catalyzing action – that will help Canadians strengthen their financial literacy and ultimately their financial resilience,” states Laflamme-Savoie.

“FCAC’s research indicates that financial vulnerability affects a wide range of people, regardless of culture, community or background. While vulnerability is not limited to specific demographic segments, systemic barriers contribute to the fact that certain groups, such as seniors, are more likely to face financial vulnerability,” she adds.

She expanded a bit on challenges facing “current and future” seniors, particularly with retirement in mind.

“Increasing financial literacy decreases the risk of vulnerability and increases the likelihood of financial resilience. Financial literacy is key to help seniors make money decisions and manage their day-to-day personal finances. With increased financial literacy, current and future seniors are more likely to: 

• look at retirement in a holistic manner (to consider their future sources of income/including government benefits/credits, the need for budgeting and building short/long-term savings/investments, accumulating/managing other financial assets, ensuring adequate insurance coverage, being informed about tax implications, about power of attorney, etc.). 
• make more informed decisions and better prepare for retirement by building personal savings and assets; considering desired lifestyle, longevity/life expectancy and increasing cost of living (food, rent/housing, utilities, medication/health care, etc.) and other unique costs that can arise later in life (i.e., retirement living accommodations, living with a chronic illness/disability, losing or caring for a sick spouse, etc.) 
• make sound decisions about when and how to retire  
• choose financial products that make the most sense for their needs  
• plan for and cope with major financial decisions related to life transitions (for example, losing a partner and taking on financial management responsibility) 
• navigate and better understand how public programs and services can help them  
• recognize and protect themselves against financial abuse, fraud and scams  
• determine the appropriate advice and supports to help with financial decisions and with managing their finances.”

Laflamme-Savoie provided a little more detail on how financial literacy programs can help seniors.

“By providing opportunities for seniors to learn at “teachable moments” and in contexts relevant for their own situations, financial literacy programs can support them in planning for and navigating through important life events in retirement,” she writes, adding that “financial education can help seniors to: 
 

• protect themselves from fraud and scams and/or from financial exploitation by family members, friends and/or support workers.   
• adapt to changes in the banking industry, like the increased digitalization of banking products/services. With the proper support, seniors can build their knowledge and learn how to use these new products or technological innovations, thus building their digital financial literacy. 
• understand how economic issues (i.e., economic growth or downturn/recession, rising inflation, falling interest rates, etc.) can have an impact on their financial situation, and help them prepare for and adapt their financial affairs accordingly, from both a short- and long-term perspective.”

“The National Financial Literacy Strategy recognizes these important issues and calls on all stakeholders to take them into account when designing products and services, including adopting approaches and tailoring programs to seniors’ needs,” Laflamme-Savoie continues. “FCAC offers Your Financial Toolkit, a comprehensive learning program that provides basic information and tools to help adults manage their personal finances and gain the confidence they need to make better financial decisions. Topics include, but are not limited to, Retirement and Pension.”

Finally, she writes, “as part of its mandate, FCAC oversees the compliance of regulated entities with federal regulations such as the Code of Conduct for the Delivery of Banking Services to Seniors which guides banks in their delivery of products and services that meet the needs of seniors.”

We thank Leonie Laflamme-Savoie and FCAC for taking the time to answer our questions.

She is correct — being a senior is complicated financially. You’re dealing with estate issues from your late parents, you have new and complex tax issues due to having more than one source of income. A great defence is to boost your level of financial literacy.

If you don’t have access to a workplace pension plan, and are feeling a bit overwhelmed by the prospect of setting up your own savings plan for retirement, the Saskatchewan Pension Plan may be just the resource you are looking for. It’s open to any Canadian with registered retirement savings plan room. Check out SPP today, a made-in-Saskatchewan retirement income solution!  

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