Blog - Fee-Only Financial Planning / Advising in Kitchener Waterloo Cambridge - WD Development


It might not seem like a large bank account balance would be a problem, but it often is.  Many clients hire me specifically to plan to deal with this issue.


Whether it's your job that gives regular bonuses, your spending is far below your income or you received a large one-time amount, cash in a bank account casuses pressue to make a decsision.  The right decision.


Some general considerations if you are in this situation:

  • do you have an emergency account?  If you lost your income for 6 weeks to 6-8 months, how would you pay your bills?  If you don't have any emergency account, consider moving the cash into a savings account (if it is currently in your main chequing account).  This money's job is to be available; it's not irresponsible to have the money 'sit there doing nothing'.  It's job is to protect your financial stability.


  • Are you saving for a specific purchase or a known expense?  If yes, leave that money in cash.  Sometimes, clients tell me that they feel like they could be gaining a higher return, or doing something else with the money.  If you are considering investing in either the stock or bond market, you are taking risk.  Risk that your investment might be worth less when you need to sell it than the day you bought it.  If your timeline is less than 3 years for a purchase/ expense, you don't have the time to invest without taking on large amounts of risk (aka- you would be gambling with money that you know you need in a certain amount in a certain time).  


  • Did this money come to you through a loss or a big life change?  Is this inheritance money?  Severance from a job loss?  A settlement after a separation/divorce?  Sale of a business?  I recommend taking time to review your priorities if your money came from any type of 'sudden wealth' event.  In my experience, clients take about 12-18 months to make any decisions on an inheritance.  You need time to review your new situation, set new priorities and test out what your life looks like now.  Using smaller amounts to pay off high-interest debt or purchase something that is meaningful to you is reasonable, but if you are feeling overwhelmed or a bit lost with the money goals, put it into a savings account, gather information and ideas and make decisions later.

If the bank or any other advisor is pressuring you to make a decision or purchase a product, I recommend getting another opinion.  There is rarely a situation that demands a decision on money like this before you are ready.  On the other hand, there are very real consequences to you to making a decision that doesn't align with your situation, goals or values.


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Financial scams are everywhere- in your emails, your texts, on social media, through phone calls and still arrive in traditional letters in our mailboxes.


It's important to protect your information and access to your finances.


The discussion below, moderated by Steadyhand, focuses on seniors.  Seniors are a large target group of scammers, but we are all vulnerable.  Over the summer, I helped a teenager unravel a bank account hack.  The bank's response wasn't great- the target received conflicting instructions, was told he had never had accounts at that bank after explaining the situation (although they had ID with them at the time, they weren't asked to provide it; the customer service rep assumed they were attempting a scam).  The bank agreed in late August that the account had been hacked, and replaced the stolen amount.  However, the bank account owner still can't set up etransfers and a few other functions in the new bank account.  Why?  The bank can't provide a good explanation and won't help further at this time.


The effects of scams are far-reaching and can destroy financial stability.  


Steps to consider:

  1. When you receive any unexpected communication, don't respond immediately.  Give yourself time to review the sender's request.
  2. Get out of a high-pressure conversation.  This is important.  It is also extremely difficult to do.  Practice- write down what you will do if you receive a phone call demanding immediate action on your part.  This includes phone calls pretending to be from family members who are 'in trouble'; phone calls pretending to be from Revenue Canada (CRA). Do not stay on the phone- hang up and call the family member or CRA directly.  Big note: CRA sends a letter if there are questions or concerns or tax money owing.  The initial communication from CRA is NOT by phone.
  3. Do not give out banking or personal information through email or text.  A legitimate organiziation will not ask for this information.
  4. Assume that you are vulnerable to scams.  One of the reasons that scams work is our assumption that we will be able to spot the scam.  Consider approaching every unexpected notification with two thoughts:  "I'm not smarter than the average bear" and "scammers do this as a full time job, it's profitable and they are extremely motivated to get at my money".  
  5. Slow down (again).  Review what you wrote out in step 2.  If this is a legitimate request and you ignore it, the organization is likely to contact you again.  I get a lot of emails claiming to have phone messages attached for 'my organization'.  Some look quite legitimate.  I've never clicked on any link; I assume that if there is a real person attached to that message, they will call me back.



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How to manage a financial emergency

Lots of things have made 2023 feel uncertain, both globally and close to home. War, politics, inflation, divisive conversations and economic shifts are part of our everyday lives.  And they can all affect our day-to-day financial stability.


How to manage a financial emergency


If you are not in the middle of an emergency right now, go back to the previous post and fill in your financial picture.  Clarity and understanding are important foundation pieces to making good decisions.  If you don't understand what's happening now, you're unlikely to choose the right adjustment to make, especially if you're under pressure.


 Step 1  Organize your net income, including the timing of pay & income deposits.  Work out how much you're spending.  Commit to an amount that you can save regularly.  Save it.  Not in your main bank account.


Step 2  When possible, build up an emergency account.  When your income is interrupted, or you have a large expense, having an emergency fund takes some of the impact out of the event.  If you have already saved, during the emergency, you're not taking on debt.....which increases your fixed expenses (to pay the debt off).....and emergency will be more contained.  An emergency fund that can cover 3 months of all of your expenses is great.  Coverage for 6 months really buffers the impact of whatever might happen.  If those amounts feel completely out of reach- do what you can.  Start somewhere.  Go back to step 1 and find any amount that can go towards protecting your financial stability.


Sidebar  "Can't I use my line of credit instead of leaving money sitting in a bank account doing nothing?"  I used to hear this question from clients all the time.  Now that interest rates have gone up, and the economy feels shaky, I don't hear it often.  Yes, you can use a line of credit if you need time to build an emergency account.  I often recommend that clients have a line of credit available.  It is a tool that can give you flexibility in a financial emergency, when your life is changing and when you need some room that is beyond your regular income.  If the line of credit is your only tool in an emergency, you need to be prepared to pay it off.  The pay-off period will stretch out the time that it takes you to financially recover, and it can restrict your financial choices until the debt is paid back.  It can still be the best solution, depending on your goals and the situation.


Step 3 Protect your earning potential.  For most of us, our biggest asset is our earning potential.  We don't put this on a net worth statement, and we often forget that this is the case.  Large expenses and rising debt can interfere with our ability to focus at work.  Losing your job has an immediate impact.  Understanding your financial situation, how much you need every month to cover expenses, how long you can survive on savings, how much you need to earn at a new job, when you need to consider large changes in your lifestyle- all of these things will settle the general financial stress that many of us carry every day.  Be deliberate about decreasing your stress- focus on what you did well in your last job/ what you do well in your current job, the skills that you have, skills that you would like to gain.  Think about how you can add value to a new employer.  It's important that you protect your ability to interview well or continue to perform well at the job that you have now.  Don't let financial stress interrupt your work performance.


What you're in the middle of a financial emergency right now?  Slow down, go to Step 1, and work from there.  Don't beat yourself up if you didn't have an emergency fund, or have already used all of it.  Work from where you are.  Know your numbers so you know what you need to do.  Don't guess.  Don't panic.  Protect your ability to earn an income.

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How to fill in your financial picture

We’re 78% of the way through 2023.  If you pay for anything, at all, anywhere, you’ll agree that prices have gone up. 


If you have debt, that price has gone up too.


As a group, Canadians are pretty comfortable with debt.  Especially debt against our houses.  For a long, long time, borrowing on a line of credit was cheap, seemingly easy money.  And since our house prices only seemed to go up, what’s the harm?  Where’s the risk?  Why wouldn’t you borrow to get what you want today instead of waiting?


78% of the way through 2023, if you have borrowed on a line of credit, or you have a large mortgage, you are getting more familiar with the risks.  And the discomfort.


This is one of the places where net worth and cash flow collide in our thinking.

For a long time, low interest rates meant that you still looked good on paper, even with a mid-six figure mortgage.  And your cash flow felt fine.  But it wasn’t long-term fine.


Now that your payments have doubled or tripled, your cash flow isn’t fine.  It doesn’t matter that your net worth still looks okay/ good / great.  You need to be able to make those debt payments AND buy groceries, pay for your car and buy winter boots for everyone in your house.


If you’re feeling cornered by your debt and are looking for a way out, start with the steps below:


How to fill in your financial picture with facts:


  • Understand your net income.  This is the amount that lands in your bank account every pay period.  This is the amount that you have available to cover ALL of your expenses.


  • Organize your expenses into two broad categories- fixed and variable.  Focus on fixed right now.  Get a sense of your variable, it that’s helpful for you to move to the next step, but if you’ve tried this before and walked away, you are behind on payments or money is keeping you up at night- find your fixed expenses only.  You’ll see how variable comes out after the next step.


  • Calendar out your net income and your fixed expenses- when and how much comes IN, when and how much goes OUT.  Do this in whatever format works best for you- print a calendar sheet and get a pen, use an online calendar.  If you are feeling overwhelmed by payments- you need a visual. Don’t shortcut this step.


  • Now you know how much of each pay cheque is already spent (fixed expenses) and how much is available for variable expenses (these are also necessary, but we often have some flexibility in how much or when we spend in this category).  Move the money that’s available for your variable expenses to a separate bank account.  Note: you can keep track of this amount on a spreadsheet, in an app or another way that makes sense to you.  A separate bank account is the fastest ‘check’ on where you’re at with your variable spending.  For some people, the cost of an additional bank account (most frequently heard objection) is a small price to pay for financial stability.


  • Make pro-active choices in your spending.  Now that you know what’s coming in when and how much is scheduled to go out and when, you can start making adjustments.  If you don’t have enough to cover both your fixed and your variable spending, you will need to make some hard choices.

There’s much written and recorded about lowering your fixed expenses- think ‘cancel your subscriptions!!!’ conversations.  Often, it is difficult to significantly lower your fixed expenses without large lifestyle changes.  Most of our fixed payments are connected to a big lifestyle choice- where you live, what you drive and stuff you own and need to maintain.  It’s worth going through the list to see what’s available to reduce or eliminate, but be prepared that this may be nibbling at the edges of your situation.  If cancelling a $20 Netflix subscription solves your debt problem- congratulations.  It likely won’t.  It may give you the motivation to work further and find more reductions- congratulations!!


If you need a big reduction in expenses- it is time to look at selling your home, switching out your car.  Be aware that these are both difficult transactions- emotionally and financially.  More and more car loans are 8 years long.  If you are 5 years in to an 8 year loan, and you need a lower payment, selling your current car won’t clear the remaining loan amount.  And you’ll need to find something else to buy.  Investigate before you do either of these- know the costs so you’re aren’t moving from high payments to new high payments. 


For most of us, the variable expenses are the ones that we have the most control over- both in timing and amount.  These expenses can also be hard to decrease.  If you are spending more than you are making, you need to make adjustments while you still have some control of the situation.  If you are spending as much as you are making, you have some time to figure out how to make more or spend less in the next 12 months to 3 years.  If you are spending everything that you’re making, you don’t have anything to save.  Sounds obvious, but lots of us miss the implications of this.  How are you going to replace your car?  Repair the car you have?  Maintain your house?  Manage a layoff from work without taking on new debt?  That’s a brief list of the short-term expense spikes that affect many of us.  Long-term, how are you going to stop working?  Preview of a future post- selling your home isn’t an answer to this question.  At least, not an answer that you’re going to like.


For the next 4 weeks, spend time with the 5 steps to filling in your financial picture:

  1. Understand your net income
  2. Organize your expenses into fixed and variable
  3. Calendar out your pay deposits and your fixed expenses
  4. Calculate and move your variable money to another account
  5. Make pro-active choices.  You now have the knowledge to spend within your pay periods!



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Canada Pension Plan


When you are working, you contribute to the Canada Pension Plan based on your earned income.


Once you are age 60 or older, you can apply to receive payments.  The amount you receive is based on your earnings history, and possibly your personal situation.


The next few posts will answer a few questions about CPP.  It's important that you understand the program basics, where to find information about both the program in general and your situation specifically, and the role CPP payments will play in your future.


Today's post answers a few basics about the program:


  1. How do I contribute?  CPP contributions are deducted from your pay, if you are employee.  If you are an employee, you contribute half of the amount (which is based to your salary) and your employer contributes the other half.  If you are self-employed, you contribute both halves.  Self-employed individuals send the CPP amount in with their income tax payments, or installment payments (depending on your payment schedule with CRA)

  2. Where does the contribution money go?  There is a CPP investment fund.  The fund received contributions and makes payments.  There is a large pool of money in this fund that is invested and generates returns of it's own that helps to meet payment needs.  You can find out more about the CPP investment fund here.

  3. What is the CPP supposed to do for me?  CPP is intended to provide a monthly payment to you once you stop working.  The amount you will receive is based on your contributions while working, how many years you contributed and how old you are when you start receiving payments.  CPP payments are made as long as you are alive.  CPP payments are adjusted to inflation every year.

Random associations:

Today is National Pot Pie Day.  These are two chicken pot pies from Sweet & Savoury Pie in Waterloo.  If you live close, I highly recommend stopping by and trying a pie!


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How to fix financial mistakes

When you are hard on yourself about any mistake, including financial mistakes, it can help you find a solution or it can hold you in a place of stress, worry and continued mistakes.


There are often a number of ways to fix mistakes, including financial mistakes.


For today, consider starting with the poem Do not trust the erasrer by Rosamond S. King.  One of the most important parts of changing your finances is changing your mindset.  Developing solutions or changing behaviour with the same mindset that got you to where you are is unlikely to get you out of where you are.

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Making Decisions while Grieving

Making decisions can be difficult on a regular day.  Grieving a loss isn't a regular day.  Making decisions can become more difficult, more exhausting and the stakes may be higher.


When you're grieving and faced with decisions, it's important to understand your current situation is, what decisions need to be made immediately and which decisions can (and possibly should) be made later.


The best decision may be to wait to make a decision.  How to do you that?  You decide on a short-term plan that deliberately allows room to make a long-term decision when you have more time, energy and clarity.  This looks like putting an inheritance, severance payment or separation settlement into a savings account and letting the bank know that you are not making any other decisions for 12 months (so please don't ask if you would like to speak to a wealth advisor or buy a GIC).


To read more on making decisions while grieving, read Noushin Ziafati's interview with myself, Sandra Fry and Ti Zhang here

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Finding your Fixed expenses

Fixed expenses- the money that you’ve already spent based on the choices that you’ve made.  These expenses are scheduled to go out at a regular time in a roughly regular amount.  The exceptions to the ‘regular time, regular amount’ rule are costs to maintain your house (if you own) and your car.  These expenses are less predictable in a short time period, but ARE predictable over a longer time period.  The other truth about these expenses is that they WILL happen.  If you own your home, you can put off some maintenance for some amount of time, but you can’t put maintenance off forever.  Same with your car- the first few years of a new car are often pretty low-expense on the maintenance side.  Then expenses will rise.  Plan for this; it’s not a surprise.  You own the thing, you need to maintain the thing.  Your fixed expenses are not the only required costs that you have, however, if you want to organize your spending & saving in a sustainable way, you need to know what you’ve already committed to and what expenses you can make day-to-day choices on.   


To find these expenses, take a look through your bank statements and credit card statements for the past 12 months.  You are only looking for 'regular time, regular amount' expenses.  Don't total all of your spending; some cateogries that occur regularly are going to be omitted in this exercise because the amount varies enough that the category will throw off you feeling in control of your money.


Use the chart below as a guide: expenses listed on the left are fixed expenses- that's what you're looking for in this step.  Expenses on the right are variable- leave those off for now.  There's a few situation-specific exceptions that may make sense to you- if you use a meal delivery service, that's a fixed cost- you know how much is leaving your account to cover that decision.  Using the meal service moves it from a variable (grocery) to fixed (contract) expense.  If you commute for work, and know your gas costs, maybe it should go on the fixed expense list.  Be careful about adding too much to the fixed list, unless you really wanted a full budget experience!  If you do, great- use both sides of the chart and brak out all your transactions for the past 12 months.  If you want a faster solution, focus only on your fixed expenses.


Once you've totalled your fixed expenses for a month, including due dates, line those up against your income deposits.  You'll start to see where they line up, and where they're giving you trouble.  You'll also start to see how much money is available from each pay period/ income deposit to cover your variable expenses.


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Organizing your Expenses

If organizing your finances has moved to the top of your priority list, that’s great news.  If you’re feeling confused & frustrated about your finances and would rather pull your own eyelashes out instead of dealing with them, but, it’s a new year and tips are everywhere you turn, I’m glad you’ve read this far.


The majority of work that I do with clients involves the foundational work related to money in/ money out.  You need to know these numbers before you start making changes.  You need to know what’s happening now to make effective choices that will move you to a better place over time.


If you need a new look at your money and are ready to do some math, this post will give you a framework for understanding where you are now and what changes will improve your situation.


Step One: knowing how much is coming in and when


You need to know how much is deposited to your bank account and when that happens.  When we try to untangle our finances, we often talk about our salary.  In this context, that is not a useful number.  None of can make choices on the full amount of our salary.  There are deductions before any money lands in our bank account.  Sometimes the deductions are large. And valuable.


I recommend that you look back at a payslip from 2022- look for the net amount deposited, or if you have your last payslip, find the year-to-date (YTD) net amount.  That will tell you how much lands in your bank account.  This is the amount that you need to focus on when you’re asking questions about what’s affordable.

Draw out the timing of the deposits so that you can compare your deposits to when your expenses happen.


See the chart below for a list of common deductions and an explanation of the benefits to you.  Need more clarification on what's happening in your specific situation?  Contact Sara for an appointment by booking an initial consultation here 

or send an email


check back on Jan 23 for Step Two: finding your fixed expenses 


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New 2023 numbers, Part 2

Next up in 2023 numbers that matter:


Canada Pension Plan contributions: $3,754.45 for employers & employees/ $7,508.90 for self-employed Canadians.  This is a noticeable hike; it's part of a multi-year plan that was approved by the provinces & feds in 2015.  Good news- there is also increased benefits that are funded by this increase.


EI premiums: $1,002.45 for employees on max insurable earnings of $61,500


Canada Pension Plan payments: max monthly retirement payment (age 65) $1,306.57.  A note that the average Canadian receives 56% of the max amount - $731.68/mnth.  CPP pays a number of other benefits, including post-retirement benefits, disability and survivor benefits.  For the entire list of CPP & QPP benefits, click here

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Sara McCullough
December 6, 2023
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