Tuesday, 19 April 2016

Pet Insurance

Do you need pet insurance?

Today I want to talk about pet insurance. It's kind of a divisive topic, some people swear by it, and other people hate it with a passion. I guess I fall somewhere in the middle of the spectrum. It has become much more common in recent years, and today we're going to talk about my experience and why exactly I chose to get insurance coverage for my furry friends. I've talked about my critters on the blog quite a bit, but for any newbies, I've got two dogs and two cats. I actually only have insurance for the two dogs (I guess you could say I chose favourites)! My justification is that our cats are always kept inside which makes them less likely to get into a hazardous situation. One of our dogs is also a purebred Boxer, and they are known for having numerous health concerns, and I just think vet bills for dogs can add up faster than for cats. This may come back to haunt me, but I guess I'll just have to wait and see. 

Pets are not cheap (more on that here) and if you've ever had to deal with an emergency vet trip you will know that you can get stuck with a huge bill, we're talking thousands of dollars. My Boxer (Baxter) was my first dog, and when we got him we had just bought a new house, the bf was in school, and we just didn't have a ton of disposable income we could drop at the vet if something happened to him. That's why we got insurance coverage, we could afford the $60/month premium on an ongoing basis but if he got hit by a car and required emergency surgery to save his life then we could find ourselves in a really tough spot (and yes, I'm that person that will spend all my dimes on our pets). The $60/month was worth it and gave us the peace of mind knowing that we wouldn't have to put our finances ahead of our pup. 

I also went for the insurance on our second dog (Bree). She is 100% mutt so her monthly premium is about half the price of Mr Baxter's (everything about that damn dog is expensive) and it just seemed worth it. I figure that there is a pretty darn good chance we will have to use the insurance at some point for at least one of them, and it could very well pay for itself. If we just look at the numbers for Baxter, we pay $60 a month so $720 a year and about $7200 over his lifetime (based on 10-year life expectancy which is pretty standard for a Boxer). That sounds like a ton of money, but that would really only be maybe two or three big health scares...and that doesn't sound crazy to me (scary yes, crazy no). 

I made the decision to set a high deductible on our policies because the whole reason to buy it was for emergencies that we couldn't afford. Both dog's policies have a deductible of $1,000, so the only way we would be filing a claim is if something that is going to cost more than that. This keeps our monthly premiums affordable but still covers us if we really need it to. Both our pups also had a clean bill of health when we insured them, so there are not pre-existing conditions that are excluded from our plan. I know some coverage options have exclusions based on breed or the age of the dog, but that's not the case for us either. I think the companies offering pet insurance are putting in more rules as they learn more about the market (as insurance companies do) and making it harder to get claims approved. I can't speak to the claims process as I've never had to go through it, but you'll want to read the fine print and make sure the coverage you think you're getting is what you are actually getting. 

If you don't like the idea of paying for insurance for your pets, then there is an alternative. Everyone knows that pets cost money and part of being a responsible pet owner is being prepared in an emergency. You can create your own sort of insurance by setting up an emergency fund specifically to cover pet costs. Instead of paying money to an insurer every month you can put save it yourself. The only concern with that is if something happens before you've had a chance to save up enough. Then you would need a plan to cover the shortfall. If I were to add another dog to our family (we are absolutely not, two is plenty), this is the route I would take at this point in time. It gives you more control over your money, and if you don't ever need to make a claim, you don't lose all the premiums you paid into the policy. That doesn't mean I regret our decision to pay for insurance. At the time it was the decision that made the most sense.

If you are looking to get pet insurance, there are quite a few options out there for coverage. The one we are with is called Trupanion, and I'm happy with it. As I said, we haven't had to submit any claims, but I think their pricing is competitive and fair. Applying is easy, and they have a straightforward website. 

You can also look into Petsecure, Pets + Us, or there's even PC Pet Insurance (yes, the grocery store). 

What is your take on pet insurance, absolutely essential or a complete waste of money? 

Do you need pet insurance?

Tuesday, 5 April 2016

Prioritizing Your Money

Save first or pay off debt?

Save, spend or pay off debt? Where do you start when you're finances are a bit of a mess, and you are determined to get back on track? It can be completely overwhelming trying to get started, and I think that's why so many people delay taking that first step or fall back on bad habits after a setback. What you should know though, is that it really doesn't need to be complicated. Yes, turning around your financial health will be tough and you'll have to make some sacrifices, but the actual system is straightforward.

There are a lot of parts when it comes to personal finance but don't get distracted (or overwhelmed) by all the different types of investments or styles of investing. When you're just getting started you want to focus on the basics...paying off debt and having a solid base of savings. Everything else will fall into place after that. Experts go back and forth about whether or not you should pay off debt first or save an emergency fund first...I'm a taking the debt side on this one. Emergency funds are vital, but if you are just starting out and have to make a choice, I think it's best to get a jump on those high-interest payments and put your money towards your debt. If tragedy strikes and you have an unexpected expense, you may find yourself back where you started, either dipping into your newly funded emergency fund or charging it to your credit card. If you do have to use your card, you've at least saved a bit on the interest payments in the meantime. 

#1 Pay Down your Debt (the high-interest stuff)
Notice that this is in regards to high-interest debt so that primarily includes credit cards and unsecured lines of credit. We'll worry about mortgages, student loans and even low-interest car loans later on. I talk more about paying down debt in this post, but I'll recap quickly here. There are two methods for debt repayment; the first is the avalanche method where you pay off your highest interest debts first, and the second is the snowball method where you pay off your smallest debts first. Honestly, it doesn't matter which one you choose, the important part is picking one and sticking with it. 

The big advantage of paying off debts is the amount of money it frees up each month. Each account that is paid off in full means one less payment going out every month and more funds available to get ahead in the next area. 

There's one exception to the debt before saving rule, and that's if your employer is willing to match your contributions. Saying no to that is basically throwing away free money so if your work has a group savings plan then 100% you should sign up for it. 

#2 Tackle that Emergency Fund
First, go buy yourself a beer for getting your debt paid off...that's huge! Then it's time to refocus and switch into savings mode. Building up an emergency fund will be key to not falling back into debt when an unexpected expense crops up (because they will!) You'll want to have about 3 months (at a minimum) of living expenses stashed away so you have a bit of breathing room if you lose your job or your dog has to go in for emergency surgery (those vet bills are killer). I like to use a no-fee, high-interest savings account for this, so you get a little interest but it is easy to access. PC Financial and Tangerine have good options. Definitely stay away from investing your emergency fund in anything risky. The whole purpose is that the money is there when you need it so tying it up in an investment that might lose money or make it harder to withdraw is not ideal. 

Those first two are the biggies and the ones that will cause you the most grief if you don't get them handled. The next points are a little more flexible, and you can mix and match depending on your comfort level and priorities. Maybe you split your extra cash equally between theses four, maybe you go with 50% towards retirement, 30% towards low-interest debt, and 10% to a big ticket item. My only stipulation, saving for retirement should be the biggest (or at least equal to the biggest) expenditure on the list. I know it's not flashy and fun or as satisfying as paying off a loan but being old and broke isn't what you want, and no, you aren't going to win the lottery. Deal? 

Save for Retirement
The younger you start the less you have to save thanks to the wonderful process of compounding interest. Investing even $100/month in your 20's will make a significant difference in the amount of money you will have in retirement. If you're jumping on the bandwagon a little late, you'll need to save more, no question about it, but the most important thing is getting started. 

Work on that Low-Interest Debt
This will include paying off any outstanding car loans or increasing your mortgage payments. A lot of mortgages will allow you to increase your payments by a certain amount and also put down an annual lump sum. Take advantage of this, you don't need to do the whole amount but increasing your monthly (or even better, bi-weekly) payment by even 10% will cut down how long you'll be paying off the mortgage and how much interest you'll pay. The more debts you pay off in full, the more monthly income will be freed up for other things. 

RESP Contributions
If you don't have children, you can skip this point but if you do you may want to factor RESP contributions into your monthly budget. If you want to set some money aside for your children(s) education, RESP's are an excellent way to get an additional benefit through the available government grants. More info here

Save for a Big Ticket Item
This could be anything from an annual vacation, to a new car, to a home reno but if you have something you want then start saving for it. And your emergency fund does not count for this! This shouldn't be your top priority, but I'm giving you the A-Ok to put a portion of your monthly savings towards something in this category. Some people go into full gear retirement savings mode and aren't able to get out enjoy life in the present. I like to think balance, live decently well now and decently well later instead of poorly now and fantastic later ;) 

There you have it, once you get past steps one and two you will be able to create a workable budget outline to get you ahead of the game. There's also room for flexibility so if your priorities change (say you have a baby) you can change up your proportions or add amounts if you come into some moula. Happy saving! 

Save first or pay off debt?

Saturday, 2 April 2016

Why Owing at Tax Time is a Good Thing

It's not such a bad thing to owe money at tax time.
If you're like me and haven't filed your taxes yet there's probably a pretty good chance it's because you owe money to good old CRA. When I was just out of school and had all those education credits to claim I always had my taxes filed within days of receiving all my slips so I could get that refund. These days I seem to owe every year, so I procrastinate for as long as possible. 

Now, who hates having to pay up come tax time? Everyone right...my hand is raised. The thing is though, it's actually a positive to have to cut a cheque to CRA.

How does that work? Well...if you owe money at the end of April it means that you didn't pay enough tax during the year. If you think about it, this means that CRA has given you an interest-free loan for the year. Not a bad deal right? You're not going to be able to get a loan from anywhere else that isn't going to cost you anything. And if we look at it the other way, if CRA actually owes you money, it means that you have given them an interest-free loan for the year...kind of puts a damper on that tax return hey? 

Now don't get me wrong, I completely understand how crappy it is to cut a cheque to pay your taxes and also how exciting it is to get a big refund. Let's compromise and agree that the best case scenario is to end up neutral...you don't have to pay anything, and they don't owe you anything. That way you're in control of more of your hard-earned cash year round and can do with it what you please; saving it all away for a rainy day obviously ;) 

How can you make keep track of where you stand tax wise? Keep an eye on those pay stubs, so you know exactly how much you are bringing in and make sure your employer is taking off the right amount of tax. That's not always the case, I know my old employer didn't take enough off, and I got caught owing a larger amount than I expected one year. You can always ask your employer to adjust your with-holding tax if need be. This can be especially important if you have some side-income that your employer doesn't know about. Maybe you have a rental property, run an anonymous blog, or have high investment income in that year. The tax your employer withholds will be based on your salary with them and not any outside income. If you're self-employed, then you need to be even more careful as you won't be getting regular pay cheques with tax taken off. It's a good idea to set aside some money throughout the year to prepare for what you owe in April. 

Long story short, don't curse too much if you have to pay CRA at this time of year...you're actually getting a bit of a deal! 

It's not such a bad thing to owe money at tax time.