Trevor & Cindy – A comprehensive financial plan in action

Trevor (45) and Cindy (42) are a married couple with two children, aged 10 and 12. Trevor works as a project manager earning $120,000 annually, while Cindy runs a small marketing business. Last year, she took $80,000 from the corporation in personal income. They own a home with a $400,000 mortgage and have $500,000 in investments including a locked-in RRSP from Cindy’s previous employer. Trevor also has a defined benefit pension through his current employer. Their primary concerns include managing debt, saving for their children’s education, preparing for retirement, and protecting their family from financial risks.

FINANCIAL MANAGEMENT

Concern:

Despite a healthy income, Trevor and Cindy struggle with cash flow due to high mortgage payments, discretionary spending, and irregular business income.

Plan:

A detailed cash flow helps them track spending and allocate funds toward debt reduction and savings. They are also able to set aside additional funds that could be used for extraordinary expenses like travel or emergencies.

INVESTMENTS

Concern:

Their investments are scattered in various accounts with no clear strategy, and they are unsure if they are on track for their long-term goals.

Plan:

A diversified portfolio aligned with their risk tolerance and goals is developed, focusing on growth investments in TFSAs and RRSPs while using a balanced approach for their RESP investments.

TAX EFFICIENCIES

Concern:

Cindy’s business income fluctuates, leading to inconsistent tax liabilities, and they are unsure how to reduce their tax burden.

Plan:

A tax-efficient strategy is implemented by maximizing RRSP contributions, taking money from her corporation, and leveraging tax credits such as childcare expenses and charitable donations. 

RETIREMENT AND SAVINGS

Concern:

They want to retire by age 60 but are unsure if they are saving enough to sustain their desired lifestyle.

Plan:

A retirement projection shows they need to increase their RRSP and TFSA contributions. A phased decumulation approach in retirement is introduced that illustrates options for Trevor to retire or work part-time as he desires, while Cindy also identifies options for unlocking her locked-in RRSP at retirement. Overall they identify a combined approach to integrate personal and corporate wealth, and how their overall savings, pension income, and government benefits integrate to sustain their income needs through retirement.

WILLS AND ESTATES

Concern:

They have powers of attorney, personal directives, and wills in place. They would like to provide financial gifts to their children but are unsure if they can afford it during their lifetimes, or if there will be anything left in their final estate.

Plan:

Resources required to sustain their lifetime needs are identified. Scenarios are assessed that include gifting to the children in their lifetime versus upon their final estate. They identity gifting to their children through the use of First Home Savings accounts when they turn 18.

INSURANCE

Concern:

If either of them becomes disabled or passes away unexpectedly, their family’s financial stability could be at risk.

Plan:

Life insurance is increased to cover the mortgage and education costs. Disability insurance is added for income protection, and critical illness insurance is secured to cover medical costs if needed.