Financial Safety Net for Vancouver

Financial Safety Net for Vancouver
Article Overview

Hey guys, we are glad you are seeking help with your finances. Vancouver is a beautiful city, but it can be hard to manage with the rising cost of living.

Let us show you the steps to growing your financial safety net for Vancouverites.

What Is a Financial Safety Net?

A financial safety net is to help you reduce financial risks that may be caused by unexpected expenses. A financial safety plan is a combination of various insurance policies and a savings account. It protects you and your family’s long-term financial goals by giving you a fallback plan that will not derail your overall financial plan.

Emergency funds are held in a liquid savings account, which makes them easily accessible, unlike investment funds, which may be locked in for a specified period. Financial advisors always recommend setting aside a specific amount to build your financial safety net for expenses that carry a significant financial impact.

Why Build a Financial Safety Net living in Vancouver?

You never can tell when you will need a financial safety net, and this is especially true when you live in Vancouver, a city with such a high cost. To ensure you stay financially stable, that’s why it’s more important to have one. Speak to anyone living in Vancouver or the surrounding suburbs like North Vancouver, Burnaby, or Richmond, and they will testify to how happy they were that they had an emergency fund and how difficult it was to find the amount of money if they didn’t have one. An emergency fund helps you plan ahead. Nobody wants a financial emergency, but they do happen, and you must be prepared for them.

The Covid 19 pandemic is an example of such an emergency. Aside from the government benefits which only went out to a narrow set of people, someone who lost their job but had an emergency fund, would have coped better for a few months than someone who had to dip into their investments. How many restaurants in Vancouver closed down over the pandemic? Certainly, some of our favorites are no longer around.

Financial Safety Net for Vancouver: 5 Tips

1. You Just Started Budgeting

When you just start out budgeting your income and expenses as part of your financial plan, it is not unusual to leave out some expenses that you may need to plan for. An emergency fund will come in handy when you finally realize you have left out some important expenses. It will help you cover the expenses for the main time till you recover and put them in your budget.

2. You Have Only One Source of Income

If you fall under this category, it is important to have an emergency fund in case of any eventuality. An emergency fund will protect you from a sudden job loss or illness that can keep you from earning your regular income. A good rule of thumb for the amount of an emergency fund is 3 to 6 months of your monthly expenses.

3. You Have A Medical Condition

If you have a medical condition that requires constant testing and purchase of drugs that may max out your income, an emergency fund will help you cater for these costs. It will also protect you from any medical emergencies that may force you to take days off without pay.

4. You’re Saving For A Goal

If you have a financial target you want to meet, having an emergency fund will guarantee you achieve this goal in case of any emergency. An emergency fund prevents you from touching your savings and investments to meet any emergency financial need. This will also greatly increase your chance of reaching your savings goal.

5. You Own A Car or A Home

These two assets do not give a warning when they want to break down. They are very essential for your everyday living and should they need fixing, it has to be done as soon as possible. An emergency fund comes in handy in these kinds of situations. If your car needs repairs or your home needs some repair and upkeep.

Why You Need A Safety Net in Vancouver: 5 Reasons

A financial safety net protects you from a financial hit and cushions your fall in cases of emergency. A safety net also allows you to take some investment risk to grow your investment funds without the fear of being impacted should it fail. Here are some of the reasons why you need a financial safety net in Vancouver.

1. To Protect Your Long Term Investments

‍A financial safety net provides you with the discipline you need to avoid jeopardizing your long-term financial goals, such as saving for retirement, putting down a down payment on a home, or taking your 25th anniversary dream vacation. Living in an expensive city like Vancouver, when an emergency situation arises, there is always the temptation to dip your hand into your investment to meet the financial emergency. However, it may cost you your ability to live comfortably in the future if you decide to stay in the city. Essentially, a financial safety net prepares you for a rainy day, definitely needed for “Raincouver”.

2. To Provide For Your Family

A financial safety net is not only for you. You also do it with your family in mind. Your kids could fall ill, needing major medical attention that could hit you financially. Though we have access to free medical care in Vancouver, if you want to be with your family to care for them, you may need to take a break from work. Having a financial safety net will help reduce the financial stress and impact. Losing your job or taking sick leave without pay could affect your family being the breadwinner of the family. A financial safety net helps your family deal with these kinds of situations till you get back on your feet.

3. Financial Stability

A financial safety net gives you financial stability by providing a cushion for any financial emergency. With a financial plan, all your income and expenditures are structured to meet your financial goal. Any slight change in the routine could put your finances off balance. With high inflation and cost living in Vancouver, you may not want to deviate too much from your original financial goal. This is the essence of a financial safety net. When an emergency arises, instead of distorting your financial plan, your safety net takes the hit while your financial plan is still intact.

4. Improves Your Saving Culture

Developing a strong financial mindset is the foundation for achieving your financial goals. A safety net fund is a separate set of savings from your financial plan’s savings plan. Knowing that you are building a safety net keeps you in check and prevents you from spending extravagantly. One saving plan allows you to spend impulsively, but with an additional safety net plan in place, you are limited in your spending to meet all of your financial goals. This will ensure you build up the savings habit and help you reach your financial goals sooner.

5. Helps You Organize Your Financial Plan‍

A safety net plan is part of your financial plan. Having it included in your financial plan gives it structure and organization. With so many temptations in such a beautiful city as Vancouver, having structure and clarity around your money is critical. Otherwise, it is really easy to spend everything you make. A safety net can be classified as one of the strategies for meeting your mid-term and long-term financial goals. It will guarantee your investments are not distorted by any financial emergency.

Start Saving in Vancouver Today: 6 Ways

For young people living in Vancouver, saving can be a problem because it might seem like there’s enough time to save in the future, and since costs like Vancouver housing rents are so high, you are tempted to put it off until later. This is the wrong mentality that you should correct. Saving helps you build your financial plan to meet your financial goals. It also ensures that you have a financial safety net for rainy days, which is something we get a lot of here in Vancouver! Nobody is too young to start saving, and you should begin developing a healthy money habit today. The younger you start, the more powerful the compounding effect on your money. Here are some methods for developing a smart savings mindset:

1. Have A Budget ‍

One effective way of saving is by having a budget and sticking to it. Young people mistake having a budget for restricting the amount of fun they have. On the contrary, by creating a budget, you will be able to track your expenses and allocate funds for your savings and investments. You will have a clear picture of where you spend on fun and what you spend on securing your future.

2. Have A Safety Net Plan ‍

This is another way to develop a saving habit. A financial safety net plan requires you to set aside a portion of your income for an emergency fund. It will ensure you keep to your saving plan to meet up with your financial safety net plan. You can use a high-interest liquid savings account as your safety net plan so you can access it in a time of emergency.

3. Set Savings Goals ‍

Goal setting is known to be an effective way of achieving a desire, it also gives your money a purpose. Visualizing what you’re saving for keeps you in check and ensures you follow through with your saving culture. Setting goals like buying your home in 3 years will improve your saving habit because you have a goal to meet.

4. ‍Find Ways To Cut Your Spending

If you have high expenses, you won’t be able to save. If you are interested in developing a saving habit, you need to cutdown on your expenses. You will need to reconsider some of the unnecessary things you buy just for the sake of buying. The habit of buying clothes thinking you will need them in the future will have to stop (you might want to unsubscribe to sales emails from Lululemon or Aritzia to help ease your temptation). Cut back on expenses on entertainment and eating out. A budget will assist you in reducing unnecessary spending.

5. Try Out Automated Saving

Automated savings ensures that a predetermined amount is deducted from your main account into your savings account before you access it. With automated savings, you can split your income between your main account and your savings account to gradually meet your saving goals. You can set up automated savings directly with any financial institution in Vancouver or reach out to a local advisor to help you set it up.

6. Track Your Progress ‍

Tracking your savings progress is essential because it will ensure that you stick to your savings plan. It also helps you to know when you are not meeting up with your savings plan. It will also encourage you by showing you how far you have come with your savings plan.

FAQ

An example of a safety net is a savings account that holds 3 months worth of your monthly expenses

You can create a financial safety net by budgeting wisely, and directing a portion of your income to a savings account

The commercial banking system has an insurance policy in place to protect the deposits of the bank’s customers. This deposit insurance is provided by the CDIC (Canadian Deposit Insurance Corporation) and covers up to $100,000. 

FISC Canada is the Financial Institutions Supervisory Committee which supervises the various financial regulatory institutions, including the Canadian Deposit Insurance Corporation or CDIC. 

Article Overview

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Written by:

Jim Pan, CFP, MFA-P

Jim is a dedicated, fee and advice only independent Certified Financial Planner with a focus on supporting healthcare business owners during their crucial growth phase. His expertise lies in offering comprehensive solutions to minimize taxes while embracing a holistic approach. With a career spanning back to 2010, Jim has established a strong presence in the financial industry. He proudly holds a range of designations, including Certified Financial Planner (CFP), and Master Financial Advisor - Philanthropy (MFA-P). He is currently pursuing additional designations and qualifications to better serve his clients and community. Beyond his qualifications, Jim is a member and an esteemed participant in the Million Dollar Round Table (MDRT), an exclusive global association comprising the top 1% of financial advisors. Jim's commitment extends to the community, where he spearheads numerous charitable fundraising events and plays an active role in enhancing the well-being of others. Additionally, he has contributed significantly by serving on the board of the Canadian Mental Health Association in Vancouver. Currently, he volunteers with Junior Achievement of British Columbia (JABC) to present personal finance topics to youths.

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