Plan your finances for a worry-free winter in the south
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(Special) - For many Canadians winter means one thing: heading south to warmer, sunnier weather.
While you're away, the last thing you want to do is worry about your finances and investments.
With a little planning, you won't have to.
Two of the most critical things to think about before you go are access to cash and your investments, and preparations in the event of an emergency or catastrophe.
Currency exchange can be a big expense for snowbirds who spend a significant amount of time outside of Canada. A significant drop in the Canadian dollar can increase the cost of living outside the country and may even force some snowbirds to shorten their trips and/or curtail spending while away.
It may help to understand a little bit about currency exchange fees and costs.
Essentially there are two types of costs associated with exchanging currency — the spread and fees.
The foreign currency exchange spread is the difference between what a bank or foreign exchange service pays for a currency and what they charge you to buy it.
Some foreign exchange methods will charge an additional fee on top of the spread that will increase your cost to convert your currency. These can take the form of a flat transaction fee or a percentage of the amount you are converting.
Banks and currency exchange services usually do not charge an exchange fee but foreign exchange kiosks, credit cards and ATM machines often do. It's a good idea to check on which outlets charge an exchange fee before converting your money with them.
By far the best solution for longer term travellers who vacation in the same location is to have an account with either a local bank or with a Canadian bank that contains U.S. currency and/or U.S. investments or bonds.
The Canadian Snowbird Association has a currency exchange program. Each month an amount of money determined by you is withdrawn from your Canadian bank account. The amounts are pooled together with the funds of all other program participants that month and are converted into U.S. currency at a preferred "bulk" rate.
The collective funds then are transferred as a single transaction to a holding account at a U.S.-based bank. Funds are paid out to the individuals on the fifth banking day of the month.
Before you leave Canada it's a good idea to take an inventory of bills that must be paid while you're gone such as credit cards, loans, income and property taxes, subscriptions and membership dues. Make sure you can pay them while you're outside the country, have someone do it for you, or arrange for them to be paid through preauthorized payment or automatic withdrawal from your account. Internet banking is a great way to keep track of expenses and bill payments.
It's probably also a good idea to meet with your financial adviser before you leave home to make sure your portfolio is in good shape and to make arrangements for investments that may mature while you're away such as Guaranteed Investment Certificates, term deposits or bonds.
Make sure your adviser knows how and where to reach you while you're away and vice versa.
Then there are legal, insurance and estate issues to consider in the event of an unexpected emergency or worse.
Your powers of attorney should be up to date in the event that something happens to prevent you from managing your affairs. Have a current will in place and let someone know where your legal documents are kept.
Know what kinds of insurance and health plans you have and how they work together. Many people will have health insurance from their employers but coverage may not be adequate and you may require more.
And keep a close track on how long you've stayed in the U.S. during your visit. Canadians are permitted to spend 183 days in the U.S. over a 12 month period, not just in a calendar year. If you exceed that the government considers you a U.S. citizen and you could become eligible to pay U.S. tax.
When vacationing away for an extended period you need a plan of action in place before you leave home so you can enjoy your time away without worrying about your financial and other affairs.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
Copyright 2017 Talbot Boggs
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