You are more experienced now, your bank account is larger, and it is easier to think further ahead.
We are now well into 2015 and your New Year's Resolution to do a better job of managing your money are already being forgotten. As the late Sir John Templeton famously stated, the best time to invest is when you have money! The challenge for many people, with many middle-class people just struggling to make ends meet, is just getting started.
You can begin with a basic monthly contribution to your RRSP or TFSA to get into the savings habit. The younger you are the better but it is never too late to start as long as you are still working. Just don't expect miracles if you don't start saving for retirement until your mid-50's for example.
Everyone in Canada has a financial plan whether they realize it or not. They have the automatic or default plan or their own custom designed plan with a qualified financial planner. The custom plan is based on your own efforts and focus on being economically self-sufficient with the advice and guidance of a trusted advisor.
The automatic (or the do nothing and don't think about it) plan, means getting the government support payments available to all Canadians CPP, Old Age Security and if your income is low enough, the Guaranteed Income Supplement. That is about it except maybe getting support from your children or other family members.
There are two schools of thought in the media - and financial planning books - about the best way to manage one's money during your career. The first one says you should build your emergency savings first, save for a house down payment (both can be done with a TFSA for example) and eliminate all consumer debt before you start saving for retirement, ideally by your mid-40's.
The challenge with this approach is that it doesn't work well in high priced real estate markets like Vancouver, Edmonton, Calgary or Toronto. Almost all of your disposal income that could go to retirement savings would be diverted for debt reduction. The result can be families hitting their early 50's with low mortgages, no retirement savings and hopefully enough savings to pay for their children's education. And they are running out of time to save money by age 65.
This approach also assumes that you only buy one house while the real estate statistics show that many people buy several homes during their work years and trade up to larger mortgages and never get out of debt. Never mind the ongoing temptation to take on consumer debt through car loans and other installment type debt.
The other approach you can consider is doing all of the same things as the first approach but also adding longer-term asset building goals to the mix. You can start saving for retirement by putting a modest amount into an RRSP on monthly basis to build the savings habit. The monthly amount for RRSPs and life insurance becomes part of your monthly family budget and is taken into account as part of the affordability calculation when buying a mortgage.
The result theoretically is that you buy a house at age 30, have a life and raise a family and have the house paid off by age 50 or so with RRSP savings of $100,000 or more. Ideally the kids are ready to move out of the family nest and your obligation to contribute to their education is done. You now have momentum for the final savings push to your ideal lifestyle in your retirement years.
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Copyright © 2015 AdvisorNet Communications Inc. All rights reserved. This article is provided for informational purposes only and is not intended to provide specific financial advice. It is strongly recommended that the reader seek qualified professional advice before making any financial decisions based on anything discussed in this article. This article is not to be copied or republished in any format for any reason without the written permission of AdvisorNet Communications. The publisher does not guarantee the accuracy of the information and is not liable in any way for any error or omission.
You are more experienced now, your bank account is larger, and it is easier to think further ahead.
Without barely a moment’s thought, you would protect your family from an immediate threat.
Do you ever feel like life is too automated? Maybe you’re suspicious of the cruise control feature on your car.
You have worked all your life and saved for retirement. What other planning work could possibly be left?
B. &C. W.
It has truly been a pleasure working with you; sincerely, thank you for everything. Coming into this experience, I knew we had things to improve and work on to get in better financial shape, but getting started seemed like a daunting task and quite frankly, it overwhelmed us. You really took the time to understand our financial picture and helped make sense of our 'chaos' and provided a clear path forward. Not only that, you were also kind enough to share some useful tips and tricks that we will put into practice and be 10X better for it, down the road as we work toward our financial goals. I cannot thank you enough for your efforts!
Alliston, ON
M.O.
We are approaching our retirement and I had been feeling for some time we needed to simplify our complicated financial picture. I also wanted to get a clear handle on whether we would be able to fund our retirement goals and still provide a legacy for our children.
Our financial picture is complex as we owned 3 properties, holding companies, a trust, exotic investment products, several separate investment accounts, run our own business and had some debt. I sensed our financial planning process would be time-consuming and would likely veer into areas beyond ‘just money’. I was looking for someone both I and my husband could feel comfortable opening up to as a trusted partner for us. Of course I was also looking for someone wicked smart who knows a lot about tax, corporate structures and investment and retirement planning.
We did a thorough search of advice-only financial planners and interviewed several before choosing to partner with Jacquie. She had come highly recommended.
Jacquie has been a godsend. She did a deep dive into our financial position and created an initial bespoke plan to help clarify our financial position. She then helped facilitate conversations with us as we made some tough decisions. As we shifted our assumptions about what we wanted and expected for the decades to come, Jacquie ran several fresh scenarios for us.
In the end, we felt comfortable with the final version of our plan and understood the guidelines we need to be aware of to stay on track. Jacquie then introduced us to some very smart, experienced professionals in the investment industry who we are considering partnering with to manage our portfolios.
It’s a relief to have completed this process. I sleep much better at night, literally. It is also reassuring to know Jacquie is a call away to help us think through any changes to our financial picture in the years ahead. M.O., Toronto, ON
Toronto, ON
