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The beginning of the New Year is often a time to turn a new financial leaf: make a budget; pay down debt; save more. That’s all commendable, but these good intentions are mostly forgotten by, say, mid-February. A better idea is to take stock of your entire financial situation. Review what’s important and prioritize the items you need to take action on. Here’s a guide to help you get started.
Financial planning
If you haven’t done so already, find a quiet time to sit down with your significant other and get to know yourself. Revisit your life goals, values, investment goals, and financial objectives. Are you looking for something as lofty as early retirement? Or perhaps you really just want to get the mortgage monkey off your back. You might want to save for a cottage or children’s education.
Investments
If you have an investment portfolio - even if it’s a mutual fund or GICs or savings bonds - you’ll want to evaluate it in light of your financial goals. A good financial plan includes a detailed statement of investment objectives, defining the optimal allocation of your investment assets. Do you have an investment strategy? Do you invest or set aside investment savings every month? If you have set out longer-term life objectives, you will need a plan to achieve them.
Protecting what’s important
Insurance is a critical part of your overall financial plan. And all too often, we have too much in some areas, too little in others, and we’re typically paying too much. To get the optimal coverage (for example, life insurance to protect your family, extended health care, disability and critical care), analyze your current protection, including all employment coverage and benefits, and assess your true needs. You’ll quickly see if you have too much (a fairly common situation for clients who first come to me) or too little coverage.
Tax planning – keeping what’s yours
You are legally entitled to arrange your affairs to pay the least amount of tax. In fact, you’d be foolish to do otherwise. Tax planning is complicated, and usually requires expert help. However, you can analyze your current family tax situation to see if you’re taking advantage of all personal and family deductions, credits, and writeoffs available. Other major tax-planning opportunities include specialized tax-minimization planning for those who are business owner/managers, professionals, senior executives, and self-employed. It’s here you need expert help to take care of all the details and make sure you don’t get into hot water with the Canada Revenue Agency.
Giving your kids a headstart in life
The facts are frightening. A four-year university education currently runs about $64,000 at a minimum by the time you factor in all the costs of tuition and books, residence, travel, and living expenses. In 10 or 15 years, some estimates put it at $140,000. Do you really want to saddle your kids with that kind of debt on graduation? Of course not! You want to give them a head start in life. A cornerstone of family financial planning is to start saving for your kids’ post-secondary education with tax-efficient plans like Registered Retirement Savings Plans and Tax-Free Savings Accounts. And the sooner you start, the better, so that you get the full benefits from the magic of long-term compounding. Even putting in a little every month is better than doing nothing at all.
Estate planning
Most people associate estate planning with a will. But making wills is only one part of an estate plan. Other key items could include trusts, registered accounts (which designate beneficiaries directly), and insurance policies. All of these elements, and more, go into creating an estate plan that provides for your family and determines how your assets are transferred to the next generation. Draw up a checklist of legal documents and items that have an effect on estate planning, including wills, insurance policies, RRSPs, trusts, and so forth. If your list is blank, you need to do something - pronto! At the very least, consult a lawyer to have wills made for you and your spouse. Then move on to some of the other items.
Getting help
Once you’ve done this preliminary review, you’ll need to decide where to get competent financial planning advice and help. That’s where your various experts can lend a hand -lawyer, stockbroker, insurance agent, and so on. You might want to juggle all of this yourself. But most people find it’s a Jot like herding cats. To quarterback all these experts (and their sometimes conflicting advice), your best bet might be to start with a Certified Financial Planner, who in fact does this stuff for a living To find a planner, speak to friends and colleagues who might be using one, to get a referral. Or check the Certified Financial Planners’ website for more information.
Robyn Thompson, CFP, CIM, FCSI, is the founder of Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management for high net worth individuals and families. Contact her directly by phone at 416-828-7159, or by email at rthompson@castlemarkwealth.com for a confidential planning consultation.
Notes and Disclaimer
© 2020 by the Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.
The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned are illustrative only and carry risk of loss. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.
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