Money and You

Money and You

 Julie Tessier, M.B.A.

In writing this series of articles, my goal is to shine a spotlight on issues that have arisen over the 20 years I have worked in the financial industry. In interacting with people in general, and women in particular, I have noted that certain themes emerge over and over. There are exceptions to every rule, but my observations show that most of us, at one time or another, ask the same questions and face similar challenges. It is my hope that these musings will be of use to you in addressing some of these.

Happy Reading!

Financial Health – What Is It? And Why Should You Care?

Physical health is relatively easy to define: How is my body working now? Is it in good shape to keep working, maybe even better than it is now? What is going on under the surface that will affect how it works now and later? What do I need to do to help it along?

How about financial health? Just add the word “financial” in front of body and re-read the first paragraph. That’s a start.

When you ask yourself these questions, you will come up with an answer. It might be: “I am financially healthy and already working to becoming even fitter”, “I am financially healthy, but maybe I could do more so it would work better”, “I have health problems and need to do something”, or even “I have no idea whether I am healthy or not”.

If you answered any except the first response, chances are you don’t have a full picture of how you are doing.  If that is the case, the smart thing is to figure out where you are now and where you want to go. In other words, you need a plan. That plan includes where you want to go, where you are now, and what you intend to do to make the trip from one to the other.

So how do you develop a plan?

Financial Health Checklist – Making a Plan

Know what your financial objectives are.

Watch out for “one size fits all” financial advice, plans or objectives. You are unique, as is your family, and while there are some things that many of us want out of lives, no one has exactly the same needs as you do. A good example is RRSP savings: the media would have you think that this is the right solution for everyone, and for many of us it is, but not for all. Make sure you know what you want so that you can make educated decisions about what fits YOU.

Gather your information – and be honest!

Making good financial decisions means really knowing what your actual situation. Gather all those papers, numbers, reports, statements and whatever else applies. It is a lot of trouble the first time, but it is worth it.

Sometimes that can mean looking at “stuff” you would prefer to ignore. For example, we have a client who is disciplined in everything except spending on restaurants. She was ashamed of this and repeatedly underestimated her spending. It made setting her up for success very difficult. Once we had an accurate picture, we worked with it. She is still spending a lot in restaurants, but at least now it is a factor that is considered in her planning.

Think in terms of the stages of your life and address them all.

Many of us are focused on where we are now. We might have a vague idea of where we want to be later, but it is hard to see beyond our current situation. Doing the exercise of thinking about future stages of your life is important so that you can anticipate your future needs. This does not mean you have to know exactly where you will be in ten, twenty or thirty years, but you need a direction. For example, while the kids are small, you are not really planning their university expenses in any detail, but you need to know whether you plan to provide money for that or not. With that information,  you can go forward.

The other mistake people make in looking at their financial objectives is to concentrate on the long-term only – Retirement.  They ignore the current objectives they unconsciously work with every day. Sometimes their current activities may make it impossible to meet their long term goals, and they wonder why they can’t get ahead.

Know your own financial style and work with it.

On a recent network television news show, a financial advisor told a family that to get out of debt and save money, all they had to do was give up their daily coffee, brown bag their lunches and stop going out to restaurants. Certainly, if a family stops spending this kind of money, they will save more, but is this realistic? How long will they maintain this lifestyle change? If it is possible to do it, by all means do, but you also have to know your own financial style and address it.

Many people, for example, will have no difficulty paying off a debt, but can’t save money at all. Rather than plan to save, these people may benefit from a forced savings plan, where they borrow money to invest or put in their RRSP, then are force to pay it back.

Others are good at saving, but not at making their money work. These people need a plan that addresses their investment strategies much more than the savings activities.

Schedule your financial check-ups.

“What gets measured gets done” is another truism. If you never check in to see how your financial health is, you will not catch any problems early. You will end up having to fix much bigger problems, or missing really great opportunities. Make your financial check-up a priority every 6 months or every year if things are really stable.

Be responsive to changes in your life.

Things will change in your life, often big things. Make checking your financial plan part of your life changes, again to avoid problems or to take advantage of opportunities.

Make sure you have the right resources.

This whole process of developing a plan may sound really easy, but it can be really difficult, particularly the first time, or after major life events. It is important to obtain support from the right resources. Good education, accurate information, good tools and systems, are all ways that you can set yourself up for success. One good way of obtaining much of this in one operation is to find a good financial advisor, one who fits your style and objectives. Some people handle all their planning themselves, but it is a lot of work, and if you start, you have to make sure you keep it up. An advisor can do a lot of the legwork for you and they have access to resources that are more difficult for you to obtain. To know more about how to choose an advisor, click here (link to how to choose an advisor – see second document).

 *This newsletter/Presentation is intended as a general source of information only and is not intended to provide any personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. (insert name of Consultant) is solely responsible for its content. For more information on this topic or any other investment or financial matters, please contact your Investors Group Consultant.