Managing Your Wealth
To make the most of your financial assets and
secure the future for you and your family, you may need to adjust the way you view your
financial situation.
It is not possible to correct your financial
situation overnight. There are no quick fixes. To get out of debt or to accumulate savings
requires long-term planning and consistent effort.
Set a Goal
If your goal is to take a holiday in the sun, you
must first determine when you can take vacation time and whether you can afford the cost
of the trip. It is the same with financial goals, whether they are short-term - to take a
holiday - or long-term - to pay off the mortgage or accumulate sufficient savings to
provide for a comfortable retirement.
The first step is to determine your
"investment horizon". For example, how long must the proceeds of your retirement
savings last? Of course, no one can determine how long their future will be. However, you
can determine the age at which you plan to retire, your general state of health, your
lifestyle now and your hoped-for lifestyle after retirement.
How much time do you have before you retire? If
you can project the amount of capital you need to accumulate for your retirement, you can
then determine the cash flow and investment strategies needed to achieve your goal.
Assess Your Financial Picture
To plan for your future, you need meaningful and
honest financial information about the present. This requires carefully reviewing your
current income, lifestyle, expenditures, debts, assets, and personal goals and then
setting out a realistic plan for achieving your goals for the future.
Your financial plan should:
• Cover
all the financial bases - accumulating wealth, protecting wealth and distributing wealth;
• Create
a financial system that includes appropriate investments to optimize growth while being
risk appropriate;
• Include
appropriate mechanisms to ensure tax efficiency and legal strategies that protect your
investments and your estate and insurance plans; and
• Evolve
as your circumstances change.
Revisit your Plan Periodically
Over time, your personal circumstances, goals and
priorities will likely change. So, too, should the corresponding aspects of your financial
planning. On a regular basis, compare the results your plan has achieved to the goals you
have established. When your goals have changed, you will need to fine tune your strategies
within the plan and make any necessary adjustments.
In keeping your financial plan current, consider:
• Are
the investments in your portfolio achieving the results you expected?
• Is
the risk of your portfolio appropriate to your investment horizons?
• Have
your personal circumstances changed to the degree that you need to revise your investment
horizon, estate plan or insurance plan?
• Are
your advisors providing the advice and information you need to make decisions?
Get Professional Advice
Sometimes individuals procrastinate about their
financial planning because they are unfamiliar with tax planning, RRSPs, investment
strategies, risk, rates of return or insurance issues. While the same people may know
little about car parts, they would not hesitate to have a mechanic to help them stay on
the road. Similarly, it makes good sense to have a financial professional help you reach
your destination.
You may have been working with a financial advisor
for years or you may have only recently decided that you need assistance to help you
achieve your financial goals. While you can try it on your own, you increase the
likelihood of actually reaching your financial destination when you partner with a
specialist who has the skills and experience to get you where you want to go.
Don't sacrifice the present to enjoy the future
and don't suffer the future to enjoy the present. As you are developing or updating your
financial plan, keep in mind that your chartered accountant can provide valuable support
in helping you analyze your financial situation and the tax-related issues in both your
financial and estate planning. |
