Keep a few basic principles in mind
At times, the world of money, money management, and investing can seem a mysterious, possibly perilous, place. Do you really need to know about the yield curve and central bank policy before making an investment? Will your personal debt-service ratio help you balance your chequing account? Will you ever save enough to retire on? And how often can you withdraw money from a TFSA, anyway?
Most of us are way too busy doing our own jobs without having to worry about being a financial planner, accountant, and professional portfolio manager, too. Fortunately, you don’t have to be. Understanding a few basic principles of personal finance to begin with goes a long way to getting your house in order and finding the right kind of help to go on from there.
First of all, have a one-on-one with your husband, wife, or partner, and get to know yourselves on a basic money matters level. Assess or reassess your aspirations, values, investment goals, and financial objectives. Perhaps you’re looking to early retirement or just paying that mortgage off early. Maybe you want to save up for a cottage. Or set aside funds for the kids’ education. There are plenty of long-term and short-term goals to consider. Write out a list. If you consult a financial planning professional, it’s the firs thing they’ll want to see.
A group RRSP at the office, a mutual fund you were once talked into at your bank, even GICs or term deposits – they are all investments – you’ve placed your money into an asset with the expectation of some sort of return. If you have stocks or bonds or ETFs, good for you. But take the time to evaluate all those investments as a group, in light of your financial goals.
A financial advisor will want to see what you already have. A good financial plan includes a detailed statement of investment objectives, defining the optimal allocation of your investment assets. Do you have such an investment strategy? Do you invest or set aside investment savings every month? If you have set out longer-term life objectives, you will want to think about how to achieve them. Professional advice can really help guide you, and those investments and savings goals are a great place to start.
Protecting your nest egg
Insurance is the financial tool that no one likes to talk about. And for good reason. The insurance industry makes insurance (especially life insurance) unnecessarily complicated. But insurance is a critical part of your overall financial plan. To get the optimal coverage (for example, life insurance to protect your family, extended health care, disability or critical care insurance), analyze your current protection, including all employment coverage and benefits, and assess your true needs. A talk with a qualified, independent advisor will quickly reveal if you have too much or too little coverage, and what types of changes to make.
Taxes can get complicated, and usually proper planning requires expert help, particularly if you’re in the high net worth bracket, a business owner or have a professional corporation. But you can start off by analyzing your current family tax situation to see if you’re taking advantage of all personal and family deductions, credits, and writeoffs available (most of this information is widely available online).
But you may also be missing major tax-planning opportunities, including specialized tax-minimization planning for those who are business owner/managers, professionals, senior executives, and self-employed. It’s here you may 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.
This is something to address early, preferably when your kids are still at pre-school age. With a four-year university education creeping up to $100,000 in Canada, do you really want to saddle your kids with that kind of debt on graduation? Of course not! 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 of long-term compounding and in the case of RESPs, government grants. Even putting in a little every month is better than doing nothing at all.
Making a will is only one part of a good estate plan. Other key items could include powers of attorney for property and health, trusts, registered accounts, 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 – and how big a cut the CRA gets. Your advisor will want a list of all your legal documents and items that have an effect on estate planning, including wills, powers of attorney, insurance policies, registered plans, trusts, digital assets, and so forth. If your list is blank, you need to do something fast! 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.
There’s a lot to consider here, and it can seem overwhelming. That’s where we come in. At Castlemark Wealth Management, we specialize in holistic family financial planning, tailored to high net worth families. We’ll take the weight off your shoulders with an integrated financial plan, including professional investment management, that lets you sleep at night – and get on with what you really want to do.
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 email@example.com for a confidential planning consultation.