Download the TriDelta All in One Place Guide

Articles

/ Posts Tagged "Comprehensive Financial Planning"

Am I Ready for Retirement?

0 Comments
July 13, 2011 , ,

Are you financially and emotionally ready to retire? What are the things you should consider when thinking of retirement? Here, we discuss some of the necessities for determining “retirement readiness.”

Goals for Retirement

When deciding to retire, the first step is to have your own fine-tuned vision of what retirement looks like. What are your goals for the next life stage? To better understand yourself, you might consider filling out a goal-setting questionnaire, such as this True Wealth Questionnaire that we frequently use with our clients.

The purpose of our easy goal-setting questionnaire  is primarily not financial, but mostly about measuring where your life is today and what you want your future to look like.

Financial Ability

Once your lifestyle vision is sorted out, it is time to shift the focus to the financial planning side. Try to estimate a financial plan that projects the next 30 years or so.

Consider talking to a financial planner to get a good sense of what your lifestyle will be like in retirement if you retire today, or at a certain point in the future. A comprehensive financial plan will expand on other issues too, like how much you can afford to help Three steps to knowing when you are ready for retirementyour children or grandchildren, or how to support your favourite charities. Based on your financial ability, you might get a “green light” for retirement, but it doesn’t mean you should retire.

Personal Considerations

Of course, financial ability is not the only concern for retirement.

For many of us, our jobs are an important part of our identities and can be very difficult to give up “cold turkey.” Also, retirement can significantly alter the balance and routine that currently exists with your spouse or partner – sometimes in a bad way.

Another issue is how to fill all of your free time. Without a plan that reflects your retirement vision, hobbies and goals, the free time can lead to depression. Eileen Chadnick, a certified coach and principal at Big Cheese Coaching in Toronto, says it is a mistake to plan for a life of full-time leisure, “Seven days of fishing gets stale very fast. The balance paradigm shifts in retirement. The key is to determine what the right balance is for you”

The issue of retirement has become much more complicated than simply aiming for a financial number. Much like other things in life, a successful and happy retirement takes planning – both financial and emotional.

If you want to read more, here’s an article that talks about all the things you can do in your free retirement time. It’s enough to get anybody excited!

Is My Financial Advisor Trustworthy?

1 Comment
June 26, 2011 , ,

Is your financial planner or advisor on your side? Is your financial advisor- client relationship based on honesty?

To put this to the test, ask your financial planner the very basic financial challenge question, “How should I spend an extra dollar (or realistically, $10,000)?”How they answer will tell you if they are the right advisor for you.

I think only an honest financial planner can answer this question properly. Here is why: If your adviser is focused on investments, the answer will most likely relate to further investments in an RRSP, RESP, TFSA or regular investment account. This may in fact be an appropriate answer, but did they ask the right questions before coming up with this recommendation? Do they know about your non-investment priorities and obligations?

Like most situations, the best answer requires some education. Most important are the questions an adviser asks before coming up with recommendations.

Does your investment adviser understand your debt situation? If you have debt with an interest rate of 6 per cent or more, then you should very likely be paying down that debt first. If your interest rate is more like 3 per cent or 4 per cent, then could you likely earn more than this return by investing elsewhere? Is your debt tax-deductible or could it be restructured this way? What is your philosophy toward carrying debt? These are all questions your adviser should consider.

Tips for Communicating with your Financial Advisor

Moreover, your advisor should inquire about personal life situations. How long has it been since you had a real vacation? If there is no urgent need for the money, would you like to take a trip?Is there a house project that is overdue or a hole in your insurance coverage that is in need of those funds? Could one of your kids or parents or a charity really benefit from this money – and is that something that you are inclined to support?

As you can see, the right answer for you is really dependent on an understanding of your overall financial situation and also your personal goals. To find out if your advisor is on your side, try asking this question and see the advice they come up with for you.  If you are not happy with the answer, start looking for a financial planner who will actually understand your needs.

If you liked this article, make sure you read about ten tips for having a better relationship with your financial advisor here!

Tips to Manage your Parents’ Money

0 Comments
June 10, 2011 , ,

For an adult child, being asked by your parents’ to manage their money can be a potential minefield. If  you have stayed out of your parents’ financial decisions until this point, it can be overwhelming to even know where to start. In addition, conflicts may arise with your siblings, other family members or parents themselves if others are not happy with your financial management style.

Whether it is for power of attorney situations or because your parents’ simply feel more confident having you take charge, tread carefully and keep in mind these four rules:

1) Understand the full financial picture.

Like any financial planner, you can’t do a good job managing someone’s investments unless you understand their situation, including how much risk they need to take, their annual expenses, income, assets and their personal risk tolerance. If you are not able to communicate or have access to the whole financial picture, then you simply can’t do a good job. Do not wait for an emergency or an illness to get yourself involved. Encourage them to explain to you their full financial picture now so you can be ready. Sit down with your parents and gather all important information (such as account numbers, passwords, company affiliations etc) in a document like the  Tridelta Financial Planning Questionnaire.

2) Don’t be afraid to use a professional.

Even if you manage your own money, you may want to work with a professional when handling your parents’ money.

There are three reasons for this:

  1. It takes some of the responsibility and burden off of you and your siblings might be more comfortable in this setting
  2. A good financial planner can often provide a wider range of insurance, investment, savings and tax options than you might be able to on your own
  3. A planner in emotionally removed from the money. Especially when managing your parents’ money, emotions can wreck havoc on investment decisions
Managing your Parents' Finances can be complicated

Photo: kenteegardin

3) Know how much capital is needed to support your parents.

If a parent might reasonably live to age 90, plan for age 95 and know the capital requirements. If their current amount won’t cover potential needs, you might be restricted in taking risks. However, if someone only requires $350,000 in income and has $1 million, it might be a mistake to be too conservative. Manage the necessary capital safely, but the other $650,00 should be managed based on a higher risk tolerance (for example, don’t make the mistake of an all-GIC portfolio).

4) Communicate with other family members.

In almost every case, there will be some criticism from other family members of how you are managing things. It is one of the reasons why it is sometimes better to hire a professional to take the heat. In any case, you can minimize criticism by communicating what you are doing, why you are doing it, and to get notional buy-in.

While it is a big responsibility to manage your parents’ money, remember these four tips and remember the ultimate reward of this: you parents’ and family’s appreciation.

 

3 Reasons to Create a Financial Plan Now

0 Comments
June 4, 2011 ,

Procrastinating on our financial planning and decision-making can have a real cost.

The following article originally appeared in my weekly Globe and Mail column.

Many people put off creating a financial plan for a myriad of reasons. Most people are waiting for something: a comfort level, the fear of making the wrong move, a certainty, divine intervention or just an inability to decide.

However, the costs add up while you are waiting to make a financial decision. Here are three examples:

1) Insurance decisions: The older you are, the greater the cost of annual premiums. The older you are, the greater the chance of getting an illness that might make you uninsurable.

2) Setting up a will: Families might delay this because they cannot decide on custody of the children or assets. However, procrastination can put families in a position where the courts and Family Law will have to decide on the caregiver, and others will determine how your assets are split.

why-create-financial-plan

3) When to start investing again: There is definitely a timing component to investing.  But the one thing we can be sure of is that while there have been ups and downs for investors, since the 1950s, stocks have always outperformed 90-day T-bills, on a decade by decade basis. Today, we have some of the lowest T-bill rates. The odds are above average that being invested in the markets is better than cash.  If we can agree on this, then on average, procrastinating on investing will hurt your wealth.

Here are two key steps to minimizing financial procrastination:

A) Before you go into a financial discussion or decision, make a list of what you would need to know to feel comfortable making a decision.What is it that you are hoping to get from this decision? What is the downside risk of making the wrong decision, and how can you decrease the chance of this downside happening?

B) Using the list as your guideline, ask the questions needed and take the time to get the list complete. Not all answers will be black and white. There will be some more emotional “gut check” items on the list that you need to get a degree of comfort with. Once this list is complete, it is time to act.

If you are sitting on a financial decision today, understand that there is likely a real cost to putting it off. The time to make the decision is now!

Watch this short video here on how a good financial planner can help you with your personal financial decisions.

Should I Sell my Cottage and Rent Instead?

0 Comments
May 23, 2011 , ,

Benefits of Renting instead of Owning Cottage Ever wondered if you should hang on to your cottage or sell it? What are the benefits of renting a cottage instead of owning it?

A cottage brings great joy to many people, but along with the joy can be a fair bit of grief. The more clients we talk to, the more we hear people complaining about the upkeep and the cost, and the family squabbles. There must be a better way. Today, there is a way to have your cake and eat it too. Simply type in “cottage rentals” in Google, and you can see thousands of cottages in minutes.

So here now are 5 reasons why we think you should consider selling your cottage and renting:

1. Avoid big tax bills at death. This is one of the biggest estate planning problems. The family cottage was bought for $40,000, 40 years ago. Today it is worth $600,000. The older parents want to keep it in the family and pass it to their 3 children. When the second parent passes, there is a tax bill of $135,000. Only 2 children want to keep the cottage. Only one of the kids has the money available to pay the tax bill. Lots of headaches (although proper insurance planning can help).

2. Avoid big family conflict. Examples abound in terms of one child’s family using the cottage much more than another, and creating conflict. One family looks after the cottage well, while the other leaves everything a mess.

3. Avoid all that work by just renting for 2 or 3 weeks. A window needs replacing, and the deck needs new wood- owning a cottage can be hard work, not to mention expensive (and we haven’t even talked about property taxes!) Instead- rent a cottage and there is no fixing, few worries.

4. By renting, you can easily get the right cottage each summer for your stage of life. The right cottage for a young family is different than for a family with teenagers, which is different than the right cottage for a retired couple.

5. Feel free to see the rest of the country or the rest of the world during the summer. What if you weren’t tied to the cottage? You could take a summer vacation anywhere in the world, whether at a cottage or in the city. You could even use the extra wealth from the sale of your cottage to fund this.

We are not suggesting that selling the cottage is the right decision for everyone, but when you look at the list above, it certainly makes you think. To understand if this is the right option for now, why not try out our “Creation of True Wealth” Questionnaire? It helps you understand what “wealthy” means to you, not in a financial, but philosophical sense. This can help you decide if owning a cottage is part of that equation or not.

↓