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Financial Planning: It’s that time of year again. How do you measure up?

Monday, December 19th, 2011

As the year comes to an end, it’s a good time to step back and seriously ask ourselves, “Have I achieved all that I wanted to?” It’s important to check in with yourself – in your relationships, career, health or overall well being. You can’t improve what you don’t measure!

It applies to your finances as well. If you were a business, you’d be preparing your year-end financial statements. You’d be cross checking your goals that you set at the beginning of the year and measure them against what you’d achieved. If you fell short, you’d look over your last year’s plan of action to see where things took a turn.

You need to do the same thing with your personal finances as well. Your family and your home are like a small business. You need to set meaningful and realistic financial goals for your personal life. Your family members need to be on the same page in terms of your financial goals. You also need a way to measure your success and celebrate your achievements – just like you would with a business.

This is something everyone at every stage in life should be doing and doing every year.

If you’re a young family, you may be overburdened with the costs of raising young kids and paying for the basics. Your objectives down the line will include staying on budget, reducing debt and possibly saving for a home. The start of a new family is an ideal time to develop a relationship with a financial planner. Your family needs to have financial goals that can be discussed, reviewed and amended (if need be) at the very least, on an annual basis. A financial planner can help with this. It’s a great way for a young family to start healthy financial discussions and set and achieve financial goals from the get-go.

A more mature family may be overextended with soccer, hockey or other extracurricular expenses. As your family grows, debt may be increasing so you might be cutting back and finding ways to bring in more income. Helping the kids with college is also in the near future and so more sacrifices need to take place. Did you put your plans to cut back and save more into action? If not, what went wrong?

How about if you’re one of the many “sandwich generation” families who not only bear the costs of their adult kids still living at home but also are taking care of mom and dad. What financial changes did you want to see happen and did they occur? Was it time to encourage the kids to leave the nest or are they still at home but finally paying rent and pitching in for food and other costs?  Were you able to create a realistic budget for the family including cutting back on some of the more frivolous expenses? How is that going? Are mom and dad able to financially pitch in a bit to at least cover the costs of their care?

An empty nester may need to be seriously planning for their ideal retirement. This could mean setting up an aggressive savings strategy, or focus on getting the last of the mortgage paid down. Planning late in life for retirement will always mean sacrifices, such as thinking about down-sizing in the coming years, working later than you hoped to or retiring on less than you ideally wanted to? It’s all a numbers game and your financial planner can help with this.

An early retiree might need to revisit the budget that they set when their income dropped 30% to 40% after they stopped working. If you’re in this position, are you eating your savings away too  quickly or increasing your debt load at an awfully fast pace? Or have you maybe lived frugally over the years so you could save as much as possible for retirement – but now find yourself hesitant to finally spend and enjoy your nest egg? Are you taking the trips you envisioned you would or learning a new hobby you wanted to learn? At this stage of the game, your financial advisor can help you determine the best way to invest your money and how to pull out an income so as not to deplete the monies too quickly.

If you’re in the ‘elderly’ stage of retirement you may want to seriously look into later in life care options. Do you want to move into a care facility sooner rather than later? Is there somewhere in particular you would like to go? Or is staying in your house as long as possible the priority? Can your budget afford to bear all of the in-home care you might require? When it comes to your will and estate planning – is everything as you wish it to be or have you made some mental changes that need to be put to paper?  Do you want to start gifting some of your estate now and can you afford to be doing this?  Do you feel your adult children are financially responsible enough to receive a large inheritance or should trusts be considered?  Your financial advisor can help guide on this or direct you to the right people to deal with.

No matter what age you are, you should be conducting an end of the year review:

• First and foremost, the three most important elements of your financial health- emergency savings, income protection and your will and estate plan. Do you have at least six months of your monthly costs put away in a savings stash somewhere? Do you have enough insurance in place to protect against the loss of income due to disability or death and do you have a valid Will and powers of attorney/Representation Agreements in place?

• Review your budget (hopefully you have some type of family budget). Where did you overspend and under-spend? Was your budget realistic or too hopeful? Maybe a new budget needs to be created to more accurately reflect your spending patterns or keep to the existing one and cutback?

• What is your networth today (what you own minus what you owe)? What was it 12 months previously? Are you richer or poorer than you were a year ago? Understand why your networth either increased or decreased. Did it go up because you stuck to your budget allowing you to increase your savings or is it just a paper increase (such as the value of your home or stocks going up)?

• Review your financial goals. What are you saving your money for? Do you have a plan in place to achieve your goals? And how are you doing?

As we move towards the end of 2011, I encourage you to take time to review your financial goals, make changes where need be and continue on or set new financial goals for the coming year. By doing this, you’ll be more likely to achieve your long-term financial objectives you will feel more in control of your money, and you’ll enjoy the peace that comes from knowing you have a plan.

Image Credit: k.steudel

How to Have Financial Conversations with Your Aging Parents

Tuesday, August 16th, 2011

Having a will and a final plan in place is recommended as soon as we enter into adulthood. Or at the very least, when a major life event has occurred such as a marriage, birth of a child or maybe even an inheritance.

As depressing as tackling issues related to our own mortality is, it’s a given and it’s better to deal with these issues sooner rather than later. But long before your family members will be dealing with your mortality, you’ll be dealing with your parents’ final arrangements. The reality is, your aging parents will need assistance with their personal and financial planning affairs.

Talking with your parents about mortality and money is never easy but it’s important to do. If you find it difficult to discuss these issues, you can start by discussing your own will and final wishes. Getting their input on your decisions can help you understand the choices that they have made. Hopefully this will open the door to discuss theirs.

Things that you need to discuss:

What they owe, where and with whom – Understanding their level and type of debt is essential. This can include investment properties and investment accounts, as well as lines of credit, credit cards, auto loans and home loans. Although you may not discuss this during your first conversation about their financial planning status, it’s important that you understand exactly what is owed and where those accounts were held.

Their will – Although it may seem grim, you need to know what to expect when your parent passes. Be sure to discuss the pertinent details of the will and know who the executor of the will is. This discussion should also include their living will.

Power of attorneys or representation agreements – These are essential in a health crisis and it’s important for you and your parents to have these established well ahead of time. It’s far better to have these documents in place long before they are needed.

Care scenarios – Do you and your parents have plans for what will happen if they become ill or invalid? This may be the most difficult of all conversations, so you may want to handle this separately from the other financial issues. Be sure to cover whether they’ll downsize and move in with you or go into care facilities.

Final arrangements – Burial arrangements and other final arrangements are important to cover with your parents as well. If you understand what your parents’ final wishes are, it will make it easier for you to follow through with them.

You need to talk early and often with your parents about finances. As they grow older, they’ll become more in need of your assistance with their day to day lives. Whether this comes in the form of financial assistance, shared living space or medical care, it’s important to understand exactly what you’ll be facing when that time comes. Don’t try to talk about all of these issues at once. Make it a point to talk with them regularly so you can keep the lines of communication open.

Are you in shape? Take the ‘Summer Shape-up’ test?

Monday, June 13th, 2011

Get the skinny on your financial ‘well being’ by taking the Summer Shape up Quiz.

Quiz

1. I earn enough money each month to pay all my bills? Yes/No

2. I have enough money saved to pay for emergency or unexpected costs? Yes/No

3. I have written financial goals? Yes/No

4. I have a written savings and spending strategy that I follow? Yes/No

5. I know my net worth (what I own minus what I owe)? Yes/No

6. I know where ALL my important financial documents are located? Yes/No

7. I have a Will and Powers of Attorney in place? Yes/No

8. I know where and how my money is invested and I meet with my advisor at least annually to review? Yes/No

9. I have had my insurance needs reviewed within the last 2 years? Yes/No

10. My mortgage and loan payments are less than 30% of my overall income? Yes/No

Please give yourself one point for every yes answer and then add up all your points to see how you did.

If you want to manage your money better and didn’t fare so well on the quiz, don’t get discouraged. This is the time to make a new start. Changing even a few of those ‘no’s’ to ’yes’s’ can make a real difference in your overall financial well-being. Here are a few simple tips to get you started:

· Educate yourself. There are many great websites and books available where you can find useful information depending on your needs.

· Find a qualified financial adviser/coach. If you wanted to lose weight, you might hire a trainer or join a weight loss program. Well if you want to lose your debt or build up your savings, get a good financial advisor/money coach who can create a plan and support you along the way.

· Stick to a plan. Why do diets fail? Because we do not stick with them. Make sure your financial goals/strategies are realistic and attainable. Most importantly, renew your commitment daily and follow through.

Don’t worry if at first you find it a challenge to make sense of your financial health. Like anything, it takes time. The most important thing is to just get started. Set some financial goals, follow a budget and save and you’ll be ahead of most.

A new year, a new start

Friday, January 30th, 2009

By the time we have surpassed our late thirties, early forties and ventured well into our mid-life years we will have likely experienced many life defining events.

‘We merged our lives with others, married and had children. We’ve survived divorce. We became empty nesters. Or perhaps we stayed single but had meaningful relationships along the way.  We started careers, changed careers and ended careers. We saw friends come and go. We’ve experienced the pain of bereavement as well as the joys of new life.’ (more…)