Understanding The Impact Of Life Events On Your Long-Term Plan
Planning For The Future Planning for the biggest financial commitments in life requires careful consideration and confidence — an advisor can instill guidance and discipline along the way.
The job of a financial planner or advisor is to outline a general path toward certain financial goals within one’s means, which can include home ownership, children’s education, and retirement. Part and parcel of that is managing debt and preparing for contingencies that may arise along the way.
"Most people think financial planning is getting a good rate of return on your investments, but it’s more than that.”
“Most people think financial planning is getting a good rate of return on your investments, but it’s more than that,” says Kyle Richie, Senior Executive Consultant at Investors Group. “A good advisor will help you come to financial conclusions that you otherwise wouldn’t have come to on your own. And more importantly, a good advisor implements the plan.”
A key aspect in doing so is to create and foster good habits, he adds. With income tax being one of the largest expenses, Richie suggests many don’t take into account what they need to save from an after-tax perspective.
Putting $100 or $1,000 into a savings or investment vehicle every month in younger, more productive years, in an RRSP, RESP, or TFSA, for example, may not supply the exact same after-tax lifestyle later on at 55, 65, or 75 years of age, he says.
“Not enough people plan for big financial decisions, so as long as you’re earning income and paying some type of income tax, the best advice is to go out and get advice,” says Richie. “Whether you’re making $30,000 or $300,000, the concepts and habits are all the same. Anyone who is serious about creating or manufacturing some type of wealth, relative to that person — the number one thing is to find a truly good advisor.”
The right person
Richie notes that there is a “big difference” between a good advisor and a good salesman, suggesting that finding one should require an interview for each prospective financial planner. Next to a spouse, children, and physician, he considers it to be one of the closest relationships one could have.
The level of trust is supposed to be very high, Richie says, and a good advisor should be adept at helping to understand the bigger picture in a personal way.
“Anything can happen, so planning for contingencies is huge,” he says. “Do you have proper life insurance? What happens if you lose your job? What if your spouse is diagnosed with cancer? These all factor into working towards a sustainable plan.”
"The financial world can be volatile, so one of the benefits of planning ahead is the security that comes with knowing your finances will be in good shape despite outside forces. Along with the safety that comes with a solid financial plan, there is also the peace of mind that comes with the fact that many deposits are insured to a certain amount."
The financial world can be volatile, so one of the benefits of planning ahead is the security that comes with knowing your finances will be in good shape despite outside forces. Along with the safety that comes with a solid financial plan, there is also the peace of mind that comes with the fact that many deposits are insured to a certain amount.
The Canada Deposit Insurance Corporation (CDIC) protects eligible deposits held in member institutions, including most Canadian chartered banks, against the failure of that member. Deposits are protected up to $100,000 in each of seven separately protected categories, including deposits in one name, joint accounts, RRSPs, TFSAs, RRIFs, trusts, and tax accounts for mortgaged properties. What are eligible deposits? They include savings and chequing accounts and GICs with a term to maturity of five years or less.
Those excluded from CDIC coverage include foreign currency accounts, stocks and bonds, mutual funds, and term deposits longer than five years.
“Since we were established in 1967, CDIC has handled 43 member failures, which affected some 2 million depositors,” says Brad Evenson, Director of Communications and Public Affairs at CDIC. “Not one of them lost a single dollar of their insured deposits.”
Creating a solid financial plan provides you peace of mind for your future goals, and knowing that certain deposits are insured will help you feel secure, with one less thing to worry about.