Tag Archives: Financial Planning

Rethinking your RRSP in the new normal

Rethinking your RRSP in the new normal

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Rethinking your RRSP in the new normal

Everyone’s retirement vision and plan to get there is different – especially now – and TD Financial has some advice for how to adjust in these unprecedented times.

Some Canadians have the option of participating in an employer-led retirement savings plan, while others may not have access to this option or prefer to choose an alternate way of saving for the future.

Photo: iStockPhoto.com
Photo: iStockPhoto.com

Regardless of your personal situation, the economic fallout of the COVID-19 public health emergency has caused many Canadians to rethink their retirement plans and assess if they’re still on track to meet their goals.

TD Financial Advisor Mohamad Hannouf offers some tips for those who may be rethinking their retirement plans:

Honest assessment

It’s important to truly understand your current situation, current needs and concerns for the future. Many consumers want to know they are on the right track, and they are wondering whether they should be buying or selling.

Careful approach

One of the first things to consider is how financial markets perform long-term. Review your financial plan on a regular basis, such as once a year or whenever you have a major life event, such as buying a home or losing your job. But if your long-term goals – such as saving for retirement – haven’t changed, be careful with adjusting your plans.

Avoid common mistakes

If you attempt to predict the ups and downs of the market, and you find yourself buying and selling at the wrong times, you could find yourself missing out on long-term growth.

A pre-authorized payment plan allows you to make regular contributions towards your RSP, so you don’t need to think about the best time to buy.

Staying focused on long-term investment goals is critical, as the best times for investment growth come after a downturn. Those who sell during a down market could miss out on returns during the recovery.


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Debt

Paying down debt a top priority in 2019

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Paying down debt a top priority in 2019

Debt

It may be a new year, but not necessarily a happy one for everyone. A new CIBC poll finds paying down debt is the top financial priority for Canadians in 2019. Almost a third (29 per cent) say they’ve taken on more debt in the past 12 months, citing day-to-day expenses as the key reason for piling up debt.

“Debt weighs heavily on Canadians, so it’s no surprise that Canadians continue to put debt concerns at the top of their list of priorities each year,” says Jamie Golombek, managing director, CIBC Financial Planning and Advice. “Debt can be a useful tool for achieving long term goals such as home ownership or funding education, but if you’re turning to debt to make ends meet, it may be time for cash-flow planning instead.”

Key poll findings:

  • Canadians say their top sources of debt are: credit card (45 per cent), mortgage (31 per cent), car loan (23 per cent), line of credit (22 per cent), personal loan (11 per cent)
  • 28 per cent say they have no debt
  • Top concerns are rising inflation (64 per cent), low Canadian dollar (34 per cent), and rising interest rates (31 per cent)

While two-in-five (39 per cent) Canadians worry that they’re forsaking their savings by focusing too much on their debt, the vast majority still (84 per cent) believe that it’s better to pay down debt than build savings. This poll finding comes as Statistics Canada recently reported that the average Canadian household owes $1.78 for every dollar of disposable income, even as the pace of borrowing continues to slow.

“There’s rarely enough money to do everything, so it’s critical to make the most of the money you earn by prioritizing both sides of your balance sheet – not debt or savings, but both,” says Golombek. “It boils down to trade-offs, and balancing your priorities both now and down the road. The idea of being debt-free may help you sleep better at night now, but it may cost you more in the long run when you consider the missed savings and tax-sheltered growth.”

Tips to make your money go further in 2019 

  • Write down your income and expenses for a three-month period to determine if your cash flow is positive, neutral or negative
  • Make a plan. If you’re cash-flow positive, use the extra cash to pay off high-interest debt – not your mortgage – first. Use the surplus to build long term savings in an RRSP or TFSA, and if you have kids, put away a little extra in an RESP. If your long-term savings are on track, consider increasing your mortgage payments. If you’re cash-flow neutral or negative, look for ways to cut expenses or lower interest by consolidating debt at a lower rate
  • Automate your plan. Time your savings or debt-repayment plan with your payroll. Putting money directly to your goals right off the top can help you both achieve your goals and get by with less
  • Review and prioritize your goals. You likely have many goals competing for your wallet. Meet with an advisor to build a financial plan that gets you on track to achieving what’s important to you today and the many years ahead

Source: CIBC

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Finance: Make A Plan And Map Out Your Financial Goals

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Finance: Make A Plan And Map Out Your Financial Goals

There’s an old saying – if you fail to plan, you plan to fail. When it comes to your finances, this is particularly true. A recent poll, conducted by CIBC, surveyed Canadians with household incomes above $100,000. Out of the study group, close to half of the participants didn’t have a financial plan in place – nothing detailed that was set out as to how they planned to reach their goals.

By not having a financial plan means that there’s no emergency fund, no nest egg – no extra money at all. This lack of planning could mean financial ruin for many. All it takes is an unpredictable hiccup, like a temporary job loss, a family emergency or a major house repair to send many bank accounts deep into the red.

It may seem daunting to come up with a financial plan, but it’s as simple as writing down your personal goals and financial needs, as well as your priorities as it relates to income, and expenses like taxes, mortgages, education needs, insurance, and retirement and estate planning, etc. When you see it in black and white, you’ll feel confident in your ability to manage unexpected changes.

BUDGETING VS. FINANCIAL PLANNING

While budgeting is an important part of financial planning, it doesn’t reflect your long-term plan. List your goals in five-year increments – 5-10-15 years. If you’re approaching retirement age, assess your retirement fund and, if necessary, take steps to improve it. By setting out your short- and longterm goals, mapping out a route as to how you’re going to get there will become much clearer.

EMERGENCY FUNDS

Bigger is better when it comes to the monies set aside for emergencies. The recommended amount is three months worth of living expenses in case of a job loss or unpaid leave. This fund doesn’t necessarily reflect three months of salary, but represents what you spend on average over a three-month period. Such expenses would include your rent or mortgage payment, utility costs, transportation, groceries, incidentals, membership fees, etc. But don’t stop at three months. If you can afford to beef up your emergency fund, do it. My recommendation is to save 15 per cent of each pay cheque and apply it to this fund.

TRACK YOUR EXPENSES

To really get a handle on what you spend each month, write down every penny that goes out of your account. Not only do you track your purchases, but it highlights areas where you may be spending too much.

DEBT IS THE BIGGEST OBSTACLE

No matter how well you map out your goals, you are bound to hit a roadblock if you are saddled with large debt payments. A healthy financial plan includes a path to becoming debt free. Aside from your mortgage debt, what other debts are you carrying? Credit cards? Lines of credit? Have you borrowed from a friend or family member? The money that you owe is costing you a lot. Tally up your debt, and then come up with a plan to tackle it. If you find that it’s unmanageable, start by working on your highest debt first and get help from a debt management service.

IT’S A JOURNEY

You’re setting yourself up for success if you have a financial plan; however, it’s not a one-time exercise. Check your financial progress every six months, and adjust your savings and investments accordingly. Seek professional advice from financial and tax advisors, or get yourself a money coach. These type of services are often money well spent.

Rubina Ahmed-Haq holds a CSC designation, is the finance editor for Home Publishing Group, and appears in Condo Life, on CBC Radio, CBC News Network, CTV Your Morning, Global Toronto ratesupermarket.ca and debt.ca. Follow her on twitter @ alwayssavemoney. AlwaysSaveMoney.ca

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