By Erin Gendron, January 11, 2019
With a new year and the end of an often overindulgent holiday season, the “let’s get organized” side of me kicks into high gear. As with most people, it’s a time to reflect on what’s going well and what new opportunities lie ahead.
Top of mind for many is, unsurprisingly, household’s finances. According to a recent Forbes article, more than half surveyed wanted to save more in the coming year.
Build your budget
You need to know where you’re starting from to know where to go next. For this reason, I’m going to come right out and say it: you need to prepare a budget.
Begin with a simple income vs. expenses (fixed and variable) = surplus or deficit, as well as a basic idea of your family’s net worth (net worth = assets – liabilities).
Positive cash flow is key
Next, track your spending and understand where your money is going – in the financial world, this is called your cash flow. Is your cash flow positive or negative every month? Which direction is it trending?
Remember the bigger picture
The third step is to think about what your bigger, long-term goals are – like retirement, child’s education, buying a recreation property or starting a business.
My husband and I had our kids in our mid-late 30s – a reality for many Canadian families. This means raising children, helping them pay for an education plus saving for retirement will become competing priorities over the next 20 years.
A big mistake is putting off retirement planning simply because it’s the furthest away. Don’t wait for a time when you can “afford it” – by that point it’ll be harder to make up for lost time. That’s because the power of tax free compounding, dollar cost averaging and good savings habits have a bigger payoff the sooner you start.
Insurance: What no one enjoys talking about it
A last consideration that can’t be overlooked: Insurance and Wills.
Having put some hard work and thought into your family’s financial plan, it’s worth going the extra step to ensure it’s all protected.
Specifically, when you have dependents, insurance and Wills are non-negotiable, as you don’t have the saving level to “self-fund” in the event of a worst-case scenario. Some questions for you and your partner to consider include:
The ability to earn an income is your biggest asset – especially when your children are small, debts are high and savings are low. Without this, even for a short time, the financial impact to your family could be severe.
Although it’s not a simple task, once you’ve thoughtfully taken the steps above, you can begin putting together a real life plan, one that gives you more confidence and peace of mind to move forward with clear goals and purpose.
And remember to review your plan periodically. It’s meant to evolve over time and to adapt to your family’s changing needs, wants and priorities.This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.