1. The problem: running out of retirement savings
The solution: Bringing out all your numbers can help you better understand how much you need to maintain your current lifestyle. Compare a list of your future expenses to your retirement income, while keeping inflation in mind and adjusting to work expenses – money for travel should decrease, but maybe you’ll finally have the time for golf. Then make an optimistic estimate of how long you live and check if the numbers match. If this is not the case, postponing your retirement, adjusting your investment strategy, or setting aside a larger portion of your salary can help close the gap.
2. The Problem: Finding a Trusted Financial Planner
The solution: a financial advisor should be like a personal finance manager, someone to help you set goals, build a plan and stay on track. See the references of your friends and consult the Institut québécois de planification financière. Be prepared to talk to multiple candidates. “Ask what they promise customers,” says Scott Plaskett, CEO of Toronto’s Ironshield Financial Planning. Can they share an example of a plan based on a proven method, showing how they work? Their answer should help you assess their ability to do what they are doing.
3. The problem: save a first home
The solution: no matter what size of house you have in mind, tidying up your finances for a future mortgage will be helpful in achieving your goal. Raising your RRSP is a safe bet because you can borrow up to $ 25,000 for a first home while enjoying a 15-year payback period without penalty. If you invest in mutual funds, pay attention to those with redemption fees that add up if you sell early. You want to have access to all of your money when you are ready to buy a house. Once the time comes, you can also take advantage of a federal tax credit.
4. The problem: debt confusion
The solution: read the fine print. “Loan agreements are not user-friendly,” says Jeff Schwartz, managing director of Consolidated Credit Counseling Services of Canada, a Toronto-based non-profit agency. Familiarize yourself with the terms and conditions and make sure you understand the type of debt you are assuming. For added security, the lender can ask for collateral, like your car on a car loan, for example. Also keep an eye on the costs you will incur if you are late. Some credit cards charge you up to $ 35 in addition to interest charges if you miss a minimum payment.
5. The problem: do not have a reserve for bad days
The solution: no one likes to think that he could be laid off from being laid off or having to deal with a furnace problem, but if that happens, you will be happy to have a financial cushion. Experts suggest setting aside three to six months of living expenses, somewhere like in a tax-free savings account where you can accumulate interest without sacrificing accessibility. You can also save money by preparing the worst case scenarios. If something happens to you, is your life insurance coverage enough to take care of your family and manage your debts? If this is not the case, check with your employer to see if you qualify for group coverage or do business with private providers.