WEALTH SMARTS
Deep down, I know that financial planning is simple: plan for life's risks and our inevitable mortality, spend less than we earn and invest wisely.
You can also go far by avoiding the following mistakes:
1. Procrastination: That convenient time to plan never comes and we'll find all kinds of excuses along the way to avoid it.
When we're finally applying for our first pension cheque and it's not enough, it's painful to realize we should have started planning years ago.
2. Unprepared for social change: A lot of our friends and social events are related to work and can disappear when we retire. If there is no plan, boredom can set in leading to loneliness and depression.
3. Failure to clearly define retirement objectives: Most people don't really know how much income or assets they really need to retire comfortably.
4. Not sure of what money must do to help accomplish objectives: Basic financial calculations like Compound Interest are factors that will make or break our retirement plans.
5. Forgetting about inflation: In 1970, my parents began sending me to the corner store to get basic groceries. I also began a short-lived stamp-collecting hobby.
I remember the price of three things: A loaf of bread was around 25 cents, a quart of milk was 30 cents and a Louis Riel regular postage stamp was six cents.
Do you think prices will continue to go up in the future? Plan on it!
6. Failure to understand and apply our tax laws: Inflation and taxes are the "double whammy" that can shrink our retirement resources over time if not planned for. It's difficult, but we need to stay on top of key taxation changes that may affect us.
7. Failure to make the best use of retirement income sources: This gets complicated because government pension plans such as CPP/QPP and OAS, private plans, RRSPs, RRIFs and a myriad of investments interact to produce a big mess if they're not part of a structured plan.
8. Failure to prepare for the unexpected: Spiraling medical costs, planning for long-term healthcare, outliving our retirement savings are just some of the issues that most of us don't plan, yet these issues are core problems for many seniors right now.
9. Denying our own mortality: Woody Allen said, "I'm not afraid to die. I just don't want to be there when it happens."
This reluctance to think about death causes many of us to avoid planning for it. The results can be very expensive for our heirs.
10. Failure to develop a winning attitude: Retirement means many things to many people. The idea of approaching it with excitement and a workable plan is what will make it a fulfilling time.
The opinions expressed are those of Richard Vetter, BA, CFP, CLU, ChFC. Richard is a certified financial planner and owner of WealthSmart Financial Group in Richmond (www. wealthsmart.ca).
