The start of the New Year brings with it the promise of hope and new beginnings in many aspects of life such as health, relationships, careers and finances.
“For a lot of people, doing a financial checkup is not top of mind,” says Patrick Fitzgerald, a financial adviser with Sun Life Financial in Ottawa. “Finances can cause of a lot of stress in people’s lives. This is a time when people tend to think about new beginnings and fresh starts and as such is a great time to review where you’ve come from, where you’re at and where you’re going in the future in terms of your financial well-being.”
A recent survey by Sun Life has found that Canadians are under stress about their personal financial health, and this is having an impact on their work lives.
About one third of Canadians in the survey reported feeling insecure about their overall financial health and distracted at work because of their financial situation. Forty-five per cent worry about personal/household finances, 32 per cent are concerned about trying to manage a budget and 31 per cent worry about unexpected expenses.
The biggest barriers to improving their financial situation were their current income, their current level of mortgage and credit card debt and their current employment situation.
“Financial health is an important component of our overall health and wellness because it has a direct impact on our day-to-day lives at work and at home,” says Kevin Dougherty, President of Sun Life Financial Canada.
“Canadians are balancing competing priorities when it comes to their finances. It’s not always easy to do this on your own. Working with a financial adviser can help build a lifetime of financial security and well-being.”
The first step is to review your life and financial goals and priorities. Are you in the asset accumulation or de-accumulation stage of your life? Are you saving to buy a home, finance your children’s education, saving for your retirement or for your family legacy?
Once you have clearly defined what you are trying to achieve you can take the remaining components of your financial plan and relate them back to these goals.
Getting to know your personal and/or household income and cash flow is hugely important in the process.
“You really need to know how much is coming and where it is going out,” says Fitzgerald. “You need to know that so you can allocate your money to where you want and need it to go.”
Another step is to review what you own and what you owe. Review your RRSP, TFSA, employer pension plan, investments, savings, the current value of any real estate and any other savings you might have. Are these assets fulfilling your goals?
You also should review your insurance to see whether they provide adequate protection for yourself and your family in the event of an illness, disability or other unforeseen event.
Once you have taken all these steps then you can start to look at the actual financial products that you have, whether they are meeting your current risk tolerance and how they are being managed (passively or actively, professionally or personally).
Fitzpatrick recommends that both partners in a relationship be present at any financial meetings to ensure everyone’s needs and wishes are represented and addressed.
“This is something that in the past may not have been made as much of a priority as it should have been,” Fitzgedrald says. “There’s a lot more openness today than there was in the past and women are making as many or maybe even more of the crucial financial decisions for the household than they did. This is something that needs to be stressed.”
Fitzgerald suggests that any formal agreement you have with a financial adviser should include a communications strategy outlining the time frame for meetings and reviews as well as who is responsible for what in the relationship.
“Building a relationship with an adviser based on trust and putting a plan in place can really help to take the stress out of finances and give people greater peace of mind and comfort about the future,” Fitzgerald says.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.