Well here we are in 2008 already. December and the Christmas season whizzed by. I was only able to get my Christmas tree a week before Christmas and decorated it only the weekend before!
Let’s start 2008 on a positive note; a different take on the list of New Year’s resolutions.
Here are the top 10 factors that will enable you and your family to be financially successful. These tips are invaluable because they come from my experience working with all of you. I have been privileged to see many of my clients increase their net worth, making great progress towards a future of financial independence.
So here they are in logical order
- Have clearly stated financial goals. For example: A time frame for retirement within 5 years. Or the extra specific amount to put on the mortgage on the anniversary date.
- Taking regular time to attend to your finances. Remember you will never find time but will instead make time. This also includes being organized in your financial paperwork. For example if you have group life insurance do you know how much your benefit is? If not would it take more than 5 minutes to locate that information?
- Differentiating between wants and needs. We have been trained to be a very impatient, trend following society. However, patience is rewarded in financial planning. Need a way to distinguish between wants and needs? Generally speaking, wants are often tangible depreciating items that tend to take up a lot of your day to day spending. Needs are often intangible appreciating assets. Therefore it is often easier to put off NEEDS and attend to WANTS.(See #5) Here’s an illustration: After a new home purchase the homeowner needs new furniture. Should he delay getting life insurance because he would prefer to buy the furniture first? If the homeowner has any close relationships with people who could benefit from homeownership then the answer is no. He is protecting the appreciating house with a need( life insurance). It takes a lot of intestinal fortitude(guts) to swim against the crowd but it is definitely rewarding.
- Having a hands-off savings account for emergencies. Saving ahead for a big purchase or vacation. See #3. Again those companies marketing instant solutions have a bad answer: the credit trap. Having an emergency fund will enable you to withstand such events as a slowdown in the economy, loss of income, or an increase in interest rates. You can bet that those homeowners in the US who have savings are doing better financially that those that lived paycheque to paycheque.
- Avoiding procrastination. For example how quickly do you do your tax return? When do you return my email or phone call?
- Knowing how you spend your wages every month. Do you know where you money goes on a monthly basis? You stand a better chance of having money left after expenses if you keep track of them. If you need an organizational tool see Issue 13. I also have hard copy templates if needed.
- Knowing which services are worth paying for, especially bank and credit card fees. Paying a monthly fee for an account that has $0 is one of many reasons the bank is richer that you think.(That TV commercial is playing mind games with the public). Try to be the bank’s worst customer because no matter if they make thousands or one dollar off of you they will still keep you on hold for up to an hour when you phone to ask about your money.
- Making time your friend not your enemy. See #2 and #5. If debt controls your budget then time is your enemy. If debt including mortgage payments are more than 35% of your total gross income that is too much.
- Understanding that good or bad financial decisions will have an exponential or additive impact on all of your finances. Just as these 10 factors are necessarily interrelated so are the decisions you make for better or for worse. Hopefully for the better!
- Taking communication seriously. The most financially successful are the ones that communicate regularly with their respective stakeholders their partner or spouse, their financial people(me or others), for example.
A little word on our loonie. Always considered the 97 pound weakling on the beach the Canadian dollar pulled off a Mighty Mouse act in 2007. Beyond the headlines of shoppers headed south for bargains there were other implications of our beefed up currency.
First of all the loonie is one of the strongest appreciating currencies against the US dollar. Investors who have foreign holdings have seen the returns on those investments adversely affected in the short term.
Since the price of oil is denominated in US dollars those provincial governments that have resource based economies are negatively affected. Manufacturing is also affected.
Many factors contribute to a strong currency. One important factor is how many institutional investors find that currency attractive. Right now fewer investors are wanting to buy the US dollar which is why it has decreased in value. Countries with strong GDP and low inflation will tend to have stronger currencies.
Over the long term fluctuations in currencies tend to even out. It is unproductive to make changes in your portfolio because of short term movements in the financial market.
In our meetings within the next few weeks I am looking forward to sharing news from various conference calls that fund managers have hosted. It has been interesting to say the least.
Until then, happy productive, fun, rewarding, and relaxing 2008!! See you all soon!!