The merging of two financial lives into one can create havoc on even the strongest of relationships and especially if money talks were never tackled beforehand. Ideally, financial discussions should have happened long before the marriage; however, it is never too late to try to understand your partner’s feelings about money and how compatible they are with yours. 

 The following quiz can help provide some insight into you and your spouse’s financial compatibility

1.       Do you have some sort of realistic budget or a spending plan in place that you are both accountable to?

2.       Are you comfortable with your spouse’s spending habits?

3.       Do you argue over monthly bills?

4.       Do you and your spouse discuss major financial decisions before they are made?

5.       Do you and your spouse have a plan of attack in case one of you should lose your job? (I.E. Currently live off of only one income and bank the other)

6.       Do you and your spouse share in the responsibility of managing your financial affairs?

7.       Do you and your spouse regularly discuss your finances including your short and long term financial goals?

8.       Do you and your spouse share the same views towards debt and savings?

9.       Are you and your spouse both actively saving for retirement?

10.   Do you and your spouse send the same message about money to your children?

Ideally, the answers to all the above questions should be yes. 

To achieve complete financial unity may not be a realistic goal for many couples but to achieve greater financial compatibility is. However, this does require a lot of work.  Here are a few tips to help improve your financial compatibility:

·         Devote more time to financial discussions and to goal planning.

·         Define what each of your financial responsibilities is.

·         Start making joint decisions about how your money is to be spent.

If you are finding it a challenge to have these important money discussions you may want to seek the advice of an experienced financial planner. A financial planner can help you identify differences you may have and how you can work towards finding a happy medium, which is valuable and meaningful to you both. When there is mutual understanding about financial goals, couples most often will work together to achieve them resulting in fewer money confrontations. You can then redirect such valuable energy towards building a more positive and prosperous future together. 

Get the skinny on your financial ‘well being’ by taking the Summer Shape up Quiz.

 Quiz 

1.       I earn enough money each month to pay all my bills? Yes/No

2.       I have enough money saved to pay for emergency or unexpected costs?  Yes/No

3.       I have written financial goals?  Yes/No

4.       I have a written savings and spending strategy that I follow? Yes/No

5.       I know my net worth (what I own minus what I owe)? Yes/No

6.       I know where ALL my important financial documents are located? Yes/No

7.       I have a Will and Powers of Attorney in place? Yes/No

8.       I know where and how my money is invested and I meet with my advisor at least annually to review? Yes/No

9.       I have had my insurance needs reviewed within the last 2 years? Yes/No

10.   My mortgage and loan payments are less than 30% of my overall income? Yes/No

 Please give yourself one point for every yes answer and then add up all your points to see how you did.

If you want to manage your money better and didn’t fare so well on the quiz, don’t get discouraged. This is the time to make a new start.  Changing even a few of those ‘no’s’ to ’yes’s’ can make a real difference in your overall financial well-being.  Here are a few simple tips to get you started:

·         Educate yourself. There are many great websites and books available where you can find useful information depending on your needs.

·         Find a qualified financial adviser/coach. If you wanted to lose weight, you might hire a trainer or join a weight loss program. Well if you want to lose your debt or build up your savings, get a good financial advisor/money coach who can create a plan and support you along the way.

·         Stick to a plan. Why do diets fail? Because we do not stick with them. Make sure your financial goals/strategies are realistic and attainable. Most importantly, renew your commitment daily and follow through.

 Don’t worry if at first you find it a challenge to make sense of your financial health.  Like anything, it takes time. The most important thing is to just get started. Set some financial goals, follow a budget and save and you’ll be ahead of most.

I always advise women of two things, first take care of your personal finances throughout your years ‘as if you had to’. And  second, save regularly regardless of your financial health. This was the adage of a client I dealt with years ago. A lesson learned when her husband of 25 years walked out and left her and their 3 kids in a state of financial shock. As she said, “how I wished I had paid attention to our finances over our marriage”.  Twenty years later she is retired and fulfilling her dream of travel. 

How? 

Well she had decided to become a student of her own financial health. Her first step was to get a true understanding of the financial situation she was now in. She figured out how much money she needed a month to house and clothe her children. With that in mind she went in search of a job that would pay enough to cover these basic needs.  And then regardless of her financial position every month she put away whatever she could towards her retirement savings. When she finally decided to retire she had over $300,000 invested. In her words, “I started saving just $5 dollars a month. After a few years this had crept up to $25. And by the time the kids had left home I was saving $200 a month. It just became an empowering habit”. 

So what did I learned from this client?

Take responsibility of your own financial health throughout your life, ‘as if you have to’.  This means you should have an understanding of what monies come in and what monies go out. And second, set up a regular saving plan.  The latte factor as it is called. If you are spending $4 a day on that fancy coffee you can surely find $20 a month to put aside for savings.

Start small if you have to and invest into something you cannot easily access. Take charge of your financial health and make your retirement your responsibility.  As I like to remind my female clients, “A Man is not your Retirement Plan”.  You are!

Rhonda Sherwood, CFP. FMA
Wealth Advisor
www.rhondasherwood.com
www.itsHERmoney.com

As women, we are likely to outlive our spouses or partners by an average of 5 years. Although this may seem financially insignificant when planning for a 20 to 25 year retirement, it could potentially be our most expensive years.

Things Women Need To Know

• 80% of men die married, while 80% of women die single. 75% of women living in poverty today were not poor before they were widowed.
• In 2005, women earned 84 cents for each dollar earned by men.
• The average income of a married woman is less than that of single women because the former take on more family responsibilities.
• Many women either stop working or work less hours when they have young children. This means they are not contributing to a company pension plan or an RRSP.
• Women tend to either be self-employed, have part-time jobs or work for a flat rate, all of which influence the savings.

So How Has This Really Impacted Us?

Let’s see - we need the same monthly income to live on as men but continue to earn less. Our broken work patterns or part time jobs have drastically impacted our ability to save and hence, the future value of our RRSP’s and pension plans are affected. And due to the increasing divorce rates we have found ourselves not only to be the primary caregivers for our families but in many cases the sole or main financial source. What money or time is left over to put towards planning our retirement?

As compelling as each of our stories is, the fact remains the same; older women who are single or widowed are most at risk for poverty. Although one would think that the likelihood of spending our Golden Years in a state of financial hardship would be more than enough of a motivation to get us into serious planning mode, less than 35% of women today actually do so. So if you take anything away from my words let it be this, it does not matter whether you are single, married, widowed, a business woman or a stay at home mom; take charge of your retirement planning today. Regardless of income, you will be the one who decides your level of financial security in retirement.

Rhonda Sherwood, CFP, FMA
Wealth Advisor, ScotiaMcLeod
www.rhondasherwood.com
www.itsHERmoney.com

Things to know about the new Tax Free Savings

• Starting January 1, 2009, the Tax Free Savings Accounts are available for Canadian residents who are at least 18 years of age.

• You can contribute up to a maximum of $5000 a year. Any unused contribution room gets carried over to the following year. 

• Withdrawals from your Tax Free Savings Account will not affect your ability to qualify for Federal income tested benefits like the Child Tax Benefit or the Guaranteed Income Supplement.

• You can have more than one Tax-Free Savings Account with different institutions but you cannot exceed your allowable contribution limit.

• You can open a Tax Free Savings Account and invests in GICs, mutual funds and other investments and not be taxed on any of the growth or earnings. 

Tips

• Don’t replace your RRSP for a TFSA just yet. If you are in a high tax bracket contributing to your RRSP may be the preferred route to take. Then use your tax rebate as your annual contribution to your TFSA.

• RESP are still an ideal vehicle to use to save for your children’s education. Like a TFSA, all growth is tax free. Unlike a TFSA, the RESP comes with the Canadian Educational Savings Grant of at least 20% but the grant and all the growth within the RESP is taxed upon withdrawal.

For More Information, check out the Government’s Tax-Free Savings Account information page.

Rhonda Sherwood, CFP, FMA

Wealth Advisor

http://www.rhondasherwood.com

http://www.itsHERmoney.com

Are you living the life today that you envisioned you would be living 5, 10 or even 20 years ago? Are you content with most, if not all, of the many components that make up your world: your family, friends, career, health, finances, spirituality and community? If yes congratulations, that is no small feat to accomplish and probably didn’t happen by chance. Most likely you achieved this through purposeful goal setting, hard work and perseverance.

 Although many of us probably have some idea of what we want our life to look like, few actually take the time to clearly define our goals, create an action plan and then follow through. Without setting goals, the direction of our life can change with every event or circumstance that comes our way. Wanting to be skinnier is very different than making a specific goal to lose 10 pounds in 3 months through diet and exercise. A sheer way to achieve success is to set goals and follow through.

Benefits of goal setting

•  Provide direction and purpose to your life
• Helps you to make decisions that will positively affect your future
• Allows you to focus your energies on what’s most important to you
• Will enhance the overall quality of your life, and will provide peace of mind           

Goal setting is also crucial to financial planning; as you will need the financial means to support the life you envision having. Without knowing what you want in life, you may be misdirecting or wasting away your resources. For this reason, the first step to undertake in the ‘savings room’ of your financial house is to determine what your short and long-term goals are. Your goals should be designed around your most important values.

 Take some time to think ahead. What do you want your life to look like in the coming years?  What is important to you? What would you like to have more of and less of? Without knowing the answer to these questions, goal setting will be a difficult challenge.  I often advise clients to follow the SMART system when devising their goals; goals should be Specific, Measurable, Attainable, Realistic and Timely.

• What are your short-term goals (under five years) and what are the financial resources you will need to achieve them (costs)?
  For example, New kitchen to be built by October 2009 at a maximum cost of $25,000
•  What are your longer-term goals (five plus years) and what are the financial resources you will need to achieve them (costs)?
  For example: Reduce work hours by half by age 55. Need extra $20,000 a year from investments to supplement part-time income.
               

People tend to have more goals than the money to support them, therefore, when doing financial planning often just two or three goals are taken into consideration. That is why it is very important when goal setting to prioritize, to be realistic and to set attainable goals.  You may want to retire when you are 50 but is this really within your financial capabilities? Maybe not, but perhaps with the proper planning, commitment and discipline retiring at 55 is within reach.

 However one thing is for sure, to achieve your goals you must start now. Only you can put your plan into action. Additionally, you must reevaluate your goals on a regular basis as they may change or evolve over time. So be prepared to make any necessary adjustments to your plan along the way.You have the power to create your own destiny, so take the time to invest in the future you want.

If a man knows not what harbor he seeks, any wind is the right wind.
-Seneca

Rhonda Sherwood, CFP, FMA
Wealth Advisor
http://www.rhondasherwood.com
http://www.itsHERmoney.com

In the last few issues of ‘itsHERmoney’ we discussed the importance of organizing the 5 rooms of one’s financial house; our personal debt room, our savings plan room, our retirement plan room, our estate plan room and our insurance needs room. Last month we tackled the topic of managing and understanding our ‘debt room’. In this issue we will deal with our ‘savings plans room’ or more specifically the importance of establishing an emergency savings fund.

Why are emergency savings so important?

As they say, “life happens when you’re busy making other plan” and life tends to cost money. Having enough money put aside for such unexpected events can be the difference between staying afloat or sinking financially. So one of the most important elements of your financial plan is to ensure an emergency fund is in place - and sooner rather than later.

Why an emergency fund?

An emergency fund is an easy to access pool of money to be used solely for the purpose of emergencies. Having an emergency fund in place gives you the “peace of mind” that you can handle most financial crises that come your way. This could be anything from an unexpected car repair bill to losing your job. Unfortunately, those who have not planned in advance for such unexpected events tend to borrow the money at the last minute and often at very high interest rates. In addition, those without emergency funds tend to collect more debt overtime.

So how much is enough?

This depends on many factors specific to each person’s situation such as, how employable you are, whether or not you carry substantial debt, if you have adequate insurance, if you are a dual income household and/or if you have children. The general rule of thumb is to have 3 to 6 months of your current living expenses set aside for emergency situations. However I recommend the following to my clients: 

• At the very minimum save a $1000 now in a separate high interest savings account. Set it up so it cannot be accessed by your ABM card. This will help protect against impulse buying. Remember an emergency isn’t, “I NEED those shoes’ but truly an unexpected bill or expense.
• When you have that $1000 saved and put aside you should aggressively start paying down those high rate loans and/or consolidate your loans into one lower rate manageable loan.
• Finally, when your debt is paid (excluding your mortgage) it is time to start saving 3 to 6 months worth of your current living expenses. If you find that you are spending what you earn then take 3 to 6 months of your current after tax income as the barometer of how much you need to put aside.
  I also recommend setting up a line of credit that would cover a few months of emergency expenses. I say this with caution to those who have trouble steering clear of debt. This is solely to be used for emergency means only.
   

 How to get started on your emergency savings plan 

1. Determine what you can ‘reasonably’ afford to put aside each month - $25, $50 or $100
2. Setup up an interest bearing savings account to save the initial $1,000. Again I advise that you open up an account that is not easy to access i.e. no chequing or ABM privileges. This $1,000 will help cushion any unexpected bills that may come your way.
3. Set up an automatic process to save – this can be an automatic monthly payment or an automatic transfer between accounts.
   When you are ready to start saving the larger emergency reserve- 3 to 6 months worth of your current living costs – open up another high earning savings account or a money market mutual fund (the latter is not as easy to access and takes a few days for the monies to settle once sold. It also tends to pay a bit more interest than a regular savings account). You want to ensure these funds are liquid and assessable when needed but are also growing with the cost of living (after tax and inflation).
4. Make sure that you keep your emergency funds separate from any accounts that you are using for other savings purposes, like reno’s, travel or a new car. 

How to find money to save

• Basically, spend less than you earn
• Save all your loose change
• Have a garage sale.
• Review your current expenses/bills to see where you can make some sensible changes - do you really need the movie channel?
• Cut back on indulgences (Bring lunch to work, have one less cappuccino a week, eat out less, and/or rent a movie versus going to the theater).
• Consolidate your debt into one low interest loan.
• Pay cash for all your purchases. People tend to curb their impulse buying when they actually have to fork over cash to make a purchase. Using cash also helps prevent out of control credit card debt and saves on the interest charges you incur when you borrow money.
• Cut down on bank machine withdrawals – those service charges do add up.
• Find creative ways to make extra money. Do you have a skill set that can be put to work?

Financial emergencies can come at any time and at any cost. All you can really do to help protect you and your family from such financial crisis’s is to ensure you are adequately insured and that you have enough savings put aside to help ride out whatever uncertainty comes your way. Start small if need be but start soon.

Rhonda Sherwood, CFP, FMA
Wealth Advisor
www.rhondasherwood.com
www.itsHERmoney.com

When thinking about your retirement, it is important to look beyond just the financial aspects and take some time to think about the kind of life you envisioned having. What makes you happy and brings enjoyment to your life? What would you like to spend more time doing and less time fretting about? How will you replace the benefits you currently get from your work environment- friendships, validation, purpose and structure?

Retirement lifestyle planning looks at all the facets of the life you wish to have including your finances, health, relationships, career and personal growth needs. Ask yourself:

•  What are my personal goals?
•  What activities will I do to continue growing as a person?
• What activities will I do to have purpose in my life? 
• How will I continue to stimulate and grow my mind?
• How will I support my current relationships and develop new ones?  

It is important to know what will bring you fulfillment and happiness in your retirement years. You can then start the planning process to ensure you have the financial means to make it all happen. Here are three steps you can do today to get the process started:

1.  Write down what you envision for your retirement years. Ensure you include all aspects such as your health, relationships, activities and career.
2. Make an appointment with a financial planner. Together you can determine the future cost of your retirement dreams and can develop a plan to work towards achieving them.
3. Commit to the plan and start saving.

 In the wise words of Harry Emerson Fosdick, “Don’t simply retire from something; have something to retire to.”

Rhonda Sherwood, CFP. FMA
Wealth Advisor
www.rhondasherwood.com
www.itsHERmoney.com