I love this time of year! My son is home for Christmas, which I think it might be the last year he comes home and I would rather go visit him where there is no snow, getting together with family and friends, but most of all, it’s a time for reflection on the past year and setting new goals for the new year.
I love setting goals and the bigger the better! A new year brings about new optimism, a chance to start fresh, and create new habits. Especially where money is concerned.
The TD Financial Health Index 2019, which was released at the end of October, had 3 overall findings (Bloomberg):
1. Earning power doesn’t automatically lead to better financial health
2. Canadians are reluctant to seek advice or even talk about money
3. Link between financial health and physical and mental well-being
As a Planner and dealing with many different business owners and people, I can honestly say that I come across these findings all the time.
Earning power doesn’t automatically lead to better financial health
And it doesn’t. I have clients come to me at all various stages in their life, making different amounts of money, with different financial issues. I have clients making $50,000 a year that have more accumulated wealth than people making $300,000 a year. It’s not uncommon for me to hear “I need to make more money first”. However, if you have money problems right now, making more money is just going to lead to more money problems, it’s actually a statistically proven fact. Making more money isn’t the solution, better money habits are the solution, and if you get good habits when you make less money, they will carry over when you make more money, and possibly get you to the point where money isn’t even a concern anymore.
Canadians are reluctant to seek advice or even talk about money
Once again, also true. Money is so personal. If there are financial troubles, people tend to think that they are the only one that has ever been in that situation before and they don’t want to tell anyone about it. As a Financial Planner, I have seen it all. Nothing surprises me. You won’t be the first person to have gone through your situation, and you won’t be the last. But sometimes the best solution is to learn how other people got out of that situation successfully instead of playing a guessing game.
Link between financial health and physical and mental well-being
There is actually a lot to this one, but overall, all 3 of these topics are related. Many Canadians are not confident that they are on the right track to meet their long-term financial goals and it can leave them financially vulnerable. Those who are financially vulnerable score lower on mental health measures. The financially vulnerable are more likely to manage their finances themselves, whereas the financially healthy are more likely to make use of financial advisors. This stuff is literally in the report, almost copied word for word, just in case you want to say I’m plagiarizing.
Now that you know what the main findings in the report are, and now that a new year and a new DECADE are upon us, what are some simple things you can do to get a better financial start? These might seem basic, simple and you know them already, however, according to the Financial Health Index, only a quarter of Canadians surveyed are financially healthy. That leaves almost 75% of people not doing some of these basic things.
1. Get a financial planner. Even the report says that people who are more financially healthy have one. It’s not always easy, I understand that, but good financial habits aren’t automatic. If they were, you would be extremely wealthy by now. There are so many tools and resources that financial planners have access to that you can’t necessarily do on your own. Plus, when you research financial info, it often comes up with ideas once you have money, not how to build it up efficiently and effectively. Also, on a behavioural standpoint, planners are known to protect people from themselves. With money having such an emotional component to it, we help manage those emotions.
2. Write out your financial goals for the year, for the next 3 years, the next 5 years, and also your big someday goals. It can include items you want to purchase, vacations you want to take, business income, asking for a raise, saving and investment goals, and debt reduction goals. Anything money related, write it down, and then write it down frequently. Don’t type it, don’t plug it into an app, physically write it. Writing it down helps it stay in our brain longer and the more often you do it, the more it helps you focus on the goal. Maybe you want to do it daily, or maybe it is a Sunday ritual that you want to create to help you get focused for Monday and the work week.
3. Become the CEO of your financial life. You need to run your financial life like a successful Fortune 500 company and not like the government. Track your income, track your spending, make plans and follow up on those plans regularly, look at financial strategies that help reduce taxes, give you financial security, and be prepared to analyze your finances and make some changes to get you to your goals faster. Just like businesses can’t operate without a business plan, you can’t operate your financial life without a financial plan. You need a plan to get to your goals.
Do this next decade financially better! At the end of the day, year, decade, it’s all up to you. Sure, a Financial Planner is going to help once you meet with one, but you have to take that step first. You will soon realize that your financial outcome has little to do with the economy, the markets, or how much money you make, but solely on you and your actions and habits.
While some advisors look for clients that have a certain amount of money, work in a certain profession, or own a certain type of business, I am looking for people who want to do what it takes to get where they want to go. Is that you? Or do you know someone who does? Let’s start the next decade off on a better foot together!