Making Money is Hard, Holding Onto it is Harder
You may have substantial earnings or have inherited a comfortable lump sum but if you don’t know how to grow it, then it is very likely that your wealth will deplete over time.
This will of course contribute to one of the greatest of financial fears, the fear of outliving your savings.
To hold onto your savings the most important first step is to work with a qualified financial professional to establish a personalized comprehensive financial and investment plan.
Obstacles to Holding onto Your Money
Poor Debt Management
If you haven’t already established a long-term financial plan, then chances are that you may already be overwhelmed by debt. The interest payments on your debt are substantially greater than the interest income on your savings accounts, with credit card debt often carrying interest payment rates in excess of 20%. The interest on these debts will significantly eat into your savings.
Impulse Buying
Social media is constantly bombarding you with the latest and greatest must-have “necessities” for a happy life. Most often these are things you think you need but probably don’t. Buying something at a great discount is not a saving unless it is something you actually need.
Lack of Financial Knowledge
You may not be managing your finances optimally as you do not have the financial know-how or resources to do so and may not have the time to obtain the required knowledge. In this scenario, you are typically living pay cheque to pay cheque. Contacting a qualified financial professionals will help provide you with any guidance you may need.
Lack of Financial Discipline
You may be spending your money as fast as you earn it. This is often the case where you increase your standard of living directly in line with your increased earnings. This is especially problematic when earnings may plateau or even decrease due to unforeseeable employment changes. Perhaps you have never put in place a dedicated savings plan to accumulate wealth for the future, wrongfully assuming that your earnings will continue to increase. Procrastination can be the most serious barrier between you and a financially secure future and retirement.
How Do You Hold onto Your Money?
The first step in holding onto your money is to obtain the assistance of a qualified financial professional who will help you formulate a comprehensive financial plan that accounts for your personal financial situation and your short- and long-term financial goals. This financial plan will include:
Getting your Debt Repayment Under Control
This includes differentiating bad debt (e.g. credit cards) from good debt (e.g. home mortgage) and prioritizing payment to maximize savings.
Establishing an Emergency Fund
An emergency fund should cover three to six months of your expenses in the event there is an unforeseen disruption to your cash flow.
Automate your Savings Contributions
Dedicate a pre-specified amount to your savings each month before you consider any discretionary spending. Increase your savings as your earnings increase, not your spending.
Differentiate and Prioritize your Savings Goals
Establish savings/investment accounts for each goal such as RRSPs and TFSAs for retirement and long-term savings. Dedicate specific accounts to shorter-term goals such as vacations or new vehicle purchases.
Diversify your Income Streams
An ideal core investment for long-term financial goals is a dividend-paying Canadian equity portfolio. As assets grow you can diversify to additional income streams including other asset classes, rental properties, business ownership, etc.
Only Spend from your Income
When you do need to make expenditures, try to use only income so as not to encroach on your capital which will decrease your future income.
Always Include Tax Planning
When considering any savings vehicle or investment, always consider the income tax consequences of every decision.
Generating Income as Part of Your Financial Plan is Key!
“When you fail to plan, you plan to fail.” Establishing a long-term financial plan is important to holding onto your money and generating an added source of income as part of this plan is key.
If you are looking to generate additional income, as a part of your financial plan, Bloom Investment Counsel, Inc. is happy to help.
For over 25 years, we have specialized in one thing and strive to be the best at it—investing in income-generating investments, specifically dividend-paying stocks, which can help you generate income if needed, and growth from investing in the stock market.
For more information about our services, call us today at 416-981-9941 or email us at info@bloominvestmentcounsel.com and talk to one of our advisors.
This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.