Give Yourself a Financial Check Up

 David Christianson, CFP, R.F.P., TEP

We talked about the importance of setting goals. Specifically, I said that your goals and objectives should be SMART - specific, measurable, achievable, relevant and time-bound.

Next, you have to develop a specific plan to take you from here to there. That means moving you efficiently from your accurate current snapshot of where you are today, to that situation you have vividly visualized for your future.

For example, close your eyes and visualize yourself financially independent. What does that mean to you? What does it look like? How do you feel? Put vivid details in your picture. (Go ahead; I’ll wait.)

Let’s say your financial independence requires $40,000 per year of income from investments, protected from inflation. You will therefore need to have $1,000,000 in 25 years, so you will invest about $1,300 per month at a seven percent return to reach that dream.

This process applies to all of your life goals, not just financial. If you want to lose 24 pounds over the next year, then you have to lose two pounds per month, or one half pound per week. (Sorry, my metric equivalents are my only human failing.) This might mean eating 300 fewer calories per day than you burn.

I also strongly believe that writing your goals down is very important and that going "public" with them can also help strengthen your commitment to them. Remember, it is the strength of your vision and commitment to yourself that will carry you over obstacles.

One more thing about goals - see if you can visualize a huge future for yourself, even one that you cannot see realistically attaining. If you can make that vision powerful enough and your commitment strong enough, you will find a way to get there.

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Now, back to your personal finances. From completing your 2008 tax return, you now know how much tax you pay, which amounts of income were taxed more heavily and what areas provided credits and tax relief. How can you build on that knowledge now to pay less tax in 2009?

Further, how do you take steps today that will turn your financial goals and dreams into reality in one year, five years and ten years from now?

Here are some steps:

  1. Pay off all non-deductible debt, starting with the highest interest rate loans. Take advantage of low interest rates to refinance. Develop a specific plan to be debt-free by a certain date.
  2. Systematically save each month for your short and medium-term goals, and for your long-term objectives. Develop a plan to pay cash for your next vacation, home renovation or car, rather than using credit card or financing.
  3. Save monthly for your 2009 RRSP contribution, if that will reduce your taxes and provide steps toward your long-term financial goals.
  4. Develop a plan to get $5,000 into a TFSA (tax-free savings account) this year and every year in the future.
  5. Reduce your income tax withholdings. Making RRSP contributions allows you to fill out a CRA form T1213, authorizing your payroll officer to reduce your taxes and increase your net paycheque. Direct this extra cash to savings, RRSP or debt reduction.
  6. Find out the current asset mix of your long-term investments. This is the blend of equities, fixed income and short-term investments. Complete a risk tolerance or asset mix questionnaire to determine if this actually is the right mix for you.
  7. Find out what you are paying for investment products and advice. If the two costs are blended together, then have your advisor "unbundle" them for you. Are you getting your money's worth? If not, talk to your advisor frankly about what you need. (I am talking about sound, consistent advice here, not necessarily “beating the market" or providing hot stock tips.)
  8. Review your estate plan, including your Will, Power of Attorney and beneficiary designations on all RRSPs, RRIFs, life insurance policies, pension plans and group insurance plans.
  9. Organize your paperwork and records. (We left this till last, as it might be your least favourite, but it can save you both time and money in the long run.)


There, I feel better. You will too, if you develop your own personal checklist like the one above, customizing it for your situation, then going down the list and take care of things.

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David Christianson is a fee-only financial planner and investment counsel with Wellington West Total Wealth Management Inc.