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| Adrian Mastracci, president of KCM Wealth Management, says “Take a close look at your finances in early 2006. Perhaps, your nestegg can be improved." |
Vancouver, BC (April 03, 2006): Conducting a review of the finances early in the year gets you going in the right direction.
Publilius Syrus, writer of mimes, said around the year 100 BC: “Many receive advice, few profit by it.”
Adrian Mastracci, “fee-only” investment counsel with Vancouver based KCM Wealth Management, comments, “Planning your finances is about doing many simple things, over and over again. Tune out the lure of superior performance. Focus on what is important to you about your future.”
Stick to your knitting. Some investors need capital preservation. Some want portfolio growth. Others require a dependable retirement income stream.
Seek consistent investment returns; not hot performance. One bad year can wipe out many good years of achievements. Make sure the finances are tuned to your specifications.
Let’s check the profit from these 10 tips:
1... Priority one
A major reason for lack of financial success is that too often no game plan exists. If that is the case, or it is outdated, then make the game plan your top priority.
Take time to review your current plan. It’s your blueprint to reach your chosen destination. If you’re not achieving your goals, it may be time for changes.
2... Take charge
Asset mix decisions have the greatest impact on portfolio returns. Not stock selection, nor market timing. Clearly, this is the focus for every investment portfolio. One that you can easily control.
Other things within your control are the amount of risk you take and investing within your profile. Your investment horizon and level of diversification.
3... Savers and payers
Many families have one spouse who earns the higher income and often owns more financial assets. Especially if only one has the employer pension.
To ultimately equalize retirement incomes, the higher income spouse can pay for the family expenditures. The lower income spouse can do the saving and accumulate more assets.
4... Saving habits
Allocate a portion of your earnings to savings on a regular basis, perhaps by automatic deposit. Aim at least for the 5% to 10% area.
Time is your biggest ally, so start as soon as you can. Discipline yourself to a savings program that you can sustain.
5… Designate beneficiaries
Designate your appropriate beneficiaries. Start with the RRSPs, RRIFs and pensions. Then review your life insurance policies and the investment accounts.
For some situations, joint accounts may be beneficial.
6… Repay debts
Pay off non-deductible loans as quickly as possible. Don’t fuss with a non-RRSP portfolio if you’ve incurred debts.
Focus on the home mortgage. Try to reduce the mortgage amortization from 25 years to 10 or 15 years. It saves you a bundle of interest.
7... Curb losses
Incurring losses is not the most detrimental thing for portfolios. Rather, it is keeping the losses far too long. Be an astute money manager. Have the nerve to admit to being wrong. We’ve all been there.
Some investments will result in losses. Adopt a loss strategy to contain the portfolio damage when the picks go south. A simple approach, such as selling at 25% below purchase price, will help.
8... Jump start RRSP
Get an early start on your 2006 RRSP deposits. There is no reason to wait until early 2007. Especially, if it’s sensible to make a spousal deposit.
The 2006 maximum is $18,000 less the pension adjustment. Also, factor in the unused room. Then you can send Canada Revenue Agency a letter to reduce your income tax deducted at source.
9... Donate securities
Many investors sell securities and make 2006 charitable contributions. Thus, consider donating the eligible securities directly to the registered charities.
The good news is that the capital gains inclusion rate on the donated securities is reduced from 50% to 25%. Your donation receipt is based on the market values of the donated securities.
10... Plan thy estate
Review your will. Begin with the named beneficiaries and the estate allocations. Determine if your executors, guardians and trustees still want the thankless duties and responsibilities.
If you own a family business, some estate freezing techniques may help.
That’s a close look at your finances in early 2006. Perhaps, your nestegg can be improved.
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