Maybe you put on your snow tires yourself. Maybe you even change your own oil. But you probably go to an auto mechanic to do your brakes, replace your muffler, or fix that weird noise your engine makes shifting into third gear. Cars today are high-tech machines. They’re much more complicated than they used to be. More often, it takes an experienced professional to help keep them running smoothly.
Personal finance is more complicated than it used to be, too. You might want to save for a home, a vacation, or your retirement. In our parents’ and grandparents’ day, that was simple for the average person. You just put your money in a savings account. And when it came time to retire, you simply drew your company pension. Times have changed.
More investing options. More decisions.
Today, you have many more decisions to make. If you want to save, do you open an RRSP? Maybe you need a TFSA? What about an RESP? Once you’ve figured out that they’re actually containers for investments, rather than investments themselves, there are even more decisions: What investments do you put in them? And how do other options fit into your plans? What about high-interest savings accounts? Should you be buying GICs?
If you’re thinking about retiring, when should you start drawing CPP? What about the rest of your savings? How can you be sure your money will last? And what will all that mean for your tax bill?
This is where that experienced professional comes in. Not an auto mechanic, but an advisor.
What does an advisor do?
An advisor performs many roles, some of which you might not expect:
A trustworthy source of information
Your advisor can keep you up to date on the latest rules and wrinkles for saving and investing limits, deadlines, and definitions.
An objective guide
Money can be an emotional subject. How you approach your finances depends on your personality, your experiences and even your family history. It might be hard for you to invest, stick to a budget, or even talk about money. Add to the mix the possibility of a partner with a different attitude, and you can see how things could get sticky. An objective advisor can help you arrive at wise decisions.
A big-picture person
An advisor can help you see how all the pieces fit together. That includes your spending patterns, your savings goals, your investments and even your life and health insurance. An advisor can also help you take the long view, and not get caught up in day-to-day stock market fluctuations.
Chances are, you don’t know exactly what you want or need. An advisor will ask the right questions: What do you want to accomplish? What might be holding you back? How comfortable are you with risk? With that information, your advisor can help you build a personalized road map to your financial future. Your advisor also has the tools to run various what-if scenarios. That way, you can see the potential outcomes of different strategies and choose the best options.
Working with an advisor will help you be realistic. You’ll get a clear picture of your current financial situation and what you may be able to achieve in the future. An advisor will crunch your numbers and flag short- and long-term challenges and opportunities. You could very well discover you’ll be better off financially than you originally thought.
Like the best soccer coach, an advisor will encourage you and help you believe in yourself and your abilities. And if you ever get in a jam, your advisor won’t scold you or judge you – just help you find a way to fix things and keep on track in the future.
Is it ever too early to speak to an advisor?
Once you start working or saving money, it’s not too soon to seek professional advice. The sooner you get a handle on your finances and make a plan for your future, the sooner your money will start working for you, and the better your chances will be of reaching your goals.
“It’s never too early to work with an advisor,” says Scott Schram, RIS, FSA, a Meridian Credit Union advisor based in Niagara Falls. “I’ve done investing and planning with people as soon as they turn 18, when they are eligible to contribute to a tax-free savings account. With one young woman, we started with an investment of $1,000 that she did a great job of saving up. We decided to continue with a monthly contribution of $100. We are going to meet annually to review her plan, but starting early will allow her to take full advantage of compounding interest.”
Starting early will also help you nip unwise spending habits – like running an ever-increasing credit card balance – in the bud before they become a way of life.
How much money do you need to see an advisor?
Not as much as you might think. All you really need is a little seed money to start with, an ongoing source of income, like a job, and the desire to become – and remain – financially successful. With your advisor’s help, you can make a plan that can start small and grow over time. It’s not necessarily about becoming fabulously wealthy (although that’s not a bad thing). Rather, it’s simply about creating a solid financial foundation to help you reach your goals, and to give you a cushion if times get tough.
“I’ve done investments into GICs for people with as little as $100,” says Schram. “Longer-term investments like mutual funds usually require at least $500, but a small monthly contribution can get you there fairly quickly. With monthly contributions on top of the initial $500, your money can grow quite substantially and allow you to achieve your financial goals sooner than you might expect. The biggest factor with investing is the time you spend in the market. So even if you only have $500 to invest, starting now is better than putting it off for a few years.”
Is it ever too late to speak to an advisor?
Maybe you’ve been successfully handling your spending and saving since the days of mullet haircuts and shoulder pads. You know the ins and outs of your investments, and you’ve built up a healthy retirement fund.
But have you ever retired before? Your parents and your older friends and relatives probably used some tried-and-true rules of thumb to manage their money in retirement. Rules about the ratio of stocks to bonds to hold, for example, or the percentage of your savings you can safely withdraw each year. But many of these rules never did apply to absolutely everyone, and some of them no longer apply at all. The world has changed and continues to change rapidly; a lot can affect your best-laid plans:
- Do-it-yourself trading is speeding up market cycles. Can you react quickly enough? Or should you even react at all?
- Interest rates are going to rise at some point. What will that mean for you?
- Inflation may become a more powerful factor. How will this affect your retirement income?
- Climate change is affecting everything from food and energy prices to insurance rates. Will you need to put aside more money, just in case?
An advisor can help you plan and manage your retirement spending. Working together, you can build in protection against the ups and downs of a changing world and make course corrections as necessary.
“It’s never too late to talk to an advisor,” says Schram. “As they say, ‘the best time to plant an oak tree was 50 years ago; the second-best time is today.’”
Talk to us. We can help
Whether you’re just starting out, well on your way or thinking about winding down, get expert advice about your money. Meet with an advisor.