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Fund Library Q&A
Your questions about financial planning, investments, and portfolio management answered by an industry expert

By Robyn K. Thompson  | Friday, January 12, 2018

Q – I’ve just received my credit card bills for December, and I’m starting to think I’m still in the same financial mess I was in last year at this time. Seems I haven’t made any progress at all in organizing my financial life. Any suggestions? – Marci S., Oshawa, Ontario

A – Around this time of year, many people are beset by doubts and anxieties about their financial situation – especially after the no-holds-barred holiday spending season. You can always get your personal financial chaos under control with some basic budgeting techniques, and there are hundreds of very good, free, online resources to help you do that. But it sounds like you’re having trouble with the bigger picture. To get your overall financial life in order, you have to start by looking at it from the top down.

Start by setting some general goals for both short-term and long-term personal objectives. For example, do you want to save for a down payment on a home? Are you setting money aside for retirement? A vacation? A new car?

Make a plan, Stan

Goals need a plan – one that allows you to set priorities and assess your resources. Take a blank sheet of paper and draw a line vertically down the centre. On one side, list your goal – say a Caribbean cruise with a cost of, say, $5,500. On the other side of the sheet, write down how much you can set aside from every paycheque to put towards that goal. Divide the bigger amount by the smaller amount to see how long it’ll take to save up to pay for that cruise in cash. At this point, you might just give up and go back to the plastic. But that’s just a plan to dig a deeper hole.

So maybe you could use a financial planner who is an expert at this sort of thing. If you want to make sense of that shoebox full of slips, and bills, and forgotten priorities, find a Certified Financial Planner to help you out.

Save a few bucks, why don’t you?

Easy to say, but how do you do it? The quickest way is to transfer some manageable fixed amount every month (or every paycheque) from your bank account to an investment account. One rule of thumb says you should set aside about 10% of your after-tax income. The trouble with rules of thumb is that they are often based on myth. Setting aside 10% of your salary isn’t really possible for most of us. The real trick is to set aside whatever you can comfortably afford to, but do it consistently.

If you put, say, $50 a week –$200 per month – into a low-risk investment account that generates 4% return compounded annually, after 25 years your savings will have grown to over $102,000! It’ll grow to a lot more if you gradually increase the monthly savings amount and the rate of return as you become more financially secure over the years.

Okay, so you have some investments

If you already have an Registered Retirement Savings Plan (RRSP), a Tax-Free Savings Account (TFSA), or a non-registered brokerage account, be sure that your entire portfolio matches your tolerance for risk. If you swear up and down that you’re an ultra-conservative investor, your portfolio is crammed with equity mutual funds, that’s hardly low-risk! It’s a fairly simple matter to fix, with a questionnaire I use to draw up a realistic risk profile.

It’s not complicated. Ask yourself what level of loss you can stand in your portfolio over a given length of time. Are you okay with a drop of 10% over three months? Or a year? On a $50,000 portfolio, that’s $5,000. Remember, 10% is how much the stock market loses when it’s going through what’s called a “correction.” Be honest: Are you comfortable losing some of that $5,000 in a short time? Think of it this way: If you lose 10% on a $5,000 portfolio, you’ll have to make over 11% on your investments (now worth $4,500) to get back to breakeven. If that worries, you, maybe you’re not as risk-ready as you think.

Creating an honest risk profile will help you rebalance your portfolio in the New Year to just the right mix of safety, income, and growth assets that will truly meet your needs – and let you sleep nights.

Setting budgets for the nuts and bolts of your monthly income and outgo is all well and good – and even necessary. But it’s only one part of the personal finance equation. Starting at the top, setting goals, and developing a plan are really the first steps to bringing order to financial chaos. – Robyn

Robyn Thompson, CFP, CIM, FCSI, is the founder of Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management for high net worth individuals and families. She is also listed as a MoneySense Approved Financial Advisor. Contact her directly by phone at 416-828-7159, or by email at for a confidential planning consultation.

Notes and Disclaimer

© 2018 by the Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned are illustrative only and carry risk of loss. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.

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