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Steps To Take Today For a Financially Healthy Tomorrow

Steps To Take Today For a Financially Healthy Tomorrow

By Anne Arbour

Are you counting down the years, months and even days to your retirement? Are you dreaming of having the freedom to make your own schedule, pursue your hobbies, or even just avoid rush hour traffic?

Silly questions – of course you are! And hopefully you’ve been able to save enough through your working life to help those coveted retirement years be financially stable ones. You might even be working with a financial adviser to plan for that exciting time.

Beyond saving and investing, however, being aware of your current day-to-day money practices will help ensure a financially healthy tomorrow. Here’s how:

Take a financial selfie.

There is no time like the present to take a snapshot of your complete financial profile as it currently stands. While you and your adviser might be focusing on what things will look like in the years to come, is it possible you have been neglecting the day-to-day? Setting aside a few hours once a year to organize a full, updated financial profile can be a very eye opening exercise, and will give you a great starting point for action items you can undertake right now to help you reap the reward of a secure future.

Ask yourself: What do I own (assets like homes, vehicles, household goods) and what is their current market value? What do I owe (liabilities) including the current outstanding balances, interest rates, payment details and maturity dates?  It is helpful to separate secured debts (those with an asset behind them like a mortgage or home equity line of credit) from unsecured (credit cards, regular line of credit, etc.).

Now that you can see all of your obligations in one place, you can devise a plan to repay those outstanding debts in full before you retire – or at a minimum, to pay them down in a meaningful way.

There is no getting around the fact that retiring with debt can be a major challenge. When your income and capacity to earn shrink, you can be particularly vulnerable to cost of living increases. Servicing debt on a fixed income leaves you exposed to potentially rising interest rates and can severely restrict your ability to do what you want to do during retirement.  Making some sacrifices today to wipe the slate clean can have a major impact on your future security.

If you need help, or are feeling overwhelmed, do not hesitate to reach out for help. There are many free, not-for-profit services available to help you. In Canada, you can find a not-for-profit credit counselling agency in your area by checking out Credit Counselling Canada and in the United States, you can find a service through the National Foundation for Credit Counselling.

Track It!

As we go about our busy lives, we often forget to consider our day-to-day spending. We remember those fixed, regular monthly expenses like our cell phone or utility bill, of course, but how many of us can accurately say how much we spent at restaurants last week? And what about that tire you had to replace this week, out of the blue? It all comes down to regular tracking.

A wise woman I know likes to say “A budget without tracking is a wish list.

Well, let’s save the wish lists for birthday presents and retirement travel. Let’s get real about our budgets and spending habits. Tracking is going to tell you the truth about where your money is really going and best of all, it will reveal opportunities to make any tweaks or material changes in your spending patterns now to help you repay any debt before retirement or boost your savings.

Tracking will also give you a really good picture of what your lifestyle requirements could be in retirement so you and your adviser can plan accordingly. While some expenses will reduce or even disappear (goodbye suits and ties!), retirement isn’t free either. You’ll still be spending money on gas to drive to the golf course or for those Pilates classes.

Another bonus about tracking is that because there are so many different ways to do it, there is really no excuse not to. You can record transactions into a notebook, download a template, use an app from your financial institution, or log receipts into a spreadsheet  – there is no one perfect way, just the way that works for you.

It’s best to start with just a few spending categories and track them for 2-3 months. Once you’re in the habit of regular tracking, and have found your preferred method, then you can build from there.

Protect yourself and your loved ones.

When was the last time you updated your will? Do you have a durable Power of Attorney in place? What about a clear health care directive?

If it’s been any length of time since you’ve reviewed any of your critical paperwork, or if there have been any significant changes in your family such as the arrival of grandchildren, now would be a good time.

Being able to clearly record your own wishes for your money and personal care while you are able to is an important part of planning for your future. Consulting a professional with expertise in estate planning can help tailor something to your current specific needs and avoid conflict at a later, potentially critical time.

Reviewing your existing insurance arrangements and foreseen needs is also an important step in preparing for retirement that you can take today. Your needs will likely have changed significantly since you first established your coverage, and it is certainly worth an annual review to make any relevant adjustments.

Maybe life insurance is not as crucial now that your children are older and on their own way, or your major debts have been paid. Maybe, instead, it’s time to look at critical illness or long term care insurance as part of your overall financial plan. Once again, consulting with a licensed professional is the way to go here to make sure your individual needs and those of your loved ones are addressed.

Clearly, long term saving and planning is important for a financially secure retirement, but there a number of steps you can take right now with respect to your day-to-day financial behaviour that will help pay dividends as well (cheap pun fully intended).

Understanding your complete financial profile as it stands today, holding a mirror up to your spending patterns to learn where the weaknesses and opportunities lie, and updating critical paperwork and coverage to accurately reflect your current and projected situation are all simple tasks you can undertake with a minimum of effort.

Then you can get back to daydreaming about your first post-retirement trip!

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Anne Arbour is the Credit Counselling Society’s Financial Educator for the Greater Toronto Area. Anne has over 25 years combined experience in facilitation and financial services, including operating her own small business financing company. She holds an MBA and is a Certified Educator In Personal Finance. Anne has served on expert panels for ACTRA and for FuturFund, and has been interviewed by Global News, Today's Parent Magazine, Canadian Money Saver Magazine and The Toronto Sun.