It's one thing to get your financial house in order. It's quite another thing to keep it that way for the duration of your life. We all know how it feels when we clean our home top to bottom. It feels great. But, we also know that within a few weeks dirt will reappear. We know that things will get out of place and we will come to the realization that living is messy and keeping a house clean, neat and tidy requires ongoing work.
Here are some practical steps for keeping your financial house in order.
1. You must be aware that your finances, like everything, require maintenance. Sticking your head in the sand and hoping for the best is not a good plan. Sure, it's a plan, just not a good one.
2. Set aside time each year to review your finances. Meet with your financial person at least once a year to get an update on your investments, performance, changes, new ideas, etc. The big questions: Is your current investment structure adequate to sustain your level of drawdown? Is your level of drawdown too high or too low? Is the level of risk appropriate? Should you be increasing or decreasing the risk level? Do you have enough cash-yielding investments? Are you properly diversified? Can your retirement lifestyle withstand a year or two of negative returns?
3. Cash flow planning. This is all about the day-to-day, month-to-month, flow of money in and out of your bank accounts. If you have money left over each month, then you are probably doing well. If you are carrying a credit card balance into the next month, then there is a problem. You are probably spending too much or not taking enough income from your sources. If your bank balance is growing month after month, then you are either taking out too much income or you are not spending enough money on enjoyment.
There are two things we are trying to avoid in retirement. Over spending or underspending. Like I say often, you don't want to be the richest person in the graveyard, nor do you want to run out and be a burden to someone else. You have to find the right balance, and that's where a plan comes in - it shows you where the guardrails are and helps you stay on a path.
4. Taxes. I'm convinced that most people pay more than their fair share of taxes, and it's all because they don't understand the system. The system is cumbersome and not user-friendly. The CRA isn't going to call you up and offer some ways you can pay less. No, it's on you to figure out how to pay less, and there are all kinds of ways to pay only what is required. Sometimes, you need to get some professional help in this area, and you should. Every dollar you save in taxes is a dollar you have to enjoy or to use to earn more dollars.
5. Money leaks. By going through your budget annually, and especially if you have another set of eyes looking, you can see the money wasters. There's nothing worse than spending money on crap that doesn't bring you joy, add value to your life, or help you make more money. Interest payments, cell phones, internet, landlines, checked bags on flights, bank account fees, debit fees, subscriptions, home and auto insurance, taxes, and I'm sure you can add a few of your own.
6. Estate planning and legal documents. This is the one that most people want to neglect. After all, we think we will live forever or there's always lots of time to look after these things. Circumstances and family dynamics are always changing and your estate plan needs to be kept up to date with these changes.
Are your wills, powers of attorney, and personal directive still relevant? The person you named as executor. Do you still want that person? Do you still want to distribute your estate the way your will stipulates? Are your beneficiary designations up to date on your investment accounts? Do they match your will? Organ donations. DNRs.
Getting your total financial house in order provides a sigh of relief, and keeping it in order allows you to breathe easy and spend more time doing the things you enjoy.
We are here to help.
We help our clients create sustainable, predictable, and tax-efficient cash flow for retirement, to ensure they do not overspend and run out of money, or underspend, and die the richest people in the graveyard.
Want to retire soon? Learn more about our services and book an appointment.
Retirement Income, Investment, & Tax Planners,
Willis J Langford CFP
Nancy Langford CRS
