Seven Steps to Financial Freedom For Any Family or Career Woman
Peace of mind lies in gaining control of your personal finances.
By: PATRICIA LOVETT-REID, Senior Vice-President, TD Waterhouse
I work for TD Waterhouse and have made a career of educating Canadians on the importance of personal finance and investing. A Certified Financial Planner by trade, I strive to break down the often complex world of finance and explain what it means to people of all walks of life – through client presentations; media appearances and books targeted to women.
Life isn’t about money. But when you take control of your finances, you lay the foundation to achieve peace of mind, contentment and the lifestyle you want.
On the personal side, I have a husband and four kids. My husband and I are both pretty disciplined when it comes to money. As you can imagine, finances and investments are important themes in our home!
SHARING A FINANCIAL FUTURE
When we got married, my husband and I realized we had different levels of assets, but importantly, similar financial values. Early on, we instituted a ritual of balancing the books every weekend.
We share one bank account because that works for us. We stick for discretionary expenses. We consult each other on every major purchase – not to seek permission, but out of respect for each other.
We communicate frequently and transparently and make decisions together.We developed our investment strategy together; reviewing our portfolio regularly and consulting our advisor quarterly. We know exactly where we stand at any given time.
INSTILLING FINANCIAL RESPONSIBILITY
This approach extends to our kids. We talk very openly with them, ad nauseum, they would say! We raised them to be industrious and to manage their money responsibly. We taught them to pay themselves first.We encouraged them to get jobs during the summer to contribute to their cash flow for the academic year. It always helps to have some skin in the game!
WOMEN AND FINANCES
Women owe it to themselves to be involved. After all, no one cares more about your money than you. When I meet women who have a hands-off approach to their finances, it is usually attributable to a lack of time – not a lack of ability or interest. But that’s not a reason to abdicate responsibility.
This doesn’t mean you have to do it yourself. Approach it the same way you would your business: Surround yourself with the right professional expertise, consult and assume responsibility – i.e. be informed, seek counsel, make decisions and measure performance. But no matter who is actually managing the assets – your spouse, your partner, your investment advisor – you must be fully engaged.
If you haven’t been involved before, approach it as an evolution. Start educating yourself. Do one thing every month to further your knowledge. Set some goals. Every step will advance you on the path and get you closer to financial responsibility or partnership.
7 STEPS TO FINANCIAL FREEDOM
1. BECOME YOUR OWN CFO
• Nobody cares more about your financial well-being than you do, so don’t abdicate financial responsibility.
2. SET GOALS
• Set realistic financial goals for yourself – short, medium and long term – and be personally accountable for reaching them.
3. AVOID COMMON MISTAKES
• Throwing caution to the wind
• Short-term view
• Under-estimating the power of compounding
• Letting taxes guide your investment decisions
• Using excessive margin
• Not knowing where you are going
• Portfolio concentration
• Not knowing what you are doing
4. LEARN MORE, EARN MORE
• Upgrade your financial literacy and skills.
• Build a team of professionals that you trust – financial advisor, lawyer, accountant, etc.
5. BE DISCIPLINED
• Pay yourself first!
• Think hard about your wants vs. needs
• Work with a financial advisor to discover your true risk tolerance and implement an appropriate long term portfolio strategy.
• Stick to your plan and don’t be tempted off-track by shortterm market movements.
6. GO BEYOND
• “Buy and hold” to defer taxes
• Maximize your RRSP and TFSA contributions
• Income split with family members
• Remember that dividends are your secret weapon
• Maximize your RESP contributions
• Maximize tax deductions
• Maximize employee benefits
• Employ yourself, part or full time
• Don’t forget about short/longterm disability, critical illness insurance and employee life insurance plans
• Take a long-term approach to saving and investing
• Set up a pre-authorized purchase plan
• Keep 6-9 months of living expenses for contingencies
Patricia Lovett-Reid, Senior Vice President of TD Waterhouse Canada Inc. is one of Canada ’s leading and respected authorities on personal finance. Patricia holds the designation of Certified Financial Planner and is a regular commentator for Business News Network, CTV, CP24 and the National on CBC. Patricia is the host of MoneyTalk , a national prime-time television program on personal finance, airing every Monday at 8:00 pm (ET) on Business News Network and offers daily market commentaries on radio stations such as AM 740 and 680 News.