Divorce can be emotionally and financially overwhelming, that’s why I am teaming up with Sunny Wishart, a Certified Financial Planner and the founder of A la Carte Financial. Sunny has worked with clients from all walks of life and is an expert at giving unbiased and objective financial advice.
Sunny and I believe very strongly that with the right knowledge and guidance, you can emerge from this chapter of your life stronger and just as financially secure.
In this episode, we discuss identifying your goals during this transition of divorce, and the effect these goals should have on your financial planning. We will teach you the importance of understanding and protecting those financial goals. We also explore how to start with short-term goals, like preserving your assets during divorce, and stress the need for liquid funds. Sunny will also explain various registered platforms such as RSPs, RESPs, and TFSAs, highlighting their purposes. You will also learn how to take advantage of the programs offered by your employer to supercharge your investment gains.
How important is it for you to understand your goals and know where you’re at today, where you want to be a year from now, five years from now, and ten years from now?
Step 1: have some liquid money:
You have to think in terms of short, medium, and long-term goals and this can be difficult especially when you are in the middle of uncoupling your finances and dividing everything. In this case, your goal could just be something like wanting to figure out your finances today and making sure you’re okay.
Your goal could be getting to the other side of this and preserving your assets. Meaning, that you don't want to dip into any savings you have accumulated or any savings you have left after all payments and settlements have been made. We're not going to move forward with retirement planning when you've got a few years of dust to settle yet. Preserving what you have is an incredible goal to start with, this is when you start looking at the different types of savings.
If you're looking to preserve your current RSP or TFSA balance or even just not have to sell your house, the first thing is to have liquid money to bail you out in case of emergencies, and this is a savings account. It is not to be drained in a pinch to pay for whatever you need to pay for that or with a credit card. You either borrow the money or you have the money, if you borrow the money and don't have the money, it means you didn't have the money in the first place.
Step 2: Understand what these registered platforms mean:
The spirit of an RSP is to provide pension income. That's it. It's not there to be drained on to pay a bill. The purpose of it with the tax strategies around it is to save now. Pension yourself later. It's your personal-built pension.
RESP’s, it's your kid's education. You're the owner, your kid is not the owner. Your kid's a minor. You are the owner. You can get your money back. The government's going to claw back their grant and growth. But you can get your money back if you really need it. But the spirit of that is education.
Then you have tax-free savings accounts. They're neat because you can use them for short, medium, and long-term goals. Any money that goes in there, you want to invest it and earn a ton of money in there to get free earnings. If you're putting it in there and it's just sitting in cash or savings and earning nothing, it's just a savings account. It's doing you no favors. Don't bother putting it in a savings account, have it create income.
And then the new FHSA’s. These are slick for younger people who are interested in buying a home and need a place to save money in a tax-efficient manner to save for a house.
So when you're ready to move forward with your goals, ask yourself, do you have that liquid money sitting there in a pinch so that you're not borrowing or liquidating those assets when preserving your assets was so important to you?
Once you've determined these goals the number one thing to do is to make sure you're protecting them. For example, retirement. Some people might say they want to focus on their kids' education before thinking of their retirement. While this might be a tough pill to swallow, sometimes prioritizing your retirement could be a lot more necessary than your kids’ education, especially if you wish to continue maintaining your current lifestyle after retirement.
In this case, check what retirement benefits your employer has to offer and find pension plans you are eligible to participate in.
So goal planning is about knowing where you want to be and where you're heading and then putting a little slush fund aside, depending on how many assets you have for emergencies. If you're not sure and you're not knowledgeable about financial planning, meet with someone like Sunny who can open your eyes to this opportunity, this option, and create awareness about these different options you have.
It's a learning curve that you can work through until you feel confident.
Everyone's situation is unique. What are your goals? Where are you at right now? Where do you want to be? How much do you need to learn? What questions do you need to ask? These are all things to consider when it comes to your investments and your money.
Figuring out how to manage finances among so many other things during this tough time can be overwhelming. If you’re feeling overwhelmed and need to speak with a professional, you can schedule a call with me.
And remember, you're perfect just the way that you are. You are awesome. You are wonderful, you are worthy, you are loved. And we look forward to talking to you again next week.