Hello everyone and welcome to the Retiring Canada Podcast. In today’s episode, we're going to discuss the power of organizing your finances before you retire.
Specifically, we are going to discuss:
- Who should organize their finances
- How simplicity leads to greater understanding and deeper relationships
- Potential gaps and pitfalls of not organizing
- Tips and tools to help get you started
- Top 5 reasons why you NEED this in your life
- Lastly, a few action items for you to consider
One of the most common threads I come across when working with clients from all backgrounds and levels of wealth is the desire to get organized. Often, that is one of the main reasons people initially reach out to our team. They find themselves in a position where they have all of this financial stuff spread out everywhere, making it extremely difficult to know where everything is.
Now, like I said, the desire to get organized is common amongst my clients, whether they have a few hundred thousand dollars to invest or multi-million dollar accounts. One of the most impactful conversations I had recently was with a couple who own a number of businesses, real property, and traditional investments. During our complimentary one-page plan process, we spent the time asking the right questions to start mapping out their very complex situation.
In our follow-up meeting to present our findings and help them get organized, the most impactful part of our discussion was their financial map—a visual representation of all their finances today and their evolution over time.
In this scenario, one of the spouses was the primary driver of the businesses and finances. The spouse who was less involved in this aspect of their relationship was blown away. For the non-financial spouse, this was the missing piece that brought clarity and understanding to their complex situation.
Simplicity is key.
As the advisor, helping to simplify clients’ finances and getting them organized allows for deeper, more meaningful conversations and connections outside of what most people think of when they work with their financial advisor.
Outside of a deeper connection and helping to build a legacy, there are countless positive real-world implications that getting organized can have on your life, especially if you are preparing for retirement.
First off, it will help ensure you are paying the least amount of tax and optimizing your retirement income.
Think about it: if you have 2 or 3 institutions managing your investments, maybe some farmland, small business income, or pensions, along with government benefits like CPP and OAS, how can you be sure you are making the right choices if things are spread around everywhere?
If the right hand doesn’t know what the left hand is doing, you could potentially be setting yourself up for poor financial outcomes, like paying CRA more than you legally have to.
Second, getting organized takes a lot of weight off your shoulders.
Having a messy financial house is a lot like having a messy home, albeit with worse potential outcomes than having too much clutter.
I don’t know about you, but having a tidy home and things organized the way I like them helps to clear my mind and keeps my day-to-day thoughts and actions free from obstruction.
Some of you may think this is a stretch, but if you have ever listened to or read Jordan Peterson’s book *12 Rules for Life,* you will know what I mean when I say, "clean your room!"
I always used to tease my dad because he would claim to have any tool you needed in his garage... the only problem was finding it when the time came.
I think this relates so well to our finances. When the time comes to make a plan to retire, do you know all of the stuff you have? More importantly, do you know how they all correlate into a coherent retirement plan?
What if you get hit by the proverbial bus? Will your spouse or the executor of your will know where everything is and where to start?
I assure you that getting organized will take the financial gorilla off your back and help ease your stress as you build up to retirement.
Lastly, as a Certified Financial Planner, I can tell you that an organized client is a happy client. This organization leads to a higher likelihood of implementing our recommendations and ultimately better long-term outcomes.
Furthermore, it also helps us unearth and address potential gaps that should be dealt with.
Things like outdated wills, incorrect beneficiary designations, foreign dividends in a corporate account, and at-risk retirement income are just some of the gaps proper organization can expose.
Now, if you are more of a DIY investor or just want to take stock of all the stuff you have, I suggest you download our Wealth Planning Worksheet. I have included a link to this document in the episode description.
In it, you will find a list of documents you should gather, along with a worksheet you can fill out that highlights the different areas of your personal finances you should organize. This includes things like investment accounts, insurance, business interests, family structure, cash flow, and a list of your trusted advisors. Even if you don’t plan on meeting with a Certified Financial Planner, this is a great first step to getting your affairs in order on your own.
To take things even a step further, I suggest creating a digital or physical binder to house each of the documents you have gathered along with this worksheet. Once a year, spend some time updating its contents, discarding old documents, and making updates to your worksheet with your new financial reality.
Again, I will leave a link to this Wealth Planning Worksheet in the description so you can get started today.
If DIY organizing or investing isn’t your thing, have a look at a sample financial map we create for our clients and prospective clients who go through our complimentary planning process.
If this is something you would be interested in, please get in touch today.
Ok, so before I jump into the action items, I will leave you with my top 5 reasons why you should organize your financial house as you build up towards retirement:
1. It will help you visualize and simplify your finances.
2. It will help you discover and address shortfalls.
3. It will help your spouse or executor better understand the household finances.
4. It will set you up for a higher likelihood of retirement success.
5. It will reduce stress, period.
As I was putting together this list, I tried to think of the downsides to organizing your finances and really cannot think of any. Well, I mean you can maybe be too organized, I guess? But I am not really sure how that would be a negative unless it causes some sort of analysis paralysis.
At the end of the day, I strongly believe simplicity is the key to success in life and business. When we overcomplicate things, we can find ourselves easily distracted and unable to see things to the finish. By focusing on what’s important, eliminating the unnecessary, and streamlining your life, you can achieve greater efficiency, clarity, and ultimately, success.
Ok, anyway, let’s get into the action items for today’s episode.
1. If you would like to get organized on your own, download our Wealth Planning Workbook. This workbook provides a list of the key documents you need to gather to help organize your finances. Next, work through each of the financial planning areas and fill it in to the best of your ability. Once you have these documents lined up, order them into a binder or folder on your computer and update on an annual basis.
2. If you want to get serious about getting organized, check out a sample of our work by clicking the link in the show notes titled Map Your Finances. This is one of four documents our prospective clients receive as they go through our complimentary one-page plan process. If you want to learn more about our process, please visit fundamentalwealth.ca or click the link in the show notes.
3. Like Jordan Peterson always says, "clean your room!" Regardless of what you think of the man’s political views, his advice on self-improvement through taking action by improving the world around you can have a tremendous impact on your thoughts and emotions. The first step is to look around for something that bothers you and fix it. It could be a dirty room… or your financial house.
Ok, that will do it for today’s episode.
For the links and resources discussed, please check out the link in the show notes or visit retiringcanada.ca.
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All comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy, facts and figures are not guaranteed, the content is not intended to be a substitute for professional investing or tax advice. Please seek advice from your accountant regarding anything raised in the content of the podcast regarding your Individual tax situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment planning.