Perhaps November should have been called Financial Illiteracy Month:
- More than one Canadian in three does not have any savings or investments.
- More than one Canadian in three finds it difficult to keep up with her/his finances.
The Task Force on Financial Literacy was established five years ago. Last year, more than 90 public, private and non-profit organizations held almost 400 workshops and other activities to help Canadians improve their financial knowledge and skills during Financial Literacy Month.
This time of year might seem an odd choice to focus on your finances. Actually, taking a break from frantic holiday planning (and spending) can make sense - and dollars.
Where to start? Treat financial planning like a trip. (1) Where are you now? (2) Where do you want to go? (3) What's the best way to get there?
The underlying principles are simple: Spend and enjoy some of your money now, but spend less than your after-tax income. Then save/invest the difference in a tax-effective way to have enough money in the future to maintain a "spend and enjoy" lifestyle as long as you live.
While do-it-yourself resources abound on the Internet, in bookshops and at financial institutions, most people would do well to have an expert advise, encourage, support and monitor them - whether a knowledgeable advisor at their local bank, trust company, credit union, etc., or a specialist in the area of interest like debt management, relationship counselling, investment, small business, retirement planning and so on.
The key: don't be embarrassed at your lack of knowledge; don't be afraid to ask questions.
I always remember the MD-PhD who was famous in her field of medicine but didn't have the time or knowledge to manage her finances.
"I have a financial planner but am embarrassed to admit I don't know what he's talking about - matters that his attitude suggests everybody understands," she told me. "So I just nod my head . . . and feel inadequate."
Your advisor should tune in to your level of knowledge, welcome questions and confirm you understand everything fully. If s/he doesn't, then find somebody who does.
Mike Grenby is a columnist and independent personal financial advisor; he'll answer questions in this column as space allows but cannot reply personally. Email [email protected]
