Turn that financial frown upside down
Setting achievable goals can break negative outlook on your monetary future
We get it: saving can be hard. Factor in the skyrocketing cost of basic life necessities and it’s little wonder that agrowing number of Canadians have a less-than-positive outlook about their financial futures.
“As a society, there’s been a shift in terms of what is and isn’t affordable,” says Lisa McConnell, a Peterborough-based financial adviser for Sun Life Financial.
“Job security isn’t what it was, health benefit packages are becoming scarce and expenses are continually on the rise. It’s fair to say that people feel like they can’t bank on the future as they have in the past.”
Case in point: a survey from 2007 cited 37 per cent of Canadians anticipating that they would not be able to afford their lifestyle in 2017. Fast-for- ward to today, where a follow-up study found that 37 per cent of participants felt they’ve had to cut back on purchases, while an additional 39 per cent expressed concern they’ll likely have to cut back on their spending more significantly by 2027.
“When I try to imagine my financial future, I foresee a lot of challenges,” says 22-year-old Sara Whetung of Douro-Dummer, Ont.
Currently a full-time student at Trent University in indigenous studies, she cites the lack of job security upon graduation as her biggest concern, with paying off school-related debt, being able to afford to buy a home and potentially going back to school for a second degree as additional concerns.
“As much as I’m currently trying to balance my finances and train myself to keep necessities important and my list of ‘wants’ low on the priority list,” Whetung says, “it’s a very difficult process.”
Not surprisingly, Whetung is not alone.
Because Canadians are generally pessimistic about rising inflation, are underwhelmed by their salaries and have limited funds with which to save for retirement, studies are showing that they’re also not contributing to RRSPs and investments as in prior years.
In fact, 35 per cent of those surveyed don’t contribute at all, while 29 per cent feel indifferent about the process.
“As a financial planner in today’s market, it’s very common to meet people who feel less than inspired about their financial futures,” says Laurrell Mohammed, manager of corporate and public affairs for TD Bank Group. “It’s been my experience, however, that once they spend time pinpointing the area(s) they’re most concerned about and develop a solid financial plan to help ease their stress and ensure their goals are attainable, their outlook can be dramatically changed.”
So what’s the best way to get into — or return to — the investment game? First things first: be honest about your goals. “It’s the most integral part of the process because you need to understand what you want to do with your money, why these goals are important to you and what sort of time frame you hope to attain them in,” Mohammed says. “Speaking to a financial planner is key because once they understand your dreams for the future, they can more accurately help you develop a plan to help those goals come to fruition.”
Next on the agenda: kicking off the saving process. Take a look at everything — yes, every single thing — you spend money on in a month, Mohammed suggests. Then, identify and limit impulse spending and work to eliminate discretionary items that aren’t a necessity.
“Making small changes, like going out for dinner one or two times fewer each a month and brown bagging your lunch instead of buying it every day,” he says, “can make a dramatic difference in your spending habits.”
If you haven’t already initiated an automatic deposit, McConnell says setting up a weekly, bi-weekly, or monthly transfer from your chequing or savings account to your investment portfolio is a wise move, simply because it’s a convenient, effective way to build equity.
She also advises paying any credit card debt as soon as possible to free up cash for saving.
Finally, once you’ve committed to the investing process, keep your focus. Mohammed and McConnell agree that saving and staying in the investment mindset is easier when you keep your goals top of mind.
“Regardless of how much capital you’re able to contribute, the point is to start, and once you’ve done that, you need to narrow your view on tangible and realistic goals,” Mohammed says.
“This is what will provide motivation and, in my experience, will really help keep your financial plan on track for the long term.”