Aligning your Goals
The Financialist • Issue 121 • April 2014
BY CECILIA TSANG BComm CFP CIM RHU
Is your portfolio the result of your goals (or lack thereof)?
In January and February of every year, many Canadians start thinking about saving for retirement due to a looming RRSP deadline. These actions are driven by their short-term goal to pay less in taxes for the prior tax year. Many people make RRSP contributions due to the tax deadline without thinking about the bigger picture, and their bigger goals. Their resulting portfolio may clearly reveal this, consisting of last-minute one-year GICs from banks that pay roughly 1%.
Some portfolios clearly reveal a long financial history, full of bits and pieces, here and there, with one account with a bank, another with a stockbroker, and yet another with an insurance company. This mish-mash “collection” of different investments is the result of a lack in positioning the portfolio to align with life goals and objectives.
In Wikipedia, “a goal is a desired result a person or a system envisions, plans and commits to achieve; a personal or organizational desired end-point in some sort of assumed development. It is roughly similar to purpose or aim, the anticipated result which guides reaction, or an end…”
Investments should be tailored to your goals and objectives. It is important to think about your goals first and then invest accordingly. Many people do this backwards and end up with pockets of different investments that they “gathered” throughout life. Some people simply do not have any clear goals or objectives. They tend to drift through life without knowing exactly what they want or where they are going. Without purpose or aim in life, it is difficult to get very far.
What are your life goals and objectives? Have you taken time to think about this or is your life so full of busyness that your path has been to plod along day by day without thought about purpose, direction, or goals?
And if you do have clear goals, are you open enough to share your true goals and objectives with others or do you tend to keep these thoughts and desires inside? What about your investment portfolio: if you have clear life goals and objectives, do your portfolio and other assets match up to these goals? Are the two aligned? Are you open and willing enough to share your life goals with your financial advisor?
Reviewing your life goals periodically helps to clarify the longer-term goals and your purpose in general. This is important because people are constantly changing; our values, goals, desires are constantly in flux. Reviewing and thinking about purpose and goals allows us to set the smaller goals and to implement steps so that we are able to reach the larger ones. When reviewing your financial assets, including your home, car, corporate holdings, and investments, do they line up with your values and your goals?
One goal that many people rarely consider is their estate-planning goals. It doesn’t matter how old you are or how many assets you have built up, estate-planning goals are always important. What are your plans for all the assets you have accumulated after you are no longer around? Again, are your assets aligned and positioned for your estate-planning goals? If you have a home and other assets worth over a million dollars and you have no children or you are not keen on leaving your children a lot of money, have you done anything to ensure that your goals will be met? Are you living off a small pension and penny-pinching while your mortgage-free home has amassed a fortune? If so, is this lifestyle aligned with your objectives and are you planning on leaving a fortune to your heirs? If you want to make sure that the next generation can afford to keep the family cottage instead of being forced to sell it due to income tax on its capital gains payable upon your death, have you taken steps to align your goals with these assets?
Remember to take time periodically to really think about your objectives – include short-term, medium-term, long-term, and estate-planning goals. Take heed of all your resources and assets when determining your lifelong goals, as they should be aligned. Contact your Rogers Group Financial advisor for strategic planning ideas.