Coast Capital Savings Credit Union

Coast Capital Savings Credit Union

January 02, 2008 14:37 ET

Op-ed Release; Financial Health: a Timely Resolution for the New Year, by Myles Connaughton, FCSI, Ch.P, Financial Planner, Coast Capital Investments

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SURREY, BRITISH COLUMBIA--(Marketwire - Jan. 2, 2008) - The start of a New Year is a great opportunity to set fresh goals in every area of your life, including your finances. In the same way as you can take steps to be more physically fit, why not begin 2008 with the goal of improving your financial health? As the famous Chinese proverb says, "A journey of a thousand miles begins with one step". While this will take some discipline, even small changes can yield significant benefits over time.

A good first step is starting off the year by meeting with a financial planner. A financial planner has the expertise to help you examine your current financial situation and your future goals and needs, and work with you to determine strategies to help you realize them. See this as similar to your annual medical check-up with your doctor - your financial planner will identify any hidden or developing financial "diseases" and provide you with possible remedies. Many financial institutions, like Coast Capital Savings can provide access to a financial planner for free, so it's definitely worth taking advantage of the opportunity.

A basic treatment for many common financial health concerns is budgeting. How much does your household spend on regular fixed expenses each month? How much disposable income do you have? How much of this will you allocate to personal and miscellaneous expenses and how much will you save or invest for tomorrow? A spreadsheet program like Excel can help with this. Track your actual monthly expenses to make sure you are sticking with your budget. Good budgeting results in financial discipline. You can see where you are overspending and areas to which you can re-direct this money for longer term gain.

We all know champion bodybuilders grow their muscles by regular workouts at the gym. Well, if you want to grow your money, the regular financial "workout" you need comes by way of savings and investments. For example, set a goal this year to automatically deposit a small percentage of your monthly household income into a separate investment account. You'll be surprised how quickly that money grows over time. Talk to your financial planner about other types of investment vehicles suitable for your situation and risk tolerance.

How about debt? It's really like cholesterol - there's the good and the bad type. A mortgage, for example, can be good debt, with appreciating house values. Borrowing money which is then wisely invested - resulting in tax-deductible interest - is another example. On the other hand, mounting personal debt and high interest payments can be bad for your financial health.

If debt repayment is taking up a significant portion of your income (more than 40 per cent), you'll want to focus on this. Develop a reasonable schedule for paying down your debt, focussing on the higher interest debt like store credit cards. Always pay more than the minimum balance, if you can. Stay committed to your goals by sacrificing expenses in other areas. You can also consult a lending specialist for possible solutions like debt consolidation. If your debt situation is acute (you are so over-stretched you're now several months delinquent), you'll need to consult a debt counsellor.

Any solid financial health strategy should include investments and a Registered Retirement Savings Plan. Retirement planning is important as government and employee pension plans provide insufficient benefits on retirement. If you don't have an RRSP, make it your goal to open one this year. For those with kids, you may also want to consider starting a Registered Education Savings Plan.

The last, but definitely not the least piece in your strategy - in fact, it needs to be a cornerstone - is insurance. Many employers provide some types of insurance as part of their benefits package, but this should not be relied on solely. Check to ensure it's adequate for you and your family and purchase additional protection as needed.

It's important to review your home insurance and make any adjustments to reflect changes in the value of your property or possessions. In addition to homeowner (or renters) insurance, personal life insurance and critical illness insurance are critical to providing security for you and your loved ones and are among the best financial investments you can make. Home insurance protects your material possessions but life and disability insurance protect the most valuable asset you have - you. Talk to your financial planner about other types of insurance that may be recommended for your financial situation.

Myles Connaughton is a Financial Planner with Coast Capital Investments. He can be reached at

Coast Capital Savings Credit Union provides advice and service related to deposit, loan and mortgage products. Coast Capital Investments provides advice and service related to mutual funds and financial planning. Coast Capital Insurance Services Ltd. provides advice and service related to segregated funds, annuities, general and life insurance products.

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