Like any good relationship, understanding each other is key, and your relationship with money is no exception. If your finances could have a heart to heart with you, what advice would they give?
Like many relationships, your situation with money might be labelled as “it’s complicated”. You might not always see eye to eye, have conflicting priorities, or you might feel like you’re not getting enough in return. Like any good relationship, the more you communicate, the better off you’ll be in the long run. If your finances could talk, here are some tips they would provide to help you both find your happy-ever-after.
Put your nerves aside and build your confidence about investing.
Don’t worry about what everyone else is doing – every financial plan is unique, just as your dreams and goals are unique. Build a good habit of balancing living for today while saving for the future. Taking simple steps such as setting up a monthly budget (and sticking with it), putting some money aside for savings from every paycheque and building a plan with a financial advisor are easy ways to boost your financial confidence.
Be willing to take risks (even very small ones).
A recent Investor Beat survey indicates that more four-in-ten Albertans fall in the ‘moderate’ level for investment risk tolerance. That said, women and Gen-Xers are more likely to see themselves as having low risk tolerance, which could limit their opportunity to earn the highest potential returns for what they’re investing for. While markets can be volatile, understanding how the markets work might give you more confidence to add some risk to your portfolio, and in return, possibly earn more on your investments.
Work with a financial advisor to make your relationship with money stronger.
Over one-third of Albertans report having a financial advisor, but many say they have no desire to have one! Having a financial advisor is like having a trusted friend where you can have a conversation and get good advice. A great advisor will really listen to you, they understand your goals, and can translate those goals into a financial plan.
A financial advisor doesn’t have to be expensive.
Millennials and Gen-Xers are more likely to believe they don’t have the money to work with a financial advisor versus Boomers (56% vs 55% vs 34%). It’s important to always ask your financial advisor how they’re being compensated. Check to see if you are being charged any fees up front for their services. Advisors are compensated in various ways like embedded costs or through advisory fees. Not all financial institutions are the same, so be sure to ask how the fee structure works so that you understand how your financial advisor makes money.
Know how much you want to save, and what you’re saving for.
A common question is “How much should I save?” The answer depends on your age and stage of life, your ambitions and your goals. Typically, saving 5 to 20 per cent of your monthly income is a good place to start, but work with whatever amount is best for you and your budget. You can also set up automatic monthly savings as you would monthly payments, ensuring you are contributing to your savings goals. “What am I saving for?” is another question to ponder—are you thinking of going back to school, travelling the world, saving for a house or planning your retirement? Setting a goal makes the idea of saving less of a chore and more like a step towards achieving your dreams.
Commit to being in it for the long haul.
Whether you’ve been saving for years, or you’re trying to find ways to get started, time is almost always on your side when it comes to saving. Investing dollars over a long period of time gives you the benefits of compounding interest, because your return earns a return, which can make your principal amount grow significantly more than over a shorter investment period.
Leverage tools to help you better understand your money.
Online tools such as ATB Prosper are a great way to get more information, learn about investing, and get started on your own path. Take our quiz to help you understand your financial preferences and how you can get started on your financial plan. From there, you can choose to work with a financial advisor as your investment strategy starts to grow.
Know that retirement can look different for everybody.
The concept of retirement is changing for many, with some people are choosing to retire earlier, while others are in a job they love and plan to work well into their 70s or 80s. One-third of Albertans are confident they have sufficient funds for a comfortable retirement, but a higher proportion (43%) would disagree. Men are more likely to feel comfortable about their retirement savings than women, as are Boomers over their younger counterparts (50% vs. 32% Millennials vs. 26% Gen-X). The traditional view of what retirement is about is changing – flexibility is key.
Make your relationship with your money a priority.
Follow these tips to help you feel more confident about your money, and remember, when it comes to nourishing your relationship with your finances:
- Keep it top of mind, no matter your age and stage
- Start saving today, even if it’s a small amount to start
- Keep working at it
- Ask questions along the way with a trusted financial advisor
- Stick to your plan