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Personal Wealth and Finance


Working out financial agreements with my fiscal partner

February 1, 2019

When establishing a financial strategy involving other stakeholders, such as paying down a mortgage, develop a written plan that all parties agree on. You can create written point-form agreements for each to sign in areas of investing, registered vehicle planning, debt repayment, etc.

When determining your goals, it is important to think positively and avoid language such as, “We will never have enough to retire,” or “We can’t seem to get ahead,” or “this debt is killing us.” Statements like this often become self-fulfilling prophecies. Rather, it is important to design an action plan and start working towards it together with all the stakeholders, such as your spouse or partner, referred to henceforth as your fiscal partner. Write your plans out regarding financial concerns such as:

Reduce or eliminate debt. One of the encumbrances to investing for retirement is that you may be servicing too much hard-core credit card debt, much of which is interest. Both fiscal partners may have credit cards doubling the family debt load and vastly reducing your net worth. Thus, it makes sense to pay down the debt on all credit cards, starting with those that carry the highest interest rates first. Aim to be 100 % debt-free of abnormal debt weighing in your net worth statement where possible (mortgages and car payments are normal).

You and your fiscal partner will appreciate the new clarity and increased financial freedom this gives. Slavery to debt repayment is financial bondage and will increase fiscal-related emotional stress on responsible partners.

Start or maximize your monthly investment plan. Your plan will depend on your income and expenses. If you are young, begin investing now. Any given sum of money can double frequently depending on time and interest rate growth. At 6 % it can double every 12 years; at 4 % every 18 years. Simply divide the interest rate into 72 to get the number of years until doubling occurs.

This simple mathematical illustration reveals the importance of beginning to invest while you are young. If you are near retirement, you may ascertain that you need to ramp up your investing, increasingly over the fewer years you have. The average Canadian retires now at age 62. Become aware of your retirement options, choosing agreed strategies with your partner way ahead of time.

Reallocate assets as you near retirement. An investment portfolio still invested in close to 100 % equities near retirement is very risky. A portfolio must have some fixed income (government bonds, corporate bonds, safe mortgages, and real estate) to reduce stock market risk. Your partner’s risk tolerance while investing.

Take advantage of tax-saving vehicles. Registered investment vehicles can help you reduce or defer the tax hit. Some plans, can offer government grants that supplement your investment contribution to help your children go to post-secondary school. Discuss the viability of tax arrangements using registered investments best suited to both fiscal partners.

Don’t sell good investments amidst a volatile market loss. It may be better to stay invested and adjust your portfolio after the market begins to retrace any losses upward after a period of market volatility. If you hold a good fund, the stocks within that fund are probably good. Nevertheless remain aware of your investment goals and get periodic updates and review the situation with your fiscal partner. Your financial partner may not be able to handle stress caused by a volatile market so plan with this in mind.

Maintain financial accounts with transparency. Spouses and partners who share mutual financial goals have a right to be aware of the banking and investment accounts and movement of funds via frequent transparent discussion. Total honesty is necessary. One spouse should not borrow recklessly, nor use credit without the agreement of the other spouse, where funds are to be accounted together in mutual fiscal arrangements. There should only be private boundaries where agreed, such as business agreements, risk, or debt and/or income necessary for solvency. Business accounts or agreements increasing risk should not co-mingle with personal finance or accounts. Establish such boundaries in advance or hard feelings can develop.

 

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