Our key themes today: (i) a few pictures can quickly illustrate the impact of our choices in securing wealth and sustaining your desired lifestyle; (ii) fraud is becoming more slick and tricky every day trying to lure your wealth into the hand of strangers; (iii) brief update for investment results since June 30th.
As each person continues the path of adult years we do something so natural that one might never have realized: we turn human capital into physical capital. That means, as we gain education, preserve health, and increase career experience and income – we choose to save a significant part of our earnings to build a nest egg and secure wealth. Major assets we accumulate include a house, registered investments (eg. RRSP, RRIF), tax free savings (eg. TFSA, FHSA), non-registered investments, tax sheltered life insurance, even savings for children or grandchildren. As we gather such assets and also reduce our debts this gradually but dramatically increases our “net wealth”.
The whole process could seem overwhelming at times, and we weren’t contemplating all this when we turned 20. But along the way you keep living, learning, working day after day, and gaining resources and savings year after year. Looking at yourself now you can see you’ve made major progress; you also get a glimpse of how this works to secure your future. For some of us, years gone are more than years to come. Those who are younger may be looking forward 40 to 60 years, with plenty of decisions which will boost or otherwise impact your success. With this in mind, you’re never alone; together we confirm a personalized financial plan to highlight where you are today and help you make the decisions to optimize and enjoy your life, your wealth, and your future.
Yet the pathway of building net wealth should not be mistaken as an easy journey; it takes persistence and perseverance. It’s a vigorous hike, not a walk in the park. (Walk in the park doesn’t pay dividends.) Pictures below may appear smooth but some years drop, compensated by other years of greater gain. Housing values may have fallen, investment markets may have dropped, and there can be illness, job loss, a lengthy pause while caring for a family member, new studies to refocus career opportunities, a mid-life break for 6-12 months’ travel, or forced early retirement. Over time, whatever bumps and dips appear on our financial pathway will be made up by accelerating value and grateful new vistas in the periods which follow.
Three pictures which follow could seem a bit blah but it’s how you choose your own picture and what you put into it, that will give it the colour and meaning you want. You could see these as options, representing different pathways or stages of net wealth. (Your personalized picture is in your financial plan which we regularly update. Ponder for a moment since we’re here, of these pictures which one seems most comfortable and helpful for you? Which would you want to avoid? Are you comfortable that we’ve been having the discussions that will help sustain your wealth now and the years ahead?)
Graph #1 tells a fairly common story-line. Career and personal life offer rising income and expanding assets which allow a rewarding transition to financial freedom and desired lifestyle in retirement. Expecting they could live beyond 90-100 (our fastest growing age segment today), or to ensure gifts to loved ones (while living or at death), this person’s investment and spending aligns with preserving net wealth well into senior years so they will remain free and confident to live as they choose and avoid becoming a burden on others.
Graph #2 enhances this sense of financial wellbeing. They may have started investing sooner; they were also careful about spending so they could invest earnestly. They were wise or lucky enough to miss calamities that damaged other peoples’ savings (see “fraud” below). As well if they enjoyed strong and harmonious relationships at home this tended to preserve what they had built together. They rewarded themselves and made memories together, while also feeding their passions and vision for an extended retirement with its desired experiences and rewards.
Graph #3 may reflect various misfortunes which can happen in a lifetime, but also possibly a pattern of spending today and sacrificing tomorrow. Someone in 1996 told me sincerely they wouldn’t be investing because they would spend everything on what they wanted at the time. Another came to me years later, admitting they had done the same and got a similar result: low savings, no wealth, no assets, which is especially sad in older years when you can no longer work and earn back what you’re missing. Don’t spend today to the exclusion of your future; we’ve seen the future, and people have admitted the fear and disappointment that can accompany picture 3. A few years ago in this letter we shared how many people may see their “own future” as a “stranger”, and they felt it would be cheating themselves now to save for a future stranger – even for themselves. So they’ve actually starved their own future. Clear message for anyone you care about, don’t let them do that. (PS: other stories can fit picture #3: eg. single and not leaving an estate; also the CTV story you see below.)
WEALTH is part of life – without it life is very difficult indeed. Wealth arises from the choices and opportunities that come our way, and what we do with these. Personal priorities and daily choices contribute enormously, help set the slant and shape for each of our personal graphs. If you are unsure of your personal wealth graph or want to review this soon let me know. And if someone you know needs help getting a grasp on their personal wealth and current/future financial security be sure to introduce us.
FRAUDS AND SCAMS.
It’s a particular blight on our society. One could say gambling was always a blight but at least one could choose (?) whether to risk one’s fortune. Today’s schemes remove choice, like hooking a fish mid-section when it wasn’t interested in the bait. Some cautionary stories – one lost $750,000 – might fit the picture in #3 above.
This was on CTV News: a widow in her small wartime home was amusing herself during sleepless nights when she clicked on a pop-up link in her browser – and that’s how she found the broker who said he could arrange 40% discount on stock of an electric vehicle manufacturer. She had followed the theme of electrification and was quickly taken in with the promise of huge discount and future profit. From January to April this year the fraudster accessed and drained her entire life savings, $750,000. If you encounter something like this reach the RCMP directly, or reach me directly. Caution everyone you know: it’s not like the late-night TV infomercials where they use to hook people into phoning; just clicking a pop-up can lead to massive frustration or much worse .
Email accounts can also open doors to wealth destruction. I’m sure you’ve seen something like this. First there was an earlier fraud on my credit card in August so I had to replace it. Among other things this meant updating our Netflix account which I did, but emails continued to warn our Netflix would be canceled unless I updated at a certain link. I ignored the link; I went directly to account settings and confirmed twice that my card # had been updated. As the emails continued I dug further — who was sending me these Netflix warnings? … “Customer Service / villageofstlouis@sasktel“. It’s a lesson to us all: don’t click anything without knowing the true and legitimate source.
I remember a colleague of mine sharing how his mother, widowed and alone at night in the family farmhouse, found links to invest in various kinds of securities. Long story short (as I’ve shared before in a fraud awareness month): he heard in her voice on the phone that something was wrong. She explained what had happened. “How bad is it mom?”, he asked. “Roughly what your Dad and I earned in our last five years working the farm”, she replied.
Not a day passes without people losing a chunk of their wealth to such schemes. Many are too embarrassed to let on to anyone that it has happened to them. Simply googling “fraud Ontario” you can immediately pull up 52,700,000 results in 0.46 of a second: top item is Report a Scam or Fraud. Visit that page for a few moments: there are helpful cautions, and you’ll remember it’s there when you need it.
IN CLOSING – SEPTEMBER.
Sometimes my letter is later in the month as I strive to always ensure this offers useful guidance and perspective. When news is flying about wars and daily impact of a changing climate, plus inflation and interest rates, political issues and anything else that touches investment markets, I want this letter to be well formed and assure that your financial path will remain on track and consistent with your overall life plan. Nothing has greatly changed on those themes since my past few letters.
Values rose in July and August, and recurring income into your accounts (dividends, real estate, infrastructure income) is higher today than in any year past. We stay on the path; if your needs or circumstances change you let me know; if you’re troubled with the onslaught of daily news, let me know. If you suffer a serious fraud, definitely let me know. We stay in this together and we are always here for you.
Yours always in Financial Security for LIFE.
Brian Weatherdon, MA, CFP, CLU, CPCA. 905-637-3500
627 Guelph Line, Burlington, Ont. L7R 3M7. 1-877-937-3500
Certified Financial Planner, Certified Retirement Coach
Author: A Lifetime Of Wealth — And How Not To Lose It (2013). Protecting Life, Loved Ones, and Future Dreams (2013). Your Business, Your Retirement: Halton Retirement Study (2015).
** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. Returns are from publicly available sources and research from a variety of firms including but not limited to Canada Life, CIBC, Dynamic, Mackenzie Financial, RBC / PH&N, and more. Opinions in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to coordinate with your legal and accounting advisers to further your financial goals in home and business. We are grateful always to receive your comments and questions.