We’ve been in the wealth management business for a long time. We’ve helped hundreds of clients from different backgrounds, careers, and family situations achieve the retirement lifestyle they have worked and saved for.
We’ve worked with people who inherited their wealth from the previous generation and who plan to pass it down to the next generation after they’re gone. We’ve met a fortunate few whose relationship with wealth started with a bit of luck–some who won the lottery and others who were offered a once-in-a-lifetime opportunity. But for the majority of people we work with, financial success is a result of intentional, strategic, and long-term financial habits developed over time to save, invest, and grow their money.
And the good news is that these strategies and habits can be adopted by anyone, whether you’re already enjoying your retirement or you’ve just started to plan.
Here are ten financial habits you should consider to set your retirement up for success:
Have a clear picture of your finances
Financial freedom doesn’t just happen. It comes from knowing how much money is earned, saved, and spent. When you know exactly where you stand financially, you can set realistic goals, make informed decisions, and plan confidently for the future.
Set goals and a have a plan to reach them
It’s hard to reach goals that you haven’t clearly identified. If you don’t know where to start, think about what you want your lifestyle to look like in retirement, and work backwards to figure out how to make it happen with a financial plan.
A plan acts like a roadmap, outlining each step you need to take in order to achieve your goals. But (and this part is important) no plan should be set-it-and-forget-it. It should evolve as your life changes.
Structure your portfolio to meet your objectives
Over our years as Retirement Transition Specialists, we’ve learned that when planning for or living in retirement, individuals have four main goals: income, growth, health, and legacy. But if you try to achieve all of your goals with the same assets, it can get messy.
When we structure a portfolio, we dedicate different groups of assets–or buckets, as we call them–to each of these four objectives. For example, the assets that we put in the income bucket are not invested in the stock market, which means they’re protected from volatility and they’ll be there when you need them. The assets in the growth bucket take advantage of the markets in strategic ways because if your portfolio isn’t growing, you risk running out of money.
Get in the habit of regularly re-evaluating your goals and sitting down with your advisor to ensure your portfolio is set up to achieve them.
Don’t go with your gut
It’s natural to have an emotional reaction to what’s happening in the markets. No one wants to see the value of their portfolio going down. But if you make your investment decisions based on that emotion, it’s unlikely you’ll reach your goals.
Investing requires habitual discipline. Discipline keeps you looking forward instead of backwards. It keeps you thinking about the next step you need to take to reach your financial goals. And it makes sure you keep choosing your financial plan over your emotions.
Make volatility your friend
Savvy investors don’t live in fear of a single day in the markets making or breaking their ability to afford their lifestyle. They see volatility as an opportunity.
Consider this example: If a big ticket item–let’s say a luxury car–went on sale, people would line up around the block for it. Because they know that even though the price is temporarily lower, the value of that car remains the same. Similarly, if you know what the proper value of a particular stock should be, it’s an easy choice to buy it when the price drops below that value.
When markets dip, stick to your strategy and look for the opportunities.
Don’t leave money on the sidelines
When investors reach a level of discomfort that they just can’t stomach, they tend to pull money out of the market and go to cash. This may feel like the safe option, but it can actually permanently destroy your capital.
If you’re trying to time the market, you have to get out at the very top and in at the very bottom. Most people don’t have the emotional constitution (or, frankly, the crystal ball) required to do that.
If you want to build your wealth, you can’t just put it under your mattress. You need your money to be working for you at all times.
Separate the news from the noise
It’s human nature to exaggerate the severity or the long-term impact of the current situation. We read a headline about high inflation and think, “This is going to last forever. What if it ruins my retirement?” We typically jump to the worst case scenario.
But making knee jerk decisions based on the headlines can actually be dangerous to your investments. Those decisions not only have the ability to impact you now, but for years down the road, potentially even putting your retirement at risk.
If the headlines are making your stomach flip, do your research. Find out how you and your family are actually affected.
Use insurance as an investment
Most people think of insurance as an expense. It’s the price you pay to drive your car, own your home, or replace lost income during your working years.
The wealthy don’t view insurance as a cost, but as an investment. They use it to strategically grow their wealth, reduce their taxes, and protect their legacy.
Have a long-term tax strategy
Tax is the single biggest expense most Canadians will experience in retirement. But a lot of people don’t realize how much they’ll be paying, or how it can impact their future. Because the more you spend on taxes, the less you have to enjoy your lifestyle.
Paying taxes is inevitable. But when and how much you pay is where planning comes into play.
Don’t do it alone
You don’t know what you don’t know. But ignorance is not always bliss. The people who have the most confidence going into retirement are those who have a professional team–an investment advisor, an accountant, a lawyer–to help them make informed decisions.
Having a trusted team of professionals who work together to create a customized and cohesive strategy to invest, grow, and protect your wealth can give you the peace of mind you need to enjoy your retirement.
Want to learn more about how we can help set your retirement up for success? Register for our upcoming seminar by clicking here.
David Popowich and Faisal Karmali are Investment Advisors with CIBC Wood Gundy in Calgary. The views of David Popowich and Faisal Karmali do not necessarily reflect those of CIBC World Markets Inc. This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change.
Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.
CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc.
Insurance services are available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are available through CIBC Wood Gundy Financial Services (Quebec) Inc.
