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Financial advisors: do you have one?

Most of you know that I really want to figure out what I should do about my (lack of an) investment strategy. It’s been really bothering me over the last 6 months. In fact, a goal of mine for November was to read 10 articles about investing. Well, I figured I’d be reading about mutual funds, ETFs, stocks, and some sort of basic strategy. But instead, I found myself researching investment advisors.

I personally think an investment advisor is the best way for me to go. I decided to look into a “fee-only” advisor, because I’m confident that – once given a plan – I can execute it myself. And, because I have a small portfolio that doesn’t need constant managing by a professional. Fee-only advisors are expensive though. Through my research, I saw them charge anywhere from $100-500 per session. To get an analysis of your entire financial well-being, as well as a strategy for the future? Even though it might seem expensive, I feel like it’s completely worth it.

Even though, up until recently, I didn’t believe in paying someone for financial advice. I figured I was young enough to do it on my own through trial and error, and besides, I had the basics down. I knew I was invested in the right mutual funds, and I had a basic understanding of what I needed to do. But as I creep closer to 30, I realize that I need a professional to help me. Nobody has ever seen my investments before. I need validation and a plan.

Now this is what I call perfect timing: earlier this month, my editor at the Toronto Star asked if I wanted to be the Moneyville guinea pig and get some complimentary advice from a fee-only financial advisor. I said yes, of course. And I’m excited to share what I’m learning with all of you soon.

Have you ever considered hiring a financial advisor?

Saving $1 million: is it possible?

There have been two Moneyville articles that really caught my eye recently. There was one called How $100 a month can make you a millionaire by Madhavi Acharya-Tom Yew, as well as Can anyone really save $1 million?, by Allison Grifiths.

In Madhavi’s article, she begins by telling readers that we can all become millionaires in 40 years just by starting off with saving $100 a month. As you get older, you increase the amount you contribute. Going from $100, $250, $500, $750 and finally with $1,000/month. The numbers are based on a 6.8% average return over the life of the RRSP or TFSA. A lot of comments on those articles were about how a 6.8% average return was too high. But according to an article by MoneySense.ca in response to those two Moneyville articles, a balanced portfolio can reasonably expect a 6-7% return.

While saving $100 or $250/month might be feasible for most of us, $750 or $1,000/month might seem like a ridiculous amount of money for a lot of people. But consider this: by the time you are in your 50’s and 60’s, you might be nearing the end of your mortgage – and your salary will most likely have increased over the years. So when that money frees up, you will be able to apply it to your Retirement Portfolio instead. Or, if you contribute more when you’re younger, you won’t have to contribute as much when you’re older. For example, I make an average salary, and have average expenses. But I am making saving for retirement a priority right now, because I know that once I start a family, I probably won’t be able to save as aggressively as I am right now.

There IS truth to what both Madhavi and Allison are saying. You CAN become a millionaire by the time you retire if you want to be. But for most of us, it takes discipline and hard work, and you really have to want it. And I guess that’s the problem. With so many 20-somethings struggling with student  and credit card debt, trying to start a family, saving for a down payment, planning a wedding, and spending money on other things, saving for retirement just isn’t a priority. In fact, I can see why it’s so hard to save anything these days – especially an amount as daunting as $1 million.

In Allison’s article, she quotes a TD Canada Trust poll, where 75% of those aged 18-34 do not believe they could ever save $1 million, and 1/3 of respondents felt they had a better chance at winning $1 million in the lottery, than saving it themselves. That thought of hopelessness makes me sad, because while it isn’t the dream or goal of some people to save that much for retirement, it is my ultimate financial dream. I want to retire early at age 55 with over $1 million in the bank. And reading the comments on those two articles was hard. Most commenters were full of negativity. But, that just fuels my fire to prove them wrong.

Whatever your savings goal is, we all have one common goal in mind: to save for retirement. And the key is to start as soon as you can. The harder you work now, the easier it will be in the future.

What do you think? Do you believe that you can save $1 million by the time you retire?

Saving for Retirement

I started saving for retirement again. Luckily I only lost 6 weeks, but even then … with all the savings goals I have this year, I don’t think I can make that time up. But anyway, starting this Friday I’ll be putting away $300 bi-weekly.

RRSPs
$50 Money Market
$50 CDN Bond Index
$50 European Index
$50 International Index
$25 CDN Index
$25 US Index

TFSA
$25 ING Direct (3%)
$25 PC Financial (2%)

According to the pay stub I received yesterday, I’ll be bringing in approximately $1,380 bi-weekly after taxes. So my Retirement Porfolio savings represents almost 22% of my net income. And based on the TD Canada Trust RRSP calculator at an average rate of return of 7%, if I keep saving at the rate I am, I can retire at age 55 (my goal retirement age) and will have $1.1 million in my Retirement Portfolio. That doesn’t even take into consideration the fact that I would increase my savings amount with any increase in salary over the years. So I’m feeling really good about the future, and I’m so glad that I took saving for my RRSPs seriously during my 20’s.

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