Now that you have lived in your home for a few years, what priority should you take? You've spent a lot of time researching to find your current ideal home. Have you considered remodeling and renovating to take advantage of the new home renovation tax credit? During these tough economic times, we sometimes wonder if it is prudent to put more money into our 'castle' or to start planning toward the future. Deciding to renovate and upgrade is wise if your home is older and your furnace, air conditioner or appliances are power-hungry and would soon require replacement. Create a budget and set up a plan to put money away monthly or weekly, depending on what works for you, towards your new equipment.
Contrary to what most people think, your home is not your best investment in terms of ROI (Return on Investment). A home allows you to build wealth if done properly. Many families do not even realize the total ownership costs of a home, so take the following advice to invest wisely.
When you think about your future, have you thought of what you will do when you retire? By retirement age, most debts would be paid off. The problem with most families is that while they are living for today and trying to dig themselves out of debt, there is not enough money being contributed to the retirement plan. This is where it is best to have a balanced approach and look at the overall plan. Invest in your RRSP. You will get a tax-refund based on your marginal tax-rate and you can use part of the refund to reinvest again. The key is being able to be disciplined enough to actually begin working on your individual plan.
Here are some questions you should ask yourself:
How much do I need to save in order to update or renovate my home?
Do I know when all of my debts will be paid off entirely?
When do I want to retire?
How much money will I have at retirement to enjoy the things that I want?
How much do I need to start saving now to reach my retirement goals?
Do I have enough funds for my children’s education?
Do I have adequate insurance to protect my family?
Do I have a will and an estate plan?
In order to answer these questions, you will need to evaluate your financial position. This means calculating your net worth. Your net worth is simply the difference between the sum of your assets (things you own), less the sum of your liabilities (debts).
To start, organize all of your documents as you get it in the mail in a central file folder system. It will help you to calculate your net worth. The review of your net worth should be done on an annual basis. Children get report cards, you get annual physical check-ups, your furnace needs an annual check-up and your car needs routine maintenance – get the point? You won’t know where you are going unless you know where you’ve been. You also need to know where you are at financially, but this is one area that many families will procrastinate on doing because the task seems so daunting.
Seek a no obligation evaluation of your financial health to steer you in the right path to your goals.
Daniel Nip is a Financial Consultant for Freedom Group and provide detailed debt, insurance and retirement solutions for Canadian Families in the GTA area. Daniel can be contacted at info@freedomgroup.ca www.freedomgroup.ca
