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pecome your
own financier

WITH A little organization,
you can become your own
financial planner.

All it takes is a detailed budget,
to let you know how much you can
save each month, and a yearly
calculation of your net worth, to
let you see where you're going.

and that’s how much you will have
to save each month to be able to
Meet these expenses. Add this
monthly figure to your ‘‘out’’ side
under the category of savings.

If the balance on your monthly
budget is a negative number, you'd
better start reducing some of your
flexible expenses. If it’s positive,

money
matters

by Lisa Smedman

After that, the only question will
be where to invest your money.
And, if you shop around cnough
to compare rates of retura and tax
treatment of the different invest-
ment vehicles, you can answer even
that question yourself.

Start by drawing up a budget
that lists your monthly cash flow
— what is coming in, and what is
going out. The ‘in’’ part is usually
simple — it’s your pay cheque.

The ‘“‘out’’ part needs to be
broken down into two general
categories: essentials (reat or mor-
tgage, food, telephone and
utilities, transportation, child care,
loan or alimony payments, etc.);
and ‘‘flexibie”? expenses (clothing,
entertainment, alcohol and ciga-
rettes, gifts, travel, and miscella-
neous expenses).

Don’t expect a budget based on
figures obtained over only one
month to be accurate. You don’t
make major purchases every
month. Instead, use a three-month
period.

Label an envelope for each cate-
gory, get receipts for absolutely
everything, and toss them all in.

Next, add up those expenses that
only come up once or twice a year
(property taxes, car and home in-
surance, tuition, major appliances
or furniture, etc). Divide by 12,

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you should be putting at least this
amount away each month, to be
used for investment.

“The really important thing for
most people is that they pay
themselves first and have some sort
of savings program,”’ says finan-
cial planner Carla Poppen. ‘‘The
crucial thing is not how much you
earn — it’s how much you save.”

Budget in hand, you now need
some way of ‘‘keeping score’' on a
year to year basis. That’s where a
statemeht of net worth (a tabula-
tion of your asseis minus your
liabilities) comes in.

A statement of net worth tells
you where you are at a particular
moment. ‘It's just a one-day slice
out of your life,’ says Poppen.

On the liabilities side, list
outstanding loans, mortgages,
debts, credit card balances and
taxes. On the assets side, list real
estate, bank account balances,
term deposits, RRSPs, money ow-
ed to you, bonds, stocks, mutual

aN

/

funds, business assets, the cash
value of life insurance policies or
pension plans, and the appraised
value of personal property such as
vehicles, boats, jewelry or anti-
ques.

The balance figure (assets minus
liabilities) is your net worth.

Comparing your yearly net
worth calculations will tell you
whether you are getting ahead or
behind.

For those who find that they still
need help, Poppen has some tips
that can help you to determine
whether a financial planner has
your best interests at heart.

Ask how the financial planner is
paid — by an hourly fee, or by
commission. Be awaye those who
work on a commission basis may
try to sell you something you don’t
need or can’t afford.

Observe how much time is actu-
ally spent on planning your finan-
ciaJ future, as opposed to selling
you a product. Be aware that some
“budgets”? are only drawn up to
‘‘prove’’ that there’s enough
money to buy a product.

Carla Poppen is a founding
memiber of the Canadian Associa-
tion of Financial Planners. She can
be reached at 732-5036 for more
information.

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The follwing flyers vaall be arrerng
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