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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

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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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