The Hidden Cost of Not Having a Financial Plan

Many people don’t understand what they will get from a financial plan because too often, financial planning is mixed up with or used interchangeably with investment management. These examples are how a Financial plan can benefit you, and the examples are focused on people in the 45-60 age group:

1. This age group wants retirement security, but they also want to help their kids and aging parents. They want balance without guilt. Your financial plan can show you concrete trade-offs. An example might be contributing an extra $25000 to an RESP and which delays retirement by 6 months, but skipping the contribution could burden the child with high student loans. The plan might show you that contributing more to an RESP and getting the grants is a better investment than an extra payment on your 3% mortgage. Or spending $100,000 on parent care could delay retirement by 18 months unless extra savings occur. Creating a cash flow plan inside the financial plan helps you make informed choices, understand the trade-offs, and prevent emotional mistakes.

2. These are typically your peak earnings years. A plan ensures you are capturing this opportunity. Creating strategic RRSP, Spousal RRSP, and TFSA contributions, corporate investment accounts(if self-employed), and pension optimization can save you thousands in taxes annually, turning more income into wealth.

3. Create clarity and confidence on when you can transition to retirement. Stop guessing! A comprehensive plan shows exactly how retirement-ready you are and your current trajectory. For example, you can retire at 63 with $75,000 in income or you can retire at 66 with $95,000. The precision transforms anxiety into actions and informed decisions.

4. Understanding how the timing of the Canada Pension Plan affects your income and how it can affect longevity risk and taxes. Delaying to age 60 is a 42% increase, and the decision should not be taken lightly.

5. Risk Management at Life's Peak. You have the most to protect and the most to lose. Comprehensive insurance reviews ensure your disability, critical illness, and life coverage match your current obligations. One unexpected health crisis shouldn't derail decades of careful planning; proper coverage protects everything you've built.

6. If you're considering selling the family home(downsizing at some point), a planner models the financial implications: reinvestment strategies and how the proceeds affect retirement income. They might reveal that downsizing could fund 5-10 extra years of travel or allow earlier retirement.

7. Get your will, powers of attorney, and beneficiary designations properly structured now. A planner can coordinate with estate lawyers to minimize probate fees and taxes, potentially saving your heirs thousands and preventing family conflicts when emotions are already high. Estate planning is a lot easier if it isn’t urgent.

8. Retirement planning is not just about the numbers. A planner can help you understand how having a purpose, a planned social life, and focusing on your health will help make you more content in retirement. Planning is most effective when it aligns with your values and vision of retirement.

All of the above can be addressed in a comprehensive financial plan. You can also choose to focus on one modality and build a plan to achieve that goal. Financial planning is more than just investing in a certain fund. Book an initial consultation today.

Rental properties: Incorporation and Taxes?

Here are some links to articles discussing taxation and whether you should incorporate as a landlord. As you will read, there are many factors to consider.

Incorporating a Rental Property: Is it Right For You?

Owning Rental Properties in Canada: Corporation vs. Personal Ownership and Tax Implications

Incorporating Your Rental Property Business: Should You Do It? Here’s the Scoop

Mastering Landlord Taxation

During conversations with landlords, I often find they aren’t working with a financial planner because they don’t have much of their assets in investments. If you read through any of the links, you learned there is a lot to know and that planning, whether it’s with a C.F.P. or an accountant, can be crucial in saving you tax dollars.

RIFF’s, Death, and TAX

Recently, a couple in their mid-80s came to me for help with their taxes.
They have:

• Over $500,000 in a Registered Retirement Income Fund (RRIF)

• A paid-off home

• Pensions that give them more than enough income to live comfortably

Their big goal is to leave as much money as possible to their three children.

Here’s the problem:

• When one spouse dies, the RRIF can pass to the other spouse with no tax right away.

• But when the second spouse dies, the RRIF is treated as income and can be taxed at up to 53.5% in Ontario.

At age 85, the government requires them to withdraw at least 8.51% of their RRIF each year. That’s about $42,550. If they both pass away before age 92, there could still be hundreds of thousands of dollars left, and more than half of it could go to taxes instead of their children.

For example, if they both passed away at age 89, there could be around $300,000 left in the RRIF and a tax bill of about $160,500.

The Fix

Instead of only taking the minimum, they can withdraw more now in a smart way. This may mean paying a bit more tax each year, but it can reduce the total tax bill over their lifetime, and leave more money for their kids.

This is something that should be caught during the financial planning process. The sooner you plan, the more options you have.

The KEY takeaways:

1. Understand the tax consequences of your accounts at death

2. Think lifetime tax bill versus annual tax bill

3. Understand your income versus expenses and what potentially could be left over.

A more Compelling reason for a Passive Approach

There is a lot of evidence that shows that active fund managers underperform the markets over the longer term. Saying active management beats passive investing over the long term is comparable to saying Tylenol causes autism. That said, there is a more compelling reason to go the passive route.

Time in the market with average returns is the winning formula to achieving your goals. If you achieve average returns for 30 years, you will rank in the top for investors. By having patience and discipline, you allow compound interest to have maximum impact on your investments, and you will increase the likelihood of hitting your goals. You don’t need to beat the market or find that one high-performing stock; just be average for 30 years.

Keep it simple and stress-free, and do it for a long time. Implementing a passive approach, typically with a low-cost, globally diversified, index-like fund for a long time, takes away guesswork and decision fatigue and significantly increases your chance of success. If there is a secret, this is it.

Survive the First Five-Pickleball and market crashes

I began playing pickleball in early September and am watching alot of videos on how to improve. There is a strategy called survive the first five. Good pickleball players’ rallies average 4 hits, and then someone will make an error. Therefore, if you can keep the ball in for four hits, the chance of you winning a point are greater because an error will occur soon. Keep it simple and keep it for five, and you will increase your likelihood of winning the point.

As an investor, you will go through 6-10 bear markets or 4-5 significant market crashes in your lifetime. These numbers are not 100% accurate because definitions are not agreed on, and investor time in the market can be very different. As an investor, survive the first 5! When the market crashes, and it will, stay invested. Better yet, keep your regular contributions going. Just like in pickleball, keep it simple, keep your money in, and you increase your likelihood of success. My belief is that your financial planner’s job is to help you not make big mistakes. We can’t control many things in trying to make you rich. We have a lot of control over our behaviours and emotions and can stop you from going broke or making the big mistakes. The next time there is a bear market or a crash, remember to survive the first five.

Investment Manager vs. Financial Planner: What’s the Difference?

Investment Manager vs. Financial Planner: What’s the Difference?

If you are getting close to retirement, you might hear two job titles that sound almost the same: investment manager and financial planner.
Both help with money, but they solve very different problems. Knowing the difference can help you choose the right help and avoid paying for services you don’t need.

What an Investment Manager Does

An investment manager looks after your accounts like RRSPs, TFSAs, or non-registered portfolios. Their main job is to decide how your money is invested and make changes when needed.

Before they invest, they will usually give you a risk tolerance questionnaire. This is a discussion and set of questions to find out how comfortable you are with market ups and downs. Your answers guide how much of your money goes into safer investments like bonds or growth investments like stocks.

Example:
Susan, 58, has an RRSP and a TFSA but hasn’t checked them in years.
She worries about losing money if the market drops just as she retires.
An investment manager reviews her accounts, checks her risk tolerance, and adjusts her portfolio to better match her age and comfort level.
Now she knows someone is watching her investments every day.

Typical Costs in Canada:
Most investment managers charge a fee based on a percentage of the investments they manage. It’s often around 0.5% to 1% per year of the total account value.
For example, if you have $500,000 invested, the cost might be $2,500 to $5,000 per year. The fund company will also charges a cost. The costs may be separated or included in the MER(management expense ratio).

What a Financial Planner Does

A financial planner looks at your whole life, not just your investments. They help you answer questions like:

• When can I retire and still live the life I want?

• How much income will I need each year?

• How do I lower taxes on RRSP withdrawals, CPP, OAS, or a business sale?

• Should I pay off debt, save more, or spend on experiences?

A good planner doesn’t just run numbers. They will talk about your values and goals—the things that bring you happiness and purpose. This might include family, travel, volunteering, or part-time work. By understanding what matters most, the planner creates a retirement plan that supports both your finances and your well-being.

Example:
David and Marie, both 60, have RRSPs, a paid-off house, and a small business they plan to sell.
They want to retire at 63 and travel every winter.
A financial planner explores what will make them happiest, runs retirement income projections, and shows a tax-smart way to draw from RRSPs and TFSAs.
They leave with a clear plan that matches their values, not just their bank balance.

Typical Costs in Ottawa:
Financial planners may charge a flat fee for a plan (often $2,000 to $5,000), an hourly rate, or an ongoing advice-only retainer (for example, $150 to $250 per month).
Some planners also offer investment management, but many advice-only planners charge only for planning and do not sell products.

Choosing the Right Help

Some Canadians hire just one professional. Others use both. The choice depends on your needs:

• If you need someone to manage and monitor your investments, an investment manager is the right fit.

• If you need a complete retirement plan that connects your money to your values and happiness, a financial planner is the better choice.

• If you want both the plan and the day-to-day management, you may work with both; just make sure you understand the costs so you’re not paying twice for the same service.

Retirement is more than numbers on a page. Whether you hire an investment manager, a financial planner, or both, the most important step is to choose help that keeps your money working for you and supports the life you want to live.

Ready to Plan Your Next Step?

If you live in Ottawa or anywhere in Canada except Quebec and want a clear, objective plan for retirement, I offer a free 45-minute planning review.
We’ll talk about your goals, your values, and what matters most to you without any pressure to buy products.

Why advice-only planning?

When I introduce myself as an advice-only financial planner, the first question is why. They ask the question for two reasons: 1. I have a license to offer investment management, life insurance, and can help with implementation. But in my advice-only role, I deliberately remove that part so clients know my only focus is the plan itself. 2. What is the difference between advice-only and engaging in planning with implementation?

First, we need to answer what advice-only financial or retirement planning is. It is comprehensive planning without a product. Regardless of the recommendations in the plan, advice-only planners will not offer or sell you products. No investment products, no life insurance sales. You are paying for advice and strategies in your best interest to help you achieve your goals. Advice-only plans typically cover: cash flow, retirement income, tax planning, estate strategies, and risk management. Commission-based advisors get paid commissions for selling products. Fee-based advisors get paid a fee plus sell products that pay commission. They typically get paid a direct fee or a percentage of assets under management.

Certified Financial Planners are regulated by FP Canada. We adhere to the Standards of Professional Responsibility.

Why is this important?

Compensation drives behaviour. You only need to watch the CBC investigation into bank practices. The employees in the bank make offers and recommendations to clients based on performance goals and compensation, not necessarily a solution based on customer needs.

Who uses advice-only planning?

DIY investors because they want to manage their investments but need help with other areas like taxes, insurance, decumulation, and estate planning.

Clients who do not want to move their investments and other products from where they currently are.

People want to limit the bias in the advice they receive.

People who do not have a large amount of assets understand that they need and want help. Many investment firms have minimum requirements for assets/investments to become their clients. Banks give attention and service to clients with minimal assets(often ignored). Some people have substantial assets in other forms, like real estate, who will benefit from planning. An example is someone who has rental properties and wants to start selling them and turning them into retirement income. They need help because of tax consequences and turning the proceeds into investments and an income source.

People who want a second opinion.

Clients who are more focused on retirement income planning or tax planning or estate planning.

People who want to reduce costs. Paying for a financial plan may cost more now, but you make it back and save money because you can achieve lower fees.

There is no one right way. I believe that most people would benefit from an advice-only plan because you are paying for the advice, and it gives you a road map for a higher likelihood of success. As Mike Tyson said, Everybody has a plan until they get punched in the face. The plan can help you take the punch, plan for the punch, and get back on track. And everyone gets hit, whether it’s a major health event, divorce (increasing at an alarming rate in seniors), job loss, etc.

Imagine walking into a bank and not knowing whether the recommendation is best for you or best for their sales target. Now imagine sitting with someone whose only job is to give you a clear, unbiased roadmap, and then you decide what to do with it.

If I don’t see it, did I really spend it

It is common to hear the advice, save up for it before you buy it, but we live in a world of instant gratifcation and the deck is not stacked in our favour. You often get hit with ads buy now, pay later or there are only two left, or my personal favorite, you will never see this price again (It’s my favorite because three weeks later you see the same price again.). There are points programs on credit cards rewarding our spending with free groceries or free travel. The average balance on a credit card in Canada in Q4 2024 was $4681 and delinquencies are on the rise.

Why the points programs? The credit card companies are for profit organziations so if they are giving you something for free, is it really free? Credit card companies know two things:

1. Usining a credit card means you will spend more than if you paid cash(one study found it to be 160%more).

2. You are twice as likely to make an impulse purchase using a credit card then using cash.

The reasoning is simple, when you pay with a credit card, you feel less pain. Should you stop paying witrh a credit card? Not necessarily. The trick is to trigger the same pain you would feel if you paid cash. The four suggestions I have are:

1. Remove apps from your phone that you make purchases from. It places an extra step to make the purchase. You need to log into your laptop or desktop to make the purchase.

2. Immediately after you make the purchase, make the payment. This way you get your points, you don’t need to carry cash, and you still feel like you spent money.

3. This is my recent discovery and what prompted this blog, use a credit card that shows up on your online banking profile so that everytime you log into online banking, you see your balance. If your credit card is separate, you can avoid looking at it until the bill comes due and it allows the balance to creep up without you feeling it.

4. If you are making a purchase that isn’t a necessity, contribute the same amount to your investment account. This gives you confidence that you can afford the purchase and reward your current self and it also looks after your future self.

We live in a world of ease and comfort and it is usually a good thing. Spending painlessly is not good and can, and is leading to cashflow and debt issues for many Canadians.

Need help getting your cashflow under control, book an hourly seesion we can review it together.

When it comes to finances, boring works

Why Smart Financial Planning Feels but Isn’t Boring

Financial planning often feels cardio. You know it’s good for you, but you’d rather binge-watch Squid Games while pretending money grows on trees. Getting your finances in order doesn’t have to be as dull as walking on a treadmill. In fact, once you see the benefits, you might even enjoy it. Here’s why you need to set up or track these key financial metrics.

1. Have Liquidity for 3-6 Months of Expenses

Having 3-6 months of expenses stashed in a savings account means you’re prepared for life’s little or big(COVID) curveballs.

Think of this fund as your financial "get out of jail free" card. Without it, you’re one unexpected expense away from picking up a second or third job.

2. Know Your Net Worth

Your net worth is like a report card for your financial life, except you don’t have to show it to your parents. It’s simply the difference between what you own (assets) and what you owe (liabilities).

Tracking your net worth helps you spot trends. You can see if your assets, like your investments, are growing, and that you are paying down your mortgage or student loans.

3. Set Up Auto Contributions for RRSP, TFSA, FHSA, and RESP (If Applicable)

Automation is the lazy person’s secret to success and a way to avoid emotional decisions. Setting up automatic contributions to your RRSP, TFSA,FHSA, or RESP ensures your money is working harder.

Every payday, a chunk of your income goes straight to your future self without you lifting a finger. It eliminates the temptation to blow that money on Uber Eats or Amazon deliveries.

4. Set Up Annual Increases in Contributions

Setting up annual increases in your contributions is like putting your financial growth on autopilot. Even a small bump (say, 1% more per year) can add up. The best part is, you won’t notice.

5. Track Your Expenses, Including Subscription Services

Remember that free trial you signed up for two years ago? Yep, still charging you $12.99 a month. Tracking your expenses reveals what you value and what’s draining your wallet.

From the groceries to the extras (streaming subscriptions, delivery apps), a good tracking system gives you clarity and control.

At the end of the day

Financial planning doesn’t have to be scary. By setting up and tracking these key financial metrics, you’ll save yourself from future headaches, take that vacation guilt-free, and you’ll sleep better knowing you’ve got a solid plan in place.

Dividends: Taxation, Integration, and Mental Accounting

Here is a great article explaining dividend stocks and why they are not necessarily as great as you are sometimes lead to believe. Read the article here

Did you know you can build your own pension?

Here is a great article discussing Individual Pension Plans. This is something to explore if you are a business owner and are thinking about retirement strategies.Read here

The Family Cottage

A group of Financial Planners shares their wealth of knowledge with other planners regularly. The articles are well thought out and educational and I want to share them with you. Here is one discussing passing the family cottage down to future generations.

Read here

Jumping into the world of adulting

You have decided you want to buy your first home and are wondering what help is available. There are two primary savings tools for first-time home buyers to buy a new home in Canada. You can consider these your welcome to home ownership hug from the government. You can use the First Home Savings Account(FHSA) or/and you can use your RRSP with the First time Home Buyers Plan(HBP). And, yes you can use both and so can your spouse or partner. The FHSA allows you to contribute $8,000 per year to a maximum contribution of $40,000. The savings can be invested and you will not be taxed on the growth of the investments when you withdraw it for the purchase, similar to your TFSA. The contributions are tax-deductible like your RRSP.

The HBP allows you to use $35,000 from your RRSP to purchase your first home without tax consequences. This amount will be increasing to $60,000 based on the recent budget. A big difference with the HBP is that it needs to be repaid within 15 years. Each year you must pay back 1/15 ($4000 annually on $60,000) of the amount or you will be taxed on that amount and lose that RRSP room.

Assuming the budget passes, this means you have access to $100,000($200,000 as a couple) to buy your new home. There are some key considerations for you to make when considering where to withdraw the money from. The primary considerations are when are you buying and how much do you have saved outside your RRSP. If it is in the near future, and you have no savings outside of your RRSP, you will likely consider the HBP. There needs to be consideration for future cash flow and budgeting because you have to repay 1/15 annually. It also affects retirement because you lose the growth on that money until you pay it back. When you have a longer time horizon to purchase the home, you can fund the FHSA, receive the tax deduction, and not worry about repayment or affecting your retirement.

Like most financial decisions, it depends on your situation.

Important links: FHSA Home Buyer’s Plan Federal Budget Announcement