How to stop worrying and start building wealth

If anything gives investors sleepless nights, it’s economic uncertainty. From the lingering COVID-19 pandemic to widespread inflation and supply chain bottlenecks, skyrocketing home and energy prices to the ever-worsening effects of climate change, investors have many reasons to be concerned.

When the FP Canada™ 2021 Financial Stress Index was published late last year, 38 per cent of Canadians said that personal finances were their greatest stressor, while 51 per cent said they’d lost sleep over money-related concerns and 31 per cent said they’d experienced health-related issues over their finances.

And that was before the war in Ukraine broke out.

It’s safe to assume that right now, both seasoned and rookie investors are more anxious than ever about making the right moves to grow and preserve their wealth.

For decades—including multiple recessions, the 2008-09 financial crisis and the pandemic—Newport’s team of experienced portfolio managers has helped our clients navigate challenging situations with a focus on investment principles designed to minimize risk and protect capital. A key part of that approach is advising clients to plan for the long term, at every stage of life.

“A goal without a plan is just a wish,” says Yasmeen Seddiq, Newport Private Wealth’s Director of Wealth Planning. “Regardless of your life stage, a financial plan forms a complete view of your current and future financial position. Not only does a plan bring clarity to your financial future, but it also helps identify strategies designed to improve your cash flow, optimize savings, and consistently grow your wealth over time.”

Worries related to unsettling economic and geopolitical news are understandable. Along with a solid plan, a back-to-basics approach to money management can ease your anxieties and help you build a stronger financial foundation. The five simple steps listed below are a good reminder of the core principles that will safeguard your wealth, now and in the future:

1. Track your monthly expenses with a household budget

Know where your money is going by using a monthly cash flow statement and a budget. Those are the first steps to better managing expenses and getting further ahead financially. More importantly, revisit your expense outflow and budget on a regular basis. Focusing on your financial goals, and re-evaluating consistently over time, will help you make wise decisions in the here and now. That’s particularly true when your circumstances change.

2. Pay yourself first

As part of your budget, be sure to include a set sum for automatic savings to your TFSA, RRSP or taxable investment account. A recent analysis of Canada Revenue Agency data found that most Canadians—including high income earners—fail to maximize their annual TFSA contributions. That’s a missed opportunity for investors of any age. Getting in the habit of treating your savings strategy like a fixed expense will not only build a foundation of good financial discipline, but you might also be surprised at how quickly it adds up (and how little impact it has on your current standard of living).

3. Understand the tax strategies that can lead to better financial health

It’s never too late to think about employing effective tax strategies to manage your wealth. For example, income splitting—where income is transferred from a high-income spouse to a low-income spouse through a spousal RRSP or how eligible pension income, and CPP retirement benefits are attributed—is both smart and sound. It can also be beneficial to have the high-income earner pay household expenses, and the low-income earner invest their money: interest, dividends and capital gains are taxed at the lower income earner’s tax rate. Seeking the right advice on these strategies can help you determine what will work best for your situation. And speaking of advice…

4. Don’t underestimate the value of advice

“When you are growing your wealth at any stage of life, having the benefit of working with an experienced financial professional can keep more money in your pocket,” says Newport Portfolio Manager Caitlin Chapman. “While it is always great to start young, many are surprised to learn that this can be most meaningful for investors in their late 50s, 60s and beyond. Having access to the tools and strategies that a financial professional brings to the table can help clients make decisions that are grounded in a long-term plan.”

If you’re not sure where to start, this article by the Newport team offers helpful guidelines that are still relevant today: How (not) to choose a financial advisor.

5. Talk to your advisor about your plan, not the market

Ask your advisor to explain how your financial plan is designed to weather challenging market conditions, such as a significant market correction. Market shifts happen on a cyclical basis and should be expected; they also inevitably end. Think of your plan as a personalized roadmap that keeps you on your long-term savings trajectory without needing to panic or make reactive, ill-timed decisions when markets dip.

Continually building and protecting your wealth shouldn’t be stressful. Seeking out the tools and advice you need to create a more secure financial future is an important step in your ongoing financial journey. Newport can help you every moment of the way, making sure you’re on the right path – and stay there.