12 Things I Learned Spending $12,000 on a Financial Plan

In my presentation, “12 Things I Learned Spending $12,000 on a Financial Plan,” I will share valuable insights and lessons from my experience using a fee-only financial planner. My reason for utilizing financial planners is to have others, who may not necessarily agree with my projections, review my plans. This approach allows me to learn from different perspectives and potentially uncover any blind spots, ultimately resulting in increased financial security and tax savings.

Remember, Im not an accountant. or a financial planner, so speak to the right professional. Im just sharing what I learned here and in my presentation.

Before diving into the process, it’s essential to establish your goals. Are you aiming for a specific annual income or net worth? Do you plan to pass on wealth to your children or cover expenses like weddings, travel, and vehicles? Additionally, consider the assumptions you make regarding returns both inside and outside the stock market. For real estate investors, this includes factors like property appreciation and inflation rates.

I will share one of the 12 lessons I learned from working with a fee-only planner; however, to learn the other 11, you’ll need to attend the December Durham Real Estate Investors meeting.

One common challenge for real estate investors is having an illiquid estate compared to individuals with stock portfolios. You may also wish to pass on properties to the next generation but face estate taxes upon doing so.

If you set up joint ownership with your spouse, the property would pass on to them without issue. The real concern arises when both of you pass away—how will your estate be handled and what will the tax situation be?

Many financial planners suggest using whole life insurance or other insurance products that accumulate tax-free funds over time. These tax-free funds can then be accessed by your estate to cover estate taxes.

Remember, this is just one lesson from my experience with a fee-only financial planner. To discover the other insights and maximize your financial potential, join us at the December Durham Real Estate Investors meeting.

When registered funds are withdrawn, whether by you or your estate, taxes will be due. These taxes must be offset against the estate taxes you’ll owe. This increases the taxes owed by your estate. So they may not be useful, except perhaps one type of registered fund for Canadians.

To prepare for this, first evaluate your real estate portfolio/estate and estimate its future value in 10, 20, or 40 years. This will help you determine the potential estate taxes. Financial planners often suggest a whole-life approach to pay for these taxes.

An alternative strategy involves utilizing Tax-Free Savings Accounts (TFSAs). These accounts enable tax-free growth on returns within the registered account. Investing in various products is possible with TFSAs. For instance, if you choose the stock market, expect around a 5% return. However, private lending may yield a more aggressive return of about 10%.

If both you and your spouse invest using registered funds, larger returns can be achieved over time. Consider a scenario where two individuals start with $80,000 each and contribute their yearly amount to their TFSAs. Assuming they invest in private lending, significant growth is possible. Over 20 years, this could amount to $1.5 million, and with compounding over 40 years, it could reach $8.2 million.

Since TFSAs aren’t taxed upon withdrawal like registered funds are, they can play a crucial role in one’s financial plan. The main challenge lies in consistently earning and investing these funds over an extended period.