Your Comprehensive Financial Checklist for 2024

Introduction to Financial Preparedness

Hey, welcome to today’s article and thanks for joining me. Today we’re going to be looking at this topic, your 2024 financial checklist. Now these are the kind of questions you ought to be asking yourself in order to make sure you have a successful 2024. Now these are questions and they’re action steps. We’re going to get into them. It’s going to be covering a wide variety of different areas of your life and I hope you find it useful. So, let’s get into that.

The Importance of Goal Setting

The first one is goal setting. Now we’re not going to be talking about how to set goals, this is more of high-level thinking. And so, let’s go through these and I think that the most important among all of your goals is your mental, emotional and your physical fitness.

Navigating Post-Pandemic Challenges

We’ve come from 2020 all the way through now to the beginning of 2024 and for anyone that was just moving into retirement in an environment where COVID hit is very disruptive, caused a lot of stress for people who were employed and working and had many years to go before retirement and then you come into retirement into an environment where we’re shut down, we’re closed down, we’ve got no access to a lot of things that we’re used to having instant access to like certain kind of groceries, buying cars for instance, new cars, all those things just dried up.

Focusing on Mental and Emotional Fitness

And so, it’s been a lot of anxiety, a lot of frustration. And so with that in mind, I want you to focus on or consider focus on your mental and your emotional fitness level and trying to surround yourself with like-minded people, people that support your goals, support your lifestyle, support you in general, that lift you up, add value to your life, that you’re adding value to their life and collectively that kind of relationship through your network is going to sustain you through these periods of time where it’s been extremely frustrating and also fearful too, right?

Maintaining Physical Health

Trying to protect yourself from getting sick. The other area, of course, is your physical fitness. So, you control two things in your retirement. One is your ability to have enough money throughout your retirement. You do that by getting a financial plan. You watch this article up here. It talks about how to get a financial plan and what are the benefits of a financial plan.

Financial Planning and Physical Fitness

And the second area that’s absolutely within your control is your physical fitness. If you have enough money to retire, great, check that off the list. But if you become unhealthy and can’t enjoy your money, can’t enjoy your lifestyle, then no amount of money is going to make that better. So, you are in complete control of your physical fitness.

Optimizing Your Fitness Routine

So, get out there, do something that is enjoyable, that’s going to create an active type of lifestyle. You don’t have to hit the weights and do all these crazy things. Find something you enjoy that keeps your moving, gets your heart rate beating a little bit. I always find that if you can do an activity where it’s just slightly difficult to carry a conversation, then you’re at a really good, optimal level of fitness.

The Role of Stretching

And do that a few times a week and you’ll find what a difference it is in your life. The other area also is stretching. I find that as I’m getting older, my body really needs to stretch a lot. I like to do that before I go to bed and when I wake up, because those are the two areas of where I’m about to go into, especially at night, when I’m about to go into a long period of rest.

Portfolio Returns and Financial Expectations

So, I want to stretch out my body and then, of course, coming out of that, stretching your body gets you started for the day. Portfolio returns. What kind of return are you expecting in your portfolio? Certainly, if you’ve done a financial plan, you know in advance what kind of return you need to have in order to make sure you have enough money throughout your, not just this one year.

Travel Plans and Budgeting

One year should not, one year of poor returns should not ruin your retirement, but you do want to have a sense of, okay, what should my portfolio look like for 2024? And I’m going to be going into more detail about that. Travel plans. Where do you plan to travel? Think about that in advance.

Mapping Out Your Year

Maybe get a calendar. I like to get a year calendar out and mark when we’re going to be traveling, when we’re going to be doing certain activities. For me, some of that travel might involve in business and where I have to be for a conference or an event. And then the other parts are for fun and travel and seeing the things that you want to do.

Debt Management Strategies

So, map that out in a calendar so you can prepare yourself not just for timing, but also for, you know, getting the money prepared for those types of events. Pay attention to your debts this year. Just do a quick review. We’re going to go through that in a short minute, but do a quick review of where your debts are, what kind of debt it is, are there any opportunities to pay down those debts, and how will you do that?

Tackling the To-Do List

And then what’s that to-do list? Now I say the to-do list because there are certain things that you keep putting off, whether that’s renovating your home, repairing your home, just going ahead and doing certain kind of activities like dental work. You know, you don’t want to, I don’t like going to the dentist, but if you have some major dental work, thinking about when you might do those kinds of things and start to get at that list.

Mastering Cash Flow for Retirement

Cash flow. Cash flow is the key to making sure you have enough money to retire and to do all the things you want to do. So here are the questions you need to ask yourself about cash flow. When do you need the money? How much money do you need? Where will it come from?

Adopting a Laddered Income Approach

And then what I like to tell people in retirement is consider the laddered income approach to your income or your expense needs. So, when you think about when do you need it? So, if you were going to do some type of event, let’s say a travel expense or a renovation expense, you may want to consider doing a withdrawal in your tax-free savings account in the previous year, like December, I know it’s in January, this has already passed, but think of that for next year.

Strategic Withdrawals and Replenishment

But the idea here is that you’re doing a withdrawal in your tax-free savings account in December and you go ahead and use that money early on, let’s say within the first six months of the year, and then it gives you an opportunity if you have some non-registered assets or if you end up coming into some money, you can replenish.

Planning for Upcoming Expenses

So, you can replace that withdrawal because it happened in the previous year, if you remember your tax-free savings account rules. So, it’s a good idea to always think about what does the first six months look like in terms of expenses and then do some withdrawals in a tax-free savings account to spend money into that expense and then replace it later on.

Anticipating Heavy Expense Years

So why I say when do you need it and how much, it’s about just understanding what are your needs for that given year. Now when I’ve done plans for people, some years are fairly light and fairly consistent and then there are certain years where it comes into where all of a sudden, you’re doing a new car, maybe that’s every five years or seven years, so are you financing it, are you leasing the car?

Financial Planning for Life Events

So that is going to be a particularly heavy year for expenses. The other things that I see are renovation and then our kids getting married and having to, not having to, choosing to help them out with their wedding or maybe even purchasing a home, giving them some money, a down payment. In certain years you’re going to have these heavier expense years, so you want to think about is 2024 one of those years where you’re going to have a heavier expense and how are you going to pay for those things? Your financial plan will obviously talk to you about how to do that.

The Need for a Withdrawal Strategy

Your withdrawal strategy, you want it to be a tax efficient withdrawal strategy. Most people I’ve said before in other articles have a contribution strategy but don’t have an actual withdrawal strategy. You’re used to putting money into your accounts but then when it comes to taking money out it’s kind of like brain fog, right? Where do we take the money from, which accounts?

Optimal Withdrawal Sequence

If you’re thinking about a tax efficient withdrawal, that is your non-registered accounts first followed by your tax-free savings account followed by your RRSP or in this case might be a RIF by the time you get into that. That’s the optimal sort of account structure that you would do your withdrawals from.

Considering CPP and OAS

You may not have those accounts; you may only have an RRSP in which case you’ve got to be thinking about because every dollar coming out of your RRSP is taxable. So, your withdrawal strategy, non-registered tax-free savings, RRSP’s and then thinking about when to take CPP between 60 to 70, what’s the optimal age for you to start taking CPP and old age security starts at 65.

RRSP Meltdown and LIRA Unlocking

You may consider doing an RRSP meltdown depending on the size of your RRSP. I always, always see plans that have RRSP balances in excess of let’s say $800,000. You’re not going to spend that money in your lifetime unless you do an RRSP meltdown. It’s just that simple RRF minimum schedule withdrawal will not get through that RRF balance in your lifetime. So RRSP is one of the RRSP meltdown is one of the strategies. Unlocking your Lira accounts where possible, there’s some provinces where you can’t unlock your Lira, 50% of your Lira, but that’s one of the strategies is where we unlock 50% of the Lira, push that money into your RRSP and then do an RRSP meltdown.

The 3 Bucket Strategy

You may want to consider watching this article here at 3 Bucket Strategy. This is an excellent way for people to manage their money, for you to manage your money that allows you to visually see, because it’s not just math that I show you, I visually show you how to use your money in a different way so that it makes living much easier and simpler that you don’t have anxiety about how to use your money, especially in an environment that might be like a volatile stock market.

Understanding Sequence of Returns

When we talk about that retirement zone, the five years leading up to retirement and the first five years of retirement, you do not want to have severe negative returns. And so, let’s look at what does that mean? Sequence of returns, this is really an interesting visual representation of what happens to your portfolio if you had two years of negative returns.

Visualizing Portfolio Impact

So, in this case, we’re just going to look at an account balance over a 10-year period of time. The annualized rate of return in all three of those lines is 4.8%. The straight line, dark blue line, just shows your straight line 4.8%. After 10 years, it’s $537,000.

The Effect of Early Returns

Now let’s look at that green line. If the person, if you had two years of negative returns, you can see it’s called a bad start, minus 16 followed by minus 6%, and then pretty decent returns all the way through, the average of that is still going to be 4.8%. And you are going to end up with, instead of $537,000, you’d have $472,000. That light blue line is two years of positive returns at the very beginning of your retirement. Still averages out at 4.8%, but because of the early sequence of returns, positive returns, you end up with $586,000.

Critical Nature of Early Retirement Returns

So, the sequence of returns is very critical in that first 10-year window of your retirement. Now how do you figure out how to set up your portfolio? Well, this is really easy. You get an advisor to give you a portfolio review. Just about every advisor is willing to do a portfolio review, complimentary, no fees, no obligations, they’ll tell you what you think should be changing, if there are any changes that need to be done.

Conducting a Portfolio Review

So, things that will be done in a portfolio review, if you want to do this yourself, but here’s what you should be looking at. What is your risk tolerance? Now risk tolerance means how well can you sleep at night with the volatility of the market? That’s a pretty good question to ask yourself.

Assessing Risk Tolerance

If you can go back to 2008 and remember what that felt like, that anxiety of seeing the markets drop so dramatically and acutely, how did you feel at that point? Now if you’re in retirement and that happens, how do you think you’re going to feel pretty awful, right?

Aligning Asset Allocation with Risk Tolerance

So, you want to do a risk tolerance review, then you want to look at your asset allocation. So, asset allocation basically means what kinds of securities do you have in your portfolio and do they match your risk tolerance? And so very often when I do a review, I’ll see someone’s risk tolerance, let’s say they might be a moderate, close to conservative investor, but they have the type of equities in their portfolio that are maybe someone who is much younger, so like an advanced or an aggressive type of portfolio, the two don’t match up.

The Importance of Rebalancing

That’s a recipe for a disaster and a recipe for a great amount of anxiety. So, you want to make sure that your risk tolerance and the underlying securities of your portfolio are in alignment, right? At the beginning of every year, I’m busy rebalancing my clients’ portfolios, this is where we go into their portfolios, examine their risk tolerance, examine the asset allocation and rebalance.

Sector Weightings and Geographic Considerations

So, you may have noticed in 2023, the NASDAQ went up dramatically. So that means anything in a client or your portfolio that had a higher weighting towards information technology is probably gone up more so than anything else in your portfolio. And that’s where you may want to rebalance that because now, you’re overweight in that particular sector. You want to look at geography. Now geography, when I say geography, I’m talking about whether it’s Canada or US or North America versus Europe, emerging markets.

Understanding Sector Outlooks for 2024

You want to ask yourself, where do I feel most comfortable investing my money? What’s the right place? Talk to advisors and you’ll get that. This last one, correlation matrix, is really cool and I’m going to show you an example of that. The first part of sector weighting when we went in one of those areas is just understanding your portfolio.

Analyzing Sector Weightings

When I do a review, I give people the sector weightings of their actual portfolio. And you can see in this particular portfolio, information technology was the highest weighting of all the other sectors, followed by financials and industrials. It’s really important that you consider what is the outlook for 2024, what are the sectors that are going to be benefiting from that kind of activity, and then are you actually invested in those sectors.

Utilizing the Correlation Matrix

It’s a pretty simple, straightforward way of looking at your portfolio. The other is correlation matrix. I really love this. It looks busy, but I’ll explain this to you. On the right-hand side, you see it says investment key. This is someone’s portfolio, nine different funds they have in their portfolio.

Deciphering Fund Relationships

When we put that on the left in the correlation matrix over a 10-year period, it tells us what is the relationship or the correlation of one fund to another. When you’re paying your fees and you’re investing in certain securities, you want to know is there any duplication.

Avoiding Duplication in Investments

Let’s look at how we read this. If we look at number five, and we’ll just go number five horizontally across to the second row, and it says 0.81, and then we go over to your investment key, we see number five is the Fidelity Global Balance Portfolio, and number two is the Fidelity Canadian Growth Company. What does that mean? 91% of the underlying securities in fund number five is identical to fund number two.

Minimizing Overlap in Portfolio Funds

What you don’t want, and you can see this scale on the bottom of the chart, you really want to minimize the deep blue. You don’t want to see much of that. This particular person’s portfolio is mostly deep blue. That means out of the nine funds that they’re investing their money, much of it is being duplicated in another fund, which is you’re paying for the same security. 

Evaluating Your Financial Advisor’s Approach

You have to ask yourself, is this advisor just chasing returns trying to give you what was the best return last month, or they actually have a portfolio that has very little correlation, so what you’d like to see is moderate to none in terms of correlation.

Diversification Through Non-Correlated Investments

An example of this would be, let’s say you had a Canadian equity fund, dividend fund that’s providing dividend to you, and then you might have, let’s say, a real estate fund. The real estate fund will have very little correlation to the Canadian dividend fund. That’s a good example of where there would be very little to none correlation because those two things aren’t correlated.

Geographical Investment Considerations

When we talked about geography earlier, we talked about where in the world could you invest your money, and you can see here are the economies of the world, the U.S. with about $27 trillion of annual GDP, Canada’s got $2 trillion, and you think about where you might want to invest your money.

Investing in the Canadian Market

So, what I always say to people when they’re investing money is I say, if you’re a conservative or a moderate investor and you’re worried about market volatility, then Canada, you’re going to avoid 98% of the world’s problem because you’re not invested in it. With that in mind, though, you’re also not participating in the other parts of the world that are doing well.

Travel Planning and Budgeting

Travel. Let’s talk about travel. Well, if you’re near retirement or you’re in retirement, travel is likely one of the things that’s going to be big on your list. It’s checking off these bucket list items that you’ve always wanted to do and go and see these places.

Allocating Funds for Travel

So, the first thing I would say to you is what does your plan say about your travel expenses? How much money did you allocate towards that travel expense for 2024? And where is the money coming from? So out of which accounts is that money going to be coming from?

Utilizing Tax-Free Savings Accounts for Travel

And back to the TFSA, here’s a good example of where you may want to take money from your TFSA in December so that you pay for your travel. Maybe you’re going away in the spring or maybe you’re going away for four or five months to Florida, you take some money from your tax-free savings account and use that to travel on in the next year.

Travel Tips for Cost Efficiency

So, some items that you would want to look for is think about, you know, if you are open to traveling, so think about traveling off-season to some of these locations that you always wanted to see. But if you go in the middle of August to Italy, it’s going to be very expensive or somewhere in Europe, it’s going to be very expensive.

Using Google Flights for Travel Deals

So, do you look for places that are more off-season in terms of the prices? A good place to look for that is Google Flights. I love using Google Flights. Just type in Google Flights, it’ll come up. And when you’re on this, you can just set that you have no destination in mind and you just have sort of like a general timeline in terms of when you want to travel.

Finding the Best Travel Fares

And it’s going to show you the prices for flights everywhere in the world from your place. So, from Toronto, for instance, or from Vancouver, wherever you may be, you just simply look at where you are and then leave it blank and it’s going to show you a flight to Vegas is this amount, a flight to Caribbean is this amount, a flight to Great Britain is this amount.

Taking Advantage of Introductory Offers

And you can plan your holidays based on what has the lowest fare for you to travel. So, you might have a list of places you want to travel to and you can figure out when is the cheapest time to actually fly to those places. You want to look at introductory offers as well.

Leveraging Hotel Points and Offers

So, if you have resorts or hotels that are new in the market and that are offering discounts for people to come. We took advantage one year of going to the Cirque CIRC Hotel in Hollywood, Florida. This was a boutique hotel. It was new. We decided to go into and to see that it was a perfect location.

Managing Debts Effectively

By the way, it ended up being one of the best hotels we’ve ever stayed in. Now when I say best, we’re not talking about luxurious. It was an absolutely beautiful hotel, but it was best because the rooms were clean. Nobody had ever really stayed in them. The restaurant below was awesome. The location was perfect. The price was awesome. So that’s what I say about introductory offer. And then of course, collect points.

Closing Thoughts and Encouragement

Use your points in your credit card or if you belong to like Hilton hotels or something like that, Bonvoy, where you’re going to just accumulate points, then consider belonging to a hotel chain that is worldwide and use their point system to stay in their hotels all over the world so you can collect points and get some freebies. The last one that we’re going to be looking at is debts.

Assessing and Planning for Debt Repayment

You want to just take stock of what debts you have, outstanding, whether it’s mortgage, car loan or credit card payments. You want to pay down your non-tax-deductible debt. So, anything like a credit card, you want to pay that down as fast as possible. Mortgage is a non-tax deductible.

The Value of a Financial Plan

So that’s why I say if you have a tax deductible like a mortgage on a rental property, that’s okay because you get to deduct that. But anything else you want to start to really have a plan on how you’re going to attack your debt, pay attention to the renewal dates so that you can start to figure out how you might be able to allocate more money to those debts.

Engaging with the Financial Community

And I always say it begins with a financial plan. You should have a financial plan done. I encourage you to get a financial plan because it is seeing the outcome of your planning decisions before you commit to them. I hope you enjoyed today’s article. Remember if you liked this article, like it and share it with everybody that needs to see it.

Invitation for Community Interaction

Put your comments below because I love hearing your comments. It’s super important for people to read the comments because they might have the same question and you will find that I’m answering the question and other people are answering questions as well and giving their experiences and feedback.

Farewell and Anticipation for the Future

Well, again, thanks so much for tuning into this article. I hope you’re doing well. I hope you have an awesome 2024 and I look forward to seeing you in the next article. Take care.