YOUR MONEY SHOULD WORK AS HARD AS YOU DO

YOUR MONEY SHOULD WORK AS HARD AS YOU DO By Jen Malia

Let’s say you have a little money. You know you should be doing something with it to prepare for the future. But when faced with all the options out there,

sometimes it feels like the easiest option is just to put it in your bank account and forget about it. The options are simply too overwhelming.

Leaving it in your low-interest earning checking account may be the easiest approach, but it isn’t likely the best choice. You worked hard for that money

and now it’s time that money worked for you.

THE NAME OF THE GAME

IS DIVERSIFICATION

SET FINANCIAL GOALS As they say in the Fire Service: "DON'T COMMIT ALL YOUR TRUCKS TO ONE FIRE,"

and nowhere does this apply more than in investing. Ideally you want to create an investment portfolio for yourself that is varied enough that if one of your investments drops in value, you have enough money in other spots to soften how severely that one loss affects you.

As tempting as it may be to sink your savings into what seems to be a sure thing, it's important to be careful, understand the risks, and plan for the future.

Setting goals can help you figure out what kind of investments and financial decisions

you should be making. They can be long-term, such as retirement planning, or shorterterm, like saving for a boat or a vacation. Part of this will mean determining whether you need to keep your money “liquid” (easily and quickly accessible) or if you can afford to lock it into an investment for a fixed period of time.

Some investments will let you pull money out if the need arises, but you pay a penalty fee to do so. There are investments that will pay out dividends on a schedule, meaning you get a bit of money regularly, while the bulk of your money continues to earn.

Ask yourself where you want to be in 5, 10 or 30 years. If you are hoping to buy a second home or retire in the lap of luxury, you’re going to need a fairly aggressive savings and investment strategy. And in financial terms, “aggressive” usually

translates to “riskier.”

RISK TOLERANCE

Investments are often high risk/high reward, or slow-growing but safer. Investing in something like a potentially volatile tech stock on the market means the payout can be massive – think of people who bought Apple stock in the early 1980s for 15¢ a share and have hung on to it for 40 years. At the time of writing, the stock is sitting comfortably at approximately $150. You could call that a nice return!

On the other hand, stocks can rapidly lose value, meaning you don't see any return, or worse, lose money. People who owned Research in Motion (better known as BlackBerry) could tell you a thing or two about stock highs and lows.

Government bonds, RRSPs or 401ks are considered "safer." The popular site Moneysense optimistically calls RRSPs “no-risk.” While unlikely to give you breathtaking returns, they are also less likely to lose your money.

And since our tolerance for risk lessens as we age, remember that your own investment mix will have to be evaluated every couple of years to make it more conservative.

FACTORS THAT MIGHT MAKE YOU MORE RISK-AVERSE

YOU ARE THE SOLE BREADWINNER IN YOUR HOUSEHOLD

YOU NEED THE MONEY TO SURVIVE

YOU ARE CLOSE TO RETIREMENT

OTHER PEOPLE RELY ON YOU FINANCIALLY

RISK-TOLERANT

YOUR FAMILY HAS MORE THAN ONE SOURCE OF INCOME

YOUR INVESTMENT RETURNS WILL BE NECESSARY ONLY FOR FUN AND LUXURIES

YOU STILL HAVE MANY EARNING YEARS AHEAD OF YOU

YOUR DEPENDENTS ARE FINANCIALLY STABLE ON THEIR OWN

WHICH INVESTMENT

IS BEST?

Unfortunately, there is no clear-cut, onesize-fits-all answer. The most important question is “Which investment is best

for me?” The answer will depend on your income, your goals, your risk tolerance, and to some extent, your financial savvy.

There are also tax implications for investments. If you are earning money from your investments, that counts as income, although it may be taxed differently. If you own an investment property, there are deductions you are allowed to make as a landlord. Even if you are already fairly comfortable in the finance sector, having a pro on board can be invaluable. It is their job to stay on top of market developments and regulations, and advise you on the best course of action for you. Since the introduction of Bitcoin in 2009, fortunes have been made and lost virtually overnight in cryptocurrencies (a decentralized currency which exists only virtually, not physically). This by itself should serve as a warning. There are many, many online posts devoted to stories of people who invested heavily in one called LUNA, only to watch it lose 99 percent of its value. The NY Post newspaper ran a story of one young investor who quit his job when LUNA peaked and his worth rose to a staggering $4.6 million. Now, left with a measly $500, he is seeing a very different future.

Imagine if he had invested only a portion of the $4.6 million in something else, how he could have lessened those losses!

THE NEXT BIG THING

MAY NEVER HAPPEN GET AN EXPERT

The best advice is to seek out professional

help. The IAFF Financial Corporation (iaff-fc.com) has a wealth management initiative and offers webinars and education for union members that may be a great place to start.

A good financial advisor will ask you lots of questions to get a grasp on your individual situation and will craft an investment strategy that reflects that.

Be wary of anyone who is pushing you to invest in a single product without offering options, or someone who won’t clearly spell out the risks you face with your potential investment. Don’t be shy about

asking him or her how they make their money (commissions vs fees).

A good financial advisor knows their job is to educate and inform clients and will be willing to take the time to invest in

you, not just for you!