Firstly, this is a biased article for me to write as I am a financial advisor. However, when I talk to teachers at various points in their career about their financial concerns, the one response I seem to hear is “I wish I had one of you earlier”.
Why do teachers need a financial advisor?
1. Mistakes cost money
I recently came across a situation where a teacher needed money for an unexpected expense for her child. She didn’t have anyone to discuss the situation with, so she took money out of her RRSP to pay for the situation. She thought her situation made her eligible for “hardship withdrawal”.
It didn’t.
Not only did this withdrawal incur a penalty but the total amount was added to her annual income and subject to income tax.
If she had someone to discuss the situation with, and lay out all of her options, she would have realized that there were a number of other options available.
2. Uninformed choices cost money
I tell (almost) every new teacher to avoid RRSPs when saving for retirement. As a teacher, you will receive a pension in retirement. Income for your RRSP will increase the amount of money you will pay in taxes to Canada Revenue (CRA).
For most new teachers, RRSPs may appear appropriate because it’s likely what your parents or non-teacher friends are using. As your teachers’ income grows your pension adjustment will also reach its maximum. Your Pension adjustment limits the amount of contribution room available towards your RRSP.
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3. No one wants to look back and think “What If?”
When my wife and I bought our house, we pondered if we should buy a move-in ready townhome and move out when our family grew, or if we should buy a bigger house and do some work. We didn’t really ask people’s opinion who had been there before us and we bought the townhome.
After we bought, the housing market took a downturn and our sizable down payment (now in the form of equity) disappeared, meaning we were stuck for a while. Sometimes we look back and wish we had bought a different house. What if we had spoken to a young family or realtor to get their opinion before buying?
Before you make any initial moves, or changes, to your financial endeavors – have you asked anyone’s opinion? Have you asked a teacher who’s been in your situation recently, or a financial advisor (not sales-person)?
I would suggest you do, so you don’t look back in a couple of years, and think “What if?”
4. I could fix my toilet, but I don’t have a weekend available to do it
Some teachers I come across are knowledgeable about financial topics. They understand pension eligibility and what accounts work well with a pension in retirement. They understand insurance, and the basic estate planning documents they need in place, and the list of other financial things that occur in their lives.
But first and foremost, they’re teachers. They are experts at educating children, providing differentiation of content to various students, and explaining complex situations with ease. While they could manage their financial lives adequately, should they be?
How much time would it take, and how accurate would it be?
I think the same thing when any type of outlet or pipe breaks in my house. I can do some things in the house, but when it comes to anything plumbing or electrical, I know enough to hurt myself and spend hours getting to that point. It makes sense to pay a professional who can do it in 25% of the time, fix the problem completely, and keep me from harm. I’m happy to pay them for their expertise.
That’s what a good financial advisor does.
They know lots of options when it comes to products, approaches to investing, insurance and income tax management; study these topics to remain up-to-date, can design a comprehensive plan that can change your future, and know the danger areas to look out for.
As I said at the start, this is a biased article for me to write as I earn my living as a financial advisor. I work with teachers and help them maximize their lives; make things easy to understand and provide you the flexibility to enjoy your free time as you wish.
