Daily Archives: January 17, 2022

By Christeen HaddadinCertified Money Coach

FIRE, which stands for Financial Independence, Retire Early, has become a whole movement in the West. People aim to retire as early as possible to spend their time doing things they are passionate about. Doesnt this sound like a dream?

What is FIRE andhow does it work?

FIRE is to reach financial independence as early as possible; meaning, the ability to generate enough passive income to cover your expenses today. FIRE takes serious commitment and big sacrifice in your 20s and early 30s so you may reach financial independence in your late 30s or early 40s.

Building up to the FIRE needs to start as early as possible, saving 50 to 70 per cent of your income. The amount youre saving needs to be invested to accelerate the process of building a solid asset base that will enable you to generate passive income to sustain your lifestyle.

If you dont wish to work for money (you dont want to exchange your time for money), you need to be in a place where your money is working for you. It would help if you have assets in stocks, bonds, real estate, or any other investment that brings in enough returns (cash inflows) to sustain your lifestyle.

People who are working towards their FIRE are actively working on building an asset base. So in their 20s and early 30s, you see them allocating a significant percentage of their active income, which is the income they work for, towards investing to grow their investment portfolio enough to generate the amount of cash flows they need to live off.

How to calculateyour FIRE amount

How big of an investment portfolio do you need to retire and live off of the passive income generated from the portfolio? It all depends on the lifestyle you envision after retirement. Then multiply the amount you will need yearly by 25 to arrive at your FIRE number. For example, if I estimate that I will need JD2,000 per month after retirement, then my annual needs are (JD2,000X12=JD2,4000).

Now I multiply my annual needs by 25 to arrive at my FIRE number, which would be JD600,000.

So, I need to build an asset base of JD600,00 to reach my financial independence. Once your reach your FIRE number, move your FIRE amount into low-risk low-yield investments, say 5 per cent yield. Then draw down (reduce the amount of money by using it) 4 per cent a year, which would allow your FIRE number to keep growing.

Reprinted with permission from Family Flavours magazine

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FIRE: The hottest thing in personal finance - Jordan Times

Many millennials may not have a pension or benefits, but theyre trading that off for flexible working hours, more vacation time and the freedom that comes with being their own boss, says an advisor.fizkes/iStockPhoto / Getty Images

Millennials are facing a unique mix of financial challenges that include high levels of student debt, precarious income, daunting real estate prices, and a career log jam as baby boomers delay retirement, according to the findings of a new report.

Theyre really on the back foot from the moment that they arrive in their financial adulthood, says Dr. Brooke Struck, research director at The Decision Lab, which authored the report released in November in partnership with FP Canada Research Foundation.

But at the same time, he adds, They are shifting their priorities in what it is that theyre hoping to get out of life, and by extension what it is that theyre hoping to achieve with their money.

All of that means advisors who work with millennials, who are aged 26 to 40, need to check old assumptions at the door and implement generation-specific planning strategies.

The immediate priority, says Dr. Struck, is often a stabilization phase to give millennials a sense of control over their finances. Only then can they absorb the risk associated with investments that provide higher potential returns and start building toward longer-term financial objectives.

A lot of financial planners have noted that theyre surprised by the low-risk appetite of millennial clients, Dr. Struck says. But if you dont know when you might need the money because your job is very precarious and youre piecing together contracts into this patchwork of a professional life you cant really afford to say, Im going to take on this higher risk.

Jarrett Holmes, financial planner at Ironshield Financial Planning in Winnipeg and a millennial himself, says there are several practical ways advisors can help millennial clients stabilize precarious income.

A double-income household may have one partner with a stable salary that can cover living expenses while the other partners irregular income is directed toward saving for vacations, a down payment for a home or retirement. If neither one has a stable salary, he says there should a cash buffer in a chequing account that shouldnt be touched until necessary and rebuilt quickly when it has been breached.

An alternative is an entirely separate buffer account that receives all of the households income and pays out a regular salary to the chequing account. The idea is to introduce a layer that acts as the employer, adding regularity to the irregularity.

Thats in addition to a rainy day fund, which Mr. Holmes says is for true emergencies [and] not meant to absorb fluctuations of income.

Mr. Holmes adds that millennials may be planning to withdraw large sums earlier than previous generations for example, to take a sabbatical. Meanwhile, their ultimate goal is often financial independence rather than retirement to reach a point in their 50s when they can choose whether or not to keep working.

Theyre investing along different time horizons than financial advisors are used to seeing. So, [we have] to plan for a potential need for access to capital much sooner than we would regularly see, says Mr. Holmes.

Liz Schieck, a certified financial planner at The New School of Finance in Toronto and also a millennial, sees a lot of upside for millennials despite a job market that may delay the point at which theyre able to achieve a stable, secure income.

The ability to build their own careers, how they want to work, where they want to work thats something that for a lot of millennials has always been a part of what theyre looking for, she says.

Many millennials may not have a pension or benefits, but theyre trading that off for flexible working hours, more vacation time, and the freedom that comes with being their own boss, she says. The hands-on approach to designing their careers spills over into financial planning, where she sees a desire to participate in decision-making and stay in control.

However, sometimes it takes a while for millennials to see their situations in a positive light.

Ms. Schieck describes an adjustment curve that often kicks in when clients are in their mid-30s. A few years earlier, they were frustrated that their lives werent going according to plan. Then, suddenly, they realize they can rewrite and reorder their grandparents and parents graph of life accomplishments.

That frees them up to craft a financial plan that works for them, Ms. Schieck says.

She finds her early work with clients often includes reassuring them that they arent starting to save for the future too late.

Its okay if were focusing on paying down debt first. Thats an important thing to check off. Thats part of your long-term picture, she tells them.

Then, Ms. Schieck focuses on building a step-by-step plan that leads millennials from one goal to another, while making sure nothing they do compromise their future goals.

We dont have to be planning for everything all at once all the time, because its overwhelming [and] we dont always know what our goals are 15 years from now, Ms. Schieck says.

She adds that millennials cant compare their reality to baby boomers reality, because then [theyll] just feel behind forever, and thats not productive.

For more from Globe Advisor, visit our homepage.

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Why advisors need to focus on generation-specific strategies for millennials - The Globe and Mail

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Fresh out of college, you are excited to take up the responsibilities of adult life and gain some real-world experience. Before you know it, you are part of the rat race, pursuing a routine of trading your time for money. Your entire working life is associated with an exhausting, repetitive lifestyle that leaves almost no time for your hobbies, relaxation, or enjoyment.

I can think of two broad reasons why people work (for an employer):

Financial independence - most of us work to earn a living, pay bills, food, and entertainment, and save for retirement.

Passion - if you are actually passionate about what you do, congratulations! Less than 20% of the U.S. workforce claims to be passionate about their jobs.

Life expectancy in the U.S. is on the rise, which means your savings must last longer. But does that add more years to your work life? The Bureau of Labor Statistics says yes. The number of workers ages 75 and older is expected to increase by 96.5% over the next decade. Remember what Warren Buffett has taught us:

"If you don't find a way to make money while you sleep, you will work until you die." - Warren Buffett

91-year-old Mr. Buffett belongs to the passionate 20%, he loves his work, and we all want to learn as much as we can from him. If you belong to the 80% who only work to earn and sustain a living, why not use your savings to generate paychecks? Not only does this provide a recurring paycheck with minimal effort on your part, but it also lets you spend time with your family and pursue your hobbies.

Investing for income, a time-tested path to financial freedom is more accessible than ever today. Anyone with a brokerage account can do it, and all it takes is a diversified portfolio of over 40 dividend-yielding securities. This article discusses two picks with yields up to 7.4% to amplify your passive income. With a portfolio of such securities, you will have sufficient income never to have to work again. Without further ado, let us dive into these picks.

For over 50 years, PIMCO has helped millions of investors pursue their objectives despite shifting and unpredictable market conditions. This world-class CEF manager known for their fixed-income generation through active management is currently managing 25 CEFs globally with over $14 billion in Assets Under Management.

PIMCO Dynamic Income Opportunities Fund (NYSE:PDO) is by far the best performing CEF in PIMCO's portfolio in 2021. Per PIMCO's October report, PDO's Net Investment Income ('NII') covered its distributions (rolling three months) by an impressive ~160%, the highest among all PIMCO CEFs.

PIMCO's top 5 outperformers

PIMCO

Investors should note that PDO was born in February 2021, when quality yields were scarce, and short-term rates were near zero. As such, PIMCO was quite conservative in setting its yield during inception (7.1% @ its $20 IPO price) compared to older CEFs.

PDO's $0.1125/month calculates to a 7.4% annual yield today. The CEF earned more than its distribution through the year, and shareholders received a $0.49/share special dividend in December. Including this distribution, the net annualized yield comes to a whopping 9.8%! PIMCO has a solid track record of rewarding shareholders, and the infant PDO has proven to be no exception.

65% of PDO's debt securities will mature within five years, with almost 33% having maturity durations of less than one year. This means the fund is highly resistant to rising rates. In fact, as rates rise next year and beyond, PDO's holdings will mature and release capital for deployment into new debt securities that yield more.

PIMCO

PDO's first birthday is approaching, and you are invited to the party. The CEF is currently trading at par with its NAV - a rare opportunity for PIMCO CEFs, which typically trade at healthy premiums due to the brand value and trust that the firm carries.

Y-Charts

With higher rates on the horizon, PDO may see a minimal impact in the short term and is at an advantage in the longer term. Investors will see high NII in excess of distributions and more special dividends. PDO is priced at a bargain today, and this sale won't last.

When was the last time you saw Big Tobacco advertise in a major sporting event? McLaren's red and white Marlboro decals are all anyone could relate to until Formula One banned tobacco companies from advertising in 2006.

Fifteen years later, British American Tobacco (NYSE:BTI) (also known as BAT) is back with a bang in Formula One with its dazzling papaya orange and cobalt blue branding, promoting its Vuse vapor device.

Instagram

BTI has been aggressively rebranding its image to the younger audience, spending over 1 billion on social media influencers, pop stars, and sporting events to promote their lung-friendly e-cigarettes and nicotine pouches. The campaigns are producing results. BAT reported a 142% increase in social media followers (vs. 1H 2020), and its new category products - Vuse, Velo, Glo are massively popular among the millennial and generation Z population worldwide. The company saw an influx of 3.6 million customers in the first nine months of the year, more than 2020 as a whole, thanks to a rise in demand for its vaping, heated tobacco, and oral products. BTI's total non-combustible user base stands at 17.1 million, and the company expects this segment to contribute to the profit growth for the first time this year.

Given new category revenue was under 7% as of 1H 2021, investors may wonder how the majority of BTI's business is performing. This is where BTI shines. Due to its balanced geographic exposure to developed, emerging, and developing markets, BTI projects 5% YoY top-line growth. The company reported a growing volume of cigarette sales in Indonesia, Bangladesh, and Pakistan, where a significant percentage of the adult population smokes combustible products. So a segment that is the pariah of the market, with competitors reporting declining sales, continues to be a growing cash cow for BTI.

BTI also stands ahead of the pack when looking at valuation, profitability, and the dividend. It is the cheapest, most profitable, and yields the highest. Its modest payout ratio ensures the 7.1% dividend is sustainable and can grow over time.

Data Source: Y-Charts

Please note: BAT's distribution varies due to the fluctuation in the USD-GBP currency exchange rates.

In the past 12 months, BTI earned $3.75/share, a 10.1% total return off which they distributed 7.1% to shareholders.

BTI's Vuse e-cigarette range is now a global leader in market share in the top five vaping markets in the world. The company is on track to hit its target 5 billion revenue from non-combustibles by 2025. The company is aggressively transforming its social image, and the efforts are paying off. Growing top-line influence of non-combustibles, a socially acceptable product segment will warrant an improved valuation from Sir Market. You get paid to wait for this transformation to happen, with a growing dividend stream and significant capital gains.

Getty

Life is short, and everyone desires to retire early. No one wants to spend 40 hours a week for thirty to forty years working for someone else unless they are actually working on something they are passionate about. Instead, wouldn't you spend more time with friends and family and pursue activities that give you joy. But we get it; no one wants to lose the comfort and predictability of a paycheck.

With income investing, you can have your cake AND eat it too. The strategy provides you with the comfort of sustainable and growing paychecks while giving you plenty of time to focus on your personal life.

This article discusses two picks with yields up to 7.4%. At HDO, our Income Method is built on the premise of getting your retirement under your control. We have a portfolio of over 45 high-quality income picks with strict allocation limits, targeting a yield between 9-10%. We issue timely buy/sell alerts so you can spend time on your hobbies. Diversification and allocation limits improve the sustainability of the income and reduce the shock from individual entities. High yield ensures you make enough to sustain your retirement while staying ahead of rising costs, volatile markets, and other economic conditions. We let the power of dividends help us pursue our passion and achieve new heights.

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2 Big Dividends That Work As Hard As You - Seeking Alpha

With 4.5 million employees quitting their jobs and one of the lowest job participation rates in decades, employers are struggling to fill the over 10 million open jobs reported by the Bureau of Labor Statistics earlier this month. Yet, two stealth developments at the Department of Labor are poised to make that struggle even worse.

First, on Jan. 4, President BidenJoe BidenCarville advises Democrats to 'quit being a whiny party' Wendy Sherman takes leading role as Biden's 'hard-nosed' Russia negotiator Sullivan: 'It's too soon to tell' if Texas synagogue hostage situation part of broader extremist threat MORE renominated David Weil to serve as administrator of the wage and hour division, the agency responsible for enforcing the minimum wage and overtime provisions of the Fair Labor Standards Act. Weil previously served in this position during the Obama administration and was nominated to reprise that performance in June 2021. His nomination stalled in the Senate, having failed to be voted favorably out of committee, but its now getting a do-over, with the Senate Health, Education, Labor & Pensions Committee again considering Weils nomination.

Second, the Labor Department quietly posted its enforcement statistics for the first year of the Biden administration. Last year, it recovered just $234.3 million in back wages. That is a decline of $23.5 million from 2020, when many businesses and Labor Department offices were closed due to the pandemic, and a decline of $98.2 million from the Trump administrations record year in 2019. Weil fared no better during his previous tenure, as his high was $266.5 million in 2016 less than every year in the Trump administration, including the lost year of 2020.

This poor performance in Democratic administrations may seem odd. Counterintuitive, but easily explicable. Under Democrats, instead of enforcing the law as written to protect low-wage workers from clear violations, the Labor Department prefers to engage in social activism.

For example, Weil doesnt like independent contracting (IC). Contractors overwhelmingly supported the Trump administrations IC rule (withdrawn by the Biden administration), and California voters rejected a strict IC test in 2020. Contractors want the financial independence and the flexibility of choosing when, where and how they work. The independent workforce increased by 34 percent in 2021, to 51.1 million workers, with 68 percent of newcomers from Gen Z and 55 percent women, according to MBO Partners. MBO Partners also reports that 87 percent of these workers are happier working independently, 78 percent say they are healthier, and nearly 30 percent reported annual earnings of over $100,000. Yet, with Weil at the helm, the Labor Department is likely to focus enforcement on ending independent contractor relationships, returning to his 2015 guidance concluding that most workers are employees.

Weil is also wrong about franchising, which he attacked in his book, The Fissured Workplace, as being responsible (with contracting) for lower wages, lack of health benefits, and diminished opportunities for upward advancement. In fact, independent franchise owners pay higher wages, offer health insurance at higher rates, and provide greater opportunity for advancement than other small businesses and create 2.3 times as many jobs than their large corporate competitors. Weil published his book just weeks before taking over as the nations top FLSA enforcer in the Obama administration, and then spent his time at the Labor Department using the power of federal investigations attempting to prove his theories. After leaving, he furthered his academic career by claiming he saw violations caused by fissuring while at the Department of Labor. Coincidence?

Also on Weils hit list is the fossil fuel industry. This industry has among the highest percentage ofprivate sector union membership and highest wages for blue collar workers. During his previous tenure, Weil led an initiative against that industry. A December 2014 press release, for example, bragged about a multi-year initiative in the Pennsylvania and West Virginia oil and gas industry: The oil and gas industry is . . . ripe for noncompliance," Weil stated. Given his disdain for the industry, we can expect increased scrutiny if Weil is confirmed. This would do nothing to protect low-wage workers, but instead turn regulatory power against an industry that already has high union membership and high wages.

In this labor market, now is not the time and Weil is not the person to put in charge of FLSA enforcement.

Tammy McCutchen served as the administrator of the Labor Departments Wage & Hour Division during the administration of President George W. Bush.

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David Weil: Wrong man, wrong place, wrong time | TheHill - The Hill

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Editor's Note: This story originally appeared on NewRetirement.

Everyone knows that if you want to achieve something, you had better set a goal. However, very few Americans actually do or even know how to set financial goals.

According to Schwabs Modern Wealth Index, only 33% of people have some sort of written plan or goals. Whats worse? The Financial Health Network finds that only 29% of Americans are financially healthy.

It doesnt take high-level calculus to figure out that there is probably a correlation. You will do better financially if you have financial goals. Heres a look at how financial goals can help you.

Financial goals and a plan will enable you to:

Stop Worrying and Feel More Confident

The American Psychiatric Association reports that 70% of adults worry about money. Setting goals is proven to help reduce your financial stress and get you on track to the future you want.

The Schwab study found that people with a plan are at least 25% more likely to feel financially stable.

Avoid Problems and Generate Wealth

The more you can get in front of your goals, the more problems you will be able to avoid and the more wealth you can create. Setting goals and planning your finances enables you to get ahead on taxes, savings, and so much more.

And, when disaster strikes, you will better be able to weather the storm. In fact, people with an overall financial plan are 32% more likely to have an emergency fund.

People who set goals and have a written plan are:

Make Better Decisions

Every financial decision you make impacts your money today and all the way through the rest of your life. By making those decisions in the context of your short- and long-term goals, you are more likely to be successful and happy.

While any financial goal-setting is good, get even better results by setting goals in all of the following categories:

Keep reading for examples of personal financial goals in all of these categories.

Process-oriented goals are about the how to achieve something, not about what you want to achieve. A process-oriented goal is a goal you set for how you want to go about achieving your goals.

So, setting process-oriented financial goals is a way to help you ensure success. It will help you build habits for wealth and security.

You can set process-oriented goals around the who, what, when, where, and why questions:

1. What and Where: Establish Systems

What kinds of systems do you want to set up for tracking and managing your goals for savings, spending, and earning? A spreadsheet? Notebook? A planning system like the NewRetirement Planner?

2. When: Set Time Frames

How often do you want to check in on your key financial metrics? Some people reconcile their accounts daily, others monthly, some quarterly, or even bi-annually or annually.

The more often the better. Make financial planning a habit!

3. Who: Get Buy-In from Household

If you are single and without any kind of family, then your financial planning is simpler.

Everyone else, your planning needs a buy-in from everyone who is or might cost you something in the future.

Most importantly, you need to plan with your spouse. Here are eight topics to tackle if you want to survive retirement with your spouse.

Now, lets move on to short-term financial goals and work up to the long-term.

Do you know how much you need to retire? What amount of money should you have in an emergency fund? How much will it cost to send kids to college, help fund your parents long-term care needs, buy a home or second home, fund health care, or pay for the vacation you really want?

Maybe none of that applies to you. You do want something in the future though.

It is really important that you know right now how much you are going to need to live the life you want to live.

Having a hard time visualizing your future wants and needs? Here are seven ways to imagine the future you want to have.

Once you know what you want, the NewRetirement Planner can help you see the numbers you need to achieve. Find out if you are on track and get loads of ideas for how to make better decisions.

Once you have determined your short- and long-term financial needs, you may learn that you need to save more. Set up a plan to increase your savings perhaps gradually, over time.

To make the goal-setting achievable and meaningful, you will want to be specific and detailed. For example, you might say that you are going to save an additional $5 every day or try for $500 a month with 50% of that going to retirement and the balance for other savings goals.

Automate: Not sure how to save more? Automating savings is one of the best things you can do today to set you up for a better future. Automating savings (especially if you schedule increases to correspond with salary bumps) ensures that savings will happen.

Tracking how you spend your money is a critical component of financial well-being. A budget will help you:

A budget does not need to be elaborate, just write down how much you have earned, how much you have spent (and on what), and how much you have saved. Make sure your expenses (including savings) are below your income.

It is NOT enough to save money. You need to have it invested efficiently and appropriately for your personal situation age, risk profile, needs, and time frame.

An investment plan is not about actively trading stocks. An investment plan is a thoughtful document that outlines your goals for your savings, strategies for achieving those objectives, a framework for making changes to your investment plan, and options for what to do if things dont go as expected.

An investment plan is one of the best short-term financial goals you can have because it sets you up for long-term success.

Like setting a plan for saving more and investing strategically, you will also want to set goals for getting rid of debt especially high-interest credit card or student loan debt. Here is how to pay off debt: 12 ways to reduce this expense for long-term prosperity.

We also strongly recommend that you document your debts in the NewRetirement Planner and run scenarios for accelerating debt payoff. See what happens to your lifetime wealth and security. This exercise can be powerful, fun, and very motivating.

As you can see, most short-term financial goals are about planning.

You see, in life, you have a finite amount of time to create a finite amount of money. That money is used to fund your entire life. And, creating plans is the best way to make sure that you will be able to accommodate your future needs.

Creating and maintaining a detailed retirement plan is a great way to visualize and manage your total pool of resources over your entire lifetime.

Dive in! The NewRetirement Planner makes creating a long-term plan easy.

Having an emergency fund cash that is the equivalent of three months to a year of income is key to your financial well-being.

An emergency fund is critical to keep you from accumulating debt or having to make compromised decisions if things go wrong.

The credit rating agencies and other services can give you great tips for boosting your credit score. A good credit score can help you with advantageous terms on loans.

Your credit score is especially important if you will be purchasing property in the future. However, your credit score can also impact the interest you pay on credit cards and your insurance rates.

Creating a long-term tax strategy can ensure that you have a much more secure retirement, and it can help you retain much more of your hard-earned money.

The NewRetirement Planner enables you to see your potential tax burden in all future years and get ideas for minimizing this expense. It takes forethought, but strategizing Roth conversions, taxable income shifts, and more can result in significant lifetime savings.

Over your life span, you will earn a finite amount of money. Similarly, you have a finite amount of time to spend.

When thinking about financial goals, how you want to spend your time is critically important. Do you want to:

Your income, what you spend, and what you save are all related to both your financial as well as lifestyle choices.

If you set a short-term goal for creating a plan to get rid of debt, your medium-term goal is to have it gone from your life.

Debt is a huge threat to your financial well-being. Having debt for things that give you utility a mortgage or car is acceptable. However, credit card debt and other kinds of high-interest debt can be akin to setting your money on fire.

Many people enter retirement with a mortgage. Financial planners usually advise against it, but a mortgage especially at a low interest rate is tolerable.

Yep. It is entirely possible to set a plan for retiring in the medium-term no matter your age.

Retiring Young: You might want to learn about Financial Independence, Retire Early (FIRE). FIRE is basically about making some significant lifestyle choices immediately to try to amass a large amount of savings that will free you from having to work. Adherents of FIRE are retiring in their 20s and 30s!

Retiring from Middle Age to Before 65: About half of Americans retire early usually by 61, but many people stop working in their 50s. And, with a plan, you can achieve this goal.

You can retire when you have saved enough money and secured enough income to last for the rest of your life no matter how long that turns out to be.

However, as you transition to retirement, you will still have goals and metrics to achieve. You want to:

In addition to retirement, the other truly long-term goal that many people have is leaving something for heirs either money or, in many cases, a home.

Use the NewRetirement Planner to track and manage your short-, medium- and long-term goals, including being able to see what kind of estate you might be able to leave behind.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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Set Financial Goals: It's the Secret to a Prosperous and Secure Future - Money Talks News

Having a written financial plan, creating an emergency account for expenses, and putting money into TFSAs and RRSPs are some ways young adults can help secure their financial future.freemixer/iStock

Finding a route to financial independence is difficult at the best of times, but the COVID-19 pandemic tore up the map for the youngest adults.

A recent Canadian Bankers Association survey found more than half (53 per cent) of Generation Z survey participants, those aged 18-25, said COVID-19 had upended their financial security.

Yet, almost all of them (98 per cent) said theyre making plans to strengthen their financial resilience. Financial advisors and planners can help Gen Z on this journey.

A written financial plan is a good place to start, some advisors say, and they stress that clear goals and emergency funds are important for clients in the gig economy or with uncertain incomes.

Determining what all the necessary expenses are including rent, internet, cellphone, gas and groceries is the first step, says Steve Bridge, certified financial planner and money coach at advice-only firm Money Coaches Canada Inc. in North Vancouver, B.C.

Being able to set aside two or three months worth [of funds for those expenses] is huge because it relieves a lot of the stress of, I dont have work this month, Mr. Bridge says.

He says he advises young clients to set up a savings account labelled holding account, which is to be used only for holding money for slower months.

Asif Khan, wealth advisor and financial planner at BMO Nesbitt Burns Inc. in Mississauga, says Gen Z clients should also start building investment buckets for a down payment on a house and for retirement.

Putting money into a tax-free savings account (TFSA) and registered retirement savings plan (RRSP) at this young age will be explosive for them in retirement, he says.

The TSFA and RRSP, for the long term for Gen Z, should be 100 per cent [in] equity compounding dividend-paying investments, Mr. Khan says.

Brian Cabral, director, wealth planning group, at CIBC Private Wealth Management in Toronto, says the decision on whether to use a strategy based on a TSFA or an RRSP depends on a clients tax bracket.

Although it makes sense to allow contribution room to grow in an RRSP until its needed in high-income years for tax savings, clients cant go wrong making contributions to either plan, he says.

Furthermore, there are government programs such as the First-Time Home Buyer Incentive and Lifelong Learning Plan that allow young clients to tap into their RRSP savings to buy a first home or go back to school for more education, Mr. Cabral says.

While home ownership seems a long way off for members of this generation, having it as a goal can still be realistic even in the current inflated market.

Mr. Khan says although homes are priced higher, younger clients are experiencing much lower interest rates than their parents and grandparents generations.

Yet, Mr. Bridge says that the basics need to be in place first.

If owning a home is a really strong goal and the numbers can work, yes absolutely, save up for a home, he says. But, adding that to everything else that is going on at that age finding a job, getting a regular income, potentially paying back student loans, maybe buying a car saving for a home on top of that is a big ask.

A particular stressor for Gen Z clients can be debt, particularly student loans. Mr. Bridge says advisors should help young clients pay down those loans sustainably.

This comes down to cash flow how much can a young person put toward [paying off these loans] every month and still meet their other goals?

Paying down a student loan too quickly can result in building a higher interest debt if something like a car repair comes up, Mr. Bridge says.

Gen Z clients being comfortable operating digitally also extends to their attitude to investments.

Were finding a lot of younger folks have decided to go with the do-it-yourself investment strategy, says Shawn Khimji, vice-president, wealth management, at Alterna Savings and Credit Union Ltd. in Toronto.

That can be challenging. . If youre not careful in your approach, especially in a market thats changing or on the cusp of changing with high inflation or interest rates, your asset allocation may not be appropriate for the future state of the economy.

There are web forums that recommend investments based on an ideology, Mr. Khimji says, adding that he tells clients to really know what theyre investing in.

The rise of bitcoin BTX21 and other cryptocurrencies also can capture Gen Zs imagination. A do-it-yourself investor might believe thats a path to easy money, Mr. Khimji says.

While he says he doesnt have a problem with young clients putting some risk capital in cryptocurrencies, they shouldnt put all their eggs in one basket.

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How advisors can help Gen Z plan for a financial future upended by the pandemic - The Globe and Mail