Often, when I conduct a Personal Financial Review (PFR), things don't add up. Clients will
tell me how much money is coming in, then they will tell me how much they spend on the mortgage/rent, food, entertainment,
travel, clothes, utilities, credit card payments etc. If I subtract one from the other, I can calculate how much
money could be made available for various financial planning strategies - investing, debt-reduction, paying down
the mortgage early, maximizing RRSP contributions, saving for children's education, or contributing to a financial
If that amount of money is not left over at the end of the month, something else is happening with the money. I will ask, "Did we make a mistake anywhere? Did we include enough for clothes, car insurance, visits to the hairdresser?"
I spent two years as an auditor with Peat Marwick (KPMG) and several years conducting internal audits with the federal government prior to becoming a financial planner. I was also a comptroller for many years and I know how to reconcile a bank statement (except my own). When things don't add up, more often than not, one or both of the breadwinners has a problem with alcohol, drugs, gambling, sex or a combination of these problems.
The government runs alcohol and gambling in this country. They make a lot of money at it and it is not in the governments interest to give it up. I would not be surprised if within 20 years they legalize soft drugs, set up "La Regie de la Prostitution Controlee" and charge hefty taxes on both. Nobody has to go to Bangkok - Montreal is much closer.
Unfortunately the person with the problem is not the only victim. The spouse and children are bigger victims.
In any case, getting the kind of help that is really required is important, both for the person with the problem and for the spouse and other family members and or friends. I can't offer the kind of help that is needed, but I can refer you to organizations that have had success in helping people recover.
It often happens that people with problems run into retiring allowances or inheritances. So what do we do when someone that we love with a problem like this runs into money? We are concerned that if the person has access to money it will be gone within a short period, or worse yet, it will be used to do damage to themselves or others.
By the way, my colleagues think I'm taking a big risk by addressing these issues. I would rather address them than pretend they don't exist. Myself and other planners that I work with have seen family finances ruined due to these problems. When you see an inheritance of a quarter of a million dollars gone after a year or two, having been slowly but systematically dropped into a machine at the Montreal Casino, you don't feel good about it. I choose to feel good about my work.
There are ways to protect the family's finances when somebody has one of these problems. For example, I don't normally like locked-in guaranteed investment certificates, but 5 year GICs are an excellent tool in a case like this. I don't really care for whole life (permanent) insurance policies, preferring to buy term and invest the difference, but in these situations, there is a real good case for paid-up whole life insurance with family members being irrevocable beneficiaries. Family trusts, and life annuities also come to mind.
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