How To Estimate Retirement Spending

How To Estimate Retirement Spending

Retirement spending is one of the most important assumptions in a retirement plan. Making the right retirement spending assumption can make the rest of a retirement plan much easier. Making the right assumption can also make a retirement plan much more successful.

Making the wrong retirement spending assumption however could mean running out of money in retirement, or it could mean working longer than necessary, or it could mean accumulating millions of dollars late in retirement. All things we would prefer to avoid.

Of course, there are some simple “rules” for retirement spending like assuming 70% of pre-retirement income, but given how important retirement spending is in a retirement plan these generic rules can lead to issues in the future.

When creating a retirement plan it’s important to make the right retirement spending assumption. This means avoiding generic rules and instead understanding your unique spending needs today and how they might change in retirement. This also means understanding the impact of being wrong with your retirement spending assumption and how doing a “trial run” of retirement spending can help improve the level of confidence you have in your retirement plan.

Four Things We Would Do In A Financial Emergency

Four Things We Would Do In A Financial Emergency

What would you do in a financial emergency? What steps would you take? Do you have a plan in place?

It turns out that nearly 4 out of 10 people don’t have even a basic plan for a financial emergency. In the latest Financial Planning Canada survey, nearly 40% of respondents said they do not have an emergency fund.

While that stat is pretty alarming, the good news is that 6 out of 10 people are saving for an emergency, but is that the only thing you can do?

Our plan includes multiple layers of protection if we were faced with a major financial emergency. There are four key things that we would do. These four things would allow us to cover basic expenses for 5+ years! How’s that for peace of mind!

This 5-year “safety net“ wasn’t something that we created overnight, but we’re thankful we now have a strong plan just in case the worst were to happen. We hope to never get to that point, but it’s nice knowing we have a solid plan that’s ready to go in case things get really, really tough.

Here are the four things we would do in a financial emergency…

The Benefit Of Financial Planning When You’re Young

The Benefit Of Financial Planning When You’re Young

There’s a common misconception that financial planning isn’t necessary when you’re young. Young people are often told to go “read some books” about personal finance. Financial planning is traditionally thought of as something reserved for those with higher income, higher net worth, transitioning into retirement etc.

The fact is… this couldn’t be further from the truth.

One of the BEST times to build a financial plan is when you’re young, when you have lots of options, when you’re designing your life (both personally and financially), and when you’re making some BIG financial decisions that will impact you well into the future.

Some of the financial decisions you make while you’re young can haunt you for years or decades. Making the right decisions now can mean less stress and greater peace of mind in the future.

So why is there this misconception that financial planning isn’t for young people?

Most likely because financial planning in the past was focused on products, it was all about investments, insurance, new debt etc. Products that could be sold. Young people were often left out of the conversation because in general, young people don’t need products, they need advice.

Getting the right advice is so important when you’re young.

Even small decisions can have an enormous impact over time. It’s important to get the right advice early on, avoid common mistakes, and create the right systems and habits that will pay dividends for decades to come.

This advice should cover a few key areas that “traditional” financial advisors rarely cover.

8 Ways To Feel Financially Secure

8 Ways To Feel Financially Secure

Feeling financially secure has nothing to do with how much money you have or how much money you earn. Feeling financially secure is all about how you feel about your finances, how you manage your finances, and your attitude towards money in general.

Financial insecurity is a very common feeling. It affects both low-income and high-income households, it affects both young and old. In fact, according to the most recent FP Canada survey, at least half of us are affected by financial stress in some way.

“Half (50%) of Canadians say that financial stress has impacted their life in at least one way, with health issues (18%), marriage/relationship problems (15%), distractions and reduced productivity at work (14%), and family disputes (13%) the most common ways stress affects them.” Source.

When talking about financial security, it’s important to differentiate between BEING financially secure and actually FEELING financially secure. It’s possible to BE financially secure but not FEEL that way. It’s possible to be in a great financial position but without the right knowledge, routines and plans, it may not actually feel that way.

In this post we’ve outlined eight things you can do to FEEL financially secure (even if you still have the exact same income, spending, and savings).

Managing Cash Flow Using The Digital Envelope Budget System

Managing Cash Flow Using The Digital Envelope Budget System

Whether it’s a torrent or a trickle, having a system to manage cash flow can help make money easy. One of the most time-consuming things about personal finances is managing income and spending. But what if you had a budgeting system that helped you manage that monthly cash flow? And what if that system was free, easy to set up, and simple to maintain?

Managing income and spending is the best way to achieve financial freedom. It doesn’t take much to go from financial ruin to financial success. It can be as little as $10 per day. It’s not about stellar investment returns, or risky real estate investing, or earning six figure salary, it’s all about paying attention to income and spending.

But old methods of managing cash flow need to be updated for the digital age. Cash is less prevalent, and credit and debit transactions dominate. Any system for managing income and spending needs to be digital, automated, and easy to set up and maintain.

The envelope budget is a classic way to manage income and spending. It’s a proven way to manage cash flow and it’s easy to understand. Money gets allocated to certain envelopes and spent during the month. As money in an envelope gets low this provides a signal to slow down on spending until the envelope gets replenished on the next payday.

Thanks to no-fee online bank accounts, the envelope budget can be easily adapted to the digital age.

But it’s not as simple as just creating a few new bank accounts. To manage cash flow with the digital envelope budget system it helps if you have a budget already created. This may require tracking your spending for a few weeks or months. Or it may require looking at past statements. It also requires an online no-fee bank account.

This is how you set up the digital envelope budget system.

The Cost Of Raising A Child

The Cost Of Raising A Child

Children are expensive. That’s something we can all appreciate. But just how expensive are they? What is the cost of raising a child? What is the cost of raising 2, 3, 4+ children?

For new parents, or soon-to-be parents, the cost of raising a child can be a real guessing game. As parents to two young children, my wife and I felt the same uncertainty when we started our family. We had to guess about how much it would cost and what kind of expenses we needed to anticipate.

We anticipated some costs, especially in the first few years, but we never took the time to look at the total cost of raising a child, we just didn’t know where to begin.

As many parents can attest to, raising a child is expensive. There are many costs when raising a child. From diapers to daycare, food to formula, the total cost of raising a child is shockingly large.

The estimated cost of raising a child in Canada is $203,550! Wow!

Plus, this estimate doesn’t even include educations savings like RESP contributions. Add in enough RESP contributions to max out the $7,200 government grant and you’re at a total cost of $239,550 to raise a child in Canada!!!

With each child costing nearly a quarter million dollars, anticipating these costs becomes a very important part of a financial plan. It’s also important to realize this this quarter million is very front loaded, with a lot of the cost coming in the early years. For new families this is important.

When building a plan, we want to anticipate these costs on a year-by-year basis, we want to understand when these expenses will occur, and we want to plan for possible cash flow issues down the road.

We also want to help new parents understand that there is a light at the end of the tunnel, because for parents with 1, 2, or 3+ young children, the cost of daycare and diapers can feel pretty overwhelming.

Lastly, we also want to anticipate government benefits and tax credits, both can help offset a large percentage of the cost of raising a child. This is an important part of a family plan and can be worth thousands of dollars per year, so we don’t want to ignore them.

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