Know Your Numbers

Financial planning boils down to knowing a few important numbers.

No, it's not your rate of return or your fees. Those matter, but not nearly as much as these:

Burn Rate

If you generally like your life - you drive nice enough cars, live in the neighbourhood you love, take enough vacations and don't have to change the type of wine you drink on the weekends based on your last paycheque - life is probably pretty good.

How much does that life cost you? In after tax dollars, how much are you spending on a monthly basis?

When you know that number, we can project how much your life will cost you in five, ten, or fifty years.  Your life will be markedly more expensive down the road, but if we understand the cost of the quality of life you want, we can project those numbers with ease.

When you know how much money you need to spend, we can then calculate how much money you need to have saved at retirement.

There are some spreadsheet warriors out there that could do these calculations to 90% accuracy, but I've yet to meet a DIY'er that takes into account inflation, government benefits, and yearly tax policy changes (HINT: we do all of that and more).

Estate Goals

Your estate is what you leave behind to those you love.  I love a good cliche, so here is one that is very applicable, "If you don't know where you are going, it doesn't matter how you get there."

Some clients want their kids to be left with a very specific amount of money when they pass, "I want each kid to have $1,000,000".

Others take the, 'they can have what is left approach'.

Some want to leave it all out there, "we are going to spend every last cent."

But the majority of the people I work with have not given this one moment of consideration before we met. 

If you don't have grand ambitions to leave your kids a fortune, the reality is that you can probably stop working much sooner than you think.  Honestly, your kids would probably be happier to see you happy than they would getting a 'few extra bucks' 25 years from now.

Saving Rate

How much of your take-home pay are you saving to invest? The higher the percentage of your income that you are not consuming, the quicker you will be able to stop working.

Sometimes saving anything feels impossible; it turns out that having a family is extremely expensive. Most of my young family clients feel like they are in survival mode, living paycheque-to-paycheque. These are seasons, folks.

Most of the time those same families are still contributing to work investment plans that they just forgot about, paying extra on their mortgage because that's just how they have always done it, have $50,000 in RESP savings for their kids that they accumulated by accident, or have zero debt and a healthy emergency savings account.

People are often saving more than they realize.

However, if you want to get ahead faster, the easiest way to do that is to increase the part of your paycheque that gets allocated to future you.

TLDR

If you know how much you spend, save and want to leave to your kids the rest is easy to figure out. 

If you know those numbers and want help putting them together, we are here to help.

If you have no clue on those numbers and feel anxious thinking about them, we are here for you too!