WHAT’S YOUR FINANCIAL STRATEGY?
A wealth plan to me is exactly what it sounds like or just a fancy way of saying retirement savings but not everyone views retirement savings equally.
When CBB fan Mary pointed out an online article about a retired Maritimes couple who were digging themselves out of $145,000 worth of debt I knew I wanted to read this debt story.
The couple who are both retired civil servants earned a combined income of $90,000 and over the years paid off their $45,000 mortgage.
Now, I’m the first to say that you don’t have to live the extravagant life to blow through your money. Why? Because even the small amounts of money we spend all add up. It’s very easy to go broke spending little bits here and there as opposed to losing it all by making larger purchases. You never win no matter what way your swipe the credit card.
The couple had $75,000 in credit card debt which snowballed into 16 maxed out credit cards and a refinance on their mortgage for $70,000. So where did all the money go? I’m not sure if they really know but what they do know is where the bigger chunks of cash went, their children’s education.
Our Wealth Plan
Not all parents have the money to put into an Registered Education Savings Plan (RESP) as it can get costly to the budget. Even though we are mortgage free and under 40 we still want to make sure when we retire all of our hard work helps us to live comfortably until the end.
We recently had a baby boy and last month we set up his RESP to the tune of $208 a month and just pre-paid cash for the entire year of 2014. We set up the RESP because we wanted to help him down the road with his education. Even so you can bet that we will make sure that he will be find a job at a young age like we both did. A bit of work growing up to earn money hasn’t killed anyone yet.
A portion of money earned from his jobs will be put aside for his education as he won’t know that we have the RESP saved up for him nor will we tell him until it’s time for him to go to school.
I bet there are loads of kids out there who think they are on easy street because mommy and daddy paid the way or will be as soon as they sign up for College or University. Do your kids a favour and teach them what hard work is about and earning a living while they are young. You don’t want to have to keep bailing them out of debt as they get older.
Your wealth plan should not include providing everything on a silver platter for the kids unless you have more money than you know what to do with. Even so why not show your kids what it’s like to be responsible with money?
You worked hard for your money and when it comes time to retire you want to enjoy that time, maybe travel or do things you couldn’t afford or had time for in your working years.
Both my wife and I had parents who at the time were not able to help us fund our educations. Now, our parents have a wealth plan that includes a retirement portfolio that suits them both.
I can assure you that at the time my parents were running their own business and any money they had went to fund the business and the houses they now own in England which are paid in full.
Money from the houses when they are gone will be left in the will for us kids to split. This means they are leaving us something because they are financially able to do so. I don’t expect it but that’s their wish as they have more than enough money with their pensions to live from.
I certainly didn’t know their financial situation to a “T” growing up but I knew from listening to them talk that money was tight. My parents were money conscious so we did without sometimes and we frequented second-hand shops. Having top of the line stuff was never on my parents agenda.
Life was great with lots of love and laughter in my family and for the most part we had what we needed. When it came time for me to go to University I knew my parents couldn’t help me and I never did say a thing about it. Not all parents can do this and parents need to look at their own financial situation before they go into the red for their kids.
Some parents might feel like they are failing their kids if they don’t pay for their education but I would have felt like I failed my parents if I accepted money that made them struggle into their retirement years.
There comes a point where kids need to take responsibility whether it be through a part-time job as they grow up and setting aside a portion of the pay or working while you go to school. The other option is having to deal with the fact that they need to get OSAP or other bank loans to pay for school.
In no way should parents who worked so hard all of their lives have to dig themselves into the ground when they should be enjoying their retirement years. That’s how I feel about my parents and I’m sure our son would feel the same about us.
I don’t know if this couple made their financial health known to the kids but they shouldn’t have had to. As adults we are in charge our own wealth plan. There are always going to be what-ifs and although we can’t predict them we must not forget about them.
You can’t expect your kids to know what you have in the bank plus imagine how they would feel if you went bankrupt and lost everything. What if they found out that for the most part it happened because you funded their education? Food for thought and although it’s basic math it boils down to financial pride and priorities.
Don’t let pride stand in the way of what reality is because parents shouldn’t have to suffer. The kids have many years to pay back a school loan something a couple who is about to retire shouldn’t have to think about.
As for the couple’s credit card debt again a budget may have saved them had they of known how much money was coming in and going out. It was just last September after debt consolidation that they paid off their credit card debt and are now packing the cash away to pay back the $70,000 loan on the house.
No one says you have to be a financial expert but you should understand the law of addition and subtraction when it comes to your money. It’s your life after all. Think about it!
Would you go into debt near retirement for your kids?
Our net worth
We are always looking for ways how to increase our savings and retirement investments. By tracking our net worth these numbers below show us how well we are doing in terms of meeting our target numbers or what areas we should concentrate more on.
After last months disaster with our Net Worth I am happy to report a rebound in our figures. I’ve been so busy lately that I was pleasantly surprised about the growth in Investments. Although I’m not sure if it was because of the transition we went through or a positive up turn in the markets that caused this, the result was certainly well received.
If you have forgotten, the transition we went through was single fee based investments to a group fee based set of accounts that is cheaper to fund because of the amount of holdings.
The other difference this month compared to the previous couple of months is that Income remained fairly consistent but actual expenses dipped quite considerably.
You can check out our November 2014 Budget Update to see where the money went in our budget to give you a bit more information.
RESP Contribution 2014 : $2500 ( I will add this figure into the above chart starting next month)
Understanding net worth
What Does Individual Net Worth Mean?
Net Worth is a snap shot of your financial health sort of like a picture or debt to net assets. In simple terms it’s a total of the value of your assets minus your liabilities.
We credit the growth of our net worth due to patience, perseverance, using a monthly budget and not giving up. Your numbers may go up and down but don’t let the numbers scare you rather understand why and move on.
If you would like to use our budget I offer a FREE downloadable budget which I created and that you can use at home just like we do. I don’t charge for it because I want you to save money not spend more!
Enjoy and let me know what you think… plus there are tonnes of other free printable lists offered at Canadian Budget Binder to help you achieve some of those financial goals and build your net worth. Now… what you need to do is determine just how much net worth you actually have and go from there….
Determining net worth
Figuring out net worth is fairly easy as long as you know your personal numbers or monthly finances which means you need to do your homework. Net Worth is simply adding up all your assets (what you own) then taking away your liabilities (what you owe) which will give you a net worth number.
Understanding your net worth will help you determine if you are on track to meeting or beating your personal financial goals. It doesn’t get any easier than that.
Calculate net worth
Do you know how to calculate your own Net Worth?
Now you can stop asking yourself the question, how do you find out your net worth? Why? It’s easy to determine. We like to calculate our net worth every month so we know if we are still on track. Some people calculate it yearly or quarterly. It’s really up to you and how informed you want to stay when it comes to your financial health.
Net Worth is essentially an estimate and not everyone uses the same type of figures. Some people don’t include vehicles like we do or they may leave out the assets inside the home like we have. It depends on what you want to calculate or what you can sell today and make money on.
Why not go ahead and calculate your own using our Free Money saving Tool Net worth Calculator (Canadian Budget Binder 2012)
Why you should set goals
Setting goals are the only way we work towards achieving what we want to get done as a couple around the house and in our financial life. I know that without them we would be flying by the seat of our pants which wouldn’t work for us.
Below are our 2014 target goals some of which are the same from 2013 and many which are new for 2014. I don’t like to move on to new goals if I have other goals that are unfinished but I also like breathing room and play time if you know what I mean.
I hope by posting them each month it motivates me like it has this past year to get stuff done and reach our target goals with some form of ease although nothing in life is that simple.
I find it’s much easier to be held accountable when I share what we need to do with all of you. Yes, my wife refers to the list when she asks what I plan to do next. I’m not sure if that’s a good thing for me or not, lol.
Do you set goals for the year?
Our short-term goals 2014
Every month I update these mini short-term goals as I like to call them where you will see what’s new and exciting in our world but not just financially. These goals are our life goals which include everyday jobs that need to be completed. We like to carry out these goals on a monthly basis although that doesn’t always work out that way.
I’ll continue to update this list for those that enjoy reading this net worth post each month but like most of you know, a list is never-ending. (Especially when your wife keeps adding to it, lol)
- Mortgage is now paid in full
- To renovate the upstairs bathroom- Renovations started, some products purchased.
- To renovate the master bathroom- Well under way now and ordering the shower door glass next week.
- Clean up the basement- Nope, I added to the mess by moving all the materials for the renovations down there.
- Fix some screw holes in the baby room– I will tackle this before baby stays in room exclusively as he is currently in a cradle.
- Start working on putting in the new flooring in the living and dining room- Haven’t even started this yet
- Purchase all new kitchen appliances- So far all we have is a new stove and an extractor fan (range hood) but they are not installed. We are on the hunt for a kitchen sink, tap and pot-filler.
- Purchase a new freezer- We are buying one medium-sized freezer and donating our large freezer.
- Invest more in our TFSA, RRSP etc. – RESP has been set up and I’m now contributing more to my RRSP starting at the end of November.
- Continue to meal plan, create new homemade meals- Not too much meal creating has been going on since our son has arrived. (check out the all new recipe index on the blog)
- To read a new personal finance book- I’m not giving up on this just yet.
- You can read more of my short-term goals in our monthly budget update here.
Our long-term goals 2014
I will do a yearly update on these goals so you know how we made out with them. The long-term goals are goals spread out over the year(s) as we are not in a huge rush to do them but they are always on the top of our mind.
- Finish remodel of the entire kitchen- This is now slated for 2015.
- Purchase a new washer and dryer- We talked about this today and will look for one on boxing day. Our luck our free washer and dryer will stop working and we won’t find a deal so we’ll start looking now. It’s about time we passed them on to a new home.
- Sort out the deck lights (garbage and I’d never buy them again and not in a huge rush to fix them) Don’t ever buy those little deck lights or you will regret it, trust me.
- Fix the fence in the back garden- I was hoping to get it done before the first snowfall but that didn’t happen so it will be worked on next Spring 2015.
- Look into buying a pressure washer- I’m going to keep my eyes open around Christmas and Boxing Day even though they aren’t big sellers this time of year.
- Update the garage (man cave) not really a man cave but I like to keep it neat and tidy- I’ve just finished cleaning out the garage to put our vehicles in for the winter. I will tackle more come Spring 2015.
- Save up to purchase a new vehicle (well, second-hand)- We talked about just parking my truck until our son is able to ride in it as he can’t right now because of his car seat.
- Save for a holiday to anywhere that is not where we live- We are saving to go back to the UK for a holiday in 2015 or early 2016.
- Start planning basement renovations (bathroom, bedroom, family room, laundry room, office, storage area.
- Look at new ways to invest our money i.e. rental units
- Continuing to educate ourselves on personal finance and investments- This was something we had a discussion about tonight. Even if we don’t invest on our own we need to educate ourselves on where our money is being invested rather than leaving it up to our financial advisor.
- Continue to network with other like-minded people
- Continue in my new career- I was offered contract full-time starting in January 2015 so life is about to get super busy.
Our financial numbers
When budgeting anything is possible, we are proof of that although we still have a long way to go in our journey. These are our numbers and our goals, not a means of comparison towards your own goals to others target goals.
We don’t care how much money others make or if they have a high net worth or if it is lower than ours as it’s not a competition. I hope our experiences perhaps will help guide you along your financial path working towards debt freedom.
We all have different financial paths
Not everyone has the same path in life. Some of you may have had to start over like I did or go to school a second time and now have OSAP loans to pay back.
Others may have divorced, lost money in the stock market or other investments, suffered job loss, fell ill or was injured on the job etc. but you can’t let that stop you from achieving your financial goals.
Some of you may have been given trust funds, paid-for homes, paid educations or perks in life that give you a financial kick-start and that’s OK too. Remember what I said, “It’s not about how much money you make, it’s how you save it”.
Focus on you and don’t let the evil eye of money jealousy or keeping up with the Joneses cloud your vision. No one cares about your money as much as you do so don’t waste your energy trying.
The only reason people accumulate wealth is because they know how to save or invest it wisely even if they did inherit money or win the lottery. The smallest improvements should mean big strides in working towards reaching your goals.
Sometimes we have to fail in order to learn and we’ve all been there. Money can be an evil force for some people especially those who have a negative attitude towards their own financial situation.
I urge you to be optimistic and little by little with determination you too should see improvements, if you want that to happen.
Net worth updates 2014
Below you can click the links to read past net worth updates to see if we were on target or if we struggled with some of our numbers. In the last year since November 2013 our net worth according to our figures has grown $82,268.47
November 2014 $621,420.63 – November 2013 $539,152.16 = $82,268.47
You will notice two Jan 2014 figures and shows where we had our house valued leading to an increase in our assets. I purposely left both Jan 2014 figures in so you can see the increase visually.
- January 2014 +3.80%
- February 2014 +1.25%
- March 2014 +0.75%
- April 2014 +0.31%
- May 2014 +1.15%
- June 2014 +1.31%
- July 2014 +1.40%
- August 2014 +0.99%
- September 2014 +0.51%
- October 2014 (-0.06%)
That’s all for this month’s net worth update but please check in at the beginning of January 2015 to see how we made out in December 2014 and what has happened to our finances since.
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