Let’s face it—nobody likes thinking about estate planning. It’s one of those things that gets tossed into the same mental box as doing your taxes, getting a root canal, or sitting through a never-ending meeting. The best description is, it 'sucks.' But, like those other things, estate planning is something you’ve got to do. As a Certified Financial Planner (CFP) I've seen scenarios where no estate planning created a burden of stress at the worst possible time, so trust me when I say, future you (and your loved ones) will be glad you did.
Why Does Estate Planning Suck?First off, estate planning forces us to confront some uncomfortable truths. We’re talking about death, taxes, and what happens when we’re no longer around to have a say in things. It’s not exactly dinner table conversation, right? On top of that, it can feel complicated and overwhelming—there are wills, trusts, power of attorney, executors, and a whole bunch of legal jargon that can make your head spin. Plus, if you’re like most people, the idea of sitting down and deciding who gets what, and how it all shakes out, can bring up some serious emotional baggage. You start thinking about fairness, family dynamics, and all the “what ifs” that can make the whole thing seem more like a minefield than a meaningful exercise. But Here’s Why You Should Do It Anyway Despite all the reasons estate planning sucks, the reasons to do it are even more compelling. Here’s why: 1. It’s About Taking Care of the People You Love When you strip away all the legal mumbo jumbo, estate planning is really about one thing: taking care of the people who matter most to you. By putting a plan in place, you’re making sure your family doesn’t have to deal with a huge mess during what will already be a tough time. You’re making things easier for them, and that’s one of the best gifts you can give. 2. You Get to Decide What Happens Without an estate plan, you’re essentially letting the government decide how your assets will be divided. And let’s be real—do you really want a bunch of bureaucrats deciding what happens to your hard-earned money and possessions? With a proper plan, you’re the one in control. You get to decide who gets what, how much they get, and when they get it. 3. It Protects Your Legacy Whether you’ve built a business, accumulated wealth, or have a collection of heirlooms that mean the world to you, estate planning helps protect your legacy. You can ensure that the things you’ve worked hard for go to the right people, in the right way, and at the right time without the government making those decisions for you. 4. It Can Save Your Family a Ton of Stress (and Money!) Losing a loved one is hard enough without adding financial and legal chaos to the mix. A well-thought-out estate plan can help avoid family disputes, reduce stress, and make the transition smoother for everyone involved. And, sometimes most importantly, it can save a significant amount of tax with the right strategy in place. Why let your hard-earned dollars go straight to the government when some simple strategies can ensure your loved ones keep more of your estate to better their lives in the future. 5. You’ll Get Peace of Mind There’s something incredibly freeing about knowing you’ve got your estate plan sorted. Once it’s done, you can get back to focusing on the things you enjoy, without that nagging feeling in the back of your mind that there’s unfinished business to take care of. Where to Start? So, how do you get started? Well, you don’t have to go it alone. As a financial advisor, I’ve helped many clients navigate the complexities of estate planning. Whether you’re just starting out or need to update an existing plan, the key is to take it one step at a time. Start by thinking about your goals, then work with a professional to put the right documents in place. It doesn’t have to be as painful as it sounds, and in the end, it’s worth every bit of effort. Your future self—and your loved ones—will thank you for it. Estate planning might suck, but it’s one of the most important things you can do for yourself and the people you care about. So, bite the bullet, get it done, and then give yourself a pat on the back for taking a big step toward securing your family’s future. If you’re not sure where to begin, don’t hesitate to reach out—I’m here to help you navigate the process and make it as painless as possible and let you get on with your Rich Life.
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Let's talk about something we all think about from time to time: those "what ifs" in life. As a financial advisor who's had the privilege of helping many clients transition into retirement over the past decade, I've heard a lot about what they wish they had done differently in their careers. The same can be said for their regrets about retirement.
Those of us who are in the career-building phase of life might be dreaming of the perfect retirement; but what if we could access the wisdom of those who came before us to avoid some of their common regrets? On the other hand, if you're considering retiring in the next five years, I want you to be able to steer clear of the most common retirement regrets I've encountered in conversation with clients who have been retired for many years. By learning from these real-life experiences, it's my hope that we can all make smarter decisions and aim for a life journey that's truly fulfilling. First up, career regrets of retirees: Not Pursuing Passion Projects: Many clients tell me they regret not following their passions or taking risks to pursue more fulfilling careers. The fear of financial instability or the comfort of a secure job often kept them from chasing their dreams. Overworking at the Expense of Personal Life: A significant regret among retirees I talk to is having spent too much time working and not enough time with family and friends. The pressure to climb the career ladder often led to neglected relationships and missed life events. Not Enjoying Life in Pursuit of Saving Money: If you know me, you know this is a huge concern of mine and one that I work hard to help clients feel peace of mind about their financial plan so they can avoid this regret. Clients often tell me they regret not investing more in experiencing life along the way in favour of saving money for retirement. It's common for people to have difficulty making the switch from saving to spending, especially when they haven't been able to enjoy the fruits of their labour along the way. Failing to Continue Learning and Growing or Staying in Unfulfilling Jobs: Some retirees tell me they wish they had pursued further education or skill development. Sticking with a job that didn't bring joy or satisfaction is a common lament. Many wish they had sought out more meaningful work rather than staying in a role out of convenience or fear of change. Do any of these feel familiar to you? The key is to be proactive, thoughtful, and willing to make changes that align with your long-term happiness and well-being. Now, let's compare those regrets with common retirement regrets I hear from clients: Not Enjoying Life More During the Healthy Years: I often have clients who look back and wish they had taken more time to enjoy life while they were still healthy and active. They regret not traveling more, trying new experiences, and making the most of their physical capabilities. Prioritizing joy and adventure when you can is crucial, as good health isn't guaranteed forever. Underestimating Healthcare Costs and Neglecting Health and Wellness: Many retirees regret not planning sufficiently for healthcare expenses. Medical costs can be substantial and unexpected, often exceeding what was initially anticipated, which is something I help clients plan for and stay ahead of. Failing to maintain a healthy lifestyle during their working years is a regret to be mindful of. Poor health can limit mobility, independence, and overall quality of life in retirement. Lack of Planning for Purpose and Engagement: Some retirees tell me they find themselves feeling aimless and unfulfilled because they did not plan for how they would spend their time. Having hobbies, volunteer work, or other engaging activities is crucial for a satisfying retirement. Not Downsizing or Adjusting Living Arrangements Sooner: I've had clients who regret not moving to more suitable living arrangements earlier. Whether it's downsizing to reduce maintenance and costs or moving to a community with better amenities, timely adjustments can enhance your retirement and comfort. I've seen firsthand how understanding these common regrets can really open up opportunities for making better choices in both your career and retirement planning. It's like having a roadmap from those who've been there and done that, helping you avoid some of the same pitfalls. Here are some actionable tips to takeaway from this conversation to steer clear of these regrets and set yourself up for a more satisfying journey: Pursue Passion Projects: Whether it's a side hustle, a hobby, or a complete career change, integrating your passions into your work life can lead to greater satisfaction. Balance Work and Personal Life and Seek Meaningful Work: Prioritize relationships and personal time. Set boundaries to ensure you're not sacrificing your personal life for career advancement. Don't be afraid to explore new career opportunities that align with your values and interests. Plan Financially and Health-Wise for Retirement: Start saving early and plan for potential healthcare costs. Maintain a healthy lifestyle to ensure a vibrant and active retirement. Engage in Purposeful Activities: Remember to enjoy life now while you are healthy and able to pursue experiences that you value. Remember, it's never too late to make positive changes. Whether you're early in your career, nearing retirement, or already enjoying your golden years, these insights can help you live a more balanced, happy, and rich life. Personal finance was my first love in the money world. I was a saver before I ever knew what investing even was. Yet my relationship with personal finance has evolved as I’ve aged and I've changed my habits as my views expanded.
Many of the personal finance rules written in stone will always apply and none of these should surprise you; live below your means, pay yourself first, stay out of credit card debt, save for emergencies. However, after more than a decade as a Certified Financial Planner there are other personal finance commandments I don’t completely agree with anymore and I wonder if some of these might raise eyebrows: Belief #1: Early Retirement Isn't for Everyone While the idea of retiring in your 40s or 50s sounds appealing, it's not a one-size-fits-all solution. Early retirement requires extreme savings and frugality, often at the cost of enjoying your prime years. For many, the sacrifices needed to retire early might outweigh the benefits. Instead of fixating on early retirement, consider aiming for financial flexibility. Build a career you enjoy, which allows you to work on your own terms. Embrace lifelong learning and adaptability. By focusing on financial freedom rather than an arbitrary retirement age, you can create a more fulfilling and less stressful life. Belief #2: Debt Can Be a Useful Tool The conventional wisdom is to avoid debt at all costs. While high-interest debt like credit cards can be detrimental, not all debt is bad. Leveraging debt can be a strategic move in building wealth. For example, taking on a mortgage to buy property can be a sound investment, if the value of the property makes sense with current interest rates. Similarly, using student loans to invest in your education can lead to higher earning potential. The key is to differentiate between good and bad debt. Good debt, used wisely, can open doors to opportunities and financial growth. Bad debt, on the other hand, should be minimized and managed carefully. Understanding this distinction is crucial for making informed financial decisions. Belief #3: It's Okay to Spend on What You Love Frugality is often preached as a cornerstone of good financial health. I subscribe to living below your means. How else are you going to build wealth if you don’t spend less than you earn and save the difference? But most personal finance experts take this to the extreme. Life is meant to be enjoyed, and sometimes that means spending money on things that bring you joy. It's important to strike a balance between saving for the future and living in the present. Don’t get me wrong — I’m still not a fan of wasting money. There are certain things I refuse to spend a lot of money on — the newest tech gadgets, luxury clothing, high-end furniture, etc. These things don't bring me joy. But there is stuff I enjoy spending money on. If you know me, you know experiences always offer a bigger bang for my buck. Brittany and I love to travel and this is a key part of OUR Rich Life. We cut back in other areas to spend focus our spending here, and that is okay, especially for this stage in our life together. By all means, save diligently and invest wisely. But don't deprive yourself of experiences or possessions that enrich your life. The key is mindful spending—prioritize what truly matters to you and cut back on expenses that don't. This approach can lead to a more satisfying and balanced life without the guilt of spending. Belief #4: Personal Finance Is Personal The most sacrilegious belief of all is that personal finance is, indeed, personal. What works for one person might not work for another. Your financial strategy should align with your values, goals, and circumstances. Giving clients peace of mind to enjoy their version of a Rich Life is always my goal. Don't be afraid to deviate from conventional wisdom if it doesn't suit your unique situation. After seeing clients pass away with millions of dollars in their accounts, I think about all the experiences they didn’t get to spend with their families at the expense of saving money. Seek advice, but ultimately, trust your judgment and tailor your financial plan to your life. Flexibility and adaptability are key to managing your finances effectively. Belief #5: Moving the goalpost isn't always the goal. The Wall Street Journal recently shared research on how much money people need to make to be happy: In the survey, most people said it would take a pretty significant pay bump to deliver contentment. The respondents, who had a median salary of $65,000 a year, said a median of $95,000 would make them happy and less stressed. The highest earners, with a median income of $250,000, gave a median response of $350,000. Does this mean contentment is basically impossible to find? Regardless of how much you make, will you always want more? The goalposts just keep moving if we're not living in the present and and focusing on our values and circumstances. Spending on what brings us joy NOW and remembering that personal finance is PERSONAL are both antidotes to the discontent that can come from following the norm and checking the boxes we've been told to check. Challenging conventional wisdom in personal finance isn't about dismissing sound advice—it's about recognizing that financial strategies should be as diverse as the people who use them. By questioning standard advice and embracing a more personalized approach, you can create a financial plan that truly works for you. Remember, the goal is not just to save for retirement but to build a life that's financially secure and fulfilling at every stage, otherwise known as a Rich Life. Having sat down and discussed retirement plans with hundreds of Canadians over my 11 year career, I can say with certainty that this one truth is truly over looked my many.
As someone who has been investing most of their life, I too struggle with this aspect and I know that I am no different than others. There's a false narrative that “Once my accounts hit X number of dollars, then I will be comfortable and happy”. The fact is, this simply doesn’t happen – regardless of what your level of wealth is. I have personally witnessed investors with multiple 7 figure portfolios constantly worry that their pile of money will run out and on the flip side, witnessed investors with modest means quite enjoy their retirement with far less worry. The truth is, once you have some base level of financial security, your day to day happiness in retirement will be impacted more by your relationships, your hobbies, and your sense of purpose than your financial assets. I was 25 when I first got the chance to travel to Europe – what a trip it was! (I blame this trip for the travel addiction I have now.) It was on this trip across the pond that I noticed many differences in how we live versus how Europeans lived, in myriad ways. One thing that struck me was the sense of community, especially amongst those in their retired years. I didn’t ask what their net worth was, but I do believe they were of modest means, we are likely not talking about 7 figure investment accounts here. They lived humbly, and they almost had a care free spirit that was so admirable. They remained youthful, out and about in the town and “Old Age Homes” really are not discussed like they are in North America. I contrast to what I see in Canada, and it couldn’t be more opposite. We continue to push, grind, save every last dollar in an effort to retire. I think there is something we can learn from the European culture – stopping to smell the roses along the way can inevitably increase your happiness. Now, I am not saying we stop saving for our future. But what I am saying is, I see far too many Canadians save diligently every year, decade after decade with virtually no plans on how to spend it in retirement. We should really consider that one can (or should?!) only delay gratification for so long. What no one wants to talk about is this: we need to be more strategic when we design our Bucket List, and more willing to plan to spend our wealth accordingly to actually check off these life-fulfilling boxes. Maybe the retirement truth nobody wants to talk about is that it shouldn't just be about retirement. Any memorable life experience, (insert your bucket list here) is far different at age 50 then age 70 – we all know this to be true. My experience as a Certified Financial Planner has taught me that we are pushing off these experiences far too late in life, and making false assumptions that our health will still be intact. But what if it isn't? Why aren't we designing our Bucket List around life stages and checking those boxes when we are able-bodied, rather than waiting for the unknown future when we finally 'deserve' these experiences but can't actually enjoy them? Do we think that at age 65 when we retire, we are going to all of a sudden learn to spend our wealth? The evidence shows retirees are spending LESS as they grow older and actually saving money in retirement. What if we spent say, 10% more in our 40’s and 15% more in our 50s instead of stocking it away for our 70s and 80s? What if we instead of waiting until we retire, we use our wealth to create these experiences instead of some day in the distant future. I love the quote from Eric Jorgenson “When you’re young, you have time. You have health, but you have no money. When you’re middle-aged, you have money and you have health, but you have no time. When you’re old, you have money and you have time, but you have no health. So the trifecta is trying to get all three at once." By the time people realize they have enough money, they’ve lost their time and their health. My entire retirement outlook changed when I read Bill Perkins book “Die with Zero”. It truly flipped everything I knew about personal finance on its head. I'm more sure than ever that there's a strategy to spending, and enjoying(!) our hard-earned savings to enrich life all the way through. I saw a chart this week from Bank of America that more or less sums up my entire investment philosophy: In the long run, stock prices go up. I view the stock market as a way to invest in innovation, profits, progress and people waking up in the morning looking to better their current situation. While I love the fact that this chart illustrates my long-term philosophy it’s a bit misleading. Yes, the stock market goes up over the long run but it can also get crushed in the short run. That can be difficult to see on a log chart with 200 years of data. The Great Depression, 1987 crash and Great Financial Crisis look like minor blips on this chart. And while every crash eventually turns into a blip on a long-term chart, they don’t feel like it in the moment. Looking at this chart got me thinking about what other visuals I would use to help explain the stock market in greater detail, so I found a few more. You can’t look at an up-and-to-the-right chart of the stock market without taking into account the drawdowns along the way: The Great Depression was not a blip. It was a tsunami. People thought the 1987 crash was going to lead to a depression. The financial system was teetering on the brink of extinction in 2008. Sometimes the stock market crashes. Sometimes it takes years to make your money back. You don’t get a long-term chart of stocks that moves up over time without getting your face ripped off on occasion. If you can’t survive the short-term drawdowns, you don’t get to participate in the long-term gains. This is true for market crashes, run-of-the-mill bear markets, terrible years and even good years in the stock market. Another favorite chart of mine that helps explain the stock market is by looking at the annual returns matched up with intra-year drawdowns: The average intra-year peak-to-trough drawdown since 1928 was -16.4%. Losses in the stock market should be expected. The other takeaway from this chart is that drawdowns happen even when the stock market finishes the year in positive territory. The average intra-year drawdown in years that have finished with a positive return for the S&P 500 going back to 1928 is -11.6%. So you should expect to experience downside volatility even when stocks are in an uptrend. In fact, the average drawdown when the S&P 500 has been up by 20% or more during a given year is -11%. You’ve had to live through a double-digit drawdown in roughly half of all 20%+ up years in the stock market over the past 95 years of returns. Think about that — to get to 20% or more you have to live through a correction in half of all years. The other surprising stat here is the sheer amount of 20%+ returns you see in the stock market in a given year. In 34 of the past 95 years, the U.S. stock market has finished the year with gains of 20% or more. That’s a greater percentage of years (36%) than the number of years that finish with a loss (27%). Of course, gains or losses in any one year are meaningless. All wise investors know the only time horizon that truly matters is the long-term. Historical numbers have shown the longer your time horizon, the better your odds for success and the less variable your range of returns are: So what is the essence of the message from all of these charts? There are no guarantees when investing in the stock market. Bad things can and will happen. But if you have a time horizon that is measured in decades as opposed to days, months or years, you’re going to be better off than most investors.
I can’t promise these relationships will continue in the future. But I have a hard time believing we’re going to have a future where people aren’t innovating, making progress and waking up trying to better their station in life. That’s the lifeblood of corporate profits and that’s why I’m a believer in owning quality companies for the long run. As retirement approaches, it's crucial to lay a solid foundation for your future financial well-being. It's a significant life transition, one that's best approached with confidence and peace of mind. This isn't a comprehensive guide by any means, but is a collection of my tips for 8 things to check off your list before you retire, based on my observations of guiding clients before, during and after retirement as their financial planner. Whether you're counting down the days until retirement or just beginning to plan, I want to empower you to make informed decisions and set yourself up for a fulfilling and financially secure retirement journey.
Pay down debt: When mortgage rates were at 1% - 3% it was fine to have a mortgage. Now that they are in the 5% - 6% range, having a mortgage in retirement will limit options and lifestyle choices. Working a few extra years or downsizing are options to help eliminate any debt. Check CPP contributions: These can be found by logging into your Service Canada account. Knowing what you will receive at 60, 65 and 70 will help with cashflow planning. Also, if self-employed, ensure all your earning years are accounted for. If you have taken years off for child-rearing, make sure you apply to have those taken into account. Check pension numbers: Did you contribute to a Defined Benefit pension plan decades ago and then found a new job/role? Those funds have been invested and growing steadily over the years. Check back with your pension plan (HOOP, OMERS, OPSEU, etc.) to determine your monthly pension AND if there is pension buy back credits for purchase. Own a car that could last you 10 years: Having a reliable car free from significant repair costs will help cash flow. It can be frustrating in year 1 or 2 of retirement having to spend $50k to $70k on a new car. Hint Hint* Toyota’s, Honda’s, Lexus are always reliable cars! Have major dental work done: If you are on a company benefits plan, get any crowns, bridges and fillings done before you are paying out of pocket. Also, explore what the costs will be to self-insure or to stay on the benefits plan after retirement at your own cost. Know employment options: Many clients will retire for a year and then return to work as they have more to give. Other common options are doing Board work, working part-time, or working for another company. Retirement employment can be a great source of funds to do the extras you might normally feel guilty about, like going on a dream vacation, getting that new car or helping the kids out financially. Build up your cash wedge: I want to see 1 year of income in cash! Why? So that when markets fall (and they will) you can use this cash wedge to draw on, and not your portfolio. 1-2 years in cash acts as an insurance policy against market risks and provides peace of mind. Know your “burn” rate: I have found there are three numbers everyone has about spending. There is the number you hope you are spending, what you think you are spending and what you are actually spending. Know your actual spend rate and include expenses that are not regular, like house maintenance, saving for a vehicle and insurance. I have found that unexpected lump sum expenses can throw a budget off. A buffer in your budget will help you account for those extra expenses. As you embark on this journey towards retirement, remember that careful planning and thoughtful consideration of your financial goals and priorities are key. By implementing some, or all, of the tips and strategies outlined, you can take proactive steps to safeguard your financial future and make the most of your retirement years. Did your New Year's resolutions include a plan to start a diet? Mine never does because I’m skeptical of any diet or exercise craze because they all end up more or less becoming fads. This is why I could never get behind the idea of buying stock in Peloton, even though I know many happy users of their product. Sure, some people will buy it and use it regularly. Others will buy it, use it and then stop using it. Some will buy it and never use it. Regardless, there is always another piece of equipment or exercise routine that comes along. When it comes to diets there are plenty of them that can work. The problem is not necessarily the diets themselves but the behavior required to stick with them.
One study estimates some 95% of all people who lose weight on a diet gain it all back eventually. It’s for these reasons I didn’t pay much attention to the Ozempic and other GLP-1 studies as those results began trickling in. But the more I learned about it the harder it became to ignore. Not only were people reporting weight loss of around 15-20% of their body weight but they weren’t craving as many salty or sugary foods. People feel fuller on the drugs. It lowers heart disease. I went from being skeptical to thinking this was some sort of miracle drug. I’m sure there are some side effects and other issues that take away from the miracle label but the potential ramifications here are enormous. If the price comes down and a decent percentage of the population begins taking these drugs there is going to be an impact on the agriculture industry, fast food, packaged food companies, the healthcare industry and probably a dozen other industries I can’t even think of right now. I’m not smart enough to sift through all of the potential winners and losers if this happens but this could be real a game-changer. Reading about these drugs and the impact they are having got me thinking about how this relates to your finances. There are no miracle drugs that can help you make better financial decisions. You can’t take medicine to save you from FOMO during a bubble. A doctor can’t write you a prescription that will make you feel less envious of the Joneses. You can’t get wrapped in a full body cast that will prevent you from panic-selling your stocks during a bear market. No amount of physical therapy will take the pain away when you go into debt. There aren’t any surgeries to remove the feelings of greed and fear you get from watching your portfolio move up and down during the different market cycles. You get the point. The good news is there are differences between physical health and financial health. I know diet/exercise makes for a good personal finance analogy but it’s much easier to change financial behavior than it is to change your habits when it comes to eating and exercise. You can’t automate your physical health. Sure, you can plan out your meals and when you’ll go to the gym but you still have to follow through with it. But you can automate the majority of your financial decisions. Bills can be paid automatically. You can pay off your credit card balance every month without ever thinking about it by setting up auto-pay. Every time you get a paycheck, you can have funds automatically directed to different accounts for saving and investing — your RRSP, TFSA, your children’s RESP, etc. And once the money hits those accounts it can be invested automatically exactly as we desired – by a team of professional money managers that purely focuses on selecting the best quality companies. Portfolios can be rebalanced automatically – taking the emotions right out of the equation. Maybe someone will create a drug that turns us all into robots in the future but for now, there is no way to take the emotions out of your finances. Your emotions aren’t good or bad, right or wrong. They just are. But you can make good decisions ahead of time so you’re not forced to deal with those emotions at times when they can ruin your financial plan with a boneheaded mistake. I spend very little time on my own personal finances because 95% of it is set on auto-pilot. Bills are paid. Contributions are made. Investments are bought or sold. My portfolio gets rebalanced. I take the emotions out of investing. I keep on buying – every….single….month….no matter what. I still have to make course corrections along the way and check in on occasion to make sure everything still makes sense. But technology makes it easier than ever to take the worst parts of yourself out of the equation when it comes to financial decision-making. The only side effects of automating good financial decisions ahead of time are rising portfolio balances, higher credit scores, increased savings balances, and more time to spend on the things you actually care about. Sounds better than a New Year's resolution, if you ask me... There are a lot of great things about my job as a CFP – I get to have conversations with incredibly successful people every day, and no two days are ever the same.
I was having a conversation with a client last week and we were discussing how to appropriately invest inheritance proceeds he was set to receive. “Brandon, I’m 61 now, I definitely don’t want to lose any money” is what he said to me. I asked, "How old was your mother when she passed?" “She was 85”. So let’s dissect this for a moment. "Your mother lived a beautifully long life and didn’t pass until 85, which is 24 years older than you are right now?" I asked. "That is correct," he said. Interesting. "So, would it be safe to assume that there is a good chance these funds need to last another 2-3 decades?" Client nods his head, yes. One thing I have noticed recently, is that we vastly underestimate how long our investment time horizon is. The life expectancy of a 65 year old female today is 86 - that is 2 more decades we need to ensure our funds last! We are living longer now than we ever have before, and fewer Canadians have defined benefit pensions that will provide a lifetime of income. Now how does this relate to owning your home? Most traditional mortgages are anywhere from 20-30 amortization periods. Year after year, you continue to pay a portion of principle and a portion of interest slowly paying off your home. Twenty years go by and woohoo you’re mortgage free! Did the value of your home change at all during those 20 years? You’re darn right it did. It changes every month, every year, just like every other piece of real estate you drive by on your way to work. The difference? There is no one with a sign showing the change in your house price every month on your front lawn! Compare this to your RRSPs – at any moment I can look up the daily values. I can honestly say it brings me very little internal happiness when I see my account values up 1 or 2%. Zilch, nada. But boy do we Canadians LOVE talking about how much house prices have gone up! It’s a national past time. What if we treated our portfolios like a mortgage? We didn’t worry about the day to day fluctuations because news flash – this is normal! Markets never go in a straight line, they are supposed to fluctuate daily, and trend upwards over time. Will markets go down month to month? You bet they will. But they NEVER stay down, and that’s what investors need to know. There will ALWAYS be a reason for markets to fluctuate – world wars, inflation, high interest rates, global pandemics, you name it. And despite all of this, markets continue to go on to reach new highs year after year. It truly is a wonderful thing. The closing price for the Dow Jones Industrial Average (DJI) in 1980 was 1,250 on November 11th 1983 At the time of writing this, the Dow Jones is now at 33,891 – an astonishing gain of 2,610% since 1983. Pretty incredible isn’t it? Let’s start treating our portfolios like a mortgage and ignoring the headlines – you’re investing time horizon is a lot longer than you think. Life is good. You’re stocking away money automatically every month into your investments, you’ve built up your emergency fund, you’re chunking away at your mortgage and your net worth is slowly climbing monthly from the systems we’ve put in place.
You now find yourself with money left over every month and ask yourself – where should I put this? As mom and dad said ‘always save for a rainy day’ right? Well, what if we start using that money now. What if we allocate a portion of our monthly income to spend guilt-free. In my experience, when people cross $150,000 of income, they stop carefully tracking expenses. (This is fine! At 150k you can loosen up. You don’t need to track the price of a coffee.) However, there are 3 problem areas I see for expenses above 150k income:
If your income has increased beyond 150k, what do you notice about your spending? Use these 4 numbers. As your income increases, these benchmarks will help you save, invest, and even spend more: Fixed costs: 50-60% of take-home pay Savings: 10-20% (the more the better) Guilt Free Spending: 20-30% Life is lived outside of a spreadsheet and guilt-free spending is something that isn’t talked about often. What is the most common financial advice? Save, cut out your Netflix, and drink coffee at home. Hardly anyone talks about conscious spending. I urge you to look at your finances to determine where you can find money every month to spend guilt-free. Start small – maybe hire help around the house, take a spa day, pick your kids up from school every day for a month, and fly premium economy for your next trip. This is your one life, why not make it a Rich one? One of the biggest problems with money is our feelings about it are always relative. So many people assume once they hit a certain level of income or net worth that all of their problems will magically vanish. Unfortunately, what typically happens when you make and save more money is you begin comparing yourself to people who have more than you, instead of your previous levels of wealth. Lifestyle creep causes you to spend more and more to keep up and since there are always going to be people richer than you, it’s difficult to feel wealthy even when you are. Bloomberg has a new survey that asks people how rich they feel: Even people with millions of dollars don’t always feel rich. My contention is it’s hard to consider yourself wealthy if you still worry about money all the time. The quotes from some of the survey respondents are telling in this regard: “Ten years ago if I had told myself I was making the money I am now, I’d be flabbergasted. I would’ve said I was living it up,” he said. “Now, while I’m financially secure, it doesn’t feel like I’m making the dollar amount I’m making.” “Honestly the more money you make, the more your lifestyle kind of changes a lot,” he said. “Your vacations and the restaurants you go to are more expensive.” This is the perfect encapsulation of lifestyle creep and why some mythical number in the future probably won’t solve all of your problems. Younger you would probably be blown away by how much you make but older you is a completely different person with different preferences and responsibilities. Here’s another one: Despite owning a home worth almost $900,000 in Dallas and a condo in Hawaii, Tom Thompson and his wife don’t feel rich. In fact, having more money has just resulted in more bills. The 54-year-old is feeling the pressure of inflation, especially as he prepares to pay for his 18-year-old son’s college tuition. Despite an annual household income of about $450,000, Thompson worries about his job stability at an ad agency where losing a big client could mean a layoff. “We’re not living paycheck to paycheck, but I feel like we have looming expenses,” he said. “My personal definition of rich is the ability to buy or participate without concern, and I do not have that.” Six-figure income. Owns a home. Owns a condo in Hawaii. Still doesn’t feel rich. Probably never will. This is one of the reasons financial advisors act more like therapists than number-crunchers with many of their clients. We all have a weird relationship with money in some form or another. We all struggle with this feeling, and I am no different. Thinking that when our investment account hits X – then I can be happy and not worry. After working with clients for the last decade I can attest, this simply does not happen! It’s counterintuitive, but many people overestimate how much they will need based on their spending habits because it can be so psychologically challenging to spend money in retirement. My favorite research on this topic comes from an Employee Benefit Research Institute study in 2018 that analyzed the spending habits of retirees during their first two decades of retirement:
The crazy thing about these results is the more secure people were in retirement, the less they spent relative to the size of their wealth. The dichotomy here is there are millions of people who are woefully underprepared for retirement from some combination of a low income or a lack of planning. Then there are those people who are prepared but cannot stop worrying about money enough to enjoy it – and this is what I am seeing more every day. Look, I’m not saying everyone has to die with zero. Having a low burn rate is certainly the best hedge against longevity risk in retirement. But what’s the point of saving in the first place if you’re not going to spend some of it? If you’re reading this, you’re more than likely going to pass with more wealth than you think. Book that vacation, complete that renovation, make those memories – that is what wealth is for. |
AuthorBrandon Yanchus is a CERTIFIED FINANCIAL PLANNER™ with over a decade of experience. This is his personal blog where he shares what he's learned helping families, professionals, business owners and retirees grow and protect their wealth. Archives
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