The 5 Financial Stages of Life

What financial stage are you in?

As we go through different stages in our lives, our financial goals will often change, sometimes dramatically. Where do you fit in this financial picture? Keep in mind, your goals may differ from the average person. For instance, you may decide to start a new business in the Early Career stage of your life. Or, you may decide to focus on travel during this time period, rather than purchasing large ticket items like a car or a house. In any case, mapping out your financial stages of life is a good start to recognizing and developing the goals that are important to you!

5 Financial Stages of Life

 

Need advice to help you reach your financial goals? Contact us at Your Neighbourhood Credit Union, where we making banking simple, personal, and friendly.

 

Build a Holiday Budget with our handy Budget Builder!

Build a Holiday Budget in Minutes!

According to Canadian Living Magazine, the average Canadian adult spent $766 on holiday gifts in 2015. About 27 percent spent over $800, while 23 percent spent $200 or less.

Do most Canadians stick to their budget? Yes, but…

stick-to-your-budget

Source: thechive.com

 

Our handy YNCU Holiday Budget Builder can help you quickly build a budget. Our advice? Print off a copy, fill out the first three categories, then bring it with you while shopping. Fill it out as you go so that you can stay on top of your spending. Then when January rolls around, you won’t be one of the 30% of Canadians that regrets how much they spent for Christmas!

Holiday Budget Spreadsheet

Here’s 6 reasons why a budget is your most powerful tool!

Did you know that according to the Financial Consumer Agency of Canada, less than half (46%) of Canadians have a budget, yet the vast majority (93%) of those who do budget stay within it most of the time. What does this mean for you? It means that if you put in the effort to start a budget, you will probably stick to it. It also means you can feel more confident about your future – a budget can completely change your financial destiny.

infographic - 6 reasons why budgeting is your most powerful tool

Myths about retirement – Part 2

family on beach

Last week I talked about some of the common myths of retirement, here is a continuation of some of those myths.

Myth #4 – Never touch your capital.

Conventional thinking and approaches often work on keeping your assets intact. That may work for the wealthy, whose investments generate plenty of cash flow so that they can preserve their capital for their children and grandchildren.

For the rest of us, it’s okay to spend your capital as a way of providing lifetime income. While saving may be a goal in itself during your working years, plan on an orderly spending of what you have saved during retirement. Isn’t that what you planned? It really is okay to spend your capital. That’s what it is there for.

The idea for many is to spend down in retirement. That’s why you save. Work with a retirement income planner on ensuring that you have enough capital to provide you with the cash flow you need no matter what happens; no matter how long you live. Look at alternatives to provide legacies for children and favourite causes while giving you the cash flow you’ll need.

 

Myth #5 – You need 70 to 85 percent of your current income level in retirement.

A growing number of analysts and researchers on retirement income and spending patterns have found that most people will be fine if they target 50% of their pre-retirement earnings. Statistics Canada has many years of supporting data on this.

You see, the focus should be on consumption dollars, what you spend on yourselves and your own lifestyle. For most Canadians, that excludes mortgages, child rearing costs and saving for retirement – things you wouldn’t necessarily be spending money on during retirement. You will need 100% of your consumption dollars and some extra money in the early, active years of retirement for those special trips and experiences you have dreamed about for years. Your actual replacement income goal will depend on your marital status, whether you own a home, whether you have children and how much money you earn, so the range can go from 40 to 60 percent.

Working with an advisor trained in the unique field of retirement income planning can prove greatly beneficial in order to work out what you need and what you want to do throughout the various phases of your retirement.

 

Myth #6 – You need that initial level of retirement income, indexed for the rest of your life.

I’m sure you can come up with a list of things that don’t fit the “set it and forget it” philosophy. Set the cruise control and forget it. Set the room temperature and forget it. Invest in a certain investment that has a particular risk associated with it and forget it. You need to make adjustments as the situation changes, as your needs and priorities change. Retirement income planning works like that.

Retirement isn’t one long vacation. It isn’t one period in your life. It represents the longest set of phases in your life. Each phase will have different needs for cash flow.

You’ll need more money in your early, active years. You then settle down to a more normal retirement where expenses drop. Then late in life, poor health, the loss of your spouse or partner, losing your driving license and your attitude and behaviours may cause you to spend even less money.

Yes, you may require money for long term care needs, but hopefully you planned for that before your retirement so that those needs aren’t coming out of your regular cash flow late in life. The amount of money you’ll need and the most efficient means of getting are important points you should review yearly. Set up an investment and income stream that is flexible and adaptable to changing circumstances. Stress test the plans, strategies and components to make sure they continue to do the job they were designed to do. Life changes and your needs for income will change with them.

 

Cheers

Grant Galloway, CFP, CLU, CHS

Financial Planner

Grant can be reached at ggalloway@yncu.com or at 519-579-7324 ext. 1 or 1-866-328-7324 Toll Free

 

 

Debunking Retirement Myths

young couple sitting on chairs on the beach

Wouldn’t it be great if your retirement could feel like your last vacation? It can, with proper planning and a strong discipline!

We are experiencing a silver Tsunami. The leading edge of the Boomers turned 65 six years ago. On average, 1,250 Canadians turn 65 years old every single day. Most Boomers were born between 1961 -1965. That’s why you feel everyone has been turning 50. And people are living longer, much longer.

With all of this happening, it’s small wonder that the media, politicians and the financial services business are all talking about retirement. That kind of focus may be good, because of what it means for savings habits and pressures on goods and services.

There are a lot of myths we have to be wary of if we want to ensure we have an adequate retirement income that lasts a lifetime.

 

Myth #1 – Retirement planning is just for older people

The definition of retirement is changing and even though it may seem like a long way off, use that to your advantage. Much like dieting and exercising, starting a plan and sticking to said plan are the hard parts.

Every little bit of savings helps and will make it easier, if you start early enough. Harness the power of compound interest where planning and saving a little now on a regular basis can let money work for you: 24 hours a day, seven days a week…for decades. Your money seems to grow slowly at first then starts to balloon as you get older, even if you put in the same amount of money.

Every year you delay means you’ll need to save more money and perhaps take on more investment risk in order to reach your goals.

 

Myth #2 – I’ll never be able to save enough for retirement

It’s surprising, even shocking, that with all of the attention devoted to an aging society and the need to save for retirement, that so few people are inspired to get started. Many do have a doom and gloom attitude about retirement. Myths aren’t helping matters.

“I’ll never be able to save enough for retirement.” That may seem true when you’re young, starting a family, paying off those school debts and dealing with a mortgage. Instead, you figure your income will go up in the future and you’ll work on developing your money management skills and habits then.

Don’t fall into the trap of thinking it’ll be easier to save for retirement in just a few more years. After all, there are competing and expensive needs no matter how old you are.

First you pay off your college debt and the next thing you know, you’re helping your kids pay off theirs. Then there is the house, wedding expenses, home renovations, grandkids and the list goes on and on. One day you’ll stop and ask yourself, ‘Where did the time go?’

Every year you delay starting to save ultimately means you’ll need to save more in order to get on track for a retirement that’s getting closer and closer.

The best time to start saving for retirement is when you are young and just starting to work. But if things just didn’t work out that way for you, then consider starting now. Let the power of compound interest work for you as long as possible.

 

Myth #3 – I need $500K, $1M, $2M to retire

The fact is that your “number” can vary greatly depending on your personal situation and goals, how long you expect to live, whether you will be single or with a spouse/partner and when you will retire.

Consider asking an advisor who specializes in retirement planning, or better yet, retirement income planning!

Consider trying some of the tools available from trusted sites produced by large financial institutions. And don’t forget government benefits like the Canada or Quebec Pension Plan (CPP/QPP) and Old Age Security. If you want to maintain the same lifestyle before and after retirement, your number is tied to how much income you will need to provide the same consumption dollars. That’s the money you normally spend on your own lifestyle. Add some extras to that bucket list of yours for those early years of retirement when you will be most active and spend more money.

 

Grant Galloway, CFP, CLU, CHS

Grant can be reached at  ggalloway@yncu.com

 

Can living on a budget improve your health? You betcha!

 

woman lifting weights with trainer

5 Ways Living On a Budget Improves Your Health

You’ll be eating less food that’s bad for you

We all know how easy it is to slip through the Tim Horton’s drive through on the way to work, grab a quick lunch at McDonalds, and/or order pizza on Friday night because we’re exhausted by the end of the week. However, these spending habits add up! Several years ago my husband and I were in the habit of ordering pizza every Friday night for our family of five. With an average bill of $40 including tip, I calculated that we were spending about $2,000 a year – on pizza! We now make our own pizza every Friday night – it not only costs less, the toppings we use make it much more nutritious. Plus, it’s delicious!

2 male hikers

Budget friendly entertainment often involves more exercise

Consider going hiking, playing tag with your kids, taking a bike ride, or going to the community pool. Budget friendly entertainment can take you outdoors to explore, walk and play, which is great for both the body and mind. It’s also a terrific way to improve your health in the process.

 

When your budget is in place and you aren’t creating more debt, you will have less stress

Financial strain is one of the biggest causes of stress in most families. Added stress can lead to health issues like:

  •  Heart disease                                                       man with hands on his head because he is stressed
  • High blood pressure
  • Asthma
  • Obesity
  • Diabetes
  • Headaches
  • Depression and anxiety
  • Gastrointestinal problems

 

When you are living on a budget, you can relieve stress by paying off debt, and staying out of debt. Creating and maintaining an emergency savings fund will also help to relieve stress.

You have more money to spend toward a gym membership or equipment 

A budget does more than just provide a blueprint for living within your means. It can also help you to save money for things that really matter to your quality of life. This could include a gym membership, personal exercise equipment, or working out with a personal trainer.

Poor spending habits hurt relationships, while good spending habits can help relationships 

Relationships are greatly impacted by a family’s financial situation. The stress of poor financial decision making can cause overwhelming stress and friction between family members. Not only does this effect relationships, it can lead to worsening physical health. Changing spending habits and decreasing debt load can alleviate stress and force couples and families to focus more on their relationships. Parents also provide a good role model to kids, because kids tend to emulate the spending habits of their parents.

 

The moral of this story? Living on a budget really can help you to improve your health. Your health is more important than owning a fancy car, designer purse or an expensive house you can’t really afford . By creating and adhering to a realistic budget , you can improve both your physical and mental health.

Need help creating a budget that you can live with? Contact your local YNCU branch to make an appointment. We have locations all over Southwestern Ontario, and now in Sault Ste. Marie and Timmins too!