A comprehensive financial plan is the first thing we do for every new client in our practice. There are a number of reasons to do a financial plan, particularly when we embark on a new relationship.
It’s not hard to misunderstand or misinterpret the content of a conversation around goals, expectations or strategy. But when that conversation is accompanied by a written plan, it becomes almost impossible for anyone involved (us on the planning side and the client on the investing side) to be out of alignment.
The plan gives us the opportunity to clarify goals on a year by year basis – goals such as the amount of income needed in retirement, perhaps a gift to a child for a house purchase, rates of investment return required, goals around legacies, charitable gifts and so on.
Once built, the plan ensures we’re all aiming at the same target. The chances of success multiply with everyone pulling in the same direction. We also have a roadmap that allows us, each year, to compare actual results against projection. We can then decide whether the plan needs to change or if we appear to be on track.
So while I think all this is great – what a plan doesn’t answer is where do you find the cash to fund your planning goals?
Everyone says invest when you are young because time is your friend. Well, that may be true, but what is also happening when you are young is building a career, paying for child care or activities, mortgage payments, surprise car repairs … the list goes on. How do you find that extra thousand dollars a month to ensure a bountiful retirement?
Gordon Stein, international personal finance speaker and best-selling author, believes he has the answer. In his book, “Cashflow Cookbook”, he identifies $13,000 of monthly savings ideas that often go overlooked by those looking to start or super charge their retirement plans. While all $13,000 of saving ideas likely won’t apply to everyone, he maintains that most people are able to find $1,000 or $2,000 a month.
That extra money could easily disappear into cash flow and lifestyle, so Gordon maintains the best strategy is to identify the savings, act to capture them, and then immediately set up a monthly obligation into a savings plan. This strategy can change the retirement picture dramatically while also avoiding the usual planning prescription of painful budgets and the daily tracking of expenses.
We’ve invited Gordon to Ottawa to present to our clients and their guests. Readers are also welcome to join the presentation online. If it sounds like something of interest let Alex know at alexandra.graff@rbc.com. Participants will of course be under no obligation.
This article is supplied by Alan MacDonald, an investment advisor with RBC Dominion Securities Inc. Member–Canadian Investor Protection Fund.
