I vividly remember our lunch date that day. We had just come from an appointment at our bank finalizing some re-financing on our home and afterward, Nancy and I decided to grab a bite to eat at Chianti's, one of our favorite restaurants. During our lunch date I took out a clean napkin and we wrote down some goals and values that were important to us.
- go on a winter trip every year somewhere warm
- pay off our mortgage in 10 years
- serve on a mission trip every couple of years
- increase our RRSP contributions
- grow our wealth through real estate
The first thing we did was change our mortgage payment to bi-weekly. That would mean we were making an extra payment every year. Secondly, we decided to double the payment. I even added a third strategy. Each month I would add a few extra dollars in pre-payment to always bring the balance down to the nearest one hundred. We continued to this consistently and paid off our mortgage in half the time. You know what it feels like to be mortgage free. It's like shedding 50 pounds. It's like getting out of prison. It's like having this huge weight lifted off. It's like freedom. Not only freedom from the burden but freedom to do other things.
The third thing we did was to start a family vacation fund so that we could go on the winter trips in the sunny south. Our first trip was to the Dominican Republic. We went on an All-inclusive and learned how to boogie board, went on a jungle safari, swam in the warm Carribean sea and soaked up the sun for 7 days. Having that trip fully paid for before we even left the city was peace of mind. In the following years we did 3 cruises, 2 out of Long Beach, CA and 1 out of Florida. We have spent a week on the gulf coast and trips all over the USA. Some of our greatest memories are the trips we have been able to make as a family. We have no regrets.
In the winter of 2007, we were able to spend a week with about a dozen other people from our church and go to one of the poorest cities in Mexico serving in some churches, orphanages and a school. I have been blessed to be able to go back to that location about 5 times.
We also committed to monthly contributions to our RRSP's and a top up strategy for each year. Something we have done religiously since and are on track to easily retire at age 60 if we so desire when the time comes.
Since that day at the restaurant, we were able to add to our real estate portfolio numerous properties that have consequently helped us grow our personal wealth and create more monthly cash flow.
A recent Schwab report shows that people who have a written retirement plan were 60% more likely to increase their retirement contributions and twice as likely to stick to a monthly savings goal than people without such a plan. Only 24% of those surveyed had a written financial plan, but yet it is the number one key to financial success.
2 big struggles for most young couples:
The first struggle is usually DEBT. When Nancy and I were first married it was very difficult to get financing for anything and the rates were so high. Today, it's easy to get credit and the rates are so low. This has resulted in most couples drowning in debt within a few years of married life. If you spend your 20's racking it up, you'll spend your 30's and 40's trying to pay it down and then, not saving for retirement until your 50's. By then you'll have lost the key ingredient to retiring well - TIME. You will end up having to save almost every cent you make or delaying retirement until your 70's. That's fine if you have a great job with a great salary, but what if you get downsized?
The second struggle is managing monthly cash flow. You have lots of money coming in, but you can't figure out where it all goes and why it disappears so fast. A lack of a "written cash flow plan" will cause a lot of money leaks, anxiety, marital stress and result in not reaching any of your financial goals.
Was it luck for us? Maybe a little. Actually, what we did over the past 10 or so years anyone can do.
The first step is to write your goals down on paper. You greatly increase your probability of reaching your goals when you write them down on paper.
The second step is to create an action plan for reaching each particular goal.
- How much extra do you need to pay towards your mortgage to be free from it in 15 years?
- If you did not have a car payment what could you do with that extra money?
- How much money do you need to put towards savings each month in your RRSP, TFSA and RESP?
"A goal without a plan is just a fart in the wind"
The third step is accountability. Whether that is a friend, a family member or an advisor like Nancy and I. As you get clarity around your goals, an action plan for achieving your goals and some accountability for staying on track and putting all of that in writing you will have the highest probability of reaching your financial goals.
What happens to most people is that they have an array of financial products spread all over the place - banks accounts, credit cards, savings plans from past employers, RRSP's here and there. Each of those financial providers is just trying to get you to buy another product that helps them reach their required targets, not helping you reach your goals.
We can help you create a sustainable, predictable cash flow from your portfolio in the most tax-efficient manner to ensure you never have to worry about running out of money. It starts with a plan.
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What are some of our goals for the next 3 years?
Retirement Income & Investment Advisors,
Willis & Nancy
587-755-0159
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