Goals Based Planning

I recently completed the two modules of Canadian Securities Institute training (Personal Financial Services Advice and Financial Planning 1) that qualifies me to apply for a Senior Account Manager position - when one becomes available in my region.  Since I am LONG finished with being mobile for work, this tightens the circle of where I might be willing to work to three branches of the bank I work for, or, if the offer was REALLY good, any of the other credit unions and / or banks within about a 20 KM radius.

While I was in the final stages of the Financial Planning (1) course, our branch's Financial Planner completed some more of her training and offered to do some goals-based planning with me.  In order to do this, I was asked to consider some financial goals I would like to obtain, and I was given a list of things to gather together so that she could review my current state and then help me put together a plan to reach my goals.

The cool thing is that I recently sat down with one of my other colleagues and he helped to put together something called a Financial Needs Assessment for me. The Financial Needs Assessment was to help me figure out if retirement at 55 was going to be responsible.  The good news is that I CAN retire at 55 on a very reduced pension, as long as my mortgage is paid off.  The bad news is that, based on my current salary and savings, if I choose to do that things will be VERY tight - even considering no mortgage payments. Something that my colleague pointed out to me (that I did not consider) was that though I could manage it, there would be no savings to do things like buy a new car or cover emergencies, should they arise. He fleshed out assessments for ages 55, 60 and 65 and at the end of the day, his recommendation was that 60 is a more responsible target if nothing changes in my financial picture.

Thankfully, my financial picture will continue to get better. The closer I get to my desired retirement date, the closer I will be to having my mortgage paid off.  Once my mortgage is paid off, everything I have been laying into my mortgage can then go into savings - the savings that will be needed to fund the emergency account and the new car fund.

Anyhow, back to the offer of Goals Based Planning made by my Financial Planner. I've managed to collect almost everything together that she needs - I'm still waiting on one document (which is probably in my mailbox right now, to be honest) but what I haven't actually done is put together my list of goals.  Retirement is obviously one of them, a new car and an emergency fund also need to be on the list.  The homework now will actually be figuring out what I will need for a new car and what would constitute (for me) a comfortable emergency fund.  

The primary consideration should always be having that emergency account set up and funded. The standard recommendation is that a person should always have 3 to 6 months' worth of income laid aside in case anything should happen to interrupt the income stream (loss of employment or an injury making it impossible to work, for example) Generally speaking, what people need to determine is what that number should look like.  I guess to be safe I should look at having 6 months' worth of (after tax) income set aside to cover expenses and so forth.  So I guess that creates goal number 1 for me: 6 months' worth of after tax income in an emergency fund account. That means somewhere between 10 and 15 thousand dollars.

The second goal will be to buy a new car.  My car is currently 8 years old - and though it runs like a top and I am maintaining it as required, I can probably count on having to replace it in the next 5 to 7 years.  I'll hold out as long as I possibly can, of course, but realistically speaking, I am going to have to replace it some day and if I can plan to have enough money set aside in 5-7 years to pay for a new car, then I'll be ahead of the game when it needs to be done. I did a little research on line and the average price of a NEW car (off the lot) this year was a little over 25 thousand.

Considering that I am currently only able to put aside just enough money to cover my annual insurance and property tax monies, well, coming up with 35-50 thousand dollars is a very scary thing.

Or is it?

If I look at the full 40 thousand, and I look at a 7 year time-frame I'm looking at about $275 a pay. That amount doesn't take into account any income or growth.  If I were to look at a conservative to a very conservative approach,  and considered a 6% growth per year that would actually make my bi-weekly contributions look a little more like $160 per pay.

I have found that breaking things into much smaller pieces makes them a lot less daunting.

Now, for the good stuff... with the recent completion of those courses, and the fact that I now can qualify for a promotion - when one comes in I can count on an incremental raise of between 3 and 7 thousand dollars a year - yes, before taxes, but after taxes, that could mean anywhere between ninety and two hundred dollars more per pay cheque - and BINGO - there is my savings requirements met!

OK, I should probably get off the computer and get things ready for my week ahead!

With love across the waters...

Decisions Decisions

The last few days have been fraught with trying to make decisions. An attractive role came up in Lake Cowichan and I spent a LOT of time trying to decide what to do about it. I spoke with friends and family, and even though my gut didn’t feel 100% with the idea, I sent in my application last week.

Over the weekend I did more thinking and Tuesday and Wednesday even more. What was I thinking on? A couple of things, really: first (and largest on the list) is that I actually don’t WANT to leave the Comox Valley – I like it here… it feels like the right place for me to be, and I can see myself living here, in this area, for a long time to come.

Second on the list, and not an unimportant issue, is the finances factor. If I took on the role and moved I would qualify for a mortgage and could buy a home, but the purchase of a home would eat up every last penny of my cushion - and I’m not overly comfortable with that idea at this point in time. When I bought my house in Ontario practically the first thing I had to do was have it re-roofed. With no “extra money” comes added stress.

Financial responsibility includes making tough decisions about large purchases - and just because you can do something doesn't always mean you should do something.

Feeling pretty close to decided on this, on Wednesday night I called and spoke with my Dad and, after explaining how I was feeling and why, I felt, even more so, that the responsible thing for me to do is to withdraw my application.

My Grannie always told me that “if it’s for you it’ll no pass you by” and I’m just not feeling it – so this time I’m going to pass it by. I sent a note to thank the branch manager for her time and consideration, but told her that I just can’t responsibly continue with the application process for this role at this time. Decision made.

It’s funny, but having the decision made and articulated actually makes me feel better. That’s probably a really good sign that I have, finally, made the right decision.

With love across the waters,