Updated: Feb 7
It's time to take stock of your life goals
Life has been busy. You’ve been working, maybe building a family, and learning a ton of things like how to fix a toilet, cook a meal with what’s left in the fridge, and what your kids might be doing on Snapchat. You’ve gone through life so far doing mostly alright financially but really just winging it when it comes to your money: you have an occasional late payment, you make random contributions to your RRSP, and you opened a TFSA because you’ve heard that’s a good idea. Now you’re pausing to ask yourself, “How am I doing? Am I on track?”
What does “on track” mean for you?
Most people think about retirement savings when they wonder whether they are on track – this makes sense because retirement this is the biggest savings goal of them all.
But there are other things in your life besides retirement. You might want to help your children with their education costs, or you’d like to buy some property outside of the city. Maybe you’d like to give your children money for a down payment. So many competing goals!
Can all of these goals have a place in your life? Maybe yes, maybe no. Better to find out now instead of winging it and hoping it will all work out. Wouldn’t it be great to know what’s possible and what you need to do to get there?
How much do you need for everything you want to do?
Start putting numbers to paper. How much do you need for retirement? For a property purchase? For education? When do you aim to reach these goals? Here’s when getting some help from a financial planner or a financial coach comes in handy. As a coach, I can help you estimate the costs and show you how to account for inflation and investment returns. I can then work the spreadsheets to come up with a savings plan.
Separate your savings into buckets
If all of your savings are lumped in together, how do you know if your savings are on track for each goal? How much of your TFSA money is for retirement? How much is for that piece of property? What if you spend the TFSA money on the property – what does that mean for your retirement savings?
Having an account for each goal allows you to see how you’re progressing. You can always move money from one account to another if things change. It’s encouraging to check your accounts and see that you are getting closer to a goal.
Spreadsheets are the most essential tool in the financial planning toolbox. They are like a canvas for the artist and Google Maps for the Uber driver. There’s no better way to track and analyze your finances. There are many apps available to help you track your spending, for example, but a spreadsheet is totally customizable and flexible. You can make it do pretty much whatever you want. It’s easy to learn the basics of using spreadsheets, and a skill well-worth acquiring. (Read more here about my “Learn to use spreadsheets” workshop.)
Below I’ve put together an example of how you can use spreadsheets to organize your goals. Assume you have three savings goals: education, down payment and retirement. Each goal has a time horizon attached to it and a monthly savings amount. The table on the left is the haphazard approach to savings – the table on the right shows you how to set up accounts to allocate your savings to specific goals.
With these goals laid out, you can figure out whether saving $1,725 a month is realistic for you in light of your income, expenses and spending habits. If not, we can adjust the time horizon for buying a property or retiring and see if that’s a more realistic goal for you. Or, we can build a spending tracker (in a spreadsheet, of course) and see where you might be able to cut down on spending and save more.
This is just one way to use spreadsheets in financial planning. Click here to read more about The Planner, my proprietary spreadsheet developed for Clarity. With the planner, you get a customized summary and analysis of your financial life - and you get your own copy to keep forever when you’re a Clarity client.
Your personal instruction booklet
Knowing whether you are on track, whether your goals and dreams are achievable, and what you need to do to get there will serve as a set of instructions for the coming years. Follow the instructions, and the thing will get built. Spending some time and money on figuring it out and getting the plan set up is time and money well worth spending.