It almost seems counter cultural to be debt free these days. It has become increasingly easy to borrow money and you can virtually extend or roll over any loan into another loan, keeping you in debt your whole life... Unfortunately more and more are staying in debt. Six out of ten Canadians are living paycheque to paycheque, newer studies are trending to seven out of 10. Regardless, most Canadians feel that they aren't gaining any ground with their finances. The "retirement dream" is looking more like a nightmare these days. Both Provincial and Federal governments are realizing this and as a result plan on taxing Canadians more to make up for their lack of saving!
Related - The Emergency Fund
1. Start Investing
Before you can start investing you want to have two things down. One, make sure you're debt free. Consumer debt is just dumb. It's the number one reason why most people will not be able to fully experience their retirement dreams. Let's take the car payment for example. The average car payment in Canada is currently $570 per month. If you were to invest your car payment over the span of your working life time (age 25-65) at a 10% return you would have $3.3 million dollars! Keep investing for another 2 years, till age 67 and you will have over $4million dollars saved. How much is that car payment really costing you?
The second thing I want you to do before you start saving for retirement is have an emergency fund. If you're like me, then growing up you probably heard grandma say "It's going to rain, so be prepared for a rainy day." That's exactly what an emergency fund is.. My one buddy calls it an "oh crap" fund. Except he doesn't use the word crap. Life is going to happen whether you like it or not, so have a plan and be prepared.
Once you're out of consumer debt (all debt except for your house) and have an emergency fund, it's time to start investing 15% of your income.
2. To Be Able to Live and Give Like Never Before
There are two things that Canadians love.... A good underdog story and hearing about big acts of generosity. Noted financial author Larry Burkett once said "If you'll do now what other people won't, you'll be able to do later what other people can't." The human spirit doesn't flourish with a self centered attitude. Getting rid of generosity killers like debt, greed and an entitlement attitude, will allow you to be more generous with your time, energy and money!
3. So Your Children Never Have to Borrow Money
The truth about debt is this. If you stay in debt long enough, it will rob you of opportunity. When you give all your money to the banks, there isn't any left for you to build with. Proverbs 13:22 says it this way: A good man leaves an inheritance for his children's children. What better inheritance to leave to your children, than one that is free of debt?.. One where your time, your energy and your money is used to build your families legacy, not the banks? The use of debt has been so intregated into our culture that it's become "just a way of life" for most people. Some of your stories almost feel like a country song. You know, the one where the guy loses is chevy, his girl and his dog, not because his dog died. Sparky got repoed! You think I'm joking. What do you get when you play a country record backwards?... You get your dog back, your girl back and your chevy back. Seriously though, we want the best for our children. The best thing you can do for them is to clean up the debt for good and build a legacy that will live on for generations.
The Right Plan
If you don't have a plan, it's time to get focused and get on one, if you have a plan, revisit it and make sure you're still on track with hitting your goals. Not sure if you're on track?.. Connect with a financial coach today. You want to be intentional with your resources. Your time, your energy and your money!