It’s the most wonderful time of the year – annual goal review season!
I love the end-of-year review process. I feel lucky that this is part of my job as a financial coach. Helping my clients track their progress and celebrate their successes is THE BEST!
On a personal note, looking back at what I set out to accomplish and celebrating the progress I have made is oh so rewarding. This year in particular.
2016 was a big year for me.
I set a lot of goals for myself – 27 to be exact – across three categories: health, wealth and happiness. One of my wealth / career goals was to attend at least one networking event per month, as a guest or as a speaker. My intention was to get to know the women I am hoping to serve (you know, the whole “go where your clients are” kind of thing).
How did I do?
Pretty darn well. I almost doubled my goal, attending 22 events, speaking at 15 of them and hosting four myself. And, I got to know a lot of women. Women of different ages and in a variety of career paths. Interestingly, many of them have something in common: they feel worried about their financial situation and uncertain if they are on the right track.
The struggle is real! Financial adulting can be really hard, at any age. Especially if you’re not sure about what you’re doing and where you’re going.
So in today’s Q&A blog post, I’m sharing one of the most common questions I heard this year all about just that.
Your Question:
Have 5 seconds? Here’s my take on what you need to know:
I hate to disappoint you, but it’s impossible to tell you how much you should have in the bank right now without knowing your goals. That’s a question of math: how much will you need in the future, how many years do you have to save, and how much can you save each year?
The answer will be different for everyone depending on what they want out of life. While I can’t tell you exactly how much you should have saved by now, I can tell you this:
By this point in your life, you should know what you want, have a clearly-defined goal and a plan for how you’re going to accomplish it.
Have 5 minutes? Here’s what else you should know:
All that being said, there are five key milestones that you must reach in order to officially make the transition into financial adulthood.
1. You pay your own bills.
It’s a blessing to receive gifts and extra help for big purchases like a down payment or a wedding, but on a day-to-day basis you are the sole funder of your lifestyle.
2. You pay yourself first.
Ideally you save between 10-20% of your after-tax income, but even as little as 1-5% demonstrates that you know how to spend less than you earn.
3. You are debt-free.
Excluding your mortgage, that is. If you are currently carrying credit card or student debt, having a written plan for how you will pay it off is the first step to achieving this milestone.
4. You invest your savings, intentionally.
You have written down your investment goals, understand your [simple_tooltip content=’Answers questions like: What are your goals? What is your timeline to achieve them? How much risk are you comfortable with?’]investor profile[/simple_tooltip], have an [simple_tooltip content=’A set of guidelines for choosing the specific investments you will own.’]investing strategy[/simple_tooltip] and know why you are holding each of your investments. Sounds like a lot of work but you can accomplish all this in a single meeting with a financial professional. (Hello, it’s me! *smiles and waves*)
5. You have insurance.
I’m all for being optimistic but it’s important to have a plan for the worst-case scenario. Almost everyone needs income insurance (aka [simple_tooltip content=’Replaces a percentage of your income should you be unable to work for an extended period of time. Different from critical illness, which is a lump sum payment if you are diagnosed with a specific illness.’]disability insurance[/simple_tooltip]) in case you aren’t able to work for an extended period of time. If you have debt or dependents you need life insurance as well.
Reading this list might make you feel icky if you can’t check off all these milestones right now. For those of you who need help making the leap into financial adulthood, you’re not alone. (I did too.)
Take a deep breath and repeat:
“I will do something today that my future self will thank me for.”
Book an consultation with me. Let’s make some goals for 2017 and a plan to get your finances on track. You can’t change the past, but you CAN change tomorrow!
What about you? What’s one goal – financial or otherwise – that you’ve reached this year? Tell me about it in the comments below and I’ll celebrate with you!!
xoxo
Lisa
I lived into my goal of taking more risks! Both in my professional and personal life I learned a lot by stepping out of my fears. For 2017 I’m modifying a bit, and strategizing about funding my professional projects in a way that doesn’t feel so *risky.* Still, risk had its place, and I’m proud to have met my goal!
That’s awesome Chloe, you’re amazing!!! If you don’t want it to feel risky, how DO you want it to feel? Being clear on that might help you figure out how to approach finding a new strategy.
That advice really resonates with me Lisa, and thank you so much for the encouragement! I think the word that sums up now I want to feel is “resourceful.” I guess the tricky part is understanding the real breadth of the resources I have access to, rather than the limited perception I’ve had so far. Hopefully my holiday read ,”The Art of Asking,” which just arrived in the mail, will be some help!
What a powerful word, feels full of possiblity. And sounds like you’ve picked up the perfect book for your quest…. as the saying goes, ask and you shall receive 🙂 Would love to chat with you more on this some time! xo
I made a budget for my new job and salary! With said budget I just opened two chequing accounts. One is where my money will be deposited, the second is where my existing bills are taken from. This way I will allocate the amount of funds necessary for bills and have a separate account for the rest (aka spending). The rest (spending) has now been dividing into different priorities. Some of these priorities include savings so I have also opened a new savings account. My budget allocates a certain amount for this fund every month as well extra for the just in case type scenarios. The fourth account I opened was a RRSP which I will contribute to monthly. The final account I have opened is a LIRA to transfer my pension to from my old career! I feel like a money hunnie and you have always been my inspiration! I want to share my budget with you and hear your feedback! Thanks for creating this page for girls like me who have always dreamed of learning how to keep track of their money, as well as learning how my money can work for me!
Wow Sarah, I’m so impressed!!! Having different bank accounts for different purposes is a great way to keep track of everything so well done. *HIGH FIVE*
One thing that comes to mind is automation – if you’re able to have all these transfers done automatically (which you can set up yourself online) then you won’t even have to think about it, your money will go where it needs to be all by itself!
Also, savings goals. If you have a clear picture in your mind about what you are saving for, and the amount that you need, it will help you stick with the plan in the face of temptation. So far you have two really clear goals – retirement (your LIRA and RRSP) and emergencies (savings). Do you know what your end goal is for these in terms of the dollar amount? And maybe think about a short term savings goal for something fun.
We’re going to cover this kind of stuff in the next few Wellth Club meetups, hope you can come! We meet on the 2nd Thursday every month.
xoxo
Lisa
These tips will definitely help a lot of people to start their year right. Great job for coming up with this short but very inspiring tips! I do agree that getting insurance is imperative right now particularly women. I’ve discussed this in my recent post that women need to plan for their future – their care needs. About 70% of women who are 75 and above are single, widow or divorced, which means a lot of women age alone. Who will take care of them? How will they pay for their future care needs? These are just some of the questions that women should address early, while they are still earning and they still have the means to build a retirement income or buy insurance. I hope this will inspire people, especially women to set smart financial goals and hit them.
Such a great point Samantha! Really important questions for us to ask ourselves.
My score is 4 out of 5. I got life insurance recently and when I’m into my 50’s I’ll consider getting long term care insurance. The only thing I’m missing right now is investing my savings. I can’t find time studying the market and making new investments. I have an account but I haven’t touched it for more than a year now. I haven’t checked it either. Your post inspired me to do the right thing and start the year right by investing my savings, intentionally. Thanks for these reminders!
Hi Timothy… Congrats, excellent score!! That’s a very common challenge when it comes to investing. Have you considered investing in ETFs? You can do it through your bank, although you’ll still need to pick the ETFs that feel right for you. Another option is to sign up with a low-cost online investment advisor like Wealthsimple or PortfolioIQ (Questrade). They will create a portfolio of ETFs for you based on your investor profile, select the investments and do the annual rebalancing. They charge a small investment fee but it can be worth the cost if the time to do it yourself is preventing you from investing at all!