Why it’s never too soon to run some retirement numbers
Inspired by various articles on this subject in recent months, I believe it’s never too soon to run your retirement numbers. This post will tell you why.
Dream early, dream big – you only have one life to live
Daydreaming is great. This includes what may lie ahead after any full-time work.
Maybe you have aspirations to try a new hobby.
Maybe there’s a passion you’ve never had the time to pursue.
Don’t put off any big adventure or plans because you’re waiting to “get around to it”. Those days may never come.
I’m trying to eat more of my own cooking on that principle as I get older. Better now than never…
I daydream we’ll eventually have $30,000 per year to spend from two key investment accounts (non-registered and TFSA) for semi-retirement. That’s just one of our financial goals. How did I arrive at that number? Some math of course.
Will we get there? I certainly hope so but I know we wouldn’t be as far along this journey if we didn’t dream a little bit.
Manage your money, nobody else will
Ain’t that the truth? OK, sure, there are some absolutely great fee-for-service financial advisors out there but let’s talk about the rest of the world: nobody really wants you to save your money. I mean, seriously, Black Friday? If that’s not one of the biggest marketing and spend-your-money-bonanzas going…
I learned a long time ago to try to adhere to these financial tenants as much as possible because nobody cares more about our financial well-being that us:
- Always spend less than I earn.
- Save early, save often.
- Keep my money management fees low for as long as possible.
- Be wary of any financial product and the financial industry at large.
- Read the fine print on contracts.
- Disaster-proof my life to the extent possible.
- Always pay down debt.
- Diversify my investments.
- Delay consumption.
I’m not perfect at these things all the time but I am getting better with time and more experience on my side. The more you adhere to your financial values the better off your retirement numbers will probably be.
Focus on cash flow, not net worth
I would argue net worth, while a good metric for overall financial health – does not provide as much value as focusing on cash flow.
While increasing net worth is great, I’m personally focused on increasing our cash flow over time. This way, regardless of the assets we own (e.g., a paid off Ottawa condo eventually), we’ll have options in terms of living off the income derived from some or a good portion of our portfolio.
Identify, monitor, and manage your risks
No two people are the same. They call it personal finance because the personal in finance is so unique. This means you, and only you, can truly understand your tolerance for investment risk. You absolutely need to balance some risks and rewards when it comes to investing.
Your financial success, regardless if you invest in real estate, stocks, private equity or other ventures will be your ability to identify, monitor, and manage your risks.
Retirement planning comes in all shapes and sizes. There is no right or wrong really.
While many day-to-day costs should eventually disappear when you approach retirement (e.g., saving for retirement; killing your mortgage and all other debt, etc.) others might arise (like higher healthcare costs and increased travel expenses).
In evaluating the life you want to lead today and the life you are working towards, I think it’s never too soon to run some retirement numbers.
When it comes to our financial plan, we’re focused on an income plan whereby most of our income derived from our portfolio will exceed major expenses. That excludes income from government benefits such as Canada Pension Plan and Old Age Security for the record.
By examining what we need from this “bottom-up” approach while we are more conservative than most, I believe we’ll be successful. At the end of the day, the only investing goals that matter are ours. I’ve been running various retirement numbers for 10 years now. I don’t intend to stop.
What’s your take on running some retirement numbers? Wait until pre-retirement or do it now and often?