Today’s decisions could cost BIG TIME tomorrow

This month, I would like to vent some of my frustrations. As a financial planner working mostly with people who are either retired or close to retirement, I have come across far too many situations where an individual’s past decisions are having a serious impact on their ability to have the retirement lifestyle they planned for or even to retire at all. We are faced daily with the “spend versus save” decision, not realizing that every one of those decisions will have an eventual impact on our future financial position and the quality of our retirement years.

Here’s the dilemma in a nutshell: “I know I should save for my retirement but that new big screen LED TV is on sale for a great price and it would be a terrific upgrade for our family room.”

Sure, it’s difficult to think about a distant future plan (something intangible that is way down the road) when it so convenient to get something you want today. This is why so many people fail to set realistic goals. But, in this case the solution seems obvious: Stay with the perfectly serviceable TV you’ve already paid for and put the money you would have spent on the new tv that you didn’t really need into an investment for some future goal (be it a retirement fund or some other more important financial goal).

Sounds simple, right? Surprisingly, for most people it’s not. Most people don’t focus much time on their future financial goals, until it’s too late. They don’t have a plan! They don’t have clear savings goals. So when they have to decide between the TV and saving for an “undefined future retirement goal”, the TV sounds far more enticing.

Step 1. Whether you’re far from retirement, approaching retirement or already retired, it is critical to acknowledge that you need some kind of plan. An effective financial plan has to be much more than just placing money in an investment held within an RRSP or in other savings vehicles. While it is undeniably true that the earlier you start saving, the better – the first thing you need to know is what you are saving for. In other words, you can’t measure a future need if you haven’t defined what that need will be. Therefore start by carefully defining your objectives – some are straightforward, like your desire to buy a larger home at some future date; others require much more thought, like looking at your retirement dreams from every angle and determining what kind of income stream you need to afford the lifestyle you want in retirement

These calculations can be complex and may require professional help. So while the creation of the plan is important, the implementation of the steps leading up to all goals, both short and long term, is equally critical. There are several factors that should not be ignored throughout the entire process. Next month, I will address some of the “what if” scenarios that can destroy even the most well calculated plan.

Yes, comprehensive financial planning is complex – and also vital. Make the right decisions today and for your future by talking to a Certified Financial Planner. It will make your daily “spend vs. save” decisions all that much easier & clearer.

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