Category: Plan for the Future

Have you heard of EVOKE?

EVOKE is a tool in the Life Planning space. It helps you identify your best life, using the following:

  • Explore
  • Vision
  • Obstacles
  • Knowledge
  • Execution

A series of questions leads to the next section, where you expand on the previous section. You determine what is important to you, and then determine how to get there.

I ran the exercise myself, and made a couple of realizations around what is important to me, and what is not. I have been reflecting on why I spend time on the things that aren’t important. Some of it is just habit. Some of it is not knowing how to redirect to the important things. And some of it is feeling a bit guilty spending time on the important things when there are other things sitting waiting.

Contact me for more information about the process.

protect@ksfraser.ca
587-600-0013
747 Windridge Road
Airdrie, Alberta T4B2R1
Canada

Secrets of the Wealthy – Live on 20% of your income

I hear you.  It is inconceivable that someone except the wealthy could actually live on 20% of their income.

When GC goes on to say live on the 20%, he scribbles on a white board the following:

Income – 100%

Subtract Taxes – 40%

Pay Yourself – 40%

Live on – 20%

He then says that if you can afford to pay the government 40% for the in-the-present services they provide, you should be willing to invest in your future for no less!

And if you are taking 40% of your gross income for investing, that leaves you 20%!

Understanding that 85% of (American) households are spending 110% of their income (hopefully the stat is take-home income and not gross income) one can imagine the frustration at being told you should be living on 20% and not 66% of gross.  The immediate reaction is “there is no way to reduce my expenses to live on 20%”.

I am right here with you.  That was my initial reaction too.

But then something magical happened.  GC said, “Ok, you can’t live on 20% if you are making minimum wage.  So make more than minimum wage.  Take your current expenses.  That becomes your 20%.  Now, how much do you have to earn to have the 100% to live on the 20?”

Now, the magical part wasn’t my being insulted about my middle class income.  I expect you reacted the same way to that statement I did initially.  But then I had a mindset shift that said work the problem from the opposite direction.  And this is what GC was getting at.

As an aside, the Canadian Government lets you save 18% of your income tax-deferred in an RRSP so that you will have retirement income.  

This is not an overnight fix.  This may not be a quick fix.  It may take months to years.  But the first step is mindset.

Once you shift mindset, you need to determine how to increase your income.  Some jobs have capacity for extra income (pay raise, overtime, bonuses, commission).  This that don’t would require either education/training for a promotion or transfer, or a new job, or as a last resort a side hustle.

GC says a side hustle should be the last resort because it takes away from your focus on your main job to the detriment of both.  But this is a post for another day.

As always, if you want to discuss this post, or anything else, give me a shout!

Once you are ready to set aside some (or all) of that 40%, let me know and we can discuss how I can help you out.  There are multiple avenues to apply step 4!

Pay Yourself First

This is a bit of advice that many coaches and advisors provide.  But do you know what they mean?

This is related to the Secrets of the Wealthy post.

Problem 1 – You can’t save yourself rich

It’s a well known “secret” that you can’t save yourself rich.  If you take any excess money at the end of the month, and stick it into a “savings” account at the bank, the interest rate (if any) will almost always be less than the real rate of inflation.  So over time, your purchasing power decreases.

Problem 2 – No spare money!

Another issue with “saving” is that 85% of households spend 110% of their income.  Therefore there isn’t any extra money at the end of the month.

The solution?

This is not the entire solution, this is step 1.

Pay Yourself First!

What this means, is before you spend ANY of that income that came in, pay yourself off of the top.   Ways to do this:

  • Have your employer deposit a portion of your income into a different bank account.  Out of sight, out of mind!
  • If your employer refuses (or if you are self employed), the first action you take on pay day is to move the amount you are “paying yourself” into that other bank account.

And once the other bank account accumulates enough “savings”, purchase an asset (something that generates passive income). (Step 4 of the Secrets of the Wealthy)

How much to pay yourself?

If you are following the Secrets of the Wealthy posts, you will see that the recommendation from GC was to live on 20% of your income.  With that number, he is saying you should be paying yourself (i.e. saving) 40% of your income.  I will expand further on that in the related post.  I hear what you are thinking – there is no way to live on 20% of your income.  I address this in the related post!

Secrets of the Wealthy!

One of the people I follow shared today the following Secrets of the Wealthy. Of course, there is more context than just the sound bite. The secrets:

  1. Pay yourself first
  2. Live on 20% of your income
  3. Don’t lose money
  4. Invest in assets that cash flow
  5. Have more passive income than earned income.

He goes on to say:

“The most important is to be patient and invest for the long term. If there is immediate gratification, it is most likely an expense rather than an investment. Investments take time to bear fruit.”

I will expand on these points in the next few posts. So don’t get your hackles up on the live on 20% until I’ve expanded on that…

If you would like to discuss any of these, or any other topics, please reach out!

Do you have a Risk Management Plan?

Do you have a plan for when something unfavorable happens?

Back when I was a Project Manager, one of the earliest activities we did in a project was the Risk Management Plan. As we were scoping out the project, we would identify things that could go wrong, and what their impacts would be. We also identified what the preventative measures we could take were, as well as the post-event actions to take.

As we did this, we identified the costs of the preventative measure, the cost of the event, the cost of post actions, and the likelihood of the event. We could then determine if taking the preventative measures were of value.

What does this have to do with a person’s life?

We face risks each and every day. Consider that your job is (usually) a large part of your life. What happens if there is a snow day? If you are on salary, you might cheer and do something else. Or perhaps your employer has given you a laptop so that you can work from home. But what if you are a wage employee, and don’t get paid if you don’t work? Or what if your car breaks down, do you have a different way to get in?

And those are reasonably minor risks, with potentially low (big picture) impacts. How about if your house burns down?

Insurance is one way of passing the financial risk of an event to a 3rd party.

We regularly go through our Risk Management Plan trying to identify risks we haven’t yet identified, validating the ones we have, re-costing the preventative measures and the expenses of the event, as well as updating our post event actions.

Would you like to find out how we can help you with your Risk Management Plan?

Schedule a Meeting with Kevin

Schedule a meeting

Old Style Planning versus Modern Planning

Surviving an illness like Cancer, a Heart Attack or a Stroke is likely, but it can be financially devastating.

Our Parents and Grandparents may not have purchased Critical Illness insurance, because 20 or 30 years ago it was much less likely to survive these illnesses.   Therefore, these illnesses were appropriately “covered” by life insurance, as the insured didn’t survive, but their families were cared for.

However, now that we frequently survive these illnesses, we need to look after our families during our treatment and recovery!  The CMHC reports that 48% of foreclosures are due to the impacts of a Critical Illness.

Critical Illness insurance provides a cash benefit to help you cover the expenses of treatment and recovery. Examples of uses of the funds:

  • Alternative treatments
  • New medications
  • Hire in home care
  • Cover unpaid leave for healthy spouse
  • Fly in friends or family for support
  • Post recovery vacation
  • Protect your savings and investments
  • Offset lost income

Contact me to discuss further!

kevin@ksfraser.com
587-600-0013
Airdrie, Alberta
Canada