Never Too Late (Revised)

Take Control of Your Retirement and Your Future

Gail Vaz-Oxlade

• Publisher: Collins
• Year: 2013
• Print ISBN:
  9781554688692
• eBook ISBN:
  9781443432139
• Topic: Personal Development
• Subtopic: Personal Finance

We all know we should save for retirement, right? But we don't. We're just not sure where to start, or when. Experts conjure magic numbers and use complicated terminology. Do we really need a million dollars? And if we don't have a snowball's chance in hell of saving that much, should we even bother?

Gail's answers are no and yes—there is no magic number that fits everyone, and yes, you must bother! The hardest part of retirement planning is getting started, so Gail walks you through the steps to put
momentum on your side—even if it's with as little as a dollar a day. She'll help you figure out where you are now, where you want to be and how to get there.

No expert, Gail included, should offer a one-size-fits-all solution, which is why Never Too Late has concrete steps for developing a plan that is right for you. Never Too Late is about cutting through the crap, taking charge and taking action to create the future you want.

1

CALCULATE YOUR NET WORTH

I have four basic rules for managing money:

1. Don’t spend more money than you make.

2. Save something.

3. Get your debt paid off.

4. Mitigate your risks.

Rule #2 is “Save something.” But how much should you save? See, that’s where the road diverges and people start to get lost. And whenever I’m asked this question, my response is always the same . . . “It depends.”

How much you need to save depends on four things:

1. how much you have already saved,

2. how much you want to have,

3. how much time you have, and

4. what kinds of investments/returns you think you’ll get.

Getting from here (where you are now) to there (where you want to be) is a matter of measuring the gap and taking steps to fill it. Sounds simple, doesn’t it. The devil is in the execution, since there are forks and turns, bumps and jostles that can make what seems like a straight path into something far more daunting.

Each year as I do the media rounds, I am asked, “When should I start contributing to my retirement plan?” For young people, the question implies they have lots of time and can wait. For older individuals, the question is really, “Is it too late for me?”

It is never too late (or too soon) to start saving for your future, no matter how your bottom line reads today. But you do have to know how that bottom line reads. So let’s get started.

WHAT YOU OWN VS. WHAT YOU OWE

If you’ve decided to take control of your retirement and your future, you may be starting from scratch or already well on your way. Depending on how old you are, how much you make, and what you’ve been doing with your money so far, you may already have a firm foundation from which you can launch your new goal. Or you may have nothing. It doesn’t matter. This isn’t a race to the finish. This is about knowing where you are now and where you want to be next.

So let’s start with where you are. And the way to do that is with a net worth statement. A net worth statement is like a snapshot that shows your financial situation at a particular point in time. In black and white, it tells you how much money would be left if you converted everything you owned to cash and used that cash to pay off everything you owed.

Your net worth statement is a little like a financial report card. You may have been deluding yourself into thinking that you were doing just fine because of that nice pension plan at work and the maxed-out TFSA (tax-free savings account). But if you’re also carrying a whopping line of credit and a couple of credit cards with balances, the net worth statement will show you in no uncertain terms where you’re really at.

The best thing about a net worth statement is that you can’t fool it, unless of course you play loosey goosey with the numbers. There’s no rationalizing, no excuses. It’s the beginning of an honest and down-to-earth desire to get to where you want to be. And if you’re serious about having a little sumthin’ sumthin’ to see you through retirement, it’s the place to start.

If you work through this process and find you have less than you thought, don’t get frustrated or sad. Knowing where you are is only the first step. And since it’s never too late to get started, working through the process I’m going to give you step by step will help you create a clear picture of what you can achieve. It’ll help to get you to where you want to be.

Step 1: Add up what you own

Grab your bank statements, RRSP (registered retirement savings plan) statements, brokerage account statements, TFSA statements, insurance policies and whatever other documents you may have that show what you already own. There’s a form on pages 18–19 that you can use to make your notes.

Make a list of the following:

• Cash in your chequing and savings account(s).

• Cash in a money market fund, a TFSA, or government bonds/Treasury bills.

• The cash value of your permanent insurance policy if you have one (not the face value, which is what the policy would pay out; the cash value, which is what you’ve built up).

• Assets in your RRSP(s).

• The current value of your company pension plan or group RRSP at work.

• Unregistered assets, such as Guaranteed Investment Certificates (GICs), mutual funds, stocks, bonds, or anything else you may own as an investment.

• The current value of your home. Don’t guess. Check comparables in your neighbourhood or ask a real estate agent to give you a realistic number for what your home would sell for in the current market. Since your home will likely be your biggest asset, you should know what it is worth.

• The current value of your recreational property. (Do not include time-shares since so many have virtually no resale value.)

• The current value of investment property (land, rental units and the like).

• The current value of any other property you own.

• The current black book value of your car or other vehicles you may have (motorcycles, Ski-Doos, boats, and the like). It’s important that you use the “black book” value because you want to be realistic about what you actually have. So don’t guess. Do the research.

• The value of collectibles that could be resold. (Forget about jewellery or other personal stuff. Those things seldom have any real resale value and should not be included on your list.)

• Total what you own. Are you impressed with what you’ve managed to accumulate so far? Well, don’t go patting yourself on the back just yet.

GAIL’S TIPS: YOUR BIGGEST ASSET

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My girlfriend Victoria likes to hold “new conversations” about money. She wants people to think outside the box, and she gathers them together to talk about new ways to think about old ideas. When she asked a group of people what they thought their biggest asset was, they responded, “My home.” You know what, it’s not. While your home may carry the greatest weight on your balance sheet, your biggest asset is YOU. It’s your ability to earn an income. It’s your decision-making skills. It’s your strength of character, your determination to act, and your willingness to change.

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Step 2: Add up what you owe

Make a list of all the money you owe. You’ll need your statements to be accurate. Don’t guess. Guessing is lazy and lets you off the hook. Know. Ready to get started? Make a list of the following:

• Mortgage(s).

• Car or other vehicle loans.

• Lines of credit.

• Credit cards (all of them; don’t forget the department store and gas cards).

• Investment loans (like the RRSP catch-up loan, but not the mortgage on your investment property, since that’s covered above).

• Student loans.

• Buy Now Pay Later plans.

• Pay-advance loans.

• Overdraft (the amount you’re into your overdraft for, not the amount you’re qualified to use).

• Back taxes.

• Home Buyers’ Plan loan from your RRSP. (Hey, you have to pay it back, and even if you owe it to your own RRSP, it’s still a liability.)

• Other loans.

• Money owed to family and friends.

Step 3: Calculate your net worth

Subtract what you owe from what you own. That’s your net worth.

If you have a positive number, it means you own more than you owe and you’re on your way to building up an asset base. If your number is a negative, it means you owe more than you own and you must get busy paying down your debt and building up your savings.

If you’re shocked, take a breath. I know looking at the truth can be hard. And seeing where you stand in black and white for the first time can make your stomach churn. But it’s okay. You’ll be fine. You’re doing the right thing by taking these steps now, and you’ll be pleasantly surprised at how a little focus and some effort can make a big difference.

Each time you make one of your debts smaller or increase your savings, you’re positively affecting your net worth. You’ll glory in the progress you make. You’ll love the feeling of achievement even as you take small steps towards your goal of having some retirement savings socked away. Your net worth statement can also serve as a deterrent to falling back into old, bad habits. Each time you spend money you haven’t yet earned and tip the net worth scale more into negative territory, you’ll know you’re shooting yourself in the foot.

By regularly updating your net worth statement, you not only check your progress towards individual financial goals, you can also assess how the decisions you make will affect your big picture. Don’t underestimate the motivation of tracking your progress in a very concrete way. Your net worth will serve as a reminder of your priorities for when you may need to make adjustments to other parts of your financial life, like your insurance coverage. And it will give you the info you need to estimate your retirement income. Over the months and years, you can chart your financial progress.

Some people update their net worth statements monthly as they pay down debt or build up savings. It becomes a motivator, watching as they move from level to level in achieving their goals. For some, quarterly updates are just fine. But you should do a net worth statement at least once a year to ...

Table of contents

• Dedication
• Introduction
• Part One: Figure Out Where You are Now
• Part Two: Decide Where You Want to Be
• Part Three: Start! Now!
• Part Four: Pull the Chute
• Acknowledgments
• Index
• Copyright
• About the Publisher