How much will achieving your goals cost?

How much will achieving your goals cost?

   Knowing how to avoid the common pitfalls of achieving goals increases your chance of success. But there is one other often overlooked cost of achievement, and that is the financial cost of progress. For all of our goals or resolutions, there will be an impact on our bank account. Recognizing these costs will help you build them into your financial plans, and clear one last hurdle to your achievement.

What type of costs will you see?

   For my fitness goals, the gym membership will cost several hundred for the year. And while I have some gear already, continued use will ensure that needs to be replaced. By the end of the year, I expect to have spent $ 2,500 on gym memberships, workout clothing, running shoes, equipment maintenance, etc.

   As I progress my career goals, I will need to have the wardrobe for the positions I plan to be in. For new suits and dress clothing, $ 2,000. The courses and professional development that will get me to my career goals? Another $ 8,000.

   By now this is starting to sound like a MasterCard commercial, and that’s only considering the costs for two of my pillars. Once we add in social outings, date nights, romantic get-aways, journals, guided meditation apps, etc. The financial cost of all that I plan on achieving climbs even higher.

   Of course, achieving what I have set my sights on this year? Making this year my best year ever? That, is priceless

How much will achieving your goals cost?

   Setting the right goals will put you on the path to living your best year ever. But an important part of achieving your goals is to understand the costs associated with each of those goals. Here’s how you can be better prepared:

  • Pull out your list of goals
  • Under each goal, list what you’ll need to get there
    • A coach? Courses and seminars? A weekly entertainment fund? New gear / clothing?
  • How much do each of these prerequisites cost?
  • How much more do you need to set aside now, and ongoing, to ensure you can achieve your goals without undermining your financial foundations?

   Understanding the costs of achievement helps you plan accordingly. No matter the numbers you come up with, it is essential that you create the plan, and keep your eyes fixed firmly on the achievement of your goals. Because the cost is nothing compared to the value you’ll experience when you make this year your best ever. The value of that? Priceless.

Resolute Resolutions

   Have you decided on your New Year's resolutions yet? How devoted are you to achieving your goals?

   For many of us, the start of the year brings a renewed focus on our career, health, and financial goals. “This year will be the year I get in shape. This year I will get that career promotion. This year I will take control over my finances.”

   As anyone who has been to the gym that first week of January will tell you, it is crowded. People are committed to their yearly goals. But one by one, as the days go by people lose that firm grasp on their resolutions. Perhaps you  notice something similar when you look at your previous goal performance. Soon enough, as we approach the end of that first month, that crowded gym is back to looking just as it did before the new year began. 

Why do people abandon their goals?

   There are a few reasons why people abandon their goals. The most prevalent one that affects most “New Year New Me” people is overwhelm. Overwhelm assaults our good intentions in many different ways. That top 10 list of things they want to do differently in the new year, but if they were to stick with them all they would lose sight of who they are. Or that BHAG that isn’t set 10 years into the future, but rather 10 months into the future. Progress seems almost non-existent despite working exhausting hours, and suddenly that goal looks like we just bit off more than we can chew. Or life simply gets in the way. How many good intentions have faded away after life throws us a curve-ball, an untimely illness, or a sudden vacation or work trip. Overwhelm has many weapons with which to cause us to falter in our quest for greatness. 

   Another reason is the goal is too vague. “Get healthier” doesn’t come with an action plan. Neither does “get a promotion”, or “be better with my money”. If you aren’t specific about the result you are wanting to achieve, it is impossible to put an action plan in place. And without an action plan, it becomes easy to talk ourselves out of doing anything.

   Finally, the inability to measure our progress hinders our ability to grow and develop. Without seeing if our actions are paying off, it is easy to rationalize that our efforts simply aren’t working. Certainly some things are easier to measure than others, but all of our goals should be measurable. Seeing progress will help us stay the course throughout the ups and downs of life.

How do you stick with your goals?

   Knowing about overwhelm, vagueness, and measurability is an important first step to overcoming those obstacles. But what can you do to ensure you actually achieve your goals? 

   To face overwhelm, you need to ensure you only have a few goals at a time. And these goals need to be ambitious, but achievable, in the time frame you allow. If there is no way you can achieve in that time frame, perhaps you need to allocate more resources to working on it, or shrink the goal, or extend the time frame. Keeping the goals in sight, yet achievable, will prevent some of the overwhelm. And finally, you need a contingency plan. It is easy to work at a goal when the sun is shining and you have nothing but free time. But what are you going to do when life gets busy, when things aren’t going your way? Knowing how you will adapt to life’s uncertainties greatly increases your chance at success.

   How else do you increase your chance at success? Specificity. You need to know exactly what you want to accomplish, and how you plan to get there. By getting specific in your goal, often you will also uncover the action plan that helps you get there. This action plan can be measured, and you can track and evaluate your progress even before you reach the prize. Specificity, being specific about your goal, clears up your vague intentions and provides you an action plan with which to measure progress. This clarity will set you up with the optimal chance of achieving your goals and resolutions.

   As you set your New Year’s Resolutions, or any other goal, make sure you are ready to combat overwhelm, vagueness, and measurability. By being specific in what you want to achieve, and building a contingency plan for when things go wrong, you will be well prepared to crush your next goals.

Setting your sights on 2020: Planning the New Decade

   Who are you going to become over the next decade?

   As we focus on our own growth and development, we can achieve incredible things. This achievement fundamentally changes us, as we recognize our capabilities and pursue new heights.

   There is no better time than now, the start of a new decade, to plan your next great accomplishment. This goal, the one that inspires you for the next decade, is your BHAG.

What is a BHAG?

   Pronounced bee-hag, the term was popularized by Jim Collins and Jerry Porras in their book, “Built to Last: Successful Habits of Visionary Companies”. This is where Jim and Jerry introduced the concept of Big Hairy Audacious Goals, or BHAG for short. These long term goals proved, in the corporate world, to be an indicator of exceptional company success. A BHAG has a way of motivating people, and reminding them of their overarching objective, in a way that a long-winded mission statement cannot.

   With proven success among corporate goliaths; think Apple, Google, Facebook, Uber, or Tesla, it’s about time we applied some of these world-changing principles to our own pursuits.

How do you set a BHAG?

   Big Hairy Audacious Goals have a few key characteristics that they must be:

  • Forward Looking - does your BHAG tell you where you’ll be in the future?
  • Exciting - does your goal fill you up with energy? Will it continue to inspire you for the years to come?
  • Adventurous - is your goal hairy and audacious enough? Is it big enough to keep you up at night? Or to wake you full of excitement in the middle of the night?

Examples of BHAG’s

   It is one thing to think of a company like Google (Alphabet), and their BHAG to organize the world’s information. Certainly, they have near unlimited resources to devote to their goals and ambitions. But can you set a BHAG for yourself, that would lead you to new heights?

   The answer is a resounding yes, we’ve all heard the stories of individuals who set BHAG’s for themselves; Thomas Edison in harnessing electricity to generate light (the light bulb), Alexander Graham Bell by sending near-instant communication across the Atlantic (the telephone), or Roger Bannister in his athletic achievement, breaking the 4-minute mile. These individuals all set Big Hairy Audacious Goals, and achieved things that changed the world.

   Often we think these successes were made by extraordinary individuals, but that simply isn’t true. These successes were achieved by normal folks, people like you and I, who had extraordinary goals.

   Let me ask you again, what BHAG are you going to set for this decade? Who will you become, as you grow into further success?

   I can’t wait to experience the future you are going to shape.

Closing out the 20-teens

   The holiday period is officially drawing to a close. With the end of the decade almost upon us, it’s time to reflect on the past, and look to the future.

   Before we can take on the new year, we need to look at our successes and failures of the past year, of the past decade. Let’s take an inventory of what happened for you in your life. Answer the following questions, preferably by writing down the answers, but at least reflect on them and learn from your past failures and successes.

  • What were your goals on January 1st, 2019?
  • What wins did you have over the last year?
  • Were your wins on your list of goals at the start of 2019?
  • What helped you accomplish those goals and wins?
  • Who was most influential in your successes? Send a quick thank-you to that person(s).
  • What were the goals you didn’t accomplish?
  • Are there any lessons you can learn? Why were you unsuccessful at achieving some of those goals?
  • How can you be better prepared to accomplish your next set of goals?
  • Who can help you along the way?
  • Who can you help accomplish their goals?
  • What are you most grateful for over the past year?

   Success is a journey with it’s own ups and downs. Taking time to reflect on what has gone right, and what hasn’t, ensures that you are continually learning and growing. That growth makes you better tomorrow than you are today. As you learn, grow and develop more, there is no telling how far you can go. The world is yours for the taking, seize it!

How to use your Emergency Fund: Best Practices

   An emergency fund can save our hides in an unexpected event. That safety cushion can be used in an emergency, or as an opportunity fund. But using the fund is only part of the equation. We also need to replenish it, or risk going into the future financially exposed.

When is it okay to use your emergency fund?

   Sometimes unforeseen events happen that put a strain on our finances. For these situations, we can dip into our emergency savings to prevent us from having to borrow money from other sources, like bank loans and credit cards. Our savings are designed to protect against the struggles of life, designed to make our financial position stronger and safer.

   In general, your emergency fund is there to help with the one-time expenses that creep up on you. A car accident not covered by insurance, a medical emergency, or unexpected travel. Anything sudden that causes you to deviate from your current financial plan can be covered by your emergency fund. But be careful that the expenses that come up are really one-time items, and that you aren’t dipping into your emergency fund for everyday purchases. If that’s the case, your expenses are creeping too high and you’re in danger of living beyond your means. And that is a very dangerous road to travel. 

   You also could dip into your emergency savings for once-in-a-lifetime investment opportunities, after appropriate due-diligence of course. You don’t want to chase too good to be true promises with your financial safety net.

What do you do after you’ve used your Emergency fund?

   What’s next after you use your emergency fund? Whether it is to cover financial shortfalls from a real emergency, or simply taking advantage of an exceptional opportunity, that money has come from a loan. You have loaned yourself funding to cover an extraordinary item, but make no mistake, you are still in debt. The only difference is that instead of borrowing from a bank or other source, you have borrowed from your future. 

   If you do use your emergency fund, you need to treat it as you would any other debt, pay down aggressively until you are debt-free, or in this case, until your emergency fund has been restored.

   In the few times I have needed to resort to using my emergency fund, I treat that loan as equivalent to one my bank would offer me. That means that I charge myself interest on the loan I made to myself. As I pay down that loan, I also pay “interest” into my emergency fund, meaning my fund is larger than it started, and I have an even larger safety net to cover future financial shortfalls. 

   Using your emergency fund is okay, especially in emergency situations. That is afterall why we put those extra dollars aside. But when we do use our emergency fund, we need to remember that we are loaning that money to ourselves. When we consider the use of our emergency fund as going into debt, we think twice about using the money. If our cause is truly just, and we need to use our safety net, thinking about it as a loan also ensures that we pay it back quickly. That way we return to a state of equilibrium, where we protect our financial stability from the unexpected future.

Doors of Opportunity

Are you ready for opportunity when it comes your way?

   If you want to achieve more than what you currently have, you need to be ready for the next level. This is true in all areas of our life, but especially in our careers, our life's work. But to be ready, to be truly ready, it takes more than passive development. We need to be actively involved in our growth.

How can you be actively involved in growth?

   To be actively involved in your own development, you need to focus on developing the skills that you need to take yourself to the next level. Identify what skill you want to focus on, and then begin learning it. Reading books, taking online or in-person courses, attending seminars, and more. And the final aspect of your growth journey is sharing what you are doing, what you are learning, and where you envision that taking you.

Why share your development journey? 

   As you grow, you want to let the world know that you are becoming more than what you were before. To paraphrase a personal development legend, Jim Rohn. Sharing your growth journey is akin to knocking on doors, looking for the chance to showcase your new skills. Most doors will remain shut, people will scarcely pay attention to your journey, as they are so engrossed in their own struggles. But every once in a while, one of those unlikely doors will open.

"If you keep knocking, you'll find open doors." - Jim Rohn

   When a door opens, and you have the chance to shine, you must be ready. That is why it is important to set yourself up now to have the best chance of capitalizing on that opportunity.

What does this look like in practice?

   I have a work colleague who is currently taking accounting courses to expand her knowledge, pursuing her goals of becoming a designated accountant. She shares her journey, the courses she has taken, the courses she is taking, and where she thinks that will take her in her career. I have seen her journey, but can do little to aid her in any way right now. But, if someone were to ask me, a practicing CPA, if I know anyone who would be good for a junior accounting role, I know someone who is going, and growing in that direction. 

   By continuing to share her journey with other people, she is gently knocking on doors, looking for the next opportunity. And when that opportunity comes? She has spent many months developing skills that will help her take full advantage.

   This happens more frequently than you know. It is estimated that between 70 and 85 percent of jobs are filled through networking. This comes about by sharing your skills, what you are looking for, and how you are growing your professional expertise.

   As you look into the future of your life, your career, your goals, ask yourself; what skills you are going to need to take you to the next level? Who can you leverage to get you there? What doors of opportunity are you going to knock on?

   And remember as Jim Rohn said, “If you keep knocking, you will find open doors.”

Your Opportunity Fund

How much do you have set aside for emergencies?

   Common financial advice says you should be holding at least 3-6 months worth of living expenses in cash, just in case an emergency comes up. This should be a target of everyone’s financial plan, to save 3-6 months worth of necessary expenses, and have those funds stored in cash, readily available if you need them.

   Accepting that target savings amount can be hard, made harder still during periods such as the last decade. That seems like an awful lot of cash to be stored, especially when the markets are performing well. After all, isn’t it better to be invested in the market in the long term? Doesn’t that mean holding a large cash position is actually losing the opportunity for greater returns?

   The answer to these questions is yes, and maybe.

Let’s look into that further.

   Over the long term, every investment market has increased. That doesn’t mean that they increase every day, every month, or every year. But over the long term, they have gone up. Unfortunately, emergencies by their nature cannot be predicted. But neither can opportunities.

   And therein lies the beauty of your emergency fund. It is liquid cash, available for use at a moment's notice. If a once-in-a-lifetime investment opportunity arises, you have funds already available that allow you to capitalize.

   It has been said that fortune favours the bold. But courage alone is worthless without the resources and ability to act. It is time to reconsider how you think about your emergency fund.

   Think of your cash reserves as both preparedness for emergencies and for opportunities. This ensures you are not just ready for the worst case, but also that you are actively scanning for opportunities. 

What kind of opportunities exist?

   Just this month, a former colleague of mine was offered an opportunity to join a startup company. This opportunity brought tremendous upside to his career, but also introduced an increased level of risk. As part owner, some months he may even have to forego his paycheck to allow the company to chase bigger and more lucrative deals. Having a fund that allows him to take advantage of the opportunity without putting his financial position at risk is the purpose of his opportunity fund.

   Other opportunities exist all around us, if only we’re looking. A real estate investment opportunity to purchase into rental properties as part of an investment group. A company that the market over-reacts to bad news and their stock is temporarily under-valued. An opportunity to buy a rare and valuable art collection from an estate auction.

   These opportunities exist all around us, but not every day. When they do arise though, temporarily re-purposing your emergency fund and using it as an opportunity fund is a viable option.

   Keep saving, putting money into both investments and bolstering your cash reserves. And keep a weather eye on opportunities, because it isn’t about what could have been, but what could be. This is your future, and capitalizing on opportunities is a perfect way to make that future brighter.

Driving in a Blizzard

   Where are you heading? Can you see where you are trying to go?

   Earlier this week, I was driving on the highway, headed for a day of meetings out of town. Shortly after the sun went down, and darkness descended upon the roads, a snow storm moved in. At first the snow was fairly light, not really accumulating much. With a slow flick of the wipers, I was able to see where I was heading without much difficulty. 

   As time went on, the snow storm became more intense, until eventually I was driving in a blizzard. Even with the wipers fully cranked, my headlights reflected off the blowing snow making visibility nearly impossible. Suddenly I couldn’t see where the road was and where the ditch was. My progress slowed down as I let off the gas pedal, trying desperately to see where I was headed. And even at slow speeds, several other travelers still wound up off the highway and into a ditch on the side. Fortunately, with rumble strips on each side, at a slow speed I was able to continue driving along the highway, creeping ever slowly towards my destination.

   This night drive in a blizzard holds a few lessons about your journey to success.

Distractions will come.

   When visibility is clear, making that drive is quite simple. The roads are flat and straight, so setting your direction and staying the course eventually gets you where you are trying to go. But as with those first few snowflakes, distractions will come no matter your journey. Small pulls on your focus, an email here, a tweet there. Most of these distractions can be ignored when they are infrequent, and they don’t threaten to derail our progress.

   But if we let them, those distractions can pull away our focus, and we end up spinning towards a ditch.

There are cliffs everywhere.

   All along the highway, for hundreds of miles, ran the drainage ditch. Once again, if you have a clear objective, a goal, you can stay in your lane and progress easily. But when these distractions become too great, you will find it harder and harder to see where your lane is and where the ditch is. 

   Maintaining focus on your goal becomes harder and harder, visibility decreases amidst the endless distractions. Even maintaining vigilance over your goals and objectives might not be enough. Certainly none of the fellow travelers on that snowy highway were planning to end up spun out on the side of the road. They all had their own destinations, but without visibility over where they were heading, what they were trying to accomplish, they ended up derailed. 

You need rumble strips.

   What can you do to remain focused on your goals? You know that distractions will come. Certainly you can use different tricks and methods to deal with them. And those wipers work to help you maintain focus on your goals. But, there are times that visibility over your goal will shrink, when the distractions are too many and too great, and they threaten to send you spinning off track. That is why you need rumble strips.

   These rumble strips on the side of the highway were indicators that I was coming too close to the edge, that I was straying too far from the path I was taking. Once I heard and felt the vibrations that my wheels were at the edge, I knew I needed to correct my course. You also need rumble strips to keep you on track.

What do these rumble strips look like?

   Creating barriers helps you stay on track. This means you need to know where you are heading, and what it looks like when you are getting off track. With holiday festivities just around the corner, some of the major areas of our life will begin to get hectic, with distractions threatening to overwhelm our goals. 

   My rumble strips are therefore designed to give me an indication that I am falling off track. For fitness, I track the number of days that I miss the gym. If that number reaches 2, I know that on the third day I need to workout, or risk losing the health gains I have worked so hard for. My financial indicator is the amount of money I contribute to my investments each month. (This is easier to hit, because my financial goals are automated.) Or my career indicator is the amount of time I spend reading in an area of focus for me. Similar to my health goals, if I spend more than 2 days without reading and developing myself, on that third day I know that I must allocate time to personal development.

   We all face distractions, the blowing snow of life that pulls us away from our goals. Maintaining focus is essential to dealing with these distractions, but sometimes even that isn’t enough. Sometimes we need indicators that let us know when we are falling off track. Setting up indicators in your life will ensure that you are making progress towards your goals, regardless of how hectic life gets.

   As we enter the final few weeks of the year, take some time to reflect on what your goals were. Are you still focused on them? What are the distractions that you need to control? Where do you need windshield wipers clearing away the snow? And what rumble strips will you implement to ensure you aren’t spinning off into the ditch? 

   With the right focus and the right systems, you can reach your destination no matter how bad the blizzard of life is.

Where should you invest your money?

We’ve all heard advice from friends and co-workers, “You need to be in the market.” More often than not, they are referring to the real estate market, with their never-researched philosophy that real estate is the best investment.

Unfortunately, this “be in the market” advice is rather misleading, as there are a wide number of investment markets you can participate in. Furthermore, the actual annual returns from various markets often switches each year. Putting this together, it simply means that there is no one “right way” to invest your money to guarantee top returns.

Here are 5 of the common markets you can be in:

Equities

Referring to stocks, the equities markets are the most common investment. An equity, or a share, refers to an ownership interest in a publicly traded company. As a shareholder, you are entitled to a portion of the company's growth and earnings. As a company does well, you can experience investment returns through dividends, earnings being paid to shareholders, or through stock appreciation, the company becoming more valuable which makes the price of the share(s) you own increase.

As a subset of this market, there are various funds and Exchange Traded Funds (ETFs) that hold a collection of shares from different companies. You can buy into these ETFs, and thus own a collection of different companies. This way of investing is extremely popular these days, as it allows you to own a diversified stock portfolio as a low cost of entry.

Fixed Income

Fixed Income investments are debt loans you make to others, usually in the form of Bonds. Most commonly these borrowers are governments and large corporations, who are reasonably certain to pay you back the loan. The structure of these investments is that you provide up-front capital, and the borrower pays you back interest over time, and your principal is returned to you at the expiration of the loan.

When considering loaning money, or buying bonds, you want to be compensated for the risk. This is often seen when purchasing a government bond, as most governments in the developed world are stable. Knowing that the US or Canadian government will still be around in 100 years, you can be fairly sure that your money will be returned to you. With this lack of risk, the amount of interest is fairly low.

With the advent of the internet, there are also peer-to-peer lending sites popping up. These sites allow you to loan money to other consumers. Since these debtors (people borrowing money) are an unproven entity, the interest rates are higher to compensate you for the risk that some of these debtors won’t ever pay back the money you loaned.

Commodities

Another common investment is in commodities, which we hear about in the financial segments on the evening news. While there are many commodities, most commonly we hear about the price of oil and gold. Since these are used in production, you can invest, or buy rights to, a certain amount of these materials. The objective is of course to buy when there is excess supply, and sell when the demand is high.

Given the cost and scale of purchasing aluminum or copper, cattle, oil, etc these markets aren’t quite as accessible to the general consumer. For many of us, to invest in the commodities markets we would need to use a financial instrument called a derivative. These complex financial instruments are best left for another time.

Foreign Currency

Another form of investment is in foreign currency. With the global nature of trade, the cost of currencies fluctuates as goods and services are performed internationally. This causes currencies to be worth more, or less, relative to each other. These fluctuations provide an opportunity to buy and sell currencies to make a profit.

Most currencies are pegged to the US Dollar, and these fluctuations are directly impacted by economic performance compared to the US. Trade between countries has a very strong impact, which means that the number and level of tariffs can dramatically impact the fluctuations of currency. For example, government policy replacing NAFTA with USMCA will impact trade in North America, and that will cause currency fluctuations.

Physical Assets

Physical assets provide another option for investing. This is where you buy an asset that will make you money. This includes real estate as an investment, where you will buy property and rent out its use to generate income. Over time, the asset may become more valuable, which will allow you to sell at a profit.

While real estate is by far the most common example of a physical asset, there are also specialty markets for a wide variety of assets. It could be as simple as buying and renting out a camera lens to make money. Or a sports cards / stamp collections. Or exotic cars. Or artwork.

The purpose of investing in a physical asset is that it allows you to generate income through rental, or investment returns through increases in value. The key distinction between investing in an asset and simply buying stuff (being a consumer), is that the asset is expected to go up in value or provide a financial return while you own it.

Where should you invest your money?

There is a long list of ways you can invest your money, with these 5 being some of the most common. Equities means buying ownership in a company, fixed income is loaning money to generate interest income. Commodities and foreign currency trade on supply and demand, impacted by global trade and government policies. And physical assets provide an extremely wide range of options to invest money in valuable items, such as real estate and artwork.

With numerous markets, and a wide variety of options, you can truly create your own financial adventure. BUT, the most important aspect of investing still remains the same;

You need to be investing now for your future. 

Where you invest is up to you. But don’t be scared by the doomsday sellers promising you that if you aren’t in their chosen market that you will lose out. 

There are a lot of investment options out there, make sure you are participating in some of the different markets on a regular basis. With regular, disciplined investing, no matter the market, financial freedom can be yours.

Finding Your Purpose

   Are you doing something you love? Do you wake up feeling energized and excited to keep going (most of the time)? 

   A staple in almost all motivational talks, at some point you will be told, Live your life with passion. While that sounds exciting, what does that really mean? And more importantly, how can you do it?

Live with Passion

   Living with passion really boils down to liking what you do, who you do it with, and who you do it for. Finding people that you care about, and that care about you, is an important step in living with passion. The good news is, you already know these people! These are the people that you already spend your time with, friends, family, community members. 

   The people in these areas that you enjoy spending time with are the people you should spend more time with. And those who you aren’t excited to see? Spend less time with them.

   When you take control over who you are spending the most time with, those energies feed the rest of our lives. We all have people in our lives that, when we’re with, we have excitement and energy, hope and enthusiasm. Spending more time with these people puts us in a better state, and our results are impacted positively. On the flip side, we also know people who have the unnatural ability to suck the air out of an already deflated balloon. We feel exhausted just entering the same room as them, and that also affects our results, but in a negative way. 

   If you want to live with passion, start by simply spending time with, living with, people that light you up inside.

   You know who you want to spend time with, and how much more energized you feel when interacting with those special groups of people. Now what are you doing to find purpose and meaning?

How do you find your purpose?

   One method that I found particularly helpful was in examining what I talked about with those people that light me up. What problems did people come to me for advice for? Where did our conversations naturally lead to?

   For me, these topics were focused heavily around a few core areas; personal finance, career growth, and health and fitness. These were the areas of life that I had a natural affinity for, or at least an interest that led to the pursuit of knowledge. Finding these areas of interest led to the eventual creation of Business Minded, and you reading this article right now. These areas that I talked about with my friends and family, they are important to many people. And the people who value growth in their careers, who value healthy living, and who value smart financial strategies? These are the people who light me up.

   Most of us already know who we like spending time with, and what we like doing. But taking the time to reflect on these elements can help us aim the direction we want to take our own lives. When was the last time you thought about the direction you were headed in life?

Action Items:

Take some time this week to reflect on your passion and purpose:

   Who do you enjoy spending time with? Who lights you up inside?

   What do you do when you are with these people? What do you talk about? What topics interest you? What problems do people come to you to help solve? 

   If you want to find your purpose, to live with passion, you need to do the things you enjoy, with the people that light you up. Find alignment between those two elements, and not only will you find fulfillment, but the world will be better because of it!

‘Tis the Season of Giving

   The holidays are upon us, and with it comes the inevitable bombard of requests from various charities. There is not enough money to donate to everyone, so how do you decide who makes the cut, and who doesn’t?

   The motivational Jim Rohn, an iconic figure for personal finance advice, said to allocate 10% of our incomes to help those less fortunate. Charity is a way of giving back to the world and society that shaped us, and allowed for our success. While 10% is not a requirement nor a maximum limit, we all are constrained by how much we are able to give.

   While it can be hard to say no to people in need, it is important to stick to our financial plan, even when it comes to charity. With hundreds of worthy causes, we need to identify the ones that speak to us directly.

Who makes the cut?

   This is a very personal question, which you must answer for yourself. Often the causes we support are ones we hold near and dear to our hearts; a loved one is sick with a rare disease, or we have a soft spot for furry four legged creatures. Whatever the cause, staying true to who you plan to help will enable you to give more generously to those causes that speak to you.

Avoid the Guilt trip

   We’ve all been there, walking into the grocery store, and someone approaches you. They spill out a long sad story of a family in need this holiday season. But you can be the hero, you can help them with just a few dollars!

   It’s a very sad fact that others in our society are struggling to get by on a daily basis. But you can’t save them all, and sooner or later you are going to have to say no, not today. The charity fundraisers will do all they can to make you feel guilty for “turning your back” on others. This is why you need to know what charities you support, which ones are going to receive your donations. Knowing that you are helping a worthy cause helps prevent those feelings of guilt that you have as you walk away from yet another outstretched hand. 

   The important thing is that you know who you want to support, which causes are just, what aid you can provide. There are many others just like you, each who have their own causes. While you may be trying to save the whales, let someone else save the children, and another save the trees. We can’t change the world alone, which is okay, because we aren’t alone. There are millions of other people out there doing their part to make the world a brighter place. And knowing that, you shouldn’t feel guilty, instead you should feel proud of the ray of light and hope that you can cast on your worthy causes. 

   Give generously to the causes you support this season of giving, and feel proud in the knowledge that you are doing your part to make the future just that little bit brighter.

Be a Detective

   Be a Detective. This isn’t advice on a career path, but it certainly falls under career advice. We are taught many things when we are younger, and one such lesson is to analyze what went wrong in any given situation. This is good advice, and it is a good lesson to learn. Unfortunately, that is only half the lesson. 

   The other half of that lesson - to analyze when things go right as well.

   Learning from our shortcomings, from our failures, from the times we stumble and fall just short of the finish line. These moments provide valuable lessons. But if you’re anything like me, you won’t fail all the time. You will have your moments in the sun. These moments need to be looked at just as hard, perhaps harder even. You need to analyse what does go right, and learn from those experiences. 

   What went right? Why did it go right? How did it go right? Ask questions. Find the answers. It could be as challengingly simple as surrounding yourself with the right people. (Yes, it sounds so simple, yet often is so difficult.) Maybe it was your plan, executing on it just a little bit each day. Or maybe it was taking that pause, considering the outcomes, thinking first and then acting with decisive movements. Success comes in many different forms, in as many different ways, but each success carries with it a valuable lesson, if you’re looking for it.

   And don’t just look. Apply those lessons. We all know of people who seem to be in the zone constantly, people who have the magic touch, where everything they touch turns to gold. That is what happens when you figure out what you are doing right, and then doing more of it. 

   So analyze your failures, learn from your mistakes. A lesson learned will turn any complete and utter disaster into a minor victory, lessening the pain just that little bit. But just as importantly (if not more so), analyze your successes. Learning from those experiences, and applying those successful habits and practices will set you up for more success in the future. Find your sweet spot, your zone, Be a Detective, and never, ever, stop learning.

How much are you spending this Holiday season?

   With Black Friday kicking off the holiday buying season, how much do we actually plan on spending?

   Recent reports by PWC, CPA Canada, and the Retail Council of Canada (as reported by CTV news) indicate that we are in for an expensive month. Canadians are planning to spend $ 650.00 on gifts alone this season, with travel and entertainment adding an extra expense for many Canadians. This all adds up to an estimated spend of over $ 1,500.

   While the numbers alone aren’t cause for concern, the surveys also report a few other more alarming statistics. 46% of Canadians won’t be planning out their spending over the holiday season, and in a Manulife report mentioned by CTV news, 60 percent of consumers are willing to go into debt over the holidays.

What does this mean?

   The old adage “Failing to plan is planning to fail,” might be applicable here. Without a general sense of how much you are planning to spend, it is hard to save for the holidays ahead of time. This leads to loading up the credit cards, and paying far more than you planned once those interest bills start coming in.  

   Putting a plan in place, and sticking to it, can avoid some of the nasty surprises that January usually brings. Since Christmas comes fairly reliably every year on December 25th, it would make sense to allocate some dollars to the gift fund throughout the year. Automatically contributing each month to a small gift fund will help ensure that you always have the resources to show your love and appreciation to those you care about.

But it’s too late for me now!

   Let’s say you don’t have a gifting fund already set up, and the holiday season is upon us already. What can you do? 

   There is still time to put a budget in place! Speak with those loved ones that you plan on exchanging gifts with, and work out a reasonable budget. This helps you both out, by taking the guess-work out of how much should you spend, and lets you focus on what you want to give. 

   And if you do need to take on debt this holiday season, make sure you pay off your credit cards in full each month. This will ensure that your high interest debt doesn’t end up costing you far more than you planned to spend on the gifts. 

   The holiday season is supposed to be full of love and joy, don’t lose sight of that amidst financial concerns. The right plan can help you get through this season with a full cup of holiday cheer!

How do you remain focused on your goals?

   Achieving our goals is critical in our pursuit of becoming better versions of ourselves. But with the constant drags on our attention, how do we remain focused on our goals versus tackling the latest urgent problem that needs to be dealt with? 

   These problems assault us constantly, threatening to derail us from our objectives. The urgent work problem that requires us to put in overtime, rippling outward and disrupting our evening schedules and bumping gym-time off the daily agenda. These urgent problems of now war and rage against our dreams of a brighter future. 

   This situation came up in one of my coaching calls recently, as fitness goals started collecting dust on the shelf, while my client was putting out the endless fires at work and school. As days went by, losing the momentum of consistent action, the question was raised: 

How do I remain focused on my goals when life is pulling me a thousand different directions?

   The resulting discussion revealed a couple of areas that we all fall prey to. The first was the desire to do better, expressed as a hope. 

“I hope to get back to the gym next week.”  

   When we began looking into this desire for improvement more, it seemed that hope wasn’t the right word. Hope could be trumped by being busy, hope could lose out to not feeling like it, hope wasn’t a strong enough commitment. 

Don’t rely on hope.

   To remain focused on your goals, you must first tell yourself what you must do, not what you hope to do. These are called non-negotiables. When pursuing your goals, you need to make them non-negotiable, they will be done, no matter what.

   For myself, a couple of my non-negotiables are reading and working out. I try and have these done in the morning, so that I don’t give myself the opportunity to be distracted first. My time table works for me, but it doesn’t work for everyone. But the principle is the same, what are your non-negotiables? What are the steps that you take towards your goals each day? And will you commit, that you won’t end your day without taking those steps?

   That commitment makes your goals non-negotiable.

   There is another aspect of uncertainty held in the statement, “I hope to get back to the gym next week.” This is the lack of specificity surrounding when this gym time will occur. It is one thing to say “I must do this each day.” And another thing entirely to give those plans a set time and place. 

   When we have a meeting, or a scheduled time commitment, we almost always show up. By scheduling time for your goals, you are declaring that nothing else can take up that time. This means your non-negotiable is on your calendar, planned, and ready to be acted upon at that time.

   Going back to my morning, at 7:15 am every working day, I walk into the gym. This is my non-negotiable, and 7:15 am is the time that I have allocated to my fitness goals. Do you know what your non-negotiables are? What steps you need to take to achieve your goals? Do you know when, and where, you will be to take those steps towards success?

   By determining your non-negotiables, and scheduling them in your calendar, you are doing what it takes to remain focused. Because they are a must for you, you will take the actions necessary to drive achievement. There is no room for excuses, too busy, not enough energy, don’t feel like it. Those excuses, other people’s demands, the inevitable fires you have to put out elsewhere in your life; that all happens outside of your scheduled achievement time.

   The discipline to follow through with your non-negotiables is the key to remaining focused on your goals. And that discipline makes you unstoppable. Your achievement, the heights you will go, only you can say when you will stop.

Where are you spending your money?

   Do you think you could save some more money now for a brighter future?

   Many of us look at our current circumstances and believe that we’re stretched thin as it is. The moderate savings we make each month, that’s all we can afford. When we’re asked to find a little bit extra, our initial reaction is, I can’t do that.

   How well do you know your spending habits? Do you know where you are spending your money now? We often have a general sense, but when we get into specific details of where each dollar goes, the results are often eye-opening.

Get to know your spending habits.

   Becoming aware of your spending habits is quite easy these days, with the majority of our transactions occurring through credit cards and electronic payment methods. It is a simple, and not overly time consuming process to look at last months statements and learn where you are spending your money. 

   That knowledge alone can help you make better financial decisions in the future, and may even uncover some areas for additional savings.

   But you can take that process one step further, by becoming proactive versus reactive to your spending. 

Becoming Proactive in your Spending

   To become proactive, you need to be putting thought into your purchase decision, and what that means, before you actually swipe your credit card. One highly effective strategy to do this is to carry around a small notebook, and before every purchase write down what you are spending on, and the amount. This notebook will put a small interruption between the usual tap-and-go buying that you are habitually used to. That brief pause gives you time to reflect, do you really want or need that candy bar or bottle of pop?

   Our financial goals are usually not derailed my large decisions, rather they suffer death by a thousand cuts. It’s the small, habitual purchases that we make that robs us of the extra few dollars each week to contribute towards our financial goals. By tracking, especially proactively by using a notebook, you take back some control over your wallet. That small, powerful step puts you back in charge of your financial destiny. Financial freedom is yours for the taking, if only you get out of your own way.

Flippin’ Success

When do you become successful?

   Is there a certain mark, a single accomplishment that, once reached, signifies that you are a success? 

   To most single people, finding a loving relationship would be an appropriate goal. But with divorce rates skyrocketing, simply entering into a relationship cannot be sufficient to call yourself a success. As any married couple will tell you, the hard work begins after the wedding day, and every day from then on. 

   If success in your relationships isn’t found in a single act, in one defining moment, where does that success lie?

   This question applies to all areas of our lives. To our friendships, our financial health, and certainly our physical health. Have you ever looked at pictures of someone losing weight? Or even looked in the mirror every day as you strive to fulfill this years’ resolution of going to the gym 5 times a week? Just like a flip book, the image changes almost imperceptibly each day.

   When does that overweight person on the cover of the flip book become healthy? Is it on page 6? Page 49? Page 152? If we compare the pictures one page to the next, they look almost identical. Even comparing one week to the next provides almost no visible change. But as we flip through those pages quickly, the change is definitely noticeable.

   This is very much similar to how we view success in our own lives. We step on the scale each morning, and beat ourselves up for seemingly no progress after a grueling workout the day before. We frown at our bank account, barely increasing since the last time we got paid. Or we become frustrated in our careers because we’re doing similar things as last month, as last quarter. 

   Taking a short term view of our accomplishments is frustrating and unrewarding, but it’s what so many of us do. As such, we never feel like we are becoming successful in our pursuits. These feelings lead us to thinking we’ll never become successful.

What is the solution?

   We need to expand our frame of comparison. We can’t look at our progress today, compared to where we were yesterday. We need a wider lens to view our success. With my coaching clients, we take a deeper look at progress every quarter. This 90-day lens allows us to see real progress, that we wouldn’t be exposed to when only looking daily or weekly. Seeing progress is important, for two reasons. First, it allows you to make adjustments, to see what is working, and what isn’t. And secondly, seeing progress feels good. We all like to know we’re improving, that we’re going somewhere, and taking a wider lens to view our efforts provides that reassurance. 

When do you become successful?

   Surely there is no date, no grandiose accomplishment that says “I made it.” You become successful by making sure each day you are working towards your grander goals. Each small, almost imperceptible step is a success. And remember, to see those successes add up, don’t look at yesterday’s results, but expand your lens. Achieving anything worthwhile is a slow process, but by taking a small step each day, you can achieve your dreams.

Why You Need a Will Now

Is your family protected in the case of your death?

   You work hard to take care of your friends and family, that’s why you have taken an interest in achieving more. But what if the worst happens, and you aren’t around to support your family and community further? This is where a will becomes essential, to ensure what you worked hard for in life goes to where you want it to after your passing.

What is a Will?

   A will is a legal document that tells the courts what you want to happen to your property, and the care of any children still considered minorities, in the event of your death. 

Why are Wills important?

   Without a will, your property and any young children will be assigned to the courts to deal with. This creates a lengthy, time consuming, and often expensive process. Furthermore, disagreements over your property causes more stress on loved ones, and can result in fractured relationships as well as your property being distributed in a way you wouldn’t want.

   A will helps alleviate these issues, by telling the courts exactly what you want to have happen with your property. Through this document, you can allocate bank balances, property ownership, and distribution of family heirlooms to different people. You are also able to donate to charities or institutions. By creating a will, you are also able to create tax savings through gifting allowances, etc. This ensures more of the assets you gathered through your efforts are given to the right people, and less is lost in estate taxes to the government.

   Perhaps the most important aspect for parents of young children though, is the ability to direct who will be caring for your children in your absence.

And if I don’t have a will?

   If you don’t have a will, a probate court will assign an administrator to consolidate the value of the estate, and disburse the property and assets based on court decisions. This almost always splits the estate among the surviving spouse and children, if applicable. If neither of these options is available, the government takes ownership of the estate.

   Aside from stressing the relationships of surviving loved ones, a court appointed administrator must follow certain formulas and rules for distributing the assets of the estate. This could result in the family home being given to someone you wouldn’t have intended, or even forcing the sale of assets to divide the proceeds among the beneficiaries. When this happens, the tax laws come into play, and you can lose a substantial amount of value of your estate in taxes, leaving far less to your beneficiaries than you would like.

How do you prepare a will?

   There are a variety of ways to prepare a will, including some very low cost solutions. At the expensive end, you can hire a lawyer to assist in the preparation. They will help you compile a list of all your assets and debts (liabilities). From there, you can indicate who should receive what asset, or part of an asset. That same process is followed by the cheaper options, websites or even DIY kits that you can find on Amazon!

   Once prepared, the will should be witnessed by 2 adults who aren’t included as beneficiaries. The final element of creating a will is to name an executor, someone who will work under court supervision to ensure that your will is followed. Other than being an adult, there are few restrictions on naming an executor, and you can easily name a spouse or child to deal with this. The executor’s role is important in ensuring the smooth settlement of your estate, including discharging any remaining debts you have, and informing government and financial institutions. 

   Now that you have a will, store it in a safe place! A home safe is usually best for this.

   You work hard for your success. Make sure that those efforts aren’t wasted for your loved ones, family, friends, and community that you leave behind. Taking the time to create a will is an important step in ensuring that your assets are distributed fairly, without losing excessive amounts to taxes. And if you have young children, this step is even more important as it will ensure they are cared for by the people you nominate.

   A will is an important element of your financial plans, that will ensure your achievements keep paying off to your loved ones long after you’ve moved onto your afterlife adventures.

It is Never Good Enough

   I hated doing dishes growing up. It was never the mountains of dirty dishes that somehow made our family look like a ravenous army. Or the soapy water that inevitably went cold and grungy. It was the glee on my sibling’s faces when they were able to hand back that pot that I swear was always dirty.

   “Good enough.” I’d grumble, lamenting as it was handed back for a second washing attempt.

   Oh brother was I ever wrong. What seemed to be a pain in the ass back then now seems like a blessing. Not the re-washing part, of course. But reaching into the cupboard and pulling out a dirty dish, ugh, I cringe just thinking of that. And as the cold sweat and shivers run down my spine, we come to the lesson of the letter. It is never, “Good enough”.

   Good enough, is not a reflection on the task at hand. It is a reflection of your values; of the thoughts, actions and words that define who you are, both to yourself and to the world you encounter. 

   Everywhere you look you will be confronted with the half-finished work and poor quality results of the “Good enough” crowd. It’s in the trash on the sidewalk, the mess on every counter and surface, all the little things that aren’t done quite right. There is enough of that already. Hold yourself to a higher standard.

   So next time you go to do the dishes, don’t let that mountain get in your head. That cold, murky water isn’t so bad. And make sure when you’re ready to move that never-clean pot to the dish drying rack, that this time, it’s clean.

   Apply that level of care to everything you do, because you’re worth the price of excellence.

   Every day is a use of our energy, our time. Don’t spend time on re-work, on fixing the little things that could easily have been done right the first time round. It’s never good enough, it’s simply, good. Because if it’s worth doing, it’s worth doing well.

How to Finance your Goals

   There are a tonne of things you’d like to do, right? Go on vacation, upgrade your vehicle, go to that fancy hotel restaurant, learn something new, etc. Our bucket lists are long, and they should be! There is so much in this world to experience, and it would be a shame to not do all we want to. But most of your goals come at a price. 

How do you finance your goals?

   For many people, they would like to do a great deal of things. They talk all about those plans, without actually putting together an action plan to follow through. Often this ends up with most of that vacation, or the new TV purchase, or any other item on the bucket list, being charged to a credit card.

   Financing anything through a credit card is a risky proposition, and while credit cards have definite advantages, they shouldn’t be used in lieu of a plan. Instead, they should be a key part of your plans.

   We all know for big ticket items, like a house or wedding, that we must save for quite a while before we are able to purchase them. But are we regularly setting aside money for the rest of the things in our lives? With consumer debt on the rise, and an estimated $ 500 Billion of non-mortgage related debt held by Canadians (as of September 2019), many people are financing their lives through borrowed money. Delinquency rates, or people not paying their debts on time, is also on the rise. Too much lifestyle funding without a plan is getting people into trouble!

   Many Business Minded readers are in a better than average financial positions, and are certainly more likely to be paying off their credit cards every month. But that doesn’t mean having a structured plan isn’t valuable! 

   As with most aspects of your financial lives, you probably don’t want to spend much time thinking about budgets for your goals. So to make sure you stay on track, without spending much time or energy, we need to turn to automation to help us out. For the major events and purchases that we’d like to experience in our lives, we need to automatically allocate a small amount of funds to separate accounts. Over time, these accounts will grow, and when it comes time to take that vacation, or buy the new phone or computer, we have the funds ready to spend. 

   I try to take at least one vacation every year. To ensure I am able to do that, I allocate a small amount of funding each month to a separate high-interest e-savings account. Over the year, those funds build up until I take my planned vacation. And the process repeats itself from there. Automatically save, achieve my goal, rinse and repeat. 

   Having systems that look out for us protects us from ourselves. Knowing that my money is already spent on a vacation that will occur in 8 months helps curb my impulse purchases today. And when it comes time to take my vacation, I am not left stressing about where all that money will come from. 

Financing through a Simple System

   Automate your goals. This system seems simple, yet for the vast majority of us, it is a system we never put the time in to implement. So today, take 15 minutes and create your simple system.

1)   Decide which goals you are pursuing, and when. How much will those items cost? Divide the cost by the time until you need to pay, and you have your amount to save each period.

2)   Open a separate account to hold the monies. This shouldn’t take you more than 5 minutes through online banking. 

3)   Set up automatic contributions to your new account, contributing the amount you calculated in step 1 each period, automatically.

4)   Enjoy life!

   The systems you put in place to control your impulses and make sure you live life to the fullest are dull. Systems don’t inspire anyone. But spending 15 minutes today can provide you the resources you need, when you need them. Achieving your goals doesn’t need to be any more intimidating than it already is. Make sure you have the financial systems in place to help reach your goals. 

   This system will help you avoid the pitfalls of consumer debt, and prevent you from needing to borrow from your future to pay for your today.

How to become more valuable at work

   When I was younger, I worked construction for a few summers. As anyone who has ever laid patio stones, decking, or fencing can tell you, a string-line is very important. We use the string, stretched out between two posts, to ensure we are operating on a straight line. That way, the newly constructed patio isn't wavy and unsightly. But as anyone who has used a string line knows, they get tangled into the most unusable mess of knots.

   As part hazing ritual, part real need, any new hire was given the task of untangling knots from these string lines. Often this was an irritating, but relatively fast process, taking only a few minutes to complete.

   One late spring day however, the knotted mess of string was worse than it had ever been, and Justin was our most recent new hires. Arriving early, our boss set the task to Justin, untangle the string. And there Justin sat in the front yard untangling string. The sun rose high in the sky as the rest of the crew were digging, sawing, and hammering away. Then the sun started sinking down, and exhausted, the crew made ready to leave. It was then that we noticed Justin, still sitting in the front yard, untangling string.

Do you know what the tasks you do every day are worth?

   In our professional lives, we often come across tasks that are time consuming. The question we must ask ourselves is, is this task worth it?

   Untangling string for those 10 hours certainly wasn't worth it for Justin. That $ 8.00 string line ended up costing the company well over $ 100 in wages on that spring day. And the cost was far beyond the simple wages cost, there was also the opportunity cost of doing valuable work for that day. 

   In today's work environment, being busy is worshiped. Running from meeting to meeting, task to task. And this busy-ness is destroying the value that we can command. Instead of focusing on being busy, we need to focus on becoming more valuable. 

How do we become more valuable at work?

   Ask yourself what the estimated cost of each task that you are doing is. You do this by taking your annual earnings divided by 2,000 hours. This will estimate what your hourly rate is. Next, multiply that hourly rate by the amount of time the task will take. The result is the cost of you completing the task. Now ask yourself, is the task worth the cost of that time commitment? Or could you be adding more value if you worked on something else instead?

   Understanding what the most valuable task that you could be working on at any given time makes you more valuable. Instead of sitting for hours untangling string, or some other equally unrewarding task, you will demonstrate your value when you focus on the task with the highest payoff.

How do you determine the value of a task?

   For many of you, each task doesn't have a clear cut line to profits or expenses. If you can measure the cost in terms of time commitment, but not the value you derive from completing the task, how do you prioritize based on value? To measure this, mark all tasks by which of your top 3 goals they support. Often, the majority of our To-Do lists will be unassigned, meaning the task doesn't directly contribute to our valuable goals. These tasks need to be either delegated, or eliminated wherever possible.

   Focusing on the tasks where the value, or contribution towards your goals, exceeds the cost of action will help you increase your value.

What to do with the unassigned tasks that can't be delegated or eliminated?

   Some tasks that pop up on our To-Do lists can't be given away or ignored. When confronted with these tasks, carefully consider if there are other options. If so, what are these other options, and are they the better course of action? In our example, Justin should have recognized the futility of such a task quickly, and we could have bought a new string line saving a day of wasted efforts. Identifying better alternatives is another way to increase your value, as you become known as someone who solves problems. Of course, sometimes the task can't be done in another, better way. In these cases, if the task is truly important, the best course of action is to buckle down and grind it to completion.

   We become more valuable when we think about what we are doing, and what we are trying to accomplish. Making sure our efforts are aligned with our goals helps us achieve more, and increase our value. When those moments come up where we must do things that don't directly add value, we should consider if there are better alternatives. Only if the task is essential, and no better alternatives are available should we commit the resources to accomplishing it. If we do this, we'll spend less time untangling string, and more time adding real value.

Will your retirement savings be enough?

Will your retirement savings be enough?

   This question is enough to cause concern among many people. How much do you need to retire? With news media throwing around words like economic recession, these concerns also bring another element to consider, sequence risk.

   Sequence risk is the danger posed by an economic downturn on an investment portfolio in the short term. While a recession provides an excellent opportunity to build wealth for a younger person, that same recession could greatly impact retirement accounts for those already in retirement or close to it. Simply put, sequence risk is the threat of withdrawing money in a downturn.

   Despite an economic downturn, you still require money to live. Because of this, when your portfolio loses value, you need to withdraw more of it as a % of total to end up with the same benefits. Burning through your retirement portfolio too quickly can lead to more life at the end of your money, not a comfortable place to be in.

   To illustrate, we’ll look at a retirement portfolio of $ 1 million, invested in stocks. (We’ll pretend like you didn’t read the asset allocation articles and didn’t realize that 100% invested in stocks is risky!) If you retired in 2008, your $ 1 million portfolio would have been hit with a loss of approximately 38%. That takes your portfolio down to $ 620,000, and you’ll still need to withdraw to pay for retirement! Those withdrawals are $ 50,000 in the first year of retirement, which is 8.06% of the portfolio!

   If you had retired in 2011 instead, where the stock market virtually didn’t grow, with an average growth of approximately -0.00 %. A withdrawal of 50,000 from your $ 1 million nest egg would only be a withdrawal of 5%.

   That is the impact of sequence risk, that you may be withdrawing more as a total % of your portfolio in a market downturn. Spending through your retirement savings too fast, even when the dollar amount doesn’t change, is something that is almost impossible to recover from.

How can you mitigate sequence risk?

   Understanding what sequence risk is, and how it can impact your retirement savings allows you to create a financial strategy to mitigate the risk. There are many options available here, and anyone close to retirement would be wise to consider them.

   More heavily weighting your portfolio into fixed income, or bonds provides relative safety from stock market fluctuations, and can provide cash flow in the form of interest. While this will help deal with threats posed by sequence risk, bonds also have a much lower rate of return. 

   Also on a similar line as fixed income, you can also hold cash reserves, which again is a safe asset allocation approach, albeit with an even lower risk and returns. Ensuring you don’t have to liquidate your more volatile investments, like stocks, during an economic downturn will help you weather the storm. Historically in the longer term, stocks have always increased in value. As a result, if you don’t need to sell during market low points, you can ride out the financial storms.

   There are other options that provide some protection against sequence risk. Owning rental real estate properties can help generate extra cash flows. This again is a more diverse investment portfolio, and that diversification provides options.

   But what if you are close to retirement, and don’t already have the appropriate asset allocation or real estate? The good news is, it’s not too late to start making your portfolio more conservative, or look at alternate investment options. Another key consideration is phasing into retirement more slowly. This could involve working part time, scaling back hours while still generating some income, which lowers the amount you need to withdraw from your retirement accounts in the short term.

   Sequence risk can throw a wrench in our best laid investment plans. And with concerns over an impending recession, it’s never a better time to explore your options in case the global economy does slow down. There are many options that you can look into; from changing asset allocation to more conservative (less volatile) investments, to exploring real estate investment properties, or even working longer to weather an economic storm. Tough times will pass, and with the right tools at your disposal, those tough times don’t need to derail your financial future.

What is a Target Date Fund?

   Asset allocation is an extremely important lever controlling your investment risk and returns. Knowing how much risk you should have at each stage in your life will help you invest effectively, without chancing losing it all. To assist with this asset allocation, a type of fund called “Target Date Fund” were created.

What is a target date fund?

   Target date funds are portfolios of investments that are managed on the basis of risk. The idea behind these funds is that you select a date in the future, usually when you plan on retiring. The fund will then handle the asset allocation for you, gradually shifting from a stock-heavy weighting at the onset to a more balanced or fixed income heavy weighting at your target date. 

   Alright, target date funds do the asset allocation part of investing for me. Surely it’s not that simple?

What other factors impact target date funds?

   Not all funds are created equal. While the premise is the same, some target date funds will target different areas of stocks. For example, one fund may invest more heavily in natural resource companies stocks, while yet another fund focuses more on financial companies stocks. Each fund is trying to out-do other funds, while maintaining the asset allocation risk levels based on your target date. 

   Even the risk level can vary by a few percentage points across different funds. For example, several funds with a target date of 2045 may have different levels of stocks. Some funds might have only 85% stocks in the portfolio, and yet others may go as high as 92% of stocks. This could have significant impacts on both the risk and return of the fund.

   When investing in target date funds, research is required to make sure that you are investing in a fund that aligns with both your social and financial goals.

What happens when the Target Date is reached?

   Target date funds are usually used for long term investing. The target date is not the end of the fund, but rather the end of when you are expected to be contributing to the fund. After that date, it is expected that you will be withdrawing from the fund, as in the case of retirement. This means that the monies in the fund will be more heavily weighted in fixed income and cash, providing you marginal returns while reducing risk.

   Once again, this is a general case. Some funds do actually force a “liquidation” of sorts, and convert your target date fund into a different, more conservative portfolio. When picking a target date fund, this is an important question to ask; “What happens on the target date?”

   Target Date Funds provide a relatively straight-forward way to invest in a diversified portfolio, while also ensuring an appropriate asset allocation strategy is being followed. The fund will reduce risk as you approach the target date, ensuring that your long term investments will be better protected against market fluctuations when you expect to draw on those investments.

   As with all investment decisions, research and counsel from a financial planner is advised. But the most important element is that you take action and invest now, as soon as possible.

   Financial freedom is a goal of all of us, and target date funds provide an easy way to step into the world of investing with a reasonably good strategy right out of the pamphlet. Investing in your future is the only way to ensure that future meets your dreams. While the world of investing sometimes seems complicated, target date funds might just be the answer you were looking for!

Lessons from the Scotiabank Marathon

Sunday, October 20, 2019

Toronto, Canada 

   Race day finally arrived. My first road-based marathon, a goal that had been set at the beginning of spring this same year. 

   Amidst a chorus of cheers and pump-up music, the pack of runners took off with me caught up in the midst. The excitement was contagious for those first few kilometers (miles), as we thundered down the streets of Toronto, several thousand strong. Passed the first few aid stations, and along the spectator lined race course.

   It was around the halfway mark, 20 kilometers (13 miles) that the pack really started to separate, with the marathoners continuing on for the grueling back half of the race. It's the back half that separates the trained from the untrained. It's the back half where your mettle is tested. It's the back half where I learned the lessons of success.

The process is painful.

   Around 28 kilometers I found out what endurance athlete's refer to when they "hit the wall". Exhaustion sets in, your legs hardly want to move. And when they do stride forward, each strike of the pavement is agony. This is part of running marathons. But this is also the first lesson of success. The process is painful.

   There will come a point in any large undertaking when pushing forward seems unbearable. The obstacles seem nigh insurmountable. Those challenges have knocked you down, leaving you bloodied and bruised, black and blue. But just like the quote on the guy's shirt in front of me said, Pain is temporary, quitting is forever.

   In the pursuit of any goal that you pursue, you will inevitably face challenges and obstacles that will hurt. To achieve success, you must endure the pain, with the belief that the reward is worth the cost.

Public goals help you push on when you feel like quitting.

   That period of exhaustion, where every step was agony lasted for quite a while. And with each agonizing step, those dark thoughts started to creep into my mind. Maybe I can't do this. Maybe I needed to train harder. Maybe I should quit. These thoughts were only compounded by the series of injuries that plagued my training. Nobody would blame me if those injuries prevented me from finishing the race. 

   These insidious excuses pushed me ever closer to quitting. And the worst part about those excuses? I believed that they were real. Heck, I really was injured throughout most of my training! But, there was one thing more powerful than my excuses. I had told everyone that I would be doing the marathon. Doing. Not attempting. I promised that I would cross the finish line. No matter the pain I was experiencing, I did not want to let down those people who were counting on me to finish. Therein lies the second lesson of success - publicly stated goals keep us accountable.

   It's easy to fall short of our goals when we keep our targets to ourselves. We can rationalize these shortcomings a million different ways, and as long as we're simply talking to ourselves, there's nobody to poke holes in our hollow excuses. That's why we need to publicly state our goals. When we have declared our goals out loud, those around us will keep us accountable for achieving them. 

   That is not to say that you will achieve every goal you announce, but simply that when you feel like quitting, you readily evaluate your reasons. There were several runners that I saw that certainly made their goals public, but for genuine health reasons they were unable to achieve. And that's okay! We shouldn't die in pursuit of a finisher's medal! We just need to be sure that our reasons are valid, and mixed up in the pain and exhaustion, even the smallest molehill seems like a mountain in our minds. And having a public goal helps us make the distinction between real hardship and in-the-moment difficulties.

Break a large task (42kms) down into games.

   Again, we return to those last 12 kilometers, feet hurting, toes bleeding, slapping down on the cracked pavement of downtown Toronto. When 12 kilometers seemed to stretch on forever, my heart pounding inside my chest. My mouth was dry, my tongue felt like sandpaper as I sucked in breath after breath of warm, dry air. And suddenly I wasn't really looking at 12 kilometers, I was only looking at the next water station 3 kilometers away. If I could reach that in the next 20 minutes, I'd be alright. Once I made it, it was only another 3 kilometers to the next drink of water, I could beat those last 20 minutes! How about doing it in 19 minutes. Then 18 minutes. Then, wait, the next stop is the finish line!

   Taking a larger task and breaking it down makes each bite more manageable. But if you add a game element into it, "beat my last 3 km time", the process becomes much more tolerable. Those 12 kms that seemed so far a moment ago was really only 3 short games and the finish line! These games keep us going when our minds would otherwise tell us to quit.

   When you break down your huge goals into smaller tasks, the goal becomes much more manageable. But you can take this concept further by making each task a game, allowing yourself to feel joy over a smaller accomplishment, and motivating you to keep going. And like any sporting series, enough wins in those small games will lead you to the championship!

   I pushed through to the finish line, and had achieved my athletic goal of the summer. But the real achievement isn't found in a new medal hanging on the wall, the real achievement lies in the hours of training that got me to that point. The real achievement is not my finishing time on the race web page, but in the lessons that I learned about success along the way. Lessons that we can all apply to whatever our goals are.

   The process is painful. You won't achieve anything worthwhile easily. There will be hardships and heartbreaks along the way. These painful experiences are there not to break you, but to build you into a stronger version of yourself. A version of yourself that is worthy of the goals you want to achieve. 

   To keep you focused on those goals, you can announce them to the world. The people you tell, of what you are planning to accomplish will hold you accountable. And when you feel like quitting, you will think twice before throwing in the towel, are the hardships really too much to bear? Would you feel comfortable telling all those that you announced your intentions to that your goal really was out of reach this time?

   If the answer is no, and you determine you can continue in the pursuit of success, breaking the remaining journey down into smaller games will help. Each mini game will lead you one step closer to the finish line, and give you a small dose of satisfaction and motivation each step along the way.

   These lessons helped me cross the finish line at the Scotiabank Toronto Waterfront Marathon, and they can help you reach your goals. Apply these lessons well, and there's no telling what you can accomplish in your life!

An Apple a Day

An apple a day keeps the doctor away. 

   We’ve all heard the cliche, often spoken by our parents or grandparents. And while apples may not keep us healthy all the time, there is certainly a positive lesson to learn. Making a small positive choice each day puts us in a healthier state. These positive choices add up over time, eventually bringing with them the succulent fruits of success. 

What are your Apples?

   The apple a day helps with our health. We’re selecting a fruit instead of something else, like chips or cookies. This trade-off provides a positive ROI, as we strengthen our bodies through improved nutrition, and stay away from foods that would do us harm. But that’s only one aspect of our lives where we are making a positive choice daily. To truly capture the essence of this advice, we need to find other apples, other positive choices that support all our goals.

   This could be reading industry news to stay abreast of the technological advancements in our careers. Or listening to a positive themed podcast in the morning, putting ourselves in an upbeat mood for the day. These apples help strengthen the important aspects in our lives. Perhaps far more important than goals, these small positive choices are the actions that we can take that lead us to both goal achievement, and the grander vision we have for our future.

What’s the catch?

   An apple a day, that seems so simple. And it is. It is also extremely simple not to do. Staying consistent with small positive choices is essential for reaping the rewards of long-term investing in ourselves.

How do we stick with these positive choices?

   If we consider each daily action like eating that apple, as a choice, then we are destined to fail. The issue here, is that we are allowing our willpower to decide if we eat the apple or the chocolate bar. Willpower is a fickle substance, and cannot be relied upon to deliver the same result day after day. 

   A far superior strategy is to create routines. These routines cost a lot of willpower up front, but then put you on an unconscious path to success. After a month or two, those decisions you used to make? They aren’t there anymore. You’ll find yourself subconsciously reaching for the apple every time that option comes up.

Time to go Apple Picking

   Now it’s your turn. What is your “apple a day”? What small thing, or things, can you do consistently to make sure you are on the right track to success? And how can you build these into a routine to make sure that you follow the path to success without relying on willpower in the future?

What is Asset Allocation?

   There are three fundamental principles to successful investing: asset allocation, market timing, and time in the market. To achieve optimal financial returns, while balancing an appropriate level of risk, we look at asset allocation.

What is Asset Allocation?

   Asset Allocation is an investment strategy that involves investing part of your portfolio in different investment classes; stocks, fixed income, and cash. These assets, or investments, make up a portion of each balanced portfolio. The amount of risk associated with the portfolio is determined by how much of each asset class is held. For example, a 100% stock portfolio is much more risky than a 50% stock, 50% fixed income portfolio.

   Okay, so Asset Allocation simply refers to how much of my investment portfolio is made up of stocks, bonds (fixed income), and cash. I’m with you so far, but why are you telling me this?

Why is Asset Allocation important?

   As one of the three levers that controls investing, Asset Allocation is the most easily adjusted. While we cannot invest earlier, and correctly timing the market is a statistical impossibility, asset allocation is our best bet to invest effectively.

   Asset allocation is widely considered the most important investment decision, with far greater impact than the specific stocks in your portfolio. The asset mix, between stocks, bonds, and cash determines the risk / return rating of each portfolio.

   In general, stocks are the riskiest, yet offer the highest returns. Fixed income is safer, but the returns are lower than stocks. And cash, or Certificate of Deposits (CDs), are the safest of all investments, yet yield the lowest returns. Asset allocation is important to understand, as it governs risk and expected returns. 

   Alright, Asset allocation is important. How do we use it best?

How to use Asset Allocation?

   Financial advisers will often recommend asset allocation based on your age, as a general approach to determine how much risk you are open to. The traditional formula is 100 minus Age = asset allocation weighting. For example, let’s say you are 30 years old. 100 - 30 = 70. This means that 70% of your portfolio should be invested in stocks, while fixed income (bonds) and cash make up the remaining 30%. 

   The traditional formula doesn’t take into consideration the increasing life expectancy, and I would advocate that for our younger readers, the asset allocation benchmark formula should be 115. For our 30 year old reader, that would look like 115 - 30 = 85. Therefore, 85% of a 30-year old's investment portfolio should be in stocks, with the remaining 15% invested in fixed income and cash. 

   This benchmark system makes a very important assumption, that the investments are made with a long-term focus. This long-term focus looks towards retirement, not shorter term financial goals like home-buying or weddings. If the monies will be needed within the next 5 years, a far more conservative asset allocation is recommended.

Key Learning Notes:

   Asset allocation is the single most important lever to control your financial investments. The term refers to how much you invest in a single area, between stocks, fixed income (bonds), and cash. The more heavily weighted in stocks, the riskier the portfolio, and the higher expected returns. As a general rule, a good benchmark for asset allocation can be established by using 115 (or 100) minus Age = allocation for stocks. This benchmark is effective if using a long term focus, for example saving for retirement.

Action Item: 

Perform the asset allocation benchmark calculation for your long term investment accounts. What is your benchmark score?

Now look at your investments. How much, as a percentage, do you have invested in stocks? Fixed income? Cash?

Is there any re-balancing required? Ideally, this exercise is conducted once or twice a year.