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The Ultimate Guide to Financial Bliss
I was privileged to teach a grade 12 class all about MONEY this week! I had a blast!
I think I talked for 70 minutes straight without air (and could have gone on for hours), and although many blank stares at times, the class was engaged and the teacher even said that it was the most she’s seen her students engage – awesome! It probably helped that I was all jacked up on Starbucks.
‘What I wish I knew in high school about money’ was not taught when I went to high school in Alberta. Probably not for you either.
I told these kids the truth – that if there is ONE class on ONE day in all of high school – THIS was the class they can’t miss (or sleep through)!
It’s our fault, as society, that we make things like trigonometry and molecular formulas FEEL more important than what’s really gonna happen when we move out of our parent’s basement and get thrown to the wolves.
Real life is actually harder than Call of Duty!
But we know this – we are the parents now, the older people in society (I can’t believe how old I felt talking to 17 year olds – sigh……)
When I was talking about credit ratings and how to file taxes I had one student that said to me, “I don’t want to do that!” Sorry kid, you have no choice and you have to play by the rules we, as society, have created for ourselves. That’s LIFE! These kids haven’t had the school of hard knocks yet! And honestly, why should they? Teaching financial education would mitigate the unnecessary school of hard knocks for most kids. I mean really teaching it. Making it important.
Here’s the thing: even though my presentation was created for 17-year-olds about to enter the “REAL” world, I realized, most of my clients, most of my friends and most adult people in general don’t know most of what I talked about. I couldn’t get most of my girlfriends to explain how the stock market worked – even after a bottle of wine….
Unless you had amazing parents to teach you this stuff or a brilliant mentor like Warren Buffet, then no one taught you about money in a real and meaningful way. Sure your parents interjected here and there tid-bits of advice (bad or good), and miraculously poured their money “issues” and “beliefs” into your brain, which if you were lucky left you financially unscathed. For most of us, let’s just say the apple doesn’t fall to far from the tree – chances are you are the same with your money as your parents are – good, bad or ugly.
I talk to people from all walks of life on a daily basis and most people don’t know this stuff and get swept into bank marketing campaigns and take them for the truth, the holy grail – because banks are smart, they know what to do with our money and will never harm us financially. Right……..
I told these kids that they are so lucky because they have the google gods at their fingertips and can at least look up information – I mean honestly, If I had google back in high school I’d probably be a neurosurgeon by now.
Here’s where I had a huge AHA moment this week! I think I assume most people know as much as I do. (This probably comes from feelings of unworthiness and not giving myself enough credit – I know most women struggle with this at some point in their lives – and I’m sure we can psychoanalyze that to death another day!)
I will no longer assume on my part. I will ask questions. I will share what I have learned. I can’t help clients reach their ultimate financial goals with out the education in place behind what they are doing in order to understand the plan and stick with it. I will never succeed as a financial professional if the basic financial knowledge is not there because why would we follow advice we don’t understand.
This is my passion and today, my post is more of a PROMISE – that I will do my best to get basic financial education in the hands of students and adults alike.
My message is creating financial clarity. Financial clarity can come once you have solid financial education.
Hi, my name is Lisa and I’m a control freak.
“Hi Lisa!”
And I do know we all enter control freak camp from time to time, some of us like camp so much we have every second of every day at control freak camp planned right down to the second.
I’ve been known to carry the Clip-Board-O’Fun around from time-to-time with everything planned down to the minute.
JK – I’m not that crazy.
Nearest 5 minutes.
All these “control issues” are really just from a place of fear and worry (or perhaps you are not a control freak and just plain scared and worried all the time – this post is for you as well), and not only are they doing emotional and financial damage to your life they are also robbing you of today’s possibilities, happiness and the enjoyment of being in the moment.
I think this is what happens. We get all concerned about ‘stuff’ that is out of our control, and we become notorious to try to make sense out of our crazy world.
GUESS WHAT! The world will NEVER REALLY MAKE SENSE!
So what do you do when the political party you didn’t vote for gets into power? Or the market drops 10% in one day? Or someone completely freaks out at you for no good reason? Or you think the world is coming to an end and your Shmita is over?
These have been my biggest struggles: WORRY! FEAR! FREAKIN’ CONTROL ISSUES! (Do I hear an AMEN?!)
I remember fear from the first time my cousin taught me about global warming in grade 4 and I remember having nightmares and thinking the world would end. I don’t think I slept for days because I was scared that the world would heat up like a big ball of fire the next day.
I also stored up a basement full of water and food for the end of the world in 2012 (actually, my sister was in the movie “2012” – so at least I knew it wasn’t real!) – We are still eating the rice and the occasional canned good! 🙂
Fast forward to now.
I still get freaked out about the things I can’t control, but now they aren’t consuming my time or pulling me away from my passion the way they used to.
I believe we are all here for a reason, and we all have amazing gifts to share with the world. The problem is when we are letting fear and worry run rampant in our heads, like a kid-on-popping-candy-sugar-high, it will stop us dead in our tracks from accomplishing our purpose.
This is how you tame your inner control freak and deal with fear and worry:
You take a piece of paper. Draw a line down the middle.
On one side you write “All the Things in my Control” and on the other side you write “All the Things Not in my Control” and then you list them.
For myself, this is what was on my list of “What I Control”
- Run/Walk/Fresh Air for an hour a day
- Write for an hour a day
- Call X number of clients a day
- Send LOVE to my family and friends
- LOVE like crazy on my 2 girls
- Put myself out there with my message everyday
- Watch what & how much goes into my mouth
- Design my living space as a place I enjoy so I can love where I write, work & live
- Vote
- Be respectful of others
- Learn
- Save Money
- Create a Financial Plan, Business Plan, Launch Plan, Life Plan, Exercise Plan
- Listen to others!!!!!! (that’s one I’ve gotten way better at over the years – but still a struggle – I like to talk!)
Your list will look different of course – but it will be similar in many ways.
All the things you CAN’T control:
- Politics
- Stock Market
- Economy
- Weather
- How people respond to you
- Outcomes
- Medical Tests
- How people treat you
- Being put on this earth and getting booted off!
The sooner you stop focusing on the things you can’t control and begin to TAKE ACTION on the things you can control, you will immediately feel better – worry and fear will leave you and only come back if you invite them.
Take Action.
What would our world look like if we stopped feeding the “NOISE” in our lives we can’t control an started listening, helping and encouraging others with that time?
Let GO of what you can’t control.
Someone very wise once said “Do not worry about tomorrow, for tomorrow will bring it’s own worries.”
He was right.
DREAMS = FINANCIAL PLANNING
What do dreams have to do with financial planning? Everything.
What’s the point of saving a dime if you haven’t figured out how that dime is going to help fuel your dreams or your dreams as a family.
What good is a big pile of money with no dreams attached to it? (FYI – people with big piles of money with no dreams attached to it, end up investing in other people’s dreams by default – what do you really think all this capital in our world is used for anyways? People’s ideas – people’s dreams! You’ll be lending out your capital for other’s dreams until you finally figure out what yours are – welcome to capitalism.)
The problem is most of us give lip service to our dreams and most are too afraid to even dream a big dream at all.
We (by we I mean I) are too afraid to talk about it. Afraid to fail. Afraid to succeed. Afraid we will be alone or no one will like us when they see the real us. Afraid of what people will think. Afraid people won’t love us.
Dreams push us right out of our comfort zone. They push us out of jobs we don’t like or careers that pay us really well to stick around. They break down the walls we worked so hard to build up not to expose the real us- so the shining part of us can stay hidden in those walls and die within. After all, that’s what our society has tricked most of us into believing.
All retirement really is, is when people have made enough money, have enough money set aside, or have enough cash flow (e.g. pensions or government benefits) to quit their job and actually follow their dreams without the financial risk of putting it all on the line (and that’s if you are lucky!) So they can finally follow their dreams in whatever shape or form they come in and take the financial consideration out of the equation all together. I think as a whole we are turning to careers or jobs we actually love – if not right away, soon after. No one sticks around in a job they don’t like anymore anyways. That would be ludicrous. However, I don’t think that we have swung the pendulum quite the other way yet. I think there are lots of hidden dreams that have yet to bubble to the surface.
Everyone has dreams. Dreams make you an artist in something. You may be an actual artist, a business owner, a musician, a surgeon, a construction worker, a pilot or gardener. It’s what fuels you. It what makes you shine and your eyes light up when you talk about it.
I’m a writer. (WOW! I don’t think I have ever actually wrote those words before about myself!) I’m also a financial coach. And at 4am this morning, I’m doing what I love because I had an idea while I was sleeping that I had to get down into Evernote and literally got me out of bed with no coffee! My blood is pumping. I’m excited to be here, in front of the fireplace, cozy, and writing!
My mom is awesome. I was on the phone with her yesterday and she told me she’s heading to Phoenix next week to spend the next 2.5 months playing her Viola with an 80 piece orchestra and a huge choir and make her art unfold into a beautiful Christmas concert. I love my mom and the passion she has when she says she’s going to do this. I can’t wait to go see her play at Christmas. That is her dream. It’s her art.
My Opa and Oma had a construction company and worked so hard – as immigrants do. I don’t think it was their dream to build apartments, but they built them, rented them out and that afforded them their dream – a hobby farm when they were around 50 years old. I remember growing up on that farm. My grandparents worked harder I bet at their chickens, sheep, tree farming, bee keeping, and vegetable garden than at construction. That second life – that was their dream – and my Opa Georg was famous in his little town, because everyone knew that that man was living his purpose – his passion; you could see it in his eyes, the way he talked, the way he loved everyone. Their money fueled their dreams. It had purpose with passion and it made a difference in that town and to our family – anyone in my family will tell you that.
I’ll tell you my story around following your dreams. The truth is – although I’ve known for years what my passion and dreams were, I finally married the two in my head.
Dreams and Passions are different elements and need to mutually meet for them to create magic!
Mine are financial coaching and writing, and somehow in the last 2 years, my dream is starting to take shape although my passion has always flustered below in my belly.
I believe passion stirs deep within, while dreams whirl around us in a playful game waiting to be caught!
Honestly, nothing is more fun to me than writing or working – because I LOVE MY WORK. I like it more than wake surfing or golf or wine tasting. And that is like swearing in my family.
This is how it happened for me: true story.
It was October 2012, I was driving home Friday afternoon from the Delta Kananaskis after my work conference. The motivational speaker had struck a chord within me. I knew what I wanted to do with my life, but I actually didn’t know what my specific dream was.
I was stuck.
I’ve known for many years I have something great to share with the world. But finding my voice in this jungle with my own self-doubt yelling back at me – much stronger than my own voice (and for those that know me know I’m no shrinking violet – I’m loud!)
I remember driving down highway 40 asking God to give me a sign. He literally responded with this. A sign I had seen many times before. A simple road sign.
“Lisa, What’s holding you back?”
Somehow that sign – that moment – changed my life (Anytime God talks to you directly typically does!) I pondered that sign at so many cross-roads in my life when the question needed to be asked and I’m sure that sign will keep cropping up when I need it to.
So last Friday afternoon, October 9, 2015 (co-incidentally my daughter’s 8th birthday) on my way home from the same convention out in Kananaskis, I saw the sign again. Actually, I asked to see the sign again. So I looked for it. And there it was.
I pulled my car over and looking like a full-out tourist with my iPhone, I took a picture of this sign. It’s my Thanksgiving blessing.
I finally know my next step because I finally know my destination or at least what road I’m supposed to be on to get there.
I’ve ran out of excuses this year. Although fear will come along for the ride, I have nothing holding me back from my dreams and a purpose to my financial plan. I have nothing holding me back.
And it finally feels good to say that.
What’s holding you back?
DUMB WAYS TO DIE
One of the insurance companies I am affiliated with, Empire Life, put out these great commercials called “Dumb Ways to Die” on you tube, so I had to share. I guess I don’t watch enough TV. Maybe you saw these; either way they are great marketing and a good laugh. 🙂
WHY YOU NEED ADVICE INDEPENDENT OF THE BANKS
I’ve contemplated writing this for months now! I mean honestly, who am I to tell the Banks where to go and expose their hidden secrets? I mean, let’s be honest now, clearly they own my @&&, and all the money in my accounts – I’m sure they got to you too unless you actually live off the grid and deal in ingots. So why would I write a post about the 5 secrets banks won’t tell you? Well, because banks won’t tell you this, so someone should. And today, I feel that someone is me {insert a full range of emoticons}.
I need to politely mention that you aren’t going to be getting your best financial, tax and estate advice from the walk-in-corner-branch MOST of the time, although banks marketing departments, along with their billions in advertising will tell you differently. This is because banks simply do not offer these products and therefore cannot offer the financial and tax advice that goes along with it. So, I do offer up a starbucks to my banking friends as an apologetic sacrificial offering, and pray next time I walk in to use the ATM I won’t be struck down by lightning or worse – the ATM gods refuse me money.
Now to be fair, I’m actually not really throwing the BIG BANKS under the bus. The banks have their purpose, however, when we don’t keep our minds open to all the financial options available to us, then we are just choosing to live with our heads in the sand (now, if that involves a beach, a book and no kids – please sign me up!)
This is why your corner bank won’t tell you this:
- perhaps the bank representative you deal with doesn’t know these products exist
- if they did know they exist, they are probably not compensated to direct you elsewhere or maybe it is a conflict of interest
- they don’t realize the tax or legal implications of your current situation and how other products could help you
- perhaps they just don’t know because that is not their specific training to be able to identify planning strategies or opportunities
It’s really not their fault. It’s just how the system has been set up and running for years.
If it ain’t broke and makes a few billion ever quarter, why change it.
Enter: Independent Financial Advice
A triple-licenced-advisor just means they are able to sell you products (legally and regulated) and are licenced with all three: Either IIROC or MFDA licenced, life and accident & sickness insurance licenced and exempt market products representative regulated – private equity offerings. (If you can’t find a triple, then a dual-licenced-advisor is your next best bet – they probably just don’t offer private equity offerings – not the end of the world.)
By the way, finding a triple-licenced-advisor may be like trying to find a unicorn, I will tell you they exist. I do know many. I also like to think of myself as a unicorn at times.
I’m not going to go into each of the products in detail, the point of this post is to bring awareness to financial products that are out there that the majority of the population does not take advantage of.
Here are the 5 products you won’t be getting from your banking branch:
- Corporate Class Mutual Funds: simply put – mutual funds that defer tax to a later date
- T-SWP Mutual Funds: simply put – return of capital mutual funds, tax planning benefits
- Segregated Funds: simply put – mutual funds with a life insurance wrapper that have guarantees, offer creditor protection and bypass probate (estate planning benefits)
- Flow-Through Shares: simply put – potential (huge) tax benefits by purchasing flow through shares of eligible Canadian companies
- Life Insurance, Critical Illness, Disability, and Extended Health Insurance: simply put – banks do sell these products through technically another entity, however if you walk into a branch, legally they can give you a phone number to their insurance division. You legally cannot buy insurance in a bank branch, you must look elsewhere.
Not only because I’m a unicorn do I believe in supporting unicorns, you need to know that independent financial advice will be your friend when it comes to tax time or when it’s time to get your hard earned money into the hands of the next generation or you want to creditor proof your business or you want to say you personally have met a unicorn. 😉
TRAVEL INSURANCE
I’ve sold travel insurance for years. 15 years to be exact. And I’ve never needed it….. until……
I’m at my annual work conference in San Francisco this week (actually I’m writing this post from my beautiful hotel room). It was amazing. 5 star all the way. Wined and dined at all the classiest iconic places in town. My 35-year-old body is fast realizing it’s not 18 anymore and 4 days of rich foods and wine start to kick in – like my credit card statement will kick in after this whole US/CND exchange rate fiasco – as I typically don’t eat or drink like that at home (I’m a pretty healthy girl for the most part!).
I get back to my hotel room at midnight. Can’t sleep. Think I have indigestion or food poisoning. Perhaps it was the shrimp. No, maybe the oysters. No, maybe the steak. Geez. The cheese platter? That last Gin & Tonic. (Honestly, we start at 5 pm and go till midnight – a lot happens in 7 hours of eating and drinking – for days straight) Then it hits me. Must have been the pork belly on that cute crouton with the yummy aioli sauce shaped like a heart…..
As I’m contemplating what foods I ate, I realize my pain is increasing and it’s like nothing I’ve felt before. Okay lies. It felt like the end stages of child labor – been there, got the T-Shirt!
So, with no sleep, at 5 am in excruciating pain, I call my Canadian travel insurance company’s phone number and ask them where I should go to seek medical attention. They give me the name and address and off I stumble down through the lobby, grab a taxi to the hospital emergency.
They were waiting for me at the California Pacific Medical Centre. They knew I was coming. It was quite nice. Like checking into a hotel. (I have to say, minus my pain, they whole experience was rather quite enjoyable.)
8 hours later after a page long of pain medication I can’t pronounce, a CT scan, an ultrasound, blood work and all diagnostics completed, I was diagnosed with a gall bladder attack, which subsided hours later. Honestly, I was terrified that it was a heart attack, because symptoms for both are similar – thankful that it was not. However, told to stay off fatty foods and on my way I went back to the hotel feeling a million times better.
And the happy part of the story is that they billed my emergency medical travel insurance directly and the only time I had to open my wallet was for my prescription medication, however they will be reimbursing me for that too. (I could go on about private health care and what a wonderful experience it was, no queue and the customer service was amazing. Ohhh – I did have a hot Doctor too {Hi Dr. Dan 😉 } – that helps. I felt like I was in my own episode of Grey’s Anatomy. And I digress….)
I’m so happy that otherwise all the tests showed I’m in great health (huge blessing), feeling great, and reminding everyone who travels out of province and out of country to purchase travel insurance. It’s relatively inexpensive if you are under 65, however, all it takes is one tiny incident and you could be paying for it big time or cashing in investments you have worked hard to save up or remortgaging your home or worse. I’ve heard all the horror stories over the years.
Funny enough, I’m staying at the hotel where Tony Bennett sang his famous song, “I left my heart in San Francisco.” I’m just glad I had travel insurance to cover this or I’d be singing, “I left my money in San Francisco.”
Before we can make any financial decisions, and start the financial planning process we need to get a snapshot of where we are financially so we can make a plan to get to where we want to go. In just a couple minutes, after completing the UP/DOWN Simple Planning Page, you will know which direction you are heading in. It’s black or white! There is no guessing here – like everything in life – you are either moving forward or backwards, up or down. It’s okay either way – the big point of this planning page is so you can start your ‘UP’ and stop the ‘DOWN’ward spiral. If you are ‘UP’, whether you knew that or had no clue – now you can plan your next financial milestone.
This is the first worksheet in my simple planning package that I give to clients, because honestly, most of my amazing brilliant clients may have a small clue, but on average most people don’t really know where they are at or by how much they are growing each month. It doesn’t matter if you are a bagillionaire or a dollaraire or if you are in an accumulation phase or a distribution phase. You need to take this first step and show your money who’s boss.
It doesn’t matter if you are headed up or down (yes, I say things twice!) It does matter that you know which way you are heading and to what degree so you can make financial choices and decisions based on that information going forward. Your financial coach is here to help you accomplish your next milestone (and drink wine with you!) And most importantly, whatever direction you are heading doesn’t mean anything about you! You are great no matter which way you are going!
TO ACCESS YOUR FREE PDF UP/DOWN SIMPLE PLANNING PAGE and AUDIO SIMPLY SIGN UP BELOW TO GET STARTED!
Have your completed your UP/DOWN SIMPLE PLANNING PAGE? Then please leave a comment below – because I want to hear from you! I want to know if this helped you, or gave you a new perspective – good or bad! Were you shocked? Pleasantly surprised? Or was is exactly where you thought you’d be? Does it make you want to create a new financial possibility for your life?
Money mindsets are so important in shaping our financial futures.
To illustrate, here’s a quick tale from one of my favorites, Earl Nightingale. I’m changing it up a bit, but the moral is still the same:
Once upon a time there was a shoe girl. The shoe girl repaired shoes on the side of the road, so naturally people would stop by and ask for directions.
One day, a girl in Jimmy Choo’s pulled up to the shoe shop and asked the shoe girl for directions to the nearest town. After giving directions, the Jimmy Choo girl asked what kind of people she should expect to find in the nearby town. The shoe girl said, “Well, what kinda people you reckon you’ll find there?” (in a southern accent of course!) The Jimmy Choo girl said, “I reckon I find some creepy men and thieves who come in the middle of the night and steal garden gnomes and I also heard they’re just down right miserable people in that town.” The shoe girl replied, “I reckon then that’s exactly what you’ll find.”
A few hours later, a girl in Louboutin’s pulled up to the shoe shop asking for directions. After the shoe girl gave directions, the Louboutin girl asked what kind of people she should expect to find in the nearby town. The shoe girl said, “Well, what kinda people you reckon you’ll find there?” The Louboutin girl said, “I reckon I find the greatest sweetest people on earth there. Where neighbours care, and men are sweet as honey, and you don’t need to lock your doors at night because it’s a safe and loving town.” The shoe girl replied, “I reckon then that’s exactly what you’ll find.”
And both the Jimmy Choo girl and the Louboutin girl went to the same town and found the people to be exactly as they expected.
So much of how life occurs to us is because we have the mindset that that is what is going to happen. When we change our beliefs and negative thoughts towards positive thoughts, then we start to reap the benefits our positive mindsets.
Here are 5 Money Mindsets that will only prosper you in every area of your life, and I will go as far as to say in your health as well. A healthy mind produces a healthy body as well.
1. Abundance Flows to You. Don’t think in terms of scarcity, think in abundance. In a round about way, I’ve mentioned this once or a thousand times. There is more than enough to go around, not to mention man’s inherent desire for increase.
2. Be a Good Steward. A steward is someone who looks after other people’s possessions and money. What does that mean? It means to take care of the items you have been blessed with, share, give away. Remember, you don’t take it with you when you go – hence, the questions begs to be asked… is it really yours? It amazes me that we hold on so tightly to things and money, when truly it’s just a tool. Money is meant to be in motion, so best not to hoard it either. Invest wisely as best you can and learn to LET IT GO….(Enter: Little 7 year-old girls singing to Frozen….and now you have that song in your head too!)
3. Have Money Mercy. Have some money mercy with yourself. We screw up and make mistakes. Pick yourself up, dust yourself off and start all over again – oooh, one of my favourite Diana Krall songs.
4. Go For It! You have to take risks in life, invest in people and relationships. That’s how humanity makes progress. It’s as scary as the Stay-Puft Marshmallow Man in Ghostbusters, but you sometimes have to cross the streams and take a chance. Do you know how you know it’s the right thing to do? You get scared, you want to retreat, feel a knot in your stomach, sweat and feel sick. That’s what taking chances does, it physically can make you ill, almost. That just means that it is so important to you and I believe its a sign that you are on the right track.
5. Take Interest In and Care For Your Money. Apathy breeds nothing. Nothing good can come when ones intentions aren’t clear. Who really wants to be around people who don’t care or aren’t interested? Treat your money good – seriously. Be thankful and grateful for every cent. Be interested in it. Track it. You will manifest more of it. Care for your money, and it will care for you back!
6. KEEP IT SIMPLE. Cause we (and by WE, I really mean I…..) like to complicate the heck out of our lives. If a good thing comes your way, accept it. Say that you receive it. Receive gifts with grace. For most of us, it’s harder to receive with grace than to give. (I know this is number six – I was just checking to see if you are paying attention!)
Ghandi said it best as he took a stand for his people:
“Your beliefs become your thoughts,
Your thoughts become your words,
Your words become your actions,
Your actions become your habits,
Your habits become your values,
Your values become your destiny.”
I think sometimes we are too disconnected from our real financial picture or maybe even down right scared to face the music and actually look at where we are financially.
I’ve been there.
You know the moment you get the mail, do a Hail Mary and you pray your visa statement isn’t as bad as you think. Then you kindly tell the police officer who came knocking at your door to investigate the screams that the neighbour heard and say it was just the movie Scream playing on TV really loud and not the shrills of you opening your visa statement…..
da-da-da……
(whatever…. like that’s never happened to you before…pffft…)
Time for the fun talk on money measurements!
These are 5 Money Measurements that you just need to know. Period. (*#5 is the money measurement I invented and for obvious reasons is my favorite! OK – so it’s not like rocket science, but I like to see how much my net worth is growing each month….you can skip right to it if you want 😉 – the other ones were probably invented by smarty-pants-Harvard-types a billion years ago and although your eyes may glaze over and think about tonight’s season premier of Grey’s Anatomy, these are still great measuring tools you need to know.)
Also, I have tried to make this less technical and I even put what the goal should be; unlike those math textbooks that never gave you the answer in the back – boooo! Or like when you learn a new sport and you don’t know if the object of the game is to score high or low (like, I still think in golf the highest number should win.) So I wrote what GOAL you are aiming for right below – you can thank me with starbucks (grande skinny vanilla latte, please)!
1) Debt Ratio = All Debt / Annual Gross Income
(GOAL: 0 or a LOW NUMBER)
This takes your total gross debt divided by your total gross income (I know there is no such thing as ‘gross debt’, but it sounded gross so I put it in there – not to be confused with your gross income, which is gross because you realize it’s what you make before tax).
So, if you earn $80,000 in gross income, and service a total of $300,000 in debt your ratio would be 3.75 There is no right or wrong number here, just know the lower you can get your number, the better it is for you. It means you will have more money every month to save for things like earlier retirement, future education, business expansion, more travel or a big party. Either way, getting your debt load down will free up money and give you more options.
2) Monthly Free Cash Flow = Monthly Take Home Dollars – Monthly Expenses
(GOAL: Highest number possible)
This gives you your disposable income that you can use. The point of cash flow is to see where money is flowing to in different areas and when analyzed by a financial coach, you should be able to find ways to increase your cash flow. Cash flow is the name of the game, because if you can consolidate debt or free up more money to save or pay off your debts in a fast time, then you will reach your goals faster. So, in a nutshell, taking time to do these money measurements will hopefully get you to your goals faster.
3) Net worth = Assets – Liabilities
(GOAL: Highest Number Possible)
Add up all your assets, like your house, your investment accounts, everything of value or that will hold it’s value (your garden gnome collection doesn’t count!) and then subtract it from what you owe and VOILA – you have your net worth. Just please don’t compare to your net worth to your neighbor’s and never get that tied up with your self worth – people have a tendency to do that. 🙂 (You are worth a billion gatrillion times more valuable!)
4) Credit Score or FICO Score
(GOAL: Highest Number Possible – over 680 is good)
There are only 2 major credit reporting agencies in Canada. You can contact Equifax or Transunion. You are allowed to get a FREE copy legally in the mail (they make this hard to find online cause they want your $), but for under $30 you can get instant access online to it. It’s a good idea to find out if you haven’t. Plus, it’s smart to make sure there is no fraudulent activity or that they have incorrect information on it, which can negatively effect if you ever need to use credit in the future. I will write a detailed blog about credit in a few weeks and how it works, because I still think it’s overlooked and most people don’t know how it’s actually calculated.
*5) Up-Down Indicator (now called the Net Worth Maximizer!)
(GOAL: Highest Number Possible )
Well, possibly the best financial tool ever invented by yours truly. You can download my Up/Down Simple Planning Page by signing up below! Or if you are really nice, I’ll email it to you. What the Up-Down Simple Planning Page does is calculate in simple terms how fast your net worth is growing each month by adding and subtracting some key personal financial numbers. I even made a 5-minute audio to accompany it for further explanation.
I created this for one of my best friends who came to me and said that she didn’t ‘feel’ like they were getting ahead financially at all, and even though I knew they were in my head, I wanted to show her that she was doing better financially than she thought. I think half of the battle is that we have these crazy notions that we are ‘bad’ financially or that our money is no good or just all that crazy money talk floating around between our ears. The bottom line is this: things probably aren’t as bad as they seem.
Final Note: You will need to pick a day, and then repeat this exercise in a year so you can get your year over year results and then get a better picture of how you are improving.
“What gets measured gets improved.” – Peter Drucker
