Why money is everything

July 14, 2020

Never Retire Profile of the Week

Alex Trebek

Born July 22, 1940, the soon-to-be 80-year-old Canadian-American television personality became a household name through his role as host of the syndicated game show Jeopardy!, which he has hosted since 1984. Trebek has also hosted a number of other game shows and made appearances in numerous television series, usually playing himself. On March 6, 2019, Trebek announced he had been diagnosed with Stage 4 pancreatic cancer. He has continued to work throughout his treatment and recently announced that despite the odds against him, he is heading into his second post- diagnosis year. How’s that for never retiring?!

Alex Trebek

Now that I have your attention, let me explain.

At the beginning of my podcasts (click here for the most recent episode) I state:

“My mission is to motivate entrepreneurs (and non entrepreneurs) to become financially literate and convert their income into true wealth. Through wealth, an entrepreneur can build a business and a life free from financial constraints. They can focus on their customers, family and health.”

I believe that we should all strive to move beyond wanting money for the sake of accumulating it.

Some people don’t care about money and are unable to achieve financial independence. Others are on a never-ending journey of accumulating and hoarding money.

To me, the purpose of money is to improve your life, your family’s life, and the lives of the people in your community.

In this way, money is a tool for achieving your truth wealth: improvement.

In my life, true wealth has included:

Taking a long weekend off so I can take one of my children to an out-of-town soccer tournament
Volunteering many of my summer evenings as a coach to help local kids develop soccer skills
Taking time off during the workday to go with my wife to her numerous doctor’s appointments
Helping my parents with their car expenses
Contributing annually to the Princess Margaret Cancer Foundation
Sending my three children to private high schools
Volunteering my time to help run a long-term care facility in the community
Providing clients with advice that is not pressured or influenced by a need to generate sales

All of these activities have enabled me to improve my life and the lives of other people. And I have been able to do these things because I have achieved financial independence.

Change how you think about you and your money

Thinking of true wealth as being about improvement opens the door for you to conceive of your financial role in an entirely new way.

If the purpose of having – and growing – money is to enable improvement in your life and lives around you, you become a steward of wealth.

In this role, you are committing to manage money deliberately and carefully. You have this goal not because you want to accumulate more money, but because you intend to add value to the world. You intend to make a difference.

That’s where I come in.

The mission of Dri Financial Group is to be enablers of true wealth.

We want to help you save, invest and protect your money so that you can be a good steward, drive improvement, and make a difference.

So how do you do it?

The first steps in building true wealth involve evaluating your current financial position.

Here are four kinds of monitoring you can engage in to lay a foundation for true wealth.

1. Monitor cashflow

Living within your means begins with a clear sense of how much you make and how much you spend. Develop a habit of sitting down once a month and calculating how much money came in (after tax) and how much went out.

Keep in mind that it may take as long as a year to get a complete picture of your cashflow. Expenses and income fluctuate month to month. For example, you may pay certain expenses yearly and some part of your income may occur as a yearly bonus or quarterly dividend.

2. Monitor tax deferral

We live in a country with a progressive tax system. The more money you earn, the higher your percentage tax rate. This isn’t something you can control.

What you can control is whether or not you take full advantage of every tax-deferral option available to you. This includes plans such RRSPs, TFSAs, IPPs, RCAs, ESOPs, and HSAs. (Business owners have several options not available to salaried employees.)

Take the time to identify all of your tax-deferral options and then assess the extent to which you are currently leveraging them.

3. Monitor spending and saving

After completing a solid assessment of cashflow and tax deferrals, there is significant merit in carefully monitoring spending and saving.

We suggest that our clients save 30% of their after-tax income. Using a system for monitoring your spending can enable you to move toward living on 70% of you net take-home pay.

To monitor where each dollar is spent, we suggest using an online app like mint.com or personal capital.com. This process will give you a complete picture of how you spend money so you can begin to make necessary adjustments.

4. Monitor net worth

Financial independence is achieved by building your net worth (the value of all of your assets minus liabilities) to the point that you could live on income from those assets. In addition to monitoring and adjusting your savings, it’s also important to have an ongoing sense of your net worth.

At least annually, prepare your personal balance sheet as follows.

On the left side of a sheet of paper or spreadsheet, list all of your assets and their current value. This includes all cash, equities, bonds, real estate, cars, and other assets of value. On the right side, list your liabilities – all the money you owe in the short and long term. This includes all debt on credit cards, a line of credit or a mortgage, along with any other financial obligations you are currently carrying.

Your goal is to get your liabilities (the right side) to zero while building your assets (the left side) to approximately 25 times your annual cash flow needs. (For example, if your total annual expenses are $100k per year, try to get the left side to $2.5M or higher.)

That’s it.

Follow these four techniques for monitoring your money and you will be on your way to building true wealth. You will be on your way to becoming a steward of improvement.
Our role in your ongoing journey is to motivate and educate you by helping you expand your financial literacy.

Here are five articles that will help you move along on your educational journey.

Did this article resonate with you? What did I miss? Send me a note and let’s start the conversation.

The process of finding an Advisor can be overwhelming. Our process is designed with you in mind. Its structured framework helps you make an informed decision about engaging an appropriate advisor.

Get started here.

Call me if you in want to map out how you can Never Retire. You can also subscribe to our Never Retire Newsletter, contact us to order a complimentary book, register for one of our events, and call us to meet with a Certified Financial Planner. We offer you a range of services from a financial plan to investment advice or helping you take advantage of our investment models. Call me at 416.355.6370 or email me at richard.dri@scotiawealth.com.