Sometimes people ask me some really tough questions. Usually, they relate to whether they are doing or have done "enough." Are they saving enough, investing enough, and doing enough to stay on a good track to retire?
I can answer their questions from the point of view of a financial expert and a wealth manager. I can tell them if they are saving more or less than is typical, and project out for them their financial future if they continue on the portfolio track they're on.
The best conversations and answers come about when my clients bring their own points of view to the table. They are the biggest experts on themselves. What are their goals? How much money do they need to be happy? How nervous does investing make them? What is their health like?
My answer and their answers help us get to the best answer for each person, and build the best investment portfolio. These are the tough questions that everybody needs to answer to be well financially, and some ideas for how to start answering them:
How much do I need to save? To come up with a plan that really works for you, you need to make a reasonable estimate for how many years you expect to live. Start with the average life expectancy for Canadian men, 80, and Canadian women, 84, and adjust it up or down, depending on your health, your family history and your comfort level with risk.
Am I saving enough? When people ask me this, they're not really asking how much they ought to save. They often aren't sure what their monthly saving and spending is, or what percentage of their income it equals.
It's easy to say 10% a month total, to all of your different savings and investing options. I often use that rule of thumb. But many people don't track their budgets closely enough to know if they are close to hitting their targets. I suggest a service like Mint. The first, most valuable thing it tells you is where your money is going.
Could I earn more money? I spend a lot of time talking about maximizing your career, as I did here: 6 steps to change your career without destroying your financial life. I find many clients believe they could make more money if they only had the courage to make a switch, either by going back to school, shifting gears at work, or perhaps starting a business. If you're find that you ask yourself this question a lot, maybe it's time to act, instead of just asking.
Do I have a cash reserve to cover my expenses for 3-6 months? This is a tough question because the answer for too many people is "no." Before you even begin to invest, build up the cash reserve that will allow you to ride out emergencies and be the resource for your family that you want to be.