Originally Posted on The Just Word Podcast, July 2021

What matters to you and how you live your life are important things to think about and discuss with your financial advisor. Finding an advisor that encourages you to approach your own financial plan with a more individualistic and personalized structure will help to set you up for success with your investments.

Sandi explains that not everyone uses money as a scorecard for financial success. She encourages individuals to really take a look at what they value in life and how they spend their time to gain what truly matters to them.

“If financial planning is done well, then the result will have the client feeling more organized when risk occurs. Financial planners should be professional and have ethics so that they live up to the spirit of that standard to benefit the people we serve.”

– Sandi Martin

Listen to the full episode on The Just Word Podcast

Well, here we are in the In-Between...again. That space between winter and summer, between hibernation indoors  and having fun outside, between “yay, the vaccines are here” and “now when do I get to visit my Mom?”.

Around here we recognize May as the time between the awful “Stressed & Bummed Out and I Don’t Know Why Season” that seems to last for most of January, February, March, and April, and our favourite “Dream State Goal-Setting Season” (aka the entire summer). It’s the time when the work gets done, and the liminal space between what has been and what’s on the way that we named our company after. 

It’s hard living in this space, particularly now. The pandemic has heightened our awareness of how much time we spend being uncertain. It’s very difficult to make decisions when you have only a vague idea of what might happen, when it might happen, or what the effect might be...but rarely all three at once. Each of us crave a simple formula that not only tells us exactly what to do, but promises us that everything will be fine if only we follow the right steps. 

As attractive as simple answers and surefire formulas for success might be (especially in the middle of the night when our deepest fears come out to play), I know that easy answers do us all a disservice. The hard work of living and making decisions in the middle of uncertainty, of defining your own version of success and moving towards it step by step, changing course as you go, is the only way we know how to live, and the only way I know how to serve my clients. 

I hope that as you move through this particular in-between season, that you see hope on the horizon, even if you have to squint a little.

This month, more than a year into a global pandemic, I’m thinking hard about family: those dear ones we haven’t hugged in far too long, those we will never hug again, and those who have been right next to us 24 hours a day, 7 days a week, for 365 days and counting….and counting...

What Does Family Mean To You?

I don’t care even the tiniest bit about what anyone else thinks “family” means. I only care about what it means to YOU.

Family is, of course, a bit of a loaded topic, and your definition of what family is and what it means to you may have evolved significantly over the years, maybe even on purpose. Your family might include only your partner and kids, full stop. Or it might be a web of relations that includes elders, aunts, cousins, and nephews you’ve never even met (yet). You might have carefully chosen your family as an adult, or your definition of family might include the ancestors who came before you and the generations who will follow you. Your cat might be your family.

If you feel a responsibility to your family, whoever they are and whatever that responsibility means to you, I have excellent news: there are so many financial tools that you can use to care for them!

Common (And Not So Common) Ways To Support Your Family

The way you spend and save your money today is an immediate and probably kind of obvious tool you can use to live out your values. In fact, you’re probably already using cash out of your own pocket to feed and shelter at least one family member, and maybe even setting some aside for someone else’s future education or retirement spending.

Wealth transfer is also a common way to care for family members, perhaps by building up (or maintaining) a portfolio of assets that can be passed along to future generations. Investing in assets that will slow or repair the destruction of our climate is another way you can use your portfolio to live out this particular value.

You may have a business that you’ve created or one that was passed down from another generation. The legacy of that business might be incredibly important to you and your family. Structuring how (or if) this business transitions to the next generation is vital to business families, as are the deep and meaningful discussions, facilitated by a professional before you even start implementing solutions. This can ensure that the meaning that your family has built within the business lives on, even if it looks a little different in each generation.

Many people don’t realize it, but investing in appropriate disability and critical illness insurance is an extremely powerful way to care for family. A few years ago, we discussed this very thing in an episode of Because Money (skip to minute 36 to hear it), and came to the conclusion that neglecting your personal risk management planning is equivalent to informing your family that THEY are your disability insurance! They might be glad to step up...but if caring for them is a value of yours, you might not feel so hot about it.

I’ve said this many times before, but it’s worth repeating: planning for your own eventual departure is truly one of the most loving and thoughtful things you can do for your family.

Family Is Important… to Everyone

Family means some kind of thing to everyone. It might be a big deal, it might be a smaller deal, but it’s a deal of some sort. You demonstrate that value in the design of your own personal and business finances, one way or another.

I recommend that you don’t leave that up to someone else, or on the backburner for another day. Spend the time to review your approach to family, and understand exactly how you want to invest - or not invest - in it, as the case may be.

I are continually amazed when people (including other financial planning practitioners) talk about financial planning as though it is a purely mathematical exercise. Meetings are assumed to be about facts, statements, and rates, to which a tremendous amount of technical and academic expertise is applied. But you and your values? Those hopes and dreams and constraints that make up your WHY and are likely the reason you undertook financial planning in the first place? These seem to enter that conversation only rarely.

I know why this is: values are squishy things that are difficult to quantify. In fact, you might have difficulty even articulating them to your planner in the first place, which is why I’m writing about how to put words around your values so that you can eventually put actions around your words.

Today, I’m examining the many ways you can put your values into action through your cash flow.

Show Me The Money

Cash flow is at once the easiest and hardest way to put your values into action. It’s super easy to support the people and causes which you value with cash out of your own pocket, or to stop spending your dollars on things that do harm - no planning needed. It’s direct and to the point, which is why there are so many axioms about it:

Put your money where your mouth is.

Vote with your wallet.

Show me your calendar and your bank statement, and I’ll show you what you really value.

But money, like time, is so ubiquitous that it’s practically invisible. We use it up every day on necessary things, and then wake up and do it all again the next day. It’s hard to look up from paying the mortgage, buying groceries, and filing your taxes to wrestle with how to keep doing those things but in a way that supports your values. Believe me, I know.

So how, exactly, do you support your value of Safety & Security with your cash flow? Or your values around Family, Freedom, Achievement & Success, or Community?

I thought a lot about this as we were planning for this series of articles, and have dusted off my old friend Design Thinking to help you find the answer for yourself (because of course I did).

Your Values in Action

The first step is always to empathize, the Design Thinking word for “do your homework”. You need to set aside your assumptions about the world and the “normal” way things are done, so you can gain real insight into yourself and what is most important to you.

With a deeper understanding of what it is you value, you need to define how this will manifest in what you do (and don’t) spend your money on.

This will look different for everyone, but here are a few examples to get you started:

• You might value freedom and security, dream of cultivating a vegetable garden and outfitting your home with alternative heat and water sources to reduce your reliance on private utilities and food manufacturing.

• You might value family, which may involve supporting parents from a distance during the pandemic by paying for grocery delivery, and hopping on a plane to see them as soon as it’s safe to do so.

• You might value achievement and success, which could manifest in pursuing an advanced degree (or two, or five).

This is a crucial step, so don’t skip it. One of the questions I always ask my clients is “what does success look like for you?” and the people who spend time really thinking about it are hands down the ones who get the most out of life.

Once you know what success looks like, you can ideate all the many paths you might take to get there. This is always a fun exercise, since it’s literally brainstorming with no limits. I recommend pouring yourself a nice drink, grabbing several sheets of paper and a nice sharp pencil, and writing down every possible way you can spend your money on manifesting your values. Every idea counts, even the ones that start with “buy a lottery ticket and…” or “quit my job and…”

Building a prototype can be as simple as recalculating how much you can spend on eating out and setting up a monthly transfer to your savings account. Or it might be as challenging as finding an alternative to Amazon. Fortunately, prototyping and testing go hand in hand, so if today’s cash flow plan isn’t moving you closer to your values, make a new one! If it’s really not working, speak to a cash flow specialist who can guide you through building a system that works for your unique situation.

Cash flow is simultaneously one of the hardest and easiest financial planning tools to align with your values. It takes hard work to build a values-based cash flow system, but the rewards can be immediate and are always so worthwhile.

Originally published in The Toronto Star on February 9, 2021

It’s challenging enough in normal times for retirees to find the retirement lifestyle that best fits their personal needs and finances at the same time.

But the pandemic makes it even trickier by knocking many retirement plans off-kilter.

In what follows, we describe how two couples — whose names we’ve changed to protect their privacy — have had to adjust their retirement lifestyles and spending after being impacted by COVID-19 in different ways.We start with Deborah and Daryl Burton, a Toronto twosome in their early 70s who both contracted COVID-19 early in the pandemic. While Daryl recovered quickly with no lasting effects, Deborah is among the group known as “long-haulers” who suffer lingering symptoms.

Investment setbacks unrelated to the pandemic have forced them to reduce their budget, although coronavirus restrictions and Deborah’s health issues limit activities they can spend money on now anyway.

We then check in on Emma and Warren Fletcher, both in their late 50s, who live in a small city near Greater Toronto’s edge. Warren was the family’s sole breadwinner when he suddenly lost his sales job early in the pandemic. At that point, the Fletchers were in reasonable financial shape but unsure whether they were quite ready for retirement. So they’ve had to review and adjust their plans to the new reality.

“Although these two couples experienced the pandemic very differently, both have been able to weather their individual challenges so far by adapting their spending to fit their circumstances and values,” says Sandi Martin, a certified financial planner and partner with Spring Financial Planning. Martin helped both couples prepare spending plans, which are shown in the accompanying table. (We also show average senior couples spending based on Statistics Canada data that I’ve adjusted.)

1. Sources of spending figures for the Burtons and the Fletchers: the couples themselves and Sandi Martin of Spring Financial Planning, who helped the couples prepare financial plans. The names of the couples have been changed to protect their privacy.

2. Shelter excludes mortgage payments and includes property taxes, utilities, maintenance, repairs and home insurance. The home and garden category includes the costs of furnishings, appliances, cleaning supplies, garden supplies, and garden services. Communication includes internet, TV and cable services, streaming services, landline phone, and cellphones. Spending on cigarettes and tobacco where applicable is included in the restaurants, alcohol category.

3. Source of average senior couples spending figures is the Statistics Canada Survey of Household Spending for 2016 for seniors 65 and older, as adapted by the author. I have defined the spending categories above and aggregated the detailed data into those categories. I have also adjusted the data for actual and projected inflation to reflect current purchasing power. Statistics Canada has not reviewed nor endorsed the adjustments and adaptations that I have made using their data.

4. The Fletchers have two children in university currently living at home. The children’s living costs included in the Fletchers’ budget are estimated at roughly $10,000 and is mainly comprised of costs related to groceries, vehicles, and communications. Tuition and other university costs are covered by RESPs and summer jobs and are not included here.

The Burtons

The Burtons picked up COVID-19 in March. While Daryl recovered quickly, Deborah continues to experience problems with breathing, fatigue and “brain fog” (although she’s long past being contagious).

With the help of their Christian beliefs, Deborah tries to stay positive. She believes her “long-hauler” symptoms are receding, albeit very slowly. “It’s not fun but there’s nothing I can do about it,” says Deborah. “You can go down with it or you can look ahead with hope.”

The Burtons have been retired for about 15 years. Recently they’ve been forced to face difficult spending choices after seeing their nest egg whittled down by poor investment results over many years. For now, their overall spending budget is roughly $75,000 a year (not counting what they spend on taxes). While that above-average amount is far from hardship, it’s nonetheless disappointing compared to what they thought they could afford previously.

“They recognize they’re still very fortunate,” says Martin. “They’re quite happy they can find some balance, even though it’s not optimal, between feeling comfortable on their spending on themselves while helping their kids, church and community.”

Despite reduced means, they continue to put a high priority on spending both time and money for the benefit of their church, other charities, and their two children’s families, which includes three grandchildren. They now budget almost $12,000 for charities and gifts to family members.

“That’s something we like to do,” says Daryl. “We’ve heard stories of people with lots of money and they (leave it in their wills) to people they would like to give it to and that’s fine. But they never had the joy of seeing what it could do to the people they are giving it to while they were alive.”

While their restrictive budget is necessary for now, they hope to justify adding to it at some point. Years of disappointing investment results lead the Burtons to convert their portfolio into cash. When they subsequently enlisted Martin’s help with financial planning, she recommended conservative spending limits that reflected ultralow returns expected from a nest egg invested in that manner.

Their budget allocates nothing to travel and some other activities they enjoy (which they can’t do now anyway because of the pandemic and Deborah’s health issues). Meanwhile, they’ve started working with a new investment adviser recommended by Martin to create a balanced stock and fixed-income portfolio that should generate better returns over the long-term. As a result, they’re hoping to justify a bit more spending leeway when their budget is next updated, ideally around the end of the pandemic when more activities are possible.

In normal times, with the budget they enjoyed in the past, they liked to travel to visit friends and family in Europe and elsewhere in Canada, or travel with their children while picking up the costs. The Burtons both like to stay fit with walking or hiking and Daryl likes golf. They enjoy live theatre and taking grandkids to the Royal Ontario Museum and Ontario Science Centre. In pandemic times, they’ve kept in contact with their kids and grandkids by Zoom. “Because of my illness we weren’t able to do driveway visits” last summer and fall, says Deborah.

They spend a hefty $31,000 a year for rent and utilities on a 800-square-foot apartment in central Toronto. While they could find a cheaper place, they enjoy its comforts, and it’s close to their children, friends, and church. They consider it home and so would be reluctant to give it up.

The Fletchers

The Fletchers are a couple in their late 50s who provide a textbook example of how to build a sizable nest egg for retirement. They did so through frugal living, diligent saving and savvy do-it-yourself investing. They’ve achieved that mainly on one income, after Emma left her professional career early on to become a stay-at-home mom for their two kids. Warren earned a good professional salary, but was never a particularly high-income earner.

When Warren’s employer laid him off suddenly in March early in the COVID crisis, they were tempted but unsure about the prospect of retirement. They knew they had done a good job squirrelling away money, but they weren’t certain they were fully ready financially and psychologically to start drawing money out.

“I needed a financial coach to say ‘you’re going to be fine,’” says Warren, about enlisting Martin’s help. “You get to the point where you’re so used to being a bit of squirrel, it’s a bit of psychological hump that I’m still working on getting over,” he says. “When it comes time to tap into it, we don’t want to continue to be real frugal when we don’t have to be. I don’t want to be some stingy guy who becomes the richest guy in the graveyard.”

After mulling over their finances and plans, the Fletchers did decide to turn Warren’s job loss into permanent retirement. Martin says it helped that they had a good handle on spending. “Because they had a good sense of what they needed to spend versus wanted to spend they could shift gears quite quickly,” she says.

The Fletchers allocate about $60,000 a year to ongoing, routine spending, plus $10,000 to support their two university-age children at home (which will end in a few years when they graduate). That lets them allocate almost $20,000 in discretionary spending for post-pandemic travel, bringing their total budget (not counting what they pay for income taxes) to around $90,000 a year. (Their income-tax bill in this budget is unusually high, and should be far less in a typical year.)

They like to eat well and spend an above-average amount on groceries. They live in a modest 1,500-square foot three-bedroom house and drive two reliable vehicles, both at least 10 years old.

They love cooking, gardening, walking, and camping. They spend carefully but are willing to pay up for quality when it counts. For example: “Camping is a low-cost activity, but buy good camping gear so you can enjoy it,” says Warren.

Warren has plans for renovation projects around the house. Emma is researching how to make the most of post-pandemic travel abroad with experiences rich in food, drink, history, culture and adventure. They will also visit friends elsewhere in Canada. They like to spend time visiting and helping their parents.

“I’ve watched some people retire and not know what to do with themselves,” says Emma. “I don’t think that’s an issue with us.”