Financial goal setting

The Advocate, Wednesday August 10, 1994

Do you set goals? Have you a firmly planted idea of what you want out of life?

If you are like most Canadians, you haven't set goals, you haven't written them down, and you do only what you have to each day, as your "chore" and contribution to life.

That's why only two of out of every 100 Canadians ends up wealthy, and only 10 out of 100 can retire and maintain their lifestyle and assets until death.

I was asked by our minister to speak to the teenagers in our church on Financial Planning. When I started I asked them a simple question. When investing your money, what is the most important in the formula for financial success: TIME + MONEY x RATE OF RETURN?

It really made me think. Most said rate of return. Some said the amount of money invested. Only a few seemed to understand the right answer, TIME. I then went on to show them how valuable it really was. I told them the story of two 19 year old girls, Karen Fisher and her friend Cheryl Gordon.

Karen was a bit of a dreamer and wanted to be a millionaire. Cheryl was a bit more practical and enjoyed living for today. By chance, Karen overheard her father's financial planner say, "If someone started young enough, it was very possible to have a million dollars by the time they retire." Karen asked asked him to show her how it was possible.

When she saw the figures for herself, she saw her dream coming true. She started to put $2,000 a year into an RRSP.

She told Cheryl, but Cheryl had her own plans to buy clothes and she wouldn't miss that trip to the beach she went to every year. Besides, she had lots of time to think about investing later.

After 8 years she saw the wisdom of what Karen was doing and also started to put $2,000 a year into an RRSP. After all, she was 26 and had a good job.

Karen did something interesting at that time. When Cheryl started to invest, Karen stopped. She remembered that the Financial planner said, "Give half as much for twice as long." She had sacrificed a little earlier, but she knew she had her plan in place. Cheryl invested $2,000 a year in the same place as Karen until she was 65 for a total of $78,000.

Their investment did very well and earned an average of 10% compound rate of return, increasing her investment ten-fold to $805,185. Karen had only invested $16,000. She managed to increase her investment 65-fold to $1,019,161.

When she began investing she knew she would only have to invest for 8 years to get her million dollars.

Seeing clearly, the magic of compounding, convinced her a little sacrifice wasn't that bad. She had a definite goal and a clear vision of the real possibility of being a millionaire. Her dream came true.

This is one of the best examples I know of that clearly illustrates the value of time. Everyone needs a financial plan to take advantage of this non-renewable resource - "TIME."

I have an excellent article, "Retiring to Easy Street is No Easy Task." It clearly shows the need to start early. Please call me if you want a copy. Remember, doing it now is never early enough.

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