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Problem-Solving: Your Path to Financial Success

Problem-Solving: Your Path to Financial Success

December 11, 2020

Using simple arithmetic can help us manage our personal finances, writes Peter Watson.

Life is all about problem solving.

This way of thinking can easily be applied towards organizing your personal finances in a manner that serves your financial objectives. Do things financially that allow you the option of living the life you want.

For example, assume you have two young children. Both parents hope someday the children will have the benefit of a strong post-secondary education.

Okay, let’s problem solve. How is this going to happen?

University is more expensive than college, so we will use that as our example. The cost per year, plus or minus, can be $25,000. A four-year degree would cost $100,000.

Your family problem-solving exercise is built around simple arithmetic. Do this on your own or work with a financial planner. Again, it’s simple arithmetic.

A degree costing $100,000 now will most likely cost more by the time your children leave high school, so accounting for inflation, what is the amount of money you need to accumulate?

Visualize your life many years down the road. What will your income be? What are your normal living costs? Will you likely be able to write a cheque for some or all of the cost of university?

Please do not be discouraged. The figure will seem high.

The idea of writing cheques for many tens of thousands of dollars during the anticipated university years of your children can be overwhelming.

Determine how much money you could put aside now on a monthly basis. What is your expected rate of return? Suddenly saving a reasonable amount monthly and investing wisely for many years is far from overwhelming.

The same logic can be applied to other life goals. This includes buying a second property and preparing for retirement.

Using your problem-solving ability can help make your life goals more attainable.

 Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com