Weekend Reading: Funding A Good Life Edition

Over the holidays I made a spending and savings plan for the new year. I reviewed our previous year’s finances and incorporated our new financial goals for the year. My wife and I discussed our “rich life” vision – what we want to do more of, what we what to do less of, what new things we want to try – all in an effort to ensure we continue funding a good life for our family.

As business owners, we start by estimating our expected revenue and expenses for the year. Next, we look at our personal spending and saving needs (I use this annual budget spreadsheet).

For instance, we want to catch up on one year of RESP contributions for our oldest daughter. We have big travel plans for which we need to appropriately budget. We also started using Fresh Prep and getting two meal kits delivered every week to save time.

That gives us a good sense of how much to pay ourselves for the year to make all of that work. Having everything planned out in advance is helpful for business owners, who too often dip into the piggy bank known as their corporate chequing account throughout the year without much thought to tax consequences.

We know exactly how much we’ll pay ourselves, which means we can properly estimate our personal taxes and pay the appropriate quarterly instalments to match.

We’ve always spent below our means, but now that our “means” have increased we want to make sure we’re maximizing our life enjoyment. That requires a delicate balance of spending and saving.

I’ve learned a lot working with hundreds of retirees over the years. Many have over-saved throughout their careers and can’t bring themselves to spend more in retirement. I don’t want to go through life spending a certain amount, only to discover I can safely spend double that amount in retirement. I’m looking for more of a balance.

I’ve also been influenced by Ramit Sethi’s rich life mantra, and more recently the Money Scope podcast’s early episodes on planning and living a good life.

It sparked our decision to move into a new home, custom built in the exact location we wanted to live. We wanted a dedicated home office and gym for our new work-from-home life.

It’s also the reason behind giving ourselves a raise both last year and this year. Business owners have a tendency to keep their compensation level from year-to-year. But we can’t pretend inflation and lifestyle creep don’t exist. We have to be honest with ourselves.

Funding a good life also includes a healthy budget for annual travel. We talk about the places we want to go, both new trips and return visits. Since we know that we’ll travel extensively every year, there’s less pressure to see it all in one trip. Slow travel is more our style, anyway.

As a former cheapskate frugal person I’ve had to give myself permission to spend more without the guilt and anxiety. I know that if I don’t start exercising my spending muscles now, it will be even more difficult to do so in retirement.

That’s where the spending and savings plan comes into play. I’m a planner, and always will be. By mapping out our expected income, expenses, and savings contributions I have a clear view of our finances for the year.

I know that we can meet our personal spending goals to fund a good life while still achieving our savings goals for the year. We’re not going to trip and fall into bankruptcy because we took an extra vacation or paid for one of the kids to get braces.

This Week’s Recap:

I updated our net worth for the end of 2023.

I also posted our investment returns for 2023.

Zoo(m) calls pic.twitter.com/gREdTr3uiN

— Boomer and Echo (@BoomerandEcho) January 12, 2024

Promo of the Week:

The past year or so has been tough sledding for credit card churners looking for attractive new sign-up offers and welcome bonuses. Many lucrative credit card deals dried up last year, with credit card issuers increasing minimum spend requirements and also the length of time it takes to reach those minimums.

The best offer I’ve seen is for small business owners and it’s the American Express Business Gold Rewards Card (<–scroll to the bottom and click “explore other cards”).

Earn a whopping 75,000 Membership Rewards points when you spend $5,000 within the first three months.

Transfer those points to Aeroplan where you can typically redeem them at 2 cents per mile. That’s $1,500 in value ($1,301 when you subtract the $199 annual fee). Not a bad return on $5,000 spending.

Do you need to have an incorporated business to qualify? No! Sole proprietors and side hustlers are welcome.

Sign-up for the American Express Business Gold Rewards Card here.

Weekend Reading:

A good one to start the year from Dr. Preet Banerjee. Want a financially healthy 2024? Add these six items to your to-do list.

A Wealth of Common Sense blogger Ben Carlson updates his favourite performance chart for 2023. I always love to see the asset class quilt of returns.

Emily Stewart at Vox says our expectations around money are all out of whack – why you don’t need everything you want.

Visual Capitalist charts the top 10 retirement planning mistakes. Number one – underestimating the impact of inflation, followed closely by underestimating how long you will live.

Paul Samuelson on the 4% rule – neat, plausible, and wrong:

“I can think of one case that supports a “withdrawal rule.” It is a single retired person with safe investments and consistent Social Security, pension and/or annuity payments.”

Speaking of flawed rules, here’s Ben Carlson’s take on Coast Fire – the strategy of front loading your retirement contributions early and then “coast” to retirement.

PWL Capital’s Ben Felix helps investors decide how to invest a lump sum of money:

Rob Carrick says people keep making this costly TFSA mistake – and paying penalties averaging almost $1,500.

Millionaire Teacher Andrew Hallam shares a retirement haven for the rich and the budget conscious.

Finally, Aaron Hector shares these tax planning quick facts and common strategies for the upcoming 2023 tax season.

Have a great weekend, everyone!