How to Save a Million Dollars

“An insightful & enlightening guide that will take your financial plan to the next level.”

Robert Smith, Retired Warehouse Manager

How to

RRSP VERSIO N

SAVE A MILLION dollars

Advice on RRSP’s, planning and more!

Author of the bestseller HOW TO GET RICH USING OTHER PEOPLE’S MONEY

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C O N T E N T S

Introduction

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1. Start early and channel Albert Einstein.

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2. Create a Financial Plan.

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3. Spend less than you earn.

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4. Make saving fixed and unavoidable.

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5. Reduce your taxes.

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6. Use money to make money.

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7. How to catch up when life gets in the way.

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In Closing

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“Is it possible to save a million dollars?

With patience, discipline, and a bit of luck, I would say ‘yes’.”

JAN ARDEN Coastal Community CFP, MBA

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I N T R O D U C T I O N Everyone has an answer to the question, “What would you do with a million dollars?” But what’s less known is what a million dollars actually looks like. Assuming you had 10,000 $100 bills, they would stack about a metre high, weigh as much as two bowling balls and you would probably be able to stuff all the bills into a fabric grocery bag.

Now, if you think you’ll never be able to stuff a fabric grocery bag full of $100 bills, think again. It can be done and we’re going to show you how.

Before you go hunting for a fabric grocery bag, we encourage you to read the following seven strategies. We assure you they are not boring and even if you have no intention of saving a million dollars, you will take away something useful. Hey, maybe you’ll end up saving $873,456—and that’s still pretty awesome.

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Start early and channel Albert Einstein.

Q: Who said: “The most powerful force in the universe is compound interest?"

A: Albert Einstein. We’re serious. There is a formula for compound interest (we won’t bore you), but basically it lets your money increase exponentially over time. The sooner you start saving, the better.

Consider, in Figure 1 (page 6) how quickly $1,000 grows to almost $2,000 thanks to compounding.

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Create a Financial Plan.

A financial plan is simply a map. You’re at point “A” and you want to get to point “B.” A financial plan will point you in the direction of point “B,” tell you how much it’ll require in savings, how much time it’ll take and what pitfalls to avoid along the way.

How much should you save? Well, a general rule of thumb is 10 to 15% of your income, but it could be less or more depending on your situation. What do you invest in? We could elaborate on the intricacies of of bonds, GICs, mutual funds and stocks, but we said this wouldn’t be boring—so come and talk to us, and let our experts help you make sense of what’s right for you.

Finally, you need to review your plan annually. The only constant in investing is change and the “map” that you create will need to be reoriented periodically as your situation and the market changes.

Trust us, this is a habit you won’t regret!

Figure 1

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Spend less than you earn.

It sounds simple, but in order to reach that one million dollar mark, it has to be part of your financial plan. How do you do this?

First and foremost, establish a budget and stick to it. Figure out all your must-have expenses, like rent, groceries, vehicle, entertainment and so on, and if they’re more than what you make, you have to consider some serious austerity measures. In other words, cut out crap that you don’t need.

For example, how much is your daily latte? (enough said). If you have the luxury of making a little more money than your expenses consume—terrific, save most of it, splurge a little, and always make your total cash outflow less than your inflow. Simple (yet hard) and so worth it.

Latte: Yes Maybe Ah, no

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Make saving fixed and automatic.

Make savings a fixed expense—similar to a mortgage or utility bill.

Set up regular automatic deductions from your chequing account to a dedicated account, such as a GIC (Guaranteed Investment Certificate), RRSP (Registered Retirement Savings Plan) or TFSA (Tax-Free Savings Account).

Don’t worry, our experts can guide you through this maze. How much and how often you contribute is up to you. Out of sight, out of mind: you’ll be amazed at how little you miss the money—and how quickly regular contributions, even small ones, add up.

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5

Reduce your taxes.

There are two certain things in life and let’s just say one of them is taxes. No, you can’t avoid taxes, but yes, you can reduce them.

Obviously, the less tax you pay, the closer you’ll be to filling that fabric grocery bag full of one million dollars.

RRSPs are great for this. Contributions are tax-deductible (reducing your taxable income), and reduce the amount of tax you pay. Yeah!

When you contribute to your RRSP, there’s a good chance you will receive a tax refund. Savvy savers use this refund to jump-start their savings for the coming year. Just talk to our experts about what an RRSP can do for you.

TAXES

MIN

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MAX

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Use money to make money.

Oh, you don’t have $5,000 kicking around to transfer into an RRSP? (who does?). Rather than skip a year’s RRSP contribution, you may want to consider taking out an RRSP loan. RRSP loans have low rates, easy terms and we’ll even let you defer your first loan payment for 90 days! You can use your tax refund to pay off or significantly reduce your RRSP loan. Leery of debt?

Don’t be. An RRSP is good debt if you use the money to aid retirement planning, lower your taxable income and encourage tax-deferred growth.

Again, our experts can help you decide if this is the right route for you.

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How to catch up when life gets in the way.

In a perfect world, all of this may seem easy. But in reality, let’s just say, “things” happen. Life gets in the way and you may fall behind. If you do, don’t despair, there are ways to catch up.

For starters, meet with one of our experts to review where you’re at and how much you need to make up. Dollars to donuts, you will find ways to curb spending to help accelerate savings. And if that’s not enough, especially as you move into your late 40s and 50s, you may want to consider downsizing and investing some of the equity from the sale of your home. Chances are you’ll end up paying less for utilities, property taxes, home repairs and other expenses. You might also consider postponing retirement by a few years and/or working part-time when you retire to supplement your income.

Sound complicated? Talk to our experts. They’ll run different scenarios and help you find the best way forward.

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I N

C L O S I N G

Why is it that so-called “financial gurus” market their investment programs on late-night TV? After all, if they’re “financial gurus,” why are they resorting to marketing at 2:00am instead of enjoying the fruits of their wisdom?

The answer is that there are no quick solutions to becoming financially secure for retirement.

The real world can be complicated. No one can predict how our lives will unfold, let alone the market, taxes, inflation and other variables.

These seven strategies may not enable you to stuff a million dollars into a fabric grocery bag right away, but they just might in the years ahead if you’re disciplined and patient.

To learn more about how the experts at Coastal Community can help you, give us a call today at 1.888.744.1010, or visit the branch nearest you. Together, let’s figure out how we can help you save a million dollars!

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