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The credit for the idea behind today’s post goes to a great one from MindTools. Although MindTools limits the number of free articles, you can certainly read at least this one! I’ve chosen to narrow down onto the financial aspect for this post.
Last post was about big picture reflections looking at the past and at the future. Today, we will do a deep dive into specifics for the future! I’m going to outline a guided financial gratitude exercise to guide your next steps. I use my previous month’s spending to loosely guide my next month’s spending. Let’s look at our previous year’s money life to loosely guide our next year’s money life.
This exercise should take 15 minutes at minimum. Make yourself a favourite drink, grab your laptop/tablet and nestle down in your favourite corner! I tend to go for a mug of tea and “my end” of the couch, but a comfortable desk and desktop will work equally well.
Find Your Current Net Worth (Or Diagnose Your Financial Situation)
- Log into your bank account(s). Add up all the monies there.
- Log into your investment account(s). Add up all the monies there.
- Find the numbers for any debts, remaining financing payments (e.g. car, furniture) and subtract those numbers from the monies above. And if looking at this makes you cringe or it’s too much of a hassle to find the specific numbers, then don’t worry. Just make a note of the things where there is debt, even if you don’t know (or don’t want to know) the amounts.
Reflect on Your Numbers
What stands out to you? Was it hard to find all the numbers? Is tracking things moving forward a goal?
Do you have more money than you thought? Less than you thought?
How do you feel, looking at the debt(s)?
What are you grateful for, when thinking about your full financial picture now compared to a year ago? Five years ago? Ten years ago?
What would you like to change?
10-Year Goal Setting
Let’s go to page 2 of the PDF.
Zooming out to 10 years from now, how would you like your financial picture to look? Write down in words what this means. If you’re not sure about what to consider, here are some jump off points:
- Overall feeling you have about your finances
- E.g. I want to feel content and completely at peace with my finances
- FI/RE number
- Is there a specific number you want to reach? (If you’re wondering about numbers for FI/RE, check out this post).
- Housing
- E.g. renting in a great part of town, mortgage paid off, renters in the basement paying for mortgage
- Debt
- E.g. no consumer debt left, no student debt left
- Work-finance balance
- Children
- E.g. RESP has xyz amount to pay for post-secondary
- Retirement Home/Long Term Care
- E.g. how much buffer do I want to put in to safeguard for potentially increased health costs?
What would have to happen in 10 years for you to reach this financial picture? Let’s think about:
- Mindset about money
- Knowledge base about money (or financial literacy)
- Earning power
- Career advances
- Career changes
- Savings rate goal
- Housing and housing costs
- Groceries and restaurant costs
- Transportation costs
5-Year Goal Setting
Let’s zoom in a little bit.
What would the financial picture look like, 5 years from now, while you’re on trajectory to reaching your 10-year goal?
Again, is there a specific number you want to reach?
What would have to happen in 5 years for you to reach this financial picture?
1-Year Goal Setting
Let’s zoom in a little more.
What would the financial picture look like, one year from now at this time, while you’re on trajectory to reaching your 5-year goal?
Again, is there a specific number you want to reach?
What would have to have happened in the “past” year for you to reach this financial picture? How did these things happen?
1-Month Goal Setting
Let’s get super granular!
What would the financial picture look like in one month, while you’re on trajectory to reaching your 1-year goal?
Again, is there a specific number you want to reach?
What changes would have to happen in the next month for you to reach this financial picture?
Dr. FIREfly’s Guided Financial Gratitude Exercise
Here is my example, drawing on the Milestones of FI framework:
Net Worth
$ 52,304.20 (but this might look more sad after tax time, lol).
Financial Gratitude Reflections
It was pretty phenomenal to realize that my net worth started at just over $5,000 on January 1, 2019. I only started tracking my net worth longitudinally once I hit $0 (although this is a number that I would keep an eye on continuously as a paid down my debts). Without doing the tracking that I normally do, I would not have been able to glance back over the year and see the enormous changes made. Also maxed out the TFSA this year!
I am eyeing that provincial student loan with anticipation. It does not mathematically make sense to pay it down now due to the 0% interest, so I’ve stopped doing that, but the psychological itchiness is ever present. Will be excited to pay it down by the end of training!
I’m grateful to my past self for learning about some basics of personal finance, to my parents for instilling this dread of debt, and for the changes that have been made compared to a year ago. Thinking back to when I was a PGY1, it’s been an even more dramatic change.
As for looking ahead…
Financial Goals Map
Life Goals
- Milestone 9: reach Fat FI/RE number about 15 years from now (specifically, purely passive income of at least $50,000 per year singly or $100,000 per year jointly with Mr. Sparks).
Actions:
- Abundance mindset shift.
- Career anchored in pursuit of only what I deem valuable. I suspect that what I deem “valuable” will shift over time, but for now, broad categories include clinical work and advocacy work (and minimizing paperwork).
- Mortgage paid off as early as possible.
10 Year Goals
- Milestone 8: Classic FI/RE.
5 Year Goals
- Milestone 5: Half FI/RE, maybe? Definitely hope to have reached Milestone 4 in the next five years and have FU money of 2-3 years of annual expenses.
Actions:
- Started making staff physician income.
- Try to live like a PGY7 (not like a TV show doctor).
- Possibly learned about and started experimenting with using RRSPs to invest in real estate.
- Learn about RESPs…might be starting to contribute to one or more – this part is extremely un-plannable.
- Hopefully have bought a reasonable abode (not a McMansion) somewhere very close to work (ideally less than 25min walking distance).
1 Year Goals
- Be 6 months away from accruing enough money in the HISA to pay down my remaining student loans in one fell swoop by the end of training
Actions:
- Contribute to TFSA first
- When TFSA maxed out, direct savings toward HISA (and if there is extra, then toward RRSP)
- If I start contributing to RRSP while still in residency, I do not plan on claiming it for tax purposes (so that the money can grow tax-sheltered for longer, and I can still keep the RRSP claiming room for when I am a staff physician)
1 Month Goals
- Try to rapidly make up for paying for Royal College exam fee and very expensive review course. *sigh*
- Will likely need to dip into HISA in order to not carry a credit card balance on the exam fee (as I keep minimal money in chequing and savings account).
Actions:
- Maintain savings rate of >50% even with this super expensive exam payment
Repeat
If you found value from this exercise, dedicate a bit of time each month to repeat the one-month goal setting page (or however often seems reasonable to you).
This format is really useful if you want to reflect on other areas of life too! This can include:
- Relationships
- Career
- Learning
- Personal expression
- Mindset
- Physical
- Enjoyment
- Public Service
And there you have it! Looking forward to hearing about your reflections,
-Dr. FIREfly
This really is a great exercise Dr. Firefly. We have done this over the years and kept our scrap papers of our goals. Our “budgets” which are more big picture than day-to-day along with our networth etc are on an Excel file. After 10-15 years in, it is interesting to look back and see how we evolved over the years. Both personally and financially. Having the financial piece in order has really enabled us to shift our personal priorities. Apparently, early on I wanted a house large enough to have a mature live tree growing inside. Now, we could do that, but once a year around Christmas is plenty, thanks.
Thanks Loonie Doc! I look forward to following in your footsteps and looking back on these exercises in the coming years and hopefully also getting the financial piece in order.