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Kim’s 10 Year Financial Plan

23 February 2010 No Comment

Today, I present an entry in the Financial Plan Writing Contest. Just a reminder that you can win $250 by participating.  Here are the brief guidelines, to read the full description of the contest, click the link above.

  • Answer the question: What is your financial plan for the next 10 years?
  • Be sure to to hit on things such as income, job security, budgeting, expense management, real estate, investing, retirement planning, etc. – the more detailed within specific areas the better!
  • Be sure to discuss how the economy might affect your plan – what if we fall into a double dip recession?  Or worse, a depression?  Or inflation?  What if you lose your job? What are you doing to prepare for any economic scenario?
  • Be specific about certain financial goals you might have
  • Include your age and your age-specific concerns & goals
  • A minimum of 500 words is required – again, more detail improves your chances of winning the contest!
  • Send your contest submission to kevin (at) 20smoney (dot) com with “Writing Contest” in the subject line

You still have time to submit your entry to the contest!  Be sure to enter soon!

First off – my bio – I’m a 26 year old Canadian. I’ve been married for almost 2 years, and we are expecting our first child in the middle of March. We currently have no debt other than our mortgage (we both worked multiple jobs to eliminate the small amount of student debt my husband had, and establish a down payment for our house).

I want to establish a small side income. My husband and I both work for the same company – a government funded non-profit. It’s a great place to work, however, our situation has some draw backs. First, it is a unionized environment, and my husband is a part of the union (I’m a non-unionized management employee). Don’t get me wrong about unions – they serve their purpose and can contribute effectively to the organization as a whole, however, if there is a strike, we lose one income during the duration, and strike pay is hardly anything; we have a contract renewal in 2011, so there is a possibility that a decrease in come could be coming for a little while (last time, negotiations were close – the contract was accepted by 1 vote.. and with the current economy and budget cut backs the company has had to make, not meeting the financial demands of the union is a possibility). Second, there is the possibility of a merger with similar corporations, which would most likely result in my job being lost, and possibly my husband’s as well, as he has the lowest seniority in his department. A side income with some consistent pay would help to buffer us financial against the negative situations that could happen, and if nothing bad happens, then it would provide us with move money to reach out financial goals sooner.

Finish my degree/get a promotion – with the succession planning that was done, I’m currently in line for a promotion in about 5 year, which would basically double my current salary. There is currently no where for my husband to move up within the company, our salaries are standard based on job classifications & experience (therefore, no getting a raise by asking or through performance), so any major pay increase is coming through me. My current degree is in a field not related to my current work, so I’m working on a second degree in the field I work. The promotion is dependent on me getting this degree (among other things).

Plan better for my next maternity leave. When I take my year off for maternity leave, my pay will be cut in about 1/2 (I get 50 weeks of maternity benefits through the government Employment Insurance). When we started trying for a baby (right after our wedding in 2008), I was told I should be able to get pregnant very fast… and I didn’t. They said that if it took more than a year, I need to come in for testing because something was most likely wrong. I had been very good, putting away money for buffer myself against the loss of income that comes with maternity leave, but after 11 months of trying, I figured something was wrong, and I spent it the money I had been saving (and by spent – I mean I used it as a prepayment for our mortgage, and spent a bit on our honeymoon, which we took around our 1 year anniversary). While on our honeymoon, I found out I was pregnant.. and my savings were gone. We plan on having a second child within about 2 years, and I’m going to start planning for it now, that way I have time to save the money (and I won’t be tempted to spend it this time since I know what can happen!)

Get my savings organized and automated. Currently, I’m not the saver I want to be. I save as much as I can that’s left over after the bills are paid – it’s a bad way to too things. I want to have my RRSP fully funded every year, as well as my TFSA, – same goes for my husband. Also, we want to get up educational savings for our children. My parents fully funded 4 years of post-secondary education, as my father really wanted to go to school, but couldn’t because of financial reasons, and didn’t want us to suffer the same way he did, or start our adult life out with piles of debt. My husband has to fully fund his education, and he sees the benefits of not having the debt load, and being able to give your child a helping hand to start. I want to increase the size of my emergency fund to $15000 (we live in a small town, so cost of living is pretty low). We need will need to get a second vehicle (one with 4×4 for the winters, as well as to provide room to our expanding family), and our currently vehicle will most likely need replacement, or have to have major repairs on a more regular basis (it’s a 2001, and the rough roads and winters can do a number on it). I want to have about 1/2 of the money ready for the purchase of a second vehicle. I want to set up a schedule and have a certain amount set aside from each pay for my various savings goals, so that it’s steady and predictable. I want to be able to think less about my finances..

Get rid of our mortgage. Currently, with our increased rate of payment, we have less than 6 years left on the mortgage.. I’m hoping to have it gone by the time I turn 30 (I hate it, and I want it gone). I haven’t actually allowed myself to keep any raise I have received in since I finished school in 2006. I have either increase my retirement plan contributions, or increased the amount I pay on the mortgage, and I do this right after my first increased pay check. That way, I never get “lifestyle inflation” because my automatic bills increase to leave me with the exact same amount of spending money that I had before. No mortgage will make the $15000 emergency fund very substantial for our household, as well as allow us to contribute more to reach our savings goals faster.

To summarize – my 10 year financial plan is to eliminate the mortgage, finish my degree, get a promotion to increase my income, set up various savings goals and automate my savings plan, as well as establish a back up income in case my husband or I (or both) lose our jobs.

Submitted by Kim

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