A 34-year-old client recently said that she was going to sell her home because she was tired of being house-poor. I told her that I thought getting rid of it was foolhardy – the mortgage was a forced way of saving, as well as a retirement nest egg. Her response surprised me. This otherwise savvy middle manager said she didn't need to worry about retirement because she would receive a good pension when she was older. Indeed, she said she could leave her job now, never work again and would still receive the same tidy sum She also believes that if she wants something, she should just be able to buy it. She feels deprived if she can't afford it.
As a result, she has maxed out her line of credit and lives from paycheque to paycheque. She spends a lot of time fretting about money.
Like many people, she has an unhealthy and unrealistic attitude about money.
Not being smart about money – how you think about, manage and spend it – has serious and lasting repercussions on how you experience your current life and for longer-term work and personal choices.
Quite simply, you have no wiggle room to deal with life's vagaries, whether a job loss, disability, the loss of a second household contributor's income or a child requiring expensive private schooling.
You also compromise personal aspirations.
Without a financial cushion or with an overly expensive lifestyle, you don't have the latitude to be able to make decisions such as whether you could return to school or take a dream, but lower-paying, job.
While 90 per cent of Canadians feel they'll have enough money to cover life's necessities in retirement, just 25 per cent believe they'll have sufficient funds to fulfill their retirement dreams, a recent Royal Bank of Canada poll found.
