Mike Reilly, B. Sc.

Financial Security Advisor
Investment Representative
Freedom 55 Financial

Healthy, wealthy and balanced

Sports commentators covering the World Series often refer to baseball as “the national pastime”. Similar statements are made during broadcasts of the Stanley Cup playoffs in Canada. However, given the millions of dollars spent every year on gym memberships, dietary supplements, workout equipment and the dozens of glossy fitness magazines at the newsstand, I’d say the effort to get in shape is one of North America’s most popular past times.

The irony is that despite the money and time, obesity and health related illnesses continues to rise year after year. While some of the failure to achieve fitness objectives may result from people having unrealistic goals, the bulk of it comes from not having a structured approach combined with knowledge of a healthy lifestyle. Not surprisingly, people who work with a personal trainer are much more likely to stick with their plan, achieve their targets and (most importantly) continue living a new, healthy lifestyle for years to come.

Healthy Living Effort Allocation

Figure 1: Healthy Living Effort Allocation

A personal trainer will listen to your goals, provide an honest assessment of your current situation, and recommend a balanced, consistent method for achieving objectives. They will likely recommend you participate in a variety of activities, allocating a certain percentage of your efforts as the Figure 1 indicates:

  • 10 per cent to stretching and flexibility
  • 15 per cent to resistance training
  • 15 per cent to sports activities (tennis, hockey, skiing, soccer, basketball etc.)
  • 20 per cent to cardiovascular training
  • 40 per cent to a healthy eating plan

Depending on the individual, those percentages might move a point or two. Even successful commercial programs like P90X, Insanity and RushFit break down their training regimes in a similar fashion. Some activities, such as yoga, karate and the increasingly popular CrossFit include a combination of benefits.

In much the same respect, managing your personal financial security plan should consist of a balanced approach. In my practice I often meet people with a single focus; “I just want to pay off my debt,” or “I’m investing everything in mining stock,” are not uncommon statements when I ask someone their philosophy behind financial security planning. While such approaches are still better than ignoring money management entirely, a single-minded strategy is unlikely to achieve long-term financial independence.

Just like lifting weights without flexible muscles can increase the likelihood of strains and tears, focusing on only one or two areas of financial security planning can leave you vulnerable in to failure others. A client that is intent on putting everything towards debt repayment without building up some savings has no source of money other than credit if an emergency arises. Likewise, an investor without income replacement insurance who is only interested in gains in the marketplace must then cannibalize those investments if she becomes sick or injured and cannot work.

Financial Security Income Allocation

Figure 2: Financial Security Income Allocation

Like a personal trainer, a financial security advisor will listen to your goals, provide an honest assessment of your current situation and likely recommend a balanced approach to achieving your financial goals by allocating income in proportions similar to Figure 2:

  • 10 per cent to savings  
  • 10 per cent to insurance
  • 10 per cent to debt servicing
  • 30 per cent to taxes
  • 40 per cent to spending

Depending on where you are in life (first job, first house, first child or ready to retire), these percentages could move a few points in either direction, but the intent to not outweigh any one sector would still be a priority.

Similar to a fitness regime, portions of these allocations can be satisfied by single solutions. For example, there are insurance products that also include a savings component. Paying down a mortgage builds equity which increases your net worth, while saving to a registered retirement savings plan (RRSP) can help reduce the portion of taxes you pay.

Having a financial security advisor has been shown to bring greater financial success. A recent report found that Canadians aged 65 and over who have an advisor working for them have four times the investable assets of those who don’t. 1 In fact, I wouldn’t be surprised to learn that people who work with a personal trainer are also three to four times more likely to reach their fitness goals than someone who didn’t.

Your financial security advisor can help you create a financial security plan that meets your specific needs. By gaining a full understanding of your goals and identifying your risk tolerance, your financial security advisor can provide financial security advice and guidance to help you reach your goals.

1Source: The value of advice report (July 2010), The Investment Funds Institute of Canada, featuring results from Ipsos Reid’s 2009 Canadian financial monitor