Aldershot Financial Group of ACPI guides families through decisions that affect their financial well being and investments. We are the "go to" people in Aldershot when a life event requires sound
financial advice. We care. We simplify. We've been through this before.
April 2020
  • Feeling Stressed? Get a Budget!
  • Model Portfolio
  • Final Thoughts
Feeling Stressed! Get a Budget!
We just celebrated Daniel’s 21st Birthday. We had to make do with a homemade cake, basic gifts (ordered on-line) and recycled candles. Dan’s a little bummed about how his painting business is (not) shaping up for the summer. Enter the Canada Emergency Response Benefit (CERB). $2,000/m is less than he would hope to make painting but his overheads are mine low and he has done a remarkable job saving during these last two years of full-time work.
   
Those of us paying for mortgages, cars and groceries would have a tougher time stretching the $2,000/m.  Let’s face it, our economy could be partially locked down for some time. In the meantime, businesses, like restaurants, barbers and the travel industry are teetering on the brink of collapse.  Those of us lucky enough to be busy working, still find ourselves with more time and less spending.

What better time to implement a budgeting system? All that money not spent on travel, entertainment and just about everything else that can’t be bought on Amazon can be harnessed to weather this storm. Here’s how: Pay expenses using one of four bank accounts (that you can easily monitor on your smartphone – best to have them all at one financial institution). These accounts help you take control of your spending without turning you into a bookkeeper.

1. Basic Cash Flow
These expenses often make up the bulk of your spending and are somewhat inflexible. Expenses, like your mortgage payment, utility bills, car expenses and the like. These expenses are typically not emotional (except when you first acquire them). We encourage automating these payments.  All income should be deposited into a bank account for this purpose.

2. Variable Cash Flow
These expenses are more emotional in nature and typically variable. You can control them to some degree and they can quickly eat up spare cash flow if automated.  We often encourage managing this cash flow on a weekly basis, avoid use of credit cards and spend cash, where possible. These expenses include groceries, eating out, entertainment and hobbies.  You can set up an automated weekly transfer from your Basic Cash Flow account to this separate bank account.

3. Lumpy Cash Flow
This rather non-technical name refers to expenses that may be basic or variable but they aren’t spread evenly over the month or even the year, expenses like car maintenance, gifts and travel.  Total annual amounts can be reasonably estimated and converted to a monthly amount. This spending isn’t typically automated but doesn’t need as much management as variable spending. This bank account can be funded with an automatic transfer each month from your Basic Cash Flow account.

4. Specific
This final cash flow account is the payoff for managing the other three. Money that may have disappeared before can be reliably captured here – short term goals like that dream vacation, the kitchen renovation or RV purchase are all possible without wondering if you can afford it or ever pay it off! This account allows you to consciously trade off today’s Wants for tomorrow’s Dreams.  After all, if it’s financial peace you’re after, why let today’s spending get in your way?

Wondering how credit cards fit in? Contact me. I’ll explain. Oh, and stay sane healthy.
Mark Orr

This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact the appropriate professional. Aldershot Financial Group is a trade name of Aligned Capital Partners Inc. (ACPI). ACPI is a Member of the Canadian Investor Protection Fund ( www.CIPF.ca ) and the Investment Industry Regulatory Organization of Canada ( www.IIROC.ca ). Mark Orr is registered to provide investment advice and transact in securities/mutual funds in the provinces of Ontario, Manitoba, and B.C. The opinions expressed are those of the author and not necessarily those of Aligned Capital Partners Inc. Investment products are provided by Aligned Capital Partners Inc. (“ACPI”). Any advice which may be given in respect of non-securities services (including insurance) is given by your advisor solely, and no such advice is given in their capacity as an agent of ACPI. Accordingly, ACPI is not liable and/or responsible for any non-investment related business conducted by Mark Orr. The Canadian Investor Protection Fund (CIPF) does not cover any non-securities related business conducted by Mark Orr.
Let's Help Each Other

Here are some ways to help those hit particularly hard during this Covid-19 crisis:
 
  1. Order take-out from your local restaurant (and leave an outsized tip)
  2. Send a note to your hairdresser, thanking them for their service and enclosing a cheque to help “tide things over”
  3. Go grocery shopping for your neighbour
  4. Sew some home-made masks for those who need them (way to go, Char)
This graph represents a hypothetical portfolio allocated to 45% DFA Five-Year Global Fixed Income Fund Class A, 15% DFA Canadian Core Equity Fund Class A, 15% DFA US Core Equity Fund Class A (from January 31, 2008 to January 31, 2009) / DFA US Core Equity Fund Class A (H) (from January 31, 2009 to March 31, 2020), 15% DFA International Core Equity Fund Class A and 10% DFA Global Real Estate Securities Fund Class A, initially invested on January 31, 2008 with pricing up to March 31, 2020 using monthly data and rebalanced on a month-end basis. The data series has been smoothed. This information is for informational purposes and not meant to be construed as investment advice. Actual client portfolio allocations and returns will vary depending on the client’s investment profile. 

Commissions, trailing commissions, management fees, and expenses may all be associated with mutual fund investments. The indicated rates of return are the historical annual compounded total returns including changes in unit/share value and reinvestment of all distributions/dividends. They do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the fund facts and consult your Advisor before investing.
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John Booth, Senior Financial Advisor, CPA, CA, CFDS, CFP
Mark Orr, Senior Financial Advisor, CPA, CA, CFP, CIM
Nicholas Cup, Associate Financial Advisor, CFP, CIM