When it comes to retirement planning, there is no escape from the message “SAVE, SAVE, SAVE and SAVE more!”

How much do you need to save for retirement?

The financial industry’s answer to “How much is enough?” is usually a number.  Input a bunch of numbers into a retirement plan or calculator and out spits a NUMBER – you need $2.8 million dollars to retire comfortably.  Whether the number is $2.8 million dollars, $262,983.12 or some other mathematical outcome, the result is often a number that we have difficulty understanding.  The number may not give us a magic solution.  Instead, it just creates more questions like how much income will that pay me?  When will the money run out?  How do I invest my money to get that amount when I retire?  And even is that really enough?

Retirement is not a number.

So how much do you need to save? The question might best be answered with a question “What do you need?”  Maybe to understand how much you need to save requires an understanding of what you spend first.

What you need for retirement is best determined by understanding your spending.  How could you figure out how much you need to save without knowing how much you are going to spend?  You need to have some idea of what retirement will look like and attach a price tag to that lifestyle.  What is your retirement price tag?  Too many people have no clue what they are spending and as a result, they use simple rules of thumbs for their spending assumptions.

Knowing what you spend today can give you a sense of how you will experience the transition to retirement.  Some people view retirement as the ‘dream’ of living a completely different life in retirement when for most people, retirement is actually an extension of the life they are already living.  Learning how you spend is an indispensible trick to help ease you smoothly to retirement.

In my book, 10 Things I Wish Someone Told Me About Retirement, my colleague Tricia French offers some quick tips to help you uncover your spending behavior today.

1. Watch Now – Track your expenses for 2 to 3 months and write everything down.  This can take a little time but more importantly, it takes honesty.  If you write it down, you will be more consciously aware.  You will see what you are spending as it happens.  This is a similar tactic with eating.  If you write down everything you eat with the caloric values attached to it, it makes you more aware and can help you to recognize good behaviors vs bad behaviors.
2. Look backwards – Another strategy is to gather two or three months of bank, credit card and line of credit statements. This takes only an evening – a little time investment yielding thorough results. Most financial institutions make it easy to access statements online. With the exception of cash withdrawals, you will have a precise itemized list of everything you have spent. Every debit or credit card expense is identified by what, where, when, and how much. Group your expenses by category and input them on your spending plan. Don’t forget bank service charges. The flaw of this method is the failure to track cash spending. Cash is easy to spend on the little things, like coffees and snacks, and you’ll likely have no receipt to show for it. Add up the cash withdrawals and categorize them as your “personal allowance”. Don’t be surprised if cash spending really adds up.
3. Practice your future – Can you afford your current lifestyle on your retirement income?  How would you know if you did not try?  Calculate the difference between your net working income and your anticipated net retirement income. As for the challenge… stockpile the difference between your pre- and post-retirement incomes in a separate account every month. If you need to dip into that stash, then you have more decisions ahead, and luckily time to do so. If you can consistently bank the difference, while maintaining your lifestyle, you can expect a stress-free transition to your retirement budget.

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Canadians love to travel and collect frequent flyer miles, and one of the most popular loyalty programs in Canada is Aeroplan.  In 2009, Aeroplan members redeemed their miles for over 1.5 million flight rewards.

Collecting and Redeeming Aeroplan Miles

I first began collecting Aeroplan miles back in 2007 when I started travelling more frequently on business.  They were easy to accumulate when I was flying across the country with Air Canada.  I also earned Aeroplan miles on occasion by filling up at Esso and shopping at Home Hardware.  I even thought enough of the Aeroplan loyalty program to purchase shares in Groupe Aeroplan (AER).

Redeeming your Aeroplan Miles for flights is fairly straightforward.  Redemption for short haul flights in Canada and the U.S. starts at 15,000 miles, and long haul flights starts at 25,000 miles.  I’ve redeemed Aeroplan miles for a free short haul flight from Lethbridge to Edmonton with no hassle, other than the extra fees and taxes.  I also like to redeem my points for products, and I have redeemed my Aeroplan miles for gift cards at Toys R Us, HBC and Home Hardware.

Upcoming Changes to the Program

Many Canadians have heard about recent changes to the Aeroplan program that comes into effect July 15^th, 2011.  These changes will increase the number of miles required to redeem for certain long haul flights.  According to Aeroplan, these changes represent an average increase of less than 5% in the number of miles per flight rewards.

There has also been an outcry from members over the apparent expiration of Aeroplan miles over time.  The Aeroplan website claims that when you stay active in the program, you make sure that your Aeroplan Miles don’t expire.  All it takes is one transaction every 12 months to keep your account active, and you have a full 7 years from the time you accumulate the miles to redeem them for a reward.

For the record, my last transaction was in March 2011 and there is a note on my account stating that my Aeroplan miles will expire in March 2012 unless I redeem my points or add to them with another transaction.

Best Loyalty Program or Waste of Time?

After I changed careers and stopped travelling frequently I found it difficult to collect Aeroplan Miles.  They don’t have a long list of sponsors like the Air Miles rewards program does, especially here in Alberta.  My transaction activity last year consisted of two flights, three visits to Esso and one trip to Home Hardware.  I even sold my Groupe Aeroplan shares last year.

For frequent Canadian travellers, the Aeroplan card should be in your wallet just for the simple fact of having Air Canada and the Star Alliance partnership.  But with the recent changes to their rewards program, constant booking issues and customer service complaints, lack of other retail sponsors and the possibility of your rewards expiring due to inactivity, it seems that collecting Aeroplan miles is more of a hassle than it’s worth.

Do you collect Aeroplan miles?  What are your thoughts on their program?

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Do not have too many credit cards. Possess many credit cards would cost you to pay annual dues and make you tempted to spend more. A maximum of 2 credit cards only if you want to have. If you have more than that, you should immediately close the other credit card. Considerations in choosing a credit card which will be maintained, among others, interest rate credit card, credit card limits and benefits offered.

Budget funds for credit cards. In preparing the budget, enter maksimalyang funds may be used by credit card.

Recording purchases using credit cards. With a record will help you determine how much you should pay so that will help limit the amount of purchase. This entry can be matched with invoices to ensure whether the right to purchase it.

Try to always pay the full bill. This is useful so that you are not burdened by a large flower. Do not be tempted to pay a minimum bill. If you already have a mortgage or credit card debt, prioritize earnestly to immediately pay off the debt by being more frugal.

Avoid using credit cards to withdraw cash. Credit cards can indeed be used to withdraw cash at an ATM, but this is not free. You must pay interest on the cash withdrawal value may be higher than the rate for spending.

Beware of credit card fraud. Mode of credit card fraud increasingly diverse either by phone or internet. So keep careful not notify the credit card number, expiration date, or other information to strangers. Nor should lend credit card to another person.

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Make a budget and get out of debt you need to do it seriously. Once you are free from credit card debt and other short-term debt investments which are neither, then you can start trying some of the following practical steps:

• Reserve Money. Always provide financial reserves at least as much as six months of income. This reserve can be a savings or other investments easily cashed if needed immediately. When changes in circumstances, for example, you get fired, then you will have sufficient financial for at least six months while you apply for a new job. Conversely, if you get a raise, tabunglah half of these salary increases.
• Debt. If you want to owe for investment, then try to carefully calculate the amount of mortgage. Installment debt should not exceed 30 percent of husband’s salary. If you are a spouse who works full, simply calculate the mortgage debt of the husband’s income alone. Then enter into the budget that you have created to be evaluated if it still makes sense to get into debt or credit. You can significantly reduce borrowing costs by paying a higher down payment. But you should be saving for that far in advance by incorporating them into your family budget. Low initial cost can be meaningful burden lower credit costs.
• Family communication. Another success factor in conducting financial planning is good communication between family members.

Prepare budgets and implement it probably only means that can help you to overcome financial problems. Avoid debt, and if you already have your credit card debt, paying off immediately. Always put your funds to be saved and invested. Thus, you can successfully overcome your financial problems.

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