Well, it seemed 2020 had barely rolled out of bed when the Duke & Duchess of Sussex pulled a fast one on the Queen of England and shocked the world with an Instagram reveal of their plan to “work to become financially independent.”
For most of us peasants, financial independence usually means our parents are no longer supporting us. For Harry and Meghan, financial independence is a bit like one of us regular Canadians giving up our child benefit payments while continuing to let our parents pay for 95 percent of our bills. As they say, your mileage may vary.
However, just because your parents are not footing the lifestyle to which you have become accustomed, does not mean you are truly financially independent. Let’s look at some areas where people give up their freedom to thrive, as the Duchess herself might say.
- Are you dependent on credit? The BDO Canada Affordability Index revealed that one in four Canadians say that their debt load is overwhelming. If your monthly expenses are largely bankrolled by Visa or Mastercard, you might want to put a freeze on your spending for a few months.Megxit plan: Get debt down—zero is a good place—where your income can cover new expenses, rather than continuously be paying debt servicing costs on past purchases.
- Are you financially dependent on your job? The BDO report also found that 53 per cent of Canadians are living paycheque to paycheque. This can create pressure to stay in a job that is no longer good for you, simply because you’re afraid to lose the income.Megxit plan: Build a savings stash of at least 3-6 months’ worth of living expenses to protect you in case of the sudden loss of your job, a key client, or a sudden outburst of ‘take this job and shove it.’
- Are you financially dependent on your partner? Marriage brings a mash-up of money, incomes and expenses. According to Statistics Canada, 68 per cent of seniors living alone are women. The fastest growing age group for living alone is middle adulthood, ages 35-64. Death or divorce can create a financial avalanche— along with the emotional one.Megxit plan: Knowing where the investment accounts are and maintaining an awareness of the family finances is the responsibility of both partners. Life insurance on both partners can help offset extra childcare or costs that a spouse would have previously covered.
- Are you secretly still dependent on your parents? You pick up the tab for lunch with your mom and you both feel proud. Yet if your long-term financial plan is heavily contingent on collecting a significant inheritance one day – in a way, you are still depending on your parents to financially rescue you. A survey by Oaken Financial found that 23 per cent of Canadians say inheritance is part of their long-term financial planning – including 24 per cent of Gen X and 30 per cent of millennials. Unfortunately, over half of those surveyed say they plan to use that money during their own retirement and nearly half have no plans to leave an inheritance whatsoever.Megxit plan: Might be a good discussion to have during your next lunch with Mom —before you reach for the bill.
