Case Study:
Enjoy life today and save for tomorrow

Sammy and Martha are not alone in wanting to enjoy their lives to the fullest. Sammy works long hours as a lawyer, and Martha's fitness consulting business is booming. For them, leisure and recreation are rewards for working hard, and as their incomes have steadily risen, they've had no problem funding their lifestyle.

But the recent slowdown in the economy has caused them to rethink some of their spending habits and devote more time to preparing for the future.

Although they believe it's important to balance present desires with future realities, they are unsure what it will take to do this on a day-to-day basis. Click through the links below to find out their best route.

What they're doing right

Though Sammy and Martha are living their lives as they see fit, they have not been doing so on borrowed money. Other than their mortgage, they don't have a lot of debt, which is a definite advantage.

And although they haven't been investing large amounts in their registered Retirement Savings Plans (RSPs), they have a realistic understanding of how time and compounding interest can work to their advantage.

As a result, most of their RSP investments are in equities. Their reasoning is that they won't need the money for about 20 years; therefore, they are willing to accept some volatility in exchange for greater growth potential.

What they need to do now

Sammy and Martha have indicated that, if at all possible, they want a convenient solution. In other words, they want to start putting some money away, but don't want to spend a lot of time thinking about it.

Good habits are hard to break

With this in mind, we think the first thing they should do is set up a regular RSP contribution plan. This way, the money can be taken directly out of their bank accounts every month and directed to an investment of their choice. Coming up with smaller monthly contributions is much easier than making large, lump-sum contributions. A regular investment plan would meet their need for convenience, and they'd barely notice the difference in their available cash flow.

More importantly, a regular investment plan will ensure that Sammy and Martha keep their retirement goals a priority while allowing them to continue their active lifestyle. In addition, their RSP contributions are always working towards their long-term goals.

Plus, when markets are down, their regular contributions buy more investment units; when markets are up, they buy less. In the investment world, this strategy is known as "dollar-cost averaging."

Play some catch up

Another strategy Sammy and Martha might want to consider is catching up on their RSP contributions with a line of credit. RSP lines of credit come with convenient repayment options. With Sammy and Martha's combined salaries and lack of debt, they shouldn't have any problems meeting the payments over time. If the catch-up contributions trigger a larger tax refund, they can use that money to pay down the line of credit.

Establish their retirement goals

Although Sammy and Martha know the kind of lifestyle they want now, they should consider sitting down with a financial advisor to determine how they want to spend their retirement. This will give them a good idea of the nest egg they'll need to fund their dreams later in life.

A financial advisor will help Sammy and Martha make sure their asset allocation strategy is in line with their long-term goals. Right now, the investments in their RSPs are mostly equity-based. A more balanced mix - that includes some bonds and other fixed-income investments - would provide some stability to their portfolios in more challenging markets.

Ready to form your own good habits? Check out Scotiabank's Hands Off® Service - it offers a painless way to contribute regularly to your RSP, and build the foundations for your retirement.

If you have unused contribution room in your registered Retirement Savings Plan, the Scotia RRSP Catch-Up® Line of Credit may be right for you. Learn about it by clicking here.

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