Forty years ago, basic personal financial planning generally consisted of dumping five pennies or so from every buck earned into a savings — not a chequing — account.

If you were a bit more dollars-and-cents savvy, you might own some Government of Canada bonds and maybe a few shares in a trusty institution, like the Royal Bank of Canada.

Times have certainly changed.

More options, more panic

Now, you have a myriad of financial options that run the alphabet from RRSPs to TFSAs to ETFs and everything in-between. You can load up on risky stocks, pack your portfolio with emerging country holdings or slam together a series of different bonds to try to boost your overall returns.

Not surprisingly, many people find understanding all of these instruments a bit overwhelming.

In a 2009 survey conducted by U.S. pollster Harris Interactive Inc. for the National Foundation for Credit Counselling, 41 per cent of Americans, or 92 million men and women, gave themselves a mark of "C", 'D" or "F" on their knowledge of personal finance.

Piercing the financial fog

But ignoring pocketbook issues is no longer an option.

That's because you need a bigger nest egg to retire comfortably than might have been the case in the 1970s.

Lower interest rates, the higher cost of living, the erosion of the real value of government-funded pensions, more expensive retirement expectations and longer lifespans now force most Canadians to think longer, harder and earlier in their lives about savings and investing.

For many of the last 20 years, many investors were able to earn an average of 10 per cent a year in their investment portfolios. The experts say those days are likely over. Returns going forward are likely to average six or seven per cent. That means you'll have to save more.

Here's the math:

Let's assume you quit work when you are 65 and die when you are 85.

If you've saved $500,000 by the time you retire and earn 10 per cent on those investments for the rest of your life, you can safely withdraw $58,730 a year and have your income stream last for 20 years.

But if you manage to earn just five per cent annually — which is much more likely than a double-digit return — suddenly your $500,000 will deliver just $40,121 in annual income for those 20 years.

If you manage to save just $250,000 by age 65, chop those figures in half. The calculus can be sobering.

Given this, Canadians have to watch both how much they save as well as the expected returns they can look forward to.

Investment chicken soup

Even with the more financially complex world, however, experts say novices to money matters need to remember some simple rules — timeless nostrums that their parents might have followed — as the starting point in their financial journey.

"Most people don't know where they are spending their money," says Jason Safar, a tax partner with the Hamilton, Ont., office of PricewaterhouseCoopers.

Basically, take a piece of paper, divide it in half and on the one side go expenses and on the other side list cash coming in.

Only then, say financial planners, will you have some idea as to whether you can save money at all. If you consistently spend more than you take home, adding to your RRSP will be next to impossible.

Once you complete that mundane chore, figure out what outstanding debt you have and whether you can chop that amount.

In the current low interest rate environment, knocking down non-deductible debt will save a person more in interest charges than they would probably make investing the money in some low-risk product like a GIC, Safar says.

Right now, for instance, a five-year mortgage has an interest rate in the range of four to five per cent, depending on the discount. Currently, five-year GICs pay just 2.10 per cent to a little more than three per cent annually.

In this case, the person with a mortgage might be better off paying down the mortgage. That's especially true in the case of someone with higher interest rate debt, like credit cards or personal loans.

Besides the money rationale, reducing outstanding debt also gives people a piece of mind. The Vanier Institute of the Family says the average Canadian family now carries just over $100,000 in debt. It's never been that high.

The household debt-to-income ratio now stands at a record 150 per cent. That means that Canadians owe $1,500 for every $1,000 in after-tax income they earn. Low interest rates simply made it easier to borrow more.

"Low interest rates have saved many households from severe distress but led many more into further debt," says Roger Sauvé, author of the Institute's latest report on Canadian family finances.

But then comes the warning. "These low rates will not continue indefinitely. Rates will rise in the near future and cause further stress when they do," he says. Sauvé notes that 17,400 mortgages were in arrears by three months or more in October 2010 — up 50 per cent from before the recession began.

Ditching the taxman

On the return side, investors should always look to minimize the amount they send to Ottawa in the form of taxes. Tax software programs do a good job of prompting taxpayers about the hundreds of available tax credits and deductions.

If you are choosing between a registered retirement savings plan and a tax-free savings account, pick the RRSP as the first place to put your eligible investments, says Cliff Wiegers, president of Wiegers Financial, a Saskatoon-based financial services company.

The tax deduction gives you a "bigger bang for your buck," Wiegers says.

Once a person maximizes his or her contributions to the RRSP, then they should look to place any remaining savings in a TFSA.

Like our parents, however, a simpler path to financial security — one that includes cutting debt and making a plan and one that shuns complexity is the best route to an easier retirement, experts say.

"The fundamentals just haven't changed," Safar says.