Financial Planning
 Like building a house there are many levels to financial planning.
Do you know where you are financially and where you’d like to be? Many people fail to plan because they think it is too hard, they lack specific goals and the investment choices and the complex tax issues involved usually overwhelm them.
You should always find out whether your current financial plans will be enough to reach your goals and dreams. Our job is to help you develop a financial plan that will become the foundation of your financial future.
Building your financial plan from the basement up
Non-Controllable Priorities
Controllable Priorities
Growth Opportunities
Building your financial plan from the basement up
First thing you need to do is find a builder. A personal financial plan requires one-on-one consultation with a professional financial planner who understands you, who knows the industry, who understands taxation, and who has access to other professional resources, to help you.
Generally, a financial plan begins with some basic principles:
- Determine where you are now financially
- Determine where you want to be financially
- Pay yourself first – use 10% of your income to meet your goals
- Live on the other 90% of your income
- Build your financial house from the bottom up on a solid foundation
- Start now!
A Sound plan should also be a flexible plan, one that recognizes that your needs and goals change over time. Reviewing your plan on a regular basis ensures it is always relevant to your situation.
When you’re juggling bills and mortgage payments, and still hoping to have something left over at the end of the month, a financial plan might seem out of reach. But in fact, a plan could help you put the pieces in place – allowing you to maximize RRSP contributions, reduce debts and reach your goals sooner than you thought you could.
Non-Controllable Events
There are things in life that we have little or no control of an example would be getting sick. Being diagnosed with cancer can send your financial world into chaos. Listed below are the non-controllable priorities that you must consider when building your financial plan:
- You could die, there’s a need for Life Insurance
- You should have a current Will or Power of Attorney.
- You could become ill or disabled, there’s a need for Disability Insurance or Critical Illness Insurance.
- You need to have a health care plan employers often provide them.
- And who will take care of you in your old age? Long Term Care Insurance might be something to consider.
Controllable Priorities
The things that you have complete control over are:
- Personal Savings
- Building an Emergency Fund
- Debt reduction
- Buying a home
- Saving for your child’s Education
- Saving for Retirement
Growth Opportunities
This is the roof of your financial house, and most people want to start here. This is where you’ll find speculative investments like real estate, art, gold and certain kinds of stocks.
Growth opportunities are very attractive so it’s not hard to understand why people are drawn to them – this is where all the excitement is, where fortunes can be made overnight!
Every now and then we hear about people who have made it big with a shrewd deal, but in reality, it is the exception rather than the rule that you can get rich quick by speculating on stocks or art or real estate. The investments that fall under this section are volatile; they don’t offer stability in the short term, or guarantees in the long term. For the average investor looking to pay down debt and build a retirement nest egg, building a financial plan from the top down, rather than the bottom up, puts you in a position where you risk losing it all.
Look at it another way: with a financial plan in place, your house sits on a solid foundation, ready to withstand uncertain times. If you flip your house upside down, so that it rests on the tip, speculative opportunities, your house is very unstable. Any shifts can throw your whole financial plan off balance.
By taking care of other priorities first, including insurance coverage and dedicated savings and debt reduction, you put yourself in a stronger position to achieve your financial goals. Asset allocation can help you put together the investment plan that is right for you. We at North Peace Financial Planning can help.
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