What is a Financial Plan & Why Everyone Should Have One!
With the new year recently passing, it is an important part of your financial well being to have your financial plan updated or created, if you have yet to start one. Although you could work through this on your own, it would be prudent to contact a financial planner and have them guide you through the process.
A financial plan is a way to determine where you are financially at a specific time. It should include all of your expenses including mortgage payments, utility payments, vehicle loans, personal loans, lines of credit, credit cards, living expenses, and any other monthly expenses. In order to determine your net worth you should include your assets as well. Your net worth is your assets minus your liabilities. Your assets could include savings accounts, RRSP’s, TFSA’s, vehicles, property. Knowing your net worth is an important piece to your financial plan and can help guide the process.
A financial plan allows you determine your current financial situation. Having a financial plan will better allow you to determine what your financial goals are. This could include retirement planning, investment strategies, and tax planning. If one of your goals is to plan for retirement, your financial planner will guide you through strategies on how to best achieve your retirement goal. This could include RRSP’s, TFSA’s or other retirement strategies. By including your goals in your financial plan, you will have the ability to periodically measure how you are progressing to reach these goals. By creating a financial plan, you will be better able to manage income and cash flow by creating a budget. This will help you prioritize spending and reduce wasteful spending. Make sure you make room for emergency spending as you never know what might creep up unexpectedly on you.
Although financial planning is not my expertise – mortgages are – I do know some very competent Financial Planners who could provide extensive insight into the importance of a financial plan. I recommend collaborating with a financial planner on such an important aspect of your life.