Financial Literacy Month – Creating a Financial Plan

Financial Plan

Working through a financial plan can be complex, and while I’m going to give you some tips here, what I recommend is sitting down with a certified financial planner (CFP). They can review all of your accounts, ensure you are headed in the right direction, and recommend investments to attain your goals.

I am going to provide you with links to help you get to through the basics on your own, as well as give you some tips when picking a financial planner.

Things to consider:

  1. Complete the GrowthZone Net Worth Statement, Personal Budget, and Financial Goals worksheets to give yourself a good understanding not only of where you sit today, but also where you want to be.
  2. Understand the difference between the rate you are paying on your debts and what you are gaining as a return on any of your investments.
  3. Is there an opportunity to consolidate your debt? This is going to be dependent on a number of factors:
    1. Are your individual payments getting hard to meet?
    2. Have you been making your payments every month? (This speaks to your credit history and will help determine if the bank will consider you for a loan).
    3. Do you have any collateral to secure a loan?
    4. Do you have steady income to support payments?
    5. Often what happens is people wait until it is too late to consolidate debts – they wait until they have missed payments, hurt their credit score, or been laid off. If you answered yes to the 4 questions above, it might be worth discussing a consolidation loan with your bank to bring everything into one payment and closing out all other debt instruments.
  4. The more risk an investor takes, the higher return demanded for that risk – that means that if you are not willing to take any risk with your investments your return is going to be low – think GICs at a rate of return less than 1%. If you put this into perspective, the Bank of Canada aims for 2% inflation year over year – this means your money at less than 1% return is actually declining in value.

Once you have completed the GrowthZone Net Worth Statement,Personal Budget, and Financial Goals and considered all of the above, it’s time to start thinking about what you need to hit those financial goals.

Here are some of my favourite links for figuring out how much you need:

Once you have this worked out, it’s time to see a financial planner. Depending on your needs you might decide that going to your local bank is the most appropriate option for you. This is perfectly acceptable, as Canadian Banks have high standards for their advisers and access to many diverse investment options.

Tips for choosing a Financial Planner:

  • Be prepared, while the planner will work all of this out for you, it is important to have an understanding of your finances going into the meeting.
  • Bring all of your documents – all statements and documents listed in the Budget Worksheet, this will ensure that your planner has a full picture and isn’t working with bits and pieces
  • Ask for a referral – friends and family aren’t great at talking about money, now is the time to broach the subject, people are picky about money, if they have someone they like to work with, it might be a good fit for you too.
  • Interview the planner – and interview more than one. This should be a long term relationship, you want to ensure that you mesh, and that the planner has your best interests in mind.
  • Understand the fee structure – depending on the type of investments you are purchasing as well as the type of organization you deal with fees can be commission, fee-only or salary. Ensure you understand.
  • Ask for accreditation – ensure that the person you are dealing with has some form of accreditation (specifically if you are investing). This can range anywhere from Investment Funds in Canada, Canadian Securities Courses, to Certified Financial Planner and many more.
  • Be aware of the need for due diligence. Your planner is going to ask you a lot of questions. This is good. They need to know you. They need to asses your risk tolerance, to understand your needs, to get to know your family structure. This all helps them build out the best financial plan for you.

Thanks for joining in on the #GrowthZone for Financial Literacy month. For more great #GrowthZone information for your personal and professional growth subscribe today.


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