Plan Before Investing

Day #7 of 30

“Think about and map your goals”

Identifying your short- and long-term financial goals will help determine which types of investments and planning approaches may be most suitable and effective to help you save for your needs. In doing so, it’s crucial to first distinguish between what you actually need versus what is a “nice-to-have.” Going through this process allows you to set realistic goals that you can confidently work towards achieving.

Two approaches to planning finances

Simple projection A simple cash-flow analysis that looks at short- and long-term goals.

Detailed plan A comprehensive wealth plan, also referred to as a financial plan, which helps guide individuals towards achieving more complex financial goals throughout their lifetimes and beyond.

Six benefits of wealth planning

• Peace of mind
• Increased control over the unexpected
• More money in your pocket

• Minimized financial risk
• Sustainability
• Easy to update

Wealth stage matters

Your stage of life will greatly impact your financial picture now and in the future, and the financial and investment decisions you make. In general, there are three main wealth stages that individuals move through and between over the course of life:

• Early savers—Establishing career, perhaps buying a home, getting married or starting a family Main objectives: Earning, saving and growing assets
• Mid-life accumulators—Stable career, homeowner, starting to think about retirement and estate planning and transferring wealth to children Main objectives: Creating a balanced portfolio of preservation and growth
• Preservers/spenders—Retired or working less, using accumulated wealth to generate income as a salary replacement, keen on protecting assets, estate and wealth transfer planning is a priority Main objectives: Minimizing risk, generating income to replace salary and managing wealth wisely in regards to income tax

Whether you develop a simple wealth projection or a more detailed wealth plan, the process involves analyzing and interpreting all of your financial information. From there, results are generated, and those results are modified and tweaked until desired goals become feasible. Your current stage in life may impact what type of recommendations are made, as well as how you implement the recommendations to pursue your financial goals, and will differ by individual (e.g. increase savings towards your retirement goal by opening a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP)).

Don’t forget to monitor!

Wealth plans and projections should be treated as living, breathing documents. To make sure they continue to work for your personal situation, they need to be reviewed on a regular basis. A good rule of thumb is to revisit it annually—unless you experience an unexpected life event, your goals change or there’s a material change in your financial picture. One of the best ways to ensure you revisit it regularly is to simply schedule the time in advance on your calendar.