Six Key Elements that Build a Successful Financial Plan
Many Canadians have some sort of financial plan. Whether you are putting some money aside every month or have a spending budget or perhaps you’ve gone into your financial institution and received projections on how much to save in order to achieve your desired goals. This is helpful, but it isn’t the full picture. There are often many more moving pieces in play, particularly if you run a business or have a blended family. Below is a list of the main areas of a complete financial plan and what is covered in each area:
1. Cash Flow Planning

No matter your income, you should still follow a cash flow plan and understand where your money is coming from and going to. This is particularly important where there is a corporation or where the income is not always from the same source. It involves budgeting and working backwards from total money coming in and total money being saved to see what is being spent. This is often the least favorite part of planning because it can reveal a discrepancy between estimated spending and actual spending.

2. Risk Management

What if the worst should happen? How would it impact the financial security of you, your family or your business? Just like investment managers often put something in place to protect against the downside by sacrificing a bit of the upside, it is prudent to put some resources into protecting against sudden death, disability, or illness.

3. Retirement Planning

Deciding when you will retire has a big impact on how much you will need to save. This involves several decisions like when to draw CPP and OAS, picking the right pension payout option, and drawing from various assets to smooth out taxable income over expected lifetime. Retirement planning also includes setting a realistic budget for yearly spending that is sustainable based on the available assets and government benefits.

4. Legacy and Estate Planning

Who do you want to leave money to when you pass away? Nobody likes to think about dying, but if you don’t do any planning, the government might end up with the biggest piece of your estate. Perhaps you would like to leave a legacy for your community or ensure a smooth transition of assets without passing through a bunch of government red tape like the probate process. If you are incapacitated, who will you trust to manage your financial affairs or make medical decisions on your behalf? Is your Will complete and up to date? If you have children from a previous marriage, how will you ensure they will be looked after. These are all important questions to address in a plan.

5. Investment Strategy

Financial planning isn’t about picking the latest and greatest stock or crypto-currency. Financial planning instead looks at your risk tolerance, the return you need in order to achieve your goals, and the optimal investments from a tax perspective and helps you build an investment policy statement (IPS) to govern your asset mix and the time horizon before you will want access those investments.

6. Tax Considerations

Tax is usually the biggest expense for a Canadian after the cost of housing. Any financial plan that does not consider the impact of tax is deficient. Sometimes people have complicated tax situations and it takes someone familiar with tax expertise to spot the problems and opportunities from a tax perspective. There are also numerous strategies to help to spread out taxable income or shift assets from taxable investments to tax-preferred or non-taxable assets. Charitable donations can also be a good way to put your tax dollars towards a cause you care about instead of to the government.

A financial plan will help you meet your needs today and in retirement, and help you weather the unexpected along the way. Whether you want a worry-free retirement, enough money to make a down payment on a house or save for your child’s education, a financial plan is important.

ZLC is an independent firm offering financial planning advice in Vancouver area as one of its many service offerings. Our approach goes beyond financial projections, we help you pull it all together to ultimately achieve more financial knowledge and control. We can help you plan for the future by:

  • Assessing your current financial situation and life priorities
  • Providing education on tax implications, investment options, and various financial instruments so you can make informed decisions
  • Running cash flow projections and giving a realistic forecast
  • Providing strategies and advice to help reach goals
  • Helping you implement various strategies while working with your professional team of accountant and/or lawyer.
  • Reviewing and revising your plan as needed

Talk to an expert at ZLC today to discuss the financial planning strategies that works for you.

This information is designed to educate and inform you of strategies and products currently available. The views (including any recommendations) expressed in this commentary are those of the author alone, and are not necessarily those of ZLC Financial. This information is not to be construed as investment advice. It is for educational or information purposes only. It is not intended to provide legal, taxation or account advice; as each situation is different, please seek advice based on your specific circumstance. This commentary is not in any respect to be construed as an offer to sell or the solicitation of an offer to buy any securities.

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