The Value of Financial Planning
If you’ve ever dreamt of a future with financial security and the ability to do the things you want, Financial Planning can be a significant piece of the puzzle to get you there. Financial planning encompasses many areas, including retirement projections, estate planning, risk mitigation, education planning, and business planning, to name a few. Often, Canadian’s will look after one or two areas of financial planning but don’t always have a financial plan. So, you may be thinking, how effective are financial plans, and what does it entail? We’re glad you asked.
The Financial Planning (FP) Canada study reports that Canadians using financial planning report significantly greater levels of financial security and emotional well-being compared to those using only limited planning or no planning at all. Additionally, the study found that 81% of Canadians who have a financial plan feel that they are on track with their financial affairs, compared to 44% who don’t have financial plans. Also proven to help you save at higher rates, financial planning has demonstrated to be significantly effective for securing your financial affairs.(1)
Having a financial plan is essential, but what does it consist of? This critical document will outline your goals; short, medium, and long term, financial and non-financial. The plan will reference your dreams, intentions, and plans. Most importantly, it will help keep you on track. Written goals are achieved almost twice as often as goals that aren’t.(2) A Financial Plan will help you achieve your financial goals.
In addition to goals, a financial plan will also encompass the strategies to reach those goals. Over time, along with plan updates, your goals and strategy can be modified and adjusted as material changes in your life occur. Received an inheritance? Let’s adjust your plan. New job with a higher salary? Let’s increase your savings rate. Once in place, it’s easy to tweak your financial plan to align better with your new needs.
A financial plan will also allow you to keep track of the growth in your net worth. An updated net worth statement can help show that you are on your way to reaching your retirement goals. Seeing growth in your net worth will help you stay motivated to stay on track with your goals, especially when life takes over and pulls you in other directions.
A financial plan doesn’t need to be 30 pages long, filled with ledgers, graphs, or charts. Your plan can start small and grow over time as your wealth increases. The important part is taking the time to begin your plan. What are you waiting for?
Reach out to one of our Wealth Strategists if you’re interested in creating or enhancing your financial plan for a more secure future.