FP Explains: How To Master Your Own Financial Plan For Your Own Lifestyle


Most of us have no idea how much money we will need to live comfortably for the rest of our lives. Follow these steps to write a successful financial plan

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By Julie Cazzin, with Allan Norman

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Do-it-yourself investors probably have no difficulty researching their next investment choices and making transactions, but developing their own financial plan takes things to another level, as the resources for proper financial planning are not forthcoming. not as freely available as for investment.

Without proper planning, people are prone to taking shortcuts which can lead to not having enough money in retirement, having too much, or having enough, but not knowing it until you are too much. old for fun.

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Consider these accepted rules: you need 70 percent of pre-retirement income for a successful retirement; your withdrawal rate should not exceed four percent of your retirement portfolio; and, you need to save 10 percent of your income. Now throw them away.

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Financial planning is about your lifestyle, so let it be your guide. To make a plan, you must first think of yourself as a lifestyle planner, then a financial planner, and finally an advisor in investments, insurance, mortgages or whatever type of product you need to carry out. your plan.

The end goal, as financial advisor and author Paul Armson noted, is to “maintain and improve your lifestyle throughout your life, without worrying about running out of money no matter what.” “.

Lifestyle planning

You can start by writing down all of your expenses, which will help you identify and clarify your lifestyle. Classify your expenses under the following headings: Properties, Living Expenses, Lifestyle (Leisure, Vehicles, Vacation), Family, Career and Financial.

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Will any of these expenses change over time? For example, travel can increase or decrease in retirement. Household spending often remains the same. Taxes generally go down in retirement. Will a property be sold at some point? You got the idea.

Writing down your expenses will help you identify and clarify your lifestyle.
Writing down your expenses will help you identify and clarify your lifestyle. Photo by Getty Images / iStockphoto

Don’t take a shortcut and assume you’ll need $ 100,000 after tax in retirement, or whatever. You are mistaken about having a true understanding of the relationship between your money and your lifestyle, and the results will not be precise, which can hamper your decision making.

Financial planning

Draw two columns on a piece of paper, then list your assets on one side and your debts on the other. Add the two columns separately. Subtract your total liabilities from your total assets and you will have your net worth – hopefully that’s a positive number – then ask more questions.

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Are you comfortable with your level of debt compared to your assets? What percentage of your assets are in your home compared to liquid assets, such as a Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), or Registered Retirement Income Fund ( RRIF) and cash? Are you going to depend on the sale of a property or business, or an inheritance to fund your retirement?

Get in the habit of updating your net worth statement once a year and comparing it to previous years. It’s a good measure of progress.

Get in the habit of updating your net worth statement once a year and comparing it to previous years.
Get in the habit of updating your net worth statement once a year and comparing it to previous years. Photo by Getty Images / iStockphoto

Next, review your income and expenses. Are you like most people and have a good idea of ​​your bill payments, but not your discretionary spending? Is your cash flow positive or negative?

Use a tax calculator to find out your marginal tax rate. Your tax rate will dictate the benefit of RRSP contributions and who should make them if you have a spouse. If you are senior, your tax rate will guide you towards your exit strategy.

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Do a Google search to see what government credits and benefits are available to you at your current age and marital status. Is there anything you can do to maximize credits and benefits?

Financial Advisor

Project your current situation into the future and examine your net worth, cash flow, and taxes over time. This will allow you to strategize today to deal with any future obstacles.

Once you have your plan, you’ll want to test it by changing the assumptions and checking for life, disability, critical illness, and / or long-term care insurance needs.

Next, check your final estate, the taxes owed, and the distribution of your assets to the beneficiaries. Use it as a reminder to check your will and powers of attorney.

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Once you have brainstormed and created your plan, create a to-do list and start implementing what needs to be done to achieve your goals. Even a small step every week will get you closer to a full financial plan in a matter of weeks.

Finally, a word of warning. A one-off plan can be dangerous. A plan must be redone every year. Annual planning keeps your assumptions honest and builds confidence in your numbers and future projections, which should take away any worries you might have and open up other opportunities.

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Remember that a plan is always a work in progress and is never finished. Everything changes: people, goals, technology. As author and motivational speaker Jim Rohn said, “It is the set of sails, not the direction of the wind that determines which direction we will go.”

The value of the plan is the thinking you put into it and the learning you get from it. This is true even if you are working with a planner. If you want to learn, participate in the planning rather than accepting explanations of the results.

Allan Norman, M.Sc., CFP, CIM, RWM, is a Certified Paid Financial Planner with Atlantis Financial Inc. and a Fully Licensed Investment Advisor with Aligned Capital Partners Inc. He can be contacted atwww.atlantisfinancière.ca Where [email protected]

This commentary is provided as a general source of information and is intended for Canadian residents only.

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