Financial Planning Priorities

Statistics show that most Canadians do little to no actual Financial Planning. I read somewhere once that about ¾ of Canadians get to retirement age and have never completed a financial plan. That is a tough way to head into retirement, not knowing if you can actually retire. When setting up a financial plan there are 3 general areas that need to be addressed:

  1. Events that we can’t control
  2. Events that we can control
  3. Enhanced Investing

DirectionEvents that we can’t control.

What can’t we control? We don’t know when we will die and we don’t know if we will get sick or disabled. These are events that we have no control over yet we can plan to make sure if or when they happen they will have minimal to no impact on our retirement plan. Part of financial planning is to prepare for the “what ifs”. What if you die prematurely? What happens? To your family, your investments, your home? What if you die and you have accumulated a large portfolio? What happens then? Life Insurance is there to help transition upon your death and it is tax free.

Related article:  Are you protected from financial disaster?

We know we are going to die at some point but we don’t know when. We also don’t know if we will ever get sick or disabled but how would a lengthy sickness or disability affect your lifestyle?  Income replacement if you can’t work temporarily or if you can’t go back to work ever.  Disability insurance replaces a percentage of your income but what about extra medical costs due to an illness? There are many products such as Critical Illness insurance or Long Term Care insurance that help look after extra medical costs. We use to get sick and die but now we get sick and live.

Also, a person must have a Will. Your Will is your game plan for your estate in the event of your death. It is your way to control, from the grave, how things are dealt with.

Related article: 12 consequences of dying without a will

My suggestion is always consult a professional when constructing your Will. Yes, there are Will kits at the box office supply stores or on line but they are a one size fits all remedy. Not everyone’s situation is the same. Spend the few hundred dollars and consult someone who does Wills and get it done right. The worst time to find out that you missed something in your Will or used wrong wording is when you die and you need your will the most.

And finally don’t forget about the Enduring Power of Attorney and the Personal Directives as key legal documents to protect you from disastrous events that you cannot control.

Events that we can control.

What can we control? We can control what day we want to retire. We can control the date of our next great holiday or trip. If you want to retire on Oct 1, 2022, you can plan for that. Controllable events such as Retirement, buying a home or saving for a holiday can be planned for because we know when we want them to happen. We manage these events or decisions through things such as RRSPs, TFSAs, savings accounts and investing in individual stocks and fixed income.  We know the dates of these particular goals and we can work out exactly how much we have to save to obtain those goals.

Enhanced Investing.

For some, saving within a RRSP and a TFSA will be more than enough to satisfy their needs and wants. Others may still have income at their disposal to invest elsewhere. Perhaps you have an interest in Art, Cars or Precious Metals. I call this enhanced investing. Areas to tweak your overall portfolio. These items usually require a bit more money and more expertise on your part.  They may be areas of interest or an area of expertise.

If you started financial planning and you decided to focus only on Controllable Events and Enhanced Investing and not the Non Controllable Events you are, in essence, building a home without a strong foundation. As long as everything goes perfect in your life you may not run into any troubles. If you are suddenly diagnosed with Cancer or suffer a heart attack or just lose your job and can’t find another for several months your financial home will come crashing down. Having to cash in your investments and savings to pay for things such as sickness, disability or death will have a serious negative effect on your financial plan. The effect to which you may never recover from.

Written by Scott Wallace

Scott Wallace has been in the Insurance and Investment industry for the past 19 years. His role is to take what is important to his clients and help them make those dreams a reality. Scott is a CFP, CLU and a Qualifying and Lifetime Member of the Million Dollar Round Table.

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