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Financial Planning 101: Life Should be an Epic Run

Conversations about retirement usually start with goals. Although there are some people with quirky retirement goals, most of us have the same bottom line: to have our future lifestyle be as good, if not better, than it is today.

That may sound easy enough, but evidence shows that most of us will experience a lifestyle decline at some point. Common triggers include paying for a child’s post-secondary education, reaching retirement, or having something unexpected happen, such as an accident or illness.

Since you’ve historically had to be among the wealthiest of the wealthy to get decent financial planning, we live in a society where practically nobody knows what to do on a monthly basis to protect and sustain their lifestyle, and that is worrying.

Imagine endless white powder

Ironically, even if financial planning was readily available to everyone, a lot of us would just skip it. It all sounds like a lot of math, jargon, and stressful decisions that we can put off until later.

But try thinking about it this way instead: your plan is there to maintain the things that truly make life worth living – things like spending time with family and friends, going out for meals, taking vacations and enjoying hobbies.

Imagine if you were an avid skier and there was nothing you loved more than hitting the peaks. Then you might think of your financial plan as a way to make sure you’ll have the time and resources to pencil Whistler, Aspen and the Alps into your calendar forever – both while you work and after you retire.

You might find it motivating to anchor your plan to the specific pleasures it will help preserve for you. Even if you find you need to make some financial sacrifices today, it can also serve as a helpful reminder to keep you going.

What should you expect?

You should expect your financial plan to tell you three major things:

  1. How to save on borrowing. The amount you pay towards interest can be one of the biggest expenses of your whole life. Minimizing interest costs – especially if you have equity in your home – is often a huge financial lever that you can pull. In fact, the money you save by reducing debt payments can often help you afford the investments and insurance that complete your plan.
  2. How to maximize your investments. People often think the key to investment success is choosing the right stocks or bonds. While this is part of the equation, it’s almost always more important to minimize taxes and fees. If you have questions such as RRSP vs. TFSA or don’t understand how much you’re really spending on mutual fund fees, your plan might be a real eye-opener. Getting these basics right can save you literally hundreds of thousands of dollars over the long run.
  3. How to protect yourself and your family. The worst thing that could happen is to optimize your borrowing and investing, then have a big financial setback because someone has become injured, ill or passed away. Don’t add financial hardship to an already difficult situation. Life, disability and critical illness insurance add a protective layer to your plan that can be a crucial ingredient for financial security.

There’s one more thing you should expect from your financial plan: flexibility. A plan isn’t meant to be locked-in today then left to play out for decades to come. It’s far more realistic to have a plan that adapts to your life as family, career, health and other factors change.

In fact, we believe that if you update your plan twice per year, you’re almost guaranteed to succeed. After all, it’s a lot easier to make a bunch of small adjustments over time than to reach a point where you realize you’ve gone way off course and don’t know how to get back on track.