When we think of health, we immediately think about our bodies and minds. But what about our finances? Maintaining our financial well-being is crucial to ensuring a secure future – one that can even help reduce the stresses that come with an uncertain financial situation. It may no longer be the start of a new year, but it’s not too late to make a resolution to improve your financial health.
A great way to put (and keep) yourself on the right track is with a comprehensive wealth plan. A customized plan helps you navigate financial challenges so you can better prepare for the future.
Elements of a Wealth Plan
Working with an Investment Advisor is a good way to address all aspects of your financial circumstances in your wealth plan. Here are some key elements an advisor will cover:
1. Set financial goals. Your short- and long-term goals will help drive the direction and composition of your wealth plan. Short-term goals might include buying a vehicle or taking a vacation. Long-term goals could be purchasing a home or putting kids through school. Whatever your objectives, try to be detailed about the timeframe and how much it will cost to achieve them. An advisor can help you define and prioritize your objectives.
2. Evaluate your financial situation. The ability to meet your goals depends largely on your finances. Start with a “balance sheet” that lists your assets and liabilities. Assets may include real estate, money held in bank accounts and registered accounts (e.g., RRSPs, TFSAs, pension plans, RRIFs), as well as money in non-registered investment accounts. Liabilities might include debt associated with credit cards and lines of credit, a mortgage, student loans and other obligations. A balance sheet is a snapshot of your net worth and helps your advisor develop or modify your wealth plan to manage your debts.
3. Create a budget. With your net worth sorted out, the next step is to create a budget that will help you spend wisely. A budget considers your regular expenses, including building an emergency fund for unexpected expenses and saving for retirement. It also lists your regular sources of income to see if the cash flow can meet your expenses. If your budget shows you may encounter a shortfall, an advisor will help identify ways to cover your costs (e.g., eliminate certain discretionary expenses, save more money, earn a higher investment return, find tax efficiencies).
4. Develop a retirement plan. For most people, their biggest long-term goal is retirement. Issues to consider include where you’ll live, life expectancy based on health and family history, desired lifestyle, projected cash flow and expenses, etc. Your advisor will evaluate these factors and construct a personalized retirement plan. Also, you may want an estate plan that reflects how you wish to distribute your assets. An estate plan encompasses a will, powers of attorney, trust designations and philanthropic pursuits such as charitable donations or setting up a scholarship/foundation that will help establish your legacy.
Benefit From Professional Advice
As you can see, a wealth plan has many components that will impact your financial future. You’ve also seen how an advisor plays a crucial role in creating and maintaining your plan. As circumstances change (e.g., marriage, children, job, home/business ownership), an advisor can revise your plan accordingly and ensure the investment component of your plan remains sufficient to fund life’s needs.
This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.