Financial planning is a relatively easy exercise that can and should be undertaken at any age. Just Google it. See? Lots of stuff out there.
At every stage of the life-cycle, from student to retired senior, there will be benefit to undertaking some version of the financial planning process. You don’t necessarily need the whole kit and caboodle of the approved FP Canada 6 Step Planning Process, but you can find out more here – https://www.financialplanningforcanadians.ca/.
As I like to say, this is not Rocket Science. You can do it on your own if you like, but you can also drywall your own basement or build your own fence. What I mean is, just because you can do something on your own, doesn’t mean you should. You will definitely get a better outcome utilizing a professional, specifically a Certified Financial Planner (CFP).
In its most basic version, financial planning, really any planning, is simple. The 6 Step Process I refered to above is the same sort of process we humans should go through for any decision making process – Introduction, Discovery, Clarification, Presentation, Implementation, Monitor. That is the GRK Wealth Management version of the official FP Canada process, we call it The Path, and a quick Google search of financial planner websites reveals something very similar across the country.
Start by gathering five pieces of information:
- What you own
- What you owe
- Where your money come from
- Where your money goes (more difficult – check your bank account and credit card statement)
- Identify your Goals – Why are you getting out of bed every day and going to work?
With these five, relatively simple, pieces of information we can build you a financial plan, no matter your age. First, we build a current “Portrait” of you, so we can project that image into the future. A Caricature is also a form of portrait, but it won’t look much like the real you as we age the image into the future with that Snap Chat filter – don’t worry, we don’t really use Snap Chat; we use sophisticated financial planning software.
Sure, there are other things to be taken into account, like investment risk, insurance coverage, estate and succession planning, but these are recommendations that come out of the financial plan itself. In our practice we break those recommendations into 5 Critical Branches: Goals, Asset Management, Cash Flow Debt & Tax Strategies, Asset Protection, and Wealth Transfer.
Breaking it down more simply again, financial planning is spending less than you make and then prioritizing what to do with the surplus. In turn there are only three things you can do with your money after tax (which we can also minimize with good planning): Spend, Save, and Pay down Debt. How you prioritize these three choices will ebb and flow through your life, but financial planning helps determine what you should be doing and when.
I hope as time passes, this blog will provide some guidance and education in your own financial planning journey, while also encouraging you to seek out a professional to help you with the process. My buddy, who dry-walled his own basement, had to pay a professional to come and fix his framing, taping, mudding and finishing errors. Not that the kid’s rec room was terrible, but it wasn’t the best drywall job ever. Reach out and hire a professional. While the process is not rocket science, it does help to have an expert on your team.
It's Not Rocket Science 