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At its core, financial planning is not just about counting dollars and cents; it’s about creating a roadmap for your financial future. It’s much more than picking a few investments and watching your savings accumulate. Done well, it involves a holistic view of your wealth, budget, estate plan, and tax consequences. It should be goal-based, focusing on the specific goals that are most meaningful to you. After all, life isn’t just about accumulating money – it’s about achieving the wealth that enables you to follow your dreams and pleasures.

 

Many Canadians choose to work with a financial planner with a brokerage, bank, or insurance company. A 2023 survey with LARi Insights market research panel found that over two thirds of respondents (68.2%) do their own financial planning, while 31.8% told us they work with an advisor. That brings a trained professional’s disciplines, wisdom, and advice into your financial planning process. But it’s certainly not mandatory. Any Canadian can start building their financial plan, starting right now. To learn more of the basics, visit What is a Certified Financial Planner.

“We realize that expert advice on allocation of funds is now crucial in the last years of pre-retirement.” – Albina, Vaughan, Ont.

The Pillars of Financial Planning

Financial planning covers a wide array of areas in financial management. Let’s break them down:

  1. Estate Planning: It’s not just for the wealthy. Estate planning ensures that your assets are distributed according to your wishes after you pass away. It involves financial products such as life insurance (you can assess your insurance needs with our Canada Life Insurance Calculator). It’s critical for ensuring your wealth passes to your next generation (with as little tax as possible). You’ll also want to consider estate planning and digital assets.
  2. Tax Planning: Tax planning helps you understand how to efficiently manage your tax obligations. There’s a wild variety of investment vehicles (RRSPs, RESPs, TFSAs, non-registered investment accounts, etc.) and investment choices (mutual funds, GICs, stocks, bonds, etc.), and there are many tax consequences to consider. We’ve made it easy to get started exploring these topics through our RRSP Guide, RESP Guide, and posts such as What is a Mutual Fund?
  3. Investments: This is where you get to play the role of the savvy investor. Investing is about growing your wealth over time. Whether it’s stocks, bonds, or real estate, it’s about making your money work for you. Proper financial planning will take into account your risk tolerance and match that to appropriate investments. The greater the risk, the higher the potential return. Learn more about how advisors manage risk.
  4. Budgeting: The backbone of financial planning. Budgeting is about understanding your income and expenses. It’s like keeping score in the game of financial success.

Why Canadians Should Care About Financial Planning

In Canada, financial planning can be a game-changer. It’s not just about saving for a rainy day; it’s about maximizing the unique financial opportunities and challenges that come with living in the Great White North. Here’s how Canadians can benefit:

  • Retirement Planning: With the rising costs of living and the uncertainty around pension plans, it’s crucial for Canadians to plan for their golden years. It helps you ensure you’re living comfortable through a long and healthy life-span, while having reserve assets to pass on to your children.
  • Education Savings: For those with children, planning for education expenses, especially with tools like the RESP (Registered Education Savings Plan), can be a significant advantage.
  • Healthcare Costs: Understanding how to navigate Canada’s healthcare system and plan for potential out-of-pocket expenses is vital. With age expectancy rising, it’s important to plan ahead for unforeseeable health issues. Retirement healthcare costs should be an important part of your plan.

 

How to Start Your Financial Planning Journey

So, where do you begin? Here’s a simple starter pack:

  1. Assess Your Current Financial Situation: Understand where you stand financially. What are your assets and liabilities? Our Net Worth Calculator (Canada) helps you easily model your financial scenario.
  2. Set Financial Goals: What are your short-term and long-term financial goals? Buying a home, saving for retirement, or perhaps a dream vacation?
  3. Create a Budget: Track your income and expenses. Try the LARi Insight budget calculator for an easy tool to help you calculate totals.
  4. Seek Professional Advice: Consider consulting with a financial planner. Websites like the Financial Planning Standards Council of Canada (FPSC) and the Canadian Securities Institute (CSI) can be great resources.

The Joy of Financial Planning

Remember, financial planning isn’t a chore; it’s an exciting journey towards financial freedom. With the right plan in place, you can enjoy the peace of mind that comes with knowing your financial future is secure. As one wise financial planner said, “The best time to start financial planning was yesterday; the next best time is today.”

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