What should my financial plan cover?

What should my financial plan cover?

Financial planning:  the ability to meet short term needs plus the confidence to realize long term objectives, while managing financial risk.  That’s my definition.  It really boils down to financial security – peace of mind.

Sounds simple enough.

I suspect most of us want some sort of financial security.

Inspired by a few recent emails on this subject I’ll outline a few things I would expect a financial plan to cover and how such a plan can help you.

First up though readers in the My Own Advisor inbox lately:

Thanks for your responses.  About a financial plan though I’m not sure what I need to do?  I already save money.

I appreciate your feedback.  I know you can’t offer any financial advice but what do you mean when you say you prefer ‘plans over products’?

You write about goals on your site.  Why do you do that – I guess these are all part of your broader plan?  If so what are those broader plans and how did you end up defining them?

Financial Planning 101

Your financial plan should likely cover every aspect of your personal finances.  This means your plan should likely cover:

  • Goal setting
  • How you organize your money (i.e., budgeting)
  • Paying down debt obligations
  • Insurance needs
  • Tax management
  • Retirement planning
  • Estate planning
  • Answering really important questions like:
    • Why is money important to me?
    • What is my money for?
    • How do I know I’m doing it right?

Financial Plan

Image courtesy of BAM Alliance.

Here are some examples of why you might want a financial plan that describes how you will succeed:

  • I want to send my kid(s) to university.
  • I’d really like to go on a trip to Europe.
  • I’ll need to replace my car in a few years.
  • I’d love to renovate our bathroom next year.
  • If anything happens to me I want to make sure my family has income security.
  • I wish I could pay off this line of credit.
  • By the time I am 60 I would love to retire.

Few financial plans are set in stone, actually, more like none of them are.  We all have a life and things change in it.  Things change day-to-day let alone month-to-month.  This means in any given year things can be very different than the year before.  This is where financial plans can help.  Financial plans can be revisited when expectations about our future change.  They can help us let go of things we couldn’t predict or see coming.  They can stabilize our financial worries because we’ve covered some money risks.

Our Financial Plan

For what’s it worth here are some things that are part of our financial plan in no order of importance:

  1. Become debt free. In doing so it will provide some significant financial flexibility – all income made will be ours to keep or spend beyond the basic necessities as we chose.
  2. Save for a newer car. We find it easier to save money when we know what we’re saving for.
  3. Have (retirement) income security. We continue to save and invest for our financial future by striving to maximize contributions to our TFSAs and RRSPs every year.  We do so even though we have some small workplace pensions in our future.
  4. Manage risk. We have robust life insurance plans in place in case something happens to one of us.
  5. Worry less about money. With a modest emergency fund in place – we have money available to us for a few months if we need it.
  6. Have fun. We set aside money every year for international travel and long weekend experiences to look forward to.

With a financial plan in place, you’ll have a better understanding of where you stand today, where you want to be and how you can get there.  I hope this post has inspired you to create one or update the one you have.

What are your thoughts on financial plans?  Do you have one that covers short-term need, longer-term goals while managing financial risk throughout?

Mark Seed is the founder, editor and owner of My Own Advisor. As my own financial advisor, I've grown our portfolio from $100,000 to well over $500,000. Our next big goal is to own a $1 million investment portfolio for an early retirement. Come follow my saving and investing journey by subscribing to my site. Delivered by Subscribe Here to My Own Advisor

4 Responses to "What should my financial plan cover?"

  1. Another nice summary Mark. We didn’t have our plans defined at your age, so you’ve in good shape. For those who feel a detailed plan may be difficult to implement and follow, stick to your basics:
    -minimize debt
    – save a portion of your earnings and increase as one earns more,
    – live within your means
    – invest your savings (here I’ll try to be fair)
    – many suggest etf’s because of their low fees, diversification and simplicity
    – I prefer investing in a select group, start with one and increase the number over time to 10 or 15 of the best DG stocks,

    Reply
    1. Thanks. The surprising thing is, in life I’m learning, if you do the ‘basics’ really well (including personal finance) you don’t really need the sophisticated stuff – it’s just noise.

      Got your eye on any stocks right now? We’re in savings mode for the TFSA for 2018.

      Reply
      1. Nope, we’re fully invested and would only sell a few if the price rose. Did you hear Dream Office REIT is offering to buy back shareholders stock for between $18-$21 per share? We own it and don’t plan to sell.

        Reply

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