Why you need a financial plan
A financial plan
is the road map to the retirement of your dreams. So why do so few people have
When it comes to financial planning, Canadians would rather
visit a dentist than go through the process of building a road map to retirement,
says Tania Slade, regional sales manager for BMO Mutual Funds.
"Folks who don't have a plan think it's painful. They think
we're going to tell them they're bad and they better stop spending their money.
They don't want to know the truth; they just want to stay in denial."
past BMO surveys show that 91 percent of Canadians agree having enough money for
retirement requires planning and advice to reach their goals, the reality is few
people take concrete steps to get that help. Baby boomers actually spend more
time planning their exercise, diet, home renovations and travel than they do planning
for retirement, she says.
While 70 percent of Canadian boomers
have an RRSP, fewer than 50 percent have a written financial plan in place, according
to BMO's most recent survey of boomers. A further 21 percent say it's in their
head, while 34 percent admit to having nothing at all.
toward financial planning can have a devastating impact on Canadians' financial
health, say financial planning experts. Because without a road map to where you
want to go, chances are you'll get lost or miss your destination.
should do it; most do not," says Pat Connor, an investment representative
and certified financial planner with Edward Jones in Ottawa. Canadians need to
understand that "retirement really isn't a date, it's a dollar figure."
The amount you'll need "to maintain a certain lifestyle" can only be
determined by financial planning.
Warren Baldwin, a fee-only
certified financial planner and regional vice-president of T.E. Wealth, in Toronto,
adds that financial planning is simply a "process through which you need
to work through to get a better understanding where all your finances are going
and how they are going to come together."
The experts say
a good financial plan has four critical components: an understanding of where
you are at today, a look at where you want to go, a strategy and implementation
plan for getting there and regular monitoring.
Each one requires
you to have realistic and concrete goals and expectations; otherwise it will be
a miserable failure. By being concrete, Connor says, "it leads to better
decisions being made."Where you are at today
This is the simple part of the plan, as it merely requires you to pull together
current information about your wealth. However, it is also the most tedious and
requires investors to dig into bank, brokerage and credit card statements and
commit to paper their major financial assets and debts.
- how much you earn. Include all revenue sources, such as income,
inheritance, rental property, etc.