A financial plan is a blueprint for the money side of life.
It’s financial planning week. Granted, not as exciting as Thanksgiving or Halloween, but bear with me. If I could reduce your stress, make you happier and more secure would you start to get a bit more interested?
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There’s one fairly easy step you can take to accomplish all of the above —- make a financial plan. According to the Financial Planning Standards Council, which oversees the Certified Financial Planner or CFP designation, only one in five Canadians has a financial plan.
“And I need one because?” you ask.
Well, those who have a comprehensive financial plan (read: know where they are and where they’re going financially) are twice as likely to feel prepared to weather difficult economic times. And they’re almost twice as likely to have peace of mind about their financial situation as those who have never done any money planning.
And peace of mind equals reduced stress. Right?
If I have you convinced the exercise is worthwhile, you might wonder about the what and where of financial planning. The process involves six elements; household budgeting, tax, retirement, estate planning (including life insurance), investing (as well as saving) and debt management.
A CFP, or certified financial planner, will have all the tools to put together a comprehensive plan. But, in the wake of some horrible investment experiences recently many are leery of advisors who are paid largely through the products they sell, such as insurance and mutual funds.
Fair enough. One option is a fee only or fee-for-service planner. About seven per cent of CFPs operate on this basis where you pay for their advice, just as you would a lawyer.
Whichever kind of advisor you choose, ask, “How and how much are you paid?” And ask them to disclose anything they don’t sell because there is no commission attached to compensate them.
The good ones will applaud your diligence.