Financial planning is crucial to meeting many of your life’s goals, but many people are afraid of making that first commitment.
Jeff Young, senior manager of financial planning support at RBC, says the first step to taking control of your financial future is to find an expert you trust who understands you.
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“I strongly encourage people to work with an adviser because there are intricacies in financial planning that most individuals are not ready to handle alone. An adviser can really help you get a vision of what your goals are,” Young said.
Decide on what your short-, mid- and long-term goals are, and then be realistic about whether you’ll be able to reach them. If some of your goals are too vague or too lofty (at least for now), it might be time to tackle them in order of importance rather than trying to conquer them all at once.
“Put all your goals together and ask yourself, ‘Can I achieve all these goals?’ If you can’t, it’s time to prioritize,” Young said.
With people living longer, inflation continually rising, taxes slowly creeping up and economies swerving up and down, Ida Templeton, a director with Canadian financial services firm Investors Group, says some measure of financial planning is crucial for everyone.
“The reason financial planning is so critical is that we all are living under the same financial circumstances. A financial plan allows you to be in a position where you can control the things you actually have control over,” she said.
While certain things in life can be predicted, some of the most challenging situations can happen suddenly, such as a job loss, a death in the family or an economic downturn, and good planning can help you weather those challenges.
“A really critical component of any good financial plan is planning for the obstacles. Stay close to the fundamentals that build up a very strong foundation in your financial pyramid,” Templeton said.
The concept of good and bad debt is important to remember, Templeton says, because the difference has enormous implications for your financial health. Good debt, such as an RRSP loan, can help you meet financial goals in the right situation, whereas bad debt, such as credit card interest, can hold you back from those goals.
Templeton says that no matter how long you’ve waited to set out on a financial plan, it’s never too late to start.
“I think people underestimate the power and opportunity they have, and a lot of times it just means asking the right questions. Be conscious and realize that no matter how much money you have, you can make positive changes for yourself,” Templeton said.