Financial Planning – what does it entail?

The wheels are always in motion when it comes to life and money. We cannot stop life from assuming its natural progression or sometimes, abruptly halting without notice. We cannot stop the fluctuating valuations of assets. We cannot stop tax laws from changes. We cannot stop inflation and the time value of money. However, we can minimize the negative impact and stop ourselves from getting stuck behind the proverbial eight ball when it comes to our finances by using proper financial planning. Allow me to explain further.

Important, constantly shifting components in our financial picture:

  • Savings rate
  • Asset values and investment growth rate
  • Expenses and liquidity needs
  • Inflation
  • Health or age related costs
  • Taxes
  • Estate surplus or deficiency.

Major life milestones or upsets:

  • Marriage and children
  • Divorce or separation
  • Employmentloss or other financial loss
  • Early death or disability
  • Step families
  • Retirement lifestyle needs
  • Longevity
  • Hopes, dreams, and legacies

Financial planning starts with examining and entwining the moving components as a whole and presents a detailed outlook of everything. By using a multi tasked approach, it shows the possibilities, potential risks, and areas requiring attention. Financial planning can show you various outcomes by manipulating one or several major components – called “what if scenarios” to show you the most important areas, and those that cannot go wrong when trying to reach various life goals.

Compartmentalizing finances is all too common and one of the most inefficient ways to plan and achieve long term positive progress. Real financial planning is multi-faceted and uses ongoing efforts of check-ups and updates. One component that deviates away from plan affects others to various degrees. If this is not caught early enough in the process – it can be too late or onerous to fix.

Financial Planning can have many areas of specific focus.

The general key efforts are:

  • Financial calculations and financial projections
  • Review of what the results actually mean for you
  • Advice on important issues such as taxes, investments, estate planning, insurance needs, cash flow, retirement income, and other asset liquidity needs.
  • Annual re-calculations that confirm if everything is still on track as planned
  • Re-calculations whenever there has been a major change whether planned or unexpected
  • Retirement withdrawal strategies

Since all components need to work efficiently together, financial planning should be the first stop before making any substantial financial decisions or changes. It’s the cornerstone of everything financial.

Susan Mallin, CIM, CFP

Vice President Financial Planning, Associate Portfolio Manager

Lorne Steinberg Wealth Management