How to make your financial plan work for you

Why should you have a financial plan? 

A financial plan typically has a protection component, such as life and disability insurance. That’s in addition to your will and power of attorney, which provide protection from life’s ups and downs.

Creating a financial plan can help you answer questions like:

• How do I save for a down payment to buy a home?
• How much should I save in my RRSP to retire comfortably?
• How can I protect myself from an unforeseen event, like losing my job or getting sick?

Christine Drolet is a Sun Life financial planner. She explains the difference between a budget and a financial plan. “Your budget is based on your daily income and spending. A financial plan, on the other hand, gives you a bigger picture. It gives you a strategy to achieve your short-, medium- and long-term goals.”

A financial plan can help you:

• save money to reach your goals
• manage and pay down your debt
• be prepared when the unexpected happens
• plan for retirement
• optimize your investments

When and how to create a financial plan 

It’s always the right time, no matter how old you are 

Whether you’re a recent graduate or retired, it’s always the right time to draw up a financial plan. And it’s a good idea to review your plan regularly.

Your financial situation can be affected by major life changes such as:

• job loss;
• marriage;
• illness;
• divorce;
• birth of a baby.

“You should make it a habit to review your financial plan every time your situation changes,” Christine Drolet advises. Why? To make sure your plan continues to help you reach your goals. If your plan no longer does that, you’ll need to change it.

Do a financial check-up 

This will serve as your financial roadmap and requires a bit of effort on your part. You’ll need to make a list of your assets and debts. This means you’ll have to gather all the information first. And you may want to have several meetings with your advisor.

Your financial check-up will show you how much money you can save. Plus it will give you the best strategies to achieve your goals.

For example:

• Is it better to use an RRSP or a TFSA to save money for your down payment?
• Which products should you invest in?
• How much should you invest each week, month or year?

A financial plan is like a compass that points you in the right direction to making better financial decisions. “It will nudge you to adopt good financial habits, while keeping you on track to achieve your goals. It will also show you how to make your money work for you,” says financial security advisor Jean-François Bélanger.

“When you know where you’re heading, when you understand the strategy you need to follow to reach your destination, when you know you’re protected, it relieves your financial anxiety. That’s real peace of mind,” Bélanger points out.