Financial Planning: Why Wealthy Women Need It
Canadians who have a written financial plan have over 30% more money and over 50% more confidence in their financial situation than those who don’t have a written financial plan. That’s the result Dr. Preet Banerjee found from his doctoral thesis research.
Would you like to have more money and more confidence? Maybe it’s time to hire a financial planner and start reaping the benefits financial planning can bring to you.
Today we’re talking about Financial Planning: What it is and Why Every Wealthy Woman Needs It. Read on!
What’s Inside?
Table of Contents
Prefer to Listen?Here’s the podcast episode!
Too many Canadians don’t have a financial plan.
That’s what a recent FP Canada report found.
Only 25 percent of Canadians are working with a financial advisor and 30 percent of those surveyed say they don't have a financial plan at all.
Interestingly, younger people are more likely to say they don't have a financial plan but wish they did.
What caught my eye about this survey is that Canadians don’t even agree on what a financial plan is. Some think it is an investment plan, that is, a plan for what types of investments you’ll put money into. Other people think a financial plan is a written plan that shows where you are today when it comes to your financial circumstances, where you plan to be tomorrow and how you’ll get there.
That definition is closer to the truth.
A financial plan looks at the big picture. It helps you set short-term and long-term financial goals and identify steps to achieving them.
Let me step back a bit and let you know that there’s a difference between financial planning and a financial plan.
Financial Planning is a verb, it’s something you do.
Financial planning is an ongoing process that looks at your entire financial situation in order to create strategies for achieving your short- and long-term goals. As life happens, the plan gets updated.
Financial Planning can reduce your stress about money because it helps you answer questions like these:
Am I going to be okay when I retire?
How long will my money last?
Am I saving enough?
How much can I spend without running out of money?
When should I take my OAS and CPP benefits?
How much will be left for my children?
A financial plan is a noun, it’s something you create
It’s part of the process of financial planning.
A financial plan is a written, comprehensive picture of your current finances, your financial goals and any strategies you've set to achieve those goals.
What Does a Written Financial Plan Include?
A complete financial plan covers every area of your financial life.
The first section will have cash flow projections that show you what you’re earning and what you’re spending.
It will show you what your net worth will be over time if you stick to your goals. Net worth is what you own and what you owe to other people.
Another section of the plan will analyze what types of investments you might consider in order to meet your goals and provide an income for yourself while being true to your own style of investing and your personal tolerance for risk.
Another section is Retirement Planning. What lifestyle can you expect given the retirement income and savings you’ll have and is there anything you can do before you retire to create the life you want in retirement.
Another section covers Tax Planning. The idea here is to research ways to minimize your current and future income tax.
Some financial plans can also have sections that review risks you and your family might have should you die or have health issues unexpectedly.
Other plans may also review Estate planning. That research helps determine whether you’re leaving as much as you should be to your heirs in the most tax efficient way possible.
So there are six areas of your financial life that a written financial plan can cover. That’s a lot. And having that plan can go a long way to increasing your sense of having confidence in your financial future.
If You Don’t Have a Plan, You Have a Problem
As the saying goes, if you don’t know where you’re going, how will you know when you get there?
As I mentioned, the research shows that those with a financial plan have more money and more confidence. Here are some of the other benefits to having a financial plan.
Having a financial plan can help you:
Prioritize your financial goals. If you have multiple goals, your plan can help you rank which are the most important.
Find the money to reach your goals. You may find it easier to save when you know what you’re saving for.
Stay organized. A financial plan can help you balance spending and saving, keep track of expenses and manage debt.
Worry less about money. A plan can help you see where you are today and create a path to get to where you want to go. A good plan will also incorporate a plan for what you will do in an emergency, such as having an emergency savings account or a line of credit that is only used in those cases.
Actually accomplish your goals. Okay, this is sort of true. The plan itself doesn’t help you stay accountable if you stuff it in a drawer somewhere and never look at it again. But, if you work with a financial advisor to create the plan and coach you to be accountable, you can finally accomplish those goals.
Make sound lifestyle and financial choices. Ooh. I have your attention now! How does it help you do that? Think about it. If you have the information and confidence that a financial plan brings you, you may decide to leave that stressful job earlier and live abroad, or start your own business.
Once you have a financial plan, remember that plan represents a moment in time. Tomorrow is another day and another surprise the universe presents us. A good professional financial planner or financial advisor is going to help you update your plan over time, every year or so as needed so that whenever you have a financial decision to make, you can go back to the plan and update it together.
Why Don’t You Already Have a Financial Plan?
So why don’t we all have financial plans? We’re smart women. This is a no-judgement zone, ladies. There’s lots of reasons why you may not have a plan.
Number one: You avoid talking about finances. I have a friend who said that if someone brought up a personal finance topic at a party, she would spill wine on herself to give her an excuse to leave the room. Does that sound like you maybe?
Second reason you don’t have a financial plan yet: You have crappy financial habits and you know you have crappy financial habits. We all have habits we aren’t proud of. But when will you say “okay, this is an issue in my life. I’m ready to turn this boat around?”
Third reason you don’t have a financial plan yet: Maybe you’re not ready to face reality. Let me encourage you on this: Having the knowledge of where you truly are and where you want to go with your finances gives you a renewed sense of power. It is the difference between “I can’t buy that thing or make that memory” and “I choose not to buy that thing.” Huge difference. It’s not a budget. It’s a mindful spending plan.
Think about your friends who are truly wealthy. High NET worth people, not high DEBT worth people. My guess is they live simple lives and don’t seem stressed because they are realistic about where they are and how they choose to spend their money.
There are many other reasons you may not have a financial plan. As I said, you’re smart. Now that you know that you should have a financial plan and you’ve kicked those excuses aside, what do you do? You can go to my website, GloryGray.com and make an appointment with me, that’s one thing!
Holistic Financial Planning
But, even if you don’t choose to work with me, it’s important to find a financial advisor who does what we call holistic financial planning. Those are the ones who can create a complete and thoughtful plan for you and help you be accountable to your goals.
How do you know if you have such an advisor? If you talk to them and they immediately start talking about the investments they will sell you with no discussion at all about who you are as a person, what plans you have for a life and how you will get there, they are not a financial planner. They should be able to prepare a written plan for you that covers at least most of the six financial areas of your life I mentioned before.
And if you want to manage your own investments and enjoy doing that, more power to you. You still can greatly benefit from going through the process of financial planning and gaining a valuable financial plan to help you gain confidence and make and keep more money!
I have some good news to tell you. Our office is accepting new clients this year. So, if you live in Canada and want to get serious about getting your financial house in order, go to GloryGray.com and get in touch with me.
If this podcast helped you, please subscribe, leave us a positive review and tell others about it so we can help them too.
You Will Also Love …
