What is Financial Planning?
Financial Planning - Whenever we hear this phrase, our minds immediately jump to retirement benefits or pensions or insurance settlements, doesn’t it?
But the world of finance, is so broad and diverse, that it actually offers a variety of services that help us not just in the far future but in our immediate needs and near future expenses.
Take Mutual funds for example, you can buy bonds and stocks and they pay out on dividends and interests. For a common person, choosing what to invest on, or knowing what bond to buy and how much to invest, is a bit confusing, isn’t it?
We all hear about people who make money through investments in stocks and shares, right? And we wonder, how they do that? Why can’t we do that? Or where to start?
Fortunately, we can have a head start into managing your money, by following these simple steps.
How to Start Financial Planning in Canada?
The key to have a financially secure, future and present, is to know what you have in your hands first. Be it your income, assets, liabilities. Your assets include, what you own like your house, your properties like land, art and collectible, cars, savings in bank accounts, the insurance policies in your name and the amount they pay off when they mature. And your liabilities begin with your taxes, the credits, which include credit card balances, loans or in short, every bit of dollar that leaves your hands now or in the future.
Now, if you subtract your liabilities from your assets, you can find your net worth. More assets and less liabilities, more in hand and thus more to invest! If it’s the other way around, you need to cut down your expenses first, find a balance before investing.
The next step is to find out your priorities. I want to travel when I retire and I have a good fifteen years to plan for. You might have a lot more time than that and you might want to start a business in the next couple years or even retire early and enjoy sitting in the porch. Whatever it is, you need to have a clear idea as to how that goal affect your present incomes.
You need to adjust the incomes, assets and liabilities in a way that they help us in your goals without biting your hands. It does need some sacrifices like not buying that brand new SUV by replacing you old but still in good condition sedan!
Once your affairs are in order, you need to plan about investing in the right place, and by place, I mean the various channels of investment like Properties, Stocks and Shares and so on. It could take a while to figure out the best way to invest. There are many certified financial planning Scarborough companies that offer a variety of services based on what you have and our goals.
RoboAdvisors are basically algorithms without any human interference that use your inputs like your current net worth and suggest you a good investment plan and you’ll get to know where to invest and what to invest in. However, financial planning is something that has to be done as per the needs of individuals. Your income, expenses, goals and future needs are different from others. I provide customized financial planning services in Scarborough. Contact me to know more about how to start financial planning.
Some Books To Read
Now, some people like to know more about all this before they get to financial advisors. For them, I would suggest some books to read to get a fair idea about how this system works. Choose one from below and give it a full read and take some time to understand and correlate the current scenarios.
1. The Wealthy Barber by David Chilton
The book talks about how to manage your everyday finances, how to use your credits more appropriately and how to create a long-term investment plan in a super fun way!
The Book also has a sequel. The wealthy barber returns!
2. Stop Over thinking your money! by Preet Banerjee
This book talks about the basics of investing, insurance, financial advisors and some simple rules for financial success. It can be read by all age-groups by the way.
3. Wealthing like rabbits by Robert R. Brown
If you want to know everything about investment accounts (RRSP and TFSA), debt repayment, frugality, credit cards, mortgages, opportunity cost, and more. You should definitely read this.
How to Start Retirement planning
I know what you’re thinking. Do I go for RRSP or TFSA or both?
I would say, whatever you choose, you need to invest consistently. Sure, each has its own advantages and disadvantages. Like RRSP – Registered Retirement Savings Plan has stricter rules than Tax free Savings account but it has more room for contribution. Likewise, TFSA is more flexible and offers more tax benefit than RRSP.
The main difference between the two is how your income is taxed when you deposit or withdraw from that account. The RRSP is tax- deferred, that is, you contribute through your pre-tax dollars and pay the tax upon withdrawal. But in TFSA you contribute after you settle your taxes, so when you take out from this account in the end, it comes tax- free! Either way, some of your money goes off as tax.
When it comes to returns on investments through both these channels, they amount to be the same. So, I would say, consider your present incomes and expenses when choosing either of the two.
Financial planning in Canada is easier than you think. All you need is the right information about yourself and the services available around you. So, stop worrying, start planning and get secure. Contact me to start your personalized financial planning.