By iA Private Wealth, December 05, 2022
As we begin a new year, some people make resolutions like dropping a bad habit or exercising more often. Other common resolutions pertain to financial well-being, such as earning more money, watching credit card debt or investing regularly.
Whether or not you choose to make formal resolutions, it’s always valuable to improve your financial health. A great way to put (and keep) yourself on the right track is with a comprehensive wealth plan. A customized plan helps you navigate financial challenges so you can better prepare for the future.
Elements of a wealth plan
Working with an Investment Advisor is a good way to address all aspects of your financial circumstances in your wealth plan. Here are some key elements an advisor will cover:
Set financial goals. Your short- and long-term goals will help drive the direction and composition of your wealth plan. Short-term goals might include buying a vehicle or taking a vacation. Long-term goals could be purchasing a home or putting kids through school. Whatever your goals, try to be detailed about the timeframe and how much it’ll cost to achieve them. An advisor can help you define and prioritize your objectives.
Evaluate your financial situation. The ability to meet your goals depends largely on your finances. Start with a “balance sheet” that lists your assets and liabilities. Assets may include real estate, money held in bank accounts and registered accounts (e.g., RRSPs, TFSAs, pension plans, RRIFs), as well as money in non-registered investment accounts. Liabilities might include debt associated with credit cards and lines of credit, a mortgage, student loans and other obligations. A balance sheet is a snapshot of your net worth and helps your advisor develop or modify your wealth plan to manage your debts.
Create a budget. With your net worth sorted out, the next step is to create a budget that will help you spend wisely. A budget considers your regular expenses, including building an emergency fund for unexpected expenses and saving for retirement. It also lists your regular sources of income to see if the cash flow can meet your expenses. If your budget shows you may encounter a shortfall, an advisor will help identify ways to cover your costs (e.g., eliminate certain discretionary expenses, save more money, earn a higher investment return, find tax efficiencies).
Develop a retirement plan. For most people, their biggest long-term goal is retirement. Issues to consider include where you’ll live, life expectancy based on health and family history, desired lifestyle, projected cash flow and expenses, etc. Your advisor will evaluate these factors and construct a personalized retirement plan. Also, you may want an estate plan that reflects how you wish to distribute your assets. An estate plan encompasses a will, powers of attorney, trust designations and philanthropic pursuits such as charitable donations or setting up a scholarship/foundation that will help establish your legacy.
Benefit from professional advice
As you can see, a wealth plan has many components that will impact your financial future. You’ve also seen how an advisor plays a crucial role in creating and maintaining your plan. As circumstances change (e.g., marriage, children, job, home/business ownership), an advisor can revise your plan accordingly and ensure the investment component of your plan remains sufficient to fund life’s needs.
To help grow your wealth in 2023, contact an iA Private Wealth Investment Advisor today.
