Planning for Retirement
If your plan is to build a house, your need a blueprint and materials. The same is true for your financial plan.
Building your financial plan - Your financial plan is unique to you, your dreams and your needs for the future. There are certain elements that hold true for every plan.
Start now - Determine where you are now financially. Develop a snapshot of your assets and sources of income, along with your liabilities and obligations. Calculate your net worth and then develop a budget to better understand your monthly spending and expenses.
Establish goals - Determine where you want to be financially. It's important that you establish some realistic short-term and long-term goals to evaluate your progress and the need for changes or modifications.
Plan and execute - Develop a series of action steps to help you achieve your goals. This could include any number of the following:
Although sometimes difficult, projecting into the future is stimulating. Visualise your goals if you want to reach them then work with your financial advisor to develop a plan to help you reach those goals.
- Pay yourself first - Plan to maximize your RRSP contribution and set aside an additional 10 per cent to save for large purchases, special occasions, annual vacations, an emergency fund and to build a cash float. A line of credit can also help handle emergency cash needs.
- Be consistent - It's a lot easier to achieve financial independence by setting some realistic expectations and then meeting small incremental savings goals rather than waiting for large milestones to creep up on you.
- Get rid of debt - Pay off higher interest rate debt first, then move to lower interest rate debt before you make large contributions to investments.