Congratulations, if you’re one of the many Canadians who has a financial plan in place! You’ve taken a decisive step toward creating a financial roadmap that can help guide you toward a more secure future.
While having a financial plan is a great start, it’s important to remember that to provide its maximum benefit, your plan needs to be continually updated to reflect the ongoing changes in your life. That includes everything from marriage and the birth of a child to career changes or a new home purchase, just to name a few.
Keep in mind that financial planning is an ongoing process. That’s why we often refer to a financial plan as a “living document,” something that’s continually amended to reflect the changes in your life. For that reason, it’s a good idea to keep your plan accessible so that you can easily review it as your financial situation changes.
The only constant in life is change.
In the following article, we’ll take a look at key life milestones that should trigger a review and possibly an update to your plan. The following article assumes you already have a financial plan in place. However, if you don’t have a plan, schedule a meeting with a Scotiabank advisor today to create a plan that will help you achieve your financial goals. For some compelling reasons to establish a financial plan, see Five benefits of having a financial plan later in this article.
Opportunities for review: the time is now
So when should you review your financial plan? While a lot depends on your circumstances, it’s recommended you review your plan once a year, at a minimum – and maybe more – especially if there have been significant life changes, such as:
- The birth of a child
- New job/career change/promotion/ salary increase
- Job loss
- New home purchase
- Death or inheritance
- Disability, illness or a change in health status
- Major move to a new province or country
- Paying off a major debt
- Major asset purchase (car, boat etc.)
Annual investment portfolio reviews with your advisor also provide an excellent opportunity to discuss and update your financial goals as they relate to your plan.
The bigger picture
While the list of key life events outlined above is fairly comprehensive, here’s a few more things to consider when reviewing your financial plan.
Goals are an essential element of any good financial plan. However, you’ll find that your goals will change as you enter different stages in your life. Are all of your goals still relevant to your financial plan? Maybe you can eliminate some goals you’ve achieved (like paying off your student or personal loan) and add new ones (like saving for a home or your child’s education). Reviewing your goals will provide a sense of the progress you’re making and perhaps prompt you to reconsider specific goals or new approaches to achieving them.
It’s a good idea to periodically review your cash flow – particularly when you experience a key life event that may impact your income and/or expenses. It may be necessary for you to make adjustments to your financial plan for the short or long-term to address changes in your cash flow.
Each key life event we experience will inevitably alter our approach to risk. For example, with the birth of a child, having adequate life insurance to protect your family financially may become a priority. Risk is also a key consideration when it comes to investing. As you approach retirement, you’ll probably start reducing your investment risk in order to safeguard your portfolio against market downturns or financial crises.
Your financial plan review: It all starts with a simple conversation
Whether you need to revise your financial plan or simply want to review certain goals, a Scotiabank advisor will work with you to update your plan to help ensure you’re on track to achieve your financial goals.
Five benefits of having a financial plan
1. Helps you set goals and plan for your future
Whatever you want to achieve in life, a financial plan will help you set realistic financial goals and outline a strategy and timeline for achieving them.
2. Identifies opportunities
Whether it’s growing your savings, reducing debt, or selecting tax-efficient investments to help you keep more of your money, a financial plan can help you get better financial outcomes.
3. Helps you navigate your finances with confidence
Working with a financial advisor to create a financial plan will help you build up your wealth through better savings approaches, while increasing your financial knowledge, so that you can be confident in the choices you make.
4. Plan for the unexpected
A financial plan can help analyze your current financial situation and put in place appropriate safeguards to handle unexpected life events (e.g., disability or illness, job interruption, loss of life).
5. Provides peace of mind
A financial plan doesn’t only give you financial benefits. A major study of Canadians found that those who engage in comprehensive financial planning report higher levels of emotional well-being than those who have engaged in limited planning.1
1. Financial Planning Standards Council, The Value of Financial Planning, 2012.