Behavioral economics shows us that if a person isn’t working toward something specific, they are more likely to over-spend on more immediate rewards, putting their future goals at risk.
With a financial plan, you can formally review these goals, re-evaluate them if needed, and keep track of your progress.
What are the values that are most important to you and your family? These will help articulate your lifetime goals.
Education. Many parents have a strong desire for their children to get a solid foundation that comes from receiving a good education.
Hopefully, as the child matures the thirst for a solid education and lifelong learning will be part of their DNA.
Parents with young children understand the financial challenges of receiving a post-secondary education and many will want to set up a savings program to assist their children when the time comes.
Student debt. Most young adults who attend a post-secondary education will graduate with debt. This presents a real hardship.
Eliminating student debt is that person’s first real financial challenge. This is made more difficult because, for many graduates, job prospects are not as plentiful and lucrative as with previous generations.
Saving to purchase your first house. The dream of homeownership is very strong in Canada. People work hard, save what they can and often adjust expectations downward in order to purchase a house.
Reducing household debt. The theory is to start eliminating debt that includes a mortgage, lines of credit, and credit card balances.
Unfortunately, debt reduction is more difficult because of the enticing historically low interest rates that encourage overconsumption, as opposed to debt reduction.
Retirement. From middle-age on, the most significant financial objective is to prepare for retirement with the hope of maintaining a desired quality of lifestyle.
All of these values have financial implications. All these values should be considered in your financial planning process.
Financial planning is not just about money. Financial planning is about the process that helps you achieve the things that are most important.