Life Stages and Financial Planning
As one goes through life’s stages your goals and requirements will change. What is right for you at age 25 is probably not the same as when you are 55. A financial plan will assist you in reaching those goals, and at a minimum will bring peace of mind. As the American baseball player/philosopher Yogi Berra said – “If you don’t know where you are going you will end up somewhere else.”
The stages and goals in a person’s life generally unfold as follows:
Stage 1: Starting your career – this stage is normally characterized by one central fact – namely you are broke. For some this never changes but with a plan and some discipline it does not need to be so.
Goals:
Pay off your student loans
Purchase a car
Buy consumer goods – furniture, ipods, etc.
Build a good credit rating
Stage 2: Career / Family – you may settle down, get married, start a family. Now it’s time to become serious about financial matters particularly if you have a partner or children who are dependent on you.
Goals:
Purchase a home
Proper insurance coverage
Make a will/Power of Attorney
Start saving some money
Stage 3: Middle Age – middle age is defined as when the phone rings on a Saturday night and you hope it’s not for you. This stage normally involves paying down mortgages and starting to think seriously about retirement.
Goals:
Pay off the mortgage
Put some serious money into retirement savings
Educate the kids
Think about purchasing a cottage or vacation property
Stage 4: Pre-retirement Years – this stage is usually one of heavy savings.
Goals:
Grow your retirement savings
Reduce debt (the goal is zero debt upon retirement)
Plan your retirement life style
Stage 5: Retirement – a well-earned retirement; put your feet up and relax
Goals:
Travel
Make necessary changes to your will
Establish an estate plan
Manage your tax bill
Remember that all plans will change over time. Surprises occur, some good and some bad. Your financial plan should be flexible enough to adapt to changes, but simple enough so that you will follow through.
Financial Planning FAQ:
Question: How would you encourage women to become more involved in their financial planning?
Most Canadian women are disinterested and unprepared when it comes to planning their financial futures, according to a recent survey by TD Waterhouse. If that’s true, how would you suggest encouraging women to become more ‘invested’ in their personal finances?
Answer: I think that this is an over generalization and likely generated by a need for furthering the agenda of TD. My wife is very involved in our financial situation. In fact she is quite a bit more involved then I am for the simple fact that she is far better at it. I would recommend anyone do a little personnel research on the topic before jumping on the band wagon.
Question: Does the Canadian government give any financial assistance to new immigrants?
A family member is planning to migrate to Canada with his family.My question is about any benefits financial and otherwise that the Canadian govt.might be giving to immigrants when they land.Would appreciate any information on this and any suggestions about useful internet sites
Answer: Whoever sponsors immigrants is financially responsible for any and all costs incurred whether it is an individual immigrant or a company that sponsors the immigrant(s). The Canadian government does not have money to give to new immigrants. Until someone has permanent resident status or becomes a Canadian citizen, they do not qualify for any type of assistance. One of the conditions of immigrating to Canada is that you must prove that you are a benefit to Canada and that you are not coming here to drain our financial assets. Coming here with your family and expecting Canadians to fund your life is not reasonable, and would result in being denied a visa to enter.
Question: Are Dave Ramsey’s books/concepts Canadian friendly or does he base most of his advice on the US system?
I would like to purchase the books as a gift for a family member who needs a financial plan but I’m worried that the books are filled with budgeting/investing advice that is useless to him here in Canada.
Answer: The budgeting will work no matter the modern country you live in, Japan, Canada, Spain, US, etc.
Investing is written by an American but he is simple- stick with Mutual funds. Life insurance- purchase term life 8-10 times your income. Disability insurance – get some. Long term care insurance- buy it when you are 60. Health insurance- get some. College savings- use educational savings plan. Don’t use the plans that you have no control over where the money is invested. He does not name funds just tells you what to look for in a good fund. He explains why he doesn’t like single stock, bonds, precious metals, etc.
Question: Financial planning?
I am planning to move out for my first time and I would like to know about how much do I need to have saved in order to live without worrying?
Answer: Experts say that you need to figure out what you spend each month and then times that by 6. Because they say you need to have at least 6 months of bill money in the bank in case you lose you job.
Question: Why do people delay personal financial planning?
People need financial planning at every stage of their lives, whether it be debt reduction, buying a house or a car, marriage, divorce, and the biggest concern of most working people—retirement. Why don’t more people realize that the financial decisions they make today have a direct effect on the life they will be able to afford tomorrow?
Answer: Could be a number of reasons: no discipline, no education in finance, no goals for the future. Personal financing should start IN THE HOME at an early age, hopefully by parents who have a successful financial plan and outlook. Children learn what they live.
Question: What is good financial planning software that can be used in confuction with dave ramsey plan (microsoft money) or something that is very good?
Answer: I set up his budget form (modified to our specific bills) on Excel. Now he has software (about $25) available on his website or subscribe to My Total Money Makeover section of his website and you can do the budget there. Or Crown Financial (originally started by the late Larry Burkett who Dave gives a lot of credit to) has budgeting forms and online software. Both would be the best way to stay completely in line with Dave’s principles. Both of the on-line subscriptions have free trial periods.
If your not interested in those, Quicken is also a very good financial planning software.
Question: Where & how does one start financial planning for oneself?
Please suggest an approach / road map, steps to financial planning that is executable by a salaried individual. I would like to avoid any middlemen or agents.
Answer: Your public library. The first book I would recommend is called “The Automatic Millionaire”. It is nothing groundbreaking or new. I can’t believe this guy got rich off of writing these books. I would never buy one of his books. But I read them at the library. It is full of 100% common sense. Very important common sense. Follow it.
Don’t try anything that involves “tricks”, paying someone else to predict the future for you, or anything like that. (You can predict the future just as well as the professionals.) Personal finance is indeed 100% common sense.
Question: How to have good Financial Planning for single income?
Answer: First list all your expenses over a given time period like per month.
Next list your income.
Add both up–if your expenses are greater than your income you need to do one of two things. A: reduce your expenses or B: increase your income.
Once you have your needs covered, you give yourself something to spend that’s extra but not too much. Set up a regular savings plan with your bank. Even if it’s only a few dollars per month going into a savings account, it will add up. Try not too look at it and let it grow so you will have it in case of a major emergency like losing your job or something like that. Seeing a huge sale on collector dolls on the shopping channel is not a major emergency.
Once you learn to live within your means, everything else is downhill from there. You might buy a book on personal finance. They have lots of them at the local bookstore. Or you can just go to your local library and read them for free!