Why You Should Plan and Save for the Future

by True Wealth Advisors

With Financial Literacy Month (FLM) in the home stretch, we’ll continue our discussion on personal finance topics. The last three weeks we wrote about the following: 5 Ways to Reduce Debt, Why Every Family Should Have a Budget and Why Financial Literacy Month Matters. We’ve already discussed the first goal of “Count Me In,” which is to “manage money and debt wisely.” Once you have a budget and your debts under control, the next goal is to “plan and save for the future.”

Why Planning for the Future Matters

It’s hard to plan short-term and long-term without a financial plan. A financial plan is like a road map. It helps you get from Point A to Point B on your way to achieving financial goals. An important part of financial literacy is to set financial objectives, identify paths to get there and take the necessary steps to achieve those objectives. These can be short-term goals, such as buying a TV set, or a major life event like buying a home or saving for retirement.

Setting Your Financial Objectives

When setting your financial objectives, it’s important to make sure they are specific and measurable. Instead of simply saying you want “enough money” to buy a home or retire comfortably, try to figure out how much money you’ll actually need. Although a lot can change between now and your golden years, it’s worthwhile to plan ahead. For example, instead of simply thinking you’ll need “a lot of money” to retire, try to figure out how much money you’ll need in your RRSP to draw down. Financial objectives don’t necessarily have to be about retirement. If you own a home and want to be mortgage-free sooner, you can aim to pay down an extra $3,000 each year. If you aspire to own a home, you can aim to save $50,000 for a down payment in the next three years.

Taking the Steps to Achieve Your Goals

It’s important to make sure your financial objectives are realistic and achievable. If you’d like to save $50,000 for a down payment, but you’re living paycheque to paycheque, you’ll need to be willing to make some financial sacrifices to get there. If you’re not currently on track to reach your financial objectives, there are two things you can do: boost your income and decrease your expenses. To boost your income you can get promoted at work, get a second job, start a side-business or rent out a part of your home. The best way to decrease your expenses is to take a look at your budget. Pay especially close attention to recurring expenses. Although $40 a month may not seem like a lot for a gym membership, it adds up to a lot over time. Figure out where you can find the extra savings, how much money you can save and how long it will take for you to achieve your financial objectives.

Financial planning isn’t something you need to do alone. There are many factors that also need to be considered (such as, taxes, inflation, economic landscape, market risk, provincial laws and so forth) and these factors affect your purchasing power and have a direct impact on whether or not your goals are achievable. Working with a specialist who understands how these forces correlate while also understanding your unique situation can go a long way to helping you get there. That is, taking care of the things that matter to you. Feel free to contact our office and let us put our experience and expertise to work for you. We’ll make sure you’re on track to meet your financial objectives.

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