What are Financial Plans and How to Build One?

 Introduction

Organizations and individuals across Toronto and other cities create financial plans detailing their current economic circumstances and short- and long-term monetary goals. It helps reduce stress, support your current needs, and help build a nest for retirement.

Learning more about a financial plan in Toronto and how to create one can help you make an informed decision. 

In this blog, we answer the question of what is a financial plan and help you build one.

What is a Financial Plan?

A financial plan identifies, organizes, and prioritizes your financial goals and outlines the steps you must take to achieve them. 

The plan also provides insight into whether you can meet your financial goals or need to change your spending. 

A financial plan is essential as it enables you to make the most of your assets and prepare for any roadblocks.

You can either create a financial plan yourself or get help from a certified financial planning professional. 

Steps to Create a Financial Plan

Step 1: Set SMART financial goals

The motive for creating a financial plan is to recognize your long-term goals and take action to achieve them. However, setting goals must be SMART - specific, measurable, achievable, relevant, and time-bound. 

SMART goals help you break down the extensive financial planning process into actionable pieces and help you achieve them quickly. 

Step 2: Collect information about your investments and finances

Once you have set the goals, you can collect information about your assets and finances. It includes rent or mortgage, utility bills, groceries, transportation, and other fixed expenses. 

Next, look at your spending history to get an idea of what you usually spend on and clearly understand your income, including your paycheck and any investment. 

Knowing where you stand helps determine your next steps to achieve your goals. 

Step 3: Save for an emergency 

Many people live paycheck to paycheck without any savings. So, when unexpected expenses come along, they won’t be able to cope with them. Therefore, it is vital to save money for an emergency. 

However, if you have been saving for years, it is good practice to review the emergency finances when creating a financial plan, and it enables you to know that they cover your current needs. 

Also, when saving money for an emergency, it is crucial to have multiple backup funds that come in handy in an unexpected crisis. 

Step 4: Reduce high-interest debt.

If you have high-interest debt, like credit card balances, payday loans, title loans, etc., plan to eliminate them faster.

Interest rates on some of these loans may be high that you end up paying more than what you borrowed. 

Also, make it a habit to cut expenses whenever possible to add to your savings and eliminate debt. 

Step 5: Plan to invest 

Investing sounds like something for rich people or when you have an established career. However, it is not the case. 

You can start investing early in your career by opening a brokerage account or putting money in Canada Saving Bonds (CSB), Exchange-traded funds (ETF), and Treasury bills. 

Financial plans use various tools for investment. Talk to a certified financial advisor to learn about them. 

Step 6: Revise your financial plan

Financial changes impact your ability to reach your goals. It is good practice to check your plan to see if you can meet those goals. If not, you can change the plan by altering the timeline, setting higher savings, or changing the goal. 

Conclusion

A financial plan helps you manage your money and plan for the future. Though making a plan will take time and effort, it will pay off in the long run.

However, no worries if you find creating a financial plan in Toronto intimidating. Seek the help of a financial advisor at Allegiant Capital Group. The professionals will guide you through creating a plan that works for you and also help you invest for the future.