Vacation homes, trips and sports cars. Most people want these luxury items. But when raising your family comes first – meaning food, clothes, education, hockey/dance/etc. – all of your income can be easily, and quickly, absorbed. In this day and age, saving for retirement is not an attractive activity and is often shuffled to the bottom of the list.
You can’t have the Porsche without the plan. Developing a financial plan should be an essential part of every person’s financial management. While there are many pros, fundamentally, it allows you to approach your affairs in a disciplined way.
As with any plan Silver + Goren helps you set up, the starting point is to lay out your objectives: where are you aiming to be and when you hope to get there. Once you’ve defined your destination, financial planning helps you launch strategies to reach your goals.
At Silver + Goren, after a client maps out their objectives, we always ask them to prepare a budget of how they currently spend their money. We ask them not to place any value or preference on what they’re doing, just document their current experience.
We then categorize their expenditures into fixed and discretionary categories. Fixed are those expenses that would be very difficult to change without a drastic lifestyle impact. These costs include housing, food and children’s activities. Discretionary expenses can be changed without having a dramatic impact. These might include travel, clothing and entertainment.
Next comes the hard part. Clients must choose what is important for their current lifestyle and how much they are prepared to put away for their future lifestyle. There is almost always a trade-off between discretionary spending and saving for the future.
Once you’ve decided to allocate a portion of your income to savings, you need to work with a financial advisor to help you find the right investment mix. This mix will depend on the risk you are prepared to take with your investments.
When your financial plan is in action, it’s smart to track your net worth on a regular basis (i.e. annually) so you can keep track of how well you are doing compared to your plan. This provides feedback so you can alter your decisions depending on how successful you have been.
For what to include in your financial plan, please download our Financial Plan Checklist. Then, when you’re ready to talk, contact us to help you get your plan in gear.