I grew up in a generation where, when a conversation about money was happening, I was asked to go to the other room. It was a taboo subject that was talked about in private rather than an open family conversation. For that reason, many of us have been sheltered and are unsure exactly how to navigate our own financial path.
Thankfully, I have been taught many tips as an adult that I now feel confident in my financial path and love sharing my learnings with others. When working with clients, I often recommend using the analogy of your finances as you would for planning a road trip. While planning a road trip most people would use GPS or Google Maps to figure out the best possible route to take right? Unfortunately, when it comes to our finances, many do not use that same logic.
In my line of work, I help families put together a financial GPS. I provide them with a plan to get on track to build a solid financial plan for today and the future.
Here are five steps to build a solid family financial plan:
1. Life insurance, also referred to as income protection. This step makes sure that if you pass away, your family can still maintain the same standard of living without any financial hardships. It is recommended to get term insurance. You can get a lot of coverage for a low monthly cost, which can help pay off debts, final expenses, mortgage and of course a stream of income for your family. Also, I would add a making a will/estate planning in this category. These might not sound like the flashiest tools to build your financial plan, but they play a crucial part in building a strong financial foundation.
2. Emergency fund. Experts say to have 3-6 months of income saved in case something happens. One thing the pandemic taught us is that things can change in a hurry, so it is always good to have some money put aside in case of a job loss, car troubles, house repairs, medical emergency, etc.
3. Debt elimination. This area has spiked in the past decade or so. Families across this great country are struggling with record levels of debt as the cost of living has gone up drastically and housing has skyrocketed. Therefore, it is especially important to get a plan in place to tackle it. I teach families a concept called debt stacking. This is used by taking a smaller debt or sometimes a higher interest debt and paying that off first. Once that payment is done, take that amount and apply it to your next debt and so on. This drastically reduces your time in debt and saves you thousands over the course of your lifetime.
4. Investing/retirement savings/children's education. This is a key area not to be overlooked. It is important to put away as much as you can for the future. There are great investment vehicles in place such as RRSPs and TFSAs to help get you to your financial destination. Putting a proper portfolio together that gives you an excellent rate of return is key to letting your money work for you.
5. Regularly review and revise your plan: Your financial situation and goals may change over time, so it's important to regularly review and revise your plan.
Remember, creating a solid family financial plan takes time and effort, but it is a critical step towards achieving financial security and stability. Consider meeting with a financial advisor to help you stay on track and adjust as needed. It’s easy to stay stuck. It takes courage to take that next step and get a plan in place to build a solid financial family plan. As Nike says, “Just do it.”