Finance: Make A Plan And Map Out Your Financial Goals

There’s an old saying – if you fail to plan, you plan to fail. When it comes to your finances, this is particularly true. A recent poll, conducted by CIBC, surveyed Canadians with household incomes above $100,000. Out of the study group, close to half of the participants didn’t have a financial plan in place – nothing detailed that was set out as to how they planned to reach their goals.By not having a financial plan means that there’s no emergency fund, no nest egg – no extra money at all. This lack of planning could mean financial ruin for many. All it takes is an unpredictable hiccup, like a temporary job loss, a family emergency or a major house repair to send many bank accounts deep into the red.It may seem daunting to come up with a financial plan, but it’s as simple as writing down your personal goals and financial needs, as well as your priorities as it relates to income, and expenses like taxes, mortgages, education needs, insurance, and retirement and estate planning, etc. When you see it in black and white, you’ll feel confident in your ability to manage unexpected changes.BUDGETING VS. FINANCIAL PLANNINGWhile budgeting is an important part of financial planning, it doesn’t reflect your long-term plan. List your goals in five-year increments – 5-10-15 years. If you’re approaching retirement age, assess your retirement fund and, if necessary, take steps to improve it. By setting out your short- and longterm goals, mapping out a route as to how you’re going to get there will become much clearer.EMERGENCY FUNDS Bigger is better when it comes to the monies set aside for emergencies. The recommended amount is three months worth of living expenses in case of a job loss or unpaid leave. This fund doesn’t necessarily reflect three months of salary, but represents what you spend on average over a three-month period. Such expenses would include your rent or mortgage payment, utility costs, transportation, groceries, incidentals, membership fees, etc. But don’t stop at three months. If you can afford to beef up your emergency fund, do it. My recommendation is to save 15 per cent of each pay cheque and apply it to this fund.TRACK YOUR EXPENSESTo really get a handle on what you spend each month, write down every penny that goes out of your account. Not only do you track your purchases, but it highlights areas where you may be spending too much.DEBT IS THE BIGGEST OBSTACLENo matter how well you map out your goals, you are bound to hit a roadblock if you are saddled with large debt payments. A healthy financial plan includes a path to becoming debt free. Aside from your mortgage debt, what other debts are you carrying? Credit cards? Lines of credit? Have you borrowed from a friend or family member? The money that you owe is costing you a lot. Tally up your debt, and then come up with a plan to tackle it. If you find that it’s unmanageable, start by working on your highest debt first and get help from a debt management service.IT’S A JOURNEYYou’re setting yourself up for success if you have a financial plan; however, it’s not a one-time exercise. Check your financial progress every six months, and adjust your savings and investments accordingly. Seek professional advice from financial and tax advisors, or get yourself a money coach. These type of services are often money well spent.Rubina Ahmed-Haq holds a CSC designation, is the finance editor for Home Publishing Group, and appears in Condo Life, on CBC Radio, CBC News Network, CTV Your Morning, Global Toronto ratesupermarket.ca and debt.ca. Follow her on twitter @ alwayssavemoney. AlwaysSaveMoney.ca