Financial planning is about creating a strategy to effectively build wealth and deploy your money so you can get the most enjoyment out of your life.
I think it’s safe to say that most of us want to not just survive but also thrive.
But let’s face it, today’s environment has made it challenging for the average person to create and manage their wealth. Here’s why:
- Expenses over the past 15 years have far outpaced most people’s incomes. The deemed necessities – things like smartphones, laptops, high-speed internet and mobile plans for entire families have only added to the expense pile.
- We are increasingly living in a world of “now” and instant gratification, causing our focus to progressively shift to managing our money for today at the expense of planning for the future.
- The majority of Canadians lack the skills to handle their money effectively – through no fault of their own. Personal finance is not innate knowledge. There are a lot of articles (like this one!) that can help build awareness. But it’s harder to find content that shows us how.
For women, the uphill challenges are even steeper. The wage gap, pink tax, longer life spans, and the career breaks many women take to care for children or parents: these inevitably mean women save far less than men and have to stretch their savings further.
A financial plan is one tool that gives women a real opportunity to equalize the wealth gender gap.
A financial plan can ensure you reach your life goals.
When I coach women about their finances, I start with these fundamental questions:
- What do you want to achieve in life?
- In five years?
- In twenty-five years?
- What matters to you most?
We all have meaningful and personal goals, whether we want to buy a home, invest in our career, raise a family, start our own practice, ensure a happy and secure retirement or something else. We don’t have just one goal – we have many. All of these objectives require money and a strategy on how to deploy that money.
Without a plan, the more goals you have, the more likely they are to be derailed. And guess which ones typically fall to the wayside? The ones that require more discipline and are seen as “boring,” such as saving for retirement.
It’s human nature to focus on the path of least resistance and the outcomes that give us the most pleasure at the expense of more important but less satisfying goals.
A financial roadmap can help you strike a balance.
A financial plan ensures you’re taking a holistic approach with your money.
A common mistake people make is to measure their financial health according to only one aspect of the financial picture—balancing their budget, for example.
The fact of the matter is that financial planning is much more encompassing. It involves cash-flow management, debt management, investing, retirement planning, tax planning, insurance planning and estate planning. When all of these parts are integrated and you can see the whole picture, you’re in a much better position to effectively use your resources (current and expected income, savings, etc.) and find opportunities to reduce unnecessary expenses, make your wealth multiply and protect your nest-egg in case unforeseen events hit your world.
By focusing on only one or two aspects of the financial planning wheel, you run a real risk of a “gap” triggering a negative domino effect on the areas that provided financial security in the first place.
A financial plan will help you navigate through uncertainty.
Most of us assume things will unfold exactly as we envision them.
Yet life doesn’t work that way – and neither do financial plans. People get ill, lose their jobs, get divorced, die…or a pandemic strikes and turns all of our lives upside down.
A good financial plan leaves room for “Plan B.” When a setback happens, you can push out a goal, change a goal or revisit your investment strategy. But you can’t maneuver those parts until you’ve mapped out your overall plan.
Many factors that affect our finances are out of our hands. Women are not closing the wealth gap overnight. But by having a plan in place and steering your financial future in the right way, you have a huge advantage in closing the gap in due time.
Remember, you don’t need to tackle this on your own. There are many qualified financial planners who are there to advise you, support your journey, and most of all be your cheerleader.
Read more financial planning tips for lawyers from Lawyers Financial on the Financial Planning Month site.
About the author
Saijal Patel is the Founder and CEO of Saij Elle, a financial consultancy and education platform with a mission to help women create financial independence and security, financial institutions better serve the needs of female investors, and companies build effective financial wellness & inclusion programs for all employees. With more than twenty years’ experience in the financial industry in North America and Asia, she is Chartered Financial Analyst (CFA) Charterholder and has held positions as a financial strategist and analyst.