“Obstacles are those frightful things you see when you take your eyes off your goal.” – Henry Ford
What is a financial planner?
A financial planner is a qualified investment professional who helps an individual meet their long-term financial objectives and goals. Financial planners do their work by consulting with clients to analyze their goals, risk tolerance, and life stages, and then identify a suitable class of investments for them. From there they set up a program to help the client meet those goals by saving or distributing their available savings into a diversified collection of investments designed to grow or provide income, as desired. Some financial planners may also specialize in tax planning, asset allocation, risk management, retirement and estate planning. (Investopedia) It is important to know that not all financial planners are created equal and there can be restrictions to what a financial planner can give advice on depending where they are employed. For example, a financial planner employed through a bank cannot give advice on risk management or insurance planning/use of insurance due to the bank act and is quite often limited to proprietary solutions offered through the bank they work for.
- Smart Things:
- Spending vs. Savings – balance it!
I have referenced a quote in previous articles that is from Warren Buffett, arguably the most successful investor on the planet. He addressed the idea of saving with the quote, “Do not save what is left after spending, but spend what is left after saving.” Mr. Buffett is a huge believer that people need to pay themselves first. If not, it’s easy to pay everyone else and forget about saving for yourself!
A certified financial planner can help you develop your personal plan with respect to saving and investing for the future. Surprisingly, it is easier than most people think to develop a system of saving and a financial planner can evaluate your individual situation to help you achieve success.
- Emergency Fund – either cash, or access to a line of credit!
Most financial experts recommend having an emergency fund for unexpected expenditures that can arise that are beyond your control. The consensus is that you should have an amount equal to a minimum of three months worth of expenses available in an emergency fund.
An emergency fund can take different forms; it can be cash, or as simple as an undrawn line of credit. In the previous paragraph I talked about a concrete plan for a savings strategy and so those first dollars saved should be used to set up access to an emergency fund. “A budget is telling your money where to go, instead of wondering where it went.” (John C. Maxwell)
- Properly Insured!
Another part of your financial plan should be to make sure that your loved ones are taken care of if something should happen, and is just as important that you have disability insurance in place in the event you are unable to work. Disability insurance is critical because most people don’t plan on becoming injured or sick, but the odds of either happening are quite high especially after the age of 40. In some cases, your largest asset is your ability to earn income and not having disability or critical insurance may derail your financial future or retirement plans. Your financial planner can evaluate your current situation and recommend any possible changes. “There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction.” (John Fitzgerald Kennedy)
- Make the Most of A Raise!
Over time, you likely will be the recipient of an increase in your wages. While it is easy to incorporate the entire increase into your budget to allow yourself to spend more, that is not the proper course of action for enhancing wealth creation. With the help of your financial planner, together you should evaluate which is the best course of action to take. A review of your plan with a new allocation to saving/investing is warranted at this time. Increased savings allocated to investments will make an enormous difference over time. A great quote to highlight this concept is a quote by Timothy Ferriss the author of ‘The 4-Hour Workweek’, “Money is multiplied in practical value depending on the number of W’s you control in your life: what you do, when you do it, where you do it, and with whom you do it.”
- Don’t Tinker with Your Investments Or Get Emotional!
The value of a financial planner as a buffer between you and your investments is incredibly valuable. Many investors are unsuccessful because they allow their emotions to become part of the equation. Their emotions cause them to sell too soon or conversely to hang onto an investment when they shouldn’t. Your financial planner is your financial partner, working on your behalf to protect and generate wealth. While they are on your team, they have a detached rational outlook with respect to your financial plan when it comes to negating emotional responses to short term fluctuations. Their job is to grow your wealth and to stop you from making irrational emotional decisions that are not based on fact or merit. “You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” (Peter Lynch) Economies are cyclical, and when recessions hit, you must stay the course. Because the economy is cyclical, the economy has shown that it will recover; be part of that recovery.
- Follow Advice!
The value of a good financial planner is that they base their advice to you on facts and reliable information as opposed to emotion. A good financial planner will be available for you to regularly review your financial plan and make any changes to your goals or address any issues as part of your long-term plans. It is paramount to be successful that you follow the advice that they give you.
- Look to Save On Taxes!
A financial planner is more than just someone who helps you build your wealth; they are someone who helps you legally keep as much of your wealth as possible. A financial planner has strategies that will help you minimize your tax liability. There are various strategies that a financial planner will suggest based on your individual situation. There is much truth to the comment that comedian Chris Rock made when he said, “You don’t pay taxes–they take taxes.”
“Most people don’t plan to fail, they fail to plan.” (John L. Beckley)
A financial planner is a vital part of your team; from building a comprehensive plan for you, to offering well researched advice, to a host of other services that they can offer. It has been noted by different studies that people who operate with a certified financial planner as part of their team do markedly better in the long run than those who go it alone. As mentioned, the holistic plan that they develop will address various commitments in your life and at the same time it can minimize financial risk. A financial planner creates that all important buffer between you and your emotions that will help to minimize stress and anxiety. Remember their job is to make your money work for you and to help you build even more wealth.
The information contained herein has been provided for information purposes only. The information has been drawn from sources believed to be reliable. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document. Wellington-Altus Private Wealth Inc. (WAPW) does not guarantee the accuracy or completeness of the information contained herein, nor does WAPW assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Before acting on any of the above, please contact your financial advisor. All insurance products and services are offered by life licensed advisors of Wellington-Altus insurance Inc. or other insurance companies separate from WAPW.
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