Financial Planning Presentation
"People never plan to fail ... |
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... They just fail to plan" |
THE BIGGEST MISTAKES PEOPLE MAKE WITH MONEY
 | They have no specific plan for accomplishing their financial
objectives. |
"Most people spend more time planning their vacation than they do their entire
financial future. No one would think of building a house without a set of blueprints, yet
many people try to reach a financial objective without an organized financial plan."
| They procrastinate about making financial decisions. |
"Procrastination can be the greatest deterrent to reaching a financial goal. Too
many people are waiting for the ‘time to be right’ before starting an investment
program. The time will never be ‘just right’, and much valuable time can be lost
through this deadly enemy."
| They never decide what they want to accomplish with their money. |
"Nothing happens until someone sets a specific financial objective and then
directs his or her thinking and actions toward the realization of that objective."
WHY FINANCIAL PLANNING IS IMPORTANT
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In spite of one of the highest living standards and per capita incomes in the world, 73%
of Canadians age 65 and over earn less than $15,000 a year!
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Surprisingly, only 5% have annual incomes over $30,000, including government
pensions
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Changing demographics and experience are changing the way we must look at
retirement planning
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We can no longer take the traditional "planning tools" of pensions and
insurance for granted
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WHY FINANCIAL PLANNING IS IMPORTANT FOR YOU
| A Service Previously Accessible Only to the Rich |
| Only Recently Available to the Average Canadian through Computerized Programs |
| The Average Canadian Doesn’t Have A Plan and This Perpetuates Uncertainty About the
Future |
| Changing Demographics and Declining Social Security Programs and Pensions are Leaving
Canadians More Vulnerable |
THE MAIN REASONS PEOPLE FAIL TO PLAN FINANCIALLY
| Lack of time |
| Procrastination |
| Failure to establish goals |
| Lack of knowledge |
| Lack of objective advice |
| Lack of commitment |
| Lower priority on proper preparations for the unexpected |
| Failure to understand how to use our tax laws and inflation |
THE OBJECTIVES OF FINANCIAL PLANNING
| Meet Ongoing Financial Needs |
| Satisfy Capital Requirements |
| Determine Appropriate Short & Long-Term Investment Strategies |
| Minimize Taxes |
| Income and Asset Protection |
| Conserve and Transfer Estate |
WHAT KEY ELEMENTS A FINANCIAL PLAN SHOULD INCLUDE
| Money & Debt Management |
| Asset Accumulation |
| Retirement Planning |
| Tax Planning |
| Risk Management |
| Estate Planning |
MONEY MANAGEMENT
| The 10% Rule |
| Emergency Fund |
CREDIT AND DEBT MANAGEMENT
| Match Assets and Debts |
| Avoid Consumer Credit/Loans |
| Leverage Only Investment Assets |
| Know How to Assess Debt Capacity |
ASSET ACCUMULATION
SHORT to MEDIUM-TERM INVESTMENT STRATEGIES
| The Challenge |
- To Get the Highest Return in the Shortest Time
| Time and the Level of Risk |
| More Aggressive |
- Mutual Funds
| Less Aggressive |
- Chequing Accounts
- Savings Accounts
- Term Deposits & GIC’s
- Life Insurance Accounts
- Treasury Bills
- Money Market Mutual Funds
- Fixed-Term Bonds
ASSET ACCUMULATION
LONG-TERM INVESTMENT STRATEGIES
| Education Planning |
| Retirement Planning |
| Registered vs Non-registered |
| Leverage |
WHY INVEST IN MUTUAL FUNDS?
Mutual Funds Offer Many Advantages:
| Full-Time Professional Management |
| Diversification |
| Favourable Tax Treatment |
| Proven Track Record |
| Liquidity |
| Choice |
RELATIVE INVESTMENT RISK
| High Speciality Fund |
| Global Fund |
| Growth Fund |
| Income Fund |
| Balance Fund |
| Dividend Fund |
| Mortgage Fund |
| Money Market Fund |
RISK MANAGEMENT
The concept of risk varies with circumstances but it is usually equivalent to
uncertainty and can also include exposure to adversity or danger
We will focus on pure risk which is what insurance companies are in the business of
insuring
Personal finances typically involve various aspects of pure risk and can directly
affect an individual’s financial planning framework. Three types of risk related to
financial insecurity are:
| personal risk |
| property risk, and |
| liability risk |
Personal risks can include
premature death
normal death
retirement risks
health risks
Risk Management Strategies
Normally, personal risk can be assumed by an individual through self-insurance of the
risk, or part of it can be transferred to an insurance company
Typically, life and disability insurance are most useful to clients to reduce personal
risk
Life insurance provides the foundation of security in any financial plan
Unlike most investments, insurance provides a guaranteed base of protection. No matter
what happens, life insurance ensures that surviving dependents have resources for their
financial future
| Provides protection against calamity or disaster |
| Provides enough funds to protect an estate from erosion at death |
| Final expenses |
| Taxes |
| Winding-Up Personal Affairs |
| Estate Conservation |
| Estate Creation |
| Estate Equalization |
EDUCATION PLANNING
How Much Will An Education Cost?
| Tuition |
| Room and Board |
| Books, Supplies and Equipment |
| Transportation |
| Clothing |
| Personal Expenses & Entertainment |
Where Will The Money Come From?
| Financial Aid/Loans |
| Registered Education Savings Plans |
| Scholarship Plans |
| Mutual Fund Company Plans |
| Open Account Plans |
| Non-Registered Plans |
| In-Trust Accounts |
| Gifts/Scholarship |
| Child Tax Credit |
RETIREMENT PLANNING
Key Factors for a Successful Retirement
| Where, When and at What Level of Lifestyle |
| When Retirement Takes Place |
| What Types of Activities |
| Financial Requirements |
| What Sources of Income |
To be truly effective, however, such planning should start at least ten or fifteen
years prior to retirement.
RETIREMENT LIFESTYLE, FINANCIAL REQUIREMENTS
Assessment of Retirement Lifestyle Financial Needs
| Timing |
- Early Retirement
| Retirement Expenditures |
- Basic Lifestyle Needs (Incl. Taxes)
- Estimated Discretionary Expenditures
| Retirement Income Sources |
- Private Company Retirement Plans (Pensions)
- Deferred Profit-sharing Plans (DPSP’s)
- Registered Retirement Savings Plans
- Investment Assets
- Government Social Security Programs
- Personal Residence
THREE CARDINAL RULES
| Save as Much as Possible |
| Start as Early as Possible |
| Aim for Growth |
WHY DO YOU NEED AN ESTATE PLAN?
| Emotional Factors |
| Costs |
| Control Factors |
WHAT IS "ESTATE PLANNING"?
| Changing Personal or Financial Circumstances |
| Probate Fees |
| Tax Planning |
| Beneficiary Designations |
| Joint Ownership |
| Planning for Incapacity |
| Reviewing Life Insurance Needs |
| Recording Your Personal Affairs |
| Pre-planning Funeral Arrangements |
| Gifting/Transferring Assets During Your Lifetime |
| Living Trusts |
| Testamentary Trusts |
| Succession of Family Business |
| Drafting a Letter of Wishes |
| Preparing a Will |
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