All about Financial Planning

Soterra Financial Group - Nov 26, 2021
There are a lot of things to consider in building a financial plan and more often, people don’t realize that financial planning isn’t just for yourself, it is also for the people who you care about.

There are a lot of things to consider in building a financial plan and more often, people don’t realize that financial planning isn’t just for yourself, it is also for the people who you care about. Having a physical document that clearly defines your financial goals and objectives over a relevant, explicitly stated time horizon will help guide you staying on track in making your financial decisions.


Who should I engage in doing this?

A well-rounded financial planning not only takes a one-sided advice from a financial advisor or investment representative, but it should also be a collaborative work between an entire wealth management team that would include: an accountant, a lawyer, an insurance agent (if different from your financial advisor), a personal banking advisor, a commercial banking advisor (if any) and a mortgage & lending if you have one.  


Here’s a list of what we think that should be included in your wealth management plan:

  1. Cashflow Planning

Cashflow planning considers your income, expenses, and overall net worth. This is a tool to project your financial position in the future and gives you an understanding of your finances throughout your lifetime. Calculating your net worth involves your “assets” which are all savings, real estate and personal use property against your “liabilities” that includes loans, mortgages, and line of credit.


  1. Tax Planning

For tax efficiency during retirement, it is important to structure your income in such a way that puts you in a lower average and marginal tax brackets than when you were working. Make sure to work with your accountant to ensure that you are accessing all tax deductions and credits available to you each tax season.


  1. Retirement Planning

Typically, when one retires there is a period defined as the “Active Retirement” years when people tend to spend more money on hobbies, activities, travel, etc. Following that, the “Passive Retirement” years start, usually between the ages of 75-80 and income is reduced again because the current income starts to build up in the bank account due to a less active lifestyle.


Retirement income comes in many forms – from a Canadian pension plan, old age security and even your savings can be turned into income1.


  1. Investment Management

Finding the right investment can be complicated. You may have heard of Mutual Funds and Segregated funds but may not understand the difference2. Although both have its own advantages, your investment profile should be reviewed to determine what your current risk tolerance is for your timelines and goals.


  1. Family Security

When we review ‘Family Security’, we assess your “Human Capital”. This is the value required to replace your lost income in the event of death, disability or critical illness and the impact these will have on your ability to maintain your family’s lifestyle and meet goals.


  1. Caring for Others

As mentioned earlier, a well-rounded financial planning isn’t just for yourself but also for the people you care about. If you have children, planning for their education is also an important goal. Having an RESP3 to support your children ‘s education helps you alleviate the burden from the costs of University tuition. Plus, no matter what your family income is, the government pays an amount of Canada Education Savings Grant (basic CESG) of 20%4 of annual contributions you make to all eligible RESPs for a qualifying beneficiary to a maximum CESG of $500 in respect of each beneficiary ($1,000 in CESG if there is unused grant room from a previous year), and a lifetime limit of $7,200.


  1. Estate Planning

Estate planning is often an area that is ignored or put off for later but having a plan in place should you pass away will relive stress and confusion for your loved ones during an extremely difficult time. If you have a will in place, this should be reviewed at least every 5 years to ensure it stays current.


Get organized!

Now that you have an idea of the core of what you need to plan for, speak to your financial advisor to get a solid and well-constructed financial plan that is tangible and accessible for both you and your advisor to discuss in an annual basis to keep you on track of your goals. A good financial plan should be able to attend to your short-term needs without losing sight of your long-term goals.