The Five Basic Steps to
Financial Independence - Year-End Reviews and the Year Ahead
As
the calendar year draws to a close it is important to review the
financial steps you have taken to date and to consider what to
do for the year ahead. The best approach to this is to consider
the five basic steps of the financial planning process. You can
follow this process yourself or ask a financial planner to help
you.
Step 1: Collect all your financial data to get an overall
view of where you are with your finances. This includes assets,
debts, a monthly budget, and your insurance coverage. Another
key part of this step is to make a list of your financial goals
and prioritize them. Without clear goals you will not know which
road to take in order to achieve your objectives.
Step 2: Conduct an analysis of your goals and financial situation
in order to identify problems and opportunities. This will enable
you to see what financial issues must be addressed first. Examples
include: deciding whether to pay off some debts or calculating
how much you would like to contribute to an RRSP or to your children's
education.
Step 3: Establish a clear course of action. You can do
this on your own or with your Financial Planner and involves answering
the following questions: What will you do, when will you do it,
and what dollar amounts will you apply to your specific strategies?
As part of this step, it is important to spend some time to review
your risk tolerance if your plan involves investing any monies.
Taking the time to do this will give you peace of mind with your
investment strategy and will help you decide what type of investments
you should make.
Step 4: Take action. Ensure that all the actions and transactions
necessary to achieve your goals are firmly in place. Your financial
institution or your financial planner can help you to finalize
and implement your financial strategies.
Step 5: Regularly review your plan to ensure that changes
in your financial situation are addressed and that you are still
on the right track to achieve your goals. This can be done as
often as you like, but at least once per year. Therefore, within
the next year, you will only need to review your plan and be proud
of what you have achieved.
This article is for general information purposes only and is
the opinion of the writer.
Phil Marcus, Senior Technical Officer and Branch Manager
SISIP Financial Services, Ottawa
