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Julie Cazzin with John DeGoey
Q: I’ve written a couple of financial plans in the past, but when I review them, I find that they’re neither very useful nor predictive of where I am in life and my investment portfolio. What am I doing wrong? And how can I better achieve my goals as set out in my plan? —Ellis
FP Answers: Financial planning is an ongoing, iterative process, not a one-time event. Financial planning is a movie, not a photograph. Maybe the easiest way to describe it is to think of a single frame in a movie. It’s a snapshot that represents a moment in time that is just a portion of a larger whole.
You should think of your plans as evolving documents since life is full of twists and turns. Part of that is your reaction to capital markets (which will always have interim milestones that are better or worse than the plan’s projections), but there are also life events: promotions and terminations at work, unexpected illnesses, inheritances and so on. Most people think it’s prudent to revisit your plan every few years.
Then, once your 2022 goals have been (hopefully) met in 2025, keep (and update) your long-term goals while setting a new set of three-year goals for 2028. That way, you’ll have an immediate thing to focus on and something else that’s further on the horizon, too.
Perhaps most crucially, focus on behaviour rather than outcomes. For instance, you may commit to putting $2,000 a month into your registered retirement savings plan or paying off your mortgage with an annual overpayment of five to 10 per cent to reach your goals sooner.
That way, if the market drops (something beyond your control), you’ll still have saved the money. Similarly, if you didn’t get your bonus, you could still pay down your mortgage, but only by five per cent, as an example.
John DeGoey is a senior investment adviser and portfolio manager with Wellington-Altus Private Wealth, which is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.
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