Own Your Financial Future (Part 2)

Last week I wrote about the imperative for women to take control of their financial future. Now it’s time to look at how to build a financial plan to help you do just that. After understanding a client’s goals, I help my clients look at six intertwined elements of a financial plan:

1.      Cash Flow

2.      Debt Management

3.      Emergency Funds

4.      Income Protection

5.      Asset Accumulation

6.      Estate Planning

Sometimes we are tempted (or led) to dive right into # 5, which is the most relevant for  growing your money, and admittedly, the most fun! However, it’s the other five that can make or break your financial goals. In this and the next blog, I take a look at some ways to rock the first four.

Manage Your Cash Flow

Cash flow is “income” minus “expenses,” typically on a monthly basis. Sometimes I see people struggle to save for their goals from what is left after their expenses. A better approach is to turn that equation upside down; namely, set aside your monthly savings target first, and then spend what is left over. Warning: you may have to drastically reduce your lifestyle if you want to meet your goals. This takes real commitment to your future self.

Eliminate Debt

Yes, I said eliminate, not reduce, debt!  If you’ve watched The Rule of 72 you’ll know that if your debt is paid using compound interest, it can quickly snowball out of control. Even “good debt” that allows you to grow an asset at a higher rate or faster pace, may not be so good forever. Inevitably, interest rates rise, or a good investment turns bad. If you are paying hundreds of dollars servicing debt each month, speak to a planner or debt specialist to see if there are lower cost options. Do not get comfortable with debt. It makes a terrible bedfellow.

Be sure to come back for the next part of this blog on how to manage “Emergency Funds” and “Income protection.”

Alison Setton

Alison Setton is an insurance and investment brokerage owner and teaches financial literacy at WealthWave, the How Money Works (TM) company in Vancouver, British Columbia. She began her career as an Environmental Engineer and pursued an MBA in order to further the projects she was passionate about. After working in roles as an Engineer, in community relations, project management and consulting, she made the leap to being an entrepreneur in the financial industry in 2012. This incredible leap, as every business owner knows, has provided the greatest education of all, and more importantly, allowed her to create the freedom of time that she and her family desired and deserved.

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