How To Review Your Financial Plan

Financial PLanThe subject of budget has been a recurring topic at home these past weeks. With all the news around real estate cost and families struggling to balance their budgets, my wife and I were discussing why so many struggle. Could it be that families don’t have the education that goes along with earning accounting certificate programs?

My point of view is that most families don’t really know where their money goes. If you don’t know where your money is going, how will you know if you can easily pay your bills, afford that nice vacation trip or even retire. Understanding your finance is the source for financial success. Until you do, you will struggle and not know for sure where you stand.

My wife wanted to know more budgeting and tools to help budget so I started putting together a budget spreadsheet. It quickly turned into a cash flow spreadsheet and after not long, I had a financial budget spreadsheet. Numbers are awesome – I admit that I was geeking out a little 🙂

My fresh Financial Budget awaits your review here: Financial Budget on Google Template. Read on for more details and a comparison with a financial advisor plan.

Financial Plan

Let me smart by saying that I could have picked a budget spreadsheet out there since there are many of them but most of them are limited to understanding what you are doing with your money today and how you can be left with more. What I find is missing from those budgets is the relationship between your daily, monthly, or annual spending with your retirement plan.

The reality is that finance starts with understanding where your money goes and that’s just the beginning of the journey. The budget leads directly to a financial plan for retirement. I had not realized it until I started stringing the different tables and data I had built over time in one spreadsheet. What I came to also discover is that it matches what you get from a financial planner (without the recommended investments). Your budget basically leads you to a financial roadmap and all you need to do is update it annually. The end goal is your ability to retire.

What You Get From A Financial Advisor

Dividend Snapshot
When I was in my 20s, I was as focused on my finances as I am now without all the knowledge and I used an advisor. This is the summary I remember getting in our initial series of meeting. It was prepared in a nice binder and the focus was on selling me products obviously.

  • You get to understand your saving rate (it’s what they need to sell you products)
  • You get to prioritize your savings between short, medium or long (paying debt, TFSA, RRSP, RESP, …)
  • You define your investment risks
  • You define your retirement goals (when and how much) and get a figure. It’s a big number that takes into consideration inflation and what you think you will need in retirement –  a lot is very hypothetical but the large amount tends to make you want to invest right now and get going.
  • You review your family plan if you have kids – i.e. life insurance coverage

What You Get From My Financial Budget

Net Financial BudgetAs I was putting the budget together to show my wife, I realized how great of a tool it can be for everyone. Starting from a budget and understanding the costs of retirement can put someone’s savings in perspective. Not to mention the understanding of what the withdrawal rate of a portfolio with inflation does to a bank account. It allows for anyone to see the big picture of their financial life. That’s even before investing.

Financial TableHere is what you get:

  • A family income review with taxes by provinces (as a bonus, you can compare your taxes by province)
  • A categorized view of your spending
    • Housing
    • Transportation
    • Food
    • Savings (RRSP, RESP, …)
    • Vacation
    • Discretionary
  • A derived retirement cost based on current budget and categories
  • A derived retirement portfolio with growth based on your budget
  • A derived retirement plan based on your cost of living (owning vs renting) with inflation and portfolio growth

All in all, I feel anyone could get a good overview of their financial plan with my financial budget and revise it annually. What’s left to do for anyone is to invest smartly to really grow that nest egg for retirement. For a full proof process, setup a recurring event in your calendar of choice (mine is Google Calendar) to review where you are at every year or quarter simulating a meeting with a financial advisor :). While you are at it, do a portfolio review to make sure your investments are still on track.

I’d love to hear your comments on the spreadsheet. Anything wrong? Anything missing? Loving it? Drop me a comment as I have tried to provide more than just tracking the spending habit of a family but also highlight the financial projection of a life style. The spreadsheet will be available in my resources section as well.

Image: Master isolated images / FreeDigitalPhotos.net