A couple having a conversation with a professional

Six financial principles to strengthen your plan

With the basics in place, financial planning can be both easier and more successful. Here are six financial principles that can serve as a firm foundation for the financial planning work you do with your Raymond James advisor.

1. Budget your way to wealth

Budgeting is simply a way to define what’s left over after you pay your expenses from your income. But, as basic as it is, most Canadians don’t have a household budget. Set yourself apart by taking the time to add up your monthly income, add up your monthly expenses and subtract your expenses from your income.

Budgeting can help you identify cost-saving opportunities and plan to use any surplus to meet financial goals such as paying off debt, creating an emergency fund, building a plan to protect income and paying yourself first to accumulate long-term savings.

2. Understand how different investments are taxed

Taxes can take a huge bite out of investment returns without appropriate planning. Understanding the taxation of interest, capital gains, Canadian dividends, foreign non-business income and return of capital makes it possible to implement tax planning strategies. These may include sheltering investments associated with a higher tax liability inside registered plans, pursuing a buy-and-hold strategy that reduces turnover, and gifting publicly traded shares instead of cash to charity.

3. Be strategic with borrowing

Borrowing can be a powerful financial tool, providing leverage to achieve some of your goals today. However, the interest charged on loans can also be a drag on a financial plan, delaying the date at which people are able to meet their long-term objectives. No matter how much or how little debt you are carrying, it’s important to know what you owe and develop a plan to repay it as efficiently as possible. Then you’ll have the opportunity to redirect money that would have gone towards interest to much more satisfying goals.

4. Let your plan guide investing decisions

When you make investing decisions informed by your financial plan, you can more easily sidestep some of the biases that commonly affect investment decision-making. Your comprehensive plan should include strategies related to financial management, investment planning, insurance and risk management, tax planning, retirement planning and estate planning. Letting it guide you when you’re considering buying or selling an investment can help you achieve your goals more efficiently.

5. Invest to achieve specific goals

What if, instead of assessing investment performance against market benchmarks, you tied success to specific goals with a separate mini-portfolio designed to meet each one? A goals-based approach starts by identifying as precisely as possible what you’re saving for, then planning to make it happen based on the time horizon and risk tolerance associated with each goal. Finally, you can measure your progress towards the results that matter to you.

6. Maximize your legacy through estate planning

One consequence of the COVID-19 pandemic is that it has pushed many Canadians to start addressing their estate planning needs. Three essentials that should be in every estate plan are a will, powers of attorney for property and for healthcare, and a plan to minimize costs. Optional extras that can make a big difference include pre-paid funeral expenses, insurance to cover costs and leave a legacy and advanced strategies such as trusts.

“Our goals can only be reached through a vehicle of a plan in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.” – Pablo Picasso

Statistics and factual data and other information are from sources Raymond James Ltd. (RJL) believes to be reliable but their accuracy cannot be guaranteed. Information is furnished on the basis and understanding that RJL is to be under no liability whatsoever in respect thereof. It is provided as a general source of information and should not be construed as an offer or solicitation for the sale or purchase of any product and should not be considered tax advice. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. Securitiesrelated products and services are offered through Raymond James Ltd., Member - Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd. (“RJFP”), a subsidiary of Raymond James Ltd., which is not a Member - Canadian Investor Protection Fund. When providing life insurance products, Financial Advisors are acting as Insurance Representatives of RJFP.