Your finances, beyond just finances

The financial security plan: a more holistic approach to needs

A financial security plan may incorporate a broader, or more holistic, view that goes beyond saving and investing. This approach is based on the observation that the wealth a person is trying to build is at the centre of a huge constellation of needs, plans, values, dreams, beliefs and even feelings. Moreover, all of these elements may vary over time – sometimes in unexpected ways – as the person moves through life’s various stages.

This is why it is generally thought that a financial security plan should abide by three main principles:

• It should be personal
  The plan should take into account the person's worldview, personal circumstances and the many life events they experience.
   
• It should be continuous
  It should also evolve with the person and be updated at least once a year.
   
• It should be comprehensive
  And it should include all the factors that may determine whether or not the person will be able to realize his or her plans and dreams.

But what are these factors?

Seven pillars

In the big picture, a holistic plan will focus on both building wealth and protecting it. To achieve this, the plan will generally cover the following elements:

• Personal finance
  Including budget and cash flow management, building an emergency fund and managing debt.
   
• Investment
  Including establishing goals, an investor profile and an investment strategy based on appropriate asset allocation.
   
• Insurance and risk management
  Including the need for life insurance as well as living benefits: wage loss, disability, critical illness.
   
• Taxation
  Including an evaluation of the household tax burden, tax optimization of investments and corporate structure (if any), and the use of government programs.
   
• Legal issues
  Including attention to marital status, matrimonial regime, protection mechanisms for minors and adults incapable of giving consent, and various types of mandates and powers of attorney.
   
• Retirement
  Including setting goals, planning an accumulation strategy and implementing a disbursement strategy.
   
• Estates
  Including making a will and planning to transfer wealth using the appropriate tools, such as a trust, foundation or life insurance policy.

A holistic plan does not necessarily have to be put together all at once: it can evolve. If, like a majority of Canadians, you have a plan based on your investments, you may already have one component covered. If you have a will and an insurance policy, two more boxes might already be ticked, at least partially. But do you have an integrated vision of all the components and are you really sure that they’re consistent with your dreams, plans and values?

Don’t hesitate to discuss this with your advisor.