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Financial Planning

Financial management starts with the planning or the thinking stage.  It is a time to consider various financial goals and make decisions about your priorities.  Once people know what they hope to achieve, their next step is to estimate their income and expenses for the period.  It is not unusual to find that expenses are larger than income and that some choices have to be made.

Set Financial Goals:

Timeframe – Conventionally, financial goals are classified into three types depending on the time needed to achieve them:

  • Short-term goals are achievable within one year.
  • Medium-term goals are achievable within approximately one to ten years.
  • Long-term goals are achievable in more than 10 years.

Estimating Cost of Living:

There are two components in the total monthly cost of living:

Monthly Expenses are routinely paid every month or, in some cases, more than once a month.  These are the expenses that most people believe comprise their monthly cost of living.

Irregular Expenses are not paid every month, but instead are paid quarterly, semi-annually, annually, or irregularly throughout the year.  They are predictable, but they are often forgotten in the cost of living.  The easiest way to accommodate the irregular expenses is to estimate them on an annual basis, by calculating the year total and then dividing by 12 (months).  This results in an amount that should be allocated each month for the irregular expenses.

To summarize:

Monthly Expenses + Monthly Amount for Irregular Expenses = Monthly Cost of Living

  1. Develop a Realistic Budget!
  • To get expenses under control, you need to set up a budget.
  • Always be conservative in your estimates of income and optimistic in your expenses.
  • Divide up your expenses between variable and fixed expenses, example:
  • Write down your expenses as you spend them
  • Add them up
  • Compare to your budget amount
  • Adjust your budget
  • Review your budget monthly
  • A budget is not carved in stone and can be adjusted
  1. Adjust to Live Within Your Means
  • Set up separate accounts.
  • If insurance is going to cost $1,200 per year, you mush save $100 per month.
  1. Be an Informed Consumer
  • Read consumer contracts before signing
  • Seek advice of Government agencies or legal
  • Do you need it or simply want the item?
  1. Save Even a Small Amount
  • Pay yourself first 10% 0f salary
  • Make payroll deductions for RRSP’s if available etc..
  • Set up RRSP through your bank, depositing as little as $20 per month
  • Set up separate accounts for savings
  • Anyone can be a millionaire if they are determined savers
  • Controlling your Credit or Credit rating and Re-establishment of Credit”
  1. Avoid Impulse Purchases
  • Only spend what cash has been allocated and no more.
  • Use a shopping list and only purchase items on the list, don’t buy on impulse.
  • Do not borrow for purchases – use cash.
  • Avoid credit cards.
  • Do not be influenced by TV images.
  • Keep miscellaneous expenses down.
  • Do not let your possessions possess you.
  1. Remember…
  • Just say “NO” to credit cards – pay cash.
  • Reconcile your habits with your income.
  • The two biggest words of temptation are “ON SALE”.


Bankruptcy is not a solution.  It cannot resolve financial mismanagement problems, or personal and family problems.  It is an opportunity to deal with them; an opportunity to make lifestyle choices that will ensure a better quality of life in the future.


Debit limit calculations.  The monthly disposable income guidelines says that spending more than 20% of disposable (net) monthly income on consumer debt repayment is a sign of financial difficulty.  If the family is larger than average, the 20% guideline is a sign of grave financial difficulty.

The annual disposable income guideline suggests that total consumer debts exceeding 15% of total annual net pay indicates serious financial trouble.

Consumer self-assessments.  There are countless self-assessment tools that allow consumers to evaluate the seriousness of their indebtedness.  The additional value of these self-assessments is that they allow consumers to learn new aspects of responsible credit use, or discover aspects of their credit management that are already appropriate.