Financial Cup of Tea – How do I build my Financial Plan?


by Sarah Chisholm,
Financial Advisor, O’Farrell Financial Services

Grab your favourite cup of tea or coffee and let us look at Financial Plans. A comprehensive Financial Plan should incorporate all your assets, liabilities, and sources of income, not only your investment accounts.

Your wealth portfolio can include any of the following investment accounts: RRSPs, TFSAs, and Non-Registered Accounts. These types of accounts are typically invested in mutual funds, ETFs, stocks, and/or bonds with the goal of using the funds for retirement or major expenses. When was the last time you reviewed your portfolios?

Next, let us look at other potential sources of wealth. Rental properties should be included in your Financial Plan. While income properties come with tenant challenges, increased debt obligations, and maintenance requirements, an income property can generate consistent cash flow and long-term equity growth. As your equity in one property grows, you may consider leveraging that equity to purchase a second or third rental property. It is important to note that the growth on your income property is considered a taxable capital gain. Have you built those taxes into your Financial Plan?

For farmers, the land can also be used as a source of wealth with cash crop or rental income and growing equity. If you wish to pass the land to a child, make sure to work with your Financial Advisor and an accountant on Financial Plan. They can help implement strategies to make the land eligible as qualified farm property instead of just rental land. This is important because Qualified Farm Property can be eligible for a tax-free rollover which defers the taxes payable to the next generation.

For business owners your biggest assets are the ability to generate profits in your business and future growth of the company. If you are re-investing most of your profits, make sure your business is well positioned for an eventual sale. Your Financial Advisor can help you determine how to maximize the value of a sale to a third-party, pass it on to a child in the most tax effective way and the tax liabilities surrounding the sale. As you are growing your business, it is important to plan for your exit. If the future sale value of the business is negligible, make sure you are drawing enough income out of the business to fund your retirement.

Finally, you cannot build your wealth if you are burdened by consumer debts. Credit cards charge exorbitant interest rates. Get serious and implement strategies to pay down your debt and help grow your overall wealth. Building all these assets, strategies, and liabilities into your Financial Plan will give you a clearer picture of where you stand currently and allow you and your advisor to make a plan for your future wealth.

Please reach out to us with any questions you may have.


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