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Debt and Financial Planning

Debt and Financial Planning

The importance of balancing expenses against revenues is essential to gain control over financial management.

Since the beginning of 2020, our society and personal lives have changed. Some of us have gone through very difficult times due to loss of income, caused by the closure of businesses. In Canada, we are fortunate to have access to social programs that can provide us with financial support for a certain period. When these programs end, however, where will we be in this debt reality? It is during these moments that we realize how vulnerable we are to our financial situation.

Reduced income and many unemployed; granted, it’s not anyone’s fault. However, we all have a responsibility to our financial situation. When it comes to financial planning, debt capacity is very important. In order to build the capacity to respond to extraordinary situations, we must prepare ourselves.

Also, we must ask ourselves: what are real and essential needs? Debt for a property (house/cottage/land) is great for building long-term assets. On the other hand, when we borrow for non-essential needs, it can cause a lot of financial trouble when something unexpected happens, such as job loss, illness, COVID-19 and others. Having access to credit can make us forget that nonessential eeds can increase our financial burden in the short and medium term.

When we go on a trip, we pack our suitcase. If we undertake a project at home, we prepare ourselves beforehand. We must also be ready to cover financial contingencies. In the financial world, it is highly recommended to have funds put aside that covers 3 to 6 months of your net salary. Some even recommend provisions up to 12 months of net income. How do you achieve this goal? It starts with a constant periodic deposit into an alternate savings account at every paycheque. This is your project!

The importance of balancing expenses against revenues is essential to gain control over financial management. The accumulation of savings is an integral part of a budget. Equally essential is a well-constructed financial plan with individual insurance coverage. Covering primary needs before making new financial commitments allows us to better assess our financial situation. From there, building a solid financial plan enables us to meet our future needs. Sound financial management today makes a future financial management easier.

Every journey is different for each of us, and the financial realities stay with us forever. Therefore, it’s important to regularly review our financial plan throughout the different stages of our lives.

 

Marc Larose, B.A., CFP
Financial Planner, Caisse Alliance
Mutual Funds Investment Specialist, Credential Asset Management
Hearst Branch
mlarose337@acpol.com

Denis Lanoix, B.A.A., QAFPTM
Wealth Management Advisor, Caisse Alliance
Mutual Funds Investment Specialist, Credential Asset Management
Hearst Branch
denis.lanoix@acpol.com

Human. Available. Connected.


Mutual funds and related financial planning services are offered through Credential Asset Management Inc. Mutual funds, other securities and securities related financial planning services are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Trade-mark(s) of Alliance Wealth Management are used under licence by Credential Financial Strategies Inc. Financial planning services are available only from advisors who hold financial planning accreditation from applicable regulatory authorities.

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