How to make your financial plan work for you

Is your financial plan a living, breathing document that reflects your changing goals and situation, or is it gathering dust in a drawer?

There it was in the junk drawer, beside a thingamajig, under an expired pizza coupon: the family’s financial plan, their best hope for achieving their goals and dreams.

I found it the day we moved into the house. But it was clear the previous owners had forgotten their financial plan long before they moved out. An old Halloween candy had glued several pages together and somebody had used the plan’s fancy cover, several times, to get a pen working.

What exactly is in a financial plan?

Typically, a written financial plan fulfills these two important purposes:

• It lists your short-term and long-term goals, ensuring they are measurable (e.g., stating dollar amounts, frequency, deadlines and priorities)
• It itemizes how you should save, invest, borrow and insure to help achieve those goals

So a financial plan isn’t something you tuck away, let alone forget in the junk drawer. It’s an action plan that you need to use regularly, to make it work for you.

That’s quite different from the way you handle other important long-term documents such as old tax returns, birth and marriage certificates, mortgage documents, your home’s lease or deed or your will. Those, you store away somewhere safe where you can find them if you need them, but you don’t expect to need them very often.

• Keep track of your important documents: Twelve key documents you need to gather

It’s your plan, not your advisor’s

Your financial plan is about your life, your goals and your finances. So don’t assume it’s your advisor’s job to keep it up to date, or to make sure you stay on track.

Your advisor provides important help and advice, along with professional knowledge and experience on what your comprehensive financial plan should include, but you’re accountable for it. Never forget that. If it’s a joint plan, neither you nor your partner can afford to tune out.

• Read more about working with an advisor: How to find an advisor

Use it when making decisions

Want to buy a car? Downsize your home? Renovate? Change jobs? Your plan makes important assumptions about how much you will:

• Earn
• Spend
• Save
• Invest
• Be taxed

So it makes sense for you to check your financial plan before making big decisions that will affect your earning/spending/saving/investing/taxes. Here’s an example of what I’m talking about: When we added a screened-in deck to our house, we decided to go over our original budget. But our financial plan indicated that, to pay for the deck, we would have to withdraw more from our retirement savings that year than the plan indicated. Because we didn’t want to do that, I decided to do some part-time freelance work to keep our short-term spending/earning in balance. Our financial plan allowed us to take control of the situation and make an informed choice. Without it, we might have inadvertently risked depleting our retirement savings too early.

Schedule a regular review

Your plan will need updating from time to time. Book time in your calendar every six to 12 months, to consider whether your plan needs a tune-up. That review includes checking whether your assumptions about income, spending, and investment returns are on track. Maybe your plan needs tweaking to reflect something unanticipated (the furnace needs replacing; your hours at work have increased). At our house, we review our plan (often with our advisor) every January 1 and July 1, when I update our net worth statement.

If you decide your plan needs revising, meet with your advisor to have it updated, with your buy-in and input. If you have a spouse, ensure this is a joint decision.

Ask yourself these three key questions

1. Do you and your spouse know where your financial plan is?
2. Do you understand what it’s telling you to do?
3. Is it up-to-date, reflecting your current goals and situation?

Where to keep it

Keep it somewhat handy, though you don’t need daily access to it. We keep ours in a distinctive folder in the top drawer of our desk, where my wife and I can both refer to it. It’s not in a box in the basement. It’s not forgotten amid old bank statements. And it’s certainly not in the junk drawer!

Do you have tips to share about how you use your financial plan?

More on financial planning:

Check out more financial planning tips and tools.

• Five financial planning milestones
• When did you last review your finances?
• What I didn’t know about my money ’til I asked
• Five financial frights and what to do about them

Are you on track to meet your financial and retirement planning goals?
It’s never too early or too late to start! To find out what Sun Life Financial’s Money for Life approach to retirement planning can do for you: Talk to an advisor.