There’s a common misconception about financial planning. According to Ruby Ubhi, a certified financial planner with Coast Capital Wealth Management, many think it’s only for the rich.
“That’s absolutely not the case,” Ubhi told the Straight by phone. “It doesn’t matter how much money you have. A financial plan can work for anybody, not just the wealthy.”
She explained that there are four broad categories that a financial planner will raise with a new client. They can be described as manage, save, grow, and protect.
“Managing” entails examining day-to-day spending and budgeting.
“Saving” involves setting aside money for a rainy day or for short-term goals.
“Growing” pertains to investing funds over the longer term and planning for retirement.
And “protecting” is looking after everything a person has worked toward, including having the right type of insurance products, including critical-care and disability coverage, if necessary.
Ubhi acknowledged that financial planning can be more difficult for a person who is “in the red”. But even then, a planner can offer advice on consolidating debts to reduce interest payments and improve monthly cash flow.
She also recommended that whatever a person wants to save should come right off their paycheque and flow into the appropriate account.
Another way to stay ahead of the game is to have bills paid automatically, reducing one’s ability to overspend.
What does a financial plan look like?
Ubhi said that in addition to automated bill payments and creating an emergency account for a rainy day, a planner might also offer advice on retirement savings.
“We would look at a diversified portfolio of investments,” she noted.
One of the big questions concerns whether to put extra funds in a registered retirement savings plan (RRSP), which offers a tax deduction, or a tax-free savings account (TFSA).
“The RRSP really depends on your income,” Ubhi said. “If you’re in a higher-income tax bracket, an RRSP may make sense.”
However, for those in lower-income brackets, an RRSP contribution won’t yield nearly as large a return at tax time.
“Usually for people starting out, early career or younger people, we always say a TFSA is a better way to go,” she declared.
“Then when they’re earning a higher income or in a higher tax bracket, it might make sense to now redirect to an RRSP. You could even then, later down the road, take that money that’s being built in the TFSA now and move it into the RRSP," Ubhi continued. "Again, it’s different for every person. You can’t say one is better than the other.”
The most widely recognized designation for people in the financial-planning sector is certified financial planner.
CFPs are regulated by the Financial Planning Standards Council and must pass a series of exams to be licensed.
Ubhi said that if someone is working with a certified financial planner or a personal financial planner, that adviser is required to provide unbiased advice.
“You won’t be pushed a certain way or to a certain product when you’re dealing with a CFP,” she stated.
Ubhi recognizes that for novices, financial planning can feel a little overwhelming.
“Start from the ground up,” she advised. “Your financial institution or whoever you’re working with would be happy to get you started. We engage with professionals in all facets of our well-being: doctors, dentists, mechanics. Finance should be the same.”