According to a recent survey, only 51% of Canadians have a formal or informal financial plan in place. There are several reasons why some individuals don’t develop a financial plan, including a lack of time, knowledge, or the belief that it’s not important. In this post, we’ll explore the cost of delaying financial planning because it can be substantial. Remember, if you need financial planning services, Ottawa certified financial planners are a fantastic resource to help you plan your future.
The Cost of Delaying Financial Planning
Not having a plan in place can significantly impact your finances and your personal well-being in several ways. You will lose valuable time, may see your savings erode due to inflation, and miss out on opportunities, ultimately ending up with less money than you need for your future. This highlights the importance of early financial planning and the potential risks associated with delaying it.
The personal impact includes stress from reacting to situations, dealing with anxiety caused by uncertainty, and feelings of disappointment. A comprehensive financial plan can alleviate these stressors, providing a sense of security and confidence in your financial future.
Time
It’s crucial to start investing for your future as early as possible. The longer you wait, the more you’ll need to save later. This highlights the power of compounding and the potential benefits of making early investments.
Saving $403 per month, starting at age 25, for example, will yield $1,006,363 at 65, assuming you start with zero and earn a 7 percent annual return. If you start investing at age 35 with zero dollars in investments, you’ll need to invest $851 per month to have $1,000,831 at a 7% annual return.
The lost time leaves you with either a bigger monthly investment burden or a smaller amount of money. You’ll miss out on compounding and potential market growth, which could result in thousands of dollars in lost opportunities.
Inflation
Inflation can also be a factor. Inflation will have a bigger impact if you have less in investments. You’ll need to draw more from a smaller pot of money to maintain your standard of living or adjust your lifestyle.
Lost opportunities
Taxes and insurance are two key areas where a lack of planning can have a significant impact.
You may overlook opportunities to reduce your personal taxes, transfer assets in a tax-efficient manner or maximize tax savings for estate planning purposes. Tax planning for high-net-worth individuals is a lifelong process and should take your goals into account. A financial plan will address your tax burden so you don’t miss out on any advantages you may have to reduce your taxes.
Insurance premiums usually get more expensive as you age. Additionally, you may no longer be eligible for the insurance you need if you wait. A comprehensive financial plan will address your insurance needs, ensuring you don’t miss the opportunity to get the coverage you want.
A financial shortfall
Without a plan, you may end up with less money than you need. A financial shortfall could force you to delay your retirement or other life goals. You may have to work longer or significantly cut back on your lifestyle.
Stress
Having a financial plan in place can reduce money stress. Four ways a plan can help are:
- You’ll be prepared for financial emergencies rather than reacting to them.
- Monitoring your progress will show you if you’re on track to meet your goals.
- You’ll know how much money you’ll have to work with if you decide to retire.
- You can include estate planning to protect your loved ones in the event of your passing.
Actively working towards your goals will reduce the stress and anxiety that comes with being uncertain about your financial position.
Disappointment
According to a recent CFG QAFP survey, 49% of Canadians experience sleep loss due to financial stress. Those who don’t work with a financial planner are twice as likely to lose sleep compared to those who do.
Approximately 21% of Canadians regret not starting earlier and saving more. The increasing cost of living, debt, and health issues are consuming a larger portion of people’s income and investments.
Some are experiencing disappointment that they didn’t pay more attention to their finances earlier or that they didn’t save enough to fund their goals. The potential regret can serve as a powerful motivator to start financial planning now, to be proactive and ensure a secure financial future.
How a Financial Planner Can Help
Many Canadians work with a financial professional, but only about two in ten work with a financial planner. A financial planner will look at all aspects of your finances, including investments, taxes, insurance, and estate planning.
Those who work with a financial planner, compared to those who don’t, find:
- They have less stress about money
- Financial issues are less likely to impact their life negatively
- They are more likely to have more disposable income
- They’re twice as likely to say they’d do nothing differently
Working with a financial professional can be beneficial for most people. If you need services for high-net-worth financial planning, Ontario certified financial planners will work with you to achieve your goals and close any gaps in your plan.
Financial planning services in Ottawa
It’s essential to start planning as soon as possible to maximize opportunities and protect yourself and your family. Our Certified Financial Planners at MDL Financial have been assisting high-net-worth clients in the Ottawa area in developing financial plans to meet their goals. Avoid the cost of delaying financial planning by contacting us today online or by calling 613-416-9649 to book a meeting.
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