Personal Financial Planning

Department specialists: Don Nilson, Errin Mechler

Personal financial planning is a nebulous term to most people. What does it MEAN? What can it do for ME? I am too young to need this! I don’t have enough wealth to apply this! I’d rather be golfing or gardening! The olden-day connotation of the term “home economics” was about managing household finances, rather than today’s interpretation of food, nutrition and health

Social psychologists claim that attitudes towards money are largely shaped by age EIGHT! So… one is never too young to be interested and concerned about money. In two-thirds of couples, one of the pair is inclined to financial management. For the other one-third, either both or neither of the pair is inclined to manage the family finances. In the latter case, this creates a time bomb problem waiting to happen.

The financial planning profession, through the Financial Planning Standards Council, promotes two forms of planning: modular and formal six-step. The latter is a detailed process which produces a long term prognostication and plan through the remainder of one’s life. Modular planning follows the time-line of one’s progression through life, from early adulthood to retirement living. The issues of the particular life-stage are addressed until the next stage of life advances.

Nick Murray, a senior New York financial advisor who has written several books and appears on the speaker circuit says that development of your financial plan needs to start with two simple questions: Who do you love? & What do you love to do? The answers to these seemingly trivial questions will answer the more important question: What is the money for? When you have the answer to that question, you will know better how much money you will need to accumulate and how it should be managed.

Stanley and Danko authored the famous book The Millionaire Next Door, which should be standard text-book reading for every teenager. They speak of the mutual importance of “offence” (making money) and “defence” (spending money). Very few championship sports teams succeed with excellence in one but not the other.

Time to “S.I.T.” down with yourself

This is a good time of year to S.I.T. down with your family finances. By S.I.T., we mean that you need to understand that, in managing your personal finances, you have THREE roles—as Saver, Investor and Taxpayer—that makes the S.I.T. acronym. Role One of family wealth accumulation starts with the SAVING function, and that means spending less than you make. Some money needs to be put aside from TODAY’s income to finance TOMORROW’s living costs. Ideally, this is achieved with a steady, monthly diet of contributions to your saving vehicles. If you leave it to a once-a-year act, like RRSP season, the cash cupboard may be bare at that time, and saving may get compromised.

Too many people think that their job is finished when the SAVING part has been done. But the job has just begun when you plunk down that contribution to a saving vehicle at your financial institution …. be it, for example, an RRSP or the new TFSA account. Role Two is the Investor function, as you now have to put those hard-earned savings to work in that savings account by selecting appropriate investments which, like you, will go to work each day to make more money for you. Too many people make that annual deposit, and then walk away until next year. That deposit may sit in cash, earning a pittance in a bank savings account or perhaps in a one year GIC earning less than the rate of inflation.

There is lots of confusion about that S-letter in rrSp and tfSa. They are both the same S—SAVINGS. In finance vernacular, SAVING (no S on the end) is what people do– the ACT, or verb, of putting money aside for the future. SAVINGS (with an S on the end) is the result, or noun, of their saving—money accumulated in some financial institution account.

When investors deposit money into an RRSP or TFSA, that money is able to invest in a wide variety of opportunities, literally around the world. There are indeed some things that are specifically prohibited by law in these two kinds of accounts, like direct real estate holdings and investments in private companies, for instance. But stocks, bonds, GICs, mutual funds, ETFs and REITs, for instance are all permitted. Thus, an investor can build a powerful SAVINGS account in a TFSA or RRSP which should be successful at accumulating wealth over a life time.

Role Three is as a Taxpayer. Here, you need to understand how taxation contributes to your personal financial decisions. At the SAVING moment, this includes understanding which type of account is most suited to your life goals—a TFSA, an RRSP, an RESP or a “regular” account. This decision turns on what you are saving for– a new car, a house, education, retirement, etc. Each of these goals has a different time line, and different accounts would accordingly be more suitable. Your tax bracket – both now and in later years – also comes to bear in choosing the right account vehicle. Lastly, tax-smart investing principles need to be understood and applied, so that you are placing the right kinds of investments in the right kinds of accounts.

Sounds complicated? Well, in truth, it is. But it all starts with some knowledge and good intentions….and with applying the wisdom of “S.I.T.”


A client asked me this rhetorical question recently. “Money” needs to be considered at three levels…in three different contexts: academically, intellectually and spiritually.

“Academically” refers to, what was termed in the old days as, home economics. You might call it the science of money. It behooves all of us to embrace a mini Degree in finance, accounting and tax in order to manage our financial affairs.

“Intellectually” means that, regardless of what science of money we understand, we still need to actually execute that wisdom through our lives. Life is ultimately distilled down to the inner battle within ourselves: the internal conversations in our heads about what we should do, want to do and what we ultimately do. This applies to our financial decisions as well.

“Spiritually” is a whole different level, and one that most of us never address. We have discussed this at length through our writings on Family Confab, which referenced the brilliant work of James Hughes in his book, The Cycle of the Gift (of which we have gifted hundreds of copies). This also references the wisdom of Stanley and Danko in their old book “The Millionaire Next Door”. Over time, the wisdom of this book has dissipated out of our collective conscience. I am thrilled to see a “20th Anniversary” new edition which brings it back to life. Lastly, this also references the wisdom of financial writer Nick Murray, who taught us decades ago to contemplate these questions in stewarding our wealth: “Who do you love? What do you love”? The insightful answers to these questions addresses the important question: “What’s the Money For”? Because….ultimately money has to have a purpose!

Ideally, we all address these three levels from our own minds and hearts. Practically speaking, we can “sub out” the first one: the academic science of money, to other parties—accountants, lawyers, investment advisors, financial planners etc. But the last two—intellectually and spiritually–must remain in our own camps.

Retirement planning

In its simplest form, the question in retirement forecasting is: Will I have enough? However, many more pertinent questions can be answered, too, like:

  • Can I indeed retire early?
  • What savings rate do we need through the remainder of our working lives?
  • Is my investment risk profile too conservative for where I need to get to? Too aggressive for my loss of sleep and what I will require?
  • Can we afford to help our children and still have enough for ourselves later?
  • What if I will require expensive health care support in later years?
  • Can I afford to support my charities as I would like?
  • Can we keep our home?
  • How much can we leave the children and still enjoy life?
  • Can we “live it up” in early retirement while we still have our health?

We assist our clients with both modular and formal financial planning to secure their futures.

We have several Certified Financial Planners in our Practice, who have been providing this expertise every day for over 30 years. Don was named amongst the first 33 National Fellows in the Financial Planning profession, and has served on related National Boards at both the regulatory and member services level.


 What Our Clients Tell Us:

55% of our personal tax clients also sought financial planning assistance, and of those, 85% said that the advice was excellent

Clients who’ve undertaken a full financial plan:

  • 100% said the plan was good or excellent in clarifying a potential retirement date
  • 100% said the plan was good or excellent in defining an investment strategy for their portfolio
  • 85% said the plan was good or excellent in addressing the probability of running out of money