The Art of Personal Financial Planning

The fact is that when it comes to finances, I have nothing to hide. My lack of financial knowledge had really hit me for the first time a few years ago, shortly after the birth of my daughter. I realized I was responsible for another life. It was not like I was not given good role models - my parents have done well! I felt I was doing ok. It was only until I was reading a business publication when I stumbled across "Self-Analysis Financial Planning Test."
No sweat I thought. Confidently, I picked up my pencil and set about responding to questions such as:

o Have you selected the proper amortization period for your mortgage?

o Is you will up-to-date?

o Could your dependents live comfortably in the event of your death?

o If you plan to retire early, have you set up a suitable savings program?

o How do you plan to pay for your children's education?

o Fifty percent of Canadians retire in financial hardship. What are you doing to guarantee you will not be one of them?

o Are you debts structured properly?

Not only could I not give a satisfactory answer to many of the questions, but also I did not even understand some of them. I caught an ominous glimpse of my husband and daughter living on the streets.

I dropped my pencil, an unnerved woman. It's not that I want to be a multimillionaire, though like everyone else, I do. I'll set for comfortable - very comfortable. I enjoy living in a nice home, following a yacht (our floating cottage), driving nice vehicles and contributing annually to an RESP and RRSP for my daughter and myself, respectively. However also recognized that I would probably be one of the millions of people who would be forced to work into their 70's. I wanted the ability to have all of those luxuries, but not compromise my thoughts of an early retirement. I think these are goals that are shared by most North Americans. Are they realistic? Can they be realized on an average salary? If so, how?

Within an hour of reading that article, I was committed to learning the basics of financial planning. I had no desire to learn the intricacies of the stock market, nor was it my goal to be able to recite the mortgage tables from memory.

All I wanted to know was how best to get where I want to be from where I am now. I figured my parents were no financial genius', but they must have learned a few things in their 64 years and they have retired quite wealthy. It seemed a good place to start.

I can not believe that my parents and I never "really" talked about money before. The only thing I was told was "cash was king" and to never borrow money. My parents were very frugal with their money, and I was always told to work for things and save, save, save. My mother had taken responsibility for educating herself financially because she was never taught about investing or financial planning by my grandparents. But here I was 35 and felt like I was uneducated and blamed the education system in part for my ignorance. How could I know calculus and not know how to do my own taxes.

It is inconceivable that our government has not altered the school curriculum to include a basic family finance course. All high school graduates should know how to fill out an income tax form properly. They should know how to select their mortgage, how to finance their child's education, and how to save and plan for retirement. We now live in a society that demands instant gratification, which is part of the problem.

I am not sure that politicians understand the tremendous benefits the economy would enjoy if the average family knew how to handle their money properly. Most North Americans are financially illiterate. There is no excuse for our possessing the little financial knowledge we do. When a university educated person like me is embarrassed by an elementary financial test, something is wrong.

So I embarked on a journey of discovery. Most financial books concentrate on investment alternatives, not on mundane topics such as saving, buying a house, and insurance - the common person's concerns. They all showed you what to do with money once you had it, but they did not tell you how to accumulate it. I was assured that a 7 year university career and full time permanent job with benefits was the way to go and to save a percentage of my earnings for RRSP's. But ....

The best advice that I ever received was "if you want to learn to do something right, watch someone who does it successfully. economic difficulties are many facing. Those who educate themselves are the ones who will retire sooner than later and will have achieved their financial goals.