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The 4 Cornerstones of Financial Planning

Wednesday, 16 September 2020

They say a goal without a plan is just a wish. If you have financial goals for your future, you need plan to get there. Financial planning is like a road map – it provides direction for wise financial decisions that will pay off over time. A financial advisor can find the perfect balance of income, savings and insurance protection to help you meet your financial goals and protect your wealth in uncertainty. As you consider your future, there are four main cornerstones to strong financial planning. Let’s look at how each of these areas will provide financial security in both controllable and unexpected life events.

1. Liquidity is the First Cornerstone to Financial Planning

Your personal financial planning should first include liquidity. Financial liquidity is determined by how easily your assets can be converted into cash. Cash is, evidently, the most liquid asset in and of itself, but the term can also be used to describe assets that can easily be converted to cash in a pinch. For example: stocks and bonds are very easy to sell off and convert to cash, whereas land, real estate or buildings are considered illiquid because they could take weeks or months to sell and get the cash you need.

So, what does liquidity have to do with your financial planning? Part of your plan should include setting aside cash or having access to liquid assets in the case of an emergency such as job loss or unforeseeable home or auto repairs. Your financial budget should leave comfortable room between your income and expenses so that you can save for future purchases without going into debt and cover emergency expenses.

A financial advisor will usually start by asking these types of questions when deciding how to make a financial plan for you:

  • Do you have money set aside for emergencies?
  • Are you comfortable with the margin between your expenses and income?
  • Do you establish a systematic savings plan for larger purchases so that you have the money to buy it without going into debt?

2. Retirement is the Second Cornerstone to Financial Planning

Whether you are just starting out in your career or approaching retirement, your financial planning should include a strategy for retirement savings. As you look to your ideal retirement lifestyle, you should use investment principles in your financial budget to achieve the lifestyle you want. There is a time-factor associated with saving for retirement; the sooner you start, the more your contributions will compound and grow, resulting in higher savings at the time of retirement. There are many different options you can explore with a financial advisor such as: Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), Life Income Fund (LIF), Life Annuity and Permanent Life Insurance. For more details about these options, check out this page. A financial advisor will be able to help you identify your goals, desired lifestyle and then make a financial plan for you to meet those goals. Here are some questions they may ask:

  • Have you started planning for retirement?
  • At what age do you want to retire? What kind of lifestyle are you wanting?
  • Do you use investment principles as a part of your financial security plan?
  • How often do you review and update your retirement plan?
  • Do you regularly contribute to your retirement plan?

3. Critical Illness & Disability (Living Benefits) is the Third Cornerstone to Financial Planning

The third cornerstone of financial planning is having a strategy in place to protect your wealth throughout uncontrollable events such as a disability or chronic illness. Your income could be severely impacted by these types of unexpected changes, and while we hope it doesn’t happen to you, it’s always better to be prepared. Critical Illness Insurance is a great way to protect your finances so that you can focus on doing what’s best for your recovery, rather than stressing about money. Disability Insurance can also supplement your income for either a short term or long term if you were injured and no longer able to work.

  • How will your income be affected in the event of disability or critical illness?
  • If you became disabled or chronically ill, could you afford your current standard of living?
  • Does your work provide disability insurance?
  • Would you be able to continue your retirement plan if you experienced injury or prolonged illness?

4. Financial Security at Death through Life Insurance is the Fourth Cornerstone to Financial Planning

The final cornerstone of a solid financial plan is to provide financial security for your family and protect your wealth in event of your death. Using life insurance as a part of your financial plan will give you peace of mind knowing your family will not experience any financial burdens at the time of your passing. In addition to covering basic living expenses, you can also use life insurance to leave behind money for post-secondary education or other future costs. Life insurance can spare your family the stress of debt repayment by covering your mortgage, car loans, credit card debt, etc. With funeral and burial costs adding up in the midst of grief, life insurance can cover these expenses allowing your family to focus on the grieving process. If you are closer to retirement, it can also serve as a means to pay taxes after death, plan your estate, and cascade wealth into future generations by leaving an inheritance.

Financial advisors will ask these types of questions as they strategize with you for financial planning:

  • Could your family afford their current lifestyle in the event of your death?
  • Have you considered how inflation may affect this income over time?
  • Do you have your insurance needs assessed regularly by a professional?
  • How will you preserve your estate for your family when you pass away?


Making a financial plan can feel overwhelming at the outset, and planning for the future can be a tough topic for some. At BIG, our desire is to see you succeed in the future and be protected no matter what life throws at you. Our financial advisors can assist you in the process and make a financial plan that you can trust. If you’re ready to start your journey to financial security and freedom, contact us on our website, or give us a call for a free consultation.

By: Amy Legault