Financial Advice: The Ultimate Financial Planning Guide

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Table of Contents

Why I wrote this financial advice with Planning guide

I started because I got tired of seeing people make bad financial choices. So professional financial advice can help you make important financial decisions.

Two kinds of people fall under this category, 1) the ones that want more money, but don’t know how to get it, and 2) the ones that have the money, but lose it because they don’t know what to do with it.

After all, how good can the money be if you don’t know how to use it?

In August 2007 I bought a house and got my first mortgage. Every two weeks I had to have at least $990 in my bank account to make the mortgage payment.

I had a decent stable job but was essentially living paycheque to paycheque.

The thought of not being able to pay the mortgage scared me. So I spent years reading every financial planning book I could find, watched every daily finances TV show, and read hundreds of financial tips.

My goal was to create a financial plan that helped me to not have to worry about money.

The reality is, most financial planning tips are about cutting back.

I wanted to continue enjoying my lifestyle and have enough money so I didn’t have to keep living paycheque to paycheque, so I created my own financial planning model.

My financial planning included not only the amount of money I was spending but also how I could make more money to become financially independent.

This process led me to create the following 6 rules, which I used as a guide for my financial planning approach.

The ultimate money answers rules to creating a great financial plan

Asses Your Financial Situation

financial advice Asses Your Financial Situation

The first step in developing a financial plan is assessing your current financial situation. With a clear understanding of where you are at, you can determine where you are going.

This means you need to find out your Net Worth.

How do you calculate your net worth?

calculate your net worth

Net worth is calculated by taking what you own (your assets – savings, investments, properties), minus what you owe (your liabilities – loans, credit cards, mortgage, and any outstanding debt).

The more debt you have, but especially the more consumer debt you get, the lower your net worth will be.

What is your current financial situation?

In order to plan where you need to be, you need to determine where you currently stand. Before moving any further, find out the following:

  • Things you own (assets)
  • How much you owe (liabilities)
  • What your income is
  • How much you are spending

Calculating your net worth

The difference between your assets and your liabilities is your net worth.  List out all your assets (things you own). This may include:

  • Your home (if you are a homeowner)
  • Your vehicles (the amount you could sell it at)
  • Your liquid cash (savings and checking accounts)
  • Your investments (RRSP, pension, bonds, and stocks)

The next part is to list all your liabilities (the money you owe). This may include:

  • Your mortgage
  • Vehicles loans
  • Amounts owed on your credit card
  • Amounts owed on your line of credit
  • Any other amount that you have to pay back to anyone

Two things directly impact your net worth. The money you earn, and the money you spend. For each item on your net worth statement, aim to understand the following:

  • What it is worth
  • How much you owe in relation to the same item
  • What it is for
  • Any commitments attached to the categories and how you will satisfy those commitments.

For instance, if you own a home, and the home is worth $700,000, but you have a mortgage on the home for $535,000, then your net worth on that item is $165,000.

However, if you owe $6,000 on a credit card and no assets, you have a negative worth there and a commitment or responsibility to pay the amount by a certain date.

While increasing assets will improve your net worth, liabilities and especially consumer debt will slow down your plan to achieve financial independence.

Adjustable-Rate Mortgage

An adjustable-rate mortgage or ARM is a type of mortgage where the initial rate is fixed for a short time after which the rate starts changing, but without a precise formula that defines what the new rate could be.

Pros of an adjustable-rate mortgage:

  • An adjustable-rate mortgage may be a smart choice for homebuyers who are planning to pay off the entire loan in the short term or those who are financially able to withstand sudden changes on the interest rate they pay.
  • ARMs are appealing because of a low introductory rate, but those rates can later rise depending on changes experienced on a specified index.

Cons of an adjustable-rate mortgage:

  • Unsophisticated homebuyers may not understand the true risks of their interest rates changing later on, to a level that could render the loan unaffordable.

Utilizing the below chart calculate your net worth

Set Up Financial Goals

Why are goals important?
You need goals to know what you are aiming for.

Set Up Financial Goals

Financial planning is the process used to make smart decisions about money; those decisions help you achieve your financial goals.

A good financial plan covers all areas of your life – from everyday spending to planning for life-changing events, setting up investment plans, children education funds, a better lifestyle, as well as planning for retirement.

Your financial life (what you owe and what you own), and your personal life (your goals, needs, dreams, and aspirations) are interconnected.

This is why most people get divorced because of money problems.

You don’t need to be wealthy or a CPA to do financial planning; in fact, we all do it every day.

When we decide to either take the train or hop on an Uber ride, or when we decide what to eat for dinner, we are taking a financial planning activity.

Why does it sound difficult?

It is not – with this guide you will get the tools you’ll need to plan and monitor your savings, expenses, and financial goal.

10 financial advice that can improve by having a financial plan.

1. Get Out of Debt Faster

2. Borrow Smarter

3. Save More Money

4. Become a Savvy Consumer

5. Balance Competing Priorities

6. Earn More Money

7. Reach Your Investing Goals

8. Protect Your Wealth

9. Prepare for Retirement

10. Save on Tax Payments

When setting up your goals be sure to distinguish between needs, wants, and wishes.

Set up your priorities, and break out larger goals into smaller, more attainable pieces. For example, suppose you want to buy a house, but need $20,000 for the down payment; your initial goal may be to save money for a down payment to buy a house.

However, that may seem like an overwhelming task.

If you break out that difficult task into bite-size goals such as save $500 or $1,000 per month for a specific period of time and keep at it, all of a sudden, saving $20,000 is not difficult at all.

Follow the SMART goal setting technique. SMART goals are goals that are S – specific, M – measurable, A – attainable, R – realistic, and T – time-based.

Why does it sound difficult

SMART Goals – Specific

If your goal is to buy a house that’s too general. If your goal is to buy a house that’s between $500,000 – $600,000, that’s more specific. Aim to make your goals as specific as possible.

Here are some questions that might help you: What exactly do I want? Where, who, how, when, with whom? Why do I want this?

SMART Goals – Measurable

The longer the goal, the less measurable it becomes.

SMART Goals – Attainable

You have to be able to tell you can do it. If that’s not possible, it might be just a dream.

SMART Goals – Realistic

Goals must be realistic and relevant. For example, if you have never been in a cycling competition, but want to win the Tour de France next year, that may not be realistic or relevant to your current goals and lifestyle.

SMART Goals – Time-based

The longer the goal, the less measurable, achievable, and realistic it becomes. However, for long-term goals, it helps when you break out those goals into smaller chunks.

SMART Goals are Specific, Measurable, Achievable, Relevant, and Timely. The reason why most people lose money is that they fail to set up SMART goals. They get up in the moment, which leads to costly mistakes that can easily be avoided simply by setting SMART goals.

Start by tracking how much money you have coming in ( your income), vs. how much money is going out (your spending).

It is actually an easy process.

To get started use our budget template on this site, which will help you summarize what you make, and what you spend.

Income higher than expenses = Good

Income lower than expenses = Bad

The key is in making sure that your income is more than what you spend every month; it’s that simple.  If you are spending more than what you bring in that means you are getting in debt. Preparing the monthly budget will help you find out the areas where you can cut back.

I know, cutting back is easier said than done, but it’s possible.

When companies spend more money than what they make those companies go bankrupt, and so do people.

Here is the entire budgeting process in 6 easy steps:

Understanding how much  money you make and spend

Most people think they understand how much money they make and how they spend it, but if you ask them to explain how they spent their last month’s salary, chances are those people would wonder while saying “where did my money go?”

What makes people richer and pooper people poorer?

People that become rich do so because they set aside a part of the money they earn; it’s that simple. What does this mean? The amount of money you make should always be higher than the amount of money you spend.

I’ll say that one more time; the amount of money you make should at all times be higher than the amount of money you spend. That’s it!

A lot of people complain about how little money they have, or they say something like “my job does not pay me enough”. Although there are valid points with that argument, the more important aspect is to know how you are spending your money.

When you do this, you can quickly realize that

It is easy to understand how much money we make.

  • Your salary
  • Income from pension

Interest or dividends on investments

    Understanding your expenditure is a more complicated matter.

    If you are prepared to put the time in to understand how you spend your money, there are enormous benefits to be had. You will be able to see where you can best make savings and where you are unknowingly wasting money.

    Get into the habit of keeping receipts, especially for cash purchases, and do your best to analyze all of your expenditures using your bank and credit card statements: you will learn a lot! The difference between your net income, after-tax, and your expenditure is your ‘disposable income’ – the amount that you have available to apply to the achievement of your goals.

    If you can increase this figure either by increasing your income or, more likely, by decreasing your expenditure then you will be able to realize your ambitions sooner. If you are spending more than you earn then you must address this situation immediately: try to increase your income but certainly take drastic steps to reduce your expenditure

    Now, track your expenses you will need to complete a budget.

    Financial Planning Guide-12


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    If you want to be financially free, creating passive additional income is your ultimate goal.

    Imagine this:

    You go on vacation and spend a week in Hawaii, you meet some of the locals, eat exotic food, and learn some Hawaiian. Aloha!

    You return home after a dream week, check your bank account and see your account balance has increased by thousands while you were away.

    It sounds unreal, right? But this is possible if you create multiple streams of income.

    How to create a stream of passive income?

    Here are a few ways to create passive income:

    1. Airbnb or rental space in your house
    2. Royalties from books, music, photography or other creative work
    3. Launch a blog
    4. Become an affiliate marketer
    5. Invest in dividend-paying stocks
    6. Sell products on Amazon (drop-shipping)
    7. Vending machines, and laundromats
    8. Set up a YouTube channel
    9. Design items like t-shirts, mugs, etc. or anything and sells via eBay, Cafepress, Zazzle, or Amazon
    10. Create a podcast where you interview industry experts, and sell your podcasts.

    How much time will you need to invest?

    The best part of building a passive income stream is that you invest upfront effort only. Once you have built the additional income stream, you spend very little time even though you will continue adding value to your bank account month after month for as long as the passive income lasts.

    The best passive incomes provide you with higher income over the long term but require you to invest more time upfront while not earning any money initially. This is the reason why most people never do it. (Ironically those people tend to be the ones stuck on a 9 -5 job with a fixed income)

    Let’s consider the following example:

    Andy starts a YouTube where he talks about cell phones, talks about each feature the device has and gives his advice on the best cell in the market.

    At the beginning stage Andy will:

    • Read and learn about different cell phones and cell phone packages
    • Spend time producing videos, editing, and setting up his channel

    Even though Andy spends significant time at this stage, he is not making any money.  This is where most people give up, or simply don’t bother.

    But then comes the passive income stage.

    Any launches his videos and starts making money from video ads while he is vacationing in Hawaii.

    Every time you make a purchase, and especially a big purchase, there is the chance of losing money.

    Some money mistakes such as overpaying when buying a house, or getting an expensive loan can have a devastating effect on your finances.

    How do you avoid making money mistakes?

    Educate Yourself about Money

    What would you do if you had a million dollars today?

    Have you ever thought about why 70% of people who win the lottery end up bankrupt? It’s because those people don’t know what to do with money.

    The rules of money are simple

    1. Never spend more money than what you earn
    2. Never accumulate consumer debt (bad debt vs. good debt)
    3. Know the difference between needs and wants
    4. Save at least 10% of your earnings (pay yourself first)
    5. Seek expert advice before making an investment
    1. Never spend more money than what you earn

    Spending less than you earn sounds easy but many people find part the most difficult to achieve.

    1. Never accumulate consumer debt

    Nothing can slow down your financial plan more than debt, especially consumer debt. Make it a goal to never accumulate bad debt. Here is the difference between good debt and dab debt.

    Good debt

    Good debt is debt that is used for an investment that creates wealth over the long run. For example, a mortgage on a home, a loan to create a business or a student loan.

    Bad debt

    Bad debt is most typically represented by consumer debt, but it can also include debt used to buy something that goes down in value. For example, credit card debt, or things that you don’t really need or that you cannot afford.

    1. Know the difference between needs and wants

    Identifying needs is simple, these include a roof over your head, nutritious food, water, clean clothes to wear, and a consistent stream of income that helps you sustain your basic necessities.

    It is the wants that often can get us into trouble. A want is a choice or a desire; life will continue if a person does not get what he or she wants.  For example, you need a car for basic transportation, but you want the more expensive car with the $600 per month payment option for 7 years.

    That right there is an option that can bring financial distress and prevent you from achieving other important financial goals. So how can you tell the difference between needs and wants?

    Need: something you have to have (not because of ego or capricious reasons)

    Want: something you would like to have

    Sometimes our wants to help us reach new heights.

    Financial Planning Guide-17

    Do any of your wants helps you achieve any of your top 5 goals?

    If yes, that’s a want you want to keep, but start a plan that turns that goal into a reality.  If on the contrary, that want does not help you achieve any of your top 5 goals, remove that want from your list of wants, as it is most likely a fad.

    1. Save at least 10% of your earnings (pay yourself first)

    There are many so-called rules of thumb, such as the 10% rule, but those rules don’t take into account your specific financial situation.

    If you have high-interest credit card debt

    If you are carrying high-interest debt, such as credit card debt, I want you to pay that first before getting started with the saving plan. The reason is, it is much easier to save when you are debt-free.

    For clarity, high-interest debt does not usually include mortgages, most car loans, or other low-interest loans that have a fixed amount you pay every month over a set period of time.

    Once that high-interest debt is paid off

    When your high-interest debt has been paid off, your goal should be to save at least 10% of your income. Ideally, you should aim to save 10% to 25%, but the amount should not be less than 10%.

    This includes setting up an emergency fund.

    Next: Setting up the Emergency Fund

    Everyone needs an emergency fund to cover unexpected expenses such as home repairs, or a sudden loss of income. After getting free of high-interest consumer debt, set up an emergency fund.

    How much? Your emergency fund should cover six months of your monthly expenses.

    Here is a template that can help you find out how much you should aim for when saving for an emergency fund.

    Financial Planning Guide-17

    1. Seek expert advice before making an investment

    Money related errors are costly. Some errors help us learn, while others give us life-long lessons. When this happens, people wish they could go back in time to correct their missteps.

    Do you know what’s one of the biggest mistakes I see people make when deciding to invest money?

    They try to do it alone.


    Why do people make many money decisions without properly evaluating their options and without seeking expert advice? Simply, because they don’t know-how.

    A good friend of mine once told me this.

    How can you learn from other people’s mistakes?

    You can learn just as much from a mistake or something bad that happened to someone else, as you can when it happens to you as long as you take it seriously enough.

    As long as you won’t say, “aw that’s not me, I would never buy a house I cannot afford, or I would never make that silly investment.

    In fact, people that are most confident of never making a mistake have a bigger risk of doing exactly that.

    You have to learn to not let your emotions discount the facts. Knowing what NOT to do with your money is half the battle.

    Many so-called financial experts recommend cutting back on everything.

    • No lattes…
    • No dinner out…
    • No vacations…

    And MAYBE… when you retire in 40 years, you might just have enough to live comfortably.

    I don’t buy it!

    A comprehensive financial plan includes your happiness today. Instead of starting with a fixed pie and then dividing the pieces, what I want you to do is expand that pie by including your goals and where you want to be.

    We will then draft a plan that will get you there without you having to make compromises on the indulgences that bring you happiness.

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