What it is: Getting a clear picture of your current financial situation. It involves understanding where your money comes from (income) and where it goes (expenses). This includes budgeting, tracking spending, managing debt (like credit cards, loans, or mortgages), and figuring out your net worth (what you own minus what you owe).

Why it matters: You can't plan a journey without knowing your starting point. This area helps you see how much money you realistically have available to save, invest, or spend. It's the foundation for all other financial decisions.

What it is: This is about strategically using your money to potentially grow it over time. It involves choosing different types of investments that align with your goals, how long you plan to invest (your time horizon), and how comfortable you are with potential ups and downs (your risk tolerance).

Why it matters: Simply saving money often isn't enough to reach big goals like retirement, especially with inflation making things more expensive over time. Investing gives your money the potential to grow faster than inflation, helping you build wealth for the future. Some accounts have tax consequences as well that are important to plan for!

What it is: Life is full of surprises, and not all of them are good. This area focuses on identifying potential financial risks – like losing your job, becoming disabled and unable to work, facing a critical illness, or premature death – and finding ways to protect yourself. The main tool here is usually insurance.

Why it matters: Unexpected events can devastate even the best-laid financial plans. Having the right protection in place helps ensure that you and your loved ones can weather financial storms without derailing your long-term goals. It provides peace of mind.

What it is: Nobody likes paying more tax than they need to! Tax planning involves finding legal ways to reduce your tax burden. This could mean using tax-advantaged accounts (like RRSPs and TFSAs here in Canada), structuring your investments wisely, taking advantage of eligible deductions and credits, and planning the timing of income or expenses.

Why it matters: Taxes can take a significant bite out of your income and investment returns. Smart tax planning means you keep more of your hard-earned money, freeing it up to work towards your goals faster.

What it is: This focuses specifically on preparing for the time when you choose to stop working or slow down. It involves figuring out how much money you'll likely need to live comfortably in retirement, determining how much you need to save between now and then, choosing the best ways to save (like pensions, RRSPs, TFSAs), and planning how you'll eventually take money out during retirement.

Why it matters: For most people, retirement is one of the biggest and longest financial goals. Planning helps ensure you can maintain your desired lifestyle without running out of money. It’s also important to know how you’ll take your money out when the time is right.

What it is: This is about planning for what happens to your assets (money, property, investments) and dependents after you pass away. It involves reviewing documents like a Will, appointing Powers of Attorney (for property and personal care in case you become unable to make decisions), exploring the benefits of setting up trusts, and naming beneficiaries on accounts like RRSPs and life insurance. It also considers minimizing taxes and fees associated with settling an estate.

Why it matters: Estate planning ensures your wishes are carried out, makes things much easier and less stressful for your loved ones during a difficult time, protects your beneficiaries, and can help preserve the value of your estate.