WealthyPlanet Blog

5 Financial Planning Tips for Moms Worried About Finances

Moms are currently struggling with financial worries, but they should be more worried about their financial planning practices. These are some of the outcomes we found from a recent survey of more than 250 Ontario Moms, members of Movies for Mommies (MFM), a national social community for new parents.

The survey was conducted in late May 2020 by WealthyPlanet, an online financial planning company and MFM partner. We asked financial planning expert and author, Michael Hlinka, CFA, to look at the survey results and provide some best practice tips. Respondents were Ontario Moms with one or more children, primarily 31‒40 years old, half of whom live in the Toronto area.

 

The survey found Covid-19 has impacted the household income for 56% of these new parent households, and 45% have applied for a government benefit program. Moms have also been concerned about their investments; 63% are either somewhat or very worried.

Tip 1 ‒ Have a goals-based financial plan

It is imperative to have a financial plan, and 62% of Ontario Moms have one. Further, 58% said their plan would be described as “holistic” covering the comprehensive tracking of investments, insurance, mortgage, and debt. A holistic plan is optimal, however we determined in fact, their plans may not be holistic.

As well as being life and family goals-based, a financial plan ensures living your desired life in retirement or if you cannot work anymore. Government-provided pensions may not be enough, and life expectancy is increasing, therefore money must last longer. For the 38% with no financial plan, this could result in future hardships.

“Even those who have financial plans could face future hardship!” according to expert Michael Hlinka. “Conventional financial planning focuses on calculating the necessary amount of financial insurance and reaching a certain dollar amount at some point in the future. Goals-based financial planning, which is the stock and trade of WealthyPlanet, focuses on helping to achieve individual financial goals, whatever they may be.”

Tip 2 — A plan for investments is not your entire financial plan

When asked where the Moms keep their financial plan — 58% said with a Bank while 20% keep their plan with a Wealth Management firm. Further, 53% said their plan does not include the comprehensive elimination of debt, and almost the same percentage said debt management should not be part of a financial plan. But financial plan objectives were somewhat evenly split between home ownership, retirement planning, debt management, and a combination of all these objectives.

“There is a good reason why debt management and the elimination of debt is not a part of many financial plans: There is nothing in it for the adviser,” says Hlinka. “The compensation model for many traditional wealth planners is transaction-driven. WealthyPlanet’s model better align with the clients’ interests by offering the assistance of a non-commission, financial-life planner.”

Tip 3 — Elimination of debt is a critically important part of your financial plan

High debt loads are a problem for many Canadians — for every dollar we make, we owe $1.80. The higher the debt, the higher the annual interest payments needed to service that debt. Interest rates right now are exceptionally low, but inflation resulting in higher interest rates could be just around the corner.

“History can help us appreciate how volatile interest rates can be,” Hlinka points out. “On September 1st, 1967, five-year fixed mortgage rates in Canada were 5.75%. Two years later, that rate had increased to 8.0%, and five years after that they were 11.5%. This is a sobering lesson; debt management is an important part of a financial plan!”

Tip 4 — Numbers are not your thing? Take advantage of free planning tools and education

When it comes to financial planning — most (64%) of couples make decisions together, according to the survey. If one of the biggest strains on a marriage is money, Moms are doing the right thing by making joint decisions. For those that do not find numbers and finances easy, there are resources available to help.

WealthyPlanet’s free, online financial planning software is designed for improving financial literacy and self reliance. You can view your holistic plan over time and understand each of the elements- from pension to retirement savings or debt- to make sure you are optimizing overall goal achievement. WealthyPlanet offers the help of an online video-enabled financial-life coach to help you learn, and in turn make your own smart decisions.

Tip 5 — A good financial plan will give the best reason to feel optimistic about the future

Despite the coronavirus and current worries expressed, 84% of Moms said they were confident or somewhat confident about their financial future. Just 16% were not confident or even fearful. Do existing financial plans warrant these healthy levels of confidence in the future?

The survey uncovered inconsistencies regarding the mixed objectives of financial plans, such as elimination of debt, but lack of focus on debt management in the plan. Further, the place where most financial plans are held (a bank or wealth management firm) may imply a focus on investments or services with fees attached for those companies. Plans may not necessarily consider all the elements of a holistic financial plan based on goals and optimized for overall achievement.

With tools and online solutions available today like the free financial planning platform offered by WealthyPlanet — it is possible to easily take control of your own comprehensive financial plan to get better insights of how to optimize goals looking over 20 to 30 years into the future. These tools provide advanced algorithmics, tax optimization and consumption smoothing for more accurate and smarter planning, often resulting in significantly more money for goals such as retirement.

WealthyPlanet gives everyday Canadians confidence about their financial future through a powerful and free online financial planning platform, cost-effective products, and money coach advice. 

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