The benefits of a documented financial plan are unknown to many Canadians as almost half (46%) say they don’t have one while others confuse their personal budget for a financial plan, according to a new report from Toronto-based Canadian Imperial Bank of Commerce (CIBC).<\/p>\n

Of the 46% of Canadians who don’t have a financial plan, 42% say they have a “pretty good idea” of what they need to do to reach their financial goals and don’t need to write anything down. More than a quarter (26%) of this group feels their financial situation is simple and doesn’t require a financial plan.<\/p>\n

“While most of us have a fairly good sense of our financial goals, it’s surprising that so many Canadians don’t have a clear road map in place to achieve what they want today and tomorrow,” says Sarah Widmeyer, managing director and head of wealth strategies with CIBC, in a statement.<\/p>\n

In contrast, 54% of Canadians say they have a financial plan in place with 64% of this group describe it as a long-term plan that identifies their savings goals and the steps needed to achieve them. However, 36% of those who say they have a financial plan describe it as a short-term plan or a budget they review regularly.<\/p>\n

This confusion may leave those Canadians ill-prepared to deal with future financial needs, says Widmeyer: “While budgeting and financial planning go hand-in-hand, a budget alone is insufficient in crafting the life you want in the future.”<\/p>\n

Clients should be informed of the various elements of a documented financial plan, which include personal goals, financial needs and priorities in areas such as income, expenses, taxes, retirement planning and insurance, Widmeyer suggests.<\/p>\n

The CIBC survey shows that Canadians who have financial plans are more confident that they can handle a variety of unexpected life events than those who don’t.<\/p>\n

The area in which the gap between the two sets of survey participants is widest pertains to the possibility of a sudden job loss for someone in the household as 70% of those with a financial plan say they could manage such a scenario while only 58% of those without a plan state the same.<\/p>\n

The CIBC survey also explores the effect that working with a financial advisor can have on a Canadian’s ability to handle unexpected scenarios. The areas in which Canadians with advisors feel the most confidence is in managing a health scenario that would make someone unable to work (78%) and paying for medical expenses not covered by an insurance provider (78%). About two-thirds of Canadians without advisors say the same for those two events.<\/p>\n

The areas in which advisors seem to be having less of a noticeable effect are in the ability to handle a divorce or a growing family. About half (52%) of those with advisors say they can handle a divorce compared with 46% of those without advisors while 60% of those with advisors say they can handle the expenses connected with a growing family compared to 55% of those without an advisor.<\/p>\n

This research is based on data collected from 1,007 Canadian adults with a household income greater than $100,000 a year who are Angus Reid Forum panellists. The data were collected from Jan. 5 to Jan. 9.<\/p>\n

Photo copyright: kzenon\/123RF<\/em> <\/p>\n

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