FINANCIAL PLANNING FOR INCORPORATED PROFESSIONALS
What You Need to Know About Financial Planning
As an incorporated professional, you’re in a unique financial position. When putting together a financial plan, you’ve got to consider two different types of financial planning – your professional and personal finances.
What should my professional financial plan focus on?
As an incorporated professional, your professional plan needs to address how to preserve the wealth you currently have and how to make it grow.
Your plan needs to focus on the following:
- How to manage your cash flow, so you have enough to keep your business running and make a profit while also paying off debt.
- Investing surplus funds into building your business or use the excess cash in other ventures.
- Optimized tax planning. This can include finding tax efficiencies, accessing surplus funds inside your corporation, paying yourself in dividends vs salary or staying under the small business tax limit.
- Retirement savings, make sure you are saving consistently through a group retirement savings plan, individual pension plan or outside of the practice.
- Determine the best way to ensure your practice has health benefits and consider options such as Health Spending Accounts (HSAs).
How to use insurance to minimize the impact of unexpected events in case of disability, critical illness, or death.
What should my personal financial plan focus on?
While it’s less complicated than the professional side of your planning, it’s still essential to ensure you don’t forget the personal side of your financial planning! It’s also vital to ensure your financial plan is fully optimized and integrated with your professional plan.
Your personal financial plan should have a firm grasp on your savings and debt, look for efficiencies in tax planning, and include an investment plan for any personal savings accounts such as RRSPs and TFSAs.
The best way to protect your personal wealth is with the right personal insurance. Insurance such as critical illness or disability insurance can provide you with an income if you’re temporarily or permanently unable to work.
In addition, you should ensure you have insurance and a proper estate plan in place.