What is financial planning and how can it help me?
Financial planning is a process that helps people manage their income, investments, and expenses in order to reach their life goals. It also helps people make financial decisions and prepare for future needs such as illness, disability, having a family, or retirement.
Financial planning can benefit everyone, but it's especially useful for people with MS. MS is an unpredictable condition that can generate unexpected medical expenses and affect a person's ability to work. Financial planning can help people with MS gain peace of mind and take control of their future. It can help them plan for unexpected expenses or changes in job status (e.g., the need to switch to part-time work or leave the work force temporarily or permanently) related to their condition. The best time to start financial planning is now, so that you can have a plan in place to deal with whatever the future may bring.
Financial planning involves four main steps:
- Take a look at your current situation, needs, and goals for the future.
- Look for areas for improvement or potential problems related to your income, tax situation, investments, and special needs related to MS (such as assistive devices, insurance coverage, and possible changes in job status).
- Develop a plan to meet your goals and address the possible risks you may encounter.
- Act on your plan and keep track of how you are doing.
You may find it helpful to enlist the help of a professional. For advice on choosing a financial planning professional, see "Time to call a financial advisor?"
Taking stock and planning for the future
To plan for the future, you need to have a realistic idea of where your finances stand right now and which major life events may be coming up.
Where do you stand?
Net worth and cash flow are two important tools that financial advisors use to help people take stock of their finances. You can use them too!
To figure out your net worth:
- List the dollar value of everything you own, such as your house, car, jewellery, bank accounts, investments (such as stocks, bonds, mutual funds, and guaranteed investment certificates [GICs]), the cash value of your life insurance policies, and any money owed to you (e.g., tax refund).
- Then list the dollar amounts of everything you owe, such as mortgages, lines of credit, credit card debt, and car loans.
- Now subtract what you owe from what you own. The result is your net worth.
To figure out your cash flow:
- List the amount of money you have coming in (you can calculate this on a monthly or yearly basis). This may include employment income, disability income, unemployment insurance income, pension income, and money from income-producing investments.
- Next, list the dollar amounts of all of your expenses (again, this can be monthly or yearly expenses, but make sure you use the same time frame as you did for the money you have coming in).
- Now subtract your expenses from your income; this is your cash flow.
Calculate your net worth and cash flow each year to help you keep track of your financial health over time. If your net worth is growing and your cash flow is positive, that's a good sign. If not, then it may be time to reexamine your financial plan or get help from a financial advisor.
Planning for the future
Consider the major life events that may affect your financial situation in the future (e.g., needing to leave the work force, medical expenses, putting children through school). MS is an unpredictable condition, so you can't know for sure exactly what will happen. But you can speak to your doctor and your local MS society to find out what kinds of changes you should plan for in the future, such as medical costs and the need to leave the workforce, change jobs, or move to part-time work.
Take a look at your net worth and cash flow to see if you will have the money you need to deal with these life events. If not, you may want to look for other sources of income (see "Helping to balance the balance sheet") or talk to a financial advisor (see "Time to call a financial advisor?") to help you make a financial plan.
Getting professional advice
Depending on your individual situation, financial planning can be a complex process. You may want to get help from a financial advisor, at least to get started. To learn more, see "Time to call a financial advisor?"
Helping to balance the balance sheet
MS can affect your ability to work, and MS treatment expenses can also affect your finances. But help is available – here are a few ways to boost your income and ease your expenses.
Working it out
If MS is making it harder for you to do your job, you don't necessarily have to quit – you can ask your employer for accommodation. This is a change to your working environment that allows you to continue to do your job, such as:
- flexible hours
- working at home
- switching one job duty for another
- moving your work station closer to the bathroom
- making your workplace wheelchair-accessible
- putting an air conditioner or fan in your work space
You can also explore job sharing, part-time work, or a career change to help you find a working arrangement that suits your skills and interests while accommodating your MS.
For your benefit
If, at some point, you need to leave work temporarily or permanently because of your MS, short-term and long-term disability benefits are available to help you cope financially. You may be eligible for disability benefits from:
- your employer
- your union
- your spouse's employer
- private disability insurance
- the government: employment insurance (EI) sickness benefits for short-term (15 weeks) coverage, and long-term disability benefits (through the Canada Pension Plan or Quebec Pension Plan) for long-term coverage
Contact your employer or insurer to find out the details of the plan, whether you are covered, when benefits start, and how much the benefits will pay. Your local MS society can provide you with more information on government plans.
Other sources of financial assistance
Depending on your situation, you may also be eligible for other sources of assistance:
- Tax relief: The government offers a number of tax relief options, including the disability tax credit, disability support deduction, medical expense tax credit, attendant care expense deduction, and GST/HST exemptions on medical devices and GST/HST rebates on specially equipped motor vehicles. To learn more, contact the Canada Revenue Agency or your local MS society.
- Financial assistance with medication costs: Some people are covered by a personal or employer's plan, and others may be eligible for provincial government reimbursement for some of the costs; pharmaceutical companies may also offer some financial assistance for medication costs.
- MS society and community-based programs: These programs can provide assistance in a variety of forms, such as helping with the costs of assistive devices or covering services not funded by the government.
Time to call a financial advisor?
Because MS can raise complex issues with employment, insurance, taxes, and healthcare expenses, people with MS may want to work with a financial advisor to help them organize their finances.
When choosing a financial advisor, it's vital to find someone you can trust. You may wish to ask your friends and family or your local MS society for a recommendation.
The advisor you choose should have the CFP (Certified Financial Planner) designation – this ensures that they meet professional standards for competence and ethics. Another valuable certification is the FCSI (Fellow of the Canadian Securities Institute), which ensures that the advisor meets rigorous ethical and educational standards and has relevant industry experience.
Once you have a list of possible advisors, narrow it down to a few and interview them.
Here are a few questions you should consider asking (you can also add your own questions):
- What are your professional qualifications and certifications (e.g., do you have the CFP designation)?
- Do you have experience in advising people with MS or other long-term health conditions that could affect employment and health care expenses?
- Are you familiar with the legal/financial issues facing people with MS?
- How are you paid (e.g., flat fee, commission)?
- What is your investment philosophy?
- How often will we meet to discuss my finances? How often will my financial plan be reviewed?
- Can you provide me with references?
After the interviews, check the advisors' references to learn more about why people like or dislike working with the advisors. After checking their references, it's also a good idea to contact the Financial Planners Standards Council (FPSC) to ensure that the advisor has a CFP designation.
The final choice of advisor will be up to you. It's important to consider the advisor's qualifications, experience, and investment philosophy, but it's also important to choose someone you enjoy working with. Together, you can chart a course for your financial future.