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The Financial Triangle

The Financial Triangle is a concept that shows us the order of operations we should take when administering our finances – what we should do first, what we should do second, and so on. Starting from the base up, in order, the steps are:

  • 1) Cash Flow – Always the very first thing we must do and thus the base of our triangle. Before we can save or spend our money, we need to budget. Controlling our cash flow allows us to make decisions on what we spend, as well as evaluate tradeoffs between spending, debt repayment, and savings. Cash flow control must come before insurance or retirement savings, because without cash flow we can’t plan the next stages.
  • 2) Insurance – The second step in financial planning. Before we tackle our long term plans we must first guarantee the stability of our current cash flows and lifestyles. Life insurance, disability insurance and critical illness insurance are the three pillars of this section of the triangle. Insurance comes before savings and investing as we need to protect what we have today before we set aside for tomorrow.
Cash Flow
Saving & Investing
Tax & Estate Planning
  • 3) Saving and investing – in this step we plan for our retirement and long term goals such as home ownership and RESP’s. At this stage we look at how much we can save, the vehicles we can save in (RRSP’s, TFSA’s, and RESP’s). In this step we look at strategies such as index investing, canadian couch potato portfolios, and passive investing.
  • 4) Taxes and estate planning – With our long term financial goals realized, the next step on top of saving and investing is estate planning and tax minimization strategies. Many people will not get to this stage, but for those that have fully maximized their savings and investing strategies the next step is to maximize any remaining funds.
  • 5) speculative and advanced investing – this stage is advanced financial planning. With all of our other financial needs fully met we can now start looking at other more advanced (and more risky) investment and tax strategies.

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The Beginner’s Guide to Saving & Investing for Canadians

Welcome to The Beginner’s Guide to Saving and Investing for Canadians. This book is designed to help Canadians make better decisions about their money. We know there are already countless books and articles about saving and investing, but we believe this one is unique. For the first time, it brings together the collective experience of Canada’s foremost personal finance bloggers and online publishers, each of whom writes about his or her particular area of expertise.

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Budgeting and Cash Flow

This series has described budgeting in 2 main parts. The first part is building your budget accounting for the income sources and expense sources which can be fixed or variable in nature. The budget is broken down into parts that you can control in the short term and parts you can control in the long term for you to see your options in adjusting your budget. The second part of the process is how to make changes to your budget and how to examine its various parts.

Index Investing

Saving for the future is very important, but savings alone can make reaching your financial goals very hard. If every dollar you want to spend in the future – say, for retirement – you have to earn and hold on to first, it can make the idea of meeting your future goals seem daunting. To get ahead, we need to not just work ourselves and save from those paycheques, we need to get our money working too.

Personal Bankruptcy

Bankruptcy is a scary word. It conjures up images of losing your home, destroying your credit, and other unpleasant thoughts. But it can provide relief from a crushing debt burden, so for some people it can be the right move.

Disability Insurance

What is it and how does it work? When it comes to insurance, Canadians simply do not have a good enough understanding of what their needs and options are. Insurance can be both confusing and boring, meaning that you likely have not invested the time to research what coverage makes the most sense for you and your family, or what risks you remain exposed to. While it’s highly likely that you have heard of life insurance, you may not have heard about disability insurance.

Critical Illness

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