Life is risky.

Every time you get in your car, walk down the street, use your cellphone – there is risk.

But you can’t spend your days locked in your house cocooned in bubble wrap.

Instead, you take steps to mitigate the risks you encounter.

You wear a seatbelt. Look both ways before you cross the street. Get the water damage insurance on your iPhone. (I might be speaking from personal experience with that one…)

You can mitigate financial risks, too.

But before you can do that, you have to know what those risks are (or what they might be).

That is a big part of what’s included in a comprehensive financial plan. Not all financial risks are obvious, but an experienced Certified Financial Planner knows what to plan for.

What sort of financial risks should you work to mitigate?

Market Risks

This is the most obvious risk, and the one most people think of when they think of financial risks. Fluctuations in the market could impact your investments. Protect your investments from dips and dives by diversifying in both type and origin.

Inflation Risks

If your investments are too conservative, you risk not keeping up with inflation. That means that the purchasing power of your money could erode over time. Combine that with rising costs of living, and you end up not having enough when you need it.

Longevity Risks

Living a long time hardly seems like a “risk” – but in financial terms, it absolutely is. Living longer puts more pressure on your savings to sustain your standard of living. Of course, you HOPE to live a long and full life, so your financial plan should account for that.

Taxation Risk

Different investment vehicles are taxed differently. Similarly, when you pull income from investments can affect taxable income. That has a cascading effect on your eligibility for certain government benefits. Your financial plan should lay out the order of income delivery to maximize spendable (and minimize taxable!) income.

Estate Risks

Estate fees, taxes, legal, and accounting fees can eat into your beneficiaries’ gifts. There are many strategies, depending on your specific investments and assets, that can be employed to maximize the benefits to your loved ones and minimize the benefits to the CRA.

Health Risks

Having to withdraw investments sooner than expected because of short or long-term health issues can strain your portfolio. Living benefit insurance can protect your earning potential AND help you continue to meet your financial goals even in the face of job loss. There is a myriad of insurance strategies you can work with to protect yourself and your family

Emotional Risks

If you have a lot of anxiety around your finances, you might be prone to sell in a down market, or before you think the market will go down, or when you think there might be the tiniest possibility that the market will go down in the next few years or ever… you get the idea.

But selling based on perceived risks or frequently changing strategies can hamper your financial goals and destroy your capital. When you know you have a plan (and can see the projected results from said plan over the next 5, 10, 20 years over a variety of scenarios) – you will be far less prone to these emotion-based decisions.

Financial planning is not about never taking risks. It is about knowing what risks you are willing to take and diminishing the potential consequences.

If you want to know what risks you could be facing financially, and how to mitigate them – book a call.