Financial Planning Software
A Tool for the DIY Approach
A key ingredient to developing anyone’s financial plan is the software tool used to forecast your incomes, expenses, assets and debts into the future. Without the forecast, it’s very difficult to effectively make good decisions about your financial future today.
We can access these forecasting tools in three primary ways:
· Through our advisor, where the advisor or their specialist operates a software planning tool, complemented by their professional planner training and paid for through part of your ongoing fees (maybe $10,000, $20,000, or more per year) paid to their company
· Through a fee-only planner, where you work with the specialist who operates a software planning tool, complemented by their professional planner training and paid by you for an up-front specific fee ($2000 to $5000 every few years) for the agreed service
· By ourselves, where you select one of a few software’s available for Canadian DIYers, complement it with self-training on the planning information relevant to you, and purchase your own software ($40 to $200 per year)
We have in the past accessed through an advisor, a fee-only planner, and are now using the DIY approach. As a result, we needed to purchase a software tool.
Over the last year, I identified several applicable software’s and trialed many of them. These include Adviice, MyOwnFP, Canadian Retirement Planners Software, and MoneyReady. I’ve settled on Adviice as the most user-friendly and best value for cost. Note there are also many free retirement calculators, but they are seriously limited relative to the software I trialed.
Considering DIY
Many of us DIY home and yard maintenance, leveraging YouTube for the necessary training. Some of us DIY auto repairs, even cabin building. Do you do it to save money, save time and/or because you like the challenge?
A 2002 article says about 25% of Canadians DIYed (filed) their own taxes. By 2023, this article suggests roughly 50% of us now DIY our own taxes. I assume this growth is tied in part to the user-friendly and high value cost of the software being used.
Did I mention, the CRA tax code is way more complex than a household financial plan. If you can learn to do your own taxes, you can certainly learn to do your own financial plan.
DIY without Training?
It is very important to consider the training aspect. DIYers aren’t professionally trained. But it is not a big challenge to become trained, as you only must learn that which is relative to your situation. If you go down the DIY route, I speculate you may need 50-100 hours of self-training geared to your unique situation. YouTube is a great resource. The pro needs over 1000 hours because they must be able to address every possible unique scenario from their hundreds of clients.
Your 50-100 hours and one scenario vs their 1000 hours and hundreds of scenarios puts you in a position to have an equal or lower error rate and save the money you’d otherwise spend. Remember, only 50% of us are still paying accountants to do our taxes, while the remaining 50% are getting it done and saving the difference.
As an additional level of safety, I’d also suggest when implementing DIY software you should reference against the most recent plan delivered to you from a professional. This will give you baseline confidence to believe you aren’t missing anything as you trial and consider transition to DIY.
Is it for You?
If you have the right combination of motivation to save costs, a willingness to learn on your own time, and an interest in your personal finances, DIY may be a Be Prepared solution for you. You can always try it and revert to your previous approach if it doesn’t fit. What do you have to lose?