This is part one of our 5-part series for Financial Literacy Month
Financial health, like physical health, is something we need to take care of throughout our life. And just as exercise and proper nutrition are key to good long-term health, developing good financial habits such as budgeting, saving and investing are necessary for good financial wellness.
Here are some key steps to keep you in top financial shape:
- Set up realistic and attainable financial goals
The confidence gained through setting and attaining small goals can be much more rewarding than setting impossible goals and falling short. Goals may range from buying a fridge or saving to start a small business or a down payment on a house to more long-term goals such as saving for your child’s education or your own retirement.
- Pay yourself first
Set aside a certain amount of what you earn each month for savings. It doesn’t need to be a huge amount, even saving $25 each month can build over time. Have it automatically transferred from your chequing to your savings account as soon as you are paid. If it “disappears” into your savings account at payday you won’t notice it gone and it will force you to budget with the remainder.
- Cut out unnecessary drains on your money
Daily expenses can add up! These can include that daily trip to Starbucks, fast food stops, or ongoing drains such as an unused gym membership or streaming video or magazine subscription you rarely use. Forgo or cancel those underused expenses and redirect the money into a savings or investment account.
- Set up a contingency fund
Unexpected expenses, such as an emergency situation or a job loss, often arise when we can least afford them. Try to build a contingency fund of 3 to 6 months. It may take time to build this, but it will go a long way toward helping to avoid dipping into retirement and other long-term savings, or, worse still, having to borrow money or take on credit card debt.
- Make your savings work for you
Leaving money sitting in a chequing account doesn’t make you wealthier—it only benefits the banks. Look at options that pay a higher interest rate such as Guaranteed Investment Certificates (GICs) or term deposits. Better still, consider options that give you some exposure to stocks such as mutual funds or Exchange Traded Funds (ETFs). These are more volatile but do offer the potential for higher returns on your money. The key to increasing your wealth is to grow your money faster than the rate of inflation. If you’re not, your money is actually losing value in terms of its buying power.
Family Services of Greater Vancouver can help you with your financial well-being. We have workshops and one-on-one financial coaching to figure out your financial goals and how to achieve them. Email firstname.lastname@example.org or call 604-638-3991 to get in touch with our team and learn more about how we can help you with your financial goals.
Murray Baker is a Financial Facilitator and Coach, Financial Empowerment, with Family Services of Greater Vancouver. He is also a speaker and author of the bestseller The Debt-free Graduate: How to Survive College Without Going Broke, now in its 14th edition.