Financial security means having enough money to pay for what you want—today and in the future. While it sounds so simple, most people find it really difficult to achieve this. No matter your income level, without proper money management, and control of your expenses, you will continue to live paycheck to paycheck.
According to experts, every individual should have at least 6 months of their monthly living expenses in savings. This is one of the tips to measure your financial security.
In case of a sudden loss of income or incapacity, a financially secure person will be able to sustain their usual standard of living for the foreseeable future. At the minimum, you should be able to meet up with your basic expenses. For instance, be capable of covering your rent, buy groceries, and commute, etc. for the next few months.
If you are unable to achieve this, you’re always one unfortunate incident away from moving back in with your mom, or into the streets – and nobody wants that. — Hence, in this article, we have gathered 10 effective money management tips. They will help you remain firmly on your feet, even in troubled waters.
Money Management Tips for Canadians
1. Create a Comprehensive Financial Plan
Your financial security is not going to happen by chance. You have to develop a plan for it. Write down how much money you receive from your salary, bonuses, benefits reimbursements, and other sources. Compare that to all of your expenses to ensure you have enough money to cover everything you need.
2. Trim Costs
It is important to identify areas to save, such as on your cell phone and cable television plan, or by planning meals and groceries to avoid takeout lunches and last-minute ordering in.
3. Eliminate Unnecessary Expenses
Make a list of your current bills and their due dates, and pay your bills on time to avoid late fees and penalty charges.
Write down all the things you’re saving for, then work out how much you need to set aside each month to reach your goals in the timeframe you want then “pay” yourself this amount each month as if it is another bill.
4. Manage your Debts
Debt management is crucial to your financial security. Apart from the financial implications, the mental impacts of the debt burden are soul-crushing. It is important to develop a strategy to manage your debt and stick to it. Here are a few tips to manage your debts;
- Focus on paying off debts with the highest interest rate first.
- Keep up with required payments (such as monthly minimums) on all your debts.
- Consolidate your debts into an “all-in-one” type of bank account or a secure line of credit so you can make a single payment each month
- Talk to a debt counselor—you may have free access through your employer’s Employee and Family Assistance Program (EFAP)
5. Re-evaluate your Taxes
Explore ways to reduce your tax burden. Don’t pay more tax than you need to – find out what tax bracket you and your spouse are in, and submit claims like child care costs, medical expenses and charitable donations with the tax return for whoever is taxed at a higher rate.
6. Automate Savings
Meeting your saving goals requires a lot of discipline which a lot of people lack. One way to avoid the temptations of splurging again after receiving your next paycheck is to automate your savings.
You can do this from your online banking apps. Immediately you get paid, a certain percentage is deducted and transferred to a separate account. It is highly important that you do this for your retirement savings.
7. Automate Bill payments
When you have essential bills outstanding, it is important that you pay them as soon as possible. It helps to ease your mental stress and prevent tensions.
For instance, you need to make sure that your rent is up to date. Avoid piling up bills for an extended period of time. This only leads to huge debt burdens and more charges.
8. Re-evaluate bill payments
If you feel that your bills are skyrocketing beyond your earnings, there is no shame in downsizing. Look for a smaller house, re-negotiate your credit card bills, get energy-saving appliances for your home and office.
All of these can help you to save a tremendous amount of money. And in the long term, you will feel more financially secure.
9. Evaluate Investment Options
Investment is one of the most important money management tips. If you have a lot of money lying around, it is wise to put it into some income-yielding investments.
There are so many avenues to invest your money in Canada these days. You can have Stocks, ETFs, Gold, or Cryptocurrency, just to name a few. We recommend Questrade. Questrade is an online independent discount broker, with a low minimum investment requirement, commission, and trading fee, that has been servicing Canadians since 1999.
10. Healthy Living
One of the best ways that you can really save some money is to live a healthy lifestyle. Terminal illnesses can bring anyone to financial ruin.
Even non-terminal illnesses can knock you out for a significantly long period, preventing you from going to work or running your business. This can cause a significant financial setback.
Hence, living a healthy lifestyle is crucial to your financial security. A few examples of healthy living tips are minimal smoking, drinking, and taking appropriate safety measures at work.
Lastly, it is important that you take advantage of Health insurance policies that are available in your province or your work environment. It will save you a lot of money if you do fall sick due to causes beyond your control.
When it comes to financial management, it helps if you work with an advisor. It helps you to greatly reduce financial stress. More importantly, you get access to expert advice on how to manoeuvre your finance to get the highest levels of satisfaction for you and your family.
Here are a few other advantages of getting an advisor.
- Goal setting and accomplishment. When you set financial goals, an advisor can serve as your accountability partner to ensure that you accomplish those goals that you have set.
- Customized financial plan: An advisor can also assist you to come up with a financial plan that is tailored to your needs.
- Lastly, an advisor can help you prepare strategically for life’s financial milestones. Professional financial advisors have a lot of experience working with different people from diverse social classes. Due to this, they are able to offer quality advice for every stage of life that you are in. A financial advisor can help your prepare adequately for retirement, marriage, job loss, career change etc.
Furthermore, households working with an advisor are likely to have about two times more financial assets than households that forgo advice. If you don’t have an advisor, you should consider getting one soon.