The Financial Consumer Agency of Canada (FCAC) makes a pretty blunt assessment of our national ability to manage our money. Due to a lack of education on personal finance, many Canadians hold “false, biased or incomplete beliefs” which can lead to unwise decisions that have the potential to drastically impact their lives.
Financial mistakes aren’t just obvious actions like overspending and falling for rotten investments; you could unknowingly be setting yourself up for money trouble by not practicing positive habits as well. For all your financial slipups, both past and present, here are some guiding principles to get you back in black and well set up for the years to come.
Tell it like it is
If you’ve never budgeted before, now is the time. Everyone should have an accurate breakdown of their financial situation, warts and all. FCAC provides a monthly budget planner which allows you to map out all your liabilities and see exactly how much you’re spending (and on what). The difference between your overall income and expenditure is an indicator of your financial health.
Get serious about debt
Use a debt calculator to work out exactly how much you owe and how long it will take you to pay it off. For multiple loans, calculate what repayment strategy will minimize interest. This is especially important if you’ve already missed a repayment, as upstanding credit behaviour is the only way to rectify a poor credit rating.
For eligible customers, a promotional balance transfer card may be a viable way to get an extension on repayments and consolidate debts from several credit cards, retail cards and loans. The MBNA Platinum Plus MasterCard, for example, offers 0% balance transfer interest with no monthly interest fees for a promotional period of 12 months.
Prepare for the future
It’s imperative that you’re in the habit of saving – no matter how young you are or how little you can afford to tuck away. As well as saving for short and long-term goals, make regular contributions to aretirement fund and build up 3-6 months’ worth of your income in an emergency account.
When this is firmly in practice and you’re comfortably maintaining financial stability, consider diversifying your assets with the guidance of a certified financial planner as a safeguard against market changes. You should also have adequate (and inexpensive) insurance coverage to protect yourself from unexpected loss. Investing in your future now will save you from really paying for it later.
Ask for help
If you’re struggling with your past financial mistakes, or are in danger of making new ones, there are resources that can help you. Among the most valuable are non-profit credit counselling agencies such as Credit Counselling Canada and the Credit Counselling Society which, at no or little cost, offer confidential advice from professionally trained and certified financial counsellors. Don’t hesitate to reach out if you’re in a bigger mess than you can handle alone. Not seeking help when you know you need it could be the biggest financial mistake of them all.
J. Paik | The Edge Blog