Balancing your chequebook is to
your financial health what a long walk is
to your physical health. Good exercise.
Getting your finances in shape is
important to maintaining wellness,
because living from paycheque to
paycheque or being weighed down
by debt can create unhealthy levels of
stress, eroding health and relationships.
Money problems can also leave you
unable to pay for life’s necessities,
such as food, shelter, clothing and
transportation, let alone little luxuries
such as a night out, a summer vacation
or a child’s birthday party. Studies
such as The External Costs of Poverty
by Alan Shiell and Jenny Zhang of the
University of Calgary have found that
people who can’t afford basic necessities
tend to suffer from poorer mental and
physical health, putting them at greater
risk of conditions such as obesity, diabetes
and depression, to name a few.
Poor financial health, however,
straddles all income groups. “Whether
you make ten thousand dollars a year
or ten thousand dollars a month, if you
spend more than you make, you are
creating a problem for yourself,” says
investment specialist Allan Schneider
of Servus Credit Union’s West Lethbridge
branch.
Likewise, no matter what your
income or debts, it’s possible to become
financially fit. Incorporating even one
or two of the following tips can help.
1. Take a financial
fitness test
Financial advisor Cindy Dorais of
ATB Securities in Okotoks believes
improving financial health starts with
such a test. Like any fitness appraisal,
a financial fitness test gathers basic
information you can use to set goals.
“You would be surprised at how many
people don’t know what their expenses
are,” Dorais says. Start by looking at
how much you earn from your job or
business. Add other income sources,
including investments, to your tally.
Next, create a list of assets (every item
you own worth over $250). Keep at least
one copy and give one to your insurance
agent. Then add up your debts and note
the interest rate on each debt.
Now, ask yourself:
Do you have enough income to cover
your debts?
Is your debt mostly credit card debt
or is it on secured debts, such as your
house or car?
Can you cut expenses to save money?
Use this information to create your
financial fitness plan.
2. Make a financial
fitness plan
Write it down, follow it and check your
progress. “Most Canadians spend more
time planning their annual vacation
than their financial future,” says Lynne
Jones, a consultant with Investors Group
Financial Services in Edmonton. A 2010
survey by Ipsos Reid found 87 per cent
of Canadians are not ready or only
somewhat ready for retirement.”
If you don’t have a financial advisor,
you can use a guide such as Stretching
Your Goals—Budgeting Basics, available
online from the Alberta Learning
Information Service ( alis.alberta.ca),
to create your own plan. “Revisit your
financial plan regularly and adapt to
changes in circumstances, including
health, career and family changes,”
advises Mary Anne Christensen, a
financial advisor with ATB Securities
in Lethbridge.
3. Pay yourself first
Create a healthy financial habit by putting
away money from every paycheque.
While many financial advisors recommend saving 10 per cent of your income,
a smaller amount is a good start, particularly if you have debts or your family or
finances have recently changed. Even $25
a month will add up to a nest egg when
put away consistently.
“All of your savings don’t all have
to go to retirement. Some people may
want to take a trip or buy a car with
their savings, but when they start saving
they become more frugal about emptying
the bank account,” Schneider says.
4. Build a nest egg
Do you have money set aside for
car repairs a plumber or a family
emergency? Building an emergency
fund for unexpected expenses can be
the key to managing a financial surprise
without going into debt. Aim to set aside
a minimum of three months’ income for
emergencies. Avoid temptations to use
your emergency fund for presents or
vacations. Keep it accessible, and try to
spend it only when an emergency strikes.
