Balancing your chequebook is toyour financial health what a long walk isto your physical health. Good exercise.
Getting your finances in shape isimportant to maintaining wellness,because living from paycheque topaycheque or being weighed downby debt can create unhealthy levels ofstress, eroding health and relationships.
Money problems can also leave youunable to pay for life’s necessities,such as food, shelter, clothing andtransportation, let alone little luxuriessuch as a night out, a summer vacationor a child’s birthday party. Studiessuch as The External Costs of Povertyby Alan Shiell and Jenny Zhang of theUniversity of Calgary have found thatpeople who can’t afford basic necessitiestend to suffer from poorer mental andphysical health, putting them at greaterrisk of conditions such as obesity, diabetesand depression, to name a few.
Poor financial health, however,straddles all income groups. “Whetheryou make ten thousand dollars a yearor ten thousand dollars a month, if youspend more than you make, you arecreating a problem for yourself,” saysinvestment specialist Allan Schneiderof Servus Credit Union’s West Lethbridgebranch.
Likewise, no matter what yourincome or debts, it’s possible to becomefinancially fit. Incorporating even oneor two of the following tips can help.
1. Take a financial
Financial advisor Cindy Dorais ofATB Securities in Okotoks believesimproving financial health starts withsuch a test. Like any fitness appraisal,a financial fitness test gathers basicinformation you can use to set goals.
“You would be surprised at how manypeople don’t know what their expensesare,” Dorais says. Start by looking athow much you earn from your job orbusiness. Add other income sources,including investments, to your tally.
Next, create a list of assets (every itemyou own worth over $250). Keep at leastone copy and give one to your insuranceagent. Then add up your debts and notethe interest rate on each debt.
Now, ask yourself:Do you have enough income to coveryour debts?
Is your debt mostly credit card debtor is it on secured debts, such as yourhouse or car?
Can you cut expenses to save money?
Use this information to create yourfinancial fitness plan.
2. Make a financial
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
3. Pay yourself first
Create a healthy financial habit by puttingaway 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 orfinances have recently changed. Even $25a month will add up to a nest egg whenput away consistently.
“All of your savings don’t all haveto go to retirement. Some people maywant to take a trip or buy a car withtheir savings, but when they start savingthey become more frugal about emptyingthe bank account,” Schneider says.
4. Build a nest egg
Do you have money set aside forcar repairs a plumber or a familyemergency? Building an emergencyfund for unexpected expenses can bethe key to managing a financial surprisewithout going into debt. Aim to set asidea minimum of three months’ income foremergencies. Avoid temptations to useyour emergency fund for presents orvacations. Keep it accessible, and try tospend it only when an emergency strikes.