According to the 2019 Canadian Financial Capability Survey, 41 percent of Canadians sought financial planning assistance during the prior 12 months.
Many of these people did so because they feel overwhelmed in trying to manage their own money. Whether you seek outside help or choose to manage your money on your own, you can make smarter decisions. Below are five great ways to start being smart about your own wealth management.
1. Follow a Clear Budget
Sticking to a budget is one of the hardest steps in financial planning. But it is also the foundation of financial success. Create your own budget and follow it on an ongoing basis. Be specific in this spreadsheet, including a hard number for how much you can spend each month. Start with three basic categories:
- Required spendings, such as mortgage or rent, utilities, and student loans
- Expenses that are difficult to reduce, such as commuting costs and groceries
- Optional expenditures, such as dining out, shopping, video streaming, travel, and savings
Your money should go first to required expenses in the first category. Of last allotment is the last category, optional expenditures.
Once you establish a budget, review it every few months. Eventually, as you reduce some of your living costs, you can move savings and personal investments like educational programs or fitness into your primary “required spending” category.
By making these self-improvements a priority over dining out or shopping, you improve your quality of life on an ongoing basis, instead of spending too much money on frivolous and fleeting pursuits.
2. Pay Down Your Debt
Credit accounts are great for improving your credit score. But you should only carry a balance that you can pay off in a month. If you maintain a lot of debt, such as through a mortgage, student loans, or credit cards, you need to focus on paying these off quickly. Otherwise, interest adds up. Also, by paying these off, you have more money to put into savings and use for other priorities.
3. Reprogram How You Think About Money
While you pay off your debt and follow a budget, you need to change how you think about money. Most of us hold onto incorrect beliefs about money that stem from childhood. You need to challenge these beliefs and improve your mental perspective. You can start this process by setting aside some time to read about how your thought processes play a role in your finances. Discover your triggers that lead to irresponsible financial decisions. Then, plan to avoid these triggers and their past results.
4. Create an Emergency Fund
Everyone needs a safety net because none of us can predict a financial emergency. But too few people actually build their own fund. Then, when an urgent need or disaster strikes, money is not available for remedy. You should always have an emergency fund and remain dedicated to putting money into it each month. Even if you can only save $10 per month in this fund, it is a start. Ideally, your fund will build enough money to keep you afloat and pay your bills for 90 days.
Having an emergency fund keeps you from going into debt when financial hiccups occur. Getting into more debt is generally a bad idea, especially since it can be so hard to get out of it. Debt uses money you could otherwise put into savings, keeping you from achieving other life goals or putting off retirement. Your emergency fund keeps you from feeling anxious or experiencing unhealthy stress when money can solve a problem.
5. Invest in Your Future
Tomorrow is not as far away as you think. While many people start young in saving for their retirement, as we all should, few think about other ways they should invest in their future. Consider these wise investments toward a better future:
- Taking online classes for a better job
- Investing in stocks and bonds
- Saving as much as you can for emergencies
- Seeking stability, such as through the purchase of a home
Follow the first four tips above and start enjoying the benefits of being smart with your money. Everyone seeks to get to a place of personal financial stability. Many of us look beyond maintaining the status quo, to a place of needing wealth management. Wealth does not need to feel like a pipe dream to you.
Find ways to learn about creating wealth. Building wealth is exciting and is something anyone can pursue. You just need good information, financial awareness, persistence and the right advice. Some of the places Canadians tend to seek advice for financial planning and wealth building include:
- Professional financial planner
- Personal bank
- Friends or family members who have built wealth
- Internet research
- Newspapers and magazines
- Radio and television programs
Keep Learning about Ways to Manage Your Wealth
Besides budgeting, saving and smart spending, consider expanding your knowledge of financial topics. Learn about retirement planning, taxation and tax planning, insurances, estate planning, education funding, powers of attorney, credit reporting and debt management. Each of these can help you achieve wealth in their own way. The more you learn, the more able you are to use your money wisely.
In the aforementioned Canadian Financial Capability Survey, 40 percent of Canadians report having improved their financial skills, knowledge, and confidence in the past five years. Those with a budget maintain the best financial well-being, such as in managing their cash flow, paying bills, and reducing debt.
Having a financial plan also reduces personal stress. You feel more secure in your financial status, with available credit and adequate savings. Wealth building and wealth management are lifelong pursuits. We are all trying to either improve our financial status or maintain a comfortable lifestyle. Of course, your definition of wealth may vary from that of people around you. But wealth starts with feeling comfortable in your finances and developing a solid financial foundation for your future.