The Top 7 Intelligent Financial Moves You Can Make
Have you always been intrigued about the best practices for securing your financial future? This list of prime actions for managing your finances is here to guide you.
1. Financial Planning: Create a Budget
Overspending is a sure-fire way to land in financial hot water. The first line of defense is to ensure your outflow doesn’t exceed your income, and the best way to accomplish this is by creating a budget. Start by keeping track of your income and expenses for a couple of months, and then you’ll be in a position to devise a budget. Simplicity is key when beginning, but having a budget is crucial. Find out how to build a budget here.
2. Debt Management: Prioritize Paying Off Debt
Clearing your debt is one of the most effective ways to improve your financial health. Start with the most expensive debts — those credit cards and loans that come with high-interest rates. Once you’ve cleared these, you can shift your focus to your mortgage. Splitting your monthly mortgage payment into bi-weekly installments, and adding extra payments when you can, can significantly reduce the lifespan of your mortgage and save you a substantial amount in interest.
3. Future Proofing: Secure Your Financial Future
Setting aside money for future needs is essential. Without savings, you could find yourself relying on credit in hard times, or working into your twilight years to supplement a meager government pension.
- Regularly save money in a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP).
- Plan for retirement. Determine the amount you’ll need for a comfortable retirement, and start saving towards it. This nest egg can also serve as an emergency fund in case of job loss.
- Get adequate insurance coverage. Accidents occur. One in four people suffer workplace injuries. Natural disasters can cause extensive damage to your property. Ensure you have sufficient insurance to cover your home and lifestyle.
- Draft a will. Decide who will inherit your assets and/or take care of your children after your demise. This ensures your hard work benefits the people you choose.
4. Start Saving Early
The earlier you start saving for retirement, the less you’ll need to save in the long run. If two people start saving for retirement, one at 21 and the other at 31, with a consistent savings rate and a 6% annual return, the person who started at 21 can save significantly less per month and still accumulate the same retirement fund. The person who started at 31 would need to save nearly double the amount to catch up. The earlier you start saving, the less you’ll need to save overall.
5. Research Before Major Financial Decisions
Many people dedicate more time to researching a new TV than they do to making significant financial decisions. Ensure you’re not one of them.
6. Be Patient: Sleep on Big Financial Decisions
There’s no rush when it comes to large financial decisions. All worthwhile opportunities will still be there if you take the time to sleep on it. It’s better to lose out on a potential opportunity and learn a cheap lesson than to rush into something and learn an expensive one. Taking the time to consider your options, evaluate your needs, and seek advice can save you from costly mistakes.
7. Maintain Your Marriage
Statistically, married individuals earn higher incomes, have double the assets at retirement, and can live comfortably on 25% less than their single counterparts. From a financial perspective, maintaining a marriage can be beneficial.
