Financial health – It’s the time of year when we make promises to do better, eat healthier or exercise. Yet, research shows a clear link between the state of our finances and our mental, emotional and physical health. So even if you do nothing else, tuning up your finances may be the ticket to a better year ahead.
“The start of the year is the perfect time to take a look at our budget and monthly cash flow to see where we can do better to meet our financial goals,” says David Nicholson, vice president at CIBC. “Make the most of that new year optimism by putting a clear action plan in place to keep you on track throughout the year.”
Here are six tips to improve your financial health this year:
1. Know your money. Take a look at your income and expenses and write them down. Having a clear picture of your financial situation can reveal some surprises and get you in the right frame of mind.
2. Get a handle on high-interest debt. Stop carrying a balance on your credit card. Some store credit cards can charge up to 30 per cent interest, so make it a priority to pay off any high-interest debt and/or consolidate your debts into one loan at a lower interest rate.
3. Think twice about spending. Don’t spend money on things you don’t need; rather picture the things you really want and save a little more for them instead. Delaying purchases is another way to reduce spending on non-essentials.
4. Automate your savings. The most effective way to save is to “pay yourself first” by setting up an automated transfer on the day your paycheque is deposited. For an added boost, direct those funds into a TFSA, RESP or RRSP to take advantage of any government grants and tax savings.
5. Start investing now. Whether you have a few thousand saved or you can only afford to sock away your lunch money each week, every dollar you invest can increase your wealth and give you more flexibility in the future. How to invest comes down to your risk tolerance and time horizon. Just remember, the earlier you start, the more you have to gain thanks to the power of compound interest.
6. Get an expert opinion. Most banks offer free financial planning to help you map out your short- and long term goals, project what your desired retirement lifestyle will cost you, and build a plan that’s unique to your financial situation. If you find it tough to stick to your plan or if something changes, be sure to modify your plan and keep yourself on track.