Here are some tips to help you focus and reach your financial goals.
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If your goal was to take charge of your finances in 2020, the COVID-19 pandemic hasn’t made it easy. After a sudden economic shutdown led to widespread income loss, millions of Canadians applied for federal relief measures such as the Canada Emergency Response Benefit (CERB). Household debt levels are on the rise and as many businesses continue to struggle, many families are struggling, too.
At present, Canadians currently owe $1.77 for every dollar of disposable income they have. Furthermore, a recent Angus Reid survey reported that two-thirds of Canada’s workforce said that a layoff or other income loss would trigger a severe financial crisis. It truly is a challenging time and if you were set on improving your financial situation this year, it’s likely been discouraging. Fortunately, there are some straightforward, achievable ways to strengthen your financial position— even during a pandemic. Here are some tips to help you focus and reach your goals.
Start by taking a close look at your finances, starting with your monthly household income and fixed expenses (rent/mortgage payments, insurance, cable bills, etc) as well as your variable expenses and discretionary spending (groceries, fluctuating utilities, entertainment, gifts, clothing, etc). Look at your insurance policies and determine if they make sense for your family. While some individuals are underinsured, others are actually overinsured and may be able to save money. The more you understand where your money is going, the better you can address gaps and problem areas.
Next, create a budget that considers your income, needs and goals for the future. An effective budget will include savings, whether that’s in the form of an RESP, and RRSP, a TFSA or all of the above. Ideally, it will also include regular contributions to a “rainy day fund” (namely, your emergency savings account).
Budgets are a fantastic tool but if your current income doesn’t meet your needs, no budget can change that. In this case, consider looking for ways to increase your income. This doesn’t have to be as dramatic as changing jobs (though that’s always an option, if it’s something you want to pursue). Instead, consider a side hustle or other job in the gig economy. By working a few evenings throughout the week, you can significantly increase your earnings. Look for work delivering food, providing transportation or making sales/customer survey calls for a business. You could also start your own independent side hustle, if you’re inspired to sell your own product or service (for example, baking custom cookies or walking dogs in your neighbourhood). There are plenty of possibilities that may match your skills and interests - just be wary of pyramid schemes or any home-based sales initiatives that require you to spend money up front. If it seems too good to be true, it likely is!
As you work on following a budget and increasing your income, focus on eliminating debt. Start with paying down any debt at a high interest rate (typically credit cards) and work your way through the list until it’s all cleared. Managing your debt feels great and will help you in several ways. First, it helps alleviate high interest payments that take up space in your budget. Secondly, it makes you more appealing in the eyes of your financial institution, which can mean better rates on any future lending. Finally, it will improve your credit score (something we’ll talk about next).
Your credit score tells financial institutions how you behave when given access to credit, and it can impact many areas of your life. From getting a new credit card or personal loan to buying a house, your credit score is incredibly important. To optimize this number, be sure to make regular payments on all outstanding debt, pay your bills on time and check your credit report for potential errors or fraud. In most cases, a credit score of 700 or higher is ideal.
If you’re ready to take control of your money and enjoy a better financial position in future and for the long-term, commit yourself to paying attention to all areas of your family’s financial plan. This means reviewing each bill as it comes in, tracking your spending, reassessing your budget as needed and keeping up-to-date records. Not only will this help you achieve the goals above, it will make tax times easier and more efficient. No matter how challenging this year has been, taking action with the guidelines above will be a step in the right direction. It’s never too late to take control of your finances, and we encourage you to start today.
We’re here to help
If you’re dealing with income loss or other financial stress and would benefit from a personal loan to help cover the necessities of life, please contact your easyfinancial branch or easyhome store. You can also give us a call at 1-888-502-3279. We know that each of our customers’ situations is unique, and are committed to working with you to help you find a solution that will best fit your needs.