Financial goals can be tough to attain, and even more so when the world is throwing extra challenges your way.
In the new year, and as we head into tax season, you may be re-evaluating your cost of living, discretionary expenses and future financial goals.
The Better Business Bureau (BBB) has put together a list of five financial resolutions to get your finances back on track.
"Holiday expenses may still be looming on your credit card bill and that’s okay,” says President and CEO Simone Lis, BBB serving Mainland BC & Yukon.
"But it's more important than ever to make sure your finances are on solid ground before you start racking up more debt."
Five resolutions to get your finances back on track
- Improve your credit score
Most lenders will not give out loans to people with bad credit or if you are lucky enough to find one that will, your interest rate will be quite high. If you have a credit of less than 660, you should really try to raise it, according to Equifax Canada. Work up your score by paying your bills on time and in full, limiting how many new accounts you open, and utilizing a smaller percentage of your overall credit limit. This is especially important if you want to finance a car or buy a home in the near future.
- Create a personal budget
Tracking your spending month to month is a strong way to identify where you can cut back. Use BBB's '10 things to help you create a budget' article to write down all fixed expenses, like mortgage, rent, car payments, cell phone bills, etc. Then see how much money is left for discretionary expenses, such as clothing, eating out, and entertainment costs. Many bank phone apps give you the chance to review your total spending by category each month, which is helpful when setting up a new budget. Many experts recommend using the 50/30/20 rule. Use 50 per cent of your income for your needs, 30 per cent for wants, and 20 per cent to pay down debt or save. Try out the budget planner built by the Financial Consumer Agency of Canada to start the year on a financially strong foot.
- Build an emergency fund
Unexpected challenges are always around the corner, but it’s best to be financially prepared when they do arrive at your door, such as losing your job or getting into an accident. The general rule of thumb is saving the equivalent of three to six months of your regular expenses. By planning out your monthly expenses, you can figure out how much money you should be putting aside each month. Whether it’s $50, $20, or even $5 a week, the important thing is to stay consistent and start now. For example, $50 a week saved equals $2,600 in a year while $5 equals $260.
- Determine and assess any debt you owe
Do you have student loans or unpaid credit card balances? Making a plan to pay off debt is all about getting organized first. Knowing who you owe, how much you owe, and how much you can afford to pay is a great place to start. If needed, book a meeting or call with a bank advisor or your lender to assess your options. Also consider choosing a debt payment methodology such as the avalanche method, the snowball method, or a debt consolidation loan, should you need one. With a debt avalanche, you tackle the debt with the highest interest rate first. With the snowball method, you simply pay off your smallest debt first. Both situations will create momentum to pay off your next debt. Look for the Sign of a Better Business when you choose your financial planner, by going to BBB.org and trusting an Accredited Business to get the job done right.
- Create a will
Having a will isn’t just for seniors. If you don’t have one when you die, provincial laws can determine who takes ownership of your assets and the costs to administer your property will increase. Wills are strongly recommended for those who have children, a spouse, or valuable assets, such as a company or stocks. Although you can write your will yourself, it’s a best practice to get help from a lawyer to ensure your will is legally binding. If your will isn’t considered legal, it could create problems for your heirs. Having a will protects both your family and your assets.
