When thinking about your overall well-being, finances may not be the first thing that springs to mind. Most of us regularly check in on our physical and mental well-being but understanding financial well-being, and constantly working to improve it, is just as important for peace of mind and overall wellness.
So, how exactly does one achieve financial well-being?
Here are 3 steps to help you get there:
1. Make a budget and stick to it.
A budget helps you determine how much money you receive, spend, and save. It balances your income with your regular expenses while guiding your spending to help you reach your financial goals.
If you’re a first-time budgeter, spend at least one month tracking everything you spend money on from a cup of coffee to your phone bill. Next, divide your expenses into two categories: “wants” and “needs”. Lastly, add in your income and see how much money you have left over. The results might surprise you.
Now that you have a better idea of what you’re working with, set yourself a realistic plan for the next few months. It’s not always easy, but a balanced budget can really help your peace of mind.
2. Don’t forget to save.
If you’re currently living paycheque to paycheque, it’s time to break the habit. Life happens, and it’s important to have available funds set aside to help you deal with unexpected situations.
If you don’t have one already, create an emergency fund. It should provide you with enough money to cover your living expenses for 3 to 6 months. Once you have that covered, you can start saving for fun stuff (like a down payment or a vacation).
3. Actively plan for retirement.
Life expectancies are continuing to increase, which means your retirement savings might need to be stretched further than you think. Set yourself up for a comfortable and sustainable retirement by planning and saving early.
Start by thinking about how much money you would need to retire and don’t forget about inflation! Break down how much you would have to save every month if you start saving now, 5 years from now, or 10 years from now. The earlier you save, the less you need to contribute each month. And be sure to talk to a financial advisor about investment tools and registered savings plans to maximize your efforts.
Looking for more information to help you build your financial knowledge, skills, and confidence? Check out Vancity’s Each One, Teach One program and find out when the next financial literacy workshop is happening.
This is the first in a series of articles for Financial Literacy Month. Check back throughout November to learn more personal finance tips.