You’re not alone.
On top of a pandemic to worry about, people are still losing sleep over their finances. In fact, a recent survey on financial stress found that nearly half of all respondents blamed money woes for keeping them up at night. More than one-third admitted that money was their number-one worry, while one-quarter cited personal health as their main concern. Not surprisingly, 44 per cent of participants said the COVID-19 pandemic has had an impact on their level of financial stress.
If you’re feeling stressed out about money, talking over the situation with your partner, family members or trusted advisor and then taking action can help relieve your financial worries. Here are some ideas:
Create a budget
If you don’t already have one, get started by creating a household budget – it’s an invaluable tool to help track income and expenses. When you know where your money is going each month, it’s easier to make adjustments to free up cash that can go towards savings or paying down debt. Examine your spending to see what can be eliminated or reduced, and take a hard look at discretionary (or non-essential) items. Explore free or lower-cost alternatives where you can. For example, try negotiating a better deal on certain products and services (think bulk purchases and bundled discounts). A budget works best when everyone in the household is on the same page, working towards common objectives.
Not sure where to start? Numerous online applications and tools are available to help. Some banking apps can analyze your bills and spending habits, track your spending, and even help you determine how much you can save and automatically transfer that amount into a savings account.
Pay down debt
Many of us have debt, and most of us don’t like to think about it. The key is being aware of how much interest you’re paying to carry that debt each month. If you can reduce the interest amount, more of your money could go towards paying down the principal. Concentrate on getting rid of debt that has the highest interest first. Consolidate wherever you can, for example, consolidating credit card balances onto a single line of credit at a lower interest rate. You could save money, plus it’s easier to pay one bill instead of several.
If you’re a homeowner who has available equity in your home, think about using it to pay off higher-interest debts. Or you can explore other options, such as an all-in-one account that lets you combine your mortgage and debts into one – a great way to help you pay both down faster at a lower interest rate.
There are three words to live by when it comes to saving: Pay. Yourself. First. Set up automatic payments to deposit a small amount from each paycheque into a high interest savings account or other savings vehicles, such as a Tax-Free Savings Account or Registered Retirement Savings Plan. You likely won’t miss it, and your savings could grow faster than you’d expect.
Start an emergency fund
It’s also a good idea to start a separate emergency fund for any unforeseen financial crises. Put in as much as you can afford weekly or monthly, whether it’s $5 or $50 – a little can add up to a lot. You could also consider opening a line of credit with a low interest rate as well, so that you don’t need to rely strictly on cash savings to pay for an unexpected expense.
Get professional advice
No matter your situation, a professional perspective can be invaluable. Let’s face it, most people have neither the time nor the expertise to tackle the complexities of their financial affairs alone. An advisor will learn about your situation and establish your risk profile. They will work with you to determine short-term and long-term goals and develop a flexible plan of action to ensure those goals are achievable.
Build a financial plan
Work with your advisor to build a comprehensive plan that balances your current needs and future goals. A good plan should be easily adaptable to changing circumstances, while including milestones to help you gauge progress. It will most likely include:
- Disciplined savings
- A customized investment strategy based on your risk profile and time horizon
- Debt management and cash flow planning
- Tax strategy
- Insurance solutions (life, disability or critical illness) to help protect your family
- Retirement plan
- Will and estate plan to protect your legacy
And as we all know, life is full of unexpected change, so it’s wise to review your plan regularly.
With a few simple steps and some expert advice, you can take the worry out of your finances. Speak to your advisor to get started.
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