#GTKnowledgeIsMoney – How to Achieve Financial Wellbeing
1 Nov 2017
Financial Literacy Month is happening throughout the month of November and focuses on strengthening the financial literacy of Canadians.
Grant Thornton Limited has launched the #GTKnowledgeIsMoney series, a campaign focused around money management tips from experts and peers. Everyone has different financial needs at different times in their lives, and it’s important to understand what steps you can take to create a better future for yourself or your family. We want to help Canadians learn more about how to manage their finances and what they can do to strengthen their financial knowledge.
This week’s topic is about how to achieve financial wellbeing.
First, what is financial wellbeing?
Financial wellbeing is defined as a state of being wherein you:
- Have control over day-to-day finances
- Have the capacity to absorb financial shock
- Are on track to meet your financial goals, and
- Have the financial freedom to make the choices that allow you to enjoy life
Achieving financial wellbeing is an ongoing, multi step process. Here is our step by step guide to help you get started:
- Set financial goals for the short term as well as the long term
- Create SMART goals – Specific, Measurable, Achievable, Realistic, Time Based
- Goals should be reviewed periodically and are likely to change over time
- Create a Personal Financial Net Worth Statement and review annually
- Create a household budget
- Track your fixed and variable household costs
- Set limits and look for ways to reduce variable costs
- For discretionary spending, do a “needs vs wants” assessment prior to spending
- Manage your available credit and use your credit to your advantage
- Pay bills and monthly debt payments on time to improve your credit score – this helps you get the best interest rates available with the lowest collateral required
- Review your credit score annually and ensure all errors are corrected
- Consider closing unused credit that you do not need
- Manage your accumulated debt – review your debt and set a debt reduction strategy
- List all your debt, both secured and unsecured
- Create a debt reduction strategy that fits within your budget created above, and be reasonable with timelines (you didn’t accumulate the debt overnight, so it won’t go away overnight)
- Target higher interest unsecured debt first as a means to improve your monthly cash flow. As cash flow improves, consider increasing your monthly debt reduction payments
- Save for the future / set up an emergency fund
- Don’t neglect savings while concentrating on your debt repayment strategy. Unplanned or emergency costs often occur, and without savings available, credit is often used
- Ensure you have life insurance appropriate to your personal situation. Obtaining life insurance at an early age is more cost effective than waiting until later years
- Utilize RRSP’s for long-term savings. These provide a tax reduction in the year saved, however they should only be accessed at retirement due to the taxes due when liquidated
- Utilize non-registered savings vehicles (TSFA, high interest bank accounts, non-registered mutual funds etc.) for shorter term savings, as these can be accessed in emergencies with little to no liquidation cost
Grant Thornton Limited is a team of Licensed Insolvency Trustees who provide expert advice to clients who are looking for financial guidance and assistance across the country. Grant Thornton offers clients help with financial counselling, debt restructuring, consumer proposals and bankruptcy. Find an office near you for a free consultation by clicking here.
Want a chance to win a $500 prize? All you need to do is share your money management advice online with us.
To be eligible for the contest, entrants must:
- Share your best money management tips on social media, tagging Grant Thornton Limited on Facebook or @GTDebtRelief on Twitter, using the hashtag #GTKnowledgeisMoney
Contest is open to all Canadian residents. Deadline for entry is Thursday, November 30th, 2017 at 11:59 pm AST. Winner will be selected through random draw. Full contest rules here.
Tell us how you achieve financial wellbeing by using the hashtag #GTKnowledgeisMoney on Facebook or Twitter.
Check back next week to read our advice on how to live within your means.