If you’re concerned about your finances, we’re going to drop some knowledge that many eventually learned later, mostly out of necessity. Personal finance plays a huge role in your life, and even though most Canadians are aware of it, only about 50% actually do anything about it.
We’re talking about budgeting, and properly managing your finances. It’s something few get excited about. In fact, most people know they should do something about it but prefer to put off or avoid the topic. This is one of those moments where you can get ahead, and in the future it’s something you’ll wish you had told your younger self.
A smart start is to spend time each week and devote 20-30 minutes to your personal finances. Make an appointment with yourself. We can assure you, it’s time well spent and an investment in your own future. It is much easier to stay on top of things weekly than to find yourself in debt and trying to figure out where you went wrong.
Personal finances are not exactly taught in school (although they should be) and many young adults will make financial mistakes that they’ll pay for years to come. From running up their credit cards and getting into debt to being late or missing payments that hurt their credit score, it happens to many of us.
The place to start is by building strong habits, and using a budget. There are countless options available, with some of the more popular options being Mint, Personal Capital, and You Need a Budget to name a few. Compare your options for budgeting apps to see what works for you. Get in the habit of updating it weekly. Remember, if it isn’t monitored, it isn’t managed. If you keep track of your finances, you may discover you’re overspending in ways you didn’t realize. From eating out too often to excessive lattes or too much online shopping, seeing the numbers alongside your income and expenses suddenly makes things very real and can help you better manage your money. To be clear, tracking your finances can be as important as creating a budget. Those that do both usually manage to save money for an emergency fund and are less likely to have their finances derailed by unexpected expenses of some kind.
Making Your Money Work for You
Leaving your money in the bank will barely help if you want to make money since the interest rate of a standard savings account is usually under one percent. Making your money work for you involves taking some of the money that you have and investing in something with better returns. This could be stocks, EFTs, or another option. When it comes to investments, the reward can come with some risk, which can vary a lot by where you invest. There are no guarantees, and the level of risk/reward is often related. This article isn’t about learning to invest, but pointing out that there are better options than leaving your money in the bank which can provide you with better returns.
One piece of investing advice that is fairly common is that you should never gamble what you can not afford to lose. Since an investment can be a bit of a gamble, you might consider not putting all eggs in one basket, and not invest in overly aggressive promises of returns as the risk can be higher. Finally, this isn’t for everyone. You should be comfortable with how things work, the potential risk, and figure out if it’s an option for you.
What’s The Point
For most Canadians there comes a time in their life that they want to make a large purchase where they do not have the funds and will require an installment loan or personal loan to make it happen. It could be to buy a car, possibly a mortgage, but there are many other less costly reasons for a loan such as bills, repairs, travel and more.
Having a good credit history can have a big influence on your options when you want to borrow, along with your credit score for a loan. Lenders look for your creditworthiness when deciding what sort of risk you might be, how likely you are to repay the loan, and whether to approve you. Managing your credit score and continually trying to improve has many benefits to know and it would be in your best interest to take the importance of your credit profile seriously sooner than later.
Another part of managing your creditworthiness would be to also keep an eye on your DTI, which is short for debt to income ratio, and something else that lenders often look at if they were considering your application. If you owe too much with credit cards or other loans and have a high DTI, many lenders would have concerns about your ability to pay them as well if they approved your loan application. Since it takes time to build or turn around a credit profile if it is less than good, it’s also the reason to take care of it. So that it is about as good as you might hope for, and allows you to be eligible for better interest rates. If you have a poor credit profile, it can be an expensive way to borrow if looking for loans with bad credit since they have higher interest rates.
Taking care of your finances and credit profile is always in your best interest, as there will come a time that you will need a good credit rating for many different reasons. Usually for borrowing, but it can also affect your employment opportunities and ability to get a mobile plan, rent an apartment, or be approved for utilities as well. Taking an interest in your cash flow, budgeting and becoming financially fit provides nothing but benefits to you and your future.