There are many considerations when developing the best strategy for your family’s financial future.
Your family’s age, composition, educational attainment, gender, income and desire to earn more should all be considered. Depending on these factors you can determine which option will work best for your family.
In a recent study [Financial Consumer Agency of Canada (FCAC)] about financial well-being among Canadians found many to be doing well, some were having trouble with meeting their financial commitments and showed lower levels of resilience and relative by household incomes.
Where to Start
First and foremost you need to figure out what your goals are for the future. Do you want to save enough money to leave you some savings for retirement? Will you need to start investing and saving for your kids’ college? Do you want to be debt free immediately? These are just a few questions to ask yourself when figuring out what your goals are.
What do you want to do when you are retired? Do you want to travel? If so, what type of travel do you want to do? If you travel only once a year, will you want to travel with a spouse or children?
One of the first things to do is to determine how much you need to save to be able to achieve your goals. Building a budget for your retirement is a key step on your journey. You need to understand what your expenses will be at different points in your life. These include major expenses like buying a home, paying for your kids’ education, major trips and other financially significant outlays. These major expenses, along with your regular expenses give you a roadmap for understanding how much money you’ll need when.
Once you have established your financial needs, you need to start working on the other side of the ledger, your income.
Income – The Big Picture
Like most families, you are probably reliant on employment income to pay your bills today as well as for helping you plan for the future. To save money for the future you need to spend less money that you bring home. There are two simple ways to accomplish saving: earn more money and/or spend less money. That part is pretty straightforward and simple, but where do you start?
There are many careers that can benefit your family in the long run. You also need to consider which type of career will work best for your family. Do you work in a field where you can be more successful with more training? If so, you will need to consider taking courses or pursuing further education that will improve your job skills for future success. There are many online resources for determining the salary levels for different positions in whatever field you are looking into. It’s important to note that the salary ranges vary considerably by geography. Much like real estate, job markets are very local. A good starting point is Salary.com.
Along with your income, you also need to manage your debt. Not only does this impact the money available to you, it can also impact your credit score if not properly managing things like making payments, credit utilization and debt to income ratio.
If you do decide to pursue additional training, it will be important to look at all options available. Specifically, as technology has developed, there are increasingly more and more online programs available. These programs offer flexibility for those who do not have the luxury to quit their current jobs and attend school full-time. Often these programs are eligible for government student loans and other benefits that traditionally were only available to on-campus students.
They say ‘the more you learn, the more you earn’ and it’s often true. Getting additional training in your chosen field or to help you qualify for new opportunities usually pays for itself in a short time. This can also help with making career changes if you find yourself in a situation that doesn’t offer a bright future or much room for advancement.
The Side Hustle
If additional training is not the right answer for you, another option is to pursue a part-time job that you can take on in addition to your current job. In recent years, many people have started driving for companies like Uber and Lyft, or delivery companies like Amazon and PostMates. The so-called “gig economy” allows you a great deal of flexibility about when you want to work and for how many hours. After going through a fairly light background check, drivers are able to log in and work at their leisure. Of course, you do need to have your own car and insurance that meet the requirements of the company you’re planning to work for.
Your credit score is an important part of your personal finance situation, where monitoring and managing it has an effect on your ability to get a personal loan in the future, if desired. It’s based on a number of things, including payment history, and should be part of your plan for developing a strong financial future. Many will use personal loans to afford a large purchase, getting out of debt or cover unexpected expenses when the time calls for it. A good credit score is essential to getting better rates and terms. Having such an option is just smart financial planning as it can allow you to afford more in life when you don’t have the savings readily available. Continuing to monitor and work towards improving your credit score should be part of the plan.
RELATED: How Bad Credit Can Affect You
Having a financial plan for the future involves more than budgeting and debt management, it often includes investing and retirement among other things like insurance and more. Creating your financial plan can be about making your money work for you along with other forms of financial literacy and wealth management that can help with things like owning a home and other financial goals. It’s never too early to start thinking about your plan, which might include options like RRSP (Registered Retirement Savings Plan), Tax-Free Savings Account (TFSA), or even a Registered Education Savings Plan (RESP) for your children.
Saving alone should not be the only plan, and making your money is key to your financial future. Many younger Canadians (millenials and gen Z) are taking a proactive approach rather than using a financial advisor and more risk tolerant with investments.
Whatever you decide, there are many things to consider and several options in front of you. Most importantly, you need to spend some time budgeting and planning so you can understand what your needs are in detail. Without some basic information, you simply can’t plan appropriately. In most cases, people do find it eye-opening when they really take a hard look at what they are earning, spending and saving. Take this first step and you’re on your way toward reaching your goals.
If you recently moved to Canada and not familiar with credit scores, this article may be helpful to read.