Canadians are living longer. As a result, many now pay attention to what they eat, make sure they get enough exercise and visit the doctor regularly to ensure potential health problems are detected at an early stage. However, what the majority of individuals fail to do is plan for their financial future.
Life expectancy figures continue to rise, meaning a person will need to have more funds to live a comfortable lifestyle following retirement. For this reason, every individual needs to ensure they are financially fit and prepared for whatever their golden years bring.
Less than one-third of Canadians have a monthly budget, and only 40 percent report they have a financial plan formally in place. This lack of attention to detail can hurt a person in both the short and long run.
In fact, more than one-third of individuals had to return to work after retiring as they couldn’t afford their normal living expenses without this added income. Sixty percent state they would do things differently if they could go back in time. They would save more and begin investing at an earlier age.
A Sound Financial Plan
To be financially fit, a person need to do more than follow a budget. A sound financial plan takes seven things into consideration: cash, risk and debt management; tax, retirement and estate planning; and investing. Neglect even one area and a heatlhy finance situation will not be achieved.
Current Money Assessment
The first step in creating a financial plan is to determine a person’s current situation. A net worth statement helps greatly in this task, as it shows how balanced one’s finances are.
Once this has been done, a monthly budget must be created. This budget shows where money is coming in and where it goes out, and must be reevaluated regularly to reflect actual spending. If there isn’t enough money coming in to cover expenses, obtain a second job or look for ways to cut expenses. This is the only way to get on track with finances.
Set Smart Goals
To achieve a goal, a person must write it down. Each person’s list of goals will be unique, based on their personal desires. One person may place an emphasis on saving more money, yet another will want to keep the bare minimum in savings and use any extra money to pay down debt.
There are not right or wrong answers here, but this list must be created. A person should write down all they wish to achieve, covering each area of their financial plan.
Prioritize these goals and pick two to begin working on. The key is to set realistic goals, ones that can easily be achieved with some work.
Review this list every six months to see where progress has been made and where changes are needed.
Consult a financial adviser if this task seems overwhelming. Becoming financially fit is an ongoing process, and individuals need to bear this in mind. What works today may not work tomorrow. Keep working at it and, with time, you’ll find you can get your finances in order once and for all.