Financial planning: Our 5 tips
Illness, quarantine, separation… life can take some surprising turns. Optimizing your financial plan can help you handle whatever comes.
42% of Canadians say that money is their biggest source of stress1. Because stress is so closely tied to physical and psychological health, taking care of your finances can have lots of positive effects on your life. It can also help you prepare for and handle the unexpected in your daily life! The good news is, it’s never too late to adopt good financial habits and optimize your financial plan.
1- Make a budget
The unavoidable first step: making a budget. This will help you track your incoming money, your expenses and your spending. A budget can be particularly useful when you feel like money is slipping through your fingers and you want to make sure to put a certain amount into savings every month, for example.
To get motivated to make and stick to your budget, you can make short-, medium- and long-term goals. Whether it’s for a trip, buying a home or preparing for a new baby, having concrete goals can help keep you on track.
2- It’s never too late to start saving
Even with a modest salary, it’s still possible to save. As little as $5 per week can help you start planning early on for your future and develop good financial habits.
Especially since some savings products, like RRSPs or TFSAs, may provide tax advantages or tax deductions. And don’t forget that’s it’s never too late to start saving! Every cent you put aside can be helpful in the event of unexpected expenses, or just to make your retirement more comfortable.
3- Set aside an emergency fund
An emergency fund is an amount of money set aside in case the unexpected happens. It can help to reduce anxiety related to your finances and prevent you from going into debt in the event of a significant, unforeseen expense. According to the Financial Consumer Agency of Canada2, an emergency fund should be about 3 to 6 months of your salary, or enough to cover your expenses for the same period of time.
This might seem difficult to achieve, but it’s completely normal for it to take several years to build up a solid emergency fund. The important thing is to start slowly with realistic amounts based on your budget.
Tip: Transfer your savings to a high interest savings account that will allow for fast access to your money, without fees or penalties. Look for an account that doesn’t have any service fees. Make sure you choose a savings product that is aligned with the level of risk you’re able to take, so you can rest easy.
As for paying off incurred debts, pay off at least the minimum amount on all your debts before they are due. When you have a little more money, start by paying off the debts with the highest interest rate.
4- Periodically review your insurance coverage with each new life event
Your financial situation will continue to evolve over the course of your life. That’s why it’s important to revisit your insurance coverage regularly to ensure that it is appropriate for your current and future needs.
For example, if over the past few years you’ve been promoted from advisor to manager, you might need to review your disability income insurance so that your coverage matches your current lifestyle. Making big renovations to your house is similar. If you go from entry-level materials to high-end, your home insurance should be adjusted to cover the improvements made to your home in case of fire or flooding.
5- Call a financial security advisor
We all want to be free from financial worries, but it’s easy to get lost in the huge range of savings and insurance products that are available. Fortunately, financial security advisors can support you every step of the way, give you all the information you need and help you make the right choices. Like, should you pay off your debts before putting money into savings? iA advisors are trained to answer these kinds of questions. Take advantage of their expertise! They’re here for you. To prepare for your meeting, fill out the Ready to plan? form to determine your needs.
Curious about the various insurance and savings products and how they could work for you? For example, do you want to invest in an RESP for your kids, or another type of investment for a personal project? Explore the iA Financial Compass. In just a few questions, this free tool can recommend products and advice to meet your needs.
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Whatever product you’re interested in, the following tools will give you an idea of how much to invest, which you can then discuss with your advisor.