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How to develop healthy financial habits

May 29 2018 by Multi-Prêts Hypothèques
What you'll learn
  • Better manage your credit card

  • Make a budget

  • Assess your personal finances

  • Develop good saving habits

Better manage your credit card

A credit card is an excellent tool if used wisely. With a little discipline, it becomes the best financial tool to create a good credit history, which allows you to take advantage of a better credit rating.

Start by finding out which products your financial institution offers.

Choose a credit card suited to your needs and, most importantly, to your financial reality. Don’t be afraid to negotiate your interest rate and take advantage of reward systems, whether it’s travel points or cashback. Avoid transferring your balance and requesting new cards even if they offer better rewards, as this could have a negative impact on your credit score.

Avoid oversights by programming automatic credit card payments from your checking account. Finally, as much as possible, pay your entire balance before the deadline written on your credit card statement.  

Make a budget

A budget is the perfect tool to regain control over your spending!   

Set out the monthly amount required to cover your essential needs, and round it up if you can.

Structure your expenses by setting a realistic goal. Avoid being too strict, however. A budget should be a tool that facilitates your financial wellbeing on a daily basis, not a source of constraints.

Lastly, be sure to add a safety cushion amount to your budget. This amount will help cover unexpected expenses of any nature, as life loves throwing curveballs our way! Click here to find out more about emergency funds.

Yes, juggling that many numbers can be intimidating. Fortunately, many free tools are available to help you manage your budget. Get acquainted with mobile apps such as Mint, Spendee or Major Finance, and see which one works best for you.  

And finally, don’t forget to include a savings section in your budget.

Assess your personal finances

Get a snapshot of your true financial situation by keeping track of your assets and liabilities.

Take into account everything you own to find out your assets (bank accounts, properties, furniture, cars, land, etc.), including accumulated savings (RRSP, TFSA, pension plan).  

Be sure to keep track of the resale value for your goods, as some tend to depreciate over time.

To calculate your liabilities, go through the same exercise. Calculate all your short-term, medium-term and long-term debt (credit cards, line of credit, student loan, personal loan, automobile loan, etc.).  

The number you get when you subtract your liabilities from your assets is your net worth. This is the number that will guide you in making decisions suited to your financial reality, namely when it comes to investment strategies.

Find out more about what makes a good debt.

Develop good saving habits

Start saving as early as possible. Thanks to compound interest, the more time passes, the more savings you build up.

Whatever happens, 10% of your income should be set aside as savings.

Stressed about having to repay several debts with various interest rates and deadlines? Learn more about debt consolidation from your mortgage broker or financial institution. All of the amounts you’re repaying can be grouped into a single monthly payment with a lower interest rate. It’s an efficient and reassuring way to maintain a good credit score!  

You’re never too young to start thinking about your retirement! Meet with your financial advisor to discuss your goals. To find out more about a phased retirement, you should also read this article.

Contribute to a TFSA! Make automatic contributions not only to your RRSP, but also to a TFSA. Unlike an RRSP, withdrawals and gains from a TFSA are tax-free (both at the federal and provincial level). That makes it an excellent investment method to foster savings, namely when it comes to building up a down payment towards the purchase of your first home!

Check out this article as well to find out more about the Registered Education Savings Plan.

Key takeaways
  • Avoid being overly strict when setting a budget. It should be a tool that facilitates your financial wellbeing on a daily basis, not a source of constraints.
  • Learn more about debt consolidation. It’s an efficient way to maintain peace of mind and a good credit score. 
  • A TFSA is an excellent investment method to foster savings.