If you’re one of the millions of Canadians planning to improve their financial situation this year, you have your work cut out for you. While it might be easy to set financial New Year’s resolutions, they’re a lot harder to achieve.
If you want to make your lofty goals a reality, you’ll need these five targeted financial tools to help.
1. An Emergency Fund
An emergency fund gives you the means to handle the unknown, like if your furnace burns out and you have to replace it, without having to take on debt.
If your fund is big enough, you’ll be able to afford unexpected repairs and medical expenses without worry. But how big is big enough? Most financial advisors subscribe to the idea that you need three to six months of living expenses set aside for an emergency.
2. A Budget
A savings goal this big is impossible without a budget. This spending plan helps you identify bad spending habits that prevent you from saving.
Track your expenses and categorize them by needs and wants. Your needs should cover all the essentials you need to keep your financial house in order, like bills, debt payments, and savings that can’t be cut.
The wants, on the other hand, are fair game. Consider what you can realistically sacrifice for savings.
3. Extra Safety Nets
An emergency fund is your first line of defence against the unknown. Unfortunately, it might not always be up to the task. You might have emptied these savings to handle an earlier emergency, or you only just started to save when your furnace breaks down.
While not ideal, emergency fund failure is realistic. You need to know how you’ll handle unexpected expenses should yours fall short in an emergency.
For many folks, a line of credit becomes their second safety net. That’s because an online line of credit gives fast access to flexible cash in emergencies. As long as you’re approved, you can use it as a backup whenever you need a little extra help.
If you borrow from a lender like Fora, you only pay interest on the money you withdraw, not the total credit limit, and there are no late fees. For more information on how a line of credit works, you can visit Foracredit.ca to explore your options.
4. Long-Term Investments
It may seem counterintuitive to invest money during a recession, but it can be a great way to get in on the ground floor. Economic downturns lower the price of stocks and bonds, so you pay less for each share than in a bull market.
While a recession may impact your investments for a year or so, you should be saving with the long game in mind. Most smart investments always go up over time.
Before you sink money in stocks and bonds, talk to an advisor at your bank. You should also consider doing some online research to understand which investments suit your long-term financial goals.
5. Insurance
By now, you probably already have some insurance. In Ontario, you need insurance if you own a car or home by law. But you may not have life, medical, or renter’s insurance — all of which can protect you from life’s biggest disasters.
Shop around for insurance companies, including for coverage you already have. You might be able to find a better deal on car or home insurance.
Using the Right Tools for Your Financial Health
There’s no doubt organizing your finances will be a challenge, but this goal is a lot easier with the right tools at your disposal.
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